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.

That Was The Week That Was-4th Week July

 

Robert C. Doll, CFA, Chief Equity Strategist Senior Portfolio Manager at Nuveen Investments in his July 22nd Newsletter wrote:

‘We want to watch top-line revenue carefully.’ The top themes going forward:

• The Fed is repeating the same message.
• The recent rise in oil prices should not be a significant drag on global growth.
• U.S. retail sales missed consensus expectations but were ahead of last year’s numbers.
• The federal deficit is  running $400 billion less than last year.

WHAT TO LOOK FORWARD TO THIS WEEK:

Monday Morning’s MarketWatch.com reports on what to look forward to this week. Jobs could get a bit stronger while GDP is expected to report growth at a stingy 0.1% in the second quarter.

 Bespoke Investment Group on July 22nd reported that: Microsoft, Intel and McDonalds oversold. Overbought stocks include Bank of America, GE and United Health Care.

Zacks Reports on July 22nd- ‘Earnings stink and no one cares…yet.’

‘When stocks get fully valued and estimates are coming down then stocks will either stagnate of retreat.’ Zacks contends that we are not there yet but will notify when to get more defensive.

Avi Gilbert @ MarketWatch.com warned on July 23rd, ‘ All roads lead to 1500 on the S&P 500 Index.’ This when the S&P 500 closed at 1696. Of course he didn’t say when but his calculations when markets retreat they’ll move to that level.

ART CASHIN on CNBC explains, maybe, why the markets keep ‘on-trucking’.  In a live interview on CNBC on July 23rd Cashin explains that the markets are overbought but the theory on the street is that the Hedge Funds don’t want to miss any part of a rally and keep the money flowing into equities. Bob Pisani added that the retail investor is holding and not selling as the markets move higher. Everyone knows this and  investors are like a long-tailed cat living in a room of a hundred rocking chairs nervously watching the action.

‘’Good Times…good times…’ Apple reported better iPhone sales and hit numbers exceeding analysts expectations Tuesday last. Shares were up Wednesday. Morningstar, same day, reiterated $600.00 share price fair value. Facebook reported earnings last Wednesday after market closed and numbers far exceeded analysts expectations as the company’s mobile ad revenue (which was virtually zip one year earlier) and up 76% from the previous quarter. The news was that no company has had to react to expanding its computing infrastructure as fast as Facebook has (Bloomberg Thursday July 25).  Shares up huge in after-hours trade. Even Cramer on CNBC was gushing about how Facebook was doing a Google better than Google.

MarketWatch Headlines: As Facebook Shares Leap 30% Wall Street eats crow. July 25th

‘All those snide remarks and snarls about Facebook may be history, at least for awhile.’

WSJ reports Thursday July 25th Bond investors running to money markets. Money eventually will come to equities, the Journal reported.

Where are Interest Rates Headed? Remember the Fed promised not to raise rates but why are 10-Year yields approaching 2 week highs? Investors can go to Google finance and check out yields daily on the main page. The 10-year closed last Wednesday at 2.49%.

WSJ reported Friday July 26th Investors have pulled $78 billion from bond funds  in the 7 weeks ending July 17th.  ‘Investors,’ the article goes on, ‘love affair with bonds is going through a rough patch.’ Not only individual investors but institutional investors are also rethinking their allocation into bonds. Bond funds have been the investment of choice for conservative income investors. Now investors are moving from bonds to money markets, even though MM pay nothing. At some point these same investors will rotate to equity-income funds.

Hate this Market? Zacks sez he doesn’t blame you.In his July 25th blog Mitch Zacks opinions bad news makes us feel bad but bad news keeps the Fed in the game. Without the Fed the markets may pull back substantially. But, Zacks, writes, even though there is a wall of worry, the markets are recovering. Maybe slower than we’d like but overall recovering.

