That Was The Week That Was-4th Week June

 

‘Mid-Year and the Markets are More Jittery, Less Optimistic’ This according to Veronica Dagher in Sunday’s WSJ. In May the Dow was ‘ripping’ through record territory. Now the markets are trying to come to terms to having the Federal Reserve’s punch bowl taken off the table. It is trying to determine the impact of higher interest rates. Higher rates make consumers more cautious. Even though Central Bankers soothed investor fears they still remain on the edge. Here’s the chart that accompanied Ms. Dagher’s article in the Personal Finance section of the Journal.

 

ANOTHER SUMMER OF VOLATILITY?

 

 

cLaRiTy is what the markets want. The Ben Bernanke wasn’t clear enough when he said the Fed would begin to consider cutting back the QE3 buying program. Market traders have long memories and remember when the Fed Chief said the Fed would start cutting back when employment hit 6.5%. Last month no language was given that suggested a reduction in the Fed’s policy. Unemployment numbers were 7.7%. Then the most recent unemployment numbers of 7.6% were announced and ‘voila!’ a complete change of direction and language. Traders need specific instructions and react badly to anything that they think is a change or a shift in policy.

Earning Season ala Sheraz Mian. More pain in the weeks ahead, he writes. While most analysts expect the markets to stabilize around S&P 500 1550 level Mian writes that they will go lower as earnings season kicks in and company’s  reevaluate their forecasts. He expects the markets to fall deeper- low 1400’s or more.

 Tuesday Markets Bounced. Bill Gross of PIMCO said that the Fed tapering plan may be too hasty. Gold fell another $12 and may see $1000 before the summer is over. Stocks in Hong Kong & Australia rallied on comments from China’s Central Bank that it was working to ease the cash squeeze. The government had taken a tight money policy to eliminate the shadow banking that was going on in the country. Interest swaps fell in China indicating that the easing was on its way. Somewhere over the weekend I read that the Chinese government could and would inject huge amounts of capital at a moments notice to avoid a financial catastrophe. Copper is getting crushed but not for the reasons that one would think. According to the WSJ a primary reason is the weak dollar. Just like oil copper is quoted in $$s. Back in April Zacks chastised Copper Bulls and said there was a better place to invest in the metal’s market.

Author, Investor, Self-Help Guru, James Altucher, said that every time the Federal Reserve has tightened up the markets have rallied. He goes on to give an example of 1999 and the markets went up almost 100% in about 2 years. Of course James neglects to mention that this was the exact same time that ‘irrational exuberance’ was on the lips of a former Fed chief and the dot com bubble was a-brewing. Everything is the same except when it’s different. 

 

 5% Growth for the U.S. economy, predicts Prudential’s Keon, who sees underlying strength in the private sector. Silver fell as did Gold last Wednesday. After hours on Wednesday there was some movement higher but both metals far under significant support. Central Bankers rushing to make nice-nice with equity markets. Speaking of nice-Nice market move on Wednesday as more bad news hit the Street on lower GDP. Continuing QE3 was seen as a positive going forward. Next stop is earning season as Alcoa starts the week July 8th. Big Apple and Big Google- Combined both hold $200 billion cash and equivalents. For Apple cash comes out to over $200 a share. Closing price for Apple was in the neighborhood of $400.00 and so for the rest of the company investors paid $200.00 Samsung gets a lot of business from Apple!

Speaking of Apple they filed patent papers to use the name iWatch in Japan. The whispers also said that Apple just inked a deal with China Mobile, the largest telecomm company in China. Not a big deal until it happens and Apple is known for patenting iSlate and other product names.

Markets Moving Higher? Probably so. What’s another clue? Index annuity providers are adjusting their caps. This means that if the market moves up 10% the annuity (if monies are in similar stock index) will move up 33% of the 10%. Index annuities are a fixed income product and have nothing to do with monies invested in the stock market. They cannot match an index because they are not invested in the index. Still its called an index annuity.

