That Was The Week That Was-4th Week October

 

Good News! Lets start with that.

Thursday the markets went on an old-fashioned buying binge with the DJIA up, at one time, 300 points. News, late in the day, of a New York City Doctor being possibly infected with Ebola triggered a selloff and the Dow fell to close up over 200 points, the Naz finished up 70 and the S&P 500 Index up over 24. Bob Doll, earlier in the week, spoke at a NAPFA meeting reminding those in attendance to expect increased market volatility going forward. The doctor was later confirmed the first known Ebola case in NYC. Fears of people not using the subway, not going to school or work caused the market selloff before the close.  Now for the rest of the weekly recap.

 

The October1987 Stock Market Crash Had No Bottom! 

As long as we’re in October ( a month known for its ‘Bearish’ Moods’) I should remind you of Black Monday, October 19, 1987.  Somewhere I have the framed front page of the October 20, 1987 Detroit Free Press announcing the market crash as a saved piece of nostalgia. The Freep reported the carnage after the markets fell 22.6% and over 500 points in one trading day, and warned of the possible meltdown that Tuesday.  It wasn’t just our markets that fell but it was a global selloff. Back then there were no stock market circuit breakers to stop the free-fall as there are today. (Some traders complain that we shouldn’t have circuit breakers at all and allow nature and markets take their course.) The 22.6% drop is equivalent to 3,600 points today. Circuit breakers were created after the 1987 crash. Circuit breakers are programs to halt trading and allow the markets to catch their breath. Circuit breaker rules are adjusted constantly. For example if the Dow falls 1,200 points before 2 p.m. EST trading will be halted for one hour.A  3,650 drop will halt trading for the remainder of the day no matter when the decline occurs. Like I said, these are rules that constantly change as the markets grow.

 

‘CRISIS BOTTOM,’ WRITES McCLELLAN IN THE DAILY McCLELLAN MARKET REPORT. Chart McClellan Market Report. 10/2014.

The charts look familiar to Tom McClelland and that’s making him bullish. Tomi Kilgore reported in the 10/17/2014 MarketWatch.com. Back four years ago McClellan reports everyone was focused on the BP Oil wellhead spewing with no clue as to how to stop it. Today traders/investors have similar concerns about a different crisis. The psychology is the same. The sentiment and price action are also identical which is signaling to McClelland that the panic over the Ebola crisis appears to be reaching a climax point.

Brett Arends, WSJ 10/18/2014, in the Sunday Journal, reported that this most recent market correction is ‘routine’ and expected not to go much further. ‘We’re in the only business in which discounts are greeted with alarm.’ Rob Arnott, chairman of Newport Beach, CA. investment firm Research Affiliates.  The following chart illustrates two horrific slumps in prior periods.

Rex Nutting, Dow Jones writer, opinions in the October 16th MarketWatch.com article that even as the DJIA has lost 8% from its all time high in September the stock market is not going to crash the economy. Main Street is doing just fine, Nutting reports. The soaring bull market didn’t help the economy all that much, he adds. While corporate profits hit record levels hiring and business investment improved only slightly. The connected economies of Main Street and Wall Street are  particularly weak right now as they have been.

Two Days in A Row? Yes! Monday markets edged up even after a hefty run the previous Friday. In other news China growth falls to 7.3% down from 7.5% a year earlier. Chinese September industrial production rose, retails sales slowed and housing sales fell 11%. (Information gathered from CNBC, WSJ, Bloomberg 10/21/2014)

Good News! Tuesday markets were up with the Dow plus over 200 and the Naz an astonishing 100 plus points. The S&P 500 was up over 35 points with gold off and oil about even for the session. So with all that action you may wonder if ‘It’s Safe?’. According to Investors Business Daily the Indexes confirmed an ‘uptrend’. IBD reported, ‘The magnitude of Tuesday’s move was compelling, if not surprising.’ The year’s worst correction, has, the paper reported, ended, for the time being, with a flurry of buying. Not so fast, reports Lawrence G. McMillan at MarketWatch.com. Despite the relative strength the S&P 500 Index is still in a downtrend. After explaining the technical side of his argument McMillan concludes by writing that a S&P 500 close above 1960 would put a fine point on a strong reversal of the correction. In the meantime various hedge fund managers have said that they have been buyers the previous week, on weakness. One hedge fund manager said that it was…’the most fun he’s had all year’. He had investments that were attractive and could buy at a decent price.  Information gathered from CNBC, Investors Business Daily, Barrons.com and MarketWatch.com 10/22/2014

Gunman Attack Canadian Parliament Shake World Stock Markets. There was little news in the U.S. of previous attack in Quebec the day before when two Canadian soldiers were run down with a car before being shot by police. Then Wednesday’s attack in the heart of their government surprised Canadians because that sort of thing just doesn’t happen in Canada. It is unknown if 100% of the 150 plus drop in the Dow was caused by the terror attack or not. ‘Europe three years behind U.S. in recovery, but pace of policy response and reform is moving at about one-third of the U.S. pace.’ Richard Madigan, J.P. Morgan equity strategist in Barrons.com 10/22/2014. ‘This is not an exuberant recovery. It’s going to remain slow moving and increasingly uneven, but we are not seeing a slide back into recession.’

