That Was The Week That Was-4th Week September

 

BAD NEWS FIRST. Thursday Markets Fell. Stocks were slammed globally and the plunge showed no favorites as it was an equal opportunity rout. It was the worst trading day since last July with the DJIA off more than 260 points at the close. The S&P 500 Index broke its 50 day moving average, which was major support for the market on Wednesday. Art Cashin, on CNBC, wondered if this sell-off was the beginning of something big. He admitted not knowing exactly what was the catalyst for selling except that it was broad based and may be setting it up for ‘one of those September-October things’. The sell-off wasn’t limited to any particular portion of the market. One bit of news/rumor alleged that in Moscow a pro-Kremlin legislature wants to allow seizures of foreign assets. That bit of news with countries with close economic relations with Russia caused concern. Rex Macey, chief allocation officer at Wilmington Trust Investment Advisors, said he would be surprised if the correction reached 10% before it ended. ‘The economy is doing too well and profits are doing too well, for the kind of 10% correction you may think about.’ In other news few money managers expect a large stock decline as they expect the U.S. economy to keep growing solidly. Jim Cramer came out on his CNBC show and told viewers to sit tight. Cody Willard at MarketWatch.com said he thinks the we’re in a bubble-blowing bull market with years to run but that doesn’t mean the market won’t correct 10% or more within a bubble-blowing bull market context. Info from various sources including live CNBC 9/25, Bloomberg.com., WSJ and MarketWatch.com

USA Today published a pre-retiree checklist. Here’s a few ideas to consider/do before retirement:

• Prepare a budget for retirement. Different than what you’d be spending while working. Less money for clothes, outside lunches, etc.
• Check your emergency fund.
• What to do with your health insurance. Options? Add dental and/or vision benefits. Medicare will not provide or cover.
• Review your life insurance.
• Where do you want to live?
• Meet with an accountant to get estimate of federal and state taxes.

In Pursuit of Happiness Sanjay Gupta, MD explores scientifically proven ways to increase your life satisfaction. People who are happy live longer and are healthier. The Danes are the happiest people in the world. Think Victor Borge who said, ‘The shortest distance between two people is a smile.’ Here’s a few tips on getting happy.

• Change your attitude.
• Work less.
• Focus on experiences.
• Build up social network.
• Volunteer.
• Laugh- a lot.

I’ll discuss when you should be buying fixed investments at the annual client meeting. Remember- as interest rates rise, principal falls.

Monday Markets Fell Most in 7 Weeks. DJIA Losing +100 points.  Concerns were about slowing China growth and fall in home sales. Scott Wren, Equity strategist at Wells Fargo Advisors said, ‘There is a lot of hype out there that the economy is going to consistently accelerate at a better rate of growth. I’m in the camp of modest growth and modest inflation, that’s not going to change anytime soon.’ Bloomberg Businessweek News 9/22/2014.

Bob Doll, CFA, in his Nuveen Asset Management Commentary for September 22, 2014 reported:

• Commodity prices will continue to fall.
• Small caps have underperformed in 2014 and trend is expected to continue.
• Third quarter growth appears to be tracking close to 3.5%
• Period following mid-term elections has been historically strong for equities.

Tuesday markets carry over losses from Monday as the reason du jour was bombings in Syria and drug makers fell on the crackdown on tax-saving mergers, allowing U.S. companies access to foreign cash without paying U.S. taxes. It was the third day of losses in a row for the markets. Bloomberg.com 9/23/2014.

Small Cap stocks big losers over the last 12-months and we’ve seen the Russell 2000 Index 50 day moving average cross over the 200 day which is called a Death Cross. Some analysts see this as the beginning of a Bear market. Others point to historical trends which illustrate once this Death Cross happens the small caps have a tendency to rally.

Info from Investopedia, WSJ, Barrons.com and Bloomberg.com

Cramer on CNBC Tuesday 9/23 said he’d only be buying two companies at this point in time. One is in tech and the other in pharmaceuticals. Wednesday markets took off as investors piled on after a three day losing streak. DJIA +150 points.

Questions on what will happen when the Fed does raise rates answered by Howard Gold who wrote in his MarketWatch.com Op piece 9/24 that stocks fell 13 out of 16 times the Fed raised rates. The S&P 500 lost 10% on average. But, if you continue to look at the numbers, within 6 months the markets were UP 1.3% after the first rate hike. Usually markets will start their correction about six months before the first rate increase. What investment sectors performed the best in a rising rate environment? Gold reports technology, energy and materials. What to avoid would be those sectors that are interest rate sensitive like financials, utilities and telecom.

