That Was The Week That Was-1st Week December

 

‘Friendship multiples joy and reduces sorrow.’-Swedish proverb

 

Do You Know The Difference Between an IRA Rollover and an IRA Transfer? There are plenty of folks that don’t. They get into expensive trouble for not knowing. A transfer is defined as when IRA assets are sent from one IRA custodian to another and made payable to the receiving custodian for the benefit of the IRA owner. In other words the account owner never has constructive receipt of the money. Transfers are never reported to the IRS and are not subject to frequency limits. If you want to move your money a dozen times a year you can. Rollovers are when the owner of the IRA takes the distribution personally and then re-deposits some or all the funds within a 60 day period of receiving the assets. You can only do One (1) Rollover per 12- month period. And the frequency of only being able to do one rollover a year is where people get into trouble. Doing more than one suddenly triggers a taxable distribution. People confuse rollovers and transfer. If a financial ‘expert’ inadvertently or unknowingly checks the wrong box on the application there may be problems in the future. Always consult with your trusted tax advisor or expert financial professional before any financial moves that may create unwanted income or tax burden. And know what previous moves were made and how they were defined.

‘ Japan May Be The Best Regional Bet For Stocks in 2015’ - Morgan Stanley.

Only the U.S. economy is expected to grow faster than anticipated, reported the investment bank. Lower energy costs boost a broad economic activity in the near term and fiscal policy becomes a bit more supportive of growth in 2015. Chart Morgan Stanley 12/1/2014.

 

It’s the dollar, baby! Oil is traded in dollars and when you’re happy-happy filling the family buggy and seeing it top at a ‘reasonable’ price, and you’re not sobbing as you empty your wallet, remember this has more to do with our strong dollar versus the rest of the world’s currency then some strange convoluted deal that cut the price of crude.(Well, there is plenty of that floating around since the U.S.A. got into the ‘fracking’ business.)The strong dollar also impacts stock values. Oil stocks are hurt but other industries, especially those in the transportation index, benefit enormously. A strong dollar makes it more fun to travel to foreign countries because we can buy more. In fact a strong dollar makes us feel ‘artificially’ rich. We can buy that foreign made wallet, purse or set of golf clubs at a more reasonable price. But, there is a trade-off. Selling our American made goods and services to a global marketplace makes our stuff more expensive. We may not sell as much which means our productivity may suffer. Think Germany and the currency they shrugged off in favor of the Euro. The German Deutsche Mark would be the strongest currency in the E.U. making it difficult to sell German made goods. That is the reason they like the Euro.The good news is that nothing lasts forever and a strong dollar eventually leads to a weak dollar and vice versa. So, enjoy it while you can.

Thanksgiving OPEC ‘No Cut in Production’ was the Big News (Along with the Lions waking up in the second quarter and eventually beating the Chicago Bears at home). The OPEC ministers met in Vienna and it was the worst kept secret as the Saudi’s were not about to give up market share for a cut in production. The Russian ruble fell as lower prices in energy are putting pressure on their economy. Other countries will be hurt that depend on at least $90 a barrel oil include Nigeria and Venezuela. Traders would do well to start ‘bottom-fishing’ in this sector and picking their spots. It’s thought that while crude oil is down 30% since June 2014 prices could fall even more. Our domestic shale oil drilling could also be curtailed as estimates of oil falling below $80 would be uneconomic for many producers. INFO FOR WSJ, CNN, CNBC 11/27 & 11/28/2014

According to veteran energy economist James Williams of WTRG Economics the bullet that the Saudi’s took in not cutting production but seeing oil prices tumble is just smart business. Had the cartel agreed to cut production we would have seen $100 a barrel oil. Instead we may see a return to $65 or lower in the not to distant future. We also would have seen global growth cut because of high oil prices. Oil demand hasn’t fallen. By not cutting production the Saudi’s are taking a hit in the pocket today, allowing economies globally to grow, and ensuring a better and more prosperous pricing in the future. With this move OPEC, according to Williams, over time will increase market and pricing share. This is the same tactic the Saudi’s took in 1979. MarketWatch.com, Barrons, CNBC, 11-28-2014

Gold Hasn’t Had a Good Year. We knew that going into 2014 with hedge funds and investment banks belittling the metal, warning investors that gold wouldn’t do much, if anything, at all in 2014. In Switzerland citizens are increasing their personal gold holdings while the nation holds a vote if the Swiss National Bank should refrain from selling more of its gold holdings and instead boost its percentage from 7% to 20% of assets. According to BuillionVault’s head of research existing Swiss customers have been raising their ownership in gold and silver by more than 60%. Switzerland was the last country to leave the gold standard in 1999. Campaigners for the yes vote cite that voting against the measure would weaken the Swiss economy. CNBC 11/30/2014

