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.

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