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-3rd Week September

 

  Businesses and organizations love to do studies. One recent study answered the question on what happens when investors ignore their investments? In a Barrons.com article on 9/10 entitled The virtues of inactive investing, found that accounts that have been forgotten, with no buying and selling, have performed the best, according to Fidelity Funds, which studied those accounts that were with their firm. Another study of investment accounts that were involved in extended litigation, and because of the long court battle, there could be no buying only selling, were found that they performed the best over those that were micro-managed.  Doing absolutely nothing, not even rebalancing, while may be considered neglectful, actually increased returns. Again this seems to validate the studies that shown those investors that did nothing with their investments through the market correction did far better than those that sold and tried to time the market.

WSJ, in their Investing for Retirement section 9/14/2014, raised the worry that in the Prez’s 2015 Budget is a real kick in the pants for Roth IRA owners. It would require (1) To start taking distributions at 70 1/2. (2) For heirs an inherited Roth IRA would not have the ‘stretch’ distribution benefit but would be required to take the funds over 5 years. There has never been a real national policy to encourage personal saving in this country. With a ‘tax’ everything movement in this country I hope someone will realize that this was Not why the Roth was created.

Dollar-rally has fueled a demand for U.S. stocks and bonds. The gains reflect investor expectation that the U.S. will raise fed funds rate in 2015. Chart source Thomson-Reuters. WSJ. 9/13/2014

S&P 500 Advance Tuesday was the biggest in 4 weeks! The S&P was up almost 15 points, the DJIA +100. MarketWatch.com reported that data from Bloomberg showed 47% of the stocks in the Nasdaq composite down at least 20% from their peak in the past 12 months, and more than 40% of the Russell 2000 companies (small cap) have fallen by as much. The S&P index is another story with fewer than 6% of the companies in what is considered Bear territory. Because of most investor’s focus on the large cap portion of the market they miss the weakness in the tech and small cap arena.

The Federal Reserve signaled Wednesday that it plans on keeping rates low for a considerable period of time. It plans on doing that as long as inflation is low. The markets responded by moving higher at the close. Bill Gross, on CNBC, commented soon after that he believes the Fed will not raise rates for more than a considerable period of time. Gross, a pretty bright guy in his own right, believes inflation numbers, as they’re calculated by the government, will remain extremely low for quite some time. Others think the Fed, when it does begin to raise rates, will do so quick and often. A report in MarketWatch.com suggested that the Fed may raise rates four times in 2015. The Fed meets eight times a year and so a dot plot line suggests a rate hike of 1/4% beginning in the middle of 2015 and continuing until rates reach 3.75%.  Information gathered  9/17 from multiple sources including WSJ, CNBC, and others.

Warren Buffett told Wells Fargo executives earlier this year why he invests in certain businesses. He said he looks for companies that are simple to run, that even an idiot can run it, because sooner or later one will.

Jobless claims fell to 280,000, their second lowest level in 14 years while the Philly Fed index showed an increase in plans to hire and future orders even as the overall index fell Thursday. The Dow was up 100 points and JP Morgan’s Jason Hunter sees no signs that the bull market is running out of steam. In Barrons.com he reported that the longer term view remains intact. The chart does not a trend that suggests the bull market is faltering. ‘Corrections should be viewed as opportunities to add to core long exposure.’

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-2nd Week September

 Financial Contagion is something all investors, both amateur and professional, need to immunize themselves from. Jason Zweig, in his ‘Intelligent Investor’, WSJ 9/5/2014, reported that recent experiments by Garriy Shteynberg, professor of psychology at the University of Tennessee, found that people who pay attention to the same thing at the same time that others do will remember it better, and be more inclined to act on it. There is evidence that 401k investors put more money into stocks when their co-workers have recently earned high returns and mutual fund managers are more likely to invest in a company when other stock-pickers in the same city are also buying it. Robert Shiller, Nobel Prize winning economist, found that investors seem to chase whatever grabbed their attention the most because other people were talking about it. This included 75% of institutional investors. Their decision to buy, he concluded, had nothing to do with fundamental research. This also should explain why certain investors bail from the market or try to time the stock market. Warren Buffett said it, and your mother probably said it more than once, that we should ‘hang out with people better than you are.’

All Investors Need a Written Plan On What Precisely To Do In Case of a Market Meltdown or Massive Correction. It has to be a plan that you decide on when things are calm. The reason is simply that most of us will get emotional and make decisions not in our best long-term interest at the onset of a crash or correction. That’s why cruise ships have lifeboat drills before something bad happens and not after. I’ll have more on this at our annual meeting this winter.

Barrons.com Sunday 9/6/2014 Published A Chart Indicating The Bull Market is Well In Charge This Year & May Continue:

The argument makes sense that as the recovery slowly grinds forward corporate earnings continue to move higher. The upside is that as things get better corporate capital spending will naturally rise leading to higher stock prices. The following chart shows how well sectors have performed year-to-date: Sources Bloomberg and Bank of America.

