CHINA DEVALUES YUAN 1.9%. DOLLAR SHOULD SOAR! BAD FOR OUR EXPORTS! China says it’s a one time adjustment made Monday last but John Gorman head of dollar interest rate trading for Asia and Pacific at Nomura Holdings, Inc. in Tokyo said this might by the start of a broader change. Experts are predicting any interest rate hikes by the U.S. Federal Reserve as early as September have faded. A strong Yuan has put pressure on China exports. China’s move is an indication the Chinese Central Bank perceives global economic weakness. A weaker Yuan helps Chinese exporters sell goods aboard. It also confirms that the Central Chinese Bank agrees that the Chinese economy is sputtering. The Chinese move, in all likelihood, will put pressure on other central bankers to push down their currencies. It will also accelerate capital outflows from China if investors expect further devaluations. Remember from previous blogs the concept of ‘Beggar Thy Neighbor’. It’s an economic policy put in force back in the 30s and revisited from time to time in order for a country to increase their economic wealth at the expense of their neighbors.Global markets down in early trading Tuesday. Sources CNBC.com & WSJ 8/11/2015
Should be great news for U.S. travelers and buying of foreign goods. 
Not so good for multi-nationals.
THE FLAT IS THE NEW UP.-
David Kostin, Goldman Sachs Chief Equity Strategist, said the Chinese devaluation doesn’t spell disaster for U.S. companies. ‘Two-thirds of the revenues of U.S. corporations are domestic,’ he told Squawk on the Street Tuesday morning. The real driver is domestic demand and with the continued better job market, things are getting better. Kostin warned that with slowing sales growth, modest economic expansion capital spending and corporate repurchases would only be able to contribute so much of a boost against new headwinds. august 11, 2015 cnbc
‘Valuation, lack of earnings growth, Fed hike on the horizon-that’s sort of the see-saw that basically leads you to ‘flat is the new up.’ You should be expecting that kind of a return in this market,’ he said. Kostin advised that investors focus more on cyclical stocks, favor value more than growth, and emphasized avoiding companies that might be overexposed internationally.
Cramer on ‘Mad Money’ Tuesday night last called China’s devaluation a ‘Trade War.’ He said that the Chinese want their people to buy the products made at home and not from somewhere else. He called the move desperate. And this move was something five times bigger than anything the Chinese have done in the last decade. He also said that what it could mean is that there is more risk in the world growth than we thought. Cramer advised rotating back to dividend stocks and domestic stocks with no exposure to China can go higher.
This is the same tack that Europe and Japan did to stimulate exports, Cramer said.It’s working and that’s why he’s worried. CNBC August 11, 2015
The Saudi’s Are Still Pumping Oil. But Could Lose The Petro-War With U.S. Frackers.
According to the U.K. Telegraph/August 5th. The Saudi’s have misjudged badly the growing shale threat. Bank of America says OPEC is now effectively dissolved. One Saudi expert said,’The policy (Saudi’s refusing to stop drilling and sending oil to market) hasn’t worked and it will never work.’ The Saudi’s are behind the oil wars and by causing the price to crash have certainly killed off prospects for a raft of high cost venture… Even if shale drillers, who have been cushioned by hedging contract, go belly-up, the wells will still be there. Stronger companies will mop up on the cheap, taking over operations. Once oil climbs back to $60-even $55- they will crank up production immediately.OPEC faces a permanent headwind. Each rise in price will be capped by a surge in U.S. output. Saudi Arabia is effectively beached, wrote the Telegraph. It relies on oil for 90% of its budget revenues. There is no other industry to speak of. The U.S. oil industry has greater staying power than the rickety political edifice behind OPEC. 
IN OTHER NEWS…
WARREN BUFFETT: NO REAL WEAKNESS IN THE ECONOMY. THE ECONOMY IS ON THE RIGHT TRACK. THE ECONOMY HAS BEEN IMPROVING SINCE THE FALL OF 2009 AND IT CONTINUES TO IMPROVE. cnn ‘One on One’- August 10, 2015
After dropping 10 out of the previous 11 sessions, ending the week before last, Cramer called the markets ‘A Falling Knife’. The vast majority of portfolio managers have suddenly become fearful of buying the dips, he said, on his program ‘Mad Money’, August 6, 2015.
