That Was The Week That Was- 3rd Week January

 

Have you registered for my client breakfast meeting? February 21st at Sycamore Hills Golf Club. Call me 586 295 0430 or write me at pstanley@westminsterfinancial.com  Need more info call or email me for particulars.

 

The Inflation No One Talks About… If you’re in your 30’s, and maybe 40’s, this may not be as much of a revelation as someone who’s been around sixty or seventy years. When I started work I remember I paid my social security tax on the first $4,800 of earned income. Today it is on $118,500 of income. That’s about a 7% compounding increase per year. I cannot think of anything that’s compounded at 7% over 50 some years. Not even health care. Today workers pay 6.2% of their income for social security plus 1.45% for Medicare. Employers match that payment. If you are self-employed, as I am, than you pay both sides or 12.4% plus 2.9% up to $118,500 of taxable income. If you were allowed to invest that money rather than paying the social and Medicare tax, and able to earn 5% tax free compound over 35 years, you’d have about $1.3 million. That would be money to use it in any method or way you would like and at any time you’d like. It’s impossible to consider that in another 40-50 years social security could be expected to be taxed at incomes to$250,000 and beneficiaries paying 20% or more of their income to keep the system going. It needs to change.

DON’T CONFUSE MARKET CORRECTIONS WITH RECESSIONS OR DEPRESSIONS.

 The S&P 500 Index fell 1.9% through January 15th. Apples that sold for a nickel during the first Great Depression would be selling today for $6.50 using a 5% compounding factor. Those were some mighty pricy apples back in the day. Figure today an apple pie based on numbers of yore would cost you about $50.00 .  

 

Morningstar Stock Investor Had Some Words of Wisdom to Nervous Investors. Here are some Key Principles:

1. Ask yourself -Will this matter in five years? Ignore the headlines and noise.
2. Invest using money you don’t or won’t need for five years.
3. Buy and hold only those stocks that you’d be comfortable holding through a downturn.

 

 

The U.S. and the U.K. launched their Quantitative Easing Programs six years ago, and Japan had their own version two years back,  the European Central Bank is embarking on their own QE Plan this week. The big questions are will it work for Europe as it did for the U.S and the U.K. or fail as it has for Japan? The problem goes deeper than merely economics and get the economies moving. It is an attempt to introduce reforms into countries with ‘fierce national’ interests. Which is why there is a ‘more than passing’ interest in the European markets by certain group of investors, and hesitancy by great many others.  WSJ 1/19/2015 EUROPEAN CENTRAL BANK PRESIDENT MARIO DRAGHI, CENTER AND ABOVE, LEAVING A DECEMBER BOARD MEETING. ASSOCIATED PRESS PHOTO.

Lesson Time! (Check, read and recheck) Monday lead story at MarketWatch was that Chinese stocks Plunged 7% after regulators cracked-down on margins. Margin limits (or borrowing money from your brokerage firm) are based upon how much invested you can borrow a percentage of, pay interest on the money you borrow and repay if the underlying stocks fall and margins need to be replenished. According to the story some Chinese brokerage firms (it was a dozen) have played a little loose with the rules and regulators in China finally cracked down last week. If you own Chinese stocks you may have had apoplexy reading the news. Then if you read CNBC’s account by Leslie Schaffer you’d learn that there was no wide spread ban on margin trading but only for certain brokerage firms and for a limited time. And the markets fell 6.4% not 7%. The analysis ended by stating the regulator action was a teapot tempest, a  mere blip in the universe of the trading year. Soon to be forgotten. CNBC and MarketWatch.com 1/19/2015. You need to read as much and as many opinions when dealing with any financial event.

The Stock Tout.  They get paid to promote junk. Someone owns a lot of a certain stock and needs to promote it as a sure thing in order to sell it to someone else. They hire a firm to promote their stock. Make sure you read the fine print when you get the email promoting that ‘sure thing’. In order to stay on just this side of being legal the ‘tout’ needs to fully disclose their position, who hired them and how they are paid.

