That Was The Week That Was-4th Week February

 Citi Economic Surprise Index Flashed Danger Last Week. The indicator which measures expectations versus reality and is used to view expected growth or retracement fell below zero. According to the ETF newsletter the last seven times the index fell below zero the markets fell six times by at least 8%.

Wal-Mart Stock is An Indicator…it accounts for a 10th of all retail sales. On Thursday Wal-Mart cautioned investors it expects same-store sales in the current quarter to remain flat. Consumers are facing headwinds from two source- increase in gas prices and the 2% increase in payroll taxes. Lower income customers are facing the pinch even more than the middle-class. With no savings and limited access to credit the bottom third of households, according to Friday’s WSJ, are glum. A friend of mine postulated that the retail biz was finding its way to the dollar stores. Still the markets take their cue from Wal-Mart and shares dipped off their highs to close at $70.26. Whispers that technically we could see the stock go lower.

Bottarelli Research Newsletter Predicts The Dow Will Retrace to 13,596. Friday the Dow closed at 14,000. Significantly the markets have been sideways for 16 days. BRN provides several reasons including high gas prices, lack of confidence in the builders and more than a hint of inflation for the pullback.

Another Reason Why Selling is Not A Good Idea. Marky Hulbert wrote about how some investors know when the market is going south is when it dips below its 200 day moving average. The Hulbert did his homework all the way to the late 1800s- 116 years- and found that by moving to cash when the markets dipped and then back in when it popped above the average the difference for buy and hold investors was a 5.1% return versus a 6.7% return. But- since the beginning of 1950s the the buy and hold crowd earned an impressive annualized 7% return. By the time most investors realize that the index has fallen below the 200-day moving average it has already started to recover. The following chart I got off Yahoo.com Finance to illustrate the five year technical. The falloff in 2008 was monstrous but selling on dips since has been costly.

  Thanks to All Who Attended My Inflation-Tax Breakfast Meeting Saturday the 16th at Sycamore Hills Golf Course.  As for yours truly I was able to stay on schedule with my presentation and everyone was on their way by 10:30. Don’t you hate it when someone says a meeting will last an hour and two hours later you’re still parked  in your seat with your legs going numb? The folks at the Sycamore do a nice breakfast with fresh fruit and juice, coffee, rolls and tea. Thanks, again, to those of you who were there for being there. One of the questions brought up was on conversion from a Traditional IRA to a Roth. A gentleman at the meeting asked what I thought of it and I said I wasn’t that much of a fan, especially with my clients who, for the most part, are not income earners at the maximum marginal tax bracket. For this Roth conversion thing to work people need to be in the upper marginal tax brackets and be concerned that their income bracket will not decrease as they get older.

 I won’t waste space trying to re-tell the specifics on why this person converted to a Roth and the benefits he thought he got, especially since I probably will get some of the information wrong in translation. The fact is that for the majority of my clients who are in the lower marginal income tax brackets the Roth conversion, from a tax-deferred to a non-taxable position simply costs too much money. Here are my numbers and why I stick with a Traditional IRA. Assume a married couple, over the age of 59 1/2, retired with income from social security and pension totaling $38,000. Ignoring State of Michigan tax the Federal tax using standard deduction is $1905. If a person transfers the assets from a Traditional to a Roth the combined tax on all income (the rollover would be considered income) $21,685. Since most people do not have non-taxable monies to pay that kind of tax the natural thing is to use IRA assets to pay the tax. This reduced the net value of the IRA. Now the question is how many years are needed to make up the amount of money lost through tax? The fact is, everything being equal, you can never catch up with investment earnings. The other point is that the use of money argument comes into play. The longer one defers the tax the cheaper the tax becomes because of the decreasing cost of money due to inflation (which is what the Breakfast Meeting was all about). By taking systematic or using the IRA to take amounts as needed and paying the tax in the year of distribution makes any argument for a Roth conversion futile, in my opinion. There are agents and brokers who use the Roth as a sales tool to gather assets. The fact that people are paying more for the immediate conversion than they probably would over their entire lifetime under a Traditional IRA and regular tax is usually not fully explained to them. Also note that while marginal tax brackets are 15%, 25% etc. The fact that normal, actual out of pocket tax in real money is a lot less. Even paying tax on $138,000 of income the actual percentage is 15.7% and not 25%, although income does fall into the higher bracket!

