That Was The Week That Was-1st Week January

 

Wha happened? Time Magazine published the following from information obtained from the Tax Policy Center. Next -for those who worry about just everything -is the March deadline for the Debt Ceiling.

 

Still Cautious about Markets? Our friends at Northern Trust have released their 2013 Investment Strategy Commentary and their look ahead perceives 2013 as having Less Risk but also Less Reward. In 2012, they report, risk was rewarded. There was a lot of risk that year but in 2013 they expect  growth in the United States and emerging markets to modestly exceed investor expectations. They are concerned, however, that Japanese and European growth will disappoint. Here is their chart on select asset class total returns:

Very Often Crowds Do Get It Right!? Offhand I forgot the name of the book ,and its author, that declared the group often makes the right decision. Wisdom of the Crowd by Surowiecki?   Morningstar seems to have the same trepidation on the insight of crowd intelligence but wrote an interesting article that said while they are wary of amateur investor’s choices most recently the most researched and viewed stock analyst reports included a list of stocks that had the best sustaining competitive advantage and were tremendously under-valued. We could find fault with each and every company on the list. However, buying shares in all would make an interesting portfolio. Perhaps we should publish this now and then compare it at the end of the year against the S&P 500 Index.    

 

Robert C. Doll, Chief Equity Strategist at Nuveen Asset Management, LLC. writes, ‘The U.S. and global economy is slowly and irregularly improving.’ He calls it a Muddle-Though Economy and a Grind –Higher Equity Market. He also noted that as ‘tail-risks’ diminish slightly better growth may be realized which could cause inflation concerns.

 

Remember This! The Bernanke said interest rates would not be increased by the Fed unless employment fell to 6.5% or inflation rose to 2.5%. The WSJ looked at employment numbers perched around 7.7% and mused the possibility of employment percentages falling but before that happening the ‘expectation’ of rising interest rates from investors would ‘move’ markets. In other words, as the economic conditions improves investors could well move rates before the Fed pulls the trigger. Investors, especially those remaining in Treasuries, have been warned.   

Dow wrapped up the year gaining 7.3% in 2012 with a gangbuster performance on Monday. On NY Eve the Senate passed a compromise saving 99% of us from any major changes in our tax life. Gold was up $20 and closed at $1676 an ounce. Oil finished over $90 and both the S&P and Nasdaq were positive for the day and year. Facebook got a new friend as Daniel Salmon of BMO Capital Markets had a change of heart and labeled the stock an ‘outperform’ from an ‘underperform’. He was a huge Bear on the stock but recent events of profitability has made his raise his estimated price from $15 to $32. Let’s not forget FB in September announced buying back $2 billion in stock at huge discount from IPO!  Janet Levinne at AdvisorOne reported on commodities that are down this year- especially coffee, sugar and cotton down 2%. The World Bank is bullish on basic metals but bearish on precious metals, writes Levinne, in their latest report. They see gold moving down to $1600 but copper and nickel making significant price increases. On energy oil should falter while a slight improvement in the price of natural gas.

Bonds still okay? Maury Harris at UBS offered up a chart illustrating how the mortgage bond market has shrunk more than the Treasury bonds have grown. Once a huge source of income the mortgage bond sector is a faint shadow. Harris says that this inequity will have investors continue to buy Treasuries.  Won’t make money but they’ll still buy Treasuries.

Spencer Jakab wrote in WSJ January 1st, ‘ 2013 may be another 1973 for stocks.’  He offered up several scenarios musing on one side that this year could simply end up like 2005 with a total return of 4.9% or 1997’s excellent 33.43%. But he wrote with budget woes and the last election behind them bad news, Spencer reflected, comes soon after. He thinks that 1973 with Middle East problems brewing and stocks hitting an all time high in 1972 the wheels came off with a loss of 14.7% in 1973 and 26.5% the next.  

Bounce! Wednesday Markets Celebrated the Compromise. And, there may be more room to run in January as the ‘whew’ factor releases investor anxiety. Still there is a cloud on the horizon as the gang in Washington has 'kicked the can’ down the road till March. See below the chart from Thursday’s WSJ.

