That Was The Week That Was-5th Week June

  For some investors hunting for safety and fixed income higher ‘than ordinary’ yield opportunities  rarely ceases. They scour the earth and internet looking for deals. Investors are now cautioned that at some point, in the not too distant future, tactics need to change. United States Treasuries, at this point, don’t seem to offer much in yield (or appreciation) and, like a recalcitrant house guest, who has overstayed their welcome, common sense dictates that there has to be a parting of the ways. The ten-year Treasury sports an approximate yield of 1.65%, and it may well be overdone with whatever future appreciable capital gains to be squeezed out of it. It doesn’t seem conceivable that the Federal Reserve’s Operation Twist can lower rates even more over the next six months. Still, nothing surprises me in this fixed income market. Morningstar reported that the fixed income sector is at the ‘Foothills’ of change. Corporations that pay dividends are the du-jour Love-Child of Investors, and some public companies are instituting paying a dividend only to reap investment ‘needed’ dollars. The number of S&P 500 companies that are paying dividends has reached 400, a 12-year high.  A decade earlier companies that instituted dividends were considered ‘slow-growth-income’ and investors shunned them. Now investors are shifting their focus to both safety, income and growth. Many of the companies that had healthy dividends have seen their share prices increased to levels that investors may find uncomfortable. Still there are others, according to Wallace Witkowski, of Dow Jones, that may be just the deal for investors willing to buy and hold. The following companies have a decent payout and little debt. Here are four household names from Witkowski:

• Walt Disney
• CVS Caremark
• Colgate-Palmolive
• Cummins

What Some Experts Like: Morningstar reports that some investors think that stocks are not attractively priced. The analysts at Morningstar say ‘no-way’. The following are a few areas they’ve liked back in April of this year and some they still think have a lot more gas in the tank: Large Cap Value (stocks like GE, Abbott Labs and Johnson and Johnson); Energy sector (all beaten up and back in April energy was 14% undervalued and my little grey cells tell me the sector is undervalued a lot more in June!) and Financials (banks were downgraded by Moody’s last week but traders think this was way overdone. We’ll wait for earnings, there’s always a surprise.) 

Something Old, Something New and Someone May Be Blue….Managed Futures. Investors may see a new type of investment in their asset allocation from certain managed account firms- the Managed Futures Fund. Morningstar reported last week that Managed Futures usually have been reserved for Hedge-Fund-Like Investors, the Daddy Warbucks kind of folk but until now no investment firms have managed to bundle them into a mutual fund for us regular peoples. Managed Futures are now being touted as the latest Trend in alternative investing. The concept is that these un-correlated assets are able to reduce risk and increase return in an investment portfolio. The Managed Future fund invests in currencies and commodities to be bought at a future date and price. There are barely a handful of these funds to invest in and none have done an exceptional or even adequate job of preserving principal or making money. Read your statement and make sure you’re not buying something you possibly may not need and may cost you money.

Dan Dorfman, 82, Died June 16. Before Jimmy ‘The Mouth’ Cramer there was Dan Dorfman. Dorfman was so influential that the SEC instituted the Dorfman rule. Stocks he recommended 95% surged on average 13% and those he bashed lost just as much, if not more. Dorfman was huge in the 90s appearing daily on the now CNBC cable show and writing for Money Magazine. In addition you could catch him on Wall Street Week with Louis Rukeyser. In his later years he reported for the Huffington Post, after fighting off allegations of illegal insider trading. The sad thing is that the WSJ devoted a bare paragraph to his passing while the NY Times was more generous. What have you done for me lately in this biz continues even at death…

FYI…Fat is a problem in Kuwait. Read this somewhere but fast food, introduced by U.S. troops in-country, after first Bush war, is causing huge problem with Kuwait adults. Stomach staple operations very common.

Kraft Foods largest company to switch from shares on NYSE  to NASDAQ effective June 26th.  

Hunting for Greek ‘Gems’… George Elliott, founder of Naftilla Asset Management, has raised about $63 million to buy nothing but Greek stocks. Elliott, who says he has a history of buying distressed assets, refused to talk to anyone who had not taken advantage of the Russian currency crisis of 1999, the S&P 500 stock market crash of 2009 or the Argentine default a decade ago. He considers those moments the best investment opportunities in the past 20-years. Elliott is 39 years old.

