That Was The Week That Was–1st Week September

 

Labor Day Edition… 

The Worst August in 3 Years. There were no winners for the month of August. A correction, long overdue, saw prices plummet due to concerns of a slowing China as well as ‘uncertainty’ regarding Federal Reserve policy. Oil prices advanced at the close of the month as OPEC struggles to come to grip with low oil prices and global glut. Russia remains in a recession as low oil prices force economic hardship due to their chief export. Economic domestic unease has kept mortgage rates below 4%. These low rates should be a boost for housing, and the broader economy, according to Bob Doll, CFA, Nuveen Asset Management. Even with the massive selloff at the beginning of the last week of August investors saw a rebound in prices at the end of the week.Investors saw it as an oversold situation and the S&P 500 Index actually gained 1.0%. There was massive technical damage done in the sudden correction and investors can expect more volatility, and not be surprised to see last week’s lows tested further. Investors would be well served, according to Bob Doll, CFA, in his weekly newsletter of August 31st, not only to hold but to overweight equity positions.  Sources WSJ, NUVEEN WEEKLY INVESTMENT COMMENTARY, CNBC/AUGUST 31, 2015.JIM CRAMER, MAD MONEY 8/31/2015

 

It’s Speculators Not Speculating and Speculating What Other Speculators Think!-Jack Bogle. ‘The Biggest exercise in sheer unadulterated speculation. Nothing to do with fundamentals, particularly the long-term value of equities.’ Bogle, founder of Vanguard Group, and a pioneer in Index Investing, said this on CNBC Power Lunch August 28th. This was in response to the ‘chatter’ on the market’s correction.

 

WSJ: SELLOFF FAILED TO RATTLE INVESTORS. STUBBORNLY BELIEVE BEST PLACE TO BE IN STOCKS.

SOURCE WSJ 8/29/2015

 

It Ain’t Over Till It’s Over… China Has Another 15% To Fall Before It Hits Bottom. The average stock in the Shanghai Composite trades at 15 times earnings, a fall from its peak of 22 times in July but experts say that’s too rich compared with the 10x’s trading earlier in 2015. Michael Parker, a Sanford C. Bernstein strategist says, ‘That for China stocks to find bottom there needs to be evidence of more effective policy making from Beijing than we’ve currently seen.’ Top of his wish list is for the Yuan to stabilize at 6.4 against the U.S. dollar. If you’re anxious to buy China stocks look for strong fundamentals or all-weather companies. Another China down draft could well be followed by a downturn for U.S. stocks as well. source Barrons.com  8/29/2015 China looms Monday last on stock futures.

 

Bonds?! Clients have been out of bonds for 2-years but the average retail investor still hangs in, chasing yields, seemingly not understanding how rising rates will destroy principal. The Goldman Sachs debt trading unit has lost $50-$60 million, as of August 26th, according to Business Insider Jonathan Marino. While $50-$60 million is not, in the world of Wall Street, a huge number, it is significant that the bank lost money in fixed income. Energy bonds especially have taken a beating this year but retail investors can view the total return for just about any fund designated as fixed income and while the yield may be attractive the net result is pathetic. Junk bonds, or what Wall Street likes to call, High Yield, sometimes sub-headed into what is called, Distressed High Yield, are in a heap of trouble, according to Wolf Richter, Business Insider, August 15th. In August these bonds dropped 5.4%, since mid-May the Distressed Bond Index lost 19%. In the last 12-months the index lost 28%, chart source Business Insider 8/15 & 8/25.

 

Buying or Selling a Mutual Fund Just Got Glitchy. Another computer glitch, a euphuism for a major screw-up by someone in IT, has prevented dozens of mutual funds and ETFs from promptly pricing their securities. The problem stemmed from a breakdown at Bank of NY Mellon Corp., the largest fund custodian in the world. Without proper pricing mutual fund sales and sells were in limbo. Investors who were trading ETFs found it made their trades more costly since pricing was totally out of whack. Those affected included funds by Goldman Sachs Group, Inc., ETFs offered by Guggenheim Partners, LLC and funds offered through Federated Investors. Prudential Financial, Inc. and Voya Investment Management were also impacted. Usually in these cases fund companies will make clients whole and then resort to suing Bank of NY Mellon, if they don’t accept liability.  WSJ 8/27/2015

made me wonder…

source Investors Business Daily

 

FYI BEAR MARKETS… Note duration and drop.

source business insider businessinsider.com 8/28/2015

Nothing is forever. The longest Bear Market the Great Recession lasted 34 months.

Yes, the American Consumer is alive and well. The WSJ reported 8/28/2015 Americans continued to ‘step up’ their spending in July. The Commerce Department reported that household spending increased 0.3% matching June’s pace.Workers wages also increase at the fastest pace since November. Most of the spending was on big ticket items such as cars and kitchen appliances. source Department of Commerce/WSJ 8/28/2015

 

 

Have a safe and fun holiday.

 

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