Mitch Zacks Sez…about the markets in 2013 that a pullback is inevitable. But the markets do appear healthy over the long term. There are four factors driving the markets this year of which three are positive:

1. Stock valuations- Markets are undervalued by about 10%.
2. Quantitative Easing-forcing investors to sell riskless assets to buy riskier assets. (We’ll start seeing real inflation when unemployment gets to around 6%).
3. The global economic outlook is improving.
4. Earnings Growth- companies have been growing at +2.8% annually and revenues have been growing at +.09%.

Watch Oil Prices For An Indication of  Bear Market Signal. This from Dr. Stephen Leeb who penned that in his blog for Seeking Alpha. Seems every catastrophic Bear came on the heels of an oil patch spike. Bear markets are defined as being a decline of at least 20% in the S&P 500 index, or another major asset class. The Naz has still not come back to those heady-frothy days of 2000 where it danced above 5000. Leeb goes on to write that few can predict a Bear but a spike in oil certainly was the catalyst. He also says for us to be really worried Brent would need to trade over $150 a barrel. That seems a long ways but things could change fast, as we have learned.

Buffett’s Partner in Buying Heinz is 3G Capital. This is a Brazilian private equity firm. The same folk that bought Burger King Restaurants and brought them public last June. Restructuring of BK has increased 4th quarter net income by 94%. Clearly these folks, and Buffett knows, knows how to manage businesses. Shares in BKW have popped more than 15% since the IPO. Brazilians? Huh? Who would’ve thunk…?

Macy’s and Penny’s Fighting Over Martha. Martha Stewart left K-Mart to upscale Macy’s but Penny’s wooed here to their new concept store and Macy’s is plenty mad. Penny’s says they want a Martha Stewart concept store within their store and Macy’s isn’t having it. Martha joins the fray saying Macy’s hasn’t held up their side of the bargain of maximizing her brand. The Martha brand is important to both retailers. Probably more so to Penny’s since there are not many Martha Stewart-like designers to fit their store within a store concept. Both sides have their points and a judge will sort it all out. It should get more interesting and heated as the Spring Time arrives. Meow!

Expect Food Prices to Increase in 2013.

Everything from Beef to lettuce will see price increases as the drought of 2012 and higher energy and fertilizer costs kick in. Last year beef prices were lower as cattle was brought to market early because of the drought and high cost of feed. This year, and probably for the next several, we’ll see higher beef prices along with chicken, pork and seafood.  Now the Question is will that be called inflationary?

Of Course Everyone’s Concerned With A Possible Correction…Tuesday was a gooood day for the markets with everything up. The S&P closed at a Five Year High. Office Max and Office Depot were in conversation to merger talks. I still use Staples and have for decades. Merger and Acquisitions may drive the markets for a bit in 2013. The Naz is comfortably over 3,000.

Gold ETF is GLD. For silver the ETF is SLV.  Nigam Arora is a gold investor and could be a golf bug but he is sensible about it and right now he is on the outs for both metals. He writes that the downside of GLD is $125. He illustrates, chart-wise, that gold has broken what is called a symmetrical triangle- twice. The first level of support from the current $160 GLD is $155-$156, and if that’s broken it’ll fall to $145-$146. Then the next before the aforementioned $125 will be $132-$137. And the fair value for silver ETF is $22-$24. This is not engraved in stone and any economic event can trigger a break-out on the upside. Gold fell to $1569 an ounce on Wednesday.

Markets Hit Across The Board Wednesday. Dow was off 108, Naz lost 50 and S&P gave up 19. China stocks fell as did the Euro which fell below $1.32. The catalyst was the Federal Reserve which is split on how long to continue to stick with their low-interest policy. The ancillary problems associated with low rates is that investors are racing to find higher returns that also involve higher risk. Dallas Fed President Robert Fisher said we have a hyper-robust bond market and you don’t sit on a hot stove twice. And, as corporations bulk up on cheap debt the ratings agencies are noticing and in some cases downgrading the company and new debt. One of the worries for the Fed is that short-term funding could dry up rather quickly if a firm is forced to sell assets at a loss. The other problem is that banks will have locked in too many low interest loans for customers over an extended period. While some on the Fed feel that excesses in the marketplace are none of their concern others voiced caution.

