That Was The Week That Was-2nd Week December

Retirement Planning is something most people can’t, won’t or don’t do. Or, if they do do- they do it once and then forget about it. Most of the time people just don’t know where to start. But the big thing is that things change from the time people start their plan to the time when the plan comes to fruition. In between then and now  people get divorced, lose their jobs, earn less, make bad investment choices, give money to kids, support a sick parent, get sick themselves, injured or lose their home. Then there are the folks that plan and ignore guarantees and die too soon. Rarely does life work in a straight line where the rules are clear and if you do this then you get that. In other words ‘retirement planning just doesn’t work for most of us.’ But, I’m singing to the choir and you know all this. In last week’s Dow Jones’ MarketWatch there was a piece that reported the ten numbers that could change your life. It was about retirement planning.  Here’s the numbers they say you should know:

• Calculate Inflation now
• Inflation later
• Needed income at retirement
• How much money you’ll need to get that income
• Taxes now and taxes tomorrow
• How much you have today, less the home you are living in 
• How much you have to save to get from here to there
• How much you can afford to save (that wasn’t one of the numbers but it should have been)
• The annual return you need to get each year to get from here to there

All of those numbers are subject to change. That includes how much money you have now. Tomorrow you could have more…or less. That makes retirement planning impossible; but still there are seminars, software and financial professionals that swear they can guarantee a life of retirement freedom. Yes, you can take a snapshot on where you are, where you want to be and what it’ll cost you to get there. But to be even semi-accurate one would need to keep on snapping pictures from now till the day of retirement to keep up with stuff that happens to you. Even then things won’t be guaranteed.

When I started in the biz I was promised that if I kept my nose to the ‘grindstone’ and did all the right things I could retire on the princely sum of $10,000 a year. This was in the day when a postage stamp cost three cents and chicken sold in the supermarket for nine cent a pound. You can see how well that plan turned out.

The Conclusion is to know what the above numbers are, where they fit, how to calculate but don’t engrave them in stone or elevate those that are selling ‘the concept’ to some sort of financial gurus.

The Most Important activity in the planning process is to pay yourself first, manage your money prudently and earn more on your investments than the combination of annual inflation and your personal marginal tax bracket. Do that and you have a reasonable chance of financial security.  Got questions, call or email me.

Over the Weekend A Growing Chorus That Washington Won’t Get It’s Act Together & The Nation Plunges Like Lemmings… and only then will some sort of a deal on taxes take place….you would think locking them into a room they’d come up with something by now, wouldn’t you? They just don’t want a deal!

The Ben Bernanke Made It Clear…Bonds are safe from destruction until unemployment falls to 6 1/2% or inflation heats to 2 1/2%. The Fed Chief made the announcement that the Fed would not raise rates unless one of the above conditions occurred. This is meant to allow businesses and individuals to dig in, take advantage of low rates; and hopefully the politicians will do their part too. The Federal Reserve, never in its history, has ever given such an insight to its future plans on raising rates.

Monday Markets Edged Up a Tetch…across all indices. This included gold closing over $1704.  McDonalds same stores in November up 2.5% when ‘experts’ cautioned for more losses. Big seller was their  breakfast onion/sausage/cheese sandwich. China ramped up production of industrial materials dispelling worries over lingering economic malaise. This included copper and oil. Beijing’s introduction in September of a $160 billion infrastructure stimulus package provided the catalyst and encouraged mills to restock, said analysts in the WSJ.

Chuck Jaffe at MarketWatch with his sack of coal to hand out to fund companies included Vanguard on this year’s list. Within annuities the money market subaccount funds are utilized for conservative deposits. The Vanguard Variable annuity semi-annual report illustrated that their money market fund earned 0.07%. This did not include, The Jaffe wrote, expenses and fees. When factored in this safe haven that the fund company titled, ‘ helped investors preserve capital’ had a net return loss of 0.08%. and still no one gets fined, loses a job, goes to jail or is sued…

Watch For My Inflation Breakfast Meeting Coming Soon. Those that should attend are those that believe all the current and past government spending will create an inflationary economy where the cost of goods and services will rise and personal income lag. The Question and Answer will provide answers to what investors should do with their money and how to prepare.

