From a Market Low in March, 2009 of 6443 on the Dow to the current 12,700 or so we’ve come a long way. Those investors that were in the market but left and sold some or all their holdings are now wishing they hadn’t. Others came back but only when the recovery was well under way. There is a lot to say about buy and hold, which I’ll save for another blog. Now getting to today’s point- The last year and a half have been miserable as the markets have settled into a non-discernable trading pattern. It’s almost random in its moves. Investors who short the market find themselves almost the next day on the wrong side as the markets go suddenly long. Others who decide to go long, find themselves looking at losses as Mr. Market laughs at them. Long- term buy and hold investors are frustrated from month to month as their accounts show either losses or back to even; and investment gains, when they do show up, are as thin as good news from Washington. Investors are frustrated and believe that there is a way to make money but no one is telling them. In the first half of this year some of the largest hedge funds that have the smartest analysts, fastest computers and most sophisticated software have seen either mediocre or poor returns. Global macro funds that make big bets on currency and interest rates were the biggest losers so far this year. In 2011 many hedge funds lost money. This year is bad but not as bad as last year. Still there is little to brag about. Most investors in hedge funds are institutional investors such as pension plans. The big Kahuna, of the hedge fund world, is John Paulson with his huge winning bet against mortgage backed securities in 2008. His hedge funds were the darlings of the hedge fund world amassing some $30 billion of new money. According to Bloomberg’s BusinessWeek in 2011 his two funds lost 36% and 52% respectively. At the end of May he is down 6% in one fund and minus 9.3% in the other. David Einhorn’s fund is up only 3.7% year to date. Explaining what’s happening, ‘People are over managing their positions,’ said Peter Rup of Artemis Wealth Managers. Still there are investors who believe there is some ‘secret’ lurking in the dark. Unfortunately, even hedge funds with all their tools and savvy cannot unlock the kind of returns that will satisfy today’s frustrated investor.
Listen to My Podcast- All About Pension Rollovers. Companies are attempting to reduce their pension liability (Ford and General Motors recently); and offering employees a lump sum distribution of their defined benefit pension. To make the decision on whether you should Rollover pension assets or not listen to my Podcast below. Click start below to listen. The entire talk is about 6 minutes. If you need more info call me at 586 783 7080 or send me an e-mail pstanley@westminsterfinancial.com
CNBC reported that the global credit crisis is causing a ‘kind of herd’ mentality with investors that is making it difficult to identify stocks and other securities that will deliver returns ‘above and beyond’ that of the market. This EU mess is making it especially difficult for Hedge Funds, CNBC reported Tuesday.
Banks Buying Your Biz…like a loss leader at he checkout banks offer a 10-year Treasury return on a One Year Certificate. There are savers that are frustrated with the current interest rate climate and are demanding safety, liquidity and yield. Unfortunately, that’s not all available. At www.bankrate.com the top four banks that offer the best one year certificate are: CIT $25,000 min and a 1.10%, MetLife 1.05% with the identical min, Ally no min and 1.07% and Discover with a $2500 min and .90%.
Cody Willard in Monday’s MarketWatch suggests that the time to short the ‘financials’ is now. He said he has been waiting patiently to bet big against the banks and with the Libor rigging scandal and almost $6 billion in trading losses for JP Morgan Chase this is a good time.
Remember This: Listen to What I Say and Not What I Do. Analysts telling us not to buy Facebook for all the reasons. Seems, according to Morningstar, 160 U.S. based mutual funds couldn’t help themselves, didn’t listen to their cohorts, and bought stock in Facebook whether or not Facebook fit in their fund criteria, or not. All sorts of different funds bought shares in Facebook and it didn’t really matter to the manager what kind of company Facebook is for them to snap up shares. According to the WSJ on July 9th, some of the fund managers may have been in the ‘game’ just to buy and sell as soon as shares bounced. Unfortunately, with the Nasdaq screw-up, they got caught and today own lots of shares in the company. The ownership of Facebook is far flung and more than likely the reader of this article may indeed own shares through the company 401k mutual funds. The following chart published in the WSJ with information provided by Morningstar.
this is Robert Gibbs, senior campaign manager for the President… and this is not…
Alcoa Reports First and generally sets somewhat the tone of reporting season. The aluminum giant has lately been off its feed as either price, volume or both have been lower than analyst’s expectations. The company stock has hovered between $8-$10, well off its bullish price of yesteryear. Second quarter earnings were reported last Monday at six cents, up a penny over consensus. That wasn’t the good news- the really good news was that AA expected sales to grow 7% and that allowed a small pop in share price afterhours.
Dull Market? Mark Hulbert, writing while on vacation in Canada, said low volume on the NYSE wasn’t anything new. Numbers kept since 1888 show that summer usually has low volume and there is no correlation between lack of buyers and sellers and what’s going on with the market. The month of September, The Hulbert explains, usually has great volume but its traditionally the worst month of the year. He concludes that there is no way that low volume leads to poor or mediocre stock market performance.