Morningstar- an independent rater of funds and stocks has just published their end of quarter economic outlook. I won’t go into details but the future looks bright! Morningstar’s Robert Johnson, CFA reports:

• U.S. oil production is a sight to behold. Oil, housing, manufacturing, improved balance sheets and labor flexibility will drive the U.S. economy.
• A weaker China, a tougher Fed and a tightening of the the U.S. fiscal policy will keep a lid on short-term economic activity but don’t be fooled; The long-term fundamentals are strong.
• Johnson continues by detailing each piece of the economy from labor to banking and sees positives along with great strengths going forward.
• If you’ve been ignoring what’s been happening right before your eyes you’ve been listening to the wrong people. This is the beginning of a marvelous economic recovery. Certainly not without its bumps and stumbles but looking good.

Thursday Markets Scored Another Triple Digit Gain! Gold continued its slide. Markets are pricing in higher interest rates and the bond story is almost assured of printing ‘The End’. Goldman Sachs CEO Lloyd Blankenfein said The Market overreacted to the Fed statement. He continued by stating the obvious and that while there were bright spots in the economy the problem is poor sentiment among Americans. This attitude has left many American businesses and institutions adverse to risk for fear of failure. ‘Confidence,’ he concluded, ‘really matters.’ Problem is, Lloyd, most Americans have been so messed over by your peers they’re like a cat with a long tail in a room filled with rocking chairs. They just don’t trust you, your peers or the government.

Markets $Ended the Quarter Up With No Thanks to an Ugly June. June was down. The year is up. 

Whispers that gold could go to $700. Blackberry shares fell Friday 29% as the smart phone manufacturer shipped less units than expected by investors. News that volatility to the markets will return for the summer.

 

Have a fun filled, safe 4th of July.

QUESTIONS CALL PAUL @ 586  295 0430 OR WRITE HIM @ 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-3rd Week June

  Summer Time May Be A Great Time to Review Your Portfolio. Lots of reasons to do it now. Call me for your review time at 586 295 0430. The review checks your allocation, risk, dividends and historical returns. We also review your beneficiaries and make sure everything is tied in with your professional estate plan. This is also to ensure that your portfolio has not increased  unwanted risk.

Leading to the Stock Selloff Last Week was Bernanke’s comments that the Fed would start to reduce their bond buying, which, for all intents and purpose, has supported the markets and kept interest rates near zero. The news was ‘shocking’ (I can’t believe that), that the end was so near. Sell programs kicked in and a global stock selloff was initiated. Probably the most revealing aspect of the week was the increase in interest rates. It’s been no secret that rates have been slowly climbing but attention was suddenly put on them as the 30-Year Mortgage is roughly 4.66%, up from 3.75% in January. Investors have pulled about $18 billion from bonds funds in the 2 weeks ending June 12th, according to Lipper. I have been slowly working with clients and selling bonds and bond funds in anticipation of this event. The 10-year jumped to a 15 month high closing over 2.5%. Earning season is just around the corner and has supported the market’s current valuations. The job market has also mirrored the current market values.

The above charts show how in-step both the jobs creation and corporate earnings have lock-stepped with stock prices. If either one or both falter we may be in for a long summer. Mitch Zacks wrote that, while rising interest rates are bad for both bonds and stocks, he believes that the economy is on track for recovery. He gives 66%-34% odds of the markets rising over the next four weeks. If you plan on staying invested for the next several years you’ll be rewarded, Zacks concludes. He is more worried about China and the disruptions occurring in their financial system than by the ‘well-functioning and independent Federal Reserve.’

Driving Home Sunday I listened to talk radio and a Talking Head was bemoaning an upcoming housing crash saying the current ‘high’ interest rates will keep buyers away and drive home prices down. Interest rates are below Civil War rates! You and I know that Home buyers buy when rates are high and rates are low. There were buyers at 8% and 10%, for those that can remember. What could hurt is the lack of product both in the new and used markets.

Zillow has become the default real estate value guide. Just in case you didn’t know- www.zillow.com.

Updates on calculators on my web site. Everything is fresh and updated and printable. Check it out from retirement planning to mortgages. Just log out of my blog and back into www.primaryplanner.com.

Has Gold Seen Its Best Days? Here is what Robert Wagner wrote in his blog:

• The high in gold is almost 2 years behind us.
• Gold has failed to make a new high and broken many trend lines of support.
• The trend is lower and if $1,200 is broken the next level of support is $1,000.