 Bob Doll, chief of equity strategist at Nuveen Asset Management, told a room of advisors in Charlotte, NC’s NAPFA fall 2014 conference Tuesday the 21st of October, that the September-October period right before a mid-term election tends to be the weakest in the four year election period. The six months following are typically the strongest months. In the last 16 mid-term elections, stocks were up an average 16% over that period.

Finally: 401 k Contribution level for 2015 increased to $18,000 from $15,000. With the ‘catch-up’ provision it will make the total for someone over the age of 50 to be able to contribute to their retirement a hefty $24,000. Questions or allocations for your plan call or write me.

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 October

 

Zero!  It seems we’ve been swimming upstream all year only to see the Dow ending October 10th right where it was at the beginning of the year. Volatility, which was subdued for most of the year, has returned. One reason experts contend  is that central banks are out of lock-step with each other, along with economic headwinds coming from Europe. China fears of slowing growth are also in the picture along with Russia, Ebola and Middle East. On the central bank side the U.S. is on track to begin raising interest rates while the EU is planning on cutting rates. Some analysts are concerned about the return of King Dollar while other currencies are deliberately weakened. The week before last’s market slide was the worst since 2012. Certain sectors have simply been awful- small caps and energy come to mind. The large cap stocks have been fairly immune until lately.

How well did active fund equity managers do as compared to the indices up to October 10, 2014? Not so well as the above chart from Bloomberg and others illustrates. In my preferred equity fund list the best performers were in REITs, Healthcare, Utilities and Consumer Staples. Poorer performers were in Technology, Small Cap and Commodities. The Emerging Markets choice did very well as compared to the index. My select Mid-cap and Large Cap Funds also had a strong positive performance for the year. 

Emotion is the killer in these kinds of markets. Ben Levisohn in Barrons.com ‘Street Wise’, reports not to expect fear to subside anytime soon.The underlying causes of the rout are not as scary as they may seem. He also contends that a ‘steeper selloff may not be a terrible thing.’ It would take froth out of the market and refocus investor's attention on fundamentals. So far investors are ignoring both earnings and fundamentals.

Ride it Out! Said Larry Kudlow, on CNBC 10/10. He also said it was a terrific time to make those 401k contributions. Which I though odd since I thought most people ‘were’ making they’re 401k contributions.He did give reasons for his optimism which included rising corporate earnings, low inflation, low interest rates and a strong dollar. He said the strong dollar is going to attract capital from around the world now that commodities and especially gold are weak. Profits, he calls the mother’s milk, and expects them to continue to rise at about 5% per year.

Speaking of a strong dollar-domestic companies that derive a good portion of their sales/profits from overseas may get hurt in the currency trade.

Jim Cramer on Mad Money Gives 10 Steps For a Market Rally

• Containment of Ebola
• Have all stocks Go Down Not Just the Industrials
• Wrench Speculation from Market. The Cult Stocks Have to go.
• Oil Need to Find a Firm Footing.
• Tech stocks Need to Stabilize
• End Russian Sanctions.
• Great Beat in Corporate Earnings-
• The Technical damage needs to run its course
• Investors need a rally in commodities.
• Stop the ISIS Crisis.

CNBC 10/13/2014

Mixed Markets Tuesday. Dow was up 125 points in the early going only to close down a handful. The tug of war finally ended with the S&P 500 and Naz up, Gold, Oil and DJIA down.

Whispers that chip makers were leading the way into a bear market was discounted as one of the big players announced better than expected earnings at the end of Trading Tuesday, and provided good forward guidance. CNBC 10/14/2014 One investment pro called the firm’s earnings ‘robust’. This on the heels of a Barrons.com article on the demise of chip makers.

If you’re a trader get your buy list ready. Investors should be staying put.