The President Wants to Provide Free 2 Year College Education to Those That Can Maintain a 2.5 Grade Average. Money would come from increased taxation of the uber-rich. Republican leaders scream bloody murder that you can’t give something to someone on the backs  of someone else. Then maybe they and the Democrats can better explain how the $100 billion sent to Afghanistan for rebuilding the country’s infrastructure was stolen by those that we were trying to help and nary a peep from either side of the aisle. New Yorker 1-2015. A hundred billion dollars would allow you to buy the Chicago Cubs baseball team and have $99 billion left over. According to Forbes.com

Investors Business Daily, harsh critic of the President, chastised his New Tax Plan as a Plan for Failure in their 1/21/2015 issue. Commentary by chief economist at the Heritage Foundation Stephen Moore argues that the President’s past Robin Hood redistribution of wealth plans, over six years, have produced the poor getting poorer and the rich richer results.  The President said he wanted to tax the rich to help the middle-class. IBD suggests those plans, if passed, could stall the economy. Increasing capital gain taxes has a history of the government getting less money than more. Increasing by 50% the inheritance tax simply means less money invested in family businesses. High taxes on investment and taxes have been practiced in Europe for decades and have turned the entire continent into an economic wasteland.

 

Tuesday Markets off to roaring good start, petered out by the first hour and finally ended slightly up at the closing. WSJ reported 1/21/2015 a stampede of corporate debt to be issued as corporations taking one last drink from cheap money pool as investors clamor for yield. Wednesday saw the opposite as markets opened lower but also ended slightly higher. Gold and metals up. 1/21/2015

 

If you have a procedure you don’t have a problem.  Most people spend more time planning a two week vacation than they do their lifetime retirement. The simple reason is that the one is fun and the other is not. I assume that if folks plan their vacations in the same way they plan retirement many would find their experience less than satisfying. In business and in life a process to accomplish a certain goal needs to be followed. Some parts of the process are not as much fun as others. Ignoring those fundamentals doesn’t change things it just creates problems later on.

 

Despite Escalating Volatility U.S. Fundamentals Remain Sound. Robert C. Doll, Senior Portfolio Manager, Nuveen Asset Management, 1-20-2015.

 

What’s More Important to You, as an Investor, Asset Allocation or Diversification?

To be fully diversified you may need to own 15-20 individual stocks in various investment sectors. Manufacturing, Consumer, Health, etc. Asset allocation is rather like insurance. Investors own shares in various investment sectors: Cash, Equities, Fixed Income and then you can break it down even finer by owning domestic, foreign, frontier and emerging markets. The idea is that not all sectors will perform the same at the same time. If you don’t mind everything going up and down at the same time then investment diversification is more important to you.

WHAT DID FOLKS SPEND THEIR GAS SAVINGS ON? #1 WAS FAST FOOD. FAST FOOD SALES INCREASED AS GAS PRICES FELL. CNBC 1/21/2015.

Jim Dandy Day @ The Markets! Domestic Markets Finished Up 260 points on the DJIA and 31 points on the S&P Thursday. Mainly markets were up on the news and anticipation of success with the ECB’s (European Central Bank) decision to launch a full scale bond buying program (much like our QE). The idea is to buy corporate and government bonds to the tune of $60 billion a month and keep doing this until September 2016. Still there are naysayers as Michael Hewson, CMA at CMC Markets said in a note Friday morning that, ‘the banking transmission mechanism in the euro area continues to remain impaired, and until that is fixed a lot of this cash is unlikely to trickle down to where it is needed.’ CNBC 1/23/2015

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 January

CLIENT BREAKFAST MEETING FEBRUARY 21ST

                        DON’T MISS IT

My annual client breakfast meeting at Sycamore Hills Golf Club on February 21st from 8:30-10 AM. I’ll talk about where markets are heading, what sectors are expected to do well, how well we predicted 2014 and how to create your specific LifeBoat Investment Plan when and if markets eventually tumble. My special guest is Larry E. Powe, attorney at law, principal/partner with Keller Thoma, PC. He will discuss wills, trusts, estate planning and all the essentials. Q&A follows. This is a client breakfast meeting. If you desire to bring a friend please call or e ahead. To reserve seats you must call or email me so I know how many pastries & fruit cups to order. 586 295 0430.

