That Was The Week That Was-3rd Week August

Driving home from an up north weekend I tuned  my radio to an early morning talk program. The on-air monologue I listened to while avoiding wild turkey’s and meandering deer centered on inflation and why was the government reporting such low inflation numbers. The radio host wondered if inflation was truly low or was it being manipulated? The show was selling gold and silver and so it wasn’t a truly impartial program. To illustrate his point, the radio host said that the government was fudging the inflation numbers. He then played a clip from a CNBC argument between talking heads from the Friday, August 17th CNBC show to prove his point. The recorded CNBC give and take illustrated that even the so-called experts couldn’t agree if the government numbers on inflation were right or being purposely skewed. I have to believe the definition of inflation has slowly morphed over the years to accommodate political economic policy. The one thing we all can all agree on is that the government cannot afford to have inflation and interest rates get much higher at this point in our domestic economic recovery. If the numbers climb that means the government pays more to those that buy our bonds. Higher interest means they print more money and printing more money means more inflation. But even at less than current 2% inflation we are still seeing higher food prices and energy costs. Contributing to higher inflation, but seemingly not calculated are the prices of goods such as cars, clothes and even homes. And if you don’t think things are moving smartly higher take the 10-year bond that just a while back was 1.65% and on August 20th was 2.85%.

Some  government experts contend that ‘a little’ bit of inflation is good for us. That’s like the FDA mandate of acceptable number of rat hairs in my oatmeal .

REALLY BIG NEWS OF THE WEEK! STEVE BALLMER,CEO, OF MICROSOFT, ANNOUNCES RETIREMENT SOMETIME IN THE NEXT 12 MONTHS. Shares in the company soared 7% on the news! This was the intractable leader that brought Windows Vista and Windows 8 to the marketplace and basically piddled away with a 38 year virtual monopoly in operating systems.

Cody Willard in his blog, The Cody Word, published in MarketWatch.com on August 23rd said when Ballmer says goodby Willard says hello to Microsoft shares. ‘Ballmer,’ Cody wrote, ‘always seemed to skate to where the puck is instead of where the puck would be.’ A poor leader who frittered away opportunity. Willard offers the following charts of Microsoft and Yahoo when shareholders are given a strong CEO.

The above chart is Microsoft shares. Published from Cody’s blog on August 23, 2013

The above chart is Yahoo.com shares. Published from Cody’s blog on August 23, 2013. Both charts from BigCharts.com

 Sunday Late Breaking News! Trump University is being sued by the NY AG. The accusation is that the school (hrmph), was involved in illegal practices, according to the NY Times. This was billed as the best place to learn the secrets of The Donald in managing your money. The school(?) blew into Detroit a few years back with much bally-hoo and faded rather quickly amid much criticism.

  This is Year to Date Performance from Last Week. Monday, August 19th markets moved down for the fourth straight day.

From The ‘Didja Know This’ Department of Investment Knowledge. If you buy a life insurance policy from a company the actual liabilities may not be with the company that issues the policy. Most companies, if not all, have buying and selling agreements with other life insurance companies. They may or may not sell a portion or all the risk of your policy to a company that may not be as financially strong as the one you decided to buy a policy from. And while the company issuing the policy has the original liability in case of death it could prove rather sticky if a massive liquidation suddenly takes place. We just don’t know because it’s never really been tested.

According to Cody Willard in his blog August 20th- On Apple’s $150 billion cash hoard. How big is all that dough? Well $150 billion is more than the market cap of Hewlett-Packard, Dell and Netflix- combined! It is also more than the ‘entire’ market cap for Oracle or Cisco or Intel. If the company paid out the entire amount in a special dividend it would be like 1% of the 2013 U.S. government GDP. And, if they didn’t spend it on acquisitions, stock buy backs or dividends,  and at the current rate of accumulation, the $150 billion could be worth $1 trillion by 2020.

Asset Allocation is Different from Diversification. Neither are intended to increase returns but reduce risk and, hopefully, volatility unless there is a severe market correction in which case nothing works.

Something I’ve been Noticing…The stock markets been getting out of the gate fast and furious but fades quickly in the late afternoon. Tuesday was no exception as the Dow was up all day until near the closing bell. Still the S&P closed up ending a four day down spell.

