That Was The Week That Was-3rd Week September

New news on how people can get from working to retirement and not worry about income has been issued a week or so ago by Fidelity investments.  The old rule that financial planners told clients was that in order to be comfortable for the rest of days a person needed 75% of their pre-retirement income, or investments that would create that amount. Now Fidelity Investments gives a more complex guideline that states someone need eight times their ending income in a lump sum to meet basic retirement needs. The Fidelity have calculated check points at certain ages on how much to save but I’ll defer that for another day. The end result of their study is that if your final income before retirement is $60,000 you’ll need about $500,000 in savings. That plus social security should, according to the folks at Fidelity, provide just enough money to meet basic retirement needs. Hold the phone! While accumulation is probably the most important part of this equation, not to mention return on investment, there is an unspoken, unwritten assumption not covered by the financial experts. Actually there are several. The one that most seem to gloss over the most is assuming that a retiree will only use 4-5% of the pot of money to live on. In fact I’ll bet if you ask a retiree about how to manage income at retirement they’ll tell you that they will live on either earnings or interest derived from their savings. For many low to middle-income retirees this is really wrong. A retiree would be much better off buying a fixed single premium immediate annuity (or several) from Best rated insurance companies and get a lifetime guaranteed income!  Not only would this income be higher than any income plan an individual or their broker could create with any certainty, there would also be less grief and worry. There is almost an un-natural aversion by retirees to dipping into their savings principal. If asked why they would give up retirement income certainty in exchange for the vagaries of the investment world most middle to lower income folks would say they’d like to leave a little something to their kids, charity or a special cause.  A fixed annuity usually cannot do that. The annuity uses both earnings and principal to provide a steady guaranteed income. For most low and some middle-income retirees this is something they would prefer to ignore. As Boomers now stumble en masse into retirement the entire retirement income planning concept has to be reworked. At the very least retirees should be taught how to use both principal and earnings on their investment to create a higher and more comfortable retirement income. 

MarketWatch Reported 10 Cities That Cannot Turn Around Housing- California and Florida plus Las Vegas. Huge surplus on both sides of the U.S.

10 Stocks Least Addicted to QE3…I did a little chart searching last week and everything I read looked yummy…but, what isn’t dependent on the Government  Fed fix?… Apple, Facebook, Newmont Mining, CF Industries, Proctor & Gamble, 3M, Johnson & Johnson, Kinder Morgan, and (for some reason) Total, S.A.

Chinese Culture is Not American! Home Depot, Mattel, Tesco (UK) and Best Buy are getting their…you know what’s handed to them…in the mysterious land way over there. You’d think these large multi-nationals would have done some basic homework before committing billions to building infrastructure and establishing  themselves in a completely foreign land. But I guess not! Home Depot, and others, according to WSJ, have gone through a painful and expensive learning process that the Chinese are not like you and me. HD finds that the Chinese are not do-it-yourselfers and more like do-it-for me’ers. Mattel has seen the light as Chinese kids read and study and don’t play with toys and dolls. Wal-Mart is opening fewer stores in 2013. Best Buy has learned that the Chinese want dishwashers, clothes dryers and not tech toys. Still some companies have gotten it right- Yum Brand Foods and McDonalds seem to have integrated into China. 

 Raymond J. Lucia, Sr. is a San Diego financial radio host and securities broker. He is under investigation by the SEC for his three bucket approach to investing which the Securities and Exchange Commission  claims he has  inserted ‘misleading’ information. Ray is not the only one to glom onto the 3 Bucket  investment approach. Many insurance companies have that as a selling tool and even the venerated risk analyzer Morningstar positively glows when it reports on what the average investor should do with their money; specifically use the three buckets of (1) immediate (2) intermediate and (3) long-term money. But what Ray Lucia forgot to tell and include in his calculations is the cost of doing business that got him in such trouble. There was that and…oh, yes, the fact that his recommendations also included nontraded REITS  for his clients. These are investments that are not traded on an exchange and only report their values once every 18 months or so. His clients believed that the REITS were much like bonds and a safe fixed investment. Of course they are not. There was that little problem plus he also inputted an inflation factor of 3% when in reality the time period suggested it was more like 5%. Most people mentally catalogue their assets in at least three buckets and there is nothing explicitly wrong with that. It’s in the execution that one gets into trouble. It all comes down to the old saw, ‘Figures can lie and liars can …”,  

