That Was The Week That Was-3rd Week February

 

Breaking Client News…Tax Documents in Mail. If you don’t get them by the end of this week call or e-mail me. 

 

Stock Forecast from the JP Morgan’s  Michael Cembalest in the 2/14 Interview section of Barrons.com  states that the U.S. markets should have ‘lots’ more turbulence but ‘good gains’ in 2014. Cembalest clarified that over the very long run investors could expect to earn 4% to 6% over inflation in real terms. ‘Usually, that translates into nominal returns of 8%-10% with 16% to 18% volatility….now we are going back to where we used to be.’ He explained that the last few years we’ve had the reverse, with volatility that was half the returns. He also predicted U.S GDP at 4% in 2014.

Applied Global Macro Research has three economists who advise clients and also, according to Barrons.com 2/15 put their money where their mouth is and currently have their hedge fund invested in S&P 500 Consumer Discretionary and Home Builders stock indexes. Demand for new homes- and the outlook for economic growth- are understated, they say. Also, contrary to others they expect 4% GDP while investors expect 2014-2015 growth in the 2.7% to 3% range. Tuesday Homebuilders Fell The Most Since Last May as Weather & Builder Expectations Collided Causing a 10 point drop in the Index.

The Japanese Stock Market Has Lost 10% in 2014-Mainly on concerns over the USA and China. The weak data coming from their chief importing nations has tripped growth in the first weeks of the year for the Japanese. WSJ 2-18-2014. On Tuesday the Bank of Japan surprised markets by announcing double the incentives to spur borrowing. The effect weakened the yen and lifted stocks just at a time when the economy was showing signs of trouble. The key word traders focused in on was ‘double’.

Speaking of Banks. Domestic Banking Officials Have Been Cashing in On 2013 Rally. Bank stocks overall rose 41% last year. January was a busy month as insiders sold shares to compensate for loss of cash of year-end bonuses and instead were given shares of stock. MarketWatch commented that these folk have expensive lifestyles and took advantage of 2013 increased share price by selling shares in 2014. MarketWatch 2/18/2014.

Zacks on 2/14 wrote in their  Profit From the Pros: It’s like nothing ever happened. The bull market is in place until a recession looms or stock valuations get bubblicious. Tuesday opened flat- mixed indices. Silly market day with snow affecting traders and saw penny stocks climb on speculation and large caps flat.  Congressional Budget Office declared that the $10.00 minimum wage would bump some people out of poverty but also cause a loss of about 750,000 jobs. Every time we’ve seen the minimum wage increase the very same thing happens. This is nothing new but this time its on the small to medium sized employer who’s not hiring because of the current political uncertainty, and now rules changed forcing them to pay more if they do hire someone. What we’re seeing in Washington is like a bunch of high school kids playing ‘government day’. It’s not that this administration wants to do bad things- they just don’t know what IT is they’re doing. Federal Reserve Informed Foreign Banks they had to hold more capital if they want to do business in the U.S.A. Arguments by the foreign banks that the increase in capital requirement would ‘systemically reduce their footprint’. The Fed may have said,’That’s fine with us!’ or something like that. Deutsche Bank has 37% of its group assets in the U.S. WSJ 2/19 What a great time for U.S. mega banks. The recession washed out 1/2 of their competition in the small to regional banking category and extended low interest rates allow them to make extraordinary profits. And then the Fed muscles their foreign competition. What a country!

Wednesday- Markets Toast! It started off with investors seeing more action in large caps and the small caps were being bludgeoned, then the tide turned and everything got seriously ugly. According to Barron’s Income Investing 2/20 it was a knee-jerk reaction to the latest Fed minutes, which showed members united in their bond-buying and now focused on raising interest rates. We’ll probably see our first interest rate hike this year so strap on your seatbelt. Before the sell-off the S&P was approaching the previous high for the year and then did the U-turn. CNBC reported stocks look ‘fatigued’, as traders ignored data. What data you ask? Like the 16% drop in housing starts- which traders blamed on the weather. Still the S&P closed at a healthy 1,828. Jeremy Siegel in ThinkAdvisor 2/19 said, ‘Stocks were undervalued 10%-15% under fair market value.’  He also expects interest rates on the 10-year to be 4%-4.5% by year-end. 

