China announced last Monday slower growth and metals went off the cliff. Taking them along for the ride were global markets, including our Dow, S&P and Naz. That was the news but if you’ve followed metals in 2013 you’d have seen that gold was going sideways and taking a slow fade right from the get-go; and so was steel and even aluminum maker Alcoa had good numbers for the quarter but couldn’t make hay. Earlier this year we saw big investor names like G. Soros cut their gold holdings and at the end of 2012 analysts were predicting gold to finish 2013 in the area of 1600 an ounce. Gold was (and is) being used as a currency replacement, rather than an inflation hedge. According to some analysts the game is afoot and gold could lose another $200.00.
Slowing China growth from a robust 14% in 2007 to a now 7.7% in the first quarter of 2013 signals a real slowdown in demand for overseas Chinese goods. The Chinese are learning what US brokers, businessmen and traders experienced in 2008 by cutting back fancy credit card lunches and even the tasty ‘knife fish’, a supreme delicacy costing $220 wholesale now cost $13.00. Beijing, according to the WSJ, hopes that the higher personal income will increase personal consumption in order to ‘rebalance’ the economy from investments and exports.
Bloomberg Reported that China’s weakening economic expansion and slowing earnings in the USA sent copper into a bear market while global stocks fell last week the most in 10 months.
Profits dropped at S&P 500 companies 1.1% in the first 3 months of the year, the first decline since 2009. Kai Fachinger, portfolio manager at RobeciSAM AG in Zurich said, ‘Growth outlooks are weak and the earnings season hasn’t exactly started extremely positive. Many market participants have their thumbs closer to the sell than the buy button.
Copper ETF Fell Friday 1.8%. JJC is the symbol and it’s down over 13% year to date. Copper is an indicator of economic growth, especially in China. The metal’s slump doesn’t bode well for global economies.
Friday saw options expiration as all indices moved up slightly but still ended the week in the red. Tom Lydon of ETF Trends reported last Saturday that saw equity redemptions right after they reached all-time highs. Not much enthusiasm last Friday and, according to Sean Kelly at Knight Capital Group, Inc., there are buyers but not with any deep conviction. Investors should look this week to existing home sale numbers, new home sales durable goods, jobless claims and updated GDP numbers. 10 Tech Companies Report Earnings this week of significant interest to investors including Apple, Zynga, Qualcomm.
Inflation isn’t here…it’s not even in the neighborhood. It will eventually arrive, like a distant cousin to a family reunion, and if you attended my February meeting you may be wondering what Kool-Aid I was drinking preaching on how to survive and benefit from coming inflationary economic times when it may be a year or two down the road. First I made it clear I didn’t think inflation of the 1970s and 80s would reappear. That was a ‘special’ time when government spending, commodity price increases and bank lending all came together in one wonderful time and place. We can certainly expect higher interest rates as monetary policy gets unwound. Morningstar talked about in a recent web interview that when inflationary times arrive it brings a recession. Looking at a 60 year history they found the magic inflation number at 4%. We’re at 1.8%, sayeth Ron Johnson from Morningstar. The median number, because of the 1970s, is 3.1%. When inflation does come you’ll probably notice it first at the gas pump and decide filling the old buggy more important than a new pair of jeans or going to the movies. The recession process starts from that point. First it’s the jean factory feeling the pinch from higher costs shipping goods to the store close to you and then having to take them back and eventually laying off workers because sales were poor. The laid off employees would then cut back on stuff they would normally buy, which would cause folks in other industries to lower prices, lay off their second shift and the process begins to spiral into ugly. While the US Government doesn’t count food and energy in its inflation calculations you should know that food and energy probably count for 20% of all spendable dollars. Inflation and recessions go together like fine wine, candles and Johnny Mathis CDs. And whenever I am asked when inflation will arrive I say that I don’t know the exact date but its usually when bank lending, interest rates, commodity prices and government spending all get out of whack at the same time. 
Stuff I Found Looking Up Other Stuff. 
George Soros holds positions in 107 companies. Warren Buffett owns 41 stocks and Carl Icahn owns 16. Why should this make any difference to anyone is that some investors need thousands of holdings to feel comfortable when all they’ve done is reduced the chances of making money. Sometimes more- lots more- isn’t a lot better.