Let the dust settle. The exuberance die down. The sheer joy of our politicians accomplishing absolutely, positively nothing. In any other industry performance as we’ve seen would be grounds for dismissal. While this should be a good year for the economy expect volatility as businesses and investors settle in. Westminster’s Joan Goodman likes the major banks going forward but especially likes Wells Fargo. Expect lots of litigation and interest rate head winds for banks. Still they did have their best year since 2006 and fewer closures since 2008.  

You Retired? No major changes in Social Security or Medicare for now but you can bet its coming. Higher deductibles, premiums, less benefits and pushing ages out even further before getting a dollar from the social security pool are all on the table. Republicans have both entitlement programs in their crosshairs. Experts seem to agree that pushing ages out a bit before getting full benefits and integrating income with other assets would save the system for a long time. Medicare needs a complete overhaul including vendor’s charges and the huge amount of fraud in the system. Remember the early 80s when the Defense Department was buying $435 claw hammers, $640 toilet seats and $7,600 coffee makers? Does anyone know what a hospital, or emergency room, charges for a band-aide or aspirin?

Thursday Markets Cooled Slightly. Gold and silver fell after Fed minutes suggested that their mortgage asset purchases may likely end this year. Remember the QE is responsible for weakening the dollar and giving precious metals a boost. Rajiv Jain portfolio manager at Virtus named portfolio manager of the year by Morningstar. Clients will recognize he manages the Emerging Markets Fund. Ford getting a push from bloggers as the stock has been hot off its $8.82 low this past Fall.  Brett Kenwell wrote that the company has good stuff going for it: Strong Technical's, 3 straight earning beats, Mulally will hang through 2014, Strong China growth, handling EU losses and the #1 selling vehicle.  Morningstar likes Fair Value at $20.00 a share. Sell at $31.00 and buy around $12.00. Shares closed near $14.00 Friday.

Seeking Alpha Reports 2 Hedge Fund Managers Are Buying Facebook. Tiger Global has 11 million shares, recently buying 9 million. There was an impressive earnings report from Facebook. The stock was $18.87 in November and since has done nothing but soar. Experts are expecting that FB should be able to grow revenue at a 30% per year clip for at least five years. Also net income margins at a healthy 30%. and the huge buyback previously mentioned in this blog.

Tablets Are Expected To Be Big Sellers in 2013! Tech enthusiasts have been predicted the demise of the PC as tablets have been the du jour tech instrument of the 21st century. I have a Kindle and an Apple and both I enjoy. But, if there is one that stands out it would be the iPad. Certainly a price difference but speed, flexibility and long life between recharging makes it a hands-down winner.

Strange -Friday markets languished and then fell and then closed up. Banks and tech earnings were slashed for the fourth quarter but Goldman offered up strong guidance on Citi, saying the bank was on its way to health. Markets up and closed at highest level since 2007. No straight line up for equities but a bumpy road ahead with an economy that refuses to quit. Calamos Growth & Income Fund reopened to old and new investors Friday. The fund, once run by John Calamos, is fifty percent equities and the balance in convertible bonds. A convertible bond is one that pays a decent fixed rate and at the same time offers potential from the company stock appreciation. An investor does not have to convert and would only if shares were attractive. Otherwise an investor would hold the bond and earn the coupon. CME shares surged 4.3% even as Morningstar downgraded the exchange operator. 

Hostess is in talks to sell its bread business… Wonder, Nature’s Pride, Home Pride, Merita and Butternut are estimated to fetch $350 million. Sugar mavens are heartened that the cake biz which includes Twinkies will be sold later this year.

Finally- What Do You Sell & What Do You Do When Inflation Starts to Percolate? Call me for my Inflation Breakfast Meeting, Saturday, February 16th at 9 AM.