 

From JP Morgan Asset Management  This Recovery is the weakest since the Great Depression.

In 2013 you could do worse betting on home builders or those ancillary businesses that support home building. Eight years later but better than never…

Tuesday Markets soared…sputtered…but closed safely up on the possibility of some sort of a happy conclusion on taxes. Up across the board, and this wasn’t window dressing. It was sincere better buy bargains. Asia was also up on our domestic political hopes. The Federal Reserve absolutely positively discourages Big Banks from Getting Bigger. The Bigs have today almost 44% of all deposits from 37% in 2007. The Fed, according to the WSJ, has made it clear to The Bigs that they will discourage any attempt at new acquisitions.

They’ll wait until the political climate changes…that’s the scary part.

Ten Stocks For 2013- …Barrons Picks:

1. Apple
2. Barnes & Noble
3. BlackRock
4. General Dynamics
5. JP Morgan
6. Marathon Petroleum
7. Royal Dutch Shell
8. Novaritus
9. Western Digital
10. Viacom

Are The Markets Rigged Against The Small Investor? Tadas Viskanta wrting for MarketWatch explains that the lost decade in equities has caused many people to turn their backs on investing. He also writes that many active managed funds have not been able to beat their indices; and if the pro’s can’t what chance the average Joe or Jane? Most investors cannot make money in the market for a few reasons: (1) Lack of time (2) Lack of knowledge (3) Lack of adequate money. And many funds are not in competition with the indices. Those that are able to beat an index have outstanding management and lots of luck. Consider that money is constantly coming in, most all funds hold some cash and the index doesn’t plus- fund allocations usually don’t match up to an index dead solid perfect. So the argument about active funds not matching up to an index are bogus and a smoke screen for Index Investors like Bogle to snark at. This argument is old and deserves a proper deep six.

Today’s Wealthy Will Get Hit With Obama Tax…and then you will…

It’s important to note that the Threshold amounts are not indexed for inflation. There’s going to be trouble down the road for millions of people as inflation heats up incomes. I only have to remind one and all about  the alternative minimum tax! We went after the so-called rich with that one and the middle-class got bit…

Wednesday was an ugly day for the markets. There was a nice bounce in the morning and then it fell apart and the Dow and Naz closed negative. The S&P had a small partial teeny decimal placed gain…Dish Networks Green-Lighted to be able to use a slice of air- used specifically for satellite transmissions- for more cellphone use. The FCC okayed the deal on Wednesday and some analysts say the air could be worth an estimated $12 billion. No one knows and Dish isn’t talking exactly how they plan on using this extra air. DISH closed at $36.67.

By the Time I write this Friday Morning Washington May Have Smelled The Roses and Compromised on Taxes. But I doubt it. Thursday Markets Fell. China was up huge! The Shanghai index up 4% on manufacturing news. Domestically gold fell below support. All indices down- S&P streak snapped. The President acts like he’s gotten a mandate rather than a second chance. Boehner suddenly develops a love affair with small business. Pelosi awakened from a deep snooze and said that a political deal had to be engineered; and the CEO of Honeywell is acting like a go-between in shuttle diplomacy between the White House and Congress, reminiscent of a scene from a John le Carre novel. In the meantime the public is demanding both sides to compromise. Stocks will continue to fall as long as this continues. 

TCB – Elvis =Taking Care of Business. It was real simple for The King- Take Care of Business. Seems politicians (you can’t call them law makers) have forgotten why they’re there. Seems like everyone knows it except them.