 Yipes! The DJIA traveled both up and down a total of 1,268 points Wednesday in a wild day that had investors both wondering why and fearful. At one point, near mid-afternoon, the Dow was off 460 points! It was good old fashioned panic selling in the early going as (WSJ/Barrons.com reported 10/15) weak U.S. data, European bad news and Ebola all triggered a ‘whipsaw’ session. Analysts were at a loss to point to a single catalyst. It was almost as if someone yelled iceberg and it was everyone to the lifeboats. The CBOE Volatility Index, which measure implied volatility on the S&P 500 jumped to its highest level since December 2011.

In Barrons.com ‘Stocks to Watch’ the bad news should have been in the small caps, mused writer Ben Levisohn. In fact by the end of the day the small cap Russell 2000 finished UP for the day. And, not just a little but up 1%! So, the wondering if the Russell is the canary is this the beginning of the healing? Two sectors also ended up, Energy and Materials. Both have been beaten up with Energy down 13% and Materials off 8.4%. Citigroup’s Tobias Levkovich noted that signs of surrender are forming. He also remarked that, ‘…the froth of ebullience evident about a month ago is now very much gone’.  Pithy, eh?  Not exactly your ‘Irrational Exuberance’ but ‘frothy ebullience’ does roll off the tongue.

Not there-yet. Bottom? All Over by Halloween? Michael Kahn at ‘Getting Technical’ in 10/16/2014 Barrons.com, reported look for a drop to 1728 on the S&P 500 which at that level is support from the February 201 low and the September 2013 high. The S&P 500 is currently less than 8% from its all time high. October, Kahn laments, is living up to its fearful reputation of the 1929 and 1987 crashes. S&P closed Thursday at 1868.

Finally: Jim Cramer of CNBC on 10/16/2014 gave reasons he believes the Ebola fears are ‘rattling’ the stock market. He admits that there are other worries in play but the deadly virus is a big reason why so many traders are selling equities. Especially, he points out when the second nurse was diagnosed with the disease the markets tanked within minutes of the news. Blame is being spread on confidence of the U.S. government and the Centers for Disease Control. ‘The government has created a lack of confidence in its response.’ Cramer said.  Especially worrisome is the comments by the CDC that the disease isn’t airborne but the CDC would by have issues if someone was within three feet of an infected individual for any sustained period of time. Like on an airplane?!

 

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 October

 

 Bad News First: Markets continued their selloff with Tuesday being the first day when it became especially ugly. There was a brief attempt at a rally early in the day but quickly evaporated and  the tumble escalated into a full rout with the Dow down 273 points at the close. The Nasdaq also continued its slide. According to Kevin Marder at MarketWatch.com the Naz has not printed an accumulation day, or session of ‘concerted buying by large participants,’ in almost five weeks. Nervous investors were following similar selloffs in Europe and Japan. The Russell 2000, the small cap index, saw a continued selloff of almost 1.7%. Experts often point to the small cap index as a leading indicator of the overall market. Signs of a slower growth in China along with renewed slowdown in Europe, especially Germany; and continued economic troubles in Japan all have contributed to increased volatility. While the U.S. economy is attracting investor dollars there is a worry that the large U.S. firms, which generate a huge percentage of their sales from overseas, will have a slowdown. info from CNBC, WSJ, Bloomberg and MarketWatch.com 10/7/2014 and 10/8/2014.

 Thursday There Was Some Serious Profit Taking as The S&P 500 Index Failed to Stay over Key Support of 1950. It closed at 1928 off 40 points for the day. The Dow was off  334 points and the Naz fell 90. Within seven days the Dow has moved 2,000 points in total up and down directions. Still, on CNBC Thursday, several investment pros said the selloff was no reason to panic. Kirk Spano in his 10/9/2014 MarketWatch.com post wrote that this was not a collapse so investors should buy the big trends. ‘The stock market correction is closer to the end than the beginning.’ Spano points to the fact that small-cap stocks are already down 10%, Energy, depending on specific industry, is down 20-30%, and the natural gas index is off 30%. The large caps have withstood most of this correction, he points out. He also recommends buying the current trends and points to one beaten up sector in particular. Those investors interested in knowing what that trend is call or e-mail me.

Here’s more recap of last week’s news

  Oil Prices are down and likely to fall more as discord among OPEC members is turning into an old fashioned Texas gas war. Add into the mix the recent ‘New’ American Oil Boom and this should be a pretty nice holiday season for us with low fuel prices allowing more for spending and travel…unless you heat with natural gas, in which case, home heating costs could be higher than last year. First oil prices are falling because a petro glut and discord among OPEC ministers. Rather than cut production members are slashing prices for market share. This is causing fracturing in a once powerful union. According to news reports members don’t get along and there is no harmony of purpose. Saudi Arabia lowered its prices for next month’s delivery. On the natural gas front, you’d think we’d be swimming in the stuff but more seasonal demand for natural gas has left stockpiles at below their five year range. So with expectations for another nasty winter home heating bills can go higher.  Overall the good news with lower oil prices inflation will be subdued as petroleum is a huge contributor. Info gathered from WSJ 10/3/2014, Barrons.com 10/3/2014 and CNBC 10/2/2014. Photo of Saudi oil minister arriving at OPEC meeting in Vienna June, 2014.