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-4th Week December

The Mayan Calendar predicted the end of the world on the 21st of December. What we didn’t know was it all could have been a Mayan practical joke or just a scribbled opinion. Today’s economic soothsayers have little in common with their Mayan counterparts but sometimes toss in a few guesses of their own just for fun. Lately many scribes have been predicted a global recession if  a certain group of gas-bags in Washington don’t compromise on a tax and spend plan. An opinion or guess on the future is just that no matter the millennium. I am lately reading that a lot of bloggsters are pushing hard on the Emerging Market sector to lead in 2013. Robert Powell, everyone’s favorite economic doomster, reports on an overarching trend that includes investing in the emerging markets as it benefits from investments for the 65 plus crowd. I like the sector for other reasons which include fixed income and non-correlation with U.S. stocks. Health Care Mutual Funds should also do well as fund companies have broomed those companies that are in contrast with Obama Care. Home Builders and associated industries look to perk up in 2013. We’re seeing values in certain zip codes as a lack of good new housing is getting scarce. Still there are bargain spots such as Las Vegas for those looking to buy a condo on The Strip, or an entire subdivision. MarketWatch sooths slipped on a turban and gazed into their crystal ball and suggested that investors steer toward the following as they are considered poised for a strong 2013:

• MegaCap Companies- Dividend, cash plus growth equals stability.
• Dividend growth again and again.
• Europe goes up.
• China breaks out
• Gold =  $2000
• Real Estate Builds
• Industrials steam ahead – including building products, remodeling etc.
• Technology = Qualcomm and Apple mentioned.
• Finally…Dogs of The Dow. And if truly confused the writers at MarketWatch say stick with 2012 winners.

On NY Eve 2012 Still No Deal! Huffington posted Republicans would agree to a compromise only if a re-jiggering of COLA on Social Security would be included in the deal. A compromise on farm bill stalled a doubling of the cost of milk. Huff didn’t know if a vote had time on a new five year farm bill. Still there are huge gaps between parties on issues of food stamps and crop subsidies.   

Let’s Get The Silliness Over! Markets were all over the place this week. Some days opening slightly higher, dropping like a manhole cover and then staggering up to close off their lows. It could have been worse. The fact that unemployment numbers came in at surprising better than expected and housing continued to climb showed that the U.S. economy is poised to generate some serious growth. Retail sales were initially reported slightly less than last year after a glorious start. Still those numbers get re-examined as retailers count gift cards and after Christmas shoppers. Gold is way off its feed, closing last Friday at $1655-below support. Oil, in the meantime, has stealthily climbed over $90.00 a barrel. The 10-year bond has slowly charged to 1.73%, while the 30-year is less than 3%. Now the economy is in the hands of the politicians. Individuals and businesses are moribund waiting for direction- any direction. Until then Individual investors will be sitting on their hands.

 

   Speaking of Silliness…The 7 worst Predictions of 2012: (1) Facebook Rocks! (2)The Supremes will kill ObamaCare. (3) Brand damage Chick-fil-A will hurt sales by opposing gay marriage. (4) Housing has no headroom. (5) President Romney! (6) Mortgage Rates are Jumping! and the bestest       (7) The World will End on December 21, 2012.

 

StockAuthority Investor David Sterman blogs his choices for commodities in 2013.

• Copper
• Oil
• Silver
• Farmland Ag chemicals such as fertilizer and also farm equipment

CNBC Christmas Eve on Squawk Forecast A Decade of ‘The Nifty Fifty’. Large Cap stocks that pay dividends. These as a bond income replacement. A slight dip in assets in bond funds precipitated this insight. 

It’s All Politics…dumb politics… ‘Over the Holiday I re-watched the Ron Howard film, ‘Frost/Nixon’, and the words spoken reminded me of what a politician put us through and what politicians as a group are now putting the nation through, ‘…utter agony.’

Here’s where they were before the Holiday break…and they couldn’t make a deal because of politics!

The best deals agreed to are those that both sides feel they’ve lost.

Christmas Eve Markets Moved Down Slightly. A rally on Asian Markets on banks and realtors.  Gold closed $1659. Domestic automakers surged on news of better than expected sales.

My Home Office Sent Me a Memo From The Hartford…They’ve sold their individual Life Insurance Biz to The Prudential. We’re seeing more of this. Life Companies bailing from their primary business because of low interest rates. If you own an annuity or life policy under the Hartford label and cannot get in touch with your agent- call or e-mail me.