About 10 Days Ago I was musing… this was while Michigan State was losing to (gasp!) Notre Dame, before the Tigers blew another to the (gasp!) Indians and San Francisco would be handing the Lions a lesson in trying to run the football up the middle. My distraction was wondering what sector would benefit from the Fed buying $40 billion a month in mortgage bonds? And I came to the conclusion that banks, the big banks, should do well. I wasn’t alone in that thinking as the next day the WSJ had an article that suggested the same thing. The reasoning is that while scooping up mortgages it would give housing and the re-fi biz a boost. And, while lower rates could, in the long-term possibly hurt, there is evidence that many of the Bigs trade at 30% discount to tangible book value. Of course the argument that book value can turn on a dime or drop off the like a Lehman is always there for you naysayers. My other thought was home builders but they’ve had a huge run this year and there may not be a lot of gas left in the tank for 2012. Still I think, as does the smart folk on Squawk Box on CNBC, that home builders long-term make some sense. Call me for a list of ideas….

Monday started off as being a little off – like an upset stomach or a touch of the flu. Suddenly out of the blue oil fell $3. Oil doesn’t just drop three bucks for no reason.Calls to various traders and searches produced a lot of dunnos. The fall precipitated other commodities to follow suit. Some finally figured it was an erroneous trade. Others came to the conclusion that it was a lot of traders simply closing positions and the Jewish Holiday left many traders off the floor which left a vacuum. At least that’s the story and so far everyone is sticking with it.  

And the new President is… Before the last election I invited a speaker for my clients who worked for Capital Bank and Trust/American Funds. He announced that Obama would win the election and that there would be no recession in 2007. Most of the people in the room, me included, believed him on the one statement and not on the other. We were wrong- totally. Last week David Weidner in his blog reported that Wall Street is firmly behind the President. Not that they are against Romney it is just that Wall Street likes to back and pick the winner. While not happy with the result of our coming election Wall Street seems to have come to grips with the fact that they don’t expect all commerce to halt and all private industry to be immediately nationalized upon the President’s re-election. An unscientific CNBC poll gives the president a 2-1 chance of winning.

Technically the markets are still Bullish…a bit of profit taking during the first half of the week. Oil showed weakness and FedEx reiterated that China was slowing.

The Cult of Gates and Buffett signed up 11 more Billionaires to give their money to charity. So far the ‘Cult’ has recruited 92 families in total to sign a pledge to give away the majority of their wealth while they are living so they can have a hand in what their money will do. There is no consensus on how to spend the money even though the wealthy meet regularly to discuss how to dispose of their billions. Pass the hat and pay off the national debt?

Once Upon a Time…in a small town of Moberly, Mo. a Beverly Hills lawyer by the name of Bruce Cole promised the natives of Moberly that if they built a new facility to manufacture his artificial sweetener he’d move his factory from China to their little town. So the townspeople did just that by organizing a municipal bond offering of $39 million dollars. Yield and tax hungry investors from across the land snapped up the muni’s only to see the project fail and their entire investment go to zero. The town defaulted on the bonds, the project was never built and the lawyer Cole has been charged with taking some of the money and using it to make his mortgage payments on his castle in Beverly Hills. According to Bloomberg lawyer Cole has been arrested and the towns people of Moberly are saddled with a partially finished factory while investors are out $39 million dollars.

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who needs someone on their side.