Woody Allen’s School of Productivity. Funny man, director and writer has some rules of work that was shared in the pages of Bloomberg BusinessWeek June 25-July 1, 2012: John Lopez reports the philosophy:

• Have a Life
• Watch Your Margins
• Just Keep Swinging
• Don’t micro-manage
• Change slows you down.

Microsoft’s new tablet is super-keen- neat-o. Its thinner than Apple’s and made of ‘vapor deposited magnesium’. It’s called Surface and should arrive in October. The tablet’s protective cover also doubles as a keyboard. ‘ Golly- folks! It’s made of vapor deposited magnesium! How cool is that!   That’s almost better than kryptonite.

Once upon a time… a company called GMAC bought another company called Residential Capital. Rez Cap almost sank GMAC with its bad mortgage loans. Rez is bankrupt today and Fortress Investment Group, a hedge fund, is offering $2.5 billion for the mortgage business. GMAC was once owned by General Motors and today is an independently owned bank renamed Ally Financial. If you understood half of that – you’re a financial expert!

If you hold an investment longer than five days you’re considered a new millennium long-term investor. According to CNBC Monday the average holding period for the S&P 500 index is five days. True liquidity has not come back to the markets and short term players and high frequency traders rule. Partial to blame is ourselves as long-term fundamental investors.

Gosh! Markets were off a lot on Monday but came back off their lows to finish, well, off a lot but a lot less than where they were. The Dow was off 136 and the S&P lost 56 and everything else was off, and there wasn’t a whole lot of anything to blame except Europe. And, European politicians. Let’s not forget the pols. Sterne, Agee reiterates that Ford is still their top pick in the auto stocks.  They have a Buy on the stock and an $18.00 price tag. Earnings of $2.00 per share are still unchanged even though softness in European sales down 5.7% the first five months of 2012. Russia and U.K. sales have picked up the slack and South American sales are also down, and that weakness, according to Sterne, may continue through the rest of 2012. Industry fundamentals for Ford which include pricing and cost performance all remain on track. Shares have not performed as well as the company has with current share price closing last Monday at $10.19. On Friday news that Ford would not make analyst projected earnings caused the stock to be badly beaten up by Mr. Market. Shares closed to $9.50.

An Acquaintance of Mine Buys Only New Homes. He’s a snob about stuff like that. He gives a sniff of his nose when you say you bought a ‘used home’. You may as well have told him that you bought used socks and shoes and wear them. He’s a ‘new money’ kind of guy. And with ‘new money’ comes ‘new money’ rules. And so I thought of him when I read that ‘new’ home sales rose over 20,000 units more in May than was estimated by the Washington Tea Leaf Readers. There still is a record of ‘previously owned’ homes on the market but, according to Commerce Department, new home sales were up. That means that people want new and there is cheap money to do it with. Recently Toll Brothers broke ground on a new 2,000 home project in Orange County, California. This is a significant but small move. Overall Builders broke ground on 516,000 single family homes last month. Toll Brothers reported profits that bested estimates in the second quarter. I told you about watching home builders, now didn’t I!

Cody Willard wrote that Facebook is still a buy and every ‘tech’ money manager is trying to build their own FB position now that the stock has stabilized.

Consumer Confidence at 5 Month Low! Yes, I was shocked too (tongue in cheek) when I read that failure of the government to address jobs, taxes, housing and entitlement programs, while the stock market stagnates and Europe threatens to infect our economy has caused most Americans to lose confidence. U.S. companies, like Ford, are keeping an eye on the public’s attitude. Bloomberg, last Tuesday, confirmed what everyone knows and that is the stock markets fluctuates between gains and losses, in a narrow trading range that is almost impossible to predict. It’s not fun anymore! People are sick and tired of being sick and tired. Expectations are slowly dimming. Even people who have money are not spending as Darden Restaurants, owner of Red Lobster and Olive Garden, reported an unexpected drop in sales at their older establishments. The consumer is getting more cautious and even the drop in the price of gasoline is not luring the buyer out to play. Unemployment has held over 8% for over 40 months, the longest historical post WW2 period. The country cries for leadership and for the leaders to lead with confidence.

There is at least One Analyst with a Happy Face and Confidence! Tom Dwyer, Chief Equity Strategist at Canaccord Genuity, think the S&P has another 250 points of upside, at least! His reasons are a historic drop in interest rates, low energy costs and a slow recovery in housing. ‘It should spell gains for the market,’ he said to CNBC.

Questions? Call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.