What's Your Plan? The majority of financial/retirement plans are based on accumulation of assets. Use of those assets is then illustrated to project a possible lifetime income. The problem is that people plan for different things through their life cycle. It could be preservation of principal, charitable bequest, income for a disabled relation. Unfortunately all these needs are funded in a similar manner using identical asset allocations. Everyone needs to establish their own specific plan and invest suitably. Investors would be less disappointed and more satisfied if they communicated their specific goal and funded it appropriately and not generically.

Robert C. Doll, CFA, Nuveen Asset Management, in his September 8th Investment Commentary:

• Job Growth Slowed in August.
• Russia/Ukraine turmoil represents a growing risk.
• U.S. appears to be energy independent by the end of this decade.

Gold Bugs Bug-Out. ETF Trends 9/8/2014, report that the largest gold ETF say its holdings fall 1.2% the prior week. This the largest drop since May, according to Bloomberg. The net long position in futures and options is at the lowest in 11 weeks after speculators added the most short bets in 3 months.

 

Barrons Cover September, 2014.

 

Some of Wall Street’s Biggest Bears Have Turned Into Bulls.

Wells Fargo’s Gina Martin Adams had a 2014 Target of 1850 and replaced it with a 12-month Target of 2,100. Birinyl Associates, a research firm, reported that 15 top strategists are now penciling in an average year-end forecast of 2010 versus an average 2014 prognostication of 1934 in December 2013. Source: Birinyl & Associates 9/10/2014. And that explains how today’s talking heads were able to predict a market collapse in 2008.

 

  Wonderful story to share next week on how ‘inaction’ managing your investments for long periods of time works to your benefit.

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 September

 

In 2011 many of us worried we’d never again see the S&P 500 Index reach 1400. Today it’s over 2000. There were also worries about slow growth and a double-dip recession. The Ben Bernanke devised something in 2011 he called ‘The Twist’, where the Fed would sell short term Treasuries and buy the long-end. Unemployment was 9% in 2011. Japan had a devastating Tsunami. Credit rating of the U.S. was downgraded. Inflation 3.2%. Interest on a 10-year was 2.01%. Worries about the EU and their banks continued and  their governments  had little money and less in the ideas department. European stocks were hammered late in the year. It seemed like a replay of 2008 for many EU members.The U.S. birthrate it was announced in 2011 had decreased for the 3rd year in a row ending in 2010. The three biggest worries Americans had were the Federal debt, jobs and economic instability. It was an awful year of worry and uncertainty but slowly we have gained ground, housing has edged up along with employment, the stock market and consumer confidence. It’s good to look back and see where we were only to appreciate where we are. There’s plenty of concerns facing us in 2014 which include geopolitical risk, a frothy market, political apathy, and low wages. Information gathered from multiple sources including WSJ, Wikipedia, Investopedia, Time.com, Google finance.

ALTERNATIVE MUTUAL FUNDS ARE IN THE NEWS BOTH AS THE NEXT BEST THING TO CREAM CHEESE AND CONCERNS THAT THEY MAY BE TICKING TIME BOMBS ARE IN THE NEWS.  Morningstar reports that $57 billion in new money has flowed to these ‘Frankenheimer’ funds the last two years. Mainly on the investor hope that theses funds will not collapse if the overall market should. The problem is that investors have little knowledge exactly what these funds invest in and no knowledge at all on how these funds will indeed perform if and when there is a market sell-off. Not all alternative funds are equal. Critics contend that they are mini-hedge funds investing in long-short, market neutral or absolute return strategies. With no history and no guarantee that these funds will be liquid in case of a market run investors may be faced with horrible losses or worse. The S.E.C. is conducting examinations of these funds not for enforcement but to gather information.  Information gathered from WSJ 8//12/2014 and MarketWatch.com 9/1/2014.

Boring? My Utility Fund Pick Has Had a Remarkable YTD. This on top of a great 2013 and an early consensus investment industry warning that the sector may well underperform this year.  It’s sometime good to ignore the experts.

Under the Radar- Gold at an 11 week low. Oil is relatively cheap. 

Banks May See New Liquidity Rules that Syphon off Dollars. Expect regulators to approve a so-called liquidity coverage ratio which would require large banks to hold safe assets-enough to fund their operations for 30 days. This would divert money from investment and from being loaned to business and consumers. The result would be a drag on earnings. WSJ 9/2/2014

While the assumption is correct during ultra-low yield atmosphere this could provide a boon when rates adjust upward.

