That Was The Week That Was- 1st Week October

 

UGLY QUARTER THAT NO ONE EXPECTED

More on the 3rd quarter of 2015 later in this blog. At the beginning of the year no economist or trader looked ahead to 2015 to predict what an ugly mess this year would turn into.It’s been a series of events coupled with a strong dollar (that’s only getting stronger), weak energy prices, worries over a China slowdown, and the loom of unknown interest rate hikes by the Federal Reserve. So far there are no winners only losers and even the ‘buy on the dip’ bargain buyers are MIA.

 

Dow Dives 300+ Monday. Bonds & Stocks Fall. Commodities in Bear Mode. Winner Dollar.The only thing beating stocks, bonds and commodities so far in 2015 is the ‘Almighty’ dollar. The U.S. dollar is still king and it isn’t helping ordinary investors. Until the dollar gives up some of its strength, and it doesn’t appear that it will, according to Michael Kahn, at Getting Technical, Barrons.com 9/28/2015 the trend for the market continues to be pressured. Both the Canadian and Australian dollar are in declining versus the dollar. The effect of the Federal Reserve raising interest rates hasn’t been taken into account. As interest rates move up the demand for securities that offer interest- mainly Treasury bonds and markets such as corporate bonds that are prices relative to them-rises. There will be an increased demand from foreign investors for dollars to buy those securities. –Barrons.com 9/28/2015

RBC Capital Markets Cut View of S&P But Remain Bullish. Jonathan Golub at RBC slashed his expectation of the S&P 500 Index hitting 2325 to 2100. Which is a 10% move higher. Pipper Jaffray amended their original projection to 2135. Golub said, ‘Our longer term outlook for the market trends remain largely intact. We believe the market will deliver 10% annually for the next several years.” Just 2 of the 10 S&P 500 sectors remained out of correction territory Monday. The only positive was consumer discretionary. SOURCE CNBC 9/28/2015

Private Sector Jobs Rose 200,000 in September. Employment Growth remains strong and broad based, except in energy and manufacturing. WSJ 930/3015 I discussed this before that we can have a great economy and a stinker stock market, or vice versa.

Overheard: The Market is so oversold. cnbc

 

If You’ve Been Paying Attention: There is a slew of stocks that pay a tasty dividend that have been beaten up. These are quality business models that have been trashed along with the overall markets. Call me for more information.

 

Superforecasting: The Art & Science of Prediction.A new book by Philip Tetlock entitled, Superforecasting: The Art & Science of Prediction, co-written with Dan Gardner shows that under the right conditions ordinary people are capable of improving their judgment enough to beat the experts. Who were those ‘elite’ ordinary people? They were the most careful, curious, open-minded, persistent and self-critical. Most experts, the book points out, are too quick to make up their minds and too slow to change them. They are in fact like most people. Those that were the best at forecasting were those that were ruthlessly honest about why they think what they do. In a project called, ‘Good Judgment Project,’ the author pitted 20,000 amateur forecasters against some of the most knowledgeable experts in the world and the amateurs won.  SOURCE WSJ 9/25/2015

Yet, emotion creates more havoc in losing money in the markets than any other attribute.

 WHYARE PRESCRIPTION DRUGS SO EXPENSIVE? Linda Johnson of the Associated Press reported that from 2008-2014 the average price for the most widely used brand-name drugs jumped 128%, according to Express Scripts Holding Co. Many new drugs for cancer, Hepatitis C and rare disorders carry list prices of $100,000 or more for a year of treatment. Here are some reasons Johnson discovered:

• No price controls
• Lengthy patents – people live longer
• Limited competition
• Small markets- many new drugs are for rare conditions or cancer subtypes.
• Development and production costs –Industry groups say it can take about a decade and well over a billion dollars to get a new drug approved.
• Fewer new generics.

 Carl Icahn, activist investor, calls it a potential dramatic catastrophe. He was referring to low interest rates, which he said should have been hiked 6 months ago but now it’s difficult because of global concerns. Low rates caused bubbles in art, real estate and high yield bonds. CNBC 9/28/2015

A Wall Street Journal article of a few weeks back reported on a popular fund manager who doubled down on high-yield oil bonds, and now the fund (name available to those that call me) has about 1/3 of its holdings in that high yield sector. The reason, explained to me, when I called the fund company to verify the accuracy and was informed that the manager was maximizing income return for investors. ‘He’s always done that,’ was the explanation. The fund has been labeled as a conservative income fund by one of the major investment rating firms.

 

 

 

 u.s.export hamper growth. The one –two punch of a strong dollar and slowing overseas market has contributed to an export boom that has gone kaput. The weakness overseas and the dollar have contributed to an overall economic drain in four out of six quarters. ‘Foreign demand remains the weakest part of the economy,’ said Jim O’Sullivan, chief U.S. economist at consulting firm High Frequency Economics.  U.S. exports are on track to decline for the first time since the financial crisis this year. Exports of goods and services are down, through July 3.5%, as compared to the same period last year. Higher interest rates will contribute to a stronger dollar and only add to the continuing weakness. WSJ ECONOMY 9/29/2015

EVEN WITH A 235 POINT LAST DAY OF THE MONTH DOW THE LAST QUARTER OF 2015 WAS A STINKER.

Worst quarter since 2011. It may not be over, according to the WSJ, as some analysts expect quarterly earnings to decline for the second quarter in a row. Carl Icahn said on CNBC 9/31/2015 he expects bad news on the earnings report and more selloff in the market. ‘Not as bad as 2008,’ he said. Investors are holding back buying on the dip as some are worried about valuations while others are waiting to see if turbulence in the bond and emerging markets will subside. WSJ, CNBC 9/31/2015 & 10/01/2015

MARKETS SNAPPED BACK AFTER WILD RIDE THURSDAY TO A MIXED MARKET DECISION.  Down triple digits the markets see-sawed for much of the day until finally ending about where they closed on Wednesday. cnbc, wsj 10/1/2015

 

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.