That Was The Week That Was-2nd Week September

Financial & Retirement Planning Doesn’t Work. The computer and the internet introduced us to an age where people can learn how to do  just about anything without going to the library or relying on the know-it-all next door neighbor.  You can learn what’s the best cement for your driveway or that loose back molar just by cranking up the HP. In the old days if you wanted to know how long your eggs would stay fresh you’d have to call mom or the local chicken farmer. Today there is a web site that tells you that plus how long you can store liverwurst before it spoils. The same with investing. There are a ga-jillion web sites on the best way to manage your money and where to invest.  The computer has evened things out. Everyone can now be smart about pert near ‘everything’ just by clicking a mouse.

The first computer I was introduced to was in 1966  in a Philadelphia life insurance company home office. It literally  filled an entire room and its capabilities were less than the five dollar hand held calculators  that are currently sold at office supply stores. What that computer did, besides payroll, was provide a financial profile for people.  A salesperson would write in customer ages and income and the computer program projected inflation, future income and social security to give that person an idea if they would be able to retire in comfort. It also told them how much more money they needed to save if there was a shortfall to their goals.

Today we have much more sophisticated  computer tools to inform us on how much we need to save, where to save and the risk and efficiency we have in our investments. I know firms that have built their entire fortunes providing people with financial plans and the investments that fund those plans. Unfortunately,  it doesn’t work. There are tools out there being sold to corporations to hand out to their 401k employees that manage their investments strictly by computer based algorithms. The reason this and other programs are worthless is because there are too many moving parts between when the plan is completed and the the day of retirement. There are just too many assumptions and not enough absolutes. Life is like that.

Yes, you can manage your investments efficiently by daily reviewing, culling, adding and reallocating. But you cannot manage the managers who manage. You have no control over macro economics, the Federal Reserve or even your local Congress person. Interest rates, global tantrums, hurricane, earthquakes and political wars and other micro infestation that cause manufacturing to go bust, inflation to rise or fall and things to go bump all at the least opportune time are not and have never been something that anyone can control let alone input and calculate as an absolute. Just as you may have popped the bubbly when your manse hit a triple digit gain back in the early 21st century, it soon came to earth and beyond. And it did all that before the bubbles in the glass went flat.

The new  retirement planners sell peace of mind and plans for the future. They doll it up with fancy names like ‘financial security’ or other such crapola but the fact is it doesn’t work. Any wonk with their salt will tell you that projections are that and nothing more. No one knows what’s awaiting us the next week and no plan, amount of ink or expensive computer program will work to tell us the absolute future. Add such intangibles like illness, accident, divorce, parents-moving in, job loss, embezzlement or just plain bad luck and you cannot plan for tomorrow with any certainty.

There are things you can control and count on but your future financial security and knowing where you or your investments will be with any certainty is not one of them. Understand that. Next week comments on why the highly touted 3 Bucket approach to investing is under investigation by the SEC.

Speaking of Algorithms…the rise of algorithms has been directly proportionate with the increase in the amount of computer power and the ability to store information . Those super fast computers that are hooked directly into Wall Street use an algorithmic function to make investment decisions so fast that before one trade is completed another is being ordered. Basically an algorithm is a program that dictates ‘if this happens do this or buy this if this happens..’ According to Bloomberg there are four extremely influential algorithms that run our lives. (1) Black-Scholes that prices options (2) Swarm- getting softball sized robots to act in unison (3) Bin Packing- that’s the elevator random walk program (4) The Fast Fourier-created 2 centuries ago to study heat transfer is now used in billions of applications a day. oddly I can’t think of a one…

Facebook Has 80% of Internet Time for Users 13-28. This is one of those things I read on the internet (Bloomberg, in this case), and as you know everything you read on the internet is true. If even slightly true FB is building a layer of consumer that knows only one significant place to go each and every day. 

GM Financial is now marketing $1.1 billion in bonds backed by auto loans. The surge in business made them do it.

The Hartford is Out of The retirement plans business. if you own an annuity or variable life product from the Hartford you may want to watch for this announcement. Call me for info on what to do.