 

Don’t Read Too Much Into The Week Before Last’s Jobs Report.  Bob Johnson, of Morningstar, shared his insight 10/4 in a Morningstar article, that concluded that the markets may have read more into the jobs number than was actually there. The year-over-year growth rates are still in the 2% range. The results are good and not great.The following chart gives readers a better understanding that while things have improved their not something one would say is a great recovery.

  Byron Wien in a Barrons OpEd 10/2/2014 wrote that there was much to worry about. Right now market valuations are not in bubble territory but he worries if earnings fall short of estimates what could happen. That doesn’t seem to be anything happening at the moment. Analysts are increasing their estimates on earnings and so investors shouldn’t be concerned now, Wein writes. Housing is an area that Wien finds troublesome, especially with the improvement in employment (under 6%), and with continued low interest rates. Housing is a key component and deserves close attention. Internationally Wien is especially concerned with geopolitical forces such as ISIS, Israel/Gaza, South China Sea and China’s ambition of extending its fishing and drilling rights into neighboring Japan and the Philippine waters, plus the breakdown in nuclear weapons negotiation with Iran. Finally Wien points home to the ‘dysfunctional’ democracy we have here in the United States. It may appeal to some ‘gridlock’ zealots, he writes, but its not constructive. Wien formerly of Morgan Stanley and currently Blackstone Advisory Vice-President.

Rival bond firms will be out bidding for business that is sure to or already has left PIMCO in the wake of Bill Gross’ leaving the firm. The amount of assets available, and if garnered, is enough to change a bond manager’s world for years to come. One bond manager calls it a, ‘Massive food fight.’ One public pension fund was contacted that had $1 billion invested with PIMCO. According to the WSJ this one firm did not think of moving its assets. (WSJ 10/4/2014) It’s reported that the fund Gross managed already some $23.5 billion of assets has left. You can bet, even without verification, that a goodly percentage is following Gross to Janus. How large was the bond portfolio that Gross managed? According to Morningstar the Total Return Fund had about 14 cents for every dollar invested in taxable bond funds. Out of 28,000 401k plans had $88 billion invested in the fund. SOURCES WSJ, CNBC, BLOOMBERG 10/3 10/4

Gold lower on dollar strength. The metal is off 9% over the past 6 months. Doomsters advocating buying gold may now be called ‘contrarians’?

  Stocks Usually Pop After Midterm Election.

MarketWatch.com reported on Sam Stovall,equity strategist at S&P Capital IQ, study of historical stock market returns six months after mid-term elections.Going back as far as 1944 Stovall discovered not only a pattern plus a reason, not a guarantee, for the market going higher. The prime reason, according to Stovall, is that the markets dislike uncertainty. Once that uncertainty passes the November through April average increase is 15.3%, and the frequency, according to Stovall’s study, is an impressive 94% of the time.  MarketWatch.com 10/06/2014. Chart S&P Capital IQ.

Stocks Jumped to close over 270 points on the DJIA Wednesday after Fed meeting minutes showed more ‘focus on slowing growth overseas and lessening inflation pressures. Investors say the U.S. economy looks better than those overseas, which should support continued but moderate gains in stocks over the long term. WSJ 10/8/2014

Investors will always find it easy to sell and not so easy to determine a point to buy back in.

According to the charts, Michael Kahn reports in Barrons.com 10/8/2014, the Bull market is faltering and the rally on Wednesday didn’t erase the bearish signals. The rally actually sent the market to fresh closing lows. Investors Business Daily 10/9/2014 shows the market 100% in correction. WSJ reported not much action in the small caps. 10/9/2014. Which is exactly what happened on Thursday as the global sell-off continued.