 

 

REQUIRED MINIMUM DISTRIBUTION 2015 AMOUNT AVAILABLE NOW. Investors 70 1/2+ must take a minimum amount out of their IRA each year. That minimum is calculated based upon (1) Previous year-end account value (2) Age of participant. Investors will see this number on their account statement or they can call me for 2015 number.

 

 

Facts on Oil. Jim Cramer clears the sludge from water-cooler opinions and irresponsible financial radio talking heads about the recent tumble in oil prices. Sixteen states benefit from higher oil prices. Six rely on oil for jobs growth. Only 10% of the U.S. lives in those states.One percent of employment growth has come from oil jobs- 2% if you count oil related.Down cycles in oil tend to be self correcting in 18 months. Still, no one knows how long oil will stay at these levels.CNBC 1/9/2015 MarketWatch.com had an article that suggested oil could fall to $20.00 a barrel. 1/11/2015

 

Don’t Take Social Security Earlier Than 70?! So writes Jonathon Clements 1/10/2014 MarketWatch.com in response to reading ‘troubling’ letters from workers that they’ve been taking their social security early and proving they’re ahead of the game. Clements argues that the risk is not dying early but living too long. He declares that working folks should almost always wait to claim the highest monthly benefit which is at age seventy. His only argument is longevity. What he ignores is those workers who: (1) Need income asap (2) Who don’t live to age 90 –or have a long lived family history for whatever fanciful old age Clements has in mind. The reality is -People should take their social security benefits based on need and family history and not through some cockamamie cookie cutter financial plan or what some stranger locked in a room, out of touch with reality, preaches.

 

 

 CNBC reported 1/12/2015 that millionaires are pouring their money into Europe. A survey from the Spectrum Group discovered that Europe is the preferred overseas investment for millionaires. Here’s the breakdown: Europe 19%, China 15% and Canada 12%. The UK was at 9% and Brazil, Australia, Japan and India were all at 8%. The report continued that US, domestic investment, was still the place to be and not that Europe is that attractive it is the ‘least’ attractive of the overseas markets at this time.

 

EARNINGS SEASON STARTED AND FIRST COMPANY TO REPORT DID SO GRANDLY. And in afterhours and days later the stock fell.

Monday Trading was off for the second session following Friday as oil continued to fall. Goldman Sachs cut its crude outlook and Jim Cramer said at the open Monday on CNBC that until all the oil related stocks get downgraded we’re still going to see this volatility swing. Oil closed under $47. Energy, technology and financials led the losses with the DJIA off 97 points. MarketWatch.com 1/12/2015

Ian Robertson of BMW said at the Detroit Auto Show that if California were a country it would be the 6th largest market in the world.

 A 300 point swing Tuesday with the DJIA up 300 and then closing down on lower oil prices. In other news the WSJ reported 1/14/2915 that manufacturing is coming back to the US. The US has lost more than 6 million manufacturing jobs between 1998 and 2010. Manufacturing is also the source of innovation. It accounted for 83% of research and development conducted by businesses in 2013. Health care may continue its run although don’t expect the kind of returns posted in 2013-2014, said Marshall Gordon, health care analyst at ClearBridge Investments in a 1/14/2015 Barrons.com interview.

Government Policies Have Stymied the Middle-Class Income Growth.  The average family, Sen Warren said on January 7th, makes less money today than they did a generation ago. Providing tax breaks and other economic benefits to corporations and the wealthy, instigated under President Reagan under the ‘trickle-down theory’, have not worked. Economists Thomas Piletty and Emmanuel  Saez checked the data from millions of tax forms filed since the 1980s.