Rumors on Apple Continue….It just wants to make you scream and Apple refuses to fight back… The latest was Wednesday when Apple’s manufacturing partner in China, Foxconn Technology Group, said it would stop hiring workers. Immediately the rumors to short Apple stock said it was because of falling demand for the Apple products although the company also manufactures products from HP to Dell. But it was Apple the shorts were after and Apple was the one again named in the financial press. The real story, again coming out late and after the damage, is that the firm slows hiring until after Chinese New Year. Because many of their employees are immigrants and after the previous New Year celebration the company has seen a higher percentage of workers returning to go back to work at Foxconn the company decided to freeze hiring until they know what percentage of the workforce does return. Foxconn operates manufacturing sites throughout the country. Betting long on fundamentals while technical's rule, for the time being.

Thursday another down day but gold mustered some gumption and pulled itself up. L.A. Little says gold’s dive is done and now it’s equities turn. Other view more upside for equities and then a downturn. Maybe two. For the most part I have not changed allocations in client accounts in 2013. Overall this is a dividend driven portfolio with allocations in both equities and bonds.  

Get Your Shopping List Ready. Speaking with Fidelity Advisors and some money managers at the firm think we’ll end up 1550-1600 on the S&P Index for the year! Bargains may appear this summer so do your individual stock homework, watch and get ready.

Friday Markets Recouped But Ended Mixed For The Week. The Dow climbed 120 points Friday but was the index down for the week but Naz and S&P were up, Gold is still under $1600. Experts are re-thinking their optimism and in Saturday’s MarketWatch Oliver Pursche gives 10 reasons why the S&P 500 will reach 1600 this year. The index closed Friday at 1516. (I remember 18 months back when the wall of worry was would the S&P ever reach 1400!).

Finally- Remember When I said to allow The Ben Bernanke to Trade The Fed and Eliminate The Nation’s Deficit? In 2012 The Federal Reserve turned over to the Treasury a record breaking earnings of $89 billion!

Questions call Paul @ 586 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

Securities Offered Through Westminster Financial Securities, Inc. Member FINRA/SIPC

That Was The Week That Was-3 Week February

  Here’s a New Word-Sequestration. March 1st is the date when $85 billion in defense and domestic spending costs goes into effect for the balance of the fiscal year. These cuts were part of the larger fiscal budget cuts that was supposed to slice $1 trillion in spending over the next 9 years. According to some economists, and reported in the WSJ and MarketWatch, the spending reductions could well dent the enthusiastic U.S. economy. So far we haven’t seen that- but we still have a week. Jim Paulson, strategist at Wells Capital Management, said, ‘The landscape for investors has moved a lot in the last sixty to ninety days.’ He also commented that while sequestration was important to the defense companies it wasn’t a catalyst for an over-all equity-market correction. News on the housing recovery and improvement in activity in China and other emerging markets provides a brighter picture for investors. Paulson said, ‘Investors appear to be motivated to navigate through Washington’s latest crisis because they don’t want to miss out on rallies. All we’ve done for four years is have one Armageddon after another.’ Any correction should be short lived and mild, said Michael Hartman, chief equity strategist at BA/Merrill Lynch Global Research. There are others that are targeting the S&P 500 at 1550-1600 in the first quarter.

Michael Kahn writes for MarketWatch, SFO  Magazine and Barron’s Online, plus he has his own Blog, ‘Behind the Headlines’. One of the things he talks about in  his February blogs is the amount of good free financial information that is now out there for anyone to use. It is not confined to one single source. It could be printed, on the internet or from talking heads. The fact that it is good, studied information that the amateur investor can use is really something that hasn’t been around or seen in a very long time. What ticks Michael off is all that the good stuff is free and, since he’s in the info business, he’d like to get paid for his knowledge. Kahn writes that the recent market boost is not from folks cashing in their bonds but money from the sidelines, once sitting in money markets.