Pssst…Contrarian with a love for Dividends? MarketWatch’s Matt Andrejczak suggested investors look at McDonalds, Intel and Microsoft. Two pay 3% dividend and the other a touch better than 4%. All are off their highs (Yes, as is Apple) with McDees slipping over 12%, Intel close to 30% and Microsoft is off 17% plus. Total debt for each is less than 60%. You can also put it on your shopping list, watch the chart and daily action. Need more info on how I watch a stock? Call or write me an E…

 

I was talking to a real smart guy yesterday and he suggested that people do two things in the next few years-(1) Buy Real Estate (2) Remortgage their existing real estate. Even if you have a 5% mortgage you’re paying too much. Call your mortgage company. And, according to another friend, Bill Minor, his monthly real estate newsletter sez home sales were up 2.1%, a 10.9% increase from last year. You can get his latest real estate market update newsletter by emailing him at Billminor@kwrealty.com  

Once Upon a Time, last week, there was an IPO (initial public offering) called SolarCity that was too expensive and so the investment banks and issuing company reduced the share price ahead of the offering. Everyone thought that would be the kiss of death since the company was also in the solar panel business. It doesn’t make the panels, it installs them. But investors were infatuated with one of the big backers, a Mr. Elon Musk, who developed PayPal, sold it to EBay and  a huge backer of Tesla Motors. Even though the business model and industry seemed iffy to investors they all thought the world of Elon Musk and so piled on and drove the stock price to where it would have been before the company and bank reduced it. And, we don’t know whether anyone except Elon, the bank and organizers, will live happily ever after but we’ll watch and report….shares closed down Friday to $11.72

Merry Christmas to All. Have A Safe and Wonderful Holiday. Today, more than ever, make sure a few of your giving dollars go to those local charities, churches that can brighten a bit those families in our neighborhoods not as fortunate.

 Prediction Season… Bank of America, Merrill Lynch peers deep into its crystal ball and sees…

• Global Equities top performing sector
• Dollar & Euro rally on global recovery
• High Yield & Emerging Market Bonds outperform in fixed
• Government Bonds should rise- but not much
• Gold hits $2000

All this is is an opinion….nothing more…

Finally- tune in next week for more predictions and what a moderate asset allocation portfolio should be.

Questions call Paul @ 586 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

That Was The Week That Was-1st Week December

Ronald Reagan’s first tax cut was in July, 1981. Over the following three years the Reagan tax cuts would slash some 25% off the marginal income tax brackets of every American. The one thing that Reagan did not do was promote consumer saving by increasing the IRA contribution. It stayed at $1500 a year but increased to $2000 in 1982 and stayed there until 2001. Reagan understood that cutting taxes allowed people to spend more. Like politicians before, and after, he was not about to encourage people to save rather than spend. This country has always been about spending. The myth is that consumer spending is 70% of Gross Domestic Production. While there is argument over the percentage and the method calculating it there is no question that spending is a big part of the United States economy. Not big- huge. We outspend everyone. There is no nation or group of nations that can compete against the American consumer.

In the past, for most people, saving was not a huge priority. With the economic recession we are getting accustomed to the idea of socking a few dollars into an IRA or retirement plan. The shock of 2008 Market Meltdown has created a sense of saving urgency. The go-to saving element for most is the 401k plan. It has replaced the defined benefit pension. The problem with the 401k is that a worker could save for years and years and still end up with less than they put in. The education process of money management is years away. Still the 401k is the one plan that has the possibility of providing financial security at retirement.

Now  there are whispers that the tax deductibility of the 401k will be removed under a Congressional compromise. The United States needs money because of its free spending ways and those of us who are prudent, and have a few dollars salted away, are in the Congressional bulls-eye. The so-called ‘new’ plan is to grandfather certain ages who are or close to retirement. Others will have their 401k plans rolled into a Social Security managed portfolio and guaranteed 3% a year (this eliminates the need for thinking about money management). Tax-Deduction of contributions, no matter how much the contribution, will be capped at $600 per individual. Also gone would be the tax deferment on earned dividends, interest and capital gains. Those would become taxable in the year earned. At retirement the individual would receive an income for life depending on how much they have in their account.

