That Was The Week That Was – 1st Week September

•   August ended as the worst August for the stock market since 2001.
• Markets started the day last Monday off and never did get traction. European and Asian markets finished generally higher but never convinced the cousins.  It was drip, drip, drip all day until the close when someone opened the tap and the markets flushed 140 points. Late in the day the  Nasdaq broke the 50 and 200 day moving average technically predicting a lower day ahead.
• 3M, along with other major cash rich corporations, is on an accelerated acquisition hunt. With over $3 billion in cash the company bid for Cogent a fingerprint recognition tech company. A spokesman for 3M said acquisitions by major corporations in the 4th quarter are going to be phenomenally active. (Companies do not acquire knowing the economy will be miserable far into the future. They are taking advantage of a rare buying opportunity).
• Hello, health problem? Taking meds? New jewelry is going high tech linking your med information either to a flash drive, which you can carry, or very nice high end jewelry. Of course there is the MedicAlert bracelet but now companies such as MedInfoChip sell a flash drive one can carry. Another company called Invisible Bracelet allows members to upload information and simply carry a fob or card like your grocery discount plastic you can carry in your wallet or key chain. Not a bad idea.
• It isn’t all bad news out there. Mark Hulbert reports that corporate insiders have cut back on the amount of shares their selling and picked up the pace on buying their company stock. The sell to buy ratio is now exceedingly bullish. In fact, Hulbert writes, you have to go back to April 3, 2009 to find a more bullish period. Of course insiders can be wrong but over the last several decades they have been more right then wrong.
• Home-prices increased for the 3rd straight month but not all areas of the country shared in the boost. The biggest gain was the San Francisco area with a 22% increase.
• Not all banks are healthy reports the FDIC. Over 800 banks are ailing but not to the point of being shut down.  Tuesday markets ended mixed. Oil fell.
• BOND POTENTIAL BUBBLE NEWS: How much is too much? According to the latest data investors have poured about $550 billion into U.S. bond mutual funds and ETFs. So when does it become a bubble? Looking back to the last bubble and counting from Fed Chairman Greenspan’s warning about ‘irrational exuberance’  to the peak of the NASDAQ there was over a trillion dollars flowed into equities before the ‘pop’. Gives us room. If there does become a bubble remember the Japan bond bubble lasted 20-years.  
• Burger King puts itself up for sale. Poor sales during the financial crisis have caused the firm to seek a buyer. Unlike McDonalds which has seen sales increase by over 4% BG has seen sales decrease over the same period by close to 3%.  (But isn’t a Whopper a better burger?)
• Wednesday stocks soared on obscure news. Traders now latching onto any bit that they claim suggests a strong recovery. Investors dumped Treasuries and snapped up commodities and other risky assets, according to Thursday’s WSJ. The gains were the biggest in 2 months and marked the strongest start to September since 1998. Boola!  According to Anthony Chan, chief economist at JP Morgan Private Wealth Management, ‘Investor sentiment was so negative that any flicker of light was going to move sentiment with quit a roar, and that’s what we got.’ Tony is telling us not to be spending this rally.
  • Old news – GM IPO reportedly to price on November 16th and for a November 18th public debut.
• The coming app bubble? According to Cody Willard, who write The Cody Word, its a coming. In less then a decade from now over one billion people will be using smart phones with apps. Smart phones are going mainstream and with it the app business. The key is to figure out how to invest in the new commerce. According to Cody the potential for apps is going to change how we consume telephone, video and social networking services.  Stay tuned.
• The above pic from MarketWatch and the Mark Hulbert piece on numbers that make September a cruel month for investors. Over the past 110 years, Hulbert reports, September has produced an average loss of 2.7% whenever the stock market has lost ground in August. 110 years!!! But, so far so good as Thursday was a good day all indices up including oil and gold. 
• American companies, according to JP Morgan Chase, are sitting on $1.05 trillion of cash-$3.2 trillion if you include banks. Which means that they have the means to hire and spend.  As the chart below illustrates that’s not the case.

• Unemployment holding steady at 10% and no one it seems can reduce it. Pundits on the right blame the government and others say it is the high level of productivity being squeezed out of today’s workers. The answer is probably in the middle, as always. Fear of health care costs and higher taxes are looming over small to medium size business owners while large corporations are minting profits with increased worker productivity. Until this is solved expect the recovery to slowly grind on.

• Finally, the week ended upbeat with over 100 on the Dow as the markets took back 1/2 of August losses. There still is, according to Michael Kahn at Barrons, an exodus from equities to bonds as the above chart shows a trend line that continues to go lower. Unless the bulls can mount a sustained advance with significant inflows, writes Kahn in his technical column, there is no reason to think about a new bull market. And don’t expect yields to perk up anytime soon. Kevin Daly at Aberdeen Asset Managers in London said, ‘…with US growth indicators softening and the Fed likely to be on hold throughout 2011, U.S. Treasury yields are unlikely to climb anytime soon.’

If you have questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.