That Was The Week That Was-4th Week June

 

 Stuff you may not have known about our 4th of July Holiday.

• Legal separation from Great Britain occurred on July 2, 1776.
• Approval of Declaration of Independence date July 4th.
• John Adams and Thomas Jefferson died on the same day July 4, 1826.
• James Monroe died on July 4, 1831.
• Calvin Coolidge was born on July 4, 1872.

 

Alternative Investments? Good For You? Alternative investments are being touted as the next best thing for the average person’s portfolio since the invention of the Easy Bake Oven. What are alternative investments? Investopedia defines them as ‘not one of the three traditional asset types’ – stocks, bonds or cash. In most cases these  type of investments are owned by large institutional or net worth individuals because of their complexity and lack of liquidity. Alternative investments include managed futures, real estate, derivatives, commodities and hedge funds. While most alternative investments don’t fit the average investor investment profile a few may be worthy of consideration. Real estate, precious metal and commodity investments are highly liquid and fairly inexpensive to buy if using an ETF or mutual fund. At some point they may be excellent choices during periods of inflation, or extreme market malaise.

Shucks! A Possible Side-Ways Market? Half-way through the year and the Dow shows slight gain while active managed funds are doing much better. The opportunity of a double digit year for the broader indices is looking about as good as Donald Trump switching hair stylists.  

Brett Arends wrote an essay for MarketWatch.com entitled 25 things I wish I knew when I graduated from high school. He wrote he had to learn a lot of things the hard way. Here are a few of my ideas on what someone graduating from high school should know about money:

• If you are unable to get your brain around money management invest in a simple broad stock market index fund and stick with it. (If you don’t know what that is simply search online for stock index funds)
• If the investment isn’t 100% liquid you don’t buy it.
• Ignore everyone and everything that preaches you should actively trade your investments.
• Time, patience, consistency and simplicity will generally make you more money than following the advice of the ‘Hoot & Holler Folk on Cable TV’.
• Pay Yourself First. Act as if you owe yourself and put your name first on the list of bills to pay.
• Try to get at least one year’s living expenses saved. You’d be delighted how independent and less stressful you’ll feel.
• Get a small Tupperware box and at the end of the day empty your spare change and singles. At the end of the year you’ll be surprised how much you’ve accumulated. Buy yourself something special or go on vacation.
• Don’t marry someone who owes a great deal of money, doesn’t really know how much and doesn’t care. There’s always a bad ending here.
• Stay away from so-called financial planners that ‘know’ how your life will play out even through you don’t.
• Saving and accumulating as much money as you can is about the best financial plan you can have.

 

Made me smile… Got

‘er done…! Almost.

 

Greek Deal Possible Relief Rally Monday. Markets up triple digits! ‘The Europeans have raised brinkmanship to an art form.’ – CNBC.com 6/22/2015

 Robert C. Doll, CFA Nuveen Asset Management June 22, 2015. Key Points:

• Leading global economic indicators point to improving signs for growth.
• Fed monetary policy decisions remain deliberate and measured.
• Corporate profit expectations should gradually strengthen later this year, which should be positive for equities.

First Time Home Buyers Drive U.S. Home Sales to Best Since 2009. We need, and usually have gotten, real estate, as the catalyst to a recovery. This last Depression it didn’t happen for many good reasons. But now it seems new home buyers are back and first timers accounted for 32% of the purchases, matching the highest share since September, 2012. Reasons are lower down payment requirements, rising rents and brighter employment picture. Reported BloombergBusiness June 22, 2015.

OVERHEARD ON CNBC ONCE THE GREEK PROBLEM IS IN THE REARVIEW MIRROR INVESTORS CAN ONCE AGAIN WORRY ABOUT CORPORATE EARNINGS.

Finra accuses broker of trying to bilk Alzheimer’s client of $2M! According to Investment News of 6/22, FINRA, the regulatory body, has identified a former stockbroker that had an 81 year old Alzheimer’s patient assign him as the beneficiary of her trust. The outcome is still unknown but I’ve written about Elder Abuse and Practices before. Children of elderly parents have to be aware of what’s going on with their parent’s money. The very least you should have a ‘talking’ relationship with your parent’s advisors.

Greek Impasse & Carl Icahn Comments Wednesday Drags Markets to Triple Digit Loss.