When Is The Middle-Class Going To Stop Protecting the Uber-Rich? The Obama Budget calls for a cap on contributions to individual retirement plans. Some financial writers are getting all hairy over the ‘proposal’. Seems the suggestion is to limit the amount of contribution to a calculation that buys an annual annuity income of $205,000, which is about $3 million. The bloggers are suggesting that this ‘budget recommendation’ is a serious threat to retirement savers. What saver are they alluding to? As a conservative I have to believe the middle-class spends more time fighting for the benefits of the rich than the rich spend time benefiting the middle-class. It’s time to stop! Hey, you listening?
In Japan REITS are a-Rocking…While our income producing Real Estate Income Trusts pay a modest 2%-3% the Japanese equivalent churn out an eye-popping 17%-18%! Why are the Japanese funds 
paying higher? Not only do they pay income but also distribute an estimate of what the capital gains will be. The problem is with US REITs that hold Japanese REITS and if, and when, the yen stabilizes the Japanese may not be able to sustain such a handsome payout without selling some of their holdings. This will not destroy US based investment REITs but put a crimp in their returns.
GS sez Interest Rates will rise significantly in the next few years. While Goldman predicts about others their stock has fallen since the beginning of the year and investors are flummoxed. Revenue from fixed income, currency and commodity trading is down at the investment bank 7% from a year ago and a full 25% less than in 2011. Tuesday Markets charged up the hill – getting some of what was lost Monday back. The Dow was up 158 but Oil fell farther back to trade under $90 a barrel.
Quick Quiz- What Countries Own The Most Gold? 
The total gold owned by nations and institutions is 31,695 tonnes. The US and Germany are the largest holders with Russia number 7. Mark Hulbert writes that gold’s fair value is $800 an ounce. It could be worthless if no one wanted it or could use it.I don’t know where he gets that number. The metal is underpriced to where it was in the early 1980s imputing inflation. According to some gold should be trading in the mid - $2,000 an ounce range. Again that’s based on where it was then and today. John Paulson is said to have lost a $1 billion in the gold route in his hedge fund. Paulson said he isn’t selling and plans on holding ….until the last investor turns off the lights. Late word from one major mutual fund company that reported they were not selling their gold holdings as they viewed them as a long-term hedge.
Wednesday repeats as all indices down again. Gold fell a smidge, but just a smidge, and picked it back after-hours. Bank of America has serious issues in the mortgage department but I didn’t have to read the report in the WSJ to learn that. Either I got caught in the perfect storm of incompetence when I remortgaged one casa with them, or its a systematic problem the bank needs to get organized and fixed. I had Citi refi one place and Bank of America another and the difference was like watching the 3 stooges one one side and a well oiled professional team on the other –Citi- doing its job and doing it well. 
Moody’s May Downgrade $12.5 billion in Muni-debt. Concerns in the $3.7 trillion muni-market are centered on certain cities and investors can expect a possible downgrade sooner than later. According to reports Chicago, Cincinnati, Minneapolis, Santa Fe and Portland are in the risk rating company sights. Bankruptcies for both Stockton and San Bernardino, California. Bankruptcy wipes out any and all agreements including pension, benefits and loans.
Market Corrections Come From Strange and Always Unexpected Places. 
Concerned investors should remember, if this slowdown continues, that housing is gathering steam, home prices are slowly increasing, job hires are getting slowly better and manufacturing is pushing ahead. The US is not full steam ahead by any sense of the imagination and the first quarter was a delightful surprise to many who thought the world would politically end. We will continue to report progress as we promised in 2008.
Curious what’s leading the markets down? It’s What lead them up! 
This is the chart of FAS ETF 1 year. Its the triple leveraged Financial ETF and the fund is compared (red line) to the S&P. Now see that little ‘tail’ at the end of the chart?
That’s this chart below- last 5 days until market close on April 18th for the FAS’s. Because of the leverage the financial etf FAS is seen falling faster than the S&P ( red line) and is not an optical illusion. (You can see these charts on Yahoo.com).
Markets off Again on Thursday. Attention on the Boston maniacs rather than markets. Senate kills any compromise on gun law and according to news reports the NRA wins another round. The vote was 40-60 against. I have no problem with guns just some sensible sporting rules.
Fitch downgrade Britain. And according to Bloomberg, no one cares. Rating agencies aren’t telling investors anything they didn’t already know. Bonds issued by the UK barely budged in price. 
Chinese tourists spend $102 billion on 83 million trips aboard more than any other people. I think I saw most of them last week at the Greektown Casino.
Finally- FDIC closed 3 banks Friday. 2 in Florida & 1 in Kentucky bringing the total ytd=8 banks closed. 
Questions call Paul @ 586 295 0430 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.
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