Best Performing Companies First Half 2012

1. Apple
2. eBay
3. EOG Resources
4. PACCAR, Inc.
5. Aflac
6. National Oilwell Varce, Inc.
7. Priceline.com Inc.
8. Caterpillar Inc.
9. Starwood Hotels and Resorts
10. Google

Markets were lower across the board on Monday. Doctor Copper in China is a surplus. When analyst Judy Zhu made her rounds of copper warehouses in China she was surprised to find 20% more copper being stored than the last time she looked. Copper is looked at as a gauge of economic growth. Analysts at Deutsche Bank wrote in August that against such high inventories any rally in copper prices was unsustainable. It would seem that the weakness in the Chinese economy is real.

Facebook an Investment! Surprised? Me, too! After the Bell on CNBC Guy DeSanti startled his buddies when he said he owned Facebook and it was for a long-term investment. No one said anything but looked at a loss for words. It’s almost like admitting you’re a closet smoker. Tuesday Zuckererberg, Facebook CEO, appeared at his first press conference since the IPO and seemed to acquit himself and the company fairly well explaining the company is on its way to (1) 950 billion members (2) Will connect with everyone on the planet by 2015 (3) Mobile is the way to go (4) Mistakes were betting on HTML (4) No Facebook phone, it wouldn’t move the dial (5) Search is a very real possibility. Shares moved UP 3% in after hour trading. Cody Willard adding to his position. Wrote in his blog that he bought at $26 and that was wrong and is adding at around $20.00.

Me thinks Moody’s is over compensating….? The ratings firm is making noise about cutting ratings on the United States. The reason is the fiscal cliff, coming soon to Washington and again politicians are more concerned about healthcare reform than they are about the business of balancing the checkbook. Moody’s which made some egregious errors in plastering AAA on mortgage bond bundles that went kaput is noisily being a pest when it shouldn’t.

Gold closed at $1745 Tuesday. But fell Wednesday- seems the stuff is following the market. Up again by the end of the week…

12 Million Consumers Ignore Banks!  Totally upset over fees and overdraft charges and the mess banks lead the economy into in 2008 consumers are finding ways to avoid doing business the way they used to. Prepaid credit cards are picking up the slack and the bank debit cards are being ignored. According to FDIC consumer borrowing also shrank. Once when not having a bank account was considered a stigma it seems having one now is not something the middle-to lower income earners are concerned about.

It Was All About Apple Wednesday. The company had an aggressive rollout of their new iPhone along with a new nano iTune. Innards of the iPhone are highly attuned to interface with Facebook mobile. ‘After the Bell’ panel on CNBC discussed options trade that had Apple stock fall during and after each new product rollout, instead shares popped almost $10.00. Talk also that the sale of new iPhones could add 1/2 of 1% to the U.S. GDP. MarketWatch remarked that Apple is set for the Holidays. Next to be announced will the the iPod and the mini-iPod. Share price on Apple moved by analysts to over $800 while some still think shares can increase to $1,000 in the next year. (That from Cody Willard who is uber-Bullish on Apple). The stock is widely owned by institutions and funds so that you may have Apple in your portfolio and not know it.

It Was All About The Ben Bernanke Thursday! QE#3 was announced! Which means the United States will be a buyer of mortgage bonds to the tune of $40 billion a month. The object is to drive the price of mortgage loans down- and give a boost to home buying which in turn would cause people to start buying ‘stuff’ and this buying would create more products which would demand that companies would need to hire people! Housing would also stabilize causing home values to increase giving folks a better feeling about where they are financially. Convoluted I know but no one said passing economics was easy. This could cause the 10-year bond yield to fall from 1.75% to about 1.10% over the next several months. And how long will The Ben and his buddies keep doing this? It is said that they will keep buying even if the economy gets better and will certainly keep buying all the way through the middle of 2015. The Fed Chairman is due for re-appointment in January, 2014 and we know nothing will change (well, almost nothing), through next year. A new president could ask The Ben to resign and change philosophies but this is highly unlikely since Ben Bernanke just boosted the President’s chance at re-election by about  3 1/2% on Thursday!