Common Sense dictates that if that idea was made into law 401k individual plans would be disappearing quicker than pay telephones. Nothing could kill qualified plans faster than removing the very incentives to save. Congress would also ruin a future tax stream. Americans may not like saving but they dislike more the idea of saving and then having the government tell them what they can and cannot do with their own money. 

Timothy A. Bassett, CFP @ Talmer Bank & Trust reiterated Fed policy that is expected to keep rates low through 2015 but will adjust if conditions improve. Basset, as others, will be watching Washington this week for some sort of compromise as he will the FOMC meeting. He reports that they do not expect any new news from the Fed.

How Bad Could It Be If Congress Doesn’t Quit Bickering? Falling off the fiscal cliff would be ruinous for the country. That’s why it was put in place, to force politicians to compromise. Failing that it would immediately create $500 billion in tax increase, $200 billion in Federal spending cuts and the tax law would revert to pre-2001 level. Also the estate tax would go back to $675,000 and subject to 55% tax rate. Child credit would be gone. Unemployment would go up to 9%, Want to look at historical precedent go to 1937 when Industrial Production fell 30% and unemployment was 19%. Investors Ignore the Cliff assuming someone in Washington has a scintilla (okay, a crumb) of common sense. The disaster that would happen to the country could take decades to unravel. In this backdrop investors are not seeing an increase in the market’s volatility index or Vix. The WSJ reported Tuesday last that this complacency by investors indicates that a deal could be reached before year’s-end.

Wednesday The President said he’d be okay with no resolution unless the Republicans agreed with his tax on rich proposal. Thursday on the Today Show Alan Simpson said that anyone, either Dem or Republican, who said they’d be okay with the country falling off the cliff was stupid. He also urged the younger people to get organized for their future. The old folks have organized to protect their rights and the younger gen had better do the same. Sunday on Meet the Press a discussion for the President allowing the country going over the cliff amounted to him getting a liberal agenda in place and able to pin the blame on the Republicans. There would be massive spending cuts and huge tax increases (see the following table in this blog). Liberal Dems would be celebrating. But, as Bob Woodward pointed out, it would throw the country into a recession and it would be the President’s recession and not the Republicans.

Fiscal Cliff? Not just for the rich… tax hikes in 2013 if Congress and the President don’t compromise…

Goldman Sachs offers some insight into 2013.

• Stocks will outperform treasuries.
• Equities will beat credit returns.
• Cyclical sectors (materials, industrials, information technology) will beat consumer stocks (telecom and healthcare).
• Stocks with high sales exposure to BRIC will beat domestic facing firms. 

Monday markets down. Not much enthusiasm, including gold that is teasing with breaking below $1700 an ounce. At the end of the week it did and closed below support. JP Morgan said Eurozone stocks would outperform their U.S. cousins in 2013.

Jim Jubak @ MSN Money likes McDonalds back over $100 by next October. The stock has had a minor pullback and not enough, sez the Jubak, to be a buyer. Look to around $72 a share, it goes that low if the U.S. falls off the FC. McDee pays a heft 3.6% dividend at current prices.

Friend from JP Morgan called yesterday and reported that the firm was ‘Bullish’ on 2013. I don’t know if folks there are whistling in the dark or just looking at all the money on the sidelines that has to go somewhere. Talking about the FC my friend repeated the old saw that you can count on politicians doing the right thing if only to save their own skin. To remind investors-Don’t get excited about interest rates popping anytime soon. Unless there is some sort of a disaster interest rates should muddle along right about here, maybe lower through 2013. The Federal Reserve is buying the long-end of mortgages and selling bonds and making a ‘fortune’! The spread between the cost of borrowing (selling our bonds) and buying mortgages that are yielding double that is a once in a lifetime opportunity. Why no one is talking about this is unbelievable. The Federal Reserve is using good old fashioned capitalism with OPM (Other People’s Money). But that’s me talking and thinking….

