That Was The Week That Was-4th Week July

Too Late to Hop on The Stock Market Train? Yes, I’d be a bit cautious about here, even though professional managers like Robert C. Doll, of Nuveen Asset Management, and  Jeremy Grantham, founder of GMO, a Boston based money manager, don’t see a ‘bubble’ just yet. Doll, in his July 14th, newsletter, reported: (1) This recovery is the slowest in post WW2 period, (2) U.S. manufacturing and energy renaissance is continuing to unfold, (3) Historically, bull markets falter when recessions ensure, not when valuations become more expensive. Jeremy Grantham, in a note to clients, said that he doesn’t see a bubble, just yet. He thinks S&P-500 2250, if he were to pick a specific number. Grantham also provides there is a bullish argument due to the huge increase in ‘financial’ deals. He calls in a veritable ‘explosion’. Never seen before. Also he reports when compared to other deal frenzies the real cost of debt this cycle is lower. Profit margins are still very high, and are expected to stay there. Third, this is a very young recovery. Just as our friends from Calamos Investments reported in their Economic Review and Outlook, July 18, 2014, ‘The U.S. remains in the middle innings of economic recovery. Because the Great Recession was atypically severe, we are likely to see a lengthier recovery cycle.

Geopolitical Tensions with Russia-Ukraine Added to the Mix along with Israel-Palestine.

Monday Markets Off Triple Digits at the Open –Closed off  48 on the DJIA and 7 S&P 500-Index. Russia Key Concern.  ‘Although geopolitical events are creating challenges for the markets, fundamentals are improving. This should help equity prices to rise.’-Robert C. Doll,CFA, Nuveen Asset Management 7-21-2014.

Sales of Existing Homes in U.S. Rise to an Eight-Month High. Bloomberg 7/22/2014

The S.E.C. is expected to change rules on money market funds. Most rules apply to institutional and corporate accounts. The ‘stable’ dollar for dollar share price will be abandon and the fund price will float. Also during a crisis the money may not be always be (1) available (2) a fee could be charged for redemptions. In the 2008 it was the institutional investor that redeemed their money funds and not the average retail account holder. It is expected that the rules will go in effect in 2-years. WSJ 7-22-2014 

Wednesday Markets Closed Mixed. Gold off $6. I probably had more fun Wednesday at the dentist than most folks had watching their stock portfolio. So I was thinking that there are those of us who still believe that the market is a bit long but not in danger of a 2008 crash and then those that have been sitting on the curb, fingers crossed, and hoping for another massive crash so they can make up for their earlier mistake of bailing when they should have been buying. More news on the markets from Morningstar (Barrons 7 –24-2014) that state almost all equity sectors are ‘fairly’ valued. CNNMoney’s Paul LaMonica in a piece he wrote said simply there are too many good reasons why stocks aren’t going to crash. ‘Bear markets often occur around the same time as severe economic downturns. The 2008 credit crisis. The 2001 recession following the dot com meltdown. The oil shock of the mid-70s.’

Joshua Brown, on investment portfolio management,  ‘Anyone can outperform at any time, no one can outperform all the time, and persistence of performance is nearly non-existent.’

Jobless Claims dropped the week before last by 19,000. This is an eight year low. Bloomberg 7-24-2014. Bank of America saw an 8% growth in credit and debit card volumes and increased balances in the first quarter. Barrons 7-5-2014, reported- ‘European stocks are no longer in the bargain bin, but fund managers are finding a ‘lot’ to like- especially companies focused on emerging markets and the consumer.’

Treasury Yields were higher Thursday on news of stronger economic data here and overseas. Chinese manufacturing activity at an 18 month high, and similarly strong manufacturing data out of Europe.  Barrons.com 7/24/14

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 July

Jim Paulsen, Wells Capital, chief investment strategist, in a note written July 10th, ‘The economic recovery seems only in its middle innings,’ and there are ‘just too many aspects of the economy which need to improve further before significant recession risk emerges.’ Paulsen was also one of many that was wrong on the 2008 Market Crash. He also suggested in his July 10th memo that investors take a barbell approach to U.S. stocks, meaning having exposure to cyclicals and defensives.  He also suggested increasing exposure in international. He feels that the value is there.  Note he doesn’t write about investors ‘asset-allocating’ but making sure that they are diversified. MarketWatch.com 7/12/2014

The difference between Defensive and Cyclicals. Defensive stocks are those that people have to do business with no matter what the economy. Think utilities and consumer products. Cyclical stocks are just about everything else: autos, manufacturing and technology, to give an example. Call me for your portfolio review at 586 295 0430.