According to one study the bottom 90% of American earners had a lower income in 2012 than they had 30 years ago. PolitiFact rated Warren’s statement as Mostly True. It is impossible to pass on higher health costs, keep a lid on worker’s wages and then expect them to save significant percentage of income for retirement while raising a family and paying for college education. Government and business know this but little is being done.

 It’s been that kind of year. Volatility has been churning fear…. for amateur investors and not the floor traders, according to Kenny Polcari in his op ed piece CNBC 1/14/2015. He writes the news is not that alarming and there is no panic on the trading floor. What there is is frustration. Polcari lists frustration with fiscal policy, monetary policy, interest rate policy, lack of leadership and mixed messages from the Federal Reserve.

 

We’ve been through this  before. Oil fell Wednesday and bounced a bit but the Dow was still off over 250 points at the close. Reports that retail sales softened in December may have been a bit off- putting. Much of that weakness may have been at the gasoline pump as reported by the Commerce Department. Still that news was the reason du jour for the markets to tumble. Déjà vu, dear reader. WSJ 1/15/2015 The decline in September-October 2014 was 9.6%. Remember how we bounced?

These are the times that the average investor should relish buying equities through their retirement plan as they get these great prices. Shares in public companies are the only thing that people don’t rush out to buy when they are on sale. A grocery store offers ten cans of Albacore tuna for a dollar and they have to have a SWAT team at the front door. You offer up a Blue Chip stock at a 10% discount and people run for the exits thinking something is wrong.

Just remember what Warren Buffett said about stocks and houses. You don’t check the price of your home everyday and shouldn’t do it with your stocks if you’re a long-term investor.

The Big News Thursday was so stunning that the reasons and explanations were absent from most US financial news sources. Only by going to the Financial Times and the BBC News Center could I get a clear explanation. The Swiss franc soared in value because of the action of the Swiss Central Bank, aka Swiss National Bank. The news created chaos throughout world stock and currency markets. Here’s why. The Swiss Central Bank in September, 2011 saw such an inflow of capital as investors looked for a safe haven that they decided to set a ceiling of 1.20 Swiss francs to the euro. The reason is that a strong Swiss franc was hurting their export business. The bank bought foreign currencies and sold the franc. It has become one of the five largest holders of foreign reserve in the world. Then Thursday, and without  fanfare, the bank announced it was abandoning its practice of supporting the SF because of the weakened euro and, at the same time, lowered key interest rates from –0.25% to –0.75% (yes that’s negative meaning it’ll cost more to have your money held at a Swiss bank). Immediately the value of the SF exploded upwards. The news surprised everyone including the head of the International Monetary Fund who called the move, ‘a bit of a surprise.’ The Swiss franc predictable went from buying 1.20 francs to 0.8052 francs, but later recovered to buy 1.04 francs. Some Swiss stocks took a tremendous hit. In the U.S. the amount of exposure we have is considered minimal. Overall this confuses currency traders and several have gone out of business, according to the news reports in Barrons.com and MarketWatch.com. Some experts, as reported in the Financial Times, think that the European Central Bank governing council meets this week, they could launch a program of quantitative easing which could possibly put more pressure on the Swiss than ever before. This could be considered a Black Swan event as something coming out of the blue and no one having it on their radar or even considering a Central Bank would do such a thing without telegraphing it to their global partners. That’s what makes this such a scary event.

Markets continued their fall Thursday and lost 100 points + on the DJIA.

 

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-1st Week January

 

UGLY. The year opened with a thud. The first trading day of the new year started ugly and then it got worse. Off 25 points on the DJIA before the bell that escalated to losing over 300 points by the close of business.Oil prices falling below $50 and fears about EUs economy that it would fall into deflation crushed just about everything. Gold and U.S. Treasuries rose. CNBC 1/6/2015

DITTO Tuesday.

