That Was The Week That Was-4th Week June

Inflation is back in the headlines. Bob Doll, Chief Equity Strategist for Nuveen Asset Management, wrote in his June 23rd newsletter, ‘Is the Fed Underestimating Inflation?’ Joe and Jane Consumer are well aware of the rising price of groceries and gasoline. You don’t need a PhD. in economics to ‘get it’ when the paycheck doesn’t stretch as far as it did just a few months earlier. The Fed is still using language that inflation is contained, but Doll wonders if the Fed is underestimating the strength of the economy, the pace of job growth and, most critically, the possibility of higher inflation. Inflation accelerated in May to its highest level in more than a year and a half (WSJ 6/26). Excluding food and energy prices rose 1.5%.

Kiplinger March, 2014 Reported why many people won’t be millionaires. Here’s a few:

• Quit School Early.
• Try to Keep Up with the Joneses.
• You Have Bad Habits.
• You Make Impulse Purchases.
• You Play the Lottery.
• You Make Minimum Payments.
• You Lack Goals.
• You Lack a Mentor.

Monday Markets Mixed.

MarketWatch.com columnist Ken Roberts wrote 6/23 that retirees could get more income by selling ‘covered calls against dividend paying stocks.’ Roberts nicely gives a thumbnail sketch of using covered call strategy without explaining risks older investors could possibly face. Investors seeking more information on using this strategy for part of their portfolio should call Paul Stanley.

Markets Fell- DJIA off over 100 points on Middle-East Concerns. Year to date both utilities and energy sectors solidly up when, at the beginning of the year, financial experts called for both to be lagging other equities. U.S. set to export oil for the first time in four decades! This Middle-East thing isn’t going away anytime soon. Expect it to keep festering throughout the summer as no one seems to have answers. Housing numbers popped unexpectedly but no one expects it to last. WSJ 6/25

What country has the highest percentage of millionaires? According to the Boston Consulting Group- Qatar 17.5%, Singapore 10%, U.S. 5.9%. Canada, with a smaller population, 2.9%.

 

Dorsey Wright Money Management Provided the above and following information from Issue 168, 6/25/2014.

• Markets edged slightly higher Wednesday.

Thursday Markets down 100 on the DJIA at the open. Jobless claims essentially flat from previous month. According to the Federal Reserve personal spending only rebounded some 0.2% in May, and real services consumption fell –0.2%. Barclays downgraded annualized Q2 growth from 4% to 2.9%. TD Ameritrade’s Eric Green cut his estimate from 3.6% to 3%. (Various sources WSJ, Barrons, Bloomberg, CNBC 6/26/2014).

Stocks Ended the Week Mildly Up. Second Weekly Gain for Nasdaq.

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-3rd Week June

  Off for 3 Days Last Week… stuff I was reading, and listening to, while on the road…

Consequences of Iraq in the hands of extremists:   Martin D. Weiss, Ph.D., wrote an article in his Money and Markets (6/14) on not underestimating the consequences of Iraq falling. It’s a huge country where the U.S.has spent close to $800 billion in country and another trillion dollars in war-related veterans benefits, plus trillions more in interest and other costs. According to a Brown University study we’ve spent close to $6 trillion dollars. China is also vitally dependant on oil produced by Iraq. A disruption could be damaging to their economic recovery. These are world changing events, Weiss writes,  happening so quickly that we could see an almost immediate inflation spike and global market recession.  The worst is that the current administration seems to have no policy or contingency for this situation. Iraq could be splintered into three countries. One a terrorist nation.

We’re overdue for a correction?

S&P 500 Chart from The Reformed Broker. Source Bloomberg/Morningstar.

The Morningstar 2014 Conference Didn’t Lack for Topics of Conversation. The one I thought most interesting was that investment managers are ‘pessimistic’ about the direction of rate and stretched valuations, especially in credit-oriented investments while there is no shortage of fixed investment buyers. Retail investors are still clamoring for ‘bonds’. Morningstar’s post 6/19 on the conference noted that it is getting extremely difficult for a manager to stay close to a ‘benchmark’ and still generate a positive absolute return in a low-interest environment.