Most People My Age Didn’t Start Investing Until 1987.   A lot of them bought US Saving Bonds, CDs and insurance policies long before they’d put a penny into a mutual fund or common stock. Savings and Loans were even considered risky. Mom and dad bought income stocks like utility companies. If you worked for an auto company you also  bought stocks in manufacturing companies.  Grandparents owned real estate. The one thing they all had in common was no one taught them what to do with their money once they earned it. There was no school or education program for saving money. There was no computer, no tout sheets, no real place you could study what the markets were about. In 1987 the wheels came off the stock market. It was a real crash- with about a 25% fall. Some hard lessons came from that market disaster. Here are a few from Wallace Witkowski of Dow Jones:

• Don’t Lose Your Head. If Exxon Drops 50% in One Trading Day it Doesn’t Mean Anything Really Changed in 24 Hours.
• Buy on Fear, Sell on Greed.
• Make a Crash Shopping List.
• What Goes Up Fast Comes Down Faster.
• There is No Such Thing as ‘It Can’t Happen.’
• Tune Out The Daily Noise.
• Don’t Bail.

 

 

Morningstar Reported…The stock, fund and ETF evaluation service gave a three point analysis that sums up where we are and going forward in 2013:

• The Market is Fairly Valued.
• Market Volatility Will Be A Way of Life as Europe woes continue and China remains closely scrutinized.
• The Fiscal Cliff, contrary to the press, will end up being a non-event.  More Like a slide than a cliff. Unemployment will be cut plus payroll withholding on social security will go back to 6%-  biggest hurt those in lower income classes.

Gold

2012 Production

A scarcity caused by lower production may impact price in 2013.

Here’s Some More Picks, Opinions and Buys by Professional Investors. These could change but if making a potential buy list you could do worse.

• Mark Holder likes Seagate and Kohls.
• Chad Brand finds Apple dirt cheap.
• Thomas Lott likes Alliance Resource Partners
• Eddy Elfenbein puts Microsoft and Wells Fargo on his Buy List.
• Amit Chokshi updates his opinion on shorting Jarden.

Short or Intermediate Bonds Kaput…

Ignoring fundamentals some investors stayed away from the markets for the entire year. They preferred losing money in bank savings or money market funds. Others have pulled their money to the sidelines for the last four years. James Paulsen, CIS at Wells Capital Management, said, ‘Our biggest liability in the stock markets has been the total destruction to confidence.’ The loss to investors by sitting out the last four years, according to Bloomberg, was a whopping $200 billion as the markets moved higher.’

 A Happy, Healthy and Well Deserved Prosperous New Year to All!

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

That Was The Week That Was-3rd Week December

  This is a story about unforeseen consequences with joint investment & savings accounts when relationships sour. Before the markets went boom in 2008, and while I was doing my radio program, a married couple came to see me. They had a lot of money sitting in a bank account doing very little and after a few discussions a joint investment account, funded with mutual funds, was decided by both and opened. On this account both the husband or the wife could make deposits or withdrawals without the signature of the other. Things went well for a few years until one day the husband called and asked, in not so polite terms, what I did with fifty thousand dollars of his money? After a few questions and phone calls it was determined that a month earlier his loving spouse had called the mutual fund company direct (circumventing her representative) and had them send her a check for fifty  thousand dollars and  was able to deposit it in her separate individually registered bank account, even though the check was made payable to both her and the husband. The husband finally admitted that he and his lady love were in ‘sorta’ conflict and trying to work things out. She, believing in a bird in the hand a lot more than one promised, decided to split marital property before a judge did. This story had a happy ending but for many people this could have been a disaster- for either spouse. Agreeing to have both party’s signatures on any withdrawals is something that a couple with a joint account should discuss before things get ugly. Aged parent with an adult child jointly on their saving or investment account should also be aware that kids sometime steal and prevention is worth…tens of thousands of dollars. Instructions to the broker or bank can pay dividends. If you cannot trust, or even suspect a possible problem with the other ‘joint’ party, or if conflicts arise, than separate accounts with named beneficiaries on each will do the job of protecting, keeping harmony and affording liquidity. Got Qs Call or E-Mail Paul…586 783 7080…

Bank of America Merrill Lynch suggests a moderate investor allocation for 2013…

• 65% stocks
• 33% bonds
• 2% cash

This for the next 12-18 months. Also, Fifth Third chief investment officer Jeff Korzenik said that he thinks we have another year or two of low rates. He said not to chase yesterday’s winners. High quality bonds especially. And, he also suggested and concurred with BofA BFF’s increasing allocation in international and emerging markets bonds and equities.

