That Was The Week That Was-5th Week July

 

Bad News First. Thursday Markets Wiped Out July Gains as Indices Tumbled. This snapped a five month winning streak as losers outpaced winners. The DJIA closed down over 300 points. Argentina defaults.. for the second time in 12 years. Portugal’s Banco Espirito Santo fell almost 40%, as hopes of raising capital without state aide collapsed. S&P moved below its 50 day average and selling accelerated. ‘People are quick to take profit,’ said Wayne Wilbanks, CIO of Wilbanks, Smith & Thomas Asset Management, LLC. ‘' Maybe the markets getting a little tired here,’ said David Chalupnik, head of equities at Nuveen Asset Management. The Fed Open Market Committee reiterated it would likely reduce bond buying in further ‘measured steps.’ Info from Reuters, Bloomberg, WSJ, 7/31/2014. I got a sense of something stirring Wednesday. See my note.

 

Alan Greenspan, former Fed Chief, said in an interview July 24th that, ‘Bubbles can’t be stopped without a ‘crunch’’. He expects a ‘sharp’ market reaction when the Federal Reserve starts to ‘unwind’  the size of the balance sheet (and attempting that) with minimal impact. He went on that it will not be easy and it is not obvious how to do it. ‘Markets have always been sensitive. They reflect animal spirits.’ He also said it is impossible to remove ‘bubbles’ from this or any future market simply because of the human nature.  Markets will run from bubble to bubble. Marketwatch.com.

A week ago Friday Reuters reported that Britain’s economy now bigger than it was before the financial crisis struck six years ago. That meant total economic output was bigger than its previous peak in the first quarter of 2008. Germany passed that milestone in 2010 and France and the United States followed in 2011. (7/25/2014) The question remains why the U.S. press or investment managers of foreign assets haven’t made this bigger news. This is sensational information for all investors. While things are not cheap overseas certainly there is value that retail investors should be exploring.  The Commerce Department reported that U.S. durable goods increased 0.7 % as demand increased from transportation to machinery and computers and electronic products. Reuters 7/25. Here’s the important part: The increase in orders for these goods, which range from toasters to aircraft are meant to last three years or more, was above economists expectations. ‘This is consistent broad, increasing demand throughout the economy,’ said Gus Faucher, senior economist at PNC Financial Services in Pittsburgh. 7/25/2014

Buy & Hold Investing is Impossible- wrote Chuck Jaffe @ MarketWatch.com, 7/26/2014. It is emotionally infeasible to think a rational person would sit back and watch their portfolio ‘be gutted’. Natixis Global Asset Management committed to a three year research study on how investors can bridge the emotional gap between a desire to generate superior investment returns and an aversion to taking risk. The study is designed to find out when the average investor is to put their ‘hand back in the fire’ after they’ve been burned.

Bankers Still Not Playing ‘Nice’. CNBC’s Matt Clinch reported that while major banks have repaired their balance sheets the culture change in investment bankers that regulators had hoped for isn’t there. ‘Reckless banking’ persists. Today’s penalties are being seen as a ‘cost of doing business’. CNBC 7/28/2014. ‘History records that money changers have used every form of abuse, intrigue, deceit and violent means possible to maintain their control over governments by controlling money and its issuance.’-U.S President James Madison

Monday Markets Closed Mixed on Home Sales Decline in June. Concerns About Israel Which Contributed to Losses along With Russia-Ukraine.  Tuesday Additional Russia Sanctions by E.U. and U.S. Dampened Markets. The very interesting part is that the markets are not exhibiting any ‘real’ volatility. It’s very ‘ho-hum’ out there.

U.S. Economy Expanded at a more than expected rate of 4% in the second quarter. This from a revised expectation of 2.6% but did little for the markets Wednesday as the Dow ended down and Naz was up. The overall economy got a boost from business investment, government spending and investment in home building.-Reuters 7/30/2014  There seems to be the very beginnings of market unrest.

This May Be the Correction Investors Have Been Waiting For. U.S. junk bond funds post $1.48 billion in weekly outflow. ‘Fears that gains in riskier assets have outpaced the improvement in the outlook for global growth and the health of consumer finances.’ Alan Gayle at RidgeWorth Investments said, ‘The easy trade is over.’ WSJ 7/31/2014.   Friday morning U.S. payrolls rose 209,000 in July. Unemployment back to 6.2%. Consumer spending rose in June by most in 3 months. Futures show negative open.  Bloomberg.com 8/1/2014 Wages expected to track inflation for near future (CNBC Squawk 8-1-2014).

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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