Icahn ‘warns’ people that the high yield market is ‘almost ridiculous’ you can buy a 5 1/4% high yield when you can buy a corporate bond that won’t go bankrupt and take a possible 40% loss for an extra 2% and (people) think they’re smart.’ CNBC 6/24/2015

Dow fell 75 Points Thursday as Transport Index Fell and DJIA followed. China Shanghai Composite continued its fall down 7% as the two week selloff continued.Morgan Stanley cautioned its investors not to buy the dip. The bank lowered its price target for  the Shanghai citing concerns like lofty valuations and high margin debt. WSJ 6/25/2015

The Greece problem is like your unemployed brother-in-law living in your basement with no intention to get a job, pay his bills and worse, move on out. The Greek pension system is broke with age 55 being the normal full retirement age for men and age 50 for women. It is the single sticking point that Greek citizens are adamant about but needs to be negotiated. This bears a striking similarity to trying to modify our Social Security system.

 Info NY Times, WSJ, MarketWatch.com and others. 6/25/2015

A Happy and Safe 4th of July Holiday!

Questions call Paul @ 586 295 0430 or write him @ 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-3rd Week June

 

KNOWING WHEN TO FOLD THEM or Reasons Why Investors Should Drop a Mutual Fund.

  Don’t get emotional about money. There are basic reasons why investors should consider dropping a fund no matter how long they’ve owned it:

• The chief portfolio manager leaves.
• The fund changes investment philosophy.
• The fund has a run on assets.
• The fund invests in an unpopular sector of the market.
• The fund doesn’t come close to matching it’s index return for many years.
• The fund’s risk (Beta) suddenly increases.
• The fund company decides to roll the assets into another fund.

The single biggest reason you should redeem a fund is that it turns into a poor performer. There are multiple reasons: It becomes either too big, it’s in the wrong investment sector or the the managers are clueless and can’t get a handle on what to do. The market seems to zig every time the managers zag, and vice versa. Common sense says: Nothing is going to make this a quick fix. In many cases a loyal customer that owns this fund will hold it for the longest time hoping things turnaround.

Mutual Fund Management is rather cruel in dealing with bad funds. Years ago I was a huge fan of Helen Young Hayes, a  world fund manager working with, at that time, the most popular domestic fund family that had 20% of all mutual fund investment assets under its management. Ms. Hayes was a stock picker extraordinaire. Then she left to raise a family. I remember telling investors that the fund she left would never be the same. I was right. It never recovered from her absence. The ensuing fund managers were not able to match Hayes’ expertise. They didn’t come close. There was a huge exodus of investor money. It became a sinking ship with outflows far outpacing inflows. It was a ‘everyone into the lifeboats’ situation. Years later the fund family pounded a wooden stake into the heart of the fund  and rolled the remaining assets into another fund with similar investment philosophy but with another name. Unless you want to dig deep you cannot find the original fund investment history since Ms. Hayes left. The history has been wiped clean from most public records.

This is what mutual fund families do to their bad funds. Fund names are changed. Funds are rolled into other similar funds. Investment philosophies changed. It’s taking the leafy branch and brushing away one’s footprints.

In the meantime loyal investors had shouldered losing season after season when they didn’t have to. Remember the basic rules about when to leave a poor performer. The rules are clear and loyalty is usually a one-way street.

 

Investors May Be Concerned About The Wrong Bubble! Howard Gold, writing for MarketWatch.com June 11th, said that Investment Bubbles are always obvious in ‘hindsight’. But when you are in the middle of one, it’s hard to fight the crowd. The Chinese Shanghai Composite Index topped 6,000 in 2007 only to fall 70% to 1,700. Now the Shanghai is over 5,000. The Central bank is cutting rates, the government is lifting restrictions on foreign investors and, on Tuesday last the Index provider MSCI is expected to include China A shares in its global benchmark. The Shangai is up 150% in the past 12 months!

• Margin debt is skyrocketed up five fold in one year.
• From 1-2014 through 5-2015 225 IPOs have come to market with an average 418% increase.
• China’s GDP slowed to 7%, the slowest since the Great Recession.