Corporations have taken note and enthusiastically borrowed the Bernanke game plan for their own shameless selfish ways. Rather than borrow money at the bank companies have gone to the public and issued bonds at an average yield (this from Bloomberg) of 2.38% to fund…(wait for it) their stock buyback programs. Finance 101 tells us that reducing outstanding stock has a purpose of increasing corporate stock value. Plus many company stocks pay a healthy dividend far in excess of what the cost is of borrowing and magically! corporate treasurers have created Value. Investors just may want to look for companies that are doing just that. Call or email me if you have questions. 

Stinky Tuesday. Gold fell, briefly, below $1700 an ounce. Apple flirts with trading under 200 day average, signaling bad things not only for Apple but for the markets. Facebook is elevated to Nasdaq 100, replacing Infosys, which is switching to listing on NYSE. Got Cars? Lots of them and I mean lots of empty lots loaded with unsold cars. A return of the 80s. Honda and Toyota go on a discount pricing spree and domestics don’t. Now we have four months backlog for Ford, GM has five months and Chrysler has six months with their new Dart not doing well at all. In fact, news is the new Dart is selling for a higher price than Ford and GM compact competition. 

Bad meatball? Darden restaurants fell 10% as the parent of Olive Garden and Red Lobster still hasn’t gotten it right and sales down. Cutting guidance the casual dining group has problems either cutting prices or quality. On the retailing side the Gap is off 7%. Yum is off on China growth and Mickey Dees didn’t hit numbers for the quarter. Seems the entire fast to casual dining sector is off its feed.- I’ve been waiting all year to write that…

Ask the richest person you know if they really mind paying more in taxes.

Am I the only conservative that misses Bill Clinton? Speaking in Sacramento the President said the Republicans and Dems were a lot closer to a compromise than their public ‘Kabuki’ dance. He went on the explain, ‘They’re sniffing each other out. They are moving toward a deal.’ Only Bill could put it in words just about everyone finds repulsive.

Markets down most of the day on Wednesday and then Dow moved up in a mixed day. Gold closed under $1700. Big news was from Sotheby’s where a drawing by Raphael sold for…$47.9 million! and I thought I was a spendthrift buying a Keurig! (where’s my sketch pad?)

 Morningstar Publishes Their Ultimate Stock Pickers Top Ten List. Greggory Warren, CFA, compiles the list along with a play-by-play of what and why active managed fund managers are buying and selling during the past quarter.

• Microsoft
• J&J
• Berkshire Hathaway B
• Google
• Wells Fargo
• P&G
• AIG
• Wal-Mart
• Pepsico
• Oracle

Window Dressing?  I write about this every year. The WSJ reported Friday that they ran an analysis on 10,000 stocks and found on the final trading day of each quarter there was a sharp increase in the number of stocks that beat the market by at least 5% points. Then the next trading day the same stocks trailed by three points or more. This practice is called ‘marking the close’ or ‘portfolio pumping’. Managers do it for bonuses and to make their portfolios look good.  It’s illegal but either difficult to prove or ignored by regulators. At the end of the year investors will see a lot of thinly traded stocks get that Santa Claus treatment. Investors who rely on total return numbers to pick next year’s investment can be sucked in to buy the fund because of the manager’s faux acumen. It could mean millions in extra personal income to the fund manager.

Friday MarketWatch Cody Willard sez Apple over $1000 in 24 months.

Looking in their crystal ball, Nigam Arora of Dow Jones, reports that Goldman Sachs downgrades its projection for gold prices in 2013. Freeport McMoRan has bet $9 billion acquiring energy diversification from metals is a clear signal that QE3 or the economy will not cause gold to skyrocket. GS puts a price tag of $1800 an ounce on gold.