 Dow closed down 130 points although it was getting beaten up worse during the trading day. Oil fell –again. CNBC 1/5/2015

 

 

We Got It Wednesday! A nice bounce across all indices with the DJIA +212. Bob Doll said on CNBC that US will contribute more to global GDP than China in 2015. Jim O’Neill  offered up his opinion that oil prices could end the year higher. The futures market is pricing Brent oil for January 2020 delivery at $73.81, according to CME group, around $20 above the spot price. In the Federal Reserve news IBD reported that Fed participants are ‘facing a different landscape than the one they’d met to discuss earlier. Geopolitics and listless foreign economies were concerns. Many participants regarded the international situation as an important source of downside risks to domestic real activity and employment…’ObamaCare is being shunned by the young and unsubsidized. If these numbers are confirmed The Department of Health and Human Services said premiums could spike in 2016. Mortgage applications fell in the week of January 7th down 9.1% while interest rates also fell, making financing attractive under 4%. Source Fannie Mae.

ALL GONE! Yes, we’re even for the year as a huge rally Thursday wiped off all losses as the DJIA posted a 320+ point increase for the day. The S&P 500 gained 2.9% over the past 2 trading days. Equities rallied on news that the Federal Reserve minutes signaled no change in interest rates policy and optimism over employment growth. Bloomberg 1/8/2915. All ten major groups in the S&P 500 index rose today. Tech companies in the S&P 500 gained 2.5%.

 

 The Gap Widens Between the Middle and Upper Classes USA Today opened the year with a detailed report on the health insurance insurance crisis in  America. ‘Employer plans now require workers to pay so much out of pocket that many feel they must skip doctor visits, putting off medical procedures,, avoid filling prescriptions and ration pills – much as uninsured have done.’ The size of the average deductible has more than doubled in the last 8 years from $585 to $1,217. The average worker is faced with such high deductibles that many feel it is the same as ‘not having insurance’.The average deductible can easily  exceed $10,000 a year for families. Median income in the U.S. is around $53,000 and the average total savings is $6,000. Bankrate.com reported that a quarter of all workers have no savings at all. Exacerbating the problem is that fact wages, calculating COL, have not increased in 50 years! Health spending has increased from 5% of GDP in 1960 to 17% in 2013. The crisis in health insurance for workers has snowballed into minimizing the amount of money workers are able to contribute to their retirement plans.  Workers are now skipping care in order to avoid paying the high deductibles. There is no easy answer. All workers are being forced to walk the delicate balance between prioritizing current and future needs.  Information provided by the Pew Research Center and the U.S Bureau of Labor.USA Today 1-2-2015

RETIREMENT PLANNING IS A LOT MORE THAN SOCKING MONEY AWAY. To get ready one needs to do some serious organization. Here are a few tips culled from experience and other sources: Fidelity.com

• Calculate your retirement income needs. It is called a budget and almost everyone ignores this. Pre-retirement income needs are different than what you’ll be spending after you retire. Know the difference.
• Do an audit of all your bills, including mortgage and car loans.
• Make sure you set up an emergency fund. It should be about six months of living expenses, more or less.
• Determine a retirement income plan using all sources. This includes 401k, Social Security, savings and pensions, including past employers and military benefits.
• Calculate health insurance costs and health providers.
• Thinking of part-time work? Understand how it may reduce your social security income.

Client Meeting. Remember when your mother would say when she had breakfast ready?, ‘Do you need a special invitation?’ Okay, here it is! A very special invitation. My annual client breakfast meeting. It’s being held at a a great place, Sycamore Hills G.C., with plenty of parking, a view of the golf course, a super Continental breakfast, it’s always warm and sunny (inside), Larry E. Powe, attorney at law, principal/partner with Keller Thoma,PC., will bring his expertise on estate planning & Trusts to our small, private setting where you can ask questions; and you can also get a sneak peak on how some experts think the year will go in the stock market and what and where you should be invested. I need you to call or e-mail your registration for Saturday, February 21st beginning at 8:30 and wrapping up by 10 A.M. 586 295 0430.