Market Up Thursday! Lots of noise out there but nothing that was of any real consequence. It was just enough good news that percolated around to boost all indices.  FB bought a messaging firm for a whole lot of money and I have a feeling some people are seriously wondering what’s going on when the messaging doesn’t support advertising. Softer than expected Chinese manufacturing numbers and rioting in Ukraine did little to damper enthusiasm for stocks. Anyone peek at the price of gold? At one time it was about $600 more expensive than it is on Thursday 2/21. Even utilities sparkled, and worries about that sector late last year may be unfounded for 2014. Utilities were on our underperform list at my Breakfast Meeting.The Gap gives 65,000 minimum wage workers huge pay increase to $9.00 in 2014 and over $10.00 in 2015.

  Warren Buffett’s ‘Business Wire, a high speed distributer of press releases has put the kibosh on allowing high frequency traders purchase direct access to its service. The NY attorney general applauded. He also called it a ‘Great Victory!WSJ 2/21/2014 

Friday Dow, Naz and S&P off Gold up. Disconcerting News from Art Cashin, UBS director of floor operations at the NYSE, speaking to Bon Pisani on CNBC around mid-day Friday. He sees a serious band of resistance at a technical level around the S&P 1848-1851. If the markets break out everything would be ‘great’, Cashin said. If not it could be very troubling.

Info collected last week from Bloomberg.com, WSJ, Barrons.com, CNBC and MarketWatch.com along with other sources deemed responsible.

Questions call Paul @ 586 295 0430 or write him at pstanley@westminsterfinancial.com . Share this blog with someone who cares about their money.

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That Was The Week That Was-2nd Week February

 

 

Something that didn’t happen last week which we’re happy about but some are not….

 According to The Daily Beast this guy   was making noises about concessions for raising the debt limit (2/10).  If this comes down to another government shutdown it’ll be the third in 3 years, with the first in 2011. According to The Peterson Institute for International Economics- fiscal uncertainty including the threat of debt default has increase unemployment by 1/2 of 1 percent, or reduced the number of jobs by 750,000. On Tuesday the House voted to extend debt limits and all the hoopla was for naught as Boehner quietly marshaled the troops to go along. Talk radio right wing Savage called  Boehner a drug addict and alcoholic, a platitude he usually reserves for NBC reporters and executives on 2/12 show, for going along with the Dems. On Wednesday the Senate quickly passed the increase and no ominous dark clouds were seen hovering over the Capital.

Markets Extended Their Gains Monday. It wasn’t that much of a rally but it was in the plus column and a win is a win is a win. Robert C. Doll, CFA, Nuveen Asset Management, Inc.  in his newsletter of 2/10 reminded readers and investors that we should anticipate fluctuations in 2014 but remain focused on fundamentals. Until emerging market turmoil settles and weather patterns change, uncertainty will likely cause volatility in both directions. 

New Movie Monuments Men Has as It’s Backdrop a Real Castle where the Nazi’s hid captured loot. The setting is the inspiration for Walt Disney’s Sleeping Beauty Castle. I thought it looked familiar. But, I don’t see the mono-rail.

The Markets Love Janet Yellen! Okay, maybe not forever but for a day last Tuesday she was everyone’s favorite as she said all the right things like keeping interest rates low for a very long time and testifying about the Fed’s easy money programs. Everybody agrees she’s a great choice for Fed Chief and she handled herself well responding in her testimony to a round of Congressional questions what the Fed would do and when. The DJIA jumped to close up 200 points on the continued policies of an accommodative Federal Reserve. 2/12 Art Cashin said on CNBC that Ms Yellen said all the right things and didn’t hurt the market.

I Had Family Business Wednesday That Kept Me Away From the Computer but Linked in ( get it? Linked…In?)With My Smart Phone. Didn’t miss much as the  markets pulled back basically on ‘nothing’, as Ben Levisohn of Barrons.com wrote. It was a Seinfeld kind of day but Bloomberg blamed it on Proctor and Gamble, while Well’s Capital James Paulson was quoted as saying, ‘ Monetary policy remains more accommodative today than most appreciate.’ Which is sweet of you to say, John. Then Paulson explains that good news may eventually become bad news for stocks, only after, possibly reaching 2000 in 2014 on the S&P. This bad news could result in a correction bringing the S&P back to close where it started in 2014. That sounds like a problem for 2015…one thing at a time, okay?