Trading Firm in Futures Files to Liquidate. A scandal involving a long-time commodities firm developing, according to last week’s WSJ. Peregrine Financial Group is missing about $215 million of customer money. The CEO is hospitalized after attempting suicide. The possible theft was discovered after a shift earlier this year to an electronic on-line system for verifying customer funds. Up to that time brokers and regulators relied on paper statements from banks. Much like the Ponzi scheme of Bernie Madoff, who’s crime was discovered when the markets went south, so was the Peregrine Financial downfall. On the heels of the MF Global scandal commodities regulators shifted their customer commodity account verification system to on-line methods. The National Futures Association said that it was possible the CEO falsified bank records. Customers in all investments are urged to know where their money is at all times. Simply getting a statement is no longer a sure method. Verify that money is invested, where it is invested and how liquid those funds are are important steps to safeguard funds. SIPC does not protect investors in case of theft.
Car Manufacturers Are Pretty Smart… Anyone remember the days when cars were manufactured and stored on lots about the metropolitan area in the thousands? When Lee Iacocca took over Chrysler the story was that he saw acres of new Chrysler cars and asked who they belonged to. When the answer came back that they were all being stored by the Chrysler company it was then that he knew the company was in trouble. Today you won’t find that excess as I discovered shopping for a car deal. Most of the dealers I have talked to are already stocking 2013 models and almost all 2012’s are gone. Today car buying is almost like buying a custom suit. You want a car? Then order one, wait three-six weeks for delivery. This method of car buying and manufacturing of both domestic and foreign will pay dividends both for the companies and shareholders.
But…Adam Lass of Bottarelli Research writes that there exists weakness in all of the domestic auto makers and some of the foreign car manufacturers. He goes on to report that further weakness precludes him from ‘buying’ any of the autos just now. He would feel more comfortable seeing ‘bullish’ support before making a buy recommendation. On Thursday Barrons.com reported that car companies are not about to go back to the good old days and ‘give’ cars away to entice buyers. Those days are gone and instead ‘value benefits’ are offered on year-end and sales events.
Remember Meredith Whitney and Her Prediction About Municipal Defaults? Ms. Whitney was the one who blew the whistle on the banking blow-out but was poo-pooed when she said communities and states would be defaulting on their obligations, causing consternation with tax-free bond buyers. Well, Ms. Whitney is getting some creds now that a few communities are filing for bankruptcy. Certainly it’s not like a avalanche of states cascading down hill. But, it gives one pause that buying a muni-bond should be done with care and best in a mutual fund or ETF where you have diversification.
The Fiscal Cliff is Looming Large. According to CNBC a lot of our current economic woes are based because Washington is allowing corporations to dangle in the wind, not knowing which way to turn. ‘Do we hire, not hire? Expand, spend money on equipment? Move into new markets? Borrow, extend debt, buy back stock? Or, nothing at all?’ Until Washington settles down to do the business of the nation the markets and the rest of us will suffer, no matter the quality of our holdings.
Supermarkets Caught Between Rock & Over-ripe Avocado…Biz stinks at the nation’s top chains as their stock price reflects lost business to either end of the …er…food chain- Walmart –Whole Foods. Even Dollar General and Target are in the food biz, sort of. Supervalu, a 4400 store Minneapolis based chain, saw its stock plummet 40% when it put itself up for sale and suspended its dividend. The WSJ reported Thursday that supermarkets cannot keep doing the same old things they did in the 1990s and expect a better result. Things have to change. Until they do experts say avoid some or all of this sector.
the above info source from individual grocers and chart/graph source WSJ. Thursday July 12, 2012.
CHINA GROWTH SLOWS IN SECOND QUARTER TO 7.6%. THE SLOWEST PACE OF GROWTH IN THREE YEARS. Merrill’s China analyst Ting Lu said that the slow growth could represent a trough of the current cycle, with activity to pick up in coming months as pro-growth policies put forward by Beijing in May start to kick in.
Gambling Stocks with Macau Exposure Lowered… according to Sterne, Agee and Leach, on second quarter estimates too high. Although investors would like to own shares in Las Vegas Sands, Wynn Resorts and Melco Crown Entertainment at the current levels. Sands is down 30% off its 2o12 high. Sterne, Agee has lowered earning expectations but believes a positive Macau sector sentiment will return in the relatively near future. In the meantime keep an eye on the above companies in the world’s hottest gambling market.
Ford Mo Co Sales Down Sharply in Europe. So what didja expect?
Friday Markets Up on JP Morgan Chase better than expected news, even as the bank disclosed higher losses from their opps trading earlier in the year. Still markets showed guts as Dow up over 200 points. Next week more earnings and Talmer Bank’s Tim Basset wrote that this could be the first negative quarter growth in 10-quarters. He goes on saying ‘that at the half-way point in the year equity markets have still maintained much of their positive momentum from 2011.’ To me this year has been almost like a golf duffer getting beat up only to have one or two spectacular shots keeping him from stomping off the course.
The key is the consumer. Saying it best was Stuart Freeman of Wells Fargo who is quoted, ‘At some point the consumer needs to make some purchases to get on with his or her life, and we’re seeing signs of that.’
Finally…One Bank Closed Friday bringing the total year-to-date to 33.
Don’t have someone on your side as a financial planner, broker or investment professional call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. There is no charge for initial meeting.
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