 

8% of the S&P 500 Index Companies Associated with Oil. On CNBC January 2nd Financial experts discussed (1) The strong dollar (2) Oil related industries in the S&P 500 Index (3) Increased Volatility. Larry McDonald, Newedge USA senior director offered up a suggestion that investors hedge their ‘fear-trades’ with energy stocks (that have been beaten up), as he believes the dollar will weaken, the VIX (volatility index) will rise, and energy companies will strengthen. He points to $3 trillion dollars of credit related investments that have been underperforming U.S. equities as a ’bubble’.

 

Monday’s Market Retreat was all about the oil-price decline that was possibly telling investors something bad that they didn’t already know about global growth.As the WSJ explained 1/5/2015, that low inflation and falling prices can have a positive effect in the short term, especially if they’re driven by lower energy prices. The problem is that if people are ‘expecting’ prices to remain steady or go lower these same consumers may put off buying or investing which would lead to weaker economic activity.Global concerns also created on Monday a nervous selloff. Germany has an annual rate of inflation of just 0.1% in December and a negative drop in consumer prices. Worries about Greece again arose and the Euro closed lower against the dollar. It’s not so much that Greece brings anything to the global economies is that if Greece opts out of the euro other countries like Italy and Spain may rethink their involvement.

 

Don’t Worry, Yet!   Energy is only 10% of the market, said Roger McNamee, co-founder of Elevation Partners, Monday on Squawk Alley CNBC. ‘The oil and gas exploration only employs about 225,000 people, so concerns this is going to hurt the economy on the employment side, I think, are unfounded. He went on to say that oil prices would benefit more Americans than it would hurt.

Good News from Byron Wien!  Talking on CNBC Blackstone’s vice chairman said that despite the rough start he thinks the S&P 500 will produce a 15% return for 2015. Currently the index is selling for a little more than 16 times earnings and he believes it can sell at 20 times earnings. ‘ The combination of earnings improvement, a little multiple improvement, we can make 15 percent.’ Wien said.

 

Sophisticated Confusion is what I calls it. This is where you know you should be compiling a list, of stocks that have fallen out of favor but don’t know what or that there are too many that you can’t choose just one or two. Here you should have either help or several resources that keep your list manageable. Almost every amateur investor has this problem. It’s the kid in the candy store syndrome. As a trader you should have entry prices and sell prices. You should also have a diversified list. You don’t want to overload in any one sector – say manufacturing. Try to keep things simple and remember that volatility is always a trader’s friend. Buy low, sell high.. most amateurs do the exact opposite. But you know that.

 

Artist Montreal Freelance Paul Bordeleau.

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-5th Week December

 

Annual Client Meeting

Because There Shouldn’t Be a Cruise Control for Your Investments.

February 21st Saturday 8:30-10:00 A.M. Sycamore Hills Golf Club, Macomb, Michigan

Larry E. Powe, Esq., Principal with the law firm Keller Thoma, P.C. will present estate planning ideas and discuss Revocable Living Trusts. Larry has been our family attorney for years and what he has to share on what you should and shouldn’t do regarding estate continuity is vital for all of us.  I will recap markets 2014 and give what experts consider will forecast going forward in 2015 markets. Also, how you can create a process to possibly safeguard assets during extreme market selloffs. Continental breakfast. You must register so I know how many Danish to order. Call or email. 586 295 0430.  Lovely Partridge Creek Shopping Center right down the road and opens as we’ll be wrapping up.

 

CLUNK! Markets fell as year closed. Low volume as investment firm offices were cleared for winter holiday vacation until sometime after the first of the year. Wall Street bonuses and parties celebrated  what had started as an awful year with cruel winter temps wrapped up as a surprisingly not so bad performance. Tuesday’s markets had the DJIA off 55, Naz down 30 and gold and oil both off a bit. Wednesday also saw selling with the Dow off 160. REITS had their best year in a decade with subsector apartments leading the pack and health-care properties the second best performer of the major property types. Experts contend that REIT performance can continue even in the face of rising interest rates expected for 2015. WSJ 12/30/2014. I’ve been a fan of the health-care property REIT sector.