So early in this year we’re seeing volatility not seen much in 2013. Chartist John Nyardi in 2/12 MarketWatch examined the S&P 500 chart and wrote that resistance is at the 1820-1830 level. If the index breaks out from there it’s ‘green flags’, saith Nyardi. If not he predicts ‘darker days ahead.’ Zacks first told us to watch for 1800…things change awfully fast. Yes, we blew through those numbers last week, my friends.

News from WSJ, Barrons.com and MarketWatch.com 2/14: Both French and German economies gathered steam in the fourth quarter, an indication of healing for the euro-zone. Adding world funds to our mix starting in the fourth quarter 2013. Comcast and Time Warner news that they were bundling into one huge gigantic money sucking organization that will, in all likelihood, become world’s biggest pain in the you-know-what consumer frustrating service company of all time. Markets edged up Thursday…Magic S&P number ready to be revised upward again by pundits as it closed a smidge under 1830. Remember earlier in the week this was the number experts said had to be there if the markets were to move forward.  Mitch Tuchman in MarketWatch.com asked if you bought the news or listened to the experts. Seems every financial critic had a voice in the coming doom this last bit except the Warren Buffett. If you bought the frightening news you were indeed doomed.

The Best Process is to stay the course or add to your holdings those quality stocks that become attractive. Buffett urged investors to not try to time the markets but hold what they had and ignore all outside noises. I reported that in our client breakfast meeting. Clients who did that were glad they did.

Finally- Recession? We Ain’t Got No Stinking  Recession! Oh, the wailing and Biblical gnashing of teeth from the doomsters for the previous few weeks as the end of the economic world was in sight as the markets fell in January and continued their slide right up to …well, last week! Except for the small cap sector we’re not only where we were in January many of the indices are in positive territory for 2014! Last week was the best week of the year. Even utilities were up 3.3%, health care 3.28%, materials 3.02% while financials lagged at a measly 1.58% (info from WSJ 2/15). Like a magic show the folks that bring gloom and end of the economic world news ran back into their rabbit holes. ‘There was no panic in January,’ reported Joe Saluzzi, co-head of equity trading at Themis Trading. Friday notched another triple digit day and like that (snap!) markets bounced to a healthy positive and the clouds parted, the sun shined and birds sang.

Information gathered from sources considered reliable and included WSJ, Barrons, MarketWatch, Bloomberg, CNBC and others.

QUESTIONS CALL PAUL @ 586 295 0430 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

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That Was The Week That Was- 1st Week February

 Last Week Started Rocky - First Trading Day of the Second Month of The Year- Right After an NFC Team beat an AFC Team in the Biggest Sporting Event in The World- a Bullish Indicator- The Stock Market Falls over 300 points! As of the 5th of Febr Dow is off over 7% for the year and could drop to the S&P 500 Index 200 day average before finding a foothold and then meandering around for another month or so. We also could have a repeat of 2012 where stocks were up and down for the entire year and then got their act together in the final quarter, ending positive for the year. Looking back- In 2013 bad news that should have had stocks pull back were ignored as the entire investment community became uber-Bullish. Jack Bogle, founder of Vanguard and  Index investing recently said before yesterday, in case of a market drop, ‘ Don’t do something, just stand there.’ Which is good enough for me. We have been waiting for a correction, which is healthy for stocks and now that we have it we have to know what to do with it. Remember to be wary when others are greedy and  be greedy when others are fearful.

Wednesday Morning Saw a Slight Pop in Tuesday’s Markets. Still most experts are calling for more pain. I’ll have reported that to those that attended my breakfast client meeting this past Saturday. Barron’s reported 2/5 more technical pressure is on stocks and Art Cashin told Bob Pisani, of CNBC, that what was needed was to get passed Tuesday’s ‘half-hearted’ bounce. Technically the markets could have problems at the S&P levels of 1765-1770. Market closed at 1755 on Tuesday. Remember need to break 1800. Could see a real reversal at 1710-1720 on the S&P.