 Here’s a Tip From MarketWatch.com. According to them the following 10 stocks rally in late August…like every time since 2003. Wallace Witkowski compiled the information and the following chart that was published 8-20-2013 on MarketWatch’s The Tell.

Nuveen Investments Published The Following Chart on Fixed Income Yields Through August 16th.

Thursday Markets Dropped in the Last Few Minutes of Trading for a 105 point loss on the DJIA.

There didn’t seem to be anything new Wednesday as the Federal Reserve reaffirmed their plan to start unwinding their easy money program. So, while nothing new, this seemed to unnerve traders who first sold and then calmed and  bought and then in the last hour tossed in the towel to continue a sell-off started last month. There was a sense of ‘uncertainty’ in the Fed minutes of June regarding the strength of the economy and perhaps it was that investors glommed on to. This doesn’t mean the Federal Reserve stops its easy money policy only ‘tapering’ how much it buys every money. It could mean just a bit less and stretched over many years. The unknown is driving traders crazy.

Art Cashin on CNBC warned August 21st  if the 10-Year hit 2.9% ‘ Alarm bells go off’.

Thursday Squirrels Got Into The Nasdaq System and Shut ‘er Down for 3 Hours! I had varmints chew on my cable lines downing my WiFi a week ago but you’d expect better security from one of the world’s largest financial institutions and their systems. Squirrels did send down the Nasdaq, where most of the tech stocks like Apple and Facebook trade, in 1984 and again in 1997, by gnawing on their cables and questions arise what happened this past week? A Naz glitch spoiled the coming out party for Facebook in 2012 and it took the stock a year to recover. It seems these glitch events are getting about as regular as a diet laced with Metamucil. If the Nasdaq was an airline they’d be grounded until they got it corrected. When traders are betting millions, if not billions, of dollars and suddenly they hit a black hole with no warning they don’t know if and when the system returns whether their broke, rich or breaking even. This doesn’t install confidence in a financial system. Some accuse high frequency traders and their computer systems as the culprits to the latest black-hole. The Commodities Futures Trading  Commission is developing some rules to taming high frequency trading for the commodity exchanges. According to the August 23, 2013 WSJ, the CFTC report is due out this week and runs about 100 pages and paves the way for greater scrutiny to these practices.

New Home Sales Plummet 13.4% in July to the lowest level in 9 months.

Experts blame the higher interest rates. Mortgage applications since June have fallen a full percentage point when rates increased.

Sad. Elmore Leonard Died Tuesday at his home in Bloomfield Township three weeks after suffering a stroke. He was 87. For those who don’t recognize the name he wrote 45 books, many that became movies, and countless stories. He was a home town boy who could have lived anywhere but chose Detroit. The Seattle Times called him ‘The Big Daddy of Crime Novels’, even though he started his career writing westerns. A short story of his became a current hit cable television series, ‘Justified.’ Movies made from his stories and books were: Get Shorty, 3:10 to Yuma, Hombre, The Big Bounce, Killshot and Glitz. I can’t remember the first book or story I read that he wrote but it made me a life long fan. Asked to write for the NY Times an article on how to write Leonard obliged with ‘Ten Rules on Writing’. The best was, ‘Try to leave out parts that readers tend to skip.’

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.

That Was The Week That Was-2nd Week August

Morningstar Interview August 7th with Jason Stipp and Bob Johnson came to the conclusion that our economic Indicators were looking up, but Johnson said for investors to mind the headwinds. On employment Johnson said that we got the boat headed in the right direction. Manufacturing has been softening for some time and he believes we’re at the bottom of the cycle. Purchasing Managers Indexes are picking up. The service number for last month’s PMI was stunning. Even some areas in Europe are picking up. The durable goods orders have also been improving. The GDP report showed that the government wasn’t really a very big drag in the June quarter. China, Johnson said, he wasn’t worried about. But a lot of our commodity goods and manufacturing is going over there and those are seeing some slowing. Finally, Johnson said he thinks the stock market tumbles back a bit right about here. He was right on the money as the first and second weeks in August were a real stinkareeno.

The WSJ Sunday Last Published Brett Arends, ‘Five Ways You Can Really Mess Up Your Retirement.’