Friday Markets Closed Mixed with Dow and S&P 500 Indices Up and Naz Down. S&P clinging to support over 1400 at 1418. Gold made a weak move and finished  $1706. The story of the day was that everyone expected a bad- a miserable if you will- jobs report. Instead the jobs number was north of 100,000, as The Jimbo Cramer sez. So any number north of 100k was good ‘nuff for The Street. Some Chartists were predicting a market meltdown on a bad employment number. ‘Get out before Friday,’ a few said. It didn’t happen and next you’ll hear from the chartists is that they’re still right and the market will drop only they cannot predict just when…Finally: send  a note to your Congressional Representative and tell them folks in Washington to, ’get ‘er done! ‘

Year-end Questions call Paul @ 586 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

That Was The Week That Was-5th Week November

 Some people spend more time planning a vacation than they do their investments or tax strategies. No one knows what the new tax horror will be for us in 2013 and beyond. Suffice to say when I see rich folk start acquiescing to the concept of paying more in taxes- you and I are next in line. After stuffing my face with leftovers the day after Thanksgiving, wiping my tears at the Michigan loss to Ohio I booted up the old HP and surfed some tax moves that you may want to consider and talk over with your tax professional.  The AMT, if not repealed, will impact some 33 million households in 2012 exceeding the previous 4 million. Remember this all started because one millionaire filed back in the day and didn’t pay a penny in tax. This so enraged Congress, and the American public, that they installed a punitive tax law that calls for everyone to pay something. Little did anyone foresee that this would cascade causing millions of Americans to pay, what is almost, a penalty. The law of unforeseen consequences. Here’s some ideas for 2012:

• Make charitable gifts now. If not sure if the group is eligible go to www.irs.gov
• Wait before you donate IRA assets to charity, this expired in January 2012 but may be reinstated by legislators.
• Max contributions to your qualified plans.
• Make an extra payment on mortgage.
• Harvest gains and losses only with the assistance of a tax professional.
• Make tuition checks before end of the year. Qualified families get benefit.
• Businesses buy depreciable equipment.
• Set up a Health Savings Account- you don’t have to fund it for 2012 but you do have to have it open by the end of 2012.

Baby Bonds….from zero assets a year ago to $600 million today. Jason Zweig reported on the boom in these ‘smaller denomination $25.00’ per bonds for business development companies. These pint size bonds pay a hefty yield of 5.75% to 7.375%. Investors are cautioned that these baby bonds have exceptional risk and little history. Many of them currently trading under par – but some aficionados say that as the public gets used to them that will iron itself out. Baby bonds trade like stocks on the New York Stock Exchange, with a typical spread of one-to five cents per $25 unit. The other thing is that these are unsecured, and while Zweig doesn’t say it, in case of default don’t expect anything of value to be left after those first in line get done picking at the carcass. I would think best way to get exposure would be through an active managed bond fund or ETF.

Dividend and Capital Gain Estimates Are Available For Most Funds 2012. Need estimate on how much you will be paying for 2012 call or email me. 

While drumbeats for an economic turnaround are heard from retailers and on-line businesses the State of Michigan has about 90,000 people, including children, who are homeless.  This year rather than sending client Holiday cards that money will find itself to a local Macomb charity. There are local food banks and shelters that deserve our holiday (and year-round) dollars more than a greeting card company.

Monday Markets Mixed…ah, but there was some surprises when a previously bearish Facebook analyst suddenly got optimistic and said there was more Upside to the stock than there was downside. Shares jumped 8%. Bernstein Research upgraded the Facebook stock to outperform and tagged it with a $33 share price. Apple moved Nasdaq- shares up over 3%. Some analysts reviewed and downgraded their price on Apple saying the company is facing tougher competition and corporate headwinds. Still most analysts have a buy on the company. Apple also bought ‘lightening’ trademark from Harley Davidson (HOG). A Canadian (eh) will lead the Bank of England. Mark Carney who runs Canada’s Central Bank will become a governor of the BOE in July. Applause was heard in global financial circles and groans at the hallowed halls of BOE. Some say even the Canadian magic can’t save GB’s economy.