Avi Gilburt writes That a week ago Friday’s spike in silver may have been a bullish indicator. Watch for it to consolidate around 19/20 and then recover to around $25.00. Ari is a chartist and has his own opinions.

My guess is that Detroit will be forced into bankruptcy. Kevyn Orr called the state of affairs dysfunctional and wasteful and expected to negotiate with  what he called ‘reasonable’ people.

I own an iPad and a Kindle. The best is the iPad. The best!

The Vine app is used in conjunction with Twitter. It is Twitter’s video sharing application and can be found online at Vine.co, instead of Vine.com. Why? According to CNBC the Vine.com domain name belongs to Amazon.

Markets are in that delicate stage of increasing interest rates and increasingly global volatility. Fear that the Fed will end QE3 sooner rather than later has caused this market insecurity. On the equity side we will recover. The losses being experienced on the fixed side unfortunately are here to stay.

For Target Date Fund Aficionados The Surprise May Be At The End. Most investors don’t understand the concept of the ‘investment glide path’ of the Target Date Funds. The glide starts from some arbitrary age point and ends at another arbitrary age point until the portfolio is primarily fixed income. With decades ahead of us in fixed income Boomers will be surprised to see the destruction of their portfolios not through equity losses but from inflation.

  Mr. Obama said that Mr. Bernanke has been around longer than he anticipated or wanted. or some such language. Essentially firing him on the spot, some say. Still without Bernanke no one in Washington would have been doing anything to pull our domestic chestnuts out of the frying pan. You may disagree with Bernanke but he did what he did and got us moving economically. You may not like the speed or the length of the battle that Bernanke fought but he was the right man for the job. Some argue that Bernanke hurt the middle-class with the zero interest being paid on CDs and passbook savings. Others say he destroyed senior citizens savings and retirement. Rex Nutting reported that the average middle class ‘family’ has about $8,500 in assets that pay interest! So how bad were they really hurt? Maybe a loss of a few hundred dollars of taxable income? But, the real benefit of Bernanke’s policies has been the interest that these same families have saved on mortgages and car loans. That amounted to thousands of dollars. That was money that was saved not just one year but for those that remortgaged Casa Grande they got the savings for the next 20 plus years. The losers have been the banks and major lenders. Now tell me again, with a straight face, how bad Bernanke was for the economy and the average family. By January 2015 we’ll be wondering why we allowed Bernanke to leave.

Finally- Vince Flynn Died. It was that bad of a week.

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 June

 

Sideways Action Marked The Beginning of The Trading Week. Robert C. Doll, CFA, of Nuveen Asset Management, reported:

• Non-farm payrolls rose slightly ahead of consensus with average earned wages flat.
• Manufacturing Purchasing Managers Index fell in May. Expect it to improve in the second half.
• 80% of the S&P 500 companies that provided guidance for the second quarter expected negative outlook.

CNBC Reports a Surge to Leveraged ETFs that are equity based. This is usually a negative contrarian signal.

Every Major Asset Class in the World is Overpriced, according to TrimTabs in its weekly analyst market letter. Reported at CNBC online last Monday this report suggested caution.

James Paulson at Wells Capital Management said, ‘I don’t see anything to end Bull stock market.’  Paulson went on to say that he thinks the 10-year Treasury will yield closer to 3% by the end of the year- a 33% move. Also he expect the S&P to touch 1700 this year. For those of us with poor memories it wasn’t that long ago that we wondered if the S&P would hit 1400.

Tuesday & Wednesday Global Market Action… it went something like this… More further on…

Thursday Markets Across Asia Fell! The Japanese stock market suffered the worst- falling 6%, and into official Bear territory. Chinese stocks were also battered. All this on worries over our Federal Reserve monetary policy and worries over cooling emerging markets. Europe was also down about 1%. The Dow fell over 120 points on Wednesday.

 

Golly! Thursday Dow Jumped on better than expected jobless and easing Fed worries. Dow up 181, S&P 500 up 23 Gold closed at 1382. Asia also saw a rebound on Friday morning.