The week ended with the markets barely up. But with more than half the S&P 500 companies reporting this will be the second least surprising earnings season in the last four years according to Factset. The biggest misses have been found in utilities, materials and tech industries. Here’s the Factset chart:

My Good Friend Bill Minor sent me this list of home improvements and how they returned $$s to homeowners when the property was sold. You can reach Bill at billminor@billminorsellshomes.com

Finally- Amazon posted a (not so) surprising loss after pouring more money into infrastructure. Jeff Bezos is betting that a massive delivery system and  cloud computing will delivery down the line. The company has been called one of those ‘never sell’ stocks. Amazon is also betting on grocery home delivery. Even with the one penny miss the shares surged over $8.00 Friday July 26th to close over $312.00. Story time, I was at Bed, Bath and Beyond shopping for this special pan that was on super sale. The store sold out of it but had it in the warehouse and could ship it…for a fee. I said forgetaboutit I’ll order it from Amazon. Bed Bath management huddled and I got the pan, the discount and no charge on shipping. That’s how big Amazon is and has changed the face of retail for the small shopper. 

Please get your client update forms in. Call me with questions or problems.

Questions call Paul @ 586 295 0430 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about your money.

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That Was The Week That Was-3rd Week July

 

 Plan Your Strategy: Are you an income or a growth and income investor? Are you looking to minimize taxes as a priority or do you value liquidity? Before the Great Recession -2 I had a husband and wife who drove me nuts. They changed their investment strategies almost every quarter from income to growth to tax managed. They even got their accountant into the game who suggested I minimize taxes without selling current assets. The fact is they didn’t have a strategy and just wanted whatever struck their fancy at the moment without selling or buying anything. When they left to return to their previous broker I breathed a sigh of relief. Investors should have a plan more than just making more money than they did the year before.

Ask yourself the question- What’s important to you? Dividend income? Liquidity? Speculation? Minimum taxes? Preservation of principal. Once you know what you want stick with the plan. Don’t fixate on preservation of principal and then get bent out of shape when the markets roar ahead. But if you do change your plan make sure you follow through. And if you don’t really have a plan there is always the default non-spoken, unwritten plan that is to perform as well as the broader markets. You’ll always have that.

Sunday’s July 21st WSJ reported that the long awaited ‘acceleration’ in the U.S. economy has once again been stalled. Previous forecasts were particularly optimistic, said Tara Sinclair, a George Washington University economist. Both the retail and restaurant industries have seen signs of weakness in growth and hiring. 

 Some One’s Got to Do It. 2013 Best and worst investments year to date according to Bloomberg posted Saturday July 13th.

• Best Large Cap Stock- Tesla Motors
• Best International Stock-Tokyo Electric Power Company Yes, that power company!
• Worst International is Spanish Bank Bankin SA.
• The worst US stock is Newmont Mining Company.

It’s Back to Growth & Income Funds for The Foreseeable Future.

The Summer of The Non-Consumer!

U.S. retail sales rose 0.4% in June and just 0.1% excluding autos. According to Aaaron Task in The Daily Ticker, July 15th, the report raises questions about the strength of the consumer, the US economy and the timing of any Federal Reserve tapering. Jeff Macke notes that the death of the US consumer are always premature. In a same day video report Macke wouldn’t give up on the U.S. consumer just yet. With both Wal-Mart and Target not providing same store sales data the governments data is the best indicator and that’s probably flawed, Macke said.

The Ben Bernanke Soothed Markets by Saying Nothing. The Fed Chief testified to Congress this past week and stressed that rates would stay low for a long time. But as previous Administrations learned the Fed may have very little to do with interest rates. The Federal Reserve may have an official line in the sand but that doesn’t mean investors cannot and indeed have caused rates to rise and fall.

Bob Pisani at CNBC Friday the 19th of July reported that the Stock Market reached new highs despite some big earning misses.

Google, E-Bay, Intuitive Surgical, Microsoft, Honeywell, General Electric and Intel all missed. Financials hit the ball out of the park with low rates assisting banks bottom line.