Looking for ways to enhance your portfolio return? Or maybe looking for stocks to trade in your ‘aggressive portfolio’. Stock spinoffs are a way for investors to benefit from a company restructuring. In a traditional spinoff the company distributes all its equity ownership to existing shareholders in a tax-free dividend of the new company’s stock. There are multiple reasons why spinoffs are done and why investors like them. Not all spinoffs are equal, be careful when you buy the individual stock- or you could invest in an ETF that specializes in exactly that market sector. Call me for more info…

Monday Markets Romped With the Dow Gaining 111+ and The Naz 24+. This on a backdrop of certain U.S. bank beating estimates even as it paid a $7 billion dollar fine for its role in the mortgage debacle of 2008. Bob Doll, CFA, chief equity strategist with Nuveen Asset Management provided reasons why investors should remain positive even as the markets move higher. “Investor anxiety remains high, but the bottom line is the economic backdrop and market fundamentals still warrant overweight positions in equities.’ Nuveen Asset Management Weekly Investment Commentary 7/14/2014.

Janet Yellen, Chairwoman Federal Reserve, testified before the Senate Tuesday and markets ended mixed. She acknowledged that inflation isn’t near the Fed’s target and the economy isn’t nearing the point where the Federal Reserve should start raising rates. Low rates will continue for the near future as the economy continues to improve but the recovery is not complete.  Compiled from a variety of sources, CNBC, Bloomberg, WSJ, etc.

Mergers & Acquisition Continues as cheap financing and a tough global economy (AP 7/16)  have made acquisitions an attractive option for companies to expand their business. Markets up modestly Thursday morning. Earnings season continues with no real surprises. Bond prices rose as it seems they are in a price rut. Yield on 10-year fell to 2.53%.

U.S. and E.U. Financial Sanctions on Russia roiled world markets Early Thursday. We’ll see how this plays out. Too many global hotspots for investors to ignore. This was written before markets opened. Domestic markets were up to this point positive for the week. Then later in the day came the shocking news.

Stocks fell Thursday afternoon on news of Malaysian passenger plane shot from the sky by missile while flying over war-torn Ukraine. Dow closed down 160+ points. According to Barrons.com 7/17/2014 the news reignited geopolitical concerns. In other news housing starts fell, Philly fed index of manufacturing rose to its highest level since 2011.

Questions call Paul @ 586 295 0430 or write him at pstanley@westminsterfinancial.com. Share this blog with people that care about their money.

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That Was The Week That Was-2nd Week July

 

Most investors have avoided European stocks and for good reason but that’s over. Investors now view European assets as cheap. Almost every article I read promotes European shares and the future value they’ll bring to portfolios. Last week’s bad news on Portuguese lender Banco Espirito Santo SA (see more news in this blog) was but a blip, according to Josie Cox, WSJ, 7/13/2014. For investors who have avoided foreign companies now may be a good time to consider buying.  See comments from investment managers in today’s blog about Europe’s resurgence.

The Latest Jobs Report Caused the Markets to Top 17000 on the Dow and it was the 7th fastest 1000 point run-up in the market’s history. Experts had expected 218,000 jobs and we got 288,000.  According to the WSJ this simply confirmed a longer running Bull market. Morningstar’s Francisco Torralba, PhD, reported that the job increase was across multiple sectors except for the Federal government, which was basically flat. Jobs in retail, professional and business services, health care, education and construction all saw increases. Cody Willard saw the Jobs Blowout as Hype. He says his analysis shows a growing inflation bubble. Also, he reported, the jobs picture has been steadily improving since 2011. Only now is it trickling down from multi-nationals to Main Street. Information gathered from WSJ, Bloomberg, CNBC, WSJ and MarketWatch.com.

It seems like yesterday when investors wondered if the S&P 500 Index would break 1400. Now a few points from hitting a record 2000 the markets took a breather last Monday in anticipation of ‘earning season.’ All indices were lower Monday. The previous week fixed income took a shellacking while equities moved higher. Utilities, REITS and the bond market signaled a possible change. Treasuries, according to Michael Kahn at Barrons.com. ‘Getting Technical’ (7-7-14), have made lower highs and lower lows since peaking in May…and with that falling trend in hand we have to take notice.’ Kahn concludes that this consolidation could continue for weeks before moving higher. Tuesday morning markets started down triple digits and closed the same. Europe also down for the day.

Sidebar: The U.S. has always had a discriminatory immigration policy.  The Immigration Act of 1917 specifically barred Asians. The law also banned ‘professional beggars, polygamists, anarchists, anyone over the age of 16 who was illiterate along with feeble minded people and others…’ Give me your tired, poor, huddled masses, wretched refuse, homeless, tempest-tost…’, is a sonnet engraved on the statue of liberty and not a dedicated national immigration policy.