Markets Soared on QE3 News Thursday! Poor earnings or not, buying stocks, bonds, real estate is just about the best place to be. (at least today!)

For The Week U.S. Stocks to 2007 High! If you want to call stock-traders mooches be my guest. Opportunists is something I would prefer since betting along with the Fed is something people in my business have grown to love and cherish. The recent rally means nothing- absolutely nothing- has changed in the real world. Business will still report less than stellar earnings, unemployment will still be in the stratosphere and the growing shadow of political uncertainty will be there through the elections. What the Ben Bernanke and crew did this past week you’d think they had ties to investment bankers and were more concerned with broker bonuses than slashing unemployment, keeping interest rates low and goosing the housing market. Sectors that were at best described as morass in polite society and toxic behind closed doors were rejuvenated. U.S. Steel, Caterpillar and commodity shares in such sectors such as coal jumped. Banking and technology added to their 2012 gains. It was a good week! I can only thank the Fed for their early Christmas present…how about you?

Finally- Like all good things, and bad, they don’t last forever. While there is juice to this rally expect traders to pull back at some point and take profits before going higher.

 Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money. Need a friend in the business call Paul and tell him your problems and get back on track.

Stop Being A Yield Victim-Register For My Fixed Income Breakfast Meeting

 If you have money earning less that 2% you’re losing purchasing power after calculating inflation and taxes.  And don’t think bank rates are going to pop up anytime soon.

Learn How You Can Shop, Manage and Implement Fixed Income Investments Into Your Savings by attending my Fixed Income Breakfast Meeting at Sycamore Hills Golf Course, Macomb, Michigan on Wednesday September 19th at 9 AM.

In about 75 minutes I’ll review the majority of fixed income investments, what they do, where you can shop for them and the benefits and risk of each.

A great many people have money they don’t plan on using for four or five years and instead of putting it where they can earn a fair return they put it where they think it will be safe but earn nothing. 

With all the options available there is a solution to your fixed yield income problem. I’ll discuss Treasuries  and Closed End Funds and just about everything in-between.  Invite a neighbor, fellow-retiree or relative to come with you.

I won’t charge for the coffee and donut and this is not a product selling seminar. It’s a meeting for clients, friends and their friends to get some answers on what to do.

 But you have to register so I know how many chairs to pull out of the closet. Call me at 586 783 7080 or email me at pstanley@westminsterfinancial.com. and give me your name, number of people that plan on attending and a phone in case something happens. You can also use the seminar registration form on the front page of my web site.

See you soon! 

 Sycamore Hills Golf Course Macomb Michigan on North Avenue, West Side of The Road about 21 1/2 Mile. Wednesday September 19th at 9 AM. Make sure you mapquest if you’ve never been there before.

That Was The Week That Was-1st Week September

 

The Message on Thursday was Clear- This is no ordinary September for the stock market. On ECB ( European Central Bank) news that they’ll be buying bonds, much like our Federal Reserve, the global markets celebrated. The Dow was up 245 points to close at a four year high. For a few hours investors forgot lousy numbers coming from China, glum economic news from Europe, same old unemployment numbers  and concentrated on bidding up stocks all across the board. If Wall Street was trying to signal that they approved of the president they couldn’t have sent a stronger signal than the one they did on Thursday. But, I wouldn’t want to bet on that.

Unemployment numbers were worse than expected. Still unemployment fell to 8.1% as more people opted out of the labor force. 

 

Voters are Investors, at least some of them are, and in a few weeks we’ll know who the President will be for the next four years. There’s lots at stake and analysts and investment types are already mulling what sectors they’ll be buying depending on who wins. But before I report what the smart people are recommending lets review what happened a week ago last Friday.

 The Ben Bernanke gave his long anticipated speech at the end of August and said The Federal Reserve would soon fire off another round of bond buying in an effort to boost the economy and bring down the unemployment rate. Benefits of a QE3 would outweigh the costs, he said, while pointing out that continuing high levels of unemployment would wreak structural damage on our economy that could last for many year. He also pointed out that the economy still faces many dangers, including self-inflicted wounds by the Congress and the administration. There doesn’t seem to be any question that a stock market (artificial as it may be) boost is coming. It could be September or December, that we don’t know but we know its coming and the markets know.

