That Was The Week That Was-2nd Week May

 

 

TAPER TANTRUM?

 

  Ward McCarthy, chief financial economist at Jefferies, said Monday, that the bond market was getting beaten like a rented mule. It could get real ugly not only for bonds but for all assets if the bond  markets continue to spike and this is the ‘end to easy’ money, he said in a Barrons.com article. George Goncalves, head of equity strategy at Nomura, said, ‘..if this is the end of easy money, low long-term rates interest story and the Fed is not going to be able to hike, the long-term interest rate market is going to do the tightening for the Fed…’ On Monday Treasury yields went higher, putting pressure on stocks. The Economist reported May 6th a similar situation in the European markets. Barrons.com reported May 11th in Michael Kahn’s ‘Getting Technical’ column, long-term Treasury yields is the potential kryptonite for the stock market.Traders in the futures pit in Chicago said that the bond moves were similar to ‘a global margin call.’ As interest rates move up principal falls. If traders are using leveraged money, and cheap money, to facilitate what is called a ‘carry trade’, we could see a rapid and ugly unwinding of all assets. Markets closed off their lows on Monday. Sources, WSJ, Barrons.com, The Economist, CNBC.com 5/11/2015

Tuesday Markets Fell 100+ points at The Bell as a Carryover From Monday but Recovered Most of the Loss & Closed Off 38 Points on The DJIA.

WSJ Reported in ‘Markets’ Many Investors Still Bullish on Bonds.  The most recent selloff isn’t believed to be sustainable because of ‘tempered economic expectations’, and more balanced positioning by traders.  Still many bond investors believe the turmoil will be contained this spring despite volatility. A $24 billion sale of 3-Year Treasuries Tuesday drew the strongest foreign demand since 2009, and demand from U.S. investors also increased. 5/12/2015 WSJ

 

Better than expected Jobs report sent markets soaring Friday the 8th of May. It was a Goldilocks report- not too much and not too little. Enough to move equities but not enough to suggest that the Federal Reserve would be raising rates in June, or possibly September, Coming off an abysmal March number the Labor Department said that employers added 223,000 jobs and the unemployment rate fell to 5.4%. NY Times –economy – 5/8/2015.

Bob Doll,CFA, Nuveen Asset Management, Senior Portfolio Manager, appearing on Squawk Box, CNBC, May 8th; ‘Expect Choppiness & A Confusing Time… Going forward the market will only go higher based on earnings…’

MORNINGSTAR reports it could do better and asks for help:

Morningstar announced that its ‘Style Box’, used by professional and amateur investors for decades, may not be ‘stylish’ in today’s investment landscape. For decades Morningstar preached that allocation using the above style box was the only way for investors to manage their money. Now the firm says that while the style boxes, since 1992, were essential tools that it was only a ‘nice’ simplification. They’ve reached out to the investment community to help redesign their ‘style’ diagram for future use. Investment News May 4-8 2015.

Amateur and professional investors sometimes get carried away with ‘uber-sophisticated’ methods and forget basics.

 

Charlie Munger, partner of Warren Buffett, Berkshire Hathaway, keeps things simple for today’s investor. Munger is a lawyer, well respected value investor, philanthropist and Vice Chairman of Berkshire Hathaway Corporation. You can do far worse than read the wisdom of Charlie Munger.

• Buy quality over value.
• It pays to wait. Sometimes the best thing you can do is nothing.
• Know what you want and build a checklist.
• Keep up to date on developments around the world.
• Understand basic math and compound interest.

Poor Charlie's Almanac The Wit & Wisdom of Charlie Munger/ Amazon 

MISSING THE 10 BEST DAYS OR 30 BEST DAYS OUT OF 10-YEARS. WHY SUCCESSFUL INVESTORS DON’T TIME THE MARKETS.

Monday China Announced Third Interest Rate Cut in Six Months. According to Mark Williams at Capital Economics, this is not the end of policy support. He expects a further reduction before the end of 2015. He also expects China GDP growth at around 7%. WSJ 5/11/2015

 INVESTORS DOUBLE-DOWN ON SPRING TURNAROUND. WSJ 5/14/2015

Investors are piling into oil, commodities and trimmed their bets on the dollar. As the dollar soared commodities fell and those assets are now in the crosshairs of investors who are betting on their rise.

According to WSJ expect the rally to continue to September when rates are expected to be hiked by the Federal Reserve.

 

TIMING THIS MARKET IS A NO-NO. The average investor shouldn’t be timing any market but some do with disastrous results. Consider how the week before ended, the new week started and finally what happened on Thursday as markets ripped higher almost 200 points on the DJIA. Here why investors should stick with their diversified investment plan: (1) American unemployment remains at a 15-year low. (2) There is little to low inflation. (3) Interest rates remain at historic low rates. (4) The jobs market is strengthening even as the economy somewhat struggles. (5) The dollar is slipping. (6) Europe is strengthening. Finally:There could be a 5%-10% correction but experts contend that this market could be 8% higher by the end of this year. The correction should be looked at as a ‘Buying Opportunity’.  Sources: BloombergBusiness 5/14/2015 (Improving Jobs Market), MarketWatch.com 5/14 (Jobless Claims Cling to 15-Year Low), CNBC, 5/14/2015 and  David Darst on the Closing Bell 5/14/2015

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

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