MONDAY AUGUST 10TH MARKETS MARCHED TRIPLE DIGITS RIGHT FROM OPENING BELL. SOME ANALYSTS CALLED IT A ‘DEAD CAT BOUNCE’, AND DIDN’T EXPECT MUCH FOLLOW THROUGH. CNBC august 10, 2015
Nuveen Asset Management, August 3, 2015: ‘We do not believe the current equity bull market will be ending any time soon. In our experience, bull markets tend to end under three circumstances:
- Rising inflation triggers aggressive Fed tightening.
- Policymakers make some sort of mistake.
- External shock occurs.
# 3 appeared suddenly and without prior warning by the Chinese Central Bank this past week as an excellent example of an event not of our doing affecting our economies and markets. So while the 3rd circumstance is impossible to predict, we see no signs that either of the first two are on the horizon.’
GOLDMAN SACH’S HEATHER KENNEDY MINER, GLOBAL HEAD OF STRATEGIC ADVISORY SOLUTIONS WITHIN GOLDMAN SACHS ASSET MANAGEMENT, ANSWERED: HOW DO STOCKS ACT WHEN RATES RISE?
- In the U.S. large capitalization equities have frequently staged short-term dip as investors assess the change in environment, but these episodes have frequently proven to be buying opportunities.
- History shows that diversified bond portfolios have often turned positive within a period of a few years even amid rising interest rates.
(The problem not addressed in the article regarding bonds and what happened over a period of systematic rate hikes where investment managers were unable to roll their portfolios into newer, higher yielding bonds, as the author suggested. You’d have to believe it would be like the dog chasing its tail.) Source Barrons.com Wall Streets Best Minds 8/5/2015
IF YOU LISTEN TO THE ‘FINANCIAL NEWS’ THERE IS A WHOLE LOT OF GUESSING GOING ON.
Made me smile…
CASH AS AN INVESTMENT SECTOR VERSUS…?
Investors often forget using cash as an investment sector. The most common thinking is that one should be fully invested at all times. In an environment where rates may be rising (and therefore principal value falling in fixed income) and equities under duress perhaps the best sector to sit things out and‘wait for opportunities’ is cash. While cash won’t return much return on investment it won’t be susceptible to pressures from either the fixed or equity side. Here I’m not suggesting timing the market or even holding cash for an extended period of time. But use the money markets in an asset allocated portfolio as a way to reduce portfolio risk, maintain stability and have fire power when buying opportunities arise. Cash can be used in place of untested hybrid fixed income and intermediate bond funds as part of a total portfolio asset allocation.
I’VE ALWAYS SUSPECTED BUT DIDN’T REALLY KNOW FOR SURE… Activist investors have had huge backing from Big Mutual Funds. We’ve known a large amount of ‘start-up’ money for today’s uber-firms has come pre-IPO from large intuitional money management companies but were never really sure these same firms were on the same side of the table as ‘investor activists’. The WSJ 8/9/2015 confirmed that in a report that these days mutual fund companies are doing what many investors thought impossible, siding with activists to get board seats, changing ideas, cost cutting and getting companies to buy stock back. Last year fund firms were behind the push to remove the entire board of Darden Restaurants and get G.M. to increase their share buyback. ‘Everyone is looking for an edge,’ said Peter Langerman, head of Franklin Templeton fund unit. Private talks between funds and activists are more common. Companies have also understood the importance of courting their institutional shareholders and have been bulking up their investor-relations departments. The recent changes at Microsoft were supported by Capital Research and it went as far as withholding support for the re-election to the board of Messrs. Ballmer and Gates. Almost a year later Ballmer announced his retirement.
While regulators focus, almost totally, on fund costs to the shareholder the value of today’s mutual fund management provides investors with an almost watchdog approach to enhancing their investment. SOURCE WSJ 8/9
Warren Buffett has never been a big timing the market kind of fellow. He’s bought, added more to the same holdings when conditions have made his picks cheap, and held. Over the years he’s sold some of what he’s bought only to buy more that he perceived as having value. One of Buffett’s lessons is that people don’t sell their house whenever it falls 5%-10% in value and then buy it back later. The same is true with investments. The big winners through the last recession were those investors who didn’t sell but stuck it out and held (some added to their holdings). This last week and the China devaluation may have been the correction we’ve been looking for.
Finally- Check out the Canadian dollar versus U.S. dollar discount. At the close of business August 11th the approximate was $1.30. With cheap gas and that kind of U.S. dollar muscle power a weekend trip to Toronto is the cheapest its been in ages. 
SOURCE GOOGLE FINANCE. COM
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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