If the President is re-elected Bank of America analysts suggest that Health Care providers such as hospitals and also health care insurance plans would benefit. Life science, diagnostic and pharmaceutical distributors would be positive choices as would alternative energy providers.

 If Romney reaches the White House -Oil, coal, defense stocks such as General Dynamics and Raytheon.  Add transportation such as rails and the education stocks that have been regulated to death under the current administration and probably let free under Romney. Telecoms because of their high dividend payout and the new tax policy will also benefit as will packaging and foresting companies that have been regulated tightly under the Dems.

  Hang On- ‘It’s going to be a bumpy ride,’ according to Oakshire Financial, an investment firm that manages currency and futures trades, warns that we are in an artificially induced liquidity driven equity bull market that will last three or four months and end badly. It is fueled by too much cash, a lot of foreign money pouring into our markets and rising costs of goods and services.

Support for the S&P 500 is 1400, say the experts that know such stuff. Thursday before the Bernanke speech the S&P 500 closed a twitch under 1400 - (1399.99 or some such number)- signaling dire consequences if it did even slightly break and close under 1400. That it didn’t happen and markets rebounded on the following Friday, along with gold reaching new 2012 highs, is telling.

Bonds- this is the time to bet with the house. As bond yield falls bond principal rises. Which is what Bernanke wants is to lower the long end of the Treasury, making this bet almost a no-brainer.  Earlier in the year when The Fed Chief opted for no interest raises until 2014 I urged investors to seek the long –end of the bond maturity.

The Folly That is Facebook..? Not so fast, dear friends. There is something amiss which I cannot explain since I am not a Facebook member (It’s a compliance thing),  but the short sellers and the press are just loving it! I haven’t read this much virulent  malignant prose against a company or  person since Richard Nixon occupied the Oval Office.  Facebook is again in the headlines with financial scribblers a-wondering what the poor employee-shareholders are going to do once their November stock- lock-up expires? Why, the news writers lament, the stock is already shedding value faster than a middle aged geezer exuviates scalp follicles. Once multi-millionaires the fools, who are the Facebook employees,  will be barely able to get a fraction of that in today’s marketplace? I remember sticks and stones being tossed at Jeff Bezos, CEO of Amazon. Bezos was reinvesting in infrastructure rather than allowing billions build up in the corporate coffers. Today Amazon is the world’s largest retailer and does a wonderful job delivering what it advertises. You don’t read bad things about Bezos anymore. Mornngstar still likes the Facebook stock to $32.00 and recommends buying it at or under $19.00. Employees and current shareholders will do the sensible thing and hold shares, cancel the BMW until 2013 and jot down some names for their I told you so bread and butter notes.

The U.S. Consumer is Baaaaack! Here is more news the WSJ, Bloomberg and Fox get wrong and then had readers hunker down in their bunkers awaiting the cataclysmic end. But past reports were wrong. Robert Johnson at Morningstar wrote, that consumer spending is on the mend. The May/June slowing was a ‘statistical fluke’. Which means someone screwed up in the reporting and no one corrected them. When writing reports that move economies…Remember the rule its’ i before e unless it’s after c or you’re trying to spell foreign in which case there is another rule for that. The fact is that July’s consumer numbers rebounded sharply hinting that June’s numbers were not correct. There was strong back to school sales, retail stores reported. Putting the cherry on the sundae Home Prices in most areas showed a strong increase. Plus, Pending Home Sales posted gains. The good news Johnson reports is that the housing recovery has continued long enough it is no longer considered an anomaly. There may be more good news with Apple and Microsoft in the headlines for this fall. A new smart phone and a new operating system is sure to gather consumer buying interest.

