That Was The Week That Was-5th Week March

 

END OF 1st QUARTER WINDOW DRESSING OR?  Simply put window dressing is an activity that managers will use that ‘dresses’ up a portfolio to make it look better than it is. Usually an investor will see ‘window dressing’ at the end of the year as managers vie for bonuses. This year’s first quarter was looking as a loss for the first time in several years until Monday when the Dow got up and ran right from the opening bell and finished up over 250 points. Monday’s action didn’t help as the quarter ended down following Tuesday’s selloff.

 

JIM CRAMER ON MAD MONEY SAID THAT IN ALL HIS YEARS HE’S NEVER SEEN A RALLY LIKE THE ONE THAT HAPPENED MONDAY WHERE EVERY BIT OF GOOD NEWS TRANSLATED INTO A STOCK MOVING MUCH HIGHER. He also said don’t be surprised we could give back some of the winnings at the beginning of the new quarter. CNBC 3/30/2015 More later in the blog.

Tuesday Markets Fell 200 Points.

 

DOW 20,000 FAIR VALUE!  Wharton Professor of Finance Jeremy Siegel has been predicting it for close to a year, and said it again on CNBC last week (March 27, 2015), that he feels much more comfortable with stocks and believes that “20,000 is Fair Market Value of the Dow”. But, he said it won’t get here today, next week or even next month. He also said on CNBC that the ‘Fed gets it.’ He once thought they were being way too aggressive in projections of interest rates.  Siegel expects the Dow to be trading between 17,000 and 18,500. I remember the Nixon years and the Dow struggling to climb over 1,000 now we’re expecting 20,000.

INVESTORS FLEE MARKET AT ‘CRISIS-LEVEL PACE’

Outflows from equity based funds in 2015 have reached their highest level since 2009. There have been $44 billion in outflows or redemptions this year to date, according to Bank of America Merrill Lynch. In the last five of the previous 6 weeks equity funds have seen outflows. Last week $10.8 billion, reported BofAML. The trend, CNBC reported, could be interpreted as a ‘Buy’ signal.

Made me smile…

 

 

This Chart From JP Morgan.

 Andy Kiersz writing for The Business Insider reported that big stock market selloffs happen all the time. However major downturns don’t happen just because prices are too high. History suggests he wrote, ‘… bear markets more often result from factors external to the stock market, such as recessions, wars and credit bubbles.’ The argument is that one or all is happening now somewhere.

 

Buy High and Sell Low. This wasn’t  phrase that someone made up. There are investors that do this - a lot. I can only assume that these are the people who want ‘market returns’ without ‘market risk.’ If they are nervous investors they’ll sell every time the market’s burp and there is no amount of common sense or fundamental knowledge that can help.  Those that lost money because they sold early and often, for whatever reason, continue to do so again and again. They can never put together the connection that they are their own worst enemy. Market corrections are buying opportunities.

Patience is also an investor’s best attribute.  If you are an investor who is constantly checking what the market is doing you may not be emotionally comfortable to be invested in stocks. Warren Buffett once cautioned that homeowners don’t check the value of their homes every day, and investors shouldn’t their investments.

 Déjà Vu All Over Again

On January 16th The WSJ’s Weekend Investor reported that the S&P 500 Index had fallen 8 out of the 11 preceding trading days in 2015. Reasons  were low oil prices and potentially weaker global economic growth. The markets bounced back. Last week more news  similar to January’s caused the markets to retreat. In January experts reported that the economic data didn’t seem to be signaling an imminent recession. Low gasoline prices, strong auto sales and the potential for more housing construction indicated an economy that does not seem on the verge of collapse. Other than the Fed announcing it may well raise interest rates in 2015 not much has changed in the last 60 days. WSJ 1/16/2015

Interesting News Tuesday After The Markets Close.  Carolyn Boroden, a technician who runs FibonacciQueen.com thinks its time to become cautious. Boroden is one of Jim Cramer’s colleagues at RealMoney.com. She’s been an analyst and student of Fibonacci.  This is a type of analysis based on medieval mathematics of Leonardo Fibonacci. Boroden said she sees a similar chart pattern in the S&P 500 Index that she saw recently in the Russell 2000 before it had its fall. (The Russell started to fall end of August, 2014 and began to recover by October 1st of last year. It was about a 20% tumble before regrouping.) What Boroden found was that when a security reaches a certain level, in this case an extension over a large upside run, it becomes vulnerable to a correction. Currently she sees market resistance about 2% from current levels. Jim Cramer on his Fast Money program clarified it by saying Boroden isn’t saying its doom and gloom or even go short the market. What she is saying is that she thinks that there is going to be a significant pullback, and that she thinks this could be a great buying opportunity. Our colleagues at our Advisory Firm suggest raising cash assets by a reasonable 10%.

Smart Investors Learn to Use Market Corrections As Buying Opportunities. Watch stock indices here. If the Russell 2000 was any kind of a timetable guide and a correction begins here then the summer should bring markets back for another run.

‘LIKE A BRUSH FIRE CLEARS AWAY DEAD WOOD TO ALLOW NEW SHOOTS TO EMERGE- A MARKET SELLOFF CREATES BUYING OPPORTUNITIES.’-Michael Kahn, ‘Getting Technical’- Barrons.com 4/2/2015 “The current market turmoil can continue, but overall the underpinnings are still good. Investors should stay engaged.’

 

And, if you didn’t have enough to think about- The Institute for Supply Management’s March index slid 1.4 points Wednesday 4/1, the lowest in almost 2 years. ADP reported March private payrolls rose by 189,000 the weakest since January, 2014. Jennifer Lee, senior economist for BMO Capital Markets, blames a stronger dollar for the recent economic sluggishness. She also believes the energy sector retrenchment has widespread spillover effects. Investors Business Daily 4/2/2015

Wrapping this up early for the week. Have a good Easter and if you need me you can send an email to pstanley@westminsterfinancial.com or call me @ 586 295 0430.

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