HEADLINE:

ObamaCare Will Cost 2 million jobs! The news that the Congressional Budget Office released is not that there will be employers laying of 2 million people but workers will either take early retirement or work only part-time with the comfort of knowing that they have health insurance. Many people today work or continue to work because they need health insurance and the only way to get it is at a reasonable price is through an employer. With the Affordable Care Act people now have greater flexibility in doing what they want to do. This according to the CBO.  And in Thursday’s WSJ more men in the prime of their working life are unemployed. Globalization and technology are moving faster than men can adapt through education and training. 2/6

Markets Down- Again- Wednesday…. Several companies down more than 10% – well into correction territory. The little blue bird company fell 24% on Wednesday/Thursday. Social media stocks were hurt during and after the trading day.

Barrons.com Had a Good Piece on Options Trading in their ‘The Striking Price’ – 2/5/2014. The article was an educational piece explaining how investors could increase yield by selling ‘puts’. If you know of or hold a stock that is moribund in a tight trading range an investor could ‘sell’ puts and get a premium for that sale. If the stock is selling above the price that the put was sold the investor gets to keep the premium and if the price is below when the option expires has to buy the stock. For more information on trading options call or email me.

Thursday Markets Rallied Over 188 Points on the Dow. Earlier in the year, the WSJ reported 2/7, investors ran from stocks to bonds, according to Lipper, in the fastest clip since the financial crisis of 2008. In one week traditional bond ETFs attracted $1.2 billion. This after seeing 7 straight weeks of outflows from bonds to equities. Investors have to know you cannot time corrections. Mark Hulbert in MarketWatch.com reported 2/7 that the oldest market timing service in existence, Dow Theory, remains signaling a buy.

Preaching to Keep One’s Head While Others Lose Theirs is Often Lost in the Clatter of Investors Rushing for The Exits.  Story time…I told an investor friend, who reads the tea leaves, that I bought a chunk of XYZ on its punishing dip and he said, smugly, ‘It’s going to go lower.’ Only he doesn’t know that for sure. His charts show the stock could come back and test the number beneath the price I paid. What he doesn’t know is when. It could be later this year or five years from now. So when someone says buy something when it gets cheap you decide what price you’d like to pay. The fact that the stock could get cheaper, or not, is always a fact of life but if its something you’d like to own more of there is nothing wrong with buying it at a price you find attractive. The winners will be those investors that didn’t panic and held what they owned or bought more.

Jobs, non-farm payrolls, came in far less than expected showing weakness  that is more than the weather cooling things off. Still, there were bright spots, as construction, manufacturing, professional and business services all did better. Complaints from some owners saying that quality, experienced people were not available, were common in the construction and manufacturing sectors. (CBS news 2/7/2014).  Bloomberg reported 113,000 new jobs while the consensus called for 188,000. One of the problems is that governments kept shedding jobs. The report concluded that even after 4 1/2 years of economic growth the U.S.A. is still 1 million jobs lower than it was before the recession. and we have added more workers…

 That poor jobs report didn’t detract investors who bid Big Friday, driving stocks up across the major indices. The rally left the S&P a smidge under 1800. Art Cashin reported on CNBC that the markets had to rally from that closing number this week. Well Fargo expects the February numbers to be more volatile and the markets to be lower. Wells downgraded their annual expectation for the year while speaking on CNBC 2/7/2014.

Finally: Thanks to All Who Attended The Breakfast Meeting Last Saturday.

Questions call Paul @ 586 295 0430 or write him at pstanley@westminsterfinancial.com Share this blog with someone who cares about their money.

SECURITIES OFFERED THROUGH WESTMINSTER FINANCIAL SECURITIES, INC. MEMBER FINRA/SIPC.

That Was The Week That Was-5th Week January

As Goes January So Goes The Year? That has been the saying for as long as I can remember and if that’s the case we can look forward to a cold summer and a lousy stock market. Last Monday, after the bell, a certain California phone and tablet maker, reported earnings but forecast less than sunny next quarter. Investors punished the stock after- hours even as the CEO explained they were in the business of making the best and not the most. The company is the most widely owned among the large mutual funds and institutional investors.  Markets mixed Monday. It was still ugly and finding winners involved staying glued to the computer through most of the day as some stocks took severe hits in the morning only to come roaring back late in the day. 1/27

JP Morgan in their weekly Market Insights Reported that the Fed Needs to Clarify It’s Own Guidance Over the Next Few Meetings if the markets are to believe that rate hikes are not coming sooner rather than later. 1/27 I had to laugh as investors have beat up lowly PE stocks of quality while bidding up no-earning high PE stocks of social interest while the Street still cries for transparency and guidance. It doesn’t make sense, does it?