Peek at Beige Book Report Ahead of Fed Policy-Making Meeting shows either an economic outlook that ‘brightened’ during the summer  or showed ‘Tepid Growth’ over the same period. Barrons.com saw it as tepid and the WSJ labeled it as ‘brightened’. Both reporters read the same report and were on same planet Earth but phrased their report a bit differently based on their subjective investment philosophy. The Barrons report was on the bond-fixed income market and WSJ focused on equities. The WSJ wrote about consumer spending and housing demand while Barrons used that information to indicate bonds were flat when the Beige Book report was released. WSJ & Barron 9/3/2014. There was nothing in the report that wasn’t already in the news. But you can see how someone can skew news to suit their philosophy.

Markets are so far showing no fear. There doesn’t seem a geopolitical concern that the market doesn’t digest and then discard. I read an interesting article at ETF.com where investors ‘may’ find a investor indicator by viewing the inflows and outflows of certain sector Exchange Traded Funds. While not a perfect indicator it may give a slight clue as to immediate investor sentiment. At the same time investors should remember that the ETF marketplace is where large investors trade and a large sale or purchase could very well be a portfolio rebalance or simple rotation that indicates absolutely nothing.

Sam Zell on CNBC Thursday 9/4 said that he thinks a stock market correction is coming. According to MarketWatch.com Zell joins a group of billionaires that are cautiously anticipating a ‘market crash’ or correction. This includes George Soros, and Carl Icahn, who said he’s very nervous about the U.S. stock market.

QUESTIONS CALL PAUL @ 586 295 0430 OR WRITE HIM @ 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-4th Week August

Taxes and Required Minimum Distributions. If you’re at least 70 1/2 and have an IRA or qualified employer sponsored plan that you are not contributing to you need to take an RMD for 2014. The amount you need to take is on your most recent statement, or you can call me. Some clients have their RMD date set automatically. In which case you do not need to do anything. You don’t have to take constructive receipt of your RMD but you can direct it to a taxable account, as many of my clients do.

The bad news is that if you don’t take your RMD by December 31st the penalty is 50% of the amount you were supposed to take out. If your RMD is $4,000 the penalty is $2,000! Make sure you do this before the end of the year. Call me for papers and instruction for your specific RMD amount.

Dennis Lockhart is CEO of the Federal Reserve Bank of Atlanta. Lockhart is not convinced that the economy is ready for ‘lift-off’. He says he is aligned with Chairwoman Yellen and doesn’t expect a rate hike anytime before mid 2015. Comments from an interview at Jackson Hole on August 24th.

The Aden sisters in their published investment newsletter of August 22nd report that bonds have been the best investment so far this year and may continue to be decades from now. They argue that we may see a return to Quantitative Easing if the Fed missteps and low interest rates for decades, much like what we’ve seen in Japan.

Index Investing has overwhelmed Active Managed Funds so far in 2014. There has been no huge star that has surprised investors in the active management arena. It seems managers are playing it very cautious and after a huge 2013 one cannot blame them. The fact that there was such huge expectations for this year that disappointed on so many levels only makes this year’s performance best seen in the rearview mirror. It has also been a stock pickers market. The fact that many of us have seen this story before should then be no surprise. As of August 22nd the S&P 500-Index +9% ytd.

Bob Doll, CFA. of Nuveen Asset Management, in his Weekly Investment Commentary: 8/25/2014:

• The labor market is strengthening.
• The housing market is also improving. July new home sales dipped slightly. Pending home sales for July have increased.
• Manufacturing levels are increasing. (Paul’s Note: Although stock weakness with those industrial/manufacturing companies with exports/facilities in Russia.)
• The Fed is adopting a more hawkish tone.
• The odds of a Republican takeover of the Senate are rising.

Consumer confidence in August rises to a seven year high! Bloomberg 8/26/2014.

Tuesday S&P 500 closed above 2000! This sent global equities to a record $66 trillion. The Index has almost tripled from its low in March, 2009. Guillaume Duchesne, equity strategist at BGL BNP Paribas SA in Luxembourg said, ‘We have recently moved from a liquidity driven market into a fundamental-driven one. …you need to be more selective, looking for markets with the strongest fundamentals.’ Bloomberg 8/26/14.

Barrons reported in ‘Asia Stocks to Watch’, the biggest e-commerce IPO slated for this fall is causing some consternation with money managers as they figure out what to sell in order to make room for what, some expect, to be the biggest IPO in U.S. history. There’s only so much money available and to make room in their portfolios money managers will have to cull their least ‘worthy’ holdings. Expect to see some stocks to slump for no other reason than they are being sold to make room. 8/27/2014 Barrons.com.

 

Questions call Paul @ 596 295 0430 or write at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

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