But, as Pisani reported, earnings were not great overall (up 3.6% this past quarter). Revenue was flat. The Federal Reserve tailwind isn’t what it used to be. And global economic data, and to some degree, U.S. economic data was and is not robust enough to instill confidence (going forward).

 

Finally- Earnings may get bumpy this week, according to Marketwatch.com on July 21st. McDonald, Ford, Starbucks, GM, Netflix, Apple, Dupont, Dow Chemical, Boeing, United Technologies, Corp., Caterpillar and 3M to name a few will be reporting. The key will be consumer based, wrote Wallace Witkowski.

Last week multi-nationals had a rough go while more domestic earning companies beat expectations.

Attention- have you completed the client update form? Call or email me if you need help. Yes, it needs to be done and updated every 3 years. It’s an S.E.C. requirement.

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-2nd Week July

Talk Radio probably causes more grief than good. The first radio station I ever stepped into was back in the mid-60s in Montgomery, Alabama. At the time I was stationed at Gunter Air Force Base and Montgomery was the home of an ex-truck driver by the name of George Wallace and the North-South Football Classic. Both the football field and the governor were small and viewed close up almost insignificant. Montgomery was also the home to the Hank Williams, Sr. museum. The radio station operated pretty much out of a broom closet where my friend played rock and roll from noon to five. You couldn’t get three people standing in the same room my friend broadcast from. But, I was impressed. Decades late I did my talk radio on several Detroit area radio stations and hung up my earphones before the second recession of 2008. When I did my show I talked about concepts, allocations and economic events. I even ran a quiz, ‘Is it U.S. or is it Foreign?’ Today’s Radio Money Mouths talk about specific funds and stocks that you should be buying and selling. This causes lots of problems simply because some people don’t know what they own. These On-Air Motor Mouths are doing nothing more than using scare tactics designed to frighten listeners. They mask it through subterfuge of being the ‘helping hand.’  That’s how  Radio Mouths get new customers- by scaring the bejesus out of listeners. My point being that now your Quarterly statements should be in your mailbox and I urge everyone to take a look at them. Don’t just toss them into a drawer. Open the envelope and read what you own, what it did and where you are. If there are holdings you see that you don’t know what they are than either call or email me. You should also know where your account closed at the end of last year (2012) and where you are today. If you don’t than look up your year-end or tax statement and compare it. Or, pick up the phone and call me.  You should know what you own, what it does and why you bought it. If not, ask questions. Never assume…

The Perfect Financial Storm struck all investors in June. The only way to hide from what is being called ‘The Great Rotation’ is by ducking under a cover of cash. It was that ugly. From May to June markets in equities fell and bonds were crushed as interest rates rose. Even those funds that were disconnected to the bond market were impacted. Thomas H. Kee, Jr. wrote in MarketWatch.com on July 8th that it was surprising the suddenness of the investor stampede from bonds. The 20-Year ETF Treasury is down 12% year to date because of it. Banks are promoting equities as having value and moving clients from bonds to equity funds, he writes. But, Kee warns, this is not yet a Buy and Hold market.

China Reported  second quarter gross domestic product Monday July 8th and it showed that the economy slowed from 7.7% growth in the first quarter to 7.5% growth in the second. The country is attempting to become less reliant on construction and heavy industry and more on consumer spending.

 

The WSJ reported That China’s Problems Are Not Our Problems. US markets are shrugging off the latest bad news from China as their growth slows. Barclays predicts 3% growth for China in the next few years- off from high single digits. To be sure the report goes on that China woes can hurt domestic companies such as Yum!Brands, Wynn Resorts and Broadcom that count on 50% of their revenue.

Markets Up For Four Straight Trading Days at the End of Tuesday July 9th.