1. Mishandling Social Security. Take it later say the experts. Take it now I say because no one knows how long you got. The winner is living the longest. The loser is not taking it at all.
2. Splurging on Big Ticket Numbers. Experts are right! Paying cash for a $40,000 car when that same money can provide a lifetime income of about $2,000 a year. Or, the payment/lease for the same auto.
3. Not Making a Budget.That’s soo 1950s…
4. Not Making a Nonfinancial Plan. Duh?
5. Moving. Yes, indeed. Heading south and discovering 110 degrees in the shade and lizards in the toilet. Next spending a bundle moving back home.

How Many Ways Can You Create a Retirement Income Plan? The other day I was working on some investment income ideas and wondered how many different ways was it possible for someone to establish an income plan that would stay the course of time and economies. I came up with a huge number of specific sectors that couldn’t and that included bank interest, stock dividends and real estate. I came to the conclusion there were only one way someone could maintain a long-term income plan: Systematic Withdrawal. Systematic withdrawal plans simply target a reasonable rate of return and can be modified up or down as the markets dictate without incurring huge losses either of principal or income and be used in either fixed or equity portfolios. If you need to know more about how to design and implement an income plan call or write me.

Markets Mixed Monday…

Robert C. Doll, CFA, Nuveen Asset Management, Chief Equity Strategist, wrote Monday August 12th:

• Expect a slow multi-year rise in U.S. Treasury yields after an abrupt start this spring.
• A sustained increase in inflation is unlikely since wage growth remains weak.
• Growth should increase in the 3rd quarter.
• Chinese economic activity shows signs of stabilization, including a stronger than expected rise in exports from China.

Sunday. August 18th, MarketWatch.com reported that this week’s market tone will be dictated by FOMC Minutes and earnings from Target and JC Penny. The DJIA is off 3% off its high and experienced the worst single week of the year as Cisco reported steady earnings but gave weak guidance going forward, along with stating they planned on laying off 4,000 employees. Wal-Mart also reported weak earnings and similar guidance. Higher interest rates and an almost certain revision on earnings has caught investors almost unaware. As Cisco shares fell Talking Heads on CNBC last Friday still supported the company and a much higher share price. Housing stocks are off 25% from their 2013 highs. Apple had its best week since 2011 as Carl Ichan Twittered that he took a huge position in the company and had spoken to the company CEO to expand their stock buyback plan. Shares in Facebook also got a boost and Big Money has jumped into the party as Seeking Alpha reported Saturday. Rounded off over $321 million new money bought FB shares while $137 million were sold. Jack Hough in Barron’s wrote that the markets are more richly valued than you think. CNBC on Friday were conflicted as to the length and depth of the sell-off. We should see some bottom after or around Labor Day, said one analyst.

Extra Cash on the sideline?   Do what the pros do and make you stock wish list and price you’d pay for your favorite stocks which may have gotten away from you earlier in the year when ‘almost’ everyone thought the markets would tank on the re-election and government do-nothing. Then call me.

Questions call Paul @ 586 205 0430 or write him at pstanley@westminsterfinancial.com Share this blog with someone who cares about their money.

SECURITIES OFFERED THROUGH WESTMINSTER SECURITIES, INC. MEMBER FINRA/SIPC.

That Was The Week That Was-1st Week August

 

  Zacks reported Friday August 9th that the Breakout is on Hold. “Mr. Market,’ wrote Steve Reitmeister, Executive VP of Investment Research, ‘does not want investing to be so easy.’ There is a huge amount of Bullish confidence out there and still the markets stalled last week after reaching 1700 on the S&P 500 Index.

It was an Ugly Week! Bloomberg reported Friday last that U.S. stocks have worst week since June due to Fed concerns. Hank Smith, who oversees $7 billion as chief investment officer at Radnor, Penn based Haverford Trust Co., said in a Thursday, August 8th interview, ‘There is still plenty of skepticism and anxiety in the market.’  

 

Reuters reported Monday August 5th that the first taste of a Test-tube burger was described as, ‘Close to Meat.’  The patties were grown from cattle stem cells at a cost of $332,000. The burger was created by ‘knitting’ 20,000 strands of lab-grown protein combined with salt, breadcrumbs, red beet juice and egg powder. ‘It’s a very good start,’ remarked one of the tasters, who also wished that the test-tube burger was served with onions, ketchup and pickles.  Didn’t we already reach a culinary low with Hamburger Helper?

Makets Fell Monday August the 5th on news that the Fed was soon to taper. Where have we heard this before? Excuse du jour. Losers were utilities and industrials while consumer staples and technology gained.