Housing! Bank of America and Citi have started a program (small by any standard but still a start (something the Administration hasn’t done nor the Congress), to keep folks in their home and stop the hemorrhaging of real estate values. The deal is to have those who are under-water and behind in mortgage payments rent their existing homes back from the bank, rather than being kicked to the curb. The contract is for three years to rent, the bank forgives the debt, takes over the home and the owner loses any equity but gets to stay where they are and rent at a cheaper price than buying. It’s taken these smart people four years to figure this out and even now doing it at a small number in select areas of the country.

Futures Traders Blast Regulators. A court appointed receiver started work planning a multiday auction this fall to liquidate the Peregrine Financial Group’s Russell Wassendorf’s personal property acquired by stealing $215 million of customer’s money. Wassendorf was the CEO of the defunct futures trading firm and jailed for stealing hundreds of millions of customer money. Much of that from farmers who were hedging their crops. How the hell does someone steal $215 million over almost 20 years and get audited by regulators regularly and get away with it? If Wassendorf didn’t run out of money and try to commit suicide he’d still be running the shop. It wasn’t the regulators that caught him any more than they latched onto Bernie Madoff, who confessed to his kids. On top of that Wasendorf, much like Madoff, had close ties to the industry rules and regulatory commissions. This  clearly show that clients need to police their own accounts at least once a year. Call the firm that holds your assets and confirm that the assets that are listed on the statement are indeed there. As simple as that. And don’t call the number on your statement- Look it up!!

It May be The Luck of The Irish. A country that has been battered and bruised economically may once again be saved as an exploration drilling well off the County Cork has a potential field of over a  billion barrels of oil. At present Ireland imports 100% of its oil. It now stands to be a big player in the oil patch and just may find itself out of the European real estate mess it got itself into many years earlier. Providence Resources announced the find after successful drilling and exploring the deep water field since this past March. Experts called it ‘the well that just keeps giving.’

Madison Square Garden Deux? Two years back or so I was entertaining the idea of buying shares in the Madison Square Garden Initial Public Offering. But ‘experts’ talked me out of it saying management ‘Family’ was either lazy, incompetent or both. The Garden is NY’s famed venue for shows and sports. In addition the company owns the Knicks and Rangers! The reason I mention this is because investors can’t know what is going on behind the scenes. The Garden has turned out to be a ‘double’ for investors in about two years! Flash forward 2012 and the Empire State Building may be going public. The problem is with the 2,000 or so owners who purchased shares in the building back when both duck-tails and poodle skirts were fashionable. The building had been owned in part by the Helmsleys and with both their deaths Peter and Anthony Maklin are attempting to bring the Empire State plus 18 additional properties to market in a Real Estate Investment Trust. The problem is that the current 2,000 owners, most who have had shares passed down to them, don’t want to have anything changed. They get a very nice, somewhat substantial, income from the building. Plus, one $10,000 original unit in 1960 is valued today at $300,000. If the deal goes through the small investor’s stake in the ESB is diversified with additional mid-town NY office buildings and a development site in Stamford, Ct. If the Malkins are able to convince 80% of the current small shareholders watch for this REIT to come to market relatively soon. REITS provide relatively high level of income, special tax considerations plus a very liquid way to own real estate. You can also buy real estate through several mutual funds and exchange traded funds.

Up or Down 2012? Mark Hulbert of MarketWatch came out after Labor Day writing what most of us think we know in our heart- the markets will close higher December 31, 2012 than they are today. Since 1896 when the DJIA was created there was a better chance of the Dow finishing higher the last four months of the year if they were ahead of the year-to-date by Labor Day. Hulbert also cautions that September may be a rough month and he sees weakness. But the rest of the year stocks will make it a happy-happy Holiday.