Private Label green beans, cookies and storage bags are  common enough but did you know that some of the most well known financial-brokerage firms sell mortgages under their name that is managed by another firm? PHH is a Baltimore based car leasing and mortgage company. According to Jon Lang at Dow Jones the company handles auto fleet leasing for a good number of Blue Chip companies. It also branched out into the mortgage loan and service biz for such operations as Morgan Stanley, Merrill Lynch, First Horizon and beginning in January for the U.S. division of HSBC. The company also underwrites and does deals for community banks and credit unions. You won’t see the PHH name but Coldwell Banker, Century 21 and ERA mortgages are also private label. PHH closed around $21 a share and has a forward P/E of 7. As home buying gathers steam expect PHH to be somewhere either making the mortgage or servicing it. The company does not hold the mortgages but sells them to government sponsored entities. For those looking for a housing play Land suggests investigating PHH.

Markets down across the board Tuesday. Everything was off its feed and there wasn’t much happy-happy on any particular stock or sector. Europe also tracked along with the U.S. markets. It was all about Senate bickering about the fiscal cliff that filtered to The Street. Shares in the gambling arena moved up but that was mainly on the coattails of Penn National, that runs 29 casinos, and split their shares creating both casinos and REIT shares. Hotels have separated management from real estate eons ago. We may not see that with the big players such as Sands and Wynn.

Coke Split shares some time back and… Westminster Financials’ Joan Goodman presented a ‘Buy’ on the stock. Highlights on KO include: AA- Credit Rating, ranked the most valuable brand worldwide. KO is on a buyback stock repurchase program of $4-5 billion over 2012-2013. The dividend is 2.7%. And cash on hand is $18.08 billion or about $4 a share. Like someone once said, ‘You could do worse.’

Stocks dead and so are bonds, according to Pimco’s money managers Gross and El-Erian. The two have been lauded as kings of money management for years. Bill Gross is known as the king of bonds. His bond fund is the world’s largest and has performed exceptionally well. Now the end is nigh, as the song says, and bonds are close to the end of their run. The U.S. economy will not perform at a 4%-5% rate as some economists predict, they have predicted; both Gross and El-Erian say that the numbers will be far less and that the United States is in for a long slow grind. There is a laundry list of reasons why both men find nothing happening for the economy until after 2022. One of the reasons is that politicians are clueless (you think?). The Street has found fault with many of their conclusions and debated the issue on CNBC and in the WSJ. Still the men have their advocates. The problem is that they are not infallible and earlier they predicted they end of Treasuries and were…(cough) wrong. 

According to experts- Apple’s breakout number is $626.00. The hill to climb is $600.

Want to own Apple? Can’t buy more than a handful of shares? You can buy a Tech Mutual Fund or ETF, Apple is overweight in most funds. Still want more bang? How about Corning? They’re the folks that make the Gorilla Glass used at Apple and a slew of smart phone and tablet companies. Corning came out with proud as punch forward guidance, and Morningstar gives it a fair value of $15.00. Most people still think Corning makes those dishes that don’t break and those white ceramic like cooking/serving pans. They do plus lots more, including television screens. The company is not just hanging their hat onto Gorilla Glass, although that’s a good enough reason to buy the stock right about now say some bloggers.

Krispy Kreme was originally all about the hype. Much like Boston Chicken the company’s expectations were larger than its business acumen. In 2003 shares in KKD were above $43 a share. Troy Peterson at Gap Edge Trading says be patient and see if shares climb and hold around $9.50. Investors could see a possible $13.00.  Boston Chicken, some thought would crush KFC, is basically bankrupt, and shares trade in the pinks and are worthless.