My Predictions For 2013… I’m one of these guys who now wears a belt with suspenders, looks behind my truck before I back out of the garage and checks the cholesterol content on everything I eat. It wasn’t always this way. Back in the day I thought if folks owned one mutual fund company they could do all they had to do and get great allocation and returns. The crash of 2008 taught me different. Fund companies did predict a Democrat for President in 2007 but they couldn’t foresee the coming global calamity in products their kinsman created, packaged and sold. I sometimes wonder about that because if you’re in the business of buying and selling individual stocks and fixed securities and rubbing shoulders and knees with other folks who are also buying and selling individual stocks and fixed securities at other companies who in turn know of and are rubbing knees and elbows with…well, you get the picture- why was it that most everyone didn’t know what was going on in their own industry? Certainly Joe and Jane knew, or had an inkling, that something was amiss when radio ads were announcing all the free mortgage money that was theirs for the asking. That off my chest here’s a few thoughts for the coming year. 

• The Federal Reserve is at the end of it’s tether.
• Let Ben Bernanke trade the Federal Reserve into eliminating our national debt. He borrows at 1.65% and buys long-term mortgages paying a tad less than 4%. You do the math.
• Multi-national companies – yes. European or China Only- nyet. Not for awhile.
• Long-term fixed for another 12 months.
• Inflation a coming.
• Home builders. Real estate. Yup.
• Refinance anything and everything.
• Dividends are still important. (Make that a Very)
• Large Caps Have The Cash- What’s Not to Like About Google, Apple, McDonalds, Coca Cola, Starbucks and Disney
• Defense is a game we should all play with our investments-You May Leave Money On The Table But You’ll Sleep Better
• Bottom line: Markets will muddle through and up in 2013 no thanks to the politicians and the lack of leadership in Washington. Win both with fixed and equities in 2013.

Did You Check Your Portfolio Stock Overlap? If you have all your money in one fund family with different mutual funds chances are you own the same stock in different funds even though the funds have different investment objectives. This would explain why your accounts go up and down all at the same time. There is a computer program that you can use and find out how bad your stock overlap is. If you don’t have the resources to do this call or E- me.

  Apple Downgraded by Citi to Neutral. The slide of the stock price from a high of $700+ was just too much to ignore. Morningstar evaluated the shares on December 6th and maintained their  fair value price of $750. CNBC Heads on Friday talked up the stock saying they’d be all over it after the first of the year.

Monday- All Indices Up. Dow 100 points as noise from Washington on a deal circulated to investors. The talks between the President and the Speaker came as the nation is fed up and the pain of Newtown, Conn is just the worst.

Working for a Family Trust the Trustee Asked if I was an Investment Technician…? Technically the answer is no. But the following chart from Michael Gayed is very interesting and you may want to use it going forward. It’s the relationship between Gold and Copper. Gold is the ‘safe’ haven investment while Copper is the ‘risk’ on investment. Gayed’s conclusion is that when Copper outperforms the risk is on and he suggests that now the risk is on for investors.  You can create this chart on StockCharts.com Gold was up $14 an ounce Friday as markets fell.

The laughing you hear is from the halls of Morgan Stanley. The firm was fined $5 million by regulators for its handling of the Facebook IPO. Let us not forget that the firm had a $2.4 billion short on the stock. Plus all the fees acquired along the way. ‘Five million? Let’s have lunch!’ Those meanie regulators!