The smart money is bearish on China. Jonathan Garner, Morgan Stanley’s chief Asia and emerging markets strategist, downgraded China stocks for the first time in 7 years. BNP Paribas also turned bearish on Chinese stocks. So maybe we should look east for a market crash and not so close to home. MARETWATCH.COM 6/11/2015

 

Everyone Who Invests Wants Free Brokerage Services! Another article on CNBC.com criticizing brokerage fees. The facts are since I’ve been in the business wire house firms and mutual fund companies have slashed their commission structure by about half of where they were when I first started. Compare that to real estate commissions that haven’t changed since the first cave was sold. It’s still a standard 6% commission even as home prices have tripled. I went looking for costs of other items we buy and the average markup:

• Coffee cost .25 cents a cup. Starbucks charges $3.75 latte.
• Diamond jewelry markup 50%-200%
• Clothes 250%-350%.
• Eyeglasses 1000%
• Over the counter drugs 200%-3000%

Sources wikipedia and other online sources. I don’t see protests at Starbucks..

 

MONDAY MARKETS OFF TRIPLE DIGITS ON GREEK FEARS AND WONDERS WHAT THE FEDERAL RESERVE IS GOING TO DO. Markets closed off their lows with the DJIA –107.67, Naz –21 and S&P 500 negative 9.68.

 

Rate Hikes are Coming. Rates have been too low-too long. Rising rates don’t kill bull markets. MarketWatch.com 6/15/2015

Made me smile?

 

Great Chart for Nervous Investors or those that think the end is near.

U.S. stocks closed higher Tuesday despite Greece fears. Dow +113. Worries about possible Greece no-deal and economic contagion to U.S. markets ignored as it was all about focusing in on the Fed message. We’ll know more Wednesday. CNBC speculated that 92% in the CNBC Fed Survey expect the Fed to begin raising rates this year with a consensus of 54 basis points, or the result of 2 quarter point hikes. CNBC.COM 6/16/2015

The Fed Speaks…Expect a rate hike this year. Maybe two rate hikes. The combination total shouldn’t impress anyone as the Fed Chief reminded everyone that rates would remain low for a very long time. The end result of all the analysis of what Jant Yellen said on Wednesday was that the Fed  is likely to do a lot less than whatever it is they say they will.

 

BARRONS reports major investors prepare for stocks to Plummet. Here we go with the hyperbole. Reporters and editors love words like crash, plummet decimate, as they describe carnage. The fact that we’re looking for a good old fashioned 5%-10% correction and nothing more and not a major stock market collapse. But Steven Sears in the Barrons.com ‘Striking Price’, June 17, 2015, loves to paint with a broad brush.

 

Speaking of Plummet!   China shares fell 3.7%, as the Shanhai Composite closed down Tuesday with no known catalyst for the selling. The ChiNext index, which tracks small startup stocks, had a 6.3% drop, the 3rd worst trading day in its history but had tripled in value in just the past year. WSJ 6/18/2015 Yes, the WSJ, used Plummet in its headline!

SOME BITS AND PIECES TO CLOSE THE WEEK…

Reuters Reported U.S. consumer prices increased the most in May in more than 2 years. This with lower oil prices. Inflation is heating up. 6/18/2015

Greek Banks May Not Open Monday as Talks Fail.Bank withdrawals accelerating. Contagion May Certainly Pour Over to U.S. Markets. Continued Volatility With The Greece as focus. Multiple sources WSJ 6/18/2015.

Markets Ignored Everything Thursday with DJIA +180 and the Nasdaq hitting a new record high +68 to close at 5132.95.

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 June

 

  Good News First! Markets Sprang Wednesday Across the Board in a Broad Based Rally With 3 Stocks Advancing for Every 1 Declining. Markets opened remarkably higher and stayed that way. Closing the DJIA + 235 with all 10 sectors in the S&P 500 Index up. Eight were up more than 1%! The reason is some sectors have already been oversold, especially in the tech sector.The rally continued into commodities. Utilities and REITs, hit by higher interest, rallied as well. CNBC.COM 6/10/2015

3 Bucket Retirement Income

The above illustrates a common 3 bucket retirement income strategy with one major flaw. The fixed income bucket is poised to leak as the Fed raises rates. Even a nominal rate hike will cause the fixed income sector to contract. Investors can reduce this risk by increasing the guaranteed or cash bucket to one-two years income and the balance in a diversified portfolio of dividend paying common stocks, mutual funds and ETFs. Financial Planners and insurance agents extoll the virtues of the 3 and even 4 bucket income strategy using fixed income for the second bucket and more adventurous investments in oil-gas, timber and commodities for the fourth bucket. Question on your ‘retirement income bucket asset allocation or to design a retirement income plan call me.586 295 0430.

 

STRONG MAY JOBS REPORT EASES CONCERNS ABOUT WINTER DIP.