Please note- There is still bad information in abundance out there. Some of it just ruinous. And the investor needs to spend the time reading just about everything to separate the proverbial wheat from the fertilizer. Like the good sergeant said, ‘Be careful out there.’

Rana Foroohar, writing for The Curious Capitalist, says the elites are losing sleep, especially after meeting in Davos. ‘We are now in real unchartered territory in terms of how much central bankers are doing in lieu of real political action, to trying to boost the global economy. Everyone at Davos was fretting about the Fed, the EU banks, the BOJ, and even the Chinese have distorted the price of real assets from stocks to bonds to real estate. George Soros said that we’re buying short-term fixes at the expense of future generations. ‘Whenever every country wants to keep its currency cheap and interest rates low in order to boost exports its a race to the bottom.’ The elites also disagree and have less faith in the politicians of the day than do Main Street citizens. The Bank of Japan recently on a tear to make currency cheaper which will impact German manufacturers more expensive than Japanese. See possible moves by G-7 in Monday’s news. And how Soros makes money…

Things That Keep Me Awake! I Got Lots of Stuff and Betcha You Do Too. A recent Time Magazine article got me thinking.  I got the kind of stuff today I didn’t have 10-years ago. I have albums of music on my iPod, racks of books on my iPad, a web site, a blog; and when I die I don’t know what’ll happen to it all. (And I am not even getting to my iPhone and my videos and the video games and stuff.) If you’re married and your spouse shares your tastes the music and books move over if they know your passwords and account numbers; and no one need know about your passing. Eventually the stuff has to go somewhere when both go. But how do you dispose of it? Can you gift e-books? Does anyone want your old Hoagy Carmichael iMusic? Can your estate sell them to settle taxes? It’s not like having the original Beetles album. Right now all you can do is will the iPod or iPad to someone and let them sort things out because the laws are murky at best. And, exactly what is it your selling? In real books and music albums there is a physical thing someone can display, touch and enjoy. With the e-books and music not so much. How big this problem? Apple said there was $7.5 billion spent at their music store just in 2012! And then there is Facebook. How do you provide instructions about your Facebook account? There is no definite method of allowing executors and heirs to access a loved one’s Facebook account and there is over a billion of those! I haven’t even touched the video that folks buy. Right now Vudu, which sells content and also access to films converted from DVD, doesn’t allow transfer to heirs. That whole cloud cyber thingamajig could cost your heirs a fair bundle. Stay tuned…. 

 

Home Prices Increase!

I feel richer already…

Monday Markets Fell- Gold was Hit Especially Hard.

News that the currency wars could be over and a truce by G-7 nations to commit to a ‘market-determined’ exchange rates dampened the metals allure. (See the Davos Meeting Concerns Above) Gold closed at $1645.00. Other metals followed suit. Apple whispers as to a new ‘wristwatch’ in development. It would be a mobile communication time piece. Those who supposedly know say that it could bolster Apple’s share price immediately and millions of the devices could be sold. On Wednesday the firm reduced prices on several iMacs which were the poorest sellers of all products. where do folks think of these things?

Vanguard Mutual Fund Management tinkering with about 20 of their mutual funds. Here’s the deal, smart folk think that by adding International fixed income to certain funds they can (according to some computer models) decrease risk and also increase return. That, is the theory. The company will also add TIPS to their Target Retirement Income funds. The fund will also add currency managed funds to hedge the dollar. Professional managers are working now to mitigate the inflationary economic scenario that is expected sooner than later.

Ford and Toyota Lauded as Two Leaders in The Auto Manufacturing Business.

Ten years old is the average age. I can remember when people got a new car every two-four years.

Stuff I found out about while looking up other stuff….Best Brand in the world is Coca Cola and the one brand that lost the most value the last year was Blackberry. There were others Goldman Sachs, Citi, Dell, .