Wednesday’s markets were down in the early slog but before you could say, ‘Happy Face,’ stocks reversed and closed up across all indices. It was all about whispers from Washington that the two sides were close to some sort of a deal, although you wouldn’t know it if you tuned in to the evening news. Both were waving proprietary political flags for the camera. Whatever it was that was whispered it did ignite a mini-rally on Wall Street.

Auto Show in L.A. Execs were stoked about 2013 and it wasn’t just the smog talking- it was car sales as aging ownership is forcing buyers into the showrooms. With Europe in the doldrums auto manufacturers look at USA as a growth market, said BLW Ludwig Willisch, AG’s North American chief. 2013 sales are projected as high as 15 million. The other bright spot is that banks that were not financing just a few short months back are. Even if the U.S. falls into the chasm experts are saying auto manufacturers could still break even. Share price on Ford and GM inching upward. 

Obama Health Care? Hedge Funds Love These Stocks… according to Insider Gorilla.com

• Cigna
• McKesson
• CVS Caremark
• Humana
• Walgreen
• Gilead Sciences
• Aetna
• WellPoint, Inc.
• Express Scripts Holding Co.

 

Friday Morning Games in Washington Continue. It still seems to be, ‘My way or the highway,’ mentality. At least for the public. With backs to the wall German Parliament Approved at the last second a bill on Greek aid. Only when the consequences of the collapse of the euro sink in did the politicians vote to give Greece more time to meet budget targets. ( Ya’ll know that’s not going to happen and its the game of kick the can goes on…) A band-aid is a good bet for the American economy as politicians continue their political posturing. If that’s the case the economy and business will grow but markets will be volatile.

Markets moved up slightly Thursday but closed off their highs. News that charities are lobbying members of Congress to ensure their tax deductibility is sacrosanct was posted in various news releases. The Limbaugh Show on Thursday dragged out the old chestnut that there may be some revamping of the existing 401k structure. While the U.S. is not a saver but a spender I find the possibility remote of the government confiscating all 401k’s, rolling them into Social Security, eliminating the tax deduction for contributions. It’s idiotic. Time Magazine reported that the 401k benefited only the top 20% of all workers. On the face of it the statement is ludicrous since corporations eliminated defined benefit pensions and shoveled retirement savings onto the workers without increasing their pay to increase their bottom line. For those that remember, employee pay is comprised of both current and deferred with benefits. The deal always has been, ‘I will take a little less today if you promise to pay me that deferred amount at retirement.’  More in next week’s blog on your 401k.

Case-Shiller reports housing in midst of recovery. Among 20 cities tracked 13 posted gains. iShares U.S. Home Construction Index Fund ITB has doubled in the last 12 months. Investors looking to take advantage of the construction growth should call or email me.

Markets slightly mixed Friday but Up for November. Yum Brands lost 10% of its share price Friday on China slowing worries. The company has 5000 stores in China. Apple iPhone debuts in China on December 14th. Also available will be its Wi-Fi version of the iPad mini and fourth generation iPad. The iPhone 4s was a big hit when it was initially introduced in China. I expect so will this phone. Apple also has a desktop called the iMac- more like a piece of art than a computer.

Cheap Money lures corporations to the bond market. More bonds offered and snapped up by yield crazy investors then in 2011. Companies have raised over $1 trillion dollars this year. The cheap money has made companies dip into the bond pool whether they needed money or not. Interest rates may never be this cheap again. Last week Amazon, Costco, Disney and Chevron all had debt offerings. Home owners may want to take a cue from business and call their mortgage company and see if they can reduce their interest rate. Many banks are offering far less than 4% fixed for 30-years. On $100,000 you could be saving $2,000 a year for a cheaper mortgage.

Finally-Just as they called it in late summer the markets predicted that the President would be re-elected they see no fiscal cliff and believe some kind of a deal before year end will be declared. While we’ve seen markets move in weird ways the last two years, the trend, according to Tom Kilgore at WSJ, for stocks is up. 

Questions call Paul @ 586 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.