Joe Terranova of CNBC said in mid-morning Monday that the markets were set to ‘rip higher’. Terranova also said he expected flows to continue from bonds to equities. Here’s some more Talking Head comments from the same program:

• Stephen Weiss of Short Hills Capital said he was taking a pause.
• Josh Brown of Fusion Analytics said he was a buyer.
• Jeremy Suefek sees bullish earnings growth.
• Stephanie Link of The Street said we’re buying stocks we like.

Robert C. Doll, CFA, Chief Equity Strategist and Senior Portfolio Manager at Nuveen Asset Management reported in his weekly newsletter:

• Real GDP for the second quarter was relatively weak.
• Jobs numbers disappointed.
• July ISM Manufacturing survey reported the biggest one month increase since 1996.
• Case-Shiller home index is up nearly 15% from its low.

Markets Tumbled Tuesday. Equities fell on Fed Fears, according to Tuesday’s WSJ. Two Federal Reserve officials indicated that the central bank could begin reducing its easy-money buying as soon as September. Again this is nothing new but somehow traders don’t want to hear this. IBM was downgraded earlier in the day and weighed heavily on the Dow. Shares fell to $190.46. Mark Newton, chief equity strategist at Greywolf Executive Partners, told the Journal, we could see a real downside acceleration, with the downgrade. He also added that most of the selling involved commodity related, materials and industrials.

  Long Term Happy Faces and Exuberance!

‘It’s the Rodney Dangerfield of bull markets,’ LPL Financial Chief Market Strategist Jeff Kleinton said Tuesday August 6th, on CNBC. Fav stocks for him have been consumer discretionary. He went on to gush that this was the most powerful bull market since WW 2.

MarketWatch.com offered up 6 Countries where Bank yields are 10% +!

• Argentina
• Serbia
• Vietnam
• Bangladesh
• Mongolia
• Ukraine (17% 1 Year CD!)

Offering A Free Dinner and Information About Money Matters is Still The Way Some People Prospect.  I cannot for the life of me understand how someone thinks they’re getting something of financial value from a free meal while listening to a sales talk. The raw land sales guys used the same gimmick to sell dirt and swamp back in the 1950s! From my side its unprofessional and demeaning. People who buy into the free and cheap end up wondering why it eventually blows up.  

Gold still under $1300- Closed Wednesday at $1290.

 HOMEBUILDERS FALLEN 25% SINCE MAY

WHILE HOME SALES HAVE GONE FROM A RECESSION ZERO TO 470,000 ANNUALLY IN THE SECOND QUARTER OF 2013 THIS IS STILL FAR UNDER 1972 NUMBERS, ACCORDING TO THE WSJ, THURSDAY, AUGUST 8TH, WHEN THE POPULATION WAS 1/2 OF WHAT IT IS NOW AND THE AVERAGE SALES PER YEAR WERE 546,000. TOUGHER LENDING RESTRICTIONS AND HIGHER INTEREST RATES MAY STILL PROPEL PEOPLE TOWARD RENTING. HOWEVER THE THOMAS REUTERS/UNIVERSITY OF MICHIGAN SURVEY OF CONSUMERS SAID IT WAS A GOOD TIME TO BUY A HOUSE. Major Listed homebuilders are likely to get the business since many of the independent home builders were lost in the depression of 08.

Thursday Markets Up Across All Indices. after 3 down days…

Market Headwind Warning…says Morningstar.

Markets ended down Friday making it 4 our of 5.

Have You Completed Account Update? Please do it or call for help. Failing to update account may possibly slow down your future transaction until account(s) is updated. This needs to be done every three years and is a SEC requirement. and, yes, I know you’re busy!

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.

That Was The Week That Was- July 2013

 

 

Chasing Yield.

Morningstar had an interview July 25th on their web site with Jeremy Glaser and Josh Peters discussing how rising interest rates affect dividend stocks and their yield. Measuring both capital appreciation and yield the results historically came in what we are seeing now as high yield stocks are being bid up and yield falls. Since the long Treasury has already seen about a full percentage move in the rate cycle this isn’t out of the ordinary results. Still Morningstar concludes that even with this move investors are still collecting dividends even if they’re not getting as much capital appreciation. There are still plenty of consumer defensive stocks that yield 2 1/2% plus.