Questions call Paul @ 586 2950430 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 October

 

  Bill Gross, formerly CEO, CIO, and co-founder of PIMCO, bid a bitter adieu the week before last and moved his kit and caboodle to Janus Capital. In the past I have been a fan of the bond fund Gross managed, the world’s largest. The fact that Gross is moving to Janus doesn’t mean that that I will be blindly following the uber-manager to his new digs. If you own anything in the PIMCO fund family you shouldn’t be concerned. The fact is Gross probably had little to do with your portfolio which means that there are folks in place that handle the day-to-day investment management duties of your money. Until those money managers disappoint I plan on not changing any client’s investment. Gross, age seventy-something, is at Janus, according to news reports, to simplify his life and lead a newly created fixed income department. While Janus is headquartered in Denver Gross will have his office minutes from his home in California. It also doesn’t appear that Gross is taking any key people from PIMCO with him to Janus. From news leaks at PIMCO Gross was not a ‘warm and fuzzy’ personality. PIMCO, from reports in WSJ, Bloomberg, CNBC and others, planned on firing Gross the same day he turned in his resignation and announced his move to Janus. Monday, following the departure, the WSJ reported $100 billion (B as in Bad) left PIMCO Investment Management for investment parts unknown. The firm manages approximately $2 Trillion dollars. Bond firms everywhere will be scrambling for a piece of this business. It will get uglier before it gets better at PIMCO.

Steven Pinker, Professor at Harvard, writer, psychologist and one who doesn’t mince words about the world at large had a wonderful essay in September 29th WSJ. Anyone who works and writes or teaches in a specialized area such as doctors, scientists, bureaucrats, investment managers,engineers and the like would do well to read this piece. In it he assails ‘pseudo-intellectuals who spout obscure verbiage to hide the fact that they have nothing to say, hoping to bamboozle their audiences with highfalutin gobbledygook.’ He is especially incensed with those that write with not the intention to inform but to show off how bright they are as compared to the reader. We have all met someone at sometime in our lives who considers themselves so superior that they can barely contain a smirk at their own self-importance. These are usually not stupid people but those who have ’difficulty imagining what it is like for someone else not to know something they know.’ Pinker suggests that writers and lecturers put themselves in their readers/listeners shoes and try to find out how other people think and feel. If nothing else it may make you a better person, Pinker concludes.

Robert C. Doll, Nuveen Asset Management and Jeff Saut of Raymond James were in harmony on CNBC 9/29 as they were discussing the current market volatility. Both agreed that this Secular Bull market has 9-10 years left to run. Saut said the average Secular Bull runs  12-15 years.   Doesn’t mean less volatility or near term correction.

A Secular Market is one of rising prices and lasts, according to financial definition, 15-25 years.

Markets were scary Monday opening lower and falling 175 points before attracting buyers and closing way up off their lows for the day. If it was a prelude to October, it was spooky. Ditto Tuesday. Markets started positive but gave up the ghost in later hours finishing lower for the session.

 

Jeff Reeves, columnist Dow Jones, reported October 1st the economy is growing and with inflation under control and no signs of ‘irrational exuberance’ investors shouldn’t worry. He also says there is no ‘stock bubble’. The data is good, valuations are fair and Fed tightening isn’t a bad thing.

Stop Worrying, Already!  Adam Parker, Chief U.S. strategist for Morgan Stanley, thinks we’re set for the rest of the decade. His favorite sectors? Healthcare and technology. His interview in Barrons.com 10/1/2014. He believes this will be the U.S.’s longest economic expansion extending, possibly, to 2020. He believes a 50% return over the next five or six years isn’t that big of a stretch.

Utilities have been the ‘go to sector’ on pullbacks.

Happy Face Traders turned to frowns as markets opened lower Wednesday, in a continuation of previous days. But, by late morning we saw a glimmer of a correction to the upside only to hear the news that Ebola was confirmed in the U.S. That bit of bad news sank stocks and even lead to a lower open on Thursday. The Dow gave up over 250 points even with a good ADP report which showed 213,000 workers being hired in September. Construction spending dropped for the month as did the ISM manufacturing purchasing managers index. The Dow Jones Industrials took out a key level which was the 50 day moving average. See chart supplied by MarketWatch.com below. The question, of course, is this a real 10% correction, or will continuing geopolitical and economic events create more of a downward slide?  I know investment professionals are saying buy the dip. But confidence is waning and it could be a wait and see a bottom strategy more than a buy the dip. September saw a 1.6% slide in the S&P 500 index and implied volatility has been trending higher the last few months. MarketWatch.com 10/01/2014,

Thursday markets fell, recovered and closed up…for the most part. DJIA was off a smidge. In other news…Warren Buffett, who’s investment modus operandi is buying businesses that any idiot can run because, he’s said, eventually one will, bought the nation’s  fifth largest car dealership. (CNBC, WSJ, 10/3/2014). Brilliant! Taking a mom and pop business and bringing it to Wall Street by a major player is new. You’ll see consolidation as more entrepreneurs cast eyes toward this business model. With the average auto 12 years old and the car business just beginning to ramp up Buffett said it was a business model good for 100 years.

Finally, Cramer on CNBC 10/2 Mad Money said now is the time to buy.

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