The NY Times reported June 6th that employers added 280,000 jobs in May. The stronger than anticipated jobs report will also lead the Federal Reserve to begin raising rates. Carl Tannenbaum, chief economist at Northern Trust, said that this was confirmation that the economy is performing well and the first quarter was an aberration.

 

Last Week the following chart illustrated how investors are rotating assets. WSJ 6/6/2015

Market Taper Tantrums May Persist as Economic News Gets Better & Fed Gets Closer to a Rate Hike. Perhaps the market thinks ‘Volcker’ when a Rate Hike is discussed. This Fed may not be that aggressive.

 

DOW THEORY PROPONENTS SAY STOCK MARKET TOOL IS SIGNALING A CORRECTION IS COMING.

 CHART WALL STREET JOURNAL JUNE 7 2015,

Dow Theory states that any lasting upside in the Dow Jones Industrials must be accompanied by the same upside in the Dow Jones Transports. The DJT are down 6.9% ytd while DJIA is +0.2%.

IGNORE THE NOISE!

Both Bogle and Buffett tell investors to ignore all the noise of a market collapse by dread-mongers. Investments go up and go down, and the goal is to find a balance that produces a steady, compounding return which minimizes the impact of a poorly timed emotional reaction.  MARKETWATCH.COM 6/8/2015 PHOTO BY GETTY

Robert C. Doll, CFA Nuveen Asset Management.

• U.S. and Global economic growth should improve later this year.
• Rising bond yields and interest rate increases may cause more equity market volatility.
• The long-term outlook is brighter, and we think (Doll) investors should retain ‘overweight’ positions in equities. June 8, 2015 Volume 3.23 Weekly Investment Commentary.

Expect ‘Kick The Can’ as a Solution to The Greece Problem. CNBC DISCUSSION 6/9/2015.

Greek bailout talks remain at an impasse, reported IBD, June 10th.  Frustration is running high with Greek PM Tsipras. Damage to the Greek economy is worse than it could have been if the deal was made back in February. The Syriza, left wing political party Tsipras heads, is called incompetent and created needless more economic damage to Greece than it needed to. Jacob Kirkegaard of the Peterson Institute for International Economics, said, It’s not even clear if the extension idea will be accepted.’ 

Now CNBC is saying what I said last week- It’s a sideways market- or it could be- as the market sorts out whether a batch of economic date means the economy is improving enough for the Fed to hike interest rates.Julian Emanuel, equities and derivatives strategist at UBS said,’ …trading sideways is a continuation…we think it resolves itself higher but there’s too much uncertainty here how to move higher,,,it may take multiple weeks of continued churn.’ CNBC.COM 6/9/2015

or Not as Wednesday’s rally may have finally broke open the flood gates.

Retail Sales Jumped in May, Brightening Growth Outlook!  The Commerce Department reported that retail sales surged in May with purchases of cars and other goods. Consumer spending, economists say, is likely to remain fairly strong in the coming months, supported by higher savings, rising home prices and a tightening labor market. Stocks closed mildly higher with the Dow closing +38.97 and the Naz unchanged. Reuters 6/11/2015 and CNBC.COM 6/11/2015

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-1st Week June

 

They Only Call It a Crash! If you were stuck on the highway and saw in your rearview mirror a car approaching yours at the speed relative to the 2008 Global Market Recession Stock Market Crash you could order and eat breakfast, lunch, dinner, text all your friends, settle your affairs and take zillions of selfies while you waited. According to my calculation the market top before the Great Recession-2 was in October 1, 2007. The low reached February 1, 2009. That is about 15 months. Even an old poop like me can move out of the way of anything moving at the speed of paint drying.  Here’s My Point…  A Market Crash It’s More Like a SLOW-MO Tumble.  Go to any stock chart to see the S&P 500-Index during that time period. A market recession or depression is a series of events that may, or may not, create a massive one day crash. It takes time, events and yes, a big drop in price is usually there, but it’s not the one or only. Most investors who stayed in for the long-haul in 2008 did better than those that tried to time the market. But if you don’t like sitting through the mess of a crash and recovery you should have a  plan in place to fit your comfort level. I talked about this at my annual meeting this past February. Modifying your asset allocation to take advantage of market conditions is a great strategy. If you want to be active during all kinds of markets you have to have a plan. Sometimes people get flustered and forget the plan they made. Tape your plan to the refrigerator or your computer monitor so when things happen you know exactly what you want to do. If you know someone who’s been on the sidelines for a good many years share this with them and ask them, why. I betcha they don’t know.