Tuesday Markets loitered in negative territory until the afternoon and finally ended up positive. It was a mixed session with the Naz off a tetch, Gold down a bit and oil up some. Paul Farrell, who, given his gloom and doom perspective on all things, you’d expect would be writing his notions from a bomb shelter while chawing on 1950s canned goods and viewing the world through a periscope, wearing a Japanese Kamikaze helmet, poo-pooed a recent CNBC conversation with Jeremy Siegel, just about the brightest financial mind in the world and a professor at Wharton, who said on that program that the Dow could reach 15,000…maybe 17,000 in 2013.   The Farrell, who prides himself in looking at no good news in any economic condition, wrote that Siegel’s words were leading Main Street Lambs to the Slaughter. He then provided eleven reasons why the bullish prediction had a huge blind spot. He also calls any bullish rally as a ‘sucker’s rally’. While there are plenty of speed bumps going forward there are also positives for continued improved economic health. No recovery, as many know, is in a straight line.

Last Wednesday’s Treasury 10-Year Auction sold out at 2.046%! Why is this important? Just a few months earlier the 10-year languished around 1.65%. Increasing yield means principal falls. Stay tuned… Mixed Market with Dow down and Naz and S&P up. Gold still softened and Oil slightly up. Foreclosures in U.S. were down! substantially.

Big Trade Negotiations Going On- EU and the USA. A broad all comprehensive deal that, according to the WSJ, could take two years to complete. Wait and see but with worries about defense costs here and abroad and niggling each trade agreement that time may be to get a blueprint of an international agreement that works for both. Good for our multi-national companies. The talks could start as soon as June as soon as the EUs national governments approve negotiating orders for their negotiators.

Sprint Has a New Partner and Trying to Sort Out It’s Bad Relationship With Nextel. With two networks to support Smart Phones have gone to the competition. Now the stock has moved from a low of last summer of $2.30 to a sideways action. Sinia Persich offers if share move above $6.00 there will be a breakout higher.

Bloomberg Reports Russia is not only the largest oil producer but Putin has encouraged the Russian Central Bank to become the biggest gold buyer. ‘The more gold a country has, the more sovereignty it will have if there’s a cataclysm with the dollar, the euro, the pound or any other reserve currency,’ said Evgeny Fedorov. Russia is now the 8th largest holder of gold. While Russia has been accumulating other developed countries have been liquidating their reserves. News is that Russia plans on continuing its purchases. Whether it increases or slows its purchasing timetable is all as to the price of the metal.

Berkshire Hathaway and Friends Bought Heinz Thursday. From reports the first offer of $70 a share by Buffett was rebuffed but second time around was a charm. This, unlike a hedge fund acquisition, will not be one of those deals where the company will be scrubbed, debt piled on, people fired and then the company will be marched out in a new IPO. Buffett will keep this and allow it to be run independently. He buys basic companies with solid earnings and good management. The banks financed about 60% of the deal with the rest cash.

 

Mixed Day- again- Thursday- even with the Heinz deal (Ya’ll remember that John Kerry’s wife is a major major shareholder!) Gold fell and even Soros sold a chunk of his gold etf along with his Amazon, Linkedin and Groupon holdings to make a big bet on the yen going lower (or taking the same side as the Japanese Central Bank). Gold finished around $1630. Home Values in Macomb and Oakland county have increased. If you are buying or selling get Bill Minor’s real estate newsletter by going to Billminor@kwrealty.com Vlad Deshkovich @ Seeking Alpha writes that we shouldn’t think that Facebook is a flash in the pan. The company is here to stay. The following charts bear that out:

With over 1 billion members Facebook still has room to add new members as it has not penetrated China and Africa.

Whispers about Apple Doings Include iWatch, iTV and iBank.  Remember there is about $100 cash baked into each share.

Valentine Days Analysts Upgrades Downgrades

• Rackspace Hosting to Outperform by Raymond James
• Lockheed Martin to Neutral at Cowen
• Masco raised to Buy at Argus
• Colgate-Palmolive Sell at BofA/Merrill
• Leap Wireless to Outperform at Wells Fargo

(Remember to do your homework, chart and read everything before buying on an analysts recommendation).

