A Good Thing!
Stocks dropped 268 points on the DJIA Wednesday primarily because of falling oil prices. Lost in the shadow of falling oil the U.S. passed a trillion dollar plus budget to get the United States through September of 2015. No haggling, infighting or stalling to get it done. Well, almost none. It looks like a deal and the president will sign it and word is he’s on the Republican side. Getting back to the oil pricing debacle MarketWatch.com shared a few reasons why we are seeing an almost 40% fall in value since the beginning of the year. (1) The increase in the U.S. as an oil shale producer. (2) A price war that the Saudi’s know they can win at the expense of their OPEC brothers to bury the fledging U.S. shale business. (3) Weaker demand from Europe and a slowing China. (4) Russian geopolitical fears diminishing. (5) A strong dollar. After the close on CNBC experts pondered the day’s events and concluded that eventually it would be a ‘good thing’ for the economy and U.S. workers. The apparent free fall of stocks is reminiscent of previous ‘market selloffs’ when hedge funds had to unwind positions that were ‘heavily’ leveraged or owned on margin. CNBC, WSJ, MarketWatch.com and Barrons.com 12/10-11/2014
Remember, a penny drop at the gas pump put $1 billion a year into the economy.
Now for the rest of the news…
Everyone has an opinion. And some of those opinions come attached to folk that have little else going for them but their opinion. That is perfectly okay if we’re in a bar, or around the office water cooler, talking about Angelina Jolie tattoos or should large curd cottage cheese best be served with canned peaches or pineapple. The problem is that a lot of opinions are published on web sites attached to financial information that other people are using as background information or to expand their understanding on a particular subject for investment purposes. It becomes truly disconcerting when a respected financial based web site publishes an article on let’s say oil prices and then invites every Tom, Dick and Harry to post their thoughts at the end of a piece. Suddenly everyone becomes a ‘Wildcatter’ or as knowledgeable as a Boone Pickens, and they let the world know it. It doesn’t matter if these same opinionates get confused between 10W40 and WD40 because online they are all self-proclaimed experts and more than willing to showoff their brilliance. This is the social evolution of ‘everyone’s knows more than anyone else culture’. The same guy that told you to bury your money in a mason jar in 2011 is doing the same thing online to an entirely new audience. Be careful out there. The fact that many of these post scripters hide behind fictitious monikers, express themselves like third graders with crayons, and have the financial acumen of monkeys (no disrespect to our simian friends intended) should be some clue as to their enlightenment.
Defense Wins! When Chuck Daly coached the Pistons he stressed defense. The philosophy then and now was if the other team has difficulty scoring you have a better chance of winning than if you get into a game of trading baskets. In almost every game played the team with a strong defense has the edge- the same is true with investing. A sterling defense doesn’t mean the other team can’t or won’t score. It simply means they won’t score as often. Investing in defensive sectors accomplishes several things: (1) During sudden market reversals you’ll lose money but historically not as much. (2) You’ll do relatively well when the markets are positive but generally not as well as the market indices. If you want to edge up your defensive positions call me. If you believe the pundits we may be in the half-time of our Bull Market. Time for many of us to review and, if it is something you need to do, check your portfolio if it is positioned defensively. Make sure you come to my annual client meeting in 2015.
What country would be the biggest financial recipient of falling oil prices? The WSJ 12/8 reported that the top policy makers in the world were forecasting that low oil would be a huge boost to the global economy. West Texas Intermediate crude has fallen by $40 a barrel. This could certainly hurt our domestic oil drilling and (newly recovered) exporting business. But falling prices also could help major oil importing countries such as Japan, Italy and Germany. The big winner is expected to be Japan since it is a nation that has to import virtually everything. Falling oil prices usually is a harbinger of bad things as it signals an economic slowdown. This time ‘experts’ think that it is an over abundance of product rather than a global economic crisis. Info WSJ 12/8, PHOTO REUTERS WSJ.
Markets were Way Off Monday the 8th of December. Ben Lenisohn at Barrons.com wrote that there was some real pain in the S&P 500 Index Monday. He continues by reporting that Sean Darby of Jefferies and Company think that the ‘base case’ for 2015 is setting up to look a lot like the late 1990s. Darby’s report is called, ‘Back to the Future.’ To remind you the late 1990s were years where everyone was an investment genius and you could throw a dart and get a winner. Finding a double on your investment dollar was as easy as leafing through a money magazine at the supermarket checkout line. Low oil prices. a strong dollar and disinflation (same as now) were keys to the decade’s investment boon. But like all good things eventually unwound around March, 2000 and crushing the NASDAQ.
China market woes caused consternation in U.S. and foreign markets Tuesday last as Chinese regulators cracked down on trading practices. Using inadequate collateral and highly leveraged trading margins has created more volatility in the Chinese markets than is comfortable. Retail investors, according to WSJ 12/10, often are confused as to what caused stocks to go up or down with no reason. Many investors are quick to pull the trigger on holdings.
Tuesday Markets Down 150 on the Dow at the open but closed off their lows. Nasdaq finished up for the session. 
Brian Belski of BMC Capital Markets predicted on CNBC Wednesday morning that we are six years into a massive 20-year Bull market.
Some insider trading is okay. It’s how you get the information. WSJ reported the reversal of convictions of three Wall Street traders with the jury saying government officials overreached. Expect more convictions to be reversed. WSJ 12/11/2014
whispers why the golden arches are not so golden and the red headed girl and some upscale eateries booming is because of the food. millennials don’t mind spending more $ for better quality and taste. 
Thursday markets stopped their slide but the global ramifications of low oil still reverberated through Russia and Norway currencies. Stocks in energy companies in those countries fell to multi-year lows. Russian is trying to stem the fall of the ruble by hiking key interest rates to 9.5%.
Coal is down 60% and former Morgan Stanley senior economist Andy Xie told CNBC so will oil as China’s economy continues to cool down. He thinks oil was remain at $60.00 a barrel for the next five years. He believes this is the new normal for oil. 
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
No comments:
Post a Comment