NetFlix CEO Reed Hastings said on Monday July 8th he will discuss second quarter results from the company’s website and from pre-arranged questions. Michael Pachter, an analyst with Wedbush Securities fumed, ‘I’m not going to submit my questions ahead of time and let them screen them to determine if they should be aired.’ Pachter has a sell rating on the stock. This remind me of the same argument David Einhorn made in his new book, ‘Fool some of the People All of the Time.’ Allied Capital was a ‘short’ by Einhorn who hired a private detective and forensic accountant to dig up shenanigans at the company. He was 99% sure of his information and was locked out of earnings conference calls by Allied who were well aware of Einhorn’s stock position. They also began using only prescreened questions. Netflix said it was modeling its conference call on Warren Buffett’s annual meetings. Netflix argued their ‘format’ provides ‘very forward thinking’. … and I got a bridge you may want to buy…

The Economy Isn’t Doing So Hot! Fed Chairman Bernanke said as much in his after the market close Q&A  that was reported in the WSJ on Wednesday the 10th of July, in which he said that it was too early to see of the economy had weathered fiscal policy headwinds, the unemployment rate probably understates the weak condition of the job market and the Fed was concerned about the very low real rate of inflation (currently pegged around 1%). That being said he stressed that rates were to stay low for a long time. He also laid out and defended his potential timetable to  wind down asset purchases. Many believe will start this September. The after-hour markets rallied on his answer. Still The Bernanke is a lame duck Fed Chair and he can say and do anything and everything and it means nothing past February, 2014. Wednesday markets mixed.

Last One Into The Pool Is … The Chairman’s words were heard and understood. Tapering doesn’t mean stopping and it doesn’t mean it happens tomorrow. Bernanke’s remarks soothed markets Thursday and opened the door to perhaps another Bull market run that was experienced in 1982 and ran to 2000. Bank of America Merrill Lynch analyst Mary Ann Bartels suggested just as much. Leading the way are the financials. Humiliated stocks and sectors the last few months have included gold, Apple, bonds, emerging markets. ‘We’re out of the trading range we’ve been since 2000.’ Bartels said in a Bloomberg interview on July 12th.  ‘Leading the way up will be the financials, energy, industrials and technology,’ she said. Since the market’s taper tantrum the market has finally realized that stocks are the place to be and the rotation from bonds has begun.

Hang On Just a Pea-Picken Minute! Not everything is all sweetness and sunshine. Jim Russell, senior equity strategist at US Bank Wealth Management said Friday the 12th of July, ‘Investors aren’t expecting good news as second quarter earnings start rolling in. This rally could be relatively muted and brief,’ he said. ‘Earning news will be bumpy and mixed, thanks in part to business conditions outside the U.S.’ And some investors said the Fed Chairman’s words shouldn’t have been taken quite as bullish as the market seems to have believed. Milton Ezarati, market analyst at asset manager Lord Abbett and Co., reminded us in a Bloomberg article published Friday the 12th, ‘Bernanke really hasn’t said anything new.’

So the summer rally is either on or off and we won’t know until we reach the end.

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A very good week for markets…Banks JPMorgan and Wells reported better than expected earnings but warned caution if rates stayed elevated! The biggest banks, the WSJ reported Saturday July 13th, were struggling with lackluster loan demand, a sluggish economy and a slew of new regulations that are crimping profits. Interest rates are still under the average during the Civil War.

Twinkies made by a New  Bakery Now at Wal-Mart.

Blackberry Smart Phones Now Being Discounted to $50.00 as Lack of Consumer Interest Hits Firm. It’s an Apple – Samsung world.

AT&T Buys LEAP Wireless! And then there were two.AT&T stores bandwidth with new acquisition. Looking ahead.

 

‘Little French Songs,’ great new album by Carla Bruni.

Robert C. Johnson, CFA @ Morningstar. ‘Still Bullish But Not Too Bullish.’ Published on their website on Saturday July 13th.

Form E-Mailed to Update Your Investment Comfort Level Requested by the S.E.C.  Each account needs an update every 3 years. If You Need help- call. I will be mailing out to everyone who is not an active e-mail user.

586-295-0430.

 

Taking a few days off this week but it’ll be a working break so call or e- if you need anything.

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.