 

Speaking of Apple…The WSJ had reported that Apple slashed the purchasing of  iPhone Parts by fifty percent in January 14th was indeed false. I was reading a blog that reiterated that bit of falsehood that started the whole Apple tumble. WSJ corrected itself but the lie was bigger than the truth. Apple sold more iPhone than ever in the 4th quarter but not as many as analysts expected. In January, 2012 rumors on Apple iPhone sales also circulated that sales were off by 50%. That, also, was not true.

Friday Ended Mixed With The Dow Up and All Other Indices Down. Gold was off a bunch! Finally closed $1610.00. Oil fell over $1.00 and ended up a few pennies over $96.00.  Positive Outlook from many mutual fund companies. Both Fidelity and American Funds report economic resurgence in the U.S. with housing, manufacturing and energy leading the way. MarketWatch.com published a blog on how anyone could be a better market timer. The upshot was not to get out of the market or try to time it at all. Wal-Mart fell over 2% Friday on weak February sales. Worried sales execs called the month a ‘disaster’. The company poor performance was a drag on the overall market.

Manipulation by any name is Manipulation.  Two ugly stories- One hit the WSJ and the other didn’t. The SEC froze a Swiss trading account that allegedly made a series of ‘suspicious’ trades that resulted in reaping almost $2 million on the Heinz deal. The SEC said that there was no history of anyone involved trading in Heinz before the acquisition. Someone told someone something that someone wasn’t supposed to tell. The other story that didn’t…Zynga, the game company, and associated with Facebook, had better than expected earnings and shares zoomed with huge volume last week. Almost immediately a huge amount of abusive ‘short-selling’ driving shares down 11% commenced. According to Brent Atwood at Seeking Alpha, there was about 13.1 million shares of Zynga that were short and caught investors off-guard. The Naked Short-Selling caught the eye of FINRA.  I had bought Zynga just the day before the announcement on the on-line gambling U.K. business model going forward this Spring-Summer .

Finally   FDIC closed a small bank in Chicago making it the 3rd bank to be shuttered in 2013.

Questions call Paul at 586 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

Securities Offered Through Westminster Financial Securities, Inc. Member FINRA/SIPC.

Reminder Inflation Meeting This Saturday

Just to provide last minute details: The address for Sycamore Hills Golf Course is 48781 North Avenue, Macomb. Phone for the Club House is 586 598 9500. The facility is located North of 21 Mile Road, before 22 Mile and on the west side of North Avenue.

Please enter through the banquet doors on the far left.

The meeting will begin at 9AM- last about 1 hour with Q&A after.

Continental Breakfast of coffee, tea, juice and rolls will be available.

Dress comfortable and you only need to bring pens. A workbook will be available to everyone.

Any questions, last minute cancellations or registrations call Paul @ 586 783 7080.

Securities offered through Westminster Financial Securities, Inc. Member FINRA/SIPC.

That Was The Week That Was-2nd Week February

 Musings….I occasionally get questioned why I usually allocate some cash in a customer’s investment account. I disagree with the notion that a client needs to be fully invested. Here’s a few thoughts:

1. You never know when you’ll need to get your hands on money- quick. If everything is invested time is needed to sell and have the security clear- usually three-five days- before money is sent. Another three day to get to your mailbox unless you want to spend the $s to wire.
2. Opportunities provide themselves throughout the year. Let’s say you bought Apple at $600 it’s now $450 and there may be an opportunity to dollar cost average your share price down. Or, something similar.
3. Your next door neighbor’s kid needs to get bailed out of a Fort Lauderdale slammer.
4. Someone in the the house gets sick and you need cash for income and you don’t want to sell stocks triggering a taxable event.
5. Some folks only keep a few hundred extra dollars for an emergency- far too little dollars, as far as I am concerned.
6. Lots of other reasons. So keep some of your investment in cash. You’ll thank me later.

 

 S&P Down for The Week- Nasdaq Up- Mitch Zacks reported Monday, February 11th in his ZIM Weekly Update: 4th Quarter GDP numbers were weak because of defense spending, the economy is still growing at a 2 –2 1/2% annual growth, consumer spending is still strong as was residential housing. Private business put inventory investment in the back end of 2012 on hold to wait and see what types of costs cuts and tax increases were coming from Washington. The markets saw the above as one-time events. However we may not, writes MZ, see a full GDP rebound until we put the rest of the ‘cliff’ behind us.

