If you told me five years ago if I would be recommending commodities, metals, emerging market bonds and REITS as part of an allocated portfolio to my clients I would have called you nuts. That was then and this is now and I am not the only investment professional that sees value where only a few years earlier I would have been more concerned about risk than return. Fertilizers makes things grow unless there is no water. Water is now a huge commodity and one with deep value. Some people see it as such and others think anything that comes from turning on a tap cannot be worth much. Water, my friends, is an alternative investment. Timber is another, as is all commodities including oil, gasoline, cattle, soy beans and corn. Those that bought the commodity index find themselves on the plus side so far this year even though oil and gasoline are down, other commodities are up. Not all alternative investments are suitable for my clients. I draw the line on currencies, hedge funds, managed futures, long-short funds and bear market funds. There are probably more and I’m having a senior moment, but you get the idea. Maybe I’ll get over them as well sometime in the future. Alternative investments and alternative investing is now mainstream whether you or I completely embrace it or not. Fund managers have found ways to create portfolios that have less risk by combining traditional and so-called exotics to provide better yields than plain vanilla products. So the next time you’re pumping gas for the car, digging into a plate of French fries or carving up a steak think of the investment opportunities you and millions of others are touching and that are available for you today. Call or write me for my personal best picks and ideas.
CNBC reported Thursday that the spike in crop prices may signal a chronic food crisis. Like most everything on the planet food can be invested in. There are stocks of companies in food related businesses such as fertilizer, chemicals and in the commodities themselves.
Dow Closed The Week @ 3 Month High. Volatility off Significantly. Investors may see carryover as Spain signals it may need a bail out. All eyes on EU this coming week.
What The Charts Say About an Investment. Click on my podcast for information on how to chart individual stocks. This will give you an idea- only- of when to either buy, sell or hold a particular stock.
Groupon shares sink! I could never understand the hype about this company. The deal is they make deals with companies to give a daily discount and then advertise that discount to subscribers and non-subscribers to entice them to buy or visit that particular vendor that day. The company doesn’t have the finesse of a Google or Facebook knowing what I like or don’t so I get ads on everything from pedicures to West-side gourmet sausage. The stock has fallen 67% so far this year. I probably get same if not better deals with Penny Saver…
Speaking of Facebook…UBS sues NASDAQ, OMX Group. The Swiss bank said it lost over $357 million on the botched Facebook IPO. UBS stock is down about 3% from the first of the year, according to Dow Jones. UBS announced they lost the money for their accounts and more importantly their client accounts. This was so messed up an offering that when this representative put in orders for himself and clients we could not confirm our buy nor could we sell what we did not know we owned until the close of business. It is unclear if UBS was using Facebook as a day-trade or for a long-term hold. But…and here is the very strange thing about the Facebook IPO. Just before its open analysts poo-pooed the stock price and the amount of shares being issued saying it was way over-priced. Still many of the ‘smartest’, ‘brightest’ and ‘richest’ investors were lined up to buy shares at the open. So if this was such a bad deal where did all these investors come from? And, why didn’t the bank convince those investors not to do the deal? Me thinks, my friends, that there was, and is, much disinformation on this stock before and after it becoming a public company. Stinks is a word that comes to mind. You, too?
Word from Fidelity is That They Are Done With Facebook- dumping 2 million shares in June. Do you want to bet that they’ll be a buyer if the stock shows life?
Is Your Home an Investment or a Place to Live at a Reasonable Price? Ages ago, before 2008, I knew a guy and his wife who bought the largest and most expensive home in their subdivision. They struggled for ages to make the mortgage payments as that home represented their retirement fund. When I met them there was no way that I could convince them to: (1) diversify (2) buy a more reasonable home (3) take the mortgage savings and invest it elsewhere. Today that home is worth less and they are a lot older, and unfortunately, poorer. For most of us we buy a home for a laundry list of reasons, last being that the home is an investment. In the early years we buy a home because of its school system, the community safety and the close proximity to shopping and other services. Later we may buy a home because of health care, neighbors and activities geared to our lifestyle. We also like the peace and quiet of the neighborhood, proximity to the arts or sports or simply a great place to raise a family. Lastly is the buying of a home where its an investment. According to Mitch Tuchman at MarketWatch.com writes that your home is a roof over your head, which, purchased properly, can be a great way to spread the cost of shelter over many years. Today, however, there may indeed be an opportunity to have a home double as an investment. Good news as housing data and consumer confidence was boosted before the Fed decision on any further economic action on Tuesday.