Stocks Moved Up for The Week. Buoyed by the Federal Reserve global securities rose to records last week. Bloomberg 6/21, reported, confidence that central bank policies will spur economic growth and a valuation call by the Fed Chair sent global equities rallying for the week, with benchmark indexes in the U.S. and Canada climbing to all-time highs.

Finally: Traveling outside major metro areas at one time was especially enjoyable when listening to various ‘Tradio’ shows.  Remember ‘Tradio’? In rural, small towns the local radio stations opened their shows with listeners  calling in and trading junk they owned for junk they wanted. The radio host was there to simply get a proper description of what was being offered and move things along. As you drove the highway and the radio signal faded you always wondered if Joe got his chicken coop roof, Ed make the trade for a used tractor tire, or Martha Sue get someone to pick up the old Kelvinator? It was wildly fun, but sadly no more. Now it’s all the same from here to the Bridge. Small town radio with big city sounds, and that’s the shame.

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 June

Most investors believe that all Roth IRAs provide tax-free withdrawals, and no Required Minimum Distributions.  While true for those that initiated the Roth, not so for those that inherit and those that have Roth 401(k)s. Choosing a Roth option in your company 401(k) plan does allow tax-free withdrawals but owners do have to begin making withdrawals at 70 1/2, the same as the Traditional 401(k) owner. A beneficiary of a Roth IRA is also subject to RMD rules. Many Roth owners should plan accordingly before converting traditional IRAs into the Roth.

Robert Frank at CNBC reported 6/7/2014 that millionaire investors have admitted to making investment mistakes. The number one mistake is not adequately diversifying. Yes, diversifying. Not asset allocating but making sure that not all their eggs were in one basket. Interesting, no?

Markets Over Due For a Correction? Trading volume and volatility are at low levels (see chart from Barclays/FactSet 6/9/2014). The Dow has been 32 months without a 10% pullback. A market correction of 10% or more happens roughly every 12 months. With complacency among investors, low trading volume and equally low VIX the opportunities for a correction are very likely.  

Sometimes people who want us to think they are real smart talk in a way that makes us want to check the batteries in our hearing aids. Alan Greenspan, former Fed chief, was one of those who would discombobulate word phrases. Now Nouriel Roubini, famous for picking correct Bear cycles, said at the Aberdeen Asset Management conference, ‘There’s schizophrenia between what the stock and bond market tell you.’

Markets closed mixed Tuesday.

Watching CBS News and the ‘ragtag’ army of insurgents beating the Iraqi Army sans American support gave pols in Washington, DC and Markets Angst Wednesday.  Brent crude up Thursday am to $111.00. The not-ready-for-prime-time Iraqi army left their uniforms and weapons on the street as they melted back to civilian life. The Dow fell over 100 Wednesday and I have to believe there is more to come in the coming weeks.

In the past 12 months, at least 10 companies have repurchased shares from activist investors.  In the past this was called Greenmail. It was hot in the 1990s until corporations beefed up defenses and new laws were put in place to discourage raiders. Now it seems, according to WSJ 6/11/2014 the ‘greenish mail’ is back. Here’s the charts- you decide.

chart by Chris Philpot WSJ 6/11/2014.

Markets Dropped  100+ points on Thursday.

Oil has been moving higher and the war in Iraq will only add to the cost. While the U.S. has decreased its dependence on overseas energy Iraq is still a huge global exporter of oil. How high and for how long will the price of oil go is unknown. One thing for sure this is a huge mess, and will only get uglier. I would expect much higher prices at the pump and and subsequent slowing of consumer spending. This could well be the catalyst for a market correction.

Friday Markets Edged Slightly Up.  But First Weekly Loss in 4 Weeks.

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-1st Week June

 Every time an article on Social Security is published critics contend that it is not a government program but one that is owned and funded by workers. They also argue that it is not an ‘entitlement’, and wish that writers and regulators stop referring to it as such. Sorry, folks, but it is a government program, created by the FDR Administration in 1935. It is an entitlement since control over who may receive benefits, how much and when is not in the hands of those funding Social Security, but the government. It’s a lot like an inheritance or gift- it’s not yours until you receive it.  

