That Was The Week That Was-3rd Week December

 

 Monday, the 15th, markets were prepped for a huge upside open. Premarket for the DJIA was + 100 points. By 10 A.M. I was on the road to a meeting and WJR radio news gave the market report as, ‘Just going negative.’ In other words in 30 minutes the buyers left the markets and selling entered. During the trading day the market was off as much as 150 points but closed down just shy of 100 on the DJIA. Both the NAZ and S&P 500 Index finished the day off 48 and 12.7 points . All indices were down a continuation of the previous Friday when the DJIA closed off over 300 points. Oil closed under $55 a barrel. One expert on CNBC expected the black gold to close and hold $55 a barrel. Investors Business Daily sent me a morning e-mail saying the markets were ‘in-correction mode’. Technically that means there is more pain in the markets. IBD cautions that it doesn’t know the extent of the downside and that the markets could recover in 4 days or 4 weeks. Jimmy Cramer said on his show Monday evening that he doesn’t know how the S&P 500 Index can keep going down when so many things are going right. As of the close Tuesday the markets were off approximately five percent. Despite the S&P losses there are things going extremely well for the economy. Alcoa’s Klaus Kleinfeld spoke to Cramer and said the Chinese economy is still a strong engine and the U.S. economy is doing fantastic. It’s time, he said, to put money into buying over there and building here. Machines programmed to handle investment trading will keep selling until their algorithms reach a point that tells them they’ve oversold and things start to reverse. Whispers that this should be a very merry holiday retail season and rumors that one ‘smart’ phone manufacturer actually has run out of product only added to the ‘sophisticated confusion’ of the markets.  info gathered from WSJ, CNBC, Barrons.com, MarketWatch.com. 12/15&16/2014 

 

 

Markets Don’t Move in A Straight Line and Asset Allocation Doesn’t Mean that Everything Moves in Concert. On December 11th it was the worst trading day since 2011. Crude fell again and experts had no idea where it would eventually end up. Channing Smith of Capital Advisors said that investors are realizing that a decline in oil prices is due to both supply and demand issues. Up to this point it was simply a supply issue. The United States is now an oil exporter and this has created a new global conundrum for existing oil exporters. The new U.S. ‘fracking’ oil business displaced our using Nigerian, Algerian, Angola and Brazilian imports. Canada continues to be a major importer of oil to the United States. The WSJ on December 13th reported that the Saudi’s dug in their heels with reduced pricing when Nigerian needed to find new customers and began encroaching on Saudi importers. The Saudi’s are not about to give up market share. Their cost to produce a barrel of oil is one of the lowest of all oil producing countries. Investors Business Daily reported that the International Energy Agency (IEA) lowered its outlook on December 12th for global oil demand for the fourth time in five months sending oil to a fresh five year low a week ago Friday. Demand growth is still expected to grow albeit more modest than previously foreseen. Until a pricing is finally established markets will continue to be volatile. WSJ, BARRONS.COM,IBD, MARKETWATCH.COM. & CNBC 12/12/2014

 

What Happened? Wednesday it was a Miracle! It was so Christmacy! There was joy and happiness all through the Street. It was a not so unexpected present from The Federal Reserve as they wrapped up their final meeting of 2014 and left a note that ‘they could be patient in beginning to normalize the stance of monetary policy’. No promises. Nothing definite. But it was enough to bring the Holiday Spirit to Wall Street and buy, buy, buy. Everything ran higher, reported IBD 12/18. Only two of IBD’s 197 industry groups lost ground. The DJIA +288, Naz +96 and S&P 500 +40. It was just beautiful.

 If You Liked What Happened Wednesday You Absolutely, Positively Were Crazy About Thursday’s Trading!  The best one day since April 8, 2002! The DJIA was up 421 points. The market was up in the past 2 trading days 4.5%. If you were trying to time the market, get out of the way of falling oil prices or lock in gains or do anything other than wrap presents, sip some eggy nog and celebrate the holiest season than you got yourself into some serious trouble. This is the problem with self-proclaimed market timers who get out or run out before things simmer down. There is still deep issues with oil producing countries. There is, and will be, increased volatility with the markets. The Federal Reserve has expressed its accommodation to the markets and the markets have responded. Info from WSJ, Barrons.com, CNBC & IBD

 Rebalancing is a process whereby a portfolio is kept within a strict investment design. Saturday last I was driving to Eastern Market and tuned to a financial show and the host was exhorting his listeners to ‘rebalance’ their portfolios as if their entire investment life depending on it. ‘This is one of the most important aspects of investing,’ he said. ‘Don’t do it every week but do it at least quarterly.’ He neglected to mention that rebalancing usually means that an investor sells their winners, buys more of their losers and possibly reduces overall portfolio risk at the expense of return when rebalancing. Most successful professional investors are not rebalancing aficionados. One of the big mistakes amateur investors make is holding losers and selling winners. The successful investor is able to cut their losses and move on while holding, or adding, to their winning assets. Before you consider rebalancing either your personal or retirement plan call me. Rebalancing is not something that you must, have to or need to do.

 

Any Similarity Between The Current ‘Market Correction’ and that of the 2008-2009 Depression is in the Mind’s of Those that Don’t Understand How Wide Spread the One and Specific the Other.'  Countries specifically in the ‘Oil Only’ business are in deep trouble. The Saudi’s can continue to hold their pricing while forcing others out of the business for an extended period of time. In 1979 the price of oil tripled and it wasn’t until 1981 that OPEC cut the price to $29 a barrel. The Saudi’s are shrewd and intelligent businesspeople and understand the oil business. They hold 26% of the known world reserves and fully understand their economic global clout. As investors if you understand what the Saudi’s are doing is ‘only business’, you get a small grasp of the global turmoil.

 

For those that enjoy conspiracies here’s one. I’ve been reading weird stuff that Putin, the CEO of Russia, Inc., has created a program to destroy the United States currency because of our involvement in what he feels are internal Russian affairs by wholesale selling those dollars in the world market. That may or may not be true. Conspiracy theorists believe that the current disruption in the oil market is the U.S. method of getting even by destroying the one single commodity that the Russian economy is based on and causing the ruble to sink in value. Makes a good movie, eh?

Who’s our friend? Bloomberg Financial,LP

What do the financial experts expect in 2015?  Make sure you come to my client breakfast meeting.

What Investment Sectors will Benefit From Lower Oil Prices? Ideas:

• Transportation. Those businesses that do not hedge their fuel costs.
• Restaurants Consumer Discretionary
• Tire Manufacturers
• Plastic companies
• Call me for specifics.

We Know John Paul ll had a lot to do with bringing down the Berlin Wall. What a lot of us don’t know is that the Vatican is a lot more geopolitical than we think. On the 17th we were stunned to hear that the Cuban embargo is ended. Something many of us Baby Boomers thought would have been impossible until the death of both brothers Castro. A new era between the U.S. and Cuba, with a political and business relationship, is being formed. A lot we still don’t know. But, we have learned that the Vatican was deeply involved in the negotiations. What I want to know is when are they going to start selling condo’s on the beach? And where are the Russians going?  It’s been a rough year for Putin. First the Ukraine, then his oil business and now his winter dacha.

Have a Merry Christmas. And for our friends who celebrate Hanukkah and Kwanzaa a joyous holiday!

Questions call Paul @ 586 295 0430 or write him a pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

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