My Inflation Meeting Early in The Year Reported on How to Take Advantage of Rising Rates. We have seen rates rise to 4.15% last week on the 30-year mortgage. This is a 14 month high. Experts contend this may stifle the bank refinancing business. It may slow it down for a bit but it won’t hurt the overall business.  

THIS COULD BE THE TIME TO STEP IN AND BUY THE ETF THAT SHORTS BONDS.  The Exchange Traded Funds that act as inverse to the bond market could see rewarding long-term returns if investors believe this is the beginning of a long-term trend of rising rates.  Call me for the list and options.

Friday saw a surprising sell-off.  Markets see-sawed and finally traders ran for the exit, unwilling to wait out the weekend. The Dow off 105 points, S&P –9 and gold up. Overall the Dow lost 1% for the week.

The news from Wallstreetdaily.com was that the short interest (betting markets will tank) is as low as it has been in a very long time.

The Intelligent Investor in WSJ blog on Saturday offered up the recent sell-off is good for investors. Stock prices have again gotten attractive in several sectors.

DETAILS ON THE WEEK AND EDUCATION NEWS FOLLOWS: 

 The Australian Retirement System has about half the assets of the U.S. 401(k) plans with 1/14 of the workers! It’s reported that 90% of the workers are enrolled in a mandatory retirement plan with an average contribution of 9% of earnings.  According to Dow Jones contributor Matthew Heimer the system works because it is mandatory, the contributions are after tax (15%), and all withdrawals are tax-free. Maybe someone should clue in lawmakers on what works?

Retirees Looking For Part-Time Work May Want to Explore:

• Patient Advocate
• Tax Prep
• Temp Help
• Mr or Mrs Fixit
• Tutor
• Non-Profit Consulting

E-Cigarettes the Next New Thing. Investors such as Fidelity and Founders Fund are climbing aboard the e-smoke train. Lorillard’s ‘blu’ currently has 34% of the e-smoke market. More brands coming on-board. A dozen states have banned sale of e-cigs to minors. Health issues remain and sales of the new fangled smokes are expected to reach $1 billion in 2013- double where they were in 2012.

 

 

New Apple Bling…or Bloop?

New features, cleaned up iPhone, iRadio,photo sharing ala Samsung, new iMac with Intel engine boost made in USA coming out now, and still boo-bears beat stock down almost $3.00 a share Monday as they were not impressed. Morningstar maintains shares to $600. Cody Willard wonders why the Market rewards McDonalds with a product anyone can replicate and ignores Apple that creates something only a handful of companies on the planet could possibly duplicate. Apple spoiled investors with their awe-some products and properties.

 

 

It’s always something!

US regulators are investigating the $32 billion in overdraft fees banks charged customers in 2012. In 2011 Bank of America was considering a $5 a month debit card fee for customers but decided against it. Fees are huge moneymakers for banks in a climate of low interest rates and consumer loans. Still some banks are considering hiking existing fees another dollar.

 

Bank of Japan Created Global Sell-Off Tuesday. Worries over Central Bank Commitment to Providing Continued Liquidity Had Global Stock Markets Shaken.  Investors were ‘disappointed’ that the Bank of Japan was simply ‘maintaining’ its stimulus. Investors were hoping the BOJ would ‘extend’ the asset purchases further.

The Federal Reserve Chairman Used the Word ‘Tapering’ to Describe The Process of Ending the Bond Buying Program aka QE3.

and that’s just this year!The definition of ‘tapering’ is not stopping….that’s what the confusion is all about.

Is This is The Start of The Summer Correction?

This is the S&P 500 Chart from Yahoo.com Finance page. Notice it was higher May 20th than it is June 11th?

The question the WSJ and others raised is the ‘tapering’ of the stimulus ending the equity recovery.

Love This Chart.

Makes Reagan look positively…conservative.

Summer Sell-Off? A Refresh? Markets can only fall so far. Unlimited upside. Mitch Zacks says an amateur investor’s worst enemy is ‘The News’.

Finally: FDIC closed 1 Bank in Tennessee making a total of 16 Year to Date.

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 SIPC/FINRA.