In the 1960s I knew a guy who drove to California in a car that caught fire about every hundred miles of so. It’s amazing that the same company that made that car has turned itself and its domestic US partner, Chrysler, around. It wasn’t Lee Iacocca or behemoth Mercedes who did it. It was the Italian auto manufacturer Fiat that US consumers derogated back in the day as Fix It Again Tony which did the job in making quality autos at the turn of this 21st century. The company posted over $400 million in profit in the second quarter of this year. Chrysler’s sales are so strong up 13% this July that they are propping up Fiat that is struggling with the EU recession. GM down by over 40% due to EU troubles.Waiting for the Chrysler IPO….
Apple- in the News- Again. According to Sanford C. Bernstein & Company Apple is considering a stock split. But this is only a rumor! The company could be added to the DJIA. According to Bernstein & Co Apple is the only company with $215 Plus market cap that pays a dividend and is not included in the Dow. Apple shares were up on the news.
Social Media Dead? The botched IPO of Facebook has many investors re-thinking their opinion of Initial Public Offerings and social media stocks in particular. There is one company that many business professionals and analysts like and its LinkedIn. When the stock went public in 2011 it too was scorned as a Facebook wannabe. Today the stock has outperformed all other social media stocks. At the end of July Groupon traded at $6.65 a share, Zynga at $2.95, Facebook at $21.71 and LinkedIn at $102.65. The stock is considered a biz recruiters tool and is popular with business professionals and home office human resources.
TopStockAnalysts Offer a ‘little known tactic’ for stock picking. It’s called ‘spinoff investing’. The way it works is to invest in the spin off from a major company. The theory is that the spinoff opens up value in the spun company shares. TopStock David Goodboy writes that News Corp is expected to split into two companies and Kraft Foods has revealed they expect to break off their international food division into a new company called Mondelez. Investors can keep an eye on the SEC Edgar Online data base for news of potential spinoffs. Not all spinoffs are winners. More homework is needed but it provides a serious source of possible investments.
‘Nothing! We’re Going to do Nothing!’ At least for awhile…The Federal Reserve did nothing Wednesday except to kick any action down the road. Taking a cue from European and Washington politicians The Ben Bernanke and Crew held back from announcing any new stimulus for the economy. Immediately upon the announcement stocks fell, the dollar rose, gold fell more and the euro lost ground. The only news, if you want to call it that, was that the Fed said they would keep interest rates low through 2014.yes, the Federal Reserve did include new language that said they were more prepared to act than not. Many said The Ben Bernanke bowed to the action of the EU, allowing them the lead. ADP Employment Numbers announced 30% above expectation at 160,000+. Most Reporting Companies exceeded expectations but did it with fewer people.
July Market Index Report
Ah…Someone Smells Opportunity. In Michigan Macomb County is the blue collar equivalent of Oakland County, which is a wealthy, sorta snooty neighborhood. Bill MacMachen, owner and founder of MacRay Harbor Resort, walked into the Macomb county Treasurer’s office last week, according to the Detroit News, and bought 657 Macomb county foreclosed properties of all shapes and sizes. Whether these were all the foreclosed properties or just those up for auction is not known. What is known is that they were a mix of vacant lots, homes and industrial businesses. The marina owner paid less than $5 million for the whole kit and ka-boodle. Individual investors were angry and very vocal at what they felt was bad manners and business sense by the county.
Bill Gross, smart rich guy who runs PIMCO bond fund, said the, ‘Cult of equity is dead.’ Meaning that stocks will not, going forward, provide investors with the kind of return that they were used to in the past. He even put the Kibosh on bonds, saying with the yields where they are investors have little hope for long-term returns. Analysts and talking heads bumbled around trying to get an answer, or spin, to Gross but couldn’t. Gross didn’t come up with any solution except writing that people would have to work longer and not expect to be able to see ‘normal’ retirement.