Year-to-Date

ROBERT C. DOLL, CFA, Chief Equity Strategist, Senior Portfolio Manager, Nuveen Asset Management reported in his July 29th Commentary:

• Expect choppiness in the equity markets for the short term for several reasons:
• Uncertainty over Fed Leadership
• Recent drop in the Japanese Market
• Mixed earnings and lackluster revenues
• Renewed concerns over the debt ceiling
• Current noise in the home builder sector

 

  How Much Cash is Adequate to Hold?

A relation of mine isn’t comfortable unless there is 2 1/2x’s their annual income in money markets and bank cd’s. Most folks would do well enough to keep 3 to 6 month income in short-term liquid assets such as bank checking, cds or money market funds. At most, for the most conservative investor, would I suggest 1 year’s income or budget to be stashed in zero earning bank liquid asset accounts. The rest should be working in dividend paying stocks, mutual funds or medium term individual bonds. Money will double using the rule of 72. If you earn a net 7.2% on your money your portfolio will double in 10 years. If you earn 1% it’ll double in 72 years. That’s the math and that’s the reality.

China’s Market World’s Worst, Losing $748 Billion, Bloomberg reported July 30th. (This may give a clue why Ben Bernanke isn’t too quick to stop buying bonds supporting low interest and the economy). The Shanghai Composite Index, which double in 10 months, ending  August 2009, as the Chinese government poured in $650 billion of stimulus into infrastructure, has fallen 43% off it’s highs. The report added that growth in China is indeed slowing while the government is trying to transform China from an exporter to a consumer driven economy. So far analysts are discouraged on China’s economy vitalization. ‘The country’s stock market is like a ‘dead animal’,said Carter Worth, chief market technician at Oppenheimer & Co. “The likelihood of gains is low,’ he said.

Markets Tuesday Sideways…

Taking a Page From The Warren Buffett Playbook Activist  Investor Bill Ackman is betting 10% of capital on One Stock! AIR PRODUCTS.

Allowing Government Intrusion Into Our Lives is Best Explained By Examining Conservationist Democrat Al Gore Who’s Claim to Fame (Besides Inventing the Internet) is the Modern Toilet. In an effort to save and preserve water new rules on how much water could be used to flush. Toilets Before 1982 Used 5-6 gallons of water per flush. Today’s Al Gore Toilet uses 1.6 gallons. The problem, as we all know, is that it now takes five or six flushes! Now someone please explain to me how the government plans on managing National HealthCare if they can’t get the toilet flush figured out?

The Washington Post reported on July 31st that the US Economy grew at a sluggish 1.7% in 2nd quarter. Business spent more, and the federal government cut less, offsetting weaker spending by consumers. The good news is that while growth remains weak economists think businesses will step up investment in the 3rd quarter, job growth will fuel more consumer spending and the drag from government cuts will fade. Government cutbacks have weighed heavily on the economy the past 12 months.The ongoing fiscal drag is masking private sector health, said Joseph LaVorgna, an economist at Deutsche Bank.

Markets Stormed Out of The Gate Early Wednesday on  a Good Jobs Report and Were Up Triple Digits & Then Gave it All Back on The Fed Downgrading the Economy to Modest. 

A Good Jobs and Manufacturing Reports Charged the Markets Thursday. Whispers that this Bull could keep moving all the way to 2015 were heard Thursday. The Fed isn’t showing any signs of tapering. The Dow was up 126 points, The S&P added  21 and the Naz a 50 point day.  Cody Willard admitted a bubble we may be seeing but wrote in MarketWatch August 1st that this is only the 7th inning. Of course no one knows what the bubble burst will do or even look like. Gold under $1300. 

Jeff Reeves on August 1st pondered why investors dislike this market and provided his five reasons:

• Failure to separate stocks from economy.
• Moralizing over corporate profits.
• Reluctance to buy at top.
• Information overload.
• Stubbornly sticking to a bad call.

Friday’s Jobs Report was Disappointing. Markets dropped as less than expected new hires in early trading but, as it has in the past, the Bulls pushed past the bad news and the markets ended mildly up. Gold ticked up to $1313.

Finally- Apple is back at #1- the world’s most valuable company. Neil Huges reported Friday August 2nd that Apple regained its crown with a marker cap of $ 414 billion last Thursday while Exxon Mobil shares slid 2% and their market cap closed $408 billion. 

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.