Yelp is a public company. What it does is allow anyone, including the crazy lady with the twenty cats, to go on their web site and give an opinion on places they’ve done business with including restaurants, pet stores and hair removal shops. Loads of folk visit the site- some 33 million a month. Andrew Zimmerman, the chubby host of his Travel channel show about eating anything, took umbrage with an amateur review and essentially said in a podcast that our opinions are those of ill-informed morons. Getting back to the story. Yelp stock took a hit Monday last because Facebook will be encroaching on its territory. Still other analysts think the stock is worth more and Scott Devine of MS gave Yelp a neutral rating but a $22 price. There are lots more places to grow since the company has only a fraction of the country under its website. I visited the site out of curiosity and saw little banner or pop-up advertising. Perhaps it is that that is holding the share price down? 

February 16th- Date of My Inflation Breakfast Meeting. It will be at Sycamore Hills Golf Course- Saturday Morning at 9 AM. ‘Call me now for reservations.’

 

Here’s a chart above that illustrates even the most conservative investors have to ‘bail’ on bonds eventually and embrace dividend paying stocks, ETFs or mutual funds. If not now- soon…

Tuesday Markets Up Across The Board. Very nice day as hope for a deal sprang from the bosoms of traders…Gold closed $1677. Dow broke 100 points and Naz was huge as Apple found traction. Wednesday Markets took back almost all what went up. Thursday up 1/2 of what was up Tuesday but down Wednesday.

 

Kirk Spano at Dow Jones reminds us that the markets are either forward or backward looking and rarely does the performance indicate ‘what’s happening now.’ He also pens reasons why we’ll see more inflation in the near future: Central banks globally have printed trillions of dollars, there are more mouths on the planet every new day and the food and energy supply is flat.

U.S. Treasury Sells GM Stake. GM agreed to buy-back 40% of the US shares and pay $400 million more than it would have had it bought those shares in the open market. GM shares spiked 6% on the news. Ford was up Friday as all auto manufacturers publically traded was slightly down.

Libor is the London interbank offered benchmark. This is the long winded way of saying the Libor is what interest rates bank charge when borrowing from each other. The Libor is also used as a ‘global’ benchmark to calculate everything from Government bonds to mortgages and credit card rates. And because of the amount of money involved (trillions and jillions) a small move in the Libor means big profits for banks. The calculation is done by using the average interest rate charged by and from a consortium of banks. UBS instigated a rigging of the Libor that was a global confidence game. Fannie Mae and Freddie Mac are thought to have lost $3 billion because of the rigging of rates. Regulators say this game continued from 2005-2010. The UBS was investigated, admitted guilt and fined $1.5 billion by regulators with No Criminal Charges. Don’t we just love banks?

Thinking of Investing in China? Growth @ 8 1/2%, huge population, increasing personal income, etc. etc.? Zacks sez buy multi-nationals that do biz in China and not the Chinese companies. Loads of companies that do including KFC and GM.

Gold closed $1652 Thursday.

Not a Big Fan of Groupon = not an investor or user be. But JP Morgan announced that they are buying a smaller version of Groupon called Bloomspot. The cost a measly $3 million. Why, you ask? Because JP has a credit card base and this is a good place to gain extra income. The company will structure discounts on client’s credit card bill. Mastercard is already in the biz with its own acquisition called Truaxis. And you thought there was only one way banks could skin you?

Cody Willard is 40 something, an investor, writer and talking head. Cody sez ignore the fiscal cliff. If it happens make sure you have your shopping list ready to snap up bargains.

No Deal- Republicans and Republicans Disagree. Boehner has little clout with his own party. ( No confidence seals The Speaker’s fate. But to give the man his due I doubt if a Rayburn or Gingrich could corral this bunch.) The difference between what Dems want and what Republicans demand is a drop in the ocean. CNBC discussed a U.S. downgrade; not because of fiscally irresponsible but because we’re politically irresponsible. At the same time the Euro is trading higher and the U.S. dollar is still a safe haven. Joining the EU was also discussed as the primary political agenda of the President. Reasons given: Global trade, health care, and social benefits all point to the end- game favored by the Democrats and the President.

 Republicans kicked the House Speaker aside and investors showed their displeasure Friday with a modest pullback.

Good News the World Didn’t End…! Good, ‘cause I still got shopping to do…

Merry Christmas! Remember if you have a little extra then help families in your neighborhood by giving to a local shelter or church.

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