Barry Sternlicht, CEO,Starwood Capital Group, on CNBC Squawk. 7/8, spoke on investing tilt more toward Europe.  He also said, “ If we had invested $2 trillion in education here in the U.S. instead of in a war we’d be a much stronger country.’  Tim Armour, Portfolio Manager at American Funds, ‘ The economic backdrop in the U.S. still looks pretty good. Europe is further behind….the situation is improving, but the metrics are further behind the U.S.- and that’s an opportunity.’ (July. 2014 Mid-Year Outlook).

Earning season has begun.

Federal Reserve says economy better and will be stopping easy monetary policy this October. The Fed also indicated it would be managing hiking interest rates in the future. Markets responded Wednesday by closing up after a 2-day selloff.

Thursday Morning Here is the question- are markets overbought and ready for a 30% drop, much like 1987? Or, will the markets continue on making fresh highs. A market crash like 1987 would be refreshing, for those that remember it. The 87 crash lead to one of the longest and most successful Bull Markets in the history of the world. For those that don’t remember, if you bought a security in January, 1987 in October you were losing money and by December (on average)  you were back to where you were in January. That wouldn’t be so bad, would it? One clue to ‘market bubbles’ is the retail investor exuberance. We’re just not seeing that right now. ‘There is too many things wrong economically and politically around the globe to forestall such confidence,’ wrote John Gustafson in a piece for Minyanville. Gustafson is president of Palmetto Wealth Management. Another point is the retail investor has been lately a net seller of equity mutual funds. The small investor has been running from this market and not embracing it. Info gathered from Barrons.com 7/9/14 The Muddled Truth about the Stock Market. Thursday markets opened triple digits down on bad news on the Portuguese Banco Espirito Santo which missed payments on short term debt issued to some clients. According to Morningstar Mid-Day Update- 7/10, the ‘delay comes on top of accounting irregularities and other financial issues facing the bank. The DJIA was off over 180 points early but closed off about 70 points Thursday.

Finally- Markets Closed Slightly Higher Friday.

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 July

Required Minimum Distribution for those 70 1/2+One of the worst things about saving in a qualified plan is the IRS rules eventually force you to take out a minimal amount and pay taxes on it whether you need it or not. If you haven’t established a set income withdrawal, or taken your 2014 RMD now may be the time to do so. RMD is calculated based on your account 2013 year-end value, and current age. You can have your Federal and state taxes withheld from your distribution. You can also reinvest your RMD into another single or joint account. Get your RMD forms by calling or e-mail me.

Paul Nolte, portfolio manager at Kingsview Asset Management, told clients 6/30/2014, ‘'The sunny market climate isn’t going to change anytime soon.” When it does, Nolte wrote, it will be something that plants doubt in investor’s minds about the economies health or an interest-rate hike. For now enjoy the markets before they enter the scary season (meaning this coming fall).

Henry Blodget’s latest stock outlook was commented on by Barrons.com 7/1/2014. Henry used to work at Merrill  Lynch and was ‘removed’ from the investment business permanently for a ‘conflict of interest’ during the dot.com heyday. That doesn’t mean he can’t comment on what’s happening in the markets. He is currently editor in- chief of the online ‘Business Insider.’ Henry believes that profit margins, stock prices are extremely high. While that doesn’t necessarily mean an immediate crash eventually gravity will take over. He believes that stocks will perform very poorly from this point on for the next seven to ten years.

Market Mixed Monday. Year to date Utilities and Emerging Markets have had a nice run. Shortened Trading Week. I would imagine a quiet holiday week with no big surprises.

Boy was I wrong! It was a very very good day Tuesday as the DJIA closed up over 125 points, the Naz was up 50 and we’re seeing the Dow close in on 17000. At this point I think reasonable investors have to be thinking ‘what’s driving’ the market? Gold and oil were up by pennies and the VIX fell. Don’t be surprised to see another pullback perhaps before Labor Day. This Middle-East situation is not going to go away.

Unemployment dropped to 6.1%. Better than expected numbers blows by expectations, David Faber, CNBC 7/3/2014. Cramer, on same morning CNBC program, said it was time to get aggressive as rates (employment numbers) get low. Don’t try to outthink this market. Multiples are not hampering further growth. This is the lowest unemployment number since 2008.

Finally- Call it the ‘Muddle Through’ Economy. Molson Coors Brewing Co CEO Peter Swinburn told investors that the last five years were challenging…but the company is now starting to see ‘green shoots’ of recovery. Consumer spending is still muted and that has to do with jobs growth, which is mainly contained in the low-wage fields. U.S. workers have climbed about 2%, just enough to cover inflation but there are few signs that show wages breaking out of that range as an abundance of idled labor allows firms to keep costs low. CEO Nate DaPore, of PMW Technologies, said the company is witnessing the choppiness among its clients in the retail and food-services sectors. ‘The economy’s very fragile.’ He said.

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

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