A No Vote Cooked Gold’s Goose as the Swiss Proposal was rejected Sunday. Gold has lost 16% since peaking March, 2014. There will be more pressure on gold now that the Swiss have rejected the proposal of their central bank adding to their ownership. The proposal would have made Switzerland the world’s 3rd largest holder by country of gold. Muted global inflation have made gold less attractive to investors. Bloomberg 11/30/2014

THE GOING MAY GET TOUGHER AS THE INVESTMENT ENVIRONMENT CHANGES, ROBERT C. DOLL, CFA, SENIOR PORTFOLIO MANAGER NUVEEN ASSET MANAGEMENT. According to Mr. Doll this is what we can expect going forward: Info from Nuveen weekly Investment Commentary 12/1/2014

Enjoy It While You Can! T Boone Pickens was on Mad Money Tuesday last and predicted the Saudi’s would eventually fold and cut production because of their OPEC members need for higher oil prices, and that oil would again climb to $100 a barrel in the next six months.  Low gas prices gave the auto stocks a kick in the boot, and the entire market 12/2/2014, THE DJIA UP 100+ as buyers ignored ‘sippy’ cars and went for the pickups! Sales of the economic autos fell by 15% while the guzzlers were up.  WSJ 12/3/2014

Low Gas Prices Are Good For The American Economy as 70% of our GDP is based on Consumer Spending.

Criticism of Public Pensions Holding More ‘Common Stock’ Than ‘Fixed Income’ in Their Portfolios. In the Opinions section of WSJ 12/3/2014, Andrew G. Biggs chides those public pension funds holding 75%+ of their assets in ‘riskier’ stock holdings. His convoluted albeit correct reasoning decided that pension managers have no choice but to hold these risky assets as total returns have fallen in the fixed sector making increasing contributions to funding of retirement plans mandatory. Plan designs are based on fixed return investment policy which demands these plans make up the difference in additional contributions. In some instances this would be as high as 50% of the normal contribution and, in most, if not all, cases, not feasible. More appropriately a better plan design would be one that would allow overfunding during good times rather than the current reduction of contributions during years of stellar performance, which is what usually happens.  Individuals managing their own retirement I.R.A.s have a similar problem. In order to meet income demands investors are being forced to look at dividend producing assets as a replacement for fixed income. Unlike a pension plan individuals cannot lock themselves into buying 30-year bonds during a rising rate environment. The balancing act both in public and private continues as to what is prudent and sensible.

Markets Up Wednesday the 3rd. Economic Activity Continued to Expand, according to the Fed’s beige book. Companies hired 207,000 in November according to ADP. Top C.E.O.s gathered in Washington, D.C. and told Congress and the President that corporate tax reform, less burdensome regulations (and more transparency), along with improvements in education are the things that can unlock the economy’s potential and create jobs. Rex Tillerson, CEO of ExxonMobil said there are something north of 4 million jobs that go unfilled simply because there are no skilled people to fill those jobs. Stephenson, CEO of AT&T, wanted to know about the president’s push for ‘net neutrality’. He wanted clarity on the subject and not getting it only caused corporate America to stall in moving forward. CNBC 12/3/2014

Comment: A few months ago I’d fill the old buggy and peel off a $50 bill and end up with coffee change, if that. The other day I did the same and I paid less than $30! That’s huge. While you and I can afford to pay higher gasoline prices many low income workers can not. Cheap gas is a godsend for them, especially during the Holiday season. Here’s the problem – cheap oil is temporary. It gives a false illusion of someone being richer than they really are. Most lower income earners will not save what they save at the pump but spend it. When the oil price trend reverses many of those same families will find themselves in worse shape financially than they were before the gas price drop.

Bill Gross May Just Have Something. In his market commentary at Janus Capital Group Bill Gross writes that’…solving the debt crisis by creating more debt cannot cure the disease if higher volatility distorts the historical flow of markets and associated commerce.’ He goes on to point out that the U.S. has had little focus on public investment and infrastructure spending. It’s been all monetary policy.’ Creating of more debt with artificially low yields leads to currency wars,exchange rate volatilities and distorts global capitalism.’  Which what each country is and has been doing-their own version of Quantitative Easing-keeping rates at, or near zero, and driving their own money value down. Barrons.com 12/5/2014

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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