Short Sellers are the Insects of the economic world. And I mean that in a good way. There is a country, somewhere in Asia, where natives look forward to marauding armies of ants that swoop through their villages, cities, homes and businesses and eat all      the nasty, unwanted bugs like creepy crawlers and roaches. Then the ants leave. Short sellers are something like those cleansing army of insects by invading en masse’ and exposing weakness in companies- it could be financial or in the executive suite. Sometimes short-sellers spot chiseling in the board room before regulators. According to Matt Andrejczak at Dow Jones the four big short bets going forward are: Radio Shack, J.C. Penny, Sturm Ruger and Green-Mountain Coffee (who’s patents expire this fall).  Did you know you can buy an Exchange Traded Fund that shorts an index? Call me if you want more information.

Last Week Started Ugly. The U.S. economy is slowing at the same time numbers show that China and Europe are both weakening. The Dow was off 100 points in about a wink and a nod almost from the opening bell but closed the gap by almost half at the close. This was also the 3rd straight month in August of contraction for manufacturing. Autos had great sales boosting double digits from all three domestics. Traders don’t seem to be ultra worried as the Ben Bernanke promised stimulus if needed.

Most Americans Don’t Understand the Basics of Investing.  The WSJ printed this news last Wednesday. The president of the Finra Foundation said, ‘There are a lot of people who think they’re good at handling their money but their behavior tells you otherwise. Those people are going to be difficult to reach and to educate because they don’t think they have a problem.’Local School Administrators and Teaching Professionals refuse to allow investment professionals on campus to teach because of a fear that students may use those same professionals to manage their money. I called the head of the Macomb Community College Community Education Department and was told that they were not interested in having someone like me who was an investment professional for that exact reason. The head of the department said she wanted students to be able to ‘go it alone’. I wonder what would happen if medical schools used that same reasoning and hired only professional teachers and no doctors with real patient experience.

PS- the sad part is that many people rely on their insurance agents for financial guidance and those agents know little more than their clients.

Our Friends at BlackRock shared this chart with me that I’ll share with you…

accounts with growth & income (dividends) beat out bond only portfolios over the long haul.

Waiting for The Stock Selloff That Never Came.  If you’re wondering why your mutual fund or ETF is lagging the indices is because managers have bet on a market decline that never materialized. Don’t just blame the retail manager. Hedge funds, as the charts illustrate, haven’t been that much better. Now managers may have to start buying. This will bid up the market making any sell-off even more painful. That’s the dilemma- play catch up or not.  

Vrrrrrm….Jack Hough in Smart Money slips on the swami’s towel and says if you missed buying stock in Ford now may be the time. August was the best for the auto maker in five years. Jack also calls Ford stock a bargain today. For example the stock sells for around 7xs this year’s profit forecast- or less than half the broader market. FactSet expects the dividend to double by 2015, Also, the company is now rated investment grade by S&P and Moody’s.

 

 

Zacks.com reports investors shouldn’t be ‘fraid of September. The Facts for September (gateway to Halloween):

• Since 1950 the average movement for stocks in September is just –0.8%.
• 5 of the last 7 September’s have been positive.
• 3 of the last 6 Septembers during election year have been positive.

Bill Clinton’s political commercials scoff at the oppositions desire to return to policies that brought on the economic collapse but he fails to mention that he was the one that killed Glass-Steagall that was part of the Banking Act of 1933 that limited what commercial banks could and couldn’t do. (He’s hoping you won’t remember.)  He said it best at the convention, ‘It takes some brass to blame someone else for something you did.’

For the Week Markets Were Up. Globally everyone was in the pool but U.S. was far from the top in a slew of upside for all markets. Italy was up almost 7%, Spain +6%, China +4%, Germany 3.5%, Brazil +2% and we were up 1.82% on the S&P 500. And just between you and me the Ben Bernanke QE3 won’t create 2 million more jobs. What it will do will keep rates low so banks can make more, keep bond investors scooping up easy pick’ens and Wall Street happy-happy. Business creates jobs and too much political uncertainty from D.C. for any sensible exec to start en-masse’ hiring.

Finally- FDIC closed one bank in Minnesota bringing the 2012 total to 41 closings and 1,000 others on the ‘troubled’ list. 

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money. Call Paul when you need someone on your side.