Someone Is Going to Put The End To Flash Trades… as about 150 stocks were involved in another mess Wednesday. This time Knight Capital, a vocal critic of the last Flash Crash, was the culprit saying their software glitch kept repeating buys and sells over and over. This went on for 30 minutes.Brokers said Knight could or should have been able to stop the computerized buys and sells but for some reason either didn’t or couldn’t… Knight stock fell on the event. Knight is looking for a suitor to bail them out of almost a 1/2 billion dollar hole! The company may be but a memory by next weekend if it doesn’t find a financial backer. Rumor has that they have but time will tell if they can rebuild investor confidence.
Investors were once again disappointed as Thursday rolled around and ECB , which once said they would do ‘whatever’ it needs to do to save the euro…demurred. Markets were expecting ECB President Mario Draghi to provide them with shock and awe and instead, according to Todd Schoenberger, managing principal of BackBay Group in New York, ‘Draghi set us up like a poker room of suckers.’ Draghi did signal ‘plans’ to lower borrowing costs by initiating bond purchases but that could be weeks away. The markets were waiting for something on Thursday of major significance and to say they were disappointed, especially in light of The Ben Bernanke bowing out of any meaningful Fed statement on Wednesday, were constrained at best. Critics lambasted the ECB president while Stephen Jen, managing partner at SLZ Marco Partners, said the markets demanded too much. Markets fell significantly on the no news.
The Auto Industry is on-tap to produce 14 million autos. Even with EU troubles the industry is cranking out and selling vehicles. The problem is that the stock price of GM and Ford finds new 2012 bottoms. Painful isn’t a word as patient investors hold shares in Ford and General Motors. Ford shares fell to under $9 and GM is a tad over $19 a share. Morningstar likes the stock of Ford to $23 and writes that investors should consider buying at or under $13.80. On GM Morningstar says fair value is $48, and consider buying at or below $28.80. There is value here, just the markets don’t see it or don’t want to see it – just yet. Stocks on Foreign Manufacturers are doing well, even as the yen appreciates. Toyota’s profit was the highest in four years. Toyota expects to expand sales in US to 14% up from 12% last year.Honda & Nissan also reported strong profitable quarters.
Apple versus Samsung. The two are suing each other over patent infringements. The court informed Samsung that certain documents could not be used in court. Samsung then sent the documents to the press! Apple, cried foul, argued that the court should sanction Samsung for breaking ethical rules. Ouch! The court told Apple to simmer down and ignored their request for sanctions. Court resumed and attendees were given earful of ‘secrets’ of Apple.
Stocks jump Friday on news of better than expected non-farm payroll increase. The Dow climbed 217 points and S&P and Naz were also up. Gold closed over $1600 and Oil was up huge to finish at $91.39. Friday’s action put the week into the black.
Retirement Issues: Another book written to assist a writer/financial planner/analyst in securing his retirement future was reviewed in one of my industry magazines. The fact is that solving retirement issues is as easy as (1) Make sure you’ve saved more than you’ll actually need for the day you stop working (2) Use less of what you’ve saved for income and lifestyle. (3) Ignore all the day to day noise and concentrate on earning 1% more than combination of inflation and taxes. It’s as easy as that! The problems start when you’ve not saved enough, you try to stretch too much from too little and maximize every investment that even the best and brightest can’t achieve and blame either your advisor or yourself. I have never met a person who has sufficient savings and a moderate lifestyle who is unhappy with where they’re at.
Finally…Friday Congress Goes On Vacation For Five Weeks.Lots to be done is still not done -the problems needing attention when our elected doorstops come back; what to do about potential Cyber attacks against water and power grid, the post office is officially bankrupt and loses $25 million a day for every day something isn’t done, the fiscal tax cliff looms and little has been done on extending the Bush tax cuts; plus still nothing on jobs even as the percent of folks not working has inched up.
Get someone on your side to help in the financial decisions. Call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.
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