 

Interesting Piece at Morningstar on Why You Shouldn’t Ever Fund a College Education With Whole Life Insurance or Variable Universal Life. I still think the best way to pay fully or partially for a kid’s education is to buy a state funded plan when the child is young. In Michigan it’s called the Michigan Education Trust but  check your state for their specific plan, enrollment and particulars. The Trust is like a zero coupon bond and buying it at discount to maturity. Insurance has to be the worst way to save for any specific buying reason. Most of the time a person barely breaks even with their deposits. The insurance salesperson recommends, sometimes, borrowing on the equity of a home to fund the insurance policy. Why do that when you can simply invest it in a discounted state plan? Big Commissions! Their sales talk includes benefits of tax deferred cash values, interest paid on money borrowed (unless loan interest exceed  earned interest), and the need for a self-completion in case of death (but few speak of disability or illness). Parents and grandparents interested in funding college could buy term life (cheap) and buy the state education trust with the balance.

Thinking of creeping into 2013  with your sidelined cash ‘cause most of the gains are in for the year? Maybe a little here and a little there. No one knows what the markets will do for the entire 2013 but a good idea is to put in 1/2 now and wait for some pullbacks to buy the other 1/4 and then the last quarter when the markets lets you. The problem with this is convincing yourself to buy now and later. As markets correct or reallocate its a nervous time for investors. There is never a compelling reason to buy- there is always one to hold cash and hide in the bunker. The risk premium is on cash and bonds this year. Opportunities are in equities and dividends.

Still…

Naysayers are on the sidelines hooting for retirees to ‘get out of the market!’ This from veteran doomster  Robert Powell at MarketWatch. He writes that there is a ‘camp’ ( unidentified as to what type or kind of ‘camp’- possibly space?) that suggests no matter what the stock market is doing or has done a retiree has no business in the market unless –the caveat- you have all your expenses covered with safe, reliable streams of income. And what exactly are these folks recommending to retirees? A mere Four Bucket Income Approach that covers the basic expenses. They call this the ‘modern portfolio theory’. Here are the Buckets:

1. Social Security
2. Part-Time Work
3. Immunized Bond Portfolio (whatever the heck that is)
4. A lifetime annuity stream (locking in at the lowest yields since Croesus started to crawl)
5. Possibly a reverse mortgage!

The above suggests that the retiree has insufficient assets accumulated and rather than follow the ‘modern portfolio four bucket into the poor house approach’ simple continue to work full time. In his blog Powell suggests that the four bucket approach is for someone who is 65 years of age. REALITY CHECK! The life expectancy for a 65 year old is for another 19 years. Following the above recipe, locking in income at the lowest yielding assets for two decades, could be the worst thing a senior could do. Inflation at a simple 2% per year would reduce purchasing power of income from the Four Bucket mess by about half over the 20 years!  That’s some fancy planning! And, in my opinion, the entire article was a waste of ink. (or is it space?)

 

Monday was Brutal, Ugly and Markets were Systematically Bludgeoned. The Dow was off 130 points at the close, through it was down more and even made a futile attempt at losing less than a hundred points during the afternoon. Gold was up slightly and so was Oil. Interest rates have been methodically moving up. The last few weeks I have been moving clients from the long-end bonds as they show extreme weakness. The 10-Year Treasury is at 1.95%. This is a substantial move up in interest. Toyota Raised Its full year guidance after posting a 23% gain in net profit. This is the first black ink for the automaker in five years. The reason for upping guidance is the weakening yen. Central Banks Race Currency to The Bottom. Making currency cheap is a global game and not one that only the Americans and Chinese can play.

A Year Earlier The Rating Services downgraded the U.S. Now it’s Payback!  Its the U.S.’s turn to charge the rating firms for their mis-predicting ratings on mortgage bonds that lead to the mortgage meltdown. Payback is a –you-know-what! S&P is currently in the Justice Department’s bulls eye. The government is asking $1 billion dollars. What’s shaking execs at S&P is that they were expected to ‘predict’ the 2008 meltdown and to have the firm admit to wrongdoing which would leave it vulnerable to investor lawsuits. Who’s got the big stick now?

