That Was The Week That Was-3rd Week September

 

Fed Leaves Rates Unchanged! ‘Greatest Uncertainty is the Federal Reserve.’-CNBC 9/17/2015. Here we go again. Another round of not knowing if and when the Federal Reserve will raise rates. Markets were slightly up ahead of the Fed announcement and fell as the decision not to hike rates was made.

 

Cramer Said The Fed Got it Right: It wouldn’t have surprised him to see the Dow nosedive 500 points, the dollar soar, emerging markets and China tank with any small amount of a rate hike. “Does it make sense to create turmoil because of an amorphous belief that inflation lurks around the corner?’ The Fed, according to Cramer, understood three critical things:

• There is no inflation. A positive for stocks but not for workers.
• Global ramifications of even a small rate hike. Europe trying to rebound but China and Brazil are struggling.
• There is time to wait. (Yellen said in her press conference that the timing of the rate hike was not as important as the degree of the hike). CNBC Mad Money 9/17/2015

 

  MARKET UNEASE MAY CONTINUE FOR SOME TIME. Robert C. Doll, CFA, Nuveen Asset Management, September 14, 2015.

• Investor sentiment remains depressed, and volatility in equities is likely to persist.
• Concerns over Fed policy are overstated and investors should not fear higher rates.
• Economic fundamentals remain solid, which should eventually help earnings and equity prices improve.

Nuveen Asset Management, Weekly Investment Commentary, Source.

  The First Retirement Seminar Invitation of The New Seminar Season. I got mine a few days ago and I thought I’d share some thoughts on what to watch out for before you pick up the phone and make a reservation for the info-commercial and free ‘gourmet’ chicken dinner.

Today retirement seminars are held at restaurants, country clubs and other venues where a free meal is offered if you sit through a ‘info-pitch’. The more expensive the meal the higher the sales commission in the seller’s products. Don’t try to kid yourself or rationalize that the person holding the seminar is a ‘friend’ or someone who thinks well of you. If you’re eating a free chicken you can be assured that the host of the retirement seminar is chowing on Kobe and they mean you to pay for it. This type of sales harkens to the day of Florida raw land pitchmen who sold dirt through dinner seminars throughout the 1950s and 60s.

To get people into the seminar costs money. Seminar mailers are expensive. Figure the average about $1.50 per mailer, which includes manufacture, postage and labeling. About 10,000 mailers are sent, on average, to gain a reasonable response. The average meal at a ‘fancy’ restaurant is about $20.00 per head. Totaling it up someone is putting up about $20,000 on a bet that they’ll recoup that in new commissionable sales. Who pays for that upfront is not a company but the person who’s name is on the mailer. Eventually the attendees end up paying for the entire seminar plus a lot more through egregious commissions.

Who’s promoting the seminar can also be found on the mailer. Securities law demands a registered representative identify themselves and the broker/dealer affiliation on any and all advertising. You’ll read that as Joe Smith, registered representative of XYZ Securities, Inc., a Securities Broker/Dealer, Member FINRA/SIPC. If you don’t see that anywhere on the mailer you don’t know who or what the folks are that are promoting the retirement seminar, or what they are eventually selling. In most cases if not securities related it’ll be an insurance agent selling high commissionable annuities. You’ll know that if you see words and phrases as, ‘Guaranteed Income, Safe, Eliminate Market Declines.’ These are all catch-phrases of the insurance agent. Although it could also be real estate limited partnerships, precious metals, viatical settlements, or oil and gas deals.

In some cases the person could be selling anything from raw land to unregistered notes. They’ll all use words on the mailer that are related to retirement because they know that’s the group that has the money.

The fact that someone is willing to invest about $20,000 to get to your pocketbook tells you something. FINRA is so concerned about seminar practices that it has issued a ‘Free Lunch’ warning to retirees. You can read this by going to the FINRA web site or searching FINRA Free Lunch Warning on the internet.

 

If you’re wondering why your favorite ‘global’ stocks are in the tank it could be the ‘strong’ U.S. dollar. While a strong American dollar is great for consumers who buy foreign goods and go on vacation overseas; it is not so for companies that do business in many foreign countries. A strong currency makes U.S. exports and products more expensive to consumers in other countries. A strong dollar affects all business and investment sectors. As a company’s earnings are affected by the strong dollar so is its stock price.  Since July, 2014 the dollar is up 20%+ against a basket of currencies.

And the strong dollar has negatively affected the earnings growth of American Multinational Companies.

Investors who think a company may have lost its luster may well rethink that it may be that the company is caught in a strong dollar environment. Source Business Insider 9/12/2015

made me smile…

 

Be Careful ETF Investors:

ETF INVESTORS SAW THEIR FUND CRASH WHILE UNDERLYING ASSETS WERE DOWN A FEW POINTS:

The Day the Markets Dropped 1,000 Points August 24th Dozens of Exchange Traded Funds Traded at Steep Discounts to the Sum of Their Holdings. WSJ 9/14/2015

The benefit of the ETF is to be able to buy and sell throughout the trading day but have the diversification of a mutual fund. On 8/24 one popular ETF was down 35% while the combined weighted value of the stocks the ETF held was down just 2.7%. Something, obviously, was and is not right.The problem is the ETF  has a wild anomaly which is a trading flaw when investors run to the exits. It seems that it is not as easy as the industry has predicted to get in and out of these products. What is particularly worrisome is how the BOND ETFs will react when investors hit the panic door. This problem isn’t in mutual funds. Mutual funds are priced at the close of business and everyone either sells or buys at that close and knows the exact price. WSJ 9/13/2015

 

Shoppers are back…

 Dow up Tuesday +228 points news of renewed consumer confidence and U.S. retail sales rise 0.2%. Retail sales haven’t decreased for 6 consecutive months. Jesse Hurwitz. economist at Barclays, described consumers as ‘buoyant’, and predicted spending would be strong. The consumer will be the dominant force behind U.S. economic growth, he predicted. Strong spending in the spring helped the economy grow at an annual rate of 2.7% in the second quarter. WSJ 9/15/2015. SOURCE BLOOMBERG PHOTO.

  Democrat Bernie Sanders Proposes Largest Peacetime Expansion of Government in Modern American History. The WSJ reported a $18 trillion for government run health care (expansion of Medicare to cover everyone), rebuild bridges and roads, expand Social Security and make tuition free at public colleges. There would also be huge tax increases to pay for the programs. Here is a chart as it appeared in the WSJ 9/16/2015

 

Markets Dow Up 140 points Wednesday. A gauge of home builder sentiment rose to its highest level since November, 2005. wsj 9/16/2015

 

U.S. Consumer Prices Fall. A key measure of inflation dropped due to sliding gasoline prices. The CPI declined 0.1% from July. The decline was due entirely to depressed oil markets, which have pushed the price of gasoline down 23% over the past year. WSJ 9/16/2015

 

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.