Looking for Income? REITS, Real Estate Investment Trusts, have been hot in 2014. These public investments trade like stocks, and sport attractive yields. While popular during periods of low and stable interest periods the principal on a REIT can fall if rates rise. Still there are opportunities for the long-term investor. Call or email me for details.

Utilities have been the surprise winner this year. After a New Year prediction that the sector would be a non-performer in 2014 it came out with a robust performance in the first quarter as the big winner. The reason, according to Barrons.com 5/31, is as an income play. While Treasuries have seen their yield fall utilities have sparked investor interest. May was a bad month for the sector as the utilities posted a loss of 2.4%. Still the sector is up 11% so far in 2014 (through May 31st), and with a 3.7% dividend yield. Looking to add the sector to your current portfolio? Call me for ideas 586 295 0430.

WSJ (6/1/2014) Reported on the rise of Frontier Markets versus Emerging Markets. Individual countries have posted significant returns; especially Bulgaria, Pakistan and Nigeria. Investors disappointed by our domestic returns in 2014 have poured more than $1.5 billion in the first four months of the year. Investors can invest in Frontier Markets through several mutual funds and Exchange Traded Funds.

Federal Reserve June Beige Book Commentary on Current Economic Conditions reported that economic activity expanded ‘moderately’ across almost all districts. Some were relatively strong although there were lingering pockets in the NE where the winter weather weighed on sales. Residential real estate was mixed, with some low inventories constricting sales. Manufacturing expanded throughout, and in an increasingly strong pace in a number of Districts. (Bloomberg 6/4)

Sam Eisenstadt predicts the S&P 500 Index hits 2100 by November. MarketWatch.com (6/4) reported the Bulls are back and there is a growing sense that they’re staying awhile. Research firm S&P Capital IQ raised its 12-month target for the S&P to 2100 from 1985- a 9% increase.  

Thursday DJIA up! The ECB cut the deposit rate and will move to persuade banks to lend. That ‘alleviated’ some investor concerns. Reuters 6/5/2014

Friday was National Donut Day! What’s Your Fav? Mine’s French Cruller.

Finally- Friday Markets Moved Up- Dow set a Record after a solid jobs report. It was the strongest week since mid-April. 

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-5th Week May

 I read something last week( 5/21) and got the giggles. Paul Merriman writing in MarketWatch.com reported that one of the biggest financial myths is that investors think its hard to beat the S&P 500 Index. Not at all, disagrees Merriman. “It would be if you were using only individual stocks. It isn’t that tough to beat the index.” And then he explains if you diversify widely in a mix of large, small, growth, value, domestic and foreign funds you will most likely beat the S&P. “Although that won’t happen every year…,” he warned. So I gotta ask, if it’s so easy to beat the index but I can only do it every so often how does that dispel the myth? And what exactly is the recipe? Isn’t that like a stopped clock is right twice a day? Sometimes people should read what they write. In the real world and in most cases financial professionals are creating portfolios with less risk than the market index but with competitive returns.

First Time Home Buyers are contributing to the lack of a housing recovery. We expected a housing boost in 2014 but first time home buyers are being shut out by higher standards, high prices and a ‘sluggish’ economy (WSJ/5/22). And the other question is what about Fannie and Freddy? Will they be reorganized or phased out? First time home buyers now account for 16% of the market- down from a historical 29% in new home sales.

Jackpot! S&P 500 Index Hits Record Tuesday. Large Cap Value stock shares up 4.42 through May 23rd, courtesy of Lord Abbett newsletter. Small cap Growth –(minius) 4.40 over same period. 

GAO (Government Accountability Office) reports most people claim social security too soon. Waiting a year may increase income benefits by 6% says the GAO. Among those born in 1946 only 8% of the men and 6% of the women delayed claiming until age 67.

Markets took a Breather Wednesday. We may be having one of those so-so years after a huge 2013. But  I’m also thinking is that this market can keep rolling on as earnings increase, manufacturing grows, home buying slowly improves (and the government doesn’t throw in a monkey wrench on borrowing). Thursday markets up. Down Friday.

Bull Markets Last Longer Than People Think. I got the following chart from MarketWatch.com that got it from Morningstar.  It shows the length of Bull markets and the relatively short Bear Markets in between.

chart created by Morningstar.

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.