The stock market crash of October, 1987 the Dow lost 22% in one day. However, for the most part the market had recovered the majority of its losses by December, 1987.

Circuit Breakers to Halt Trading Were Created Due to The October, 1987 Crash. The new circuit breaker rules allow time for traders to remove automatic trading systems and give investors a breather. A 7% fall before 3:25PM will stop trading for 15 minutes, a 13% decline before 3:25 a 15 minute cease in trading, after 3:25 for the remainder of the trading day. A 20% decline will stop trading at anytime for the entire day.

 

 

1st Quarter GDP 0.7%

For the second year in a row the economy contracted in the first quarter– certainly a far cry from the projected 3% annual growth economists expected. Higher imports and moderate spending by consumers were highlighted. Investors will look forward to additional data this week. MARKETWATCH.COM 5/29/2015

 

 

DIVIDENDS WORK EVEN WHEN THE MARKET DOESN’T. Investors get paid to wait, is the way I look at it. If you own a stock that pays 2% but hasn’t gone anywhere in a year you are earning what a 10-Year Treasury is yielding, with the potential for growth. If this year turns out to be dead-even from where it started and you own a slew of mutual funds that pay dividends you may well be better off than the person who parked their money in a money market or passbook savings account.

Made me smile…

New Yorker June 1 2015

 

S&P 500= 4300

  Barrons.com interviewed Jeffrey Saut, chief investment officer at Raymond James, May 30, 2015. He said, ‘We are in a secular bull market-secular meaning multi-year, if not multi-decade. …secular bull markets last somewhere around 14-15 years. And they tend to compound at double digit rates. There is probably another eight or nine years left.’ Saut projects that the S&P price objective in 2023-2024 should be around 4300.

Maybe the Bubble is in Art?  A Picasso sold a few weeks back for the tidy sum of $179+ million for what, some art experts call, a so-so piece from Picasso’s just O.K. later period. Thirty-five years earlier, in 1980 the art critic Robert Hughes wondered how a ‘spiraling market’  …had produced auction prices that had seen a mediocre Picasso from 1923 sell for $3 million. ‘The rising bubble in the art work has not affected the Old Masters. Rather the rising tide of money has elevated the resale value of contemporary art and the work of living artists sometimes close to the level of the distinguished dead’ –The Talk of The Town, New Yorker June 1, 2015. And perhaps investment managers take heed as bubbles in non-correlated assets brew from strange places. Consider the Japanese Bubble from 1986-1991 where there was no price that was too high or unattractive for Japanese investors to snatch up everything from Rockefeller Center to Pebble Beach. The Japanese bought it all at the top and then sold it back to us at the bottom.  

 

Construction Spending Fastest Pace in 6 Years

 

June Swoon?

Talk Monday June 1st on Markets souring  as June is typically a weak month for stocks.  Previously, Cramer on CNBC said a,  ‘June Swoon’ was about right as long as the dollar remained strong and the negative effect it had on American companies. May 29, 2015 CNBC. Swoon is used to define an overall decline in the value of the stock market. On the 27th of May Cramer explained that he believes it is ‘almost necessary for investors to call for a market wide correction. The fact that if you don’t call for a correction you’re going to look silly. And I think that’s part of the problem with this market.’ –CNBC May 27, 2015

 

 

Markets were tepidly up at the close Monday June 1st. Tuesday off a bit. Wednesday Markets  closed up off their highs. Naz was unchanged.

 

Circuit Breakers For Treasury Bonds? London Based ICAP PLC is studying the possibility of temporarily halting Treasury trading following large price moves. There is argument for and against but price gyrations have been unnerving traders. Worries over a bond free-fall have precipitated these discussions. WSJ 6/2/2015

WORRIES OVER GREECE, JOBS REPORT & OPEC plus the RUMBLINGS OF THE ‘R’ WORD saw the markets fall 171 points on the DJIA, –18 points on the S&P 500. The Naz was unchanged. Treasury yield also fell Thursday June 4th. CNBC had discussions throughout the trading day on a Recession. Were we in one, were we approaching one? No one knew. Both the Dow and the S&P 500 closed below their 50-day moving average. The IBD ETF Market Strategy was confirmed up-trend and to remain 100% invested. IBD June 5, 2015.

Questions call Paul @ pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

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