Apple is Dead Money….for now…sez Bill Gunderson at MarketWatch. 

No short term big movement on the stock according to Gunderson but see the above valuations which makes this the best long-term play. Back in November he called it the best cheapest quality stock in the world.

Best Tech Picks by The Top 4 Advisors?

• Microsoft Recommended by Four
• Apple Recommended by Two
• Google by None
• Yahoo by None

Looking for Your Account Tax Statements? Expect Them By 15th of February  -for sure by the February 28th.

Call if you have questions.

Reversal Tuesday- or Was It Opposite Day? The Dow was up over 120 points early in the session but finally closed up 99 points with the Naz up 41 and the S&P up 15. Gold and Oil modulated around the same numbers, slightly down, from the day before.

Watch Zynga? The Gaming site closely aligned (hrmph) with Facebook saw its stock plummet when it was befriended…or is that de-friended by FB. The company surprisingly showed a profit not an expected loss in the fourth quarter and shares jumped. Now news that the company may partner with UK gambling sites. Two sites may be launched by early June- ZyngaPlusPoker and ZyngaPlusCasino. The company has always had the capability of handling a domestic on-line poker site. Shares up 11% on Friday!

Biggest News was Dell Going Private. The deal has been in the works but still this was a big deal. Microsoft is a contributor to making the deal work. To protect its interests in selling its products the software maker made a $2 billion contribution. Microsoft has done similar ‘saving graces’ for the likes of Nokia and Yahoo runs Bing. Michael Dell gets his company back in a $24 billion buyout but more importantly investors should remember that Mikey has bought a bunch of his shares and seen value diminish significantly. This could be the one and only way the computer mogul could re-jigger his wealth. As far as buyouts this wasn’t the biggest. RJR Nabisco in 1988 was huge at $25 billion ( ‘member that?) but there have been others since-

Experts on Thursday said this Dell event is not something we’ll see a lot of.

 

Wednesday Markets Sideways. American’s AMR and U.S. Airways Group are in ‘hush’ negotiations that would create the world’s largest airline. Goldman Sachs listed their 10 stocks with upside potential:

• Apple
• Goodyear Tire and Rubber
• Prudential
• Applied Materials
• Joy Global
• Ford
• Discover
• Williams Company
• Southwestern Energy
• National Oilwell Varco, Inc.

Bill Gross and Jim Rogers Team-up? Actually the two have been warning investors that the Bond party is over. Rogers said on Bloomberg Radio that he was shorting long-term government bonds. Rogers is known for his affinity for precious metals and has never seen a commodity he hasn’t liked. Clients wondering how they can short the 20-year bond may call or email me.

Thursday Markets were all over the place. Off over 100 points in early action the Dow closed down 43 points. A mere piffle….Gold is trading sideways and so is Oil. More whispers of a correction but still upside as momentum continues to carry markets higher. Investors may want to cast an eye at gold to trade when markets make their move down. A be Careful  Driving Shout To All My East Coast Clients and Friends…

Friday Up! Yawn…seemed so 1990’sish… The kind of market on Friday that you didn’t have to know anything, study anything, just rake in the moola. Exelon cut its dividend to a reasonable 4% from around a heft 6% and the markets didn’t bat an eye since the price has been baked into the utility. Google’s CEO has decided to do some family planning or re-allocation which is code for selling a lot of company shares, paying the tax now and not caring who knows it. The sale of $2.5 billion of Google stock should rock shares more than a bit this week.  Gold and Oil ended the week down.

Bloomberg Reports that six bottles of 1911 Moet Champagne are on the auction block and may fetch $63,400. This is considered primo vintage, according to Michael Broadbent, founder of Christie’s wine department. The best years for Champagne was between 1874 and 1921. There is also an old musty labeled bottle of brandy from around the time Napoleon was girding his loins for a battle against Moscow that will be on sale for those interested. Investors may want to research the Liv-ex Fine Wine 50 Index (LXFW50) as an alternative to buying and storing their own Muscatel.  I’ll be off this weekend checking the bargain bins at Costco for a few bottles of Manischewitz.

Questions call Paul @ 586 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

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