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MarketWatch.com reported the changing face of home ownership. The above chart from Trulia is interesting. 1/28

Bloomberg.com Reported on Emerging Markets Fear 1/28. Emerging markets are not sneezing enough to really worry that the rest of the world will catch cold. The MSCI Emerging Markets Index is down 7.1% in 2014. Torsten Slok, chief International economist in NY at Deutsche Bank said,… ‘that the central expectation is while the US markets could take a temporary hit, the shock will not be a major one for the U.S. economy.’ While fears of currency devaluation will hurt sales of S&P global companies the real threat is posed with China.

Turkey’s economy in 2013 was the darling of investors and today- not so much. Inflation over 7% and a falling currency contributed to a weak Turkey Stock Market and Economy until…The Central Bank raised interest rates by a lot on Tuesday of last week. For example it more than doubled its benchmark 1-week lending rate for banks from 4.5% to 10%! And it also shifted it primary lending to the weekly from the over night rate. The result was significant tightening in what is the 15th largest economy in the world. There remains unrest in other sectors of the emerging market world economies which is causing discomfort with U.S. and global traders. WSJ 1/29

Stocks were broadly higher across all indices closing Tuesday with the DJIA up over 90 points.  relief….

On Wednesday the Dow fell 190 points and the Federal Reserve Stuck to its plan to decrease bond buying by $10 billion a month to $65 billion. It was that kind of scary day- if you were a stockwatcher. Stuff that you own went down and stuff you wanted to buy didn’t. It was like that and nothing you could do as the emerging market story still played out as investors were rotating from on thing to another. Still U.S. investors should know that emerging markets panics are about as common as NCIC cable reruns. Matthew Lynn reported in MarketWatch.com there are 3 reasons not to be concerned that the emerging market problems will impact us:

• They sell us stuff not the other way around. When have you heard of huge exports to Turkey or Argentina?
• Currency collapses are part of the solution not the problem. What do you and I care if a Zurich bank made a bad derivative trade?
• Emerging markets are actually growing. The IMF reported that growth in emerging markets would be 5.1% in 2014 versus 4.7 in 2013.

Thursday Markets were Up! It was all about corporate earnings as some reported Huge numbers and others didn’t hit consensus. The Dow closed up over 100 points on earnings and the fact that in the last quarter U.S. GDP jumped 3.3% and could have been a point higher if the government hadn’t contributed with shut-downs, squabbles and the rest you know. We do this shopping business better than anyone else in the world and we’re back doing it again. The consumer was back and numbers, seasonally adjusted, showed just how much we like to shop. The WSJ reported 1/31 how the oil bidzness is assisting in growing the economy. The following info chart from Commerce Department gives you an idea of the contribution energy has.

The Daily Beast Reported 1/31 on how several schools confiscated children’s lunches, tossed them because parents were either behind in their lunch monies or had a zero balance. The lunch costs $2.00 in Salt Lake City Schools and 40 kids were punished. Lunch ladies, who prepare and serve the food, were reportedly in tears as they were ordered to grab trays of food from kids and throw them away. In Dickenson, Texas, a 12 year old was told to throw out his breakfast because he was fifty cents short. In 2013 in Attleboro, Mass two dozen middle-schoolers were left crying after being told to throw away their lunches because they too did not have enough in the lunch money account. This is where school board members stand on their haunches and get things fixed. If not, these are the events that define who we are. Then there is the Greenville, SC school teacher, Margaret Southern, who lived modestly and when she died left over $8 million to Community Foundation of Greenville, S.C. for the benefit of children and animals.

Finally:Dow finished January the worst since 2009. Mitch Zacks reported that the important number on the S&P 500 Index is 1800. If we close under that expect more pain. If above markets should start to recover lost ground 1/30. Historically whenever the DJIA ended lower in January over the last 42 years it followed down for the rest of the year 62% of the time. But,dear reader, before you run to hide for the next 11 months this coming week has some huge numbers to consider including numbers on employment and manufacturing.

Questions call Paul @ 586 205 0430 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

SECURITIES OFFERED THROUGH WESTMINSTER FINANCIAL SECURITIES, INC. MEMBER SIPC/FINRA