Market Tops. Last week I wrote about Dow 740 during the Nixon days and related that to where we are today. Back then investors were just as impressed with Dow 700 as we are with Dow 18,000. There were even investors who didn’t believe a Dow 1,000 was possible in their lifetime. Investors may now be thinking that we’re at market tops and should take some, if not all, investments off the table. After all, they rationalize, how much higher can the market go even as pundits point to a possible Dow 20,000 for 2015. Arguing for the Mount Everest position that there is nothing more to climb, market contrarians point to the Nasdaq. It has not matched its once lofty 5000+ reached in March, 2000. For the naysayers I can only say, ‘Give it time.’ While no one knows if 18,000 is the temporary top and a less than subtle market retracement will take place any time soon; we do know that given time 18,000 will be looked upon by future investors with nostalgia. The Dow, and other Indices, will always report numbers that reflect a true account of the economy through a careful combination of current price, future growth, and earnings.

Contemplate? January myths prevail. As goes January so goes the year? If the year ends in five it will be a winner. As to the champion of the the Super Bowl so goes the market? AFC winner spells doom, according to those that pick ponies by their silk colors. So far the whispers, by the Trading Intelligentsia as 2014 wraps up, paint a gloomy picture for January. Why? Maybe because December was such a up and down month. Going from 5% correction to breaking new records while energy fell 40% is unexplainable by the best of minds. We may see a sector rotation in the next thirty days, or a simple selloff. No one really knows what will happen. In 2014 we had a terrible January due to the harsh weather. It took almost six months for the markets to gain traction. The end result for 2014, while not spectacular, was acceptable by anyone’s standards. Let’s not put too much credence on January results as a barometer for the year no matter what they are.

 

Oil Cooties. Any business remotely related to the oil/energy business seems to be infected. Downgrades by analysts on everything from oil service companies to multinational corporations that own energy related businesses are giving investors dyspepsia. The difficulty in finding the investment gems is: 1. Not knowing how far oil prices will fall. 2. How long oil prices will remain at these levels. 3. Which industries/firms will recover and which will not. Investing in the wrong company may result in ‘dead’ money for years before seeing a meaningful return. Whispers on insiders buying may be premature as oil still hasn’t stabilized in price and some of those ‘early’ buyers have been badly burned. Talking heads on New Year’s Eve CNBC echoed this sentiment as one wag considered we’re 85% to the bottom and this was the time to dip one’s toe into the oil patch and another suggested buying only those that can continue to pay shareholders a dividend.

 

IN 2015 WHAT WILL DRIVE THE MARKETS HIGHER?

Huge Johnson on CNBC thinks that there will be no Dow 19,000 in 2015. He was the guy that wasn’t that crazy about the markets in either 2013 or 2014 , and said he was surprised by the actual positive results. Back now he comes on CNBC the day after Christmas to give his thoughts on the year ahead saying he believes large domestic stocks are the place to be for the coming year. He also thinks international developed and then emerging markets for the second and third picks for the coming year. Johnson is sour on corporate earnings and doesn’t see a pick up over the next twelve months.

Bob Doll, CFA Nuveen Asset Management Senior Portfolio Manager: 2015 Predictions:

1. U.S. GDP grows 3% first time since 2005
2. Core inflation contained but wage growth begins to increase.
3. Federal Reserve raises interest rates as short term rate rise more than long-term.
4. European Central Bank begins a large scale quantitative easing program.
5. U.S. contributes more to global GDP than China for the first time since 2006.
6. U.S. equities enjoy another good but volatile year as corporate earnings and the dollar rise.
7. Tech, health care and telecom outperform utilities, energy and materials.
8. Oil falls further before ending the year higher than when they started.
9. U.S. mutual funds show first significant inflows since 2004.

 

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