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.