That Was The Week That Was-3rd Week August

Driving home from an up north weekend I tuned  my radio to an early morning talk program. The on-air monologue I listened to while avoiding wild turkey’s and meandering deer centered on inflation and why was the government reporting such low inflation numbers. The radio host wondered if inflation was truly low or was it being manipulated? The show was selling gold and silver and so it wasn’t a truly impartial program. To illustrate his point, the radio host said that the government was fudging the inflation numbers. He then played a clip from a CNBC argument between talking heads from the Friday, August 17th CNBC show to prove his point. The recorded CNBC give and take illustrated that even the so-called experts couldn’t agree if the government numbers on inflation were right or being purposely skewed. I have to believe the definition of inflation has slowly morphed over the years to accommodate political economic policy. The one thing we all can all agree on is that the government cannot afford to have inflation and interest rates get much higher at this point in our domestic economic recovery. If the numbers climb that means the government pays more to those that buy our bonds. Higher interest means they print more money and printing more money means more inflation. But even at less than current 2% inflation we are still seeing higher food prices and energy costs. Contributing to higher inflation, but seemingly not calculated are the prices of goods such as cars, clothes and even homes. And if you don’t think things are moving smartly higher take the 10-year bond that just a while back was 1.65% and on August 20th was 2.85%.

Some  government experts contend that ‘a little’ bit of inflation is good for us. That’s like the FDA mandate of acceptable number of rat hairs in my oatmeal .

REALLY BIG NEWS OF THE WEEK! STEVE BALLMER,CEO, OF MICROSOFT, ANNOUNCES RETIREMENT SOMETIME IN THE NEXT 12 MONTHS. Shares in the company soared 7% on the news! This was the intractable leader that brought Windows Vista and Windows 8 to the marketplace and basically piddled away with a 38 year virtual monopoly in operating systems.

Cody Willard in his blog, The Cody Word, published in MarketWatch.com on August 23rd said when Ballmer says goodby Willard says hello to Microsoft shares. ‘Ballmer,’ Cody wrote, ‘always seemed to skate to where the puck is instead of where the puck would be.’ A poor leader who frittered away opportunity. Willard offers the following charts of Microsoft and Yahoo when shareholders are given a strong CEO.

The above chart is Microsoft shares. Published from Cody’s blog on August 23, 2013

The above chart is Yahoo.com shares. Published from Cody’s blog on August 23, 2013. Both charts from BigCharts.com

 Sunday Late Breaking News! Trump University is being sued by the NY AG. The accusation is that the school (hrmph), was involved in illegal practices, according to the NY Times. This was billed as the best place to learn the secrets of The Donald in managing your money. The school(?) blew into Detroit a few years back with much bally-hoo and faded rather quickly amid much criticism.

  This is Year to Date Performance from Last Week. Monday, August 19th markets moved down for the fourth straight day.

From The ‘Didja Know This’ Department of Investment Knowledge. If you buy a life insurance policy from a company the actual liabilities may not be with the company that issues the policy. Most companies, if not all, have buying and selling agreements with other life insurance companies. They may or may not sell a portion or all the risk of your policy to a company that may not be as financially strong as the one you decided to buy a policy from. And while the company issuing the policy has the original liability in case of death it could prove rather sticky if a massive liquidation suddenly takes place. We just don’t know because it’s never really been tested.

According to Cody Willard in his blog August 20th- On Apple’s $150 billion cash hoard. How big is all that dough? Well $150 billion is more than the market cap of Hewlett-Packard, Dell and Netflix- combined! It is also more than the ‘entire’ market cap for Oracle or Cisco or Intel. If the company paid out the entire amount in a special dividend it would be like 1% of the 2013 U.S. government GDP. And, if they didn’t spend it on acquisitions, stock buy backs or dividends,  and at the current rate of accumulation, the $150 billion could be worth $1 trillion by 2020.

Asset Allocation is Different from Diversification. Neither are intended to increase returns but reduce risk and, hopefully, volatility unless there is a severe market correction in which case nothing works.

Something I’ve been Noticing…The stock markets been getting out of the gate fast and furious but fades quickly in the late afternoon. Tuesday was no exception as the Dow was up all day until near the closing bell. Still the S&P closed up ending a four day down spell.

 Here’s a Tip From MarketWatch.com. According to them the following 10 stocks rally in late August…like every time since 2003. Wallace Witkowski compiled the information and the following chart that was published 8-20-2013 on MarketWatch’s The Tell.

Nuveen Investments Published The Following Chart on Fixed Income Yields Through August 16th.

Thursday Markets Dropped in the Last Few Minutes of Trading for a 105 point loss on the DJIA.

There didn’t seem to be anything new Wednesday as the Federal Reserve reaffirmed their plan to start unwinding their easy money program. So, while nothing new, this seemed to unnerve traders who first sold and then calmed and  bought and then in the last hour tossed in the towel to continue a sell-off started last month. There was a sense of ‘uncertainty’ in the Fed minutes of June regarding the strength of the economy and perhaps it was that investors glommed on to. This doesn’t mean the Federal Reserve stops its easy money policy only ‘tapering’ how much it buys every money. It could mean just a bit less and stretched over many years. The unknown is driving traders crazy.

Art Cashin on CNBC warned August 21st  if the 10-Year hit 2.9% ‘ Alarm bells go off’.

Thursday Squirrels Got Into The Nasdaq System and Shut ‘er Down for 3 Hours! I had varmints chew on my cable lines downing my WiFi a week ago but you’d expect better security from one of the world’s largest financial institutions and their systems. Squirrels did send down the Nasdaq, where most of the tech stocks like Apple and Facebook trade, in 1984 and again in 1997, by gnawing on their cables and questions arise what happened this past week? A Naz glitch spoiled the coming out party for Facebook in 2012 and it took the stock a year to recover. It seems these glitch events are getting about as regular as a diet laced with Metamucil. If the Nasdaq was an airline they’d be grounded until they got it corrected. When traders are betting millions, if not billions, of dollars and suddenly they hit a black hole with no warning they don’t know if and when the system returns whether their broke, rich or breaking even. This doesn’t install confidence in a financial system. Some accuse high frequency traders and their computer systems as the culprits to the latest black-hole. The Commodities Futures Trading  Commission is developing some rules to taming high frequency trading for the commodity exchanges. According to the August 23, 2013 WSJ, the CFTC report is due out this week and runs about 100 pages and paves the way for greater scrutiny to these practices.

New Home Sales Plummet 13.4% in July to the lowest level in 9 months.

Experts blame the higher interest rates. Mortgage applications since June have fallen a full percentage point when rates increased.

Sad. Elmore Leonard Died Tuesday at his home in Bloomfield Township three weeks after suffering a stroke. He was 87. For those who don’t recognize the name he wrote 45 books, many that became movies, and countless stories. He was a home town boy who could have lived anywhere but chose Detroit. The Seattle Times called him ‘The Big Daddy of Crime Novels’, even though he started his career writing westerns. A short story of his became a current hit cable television series, ‘Justified.’ Movies made from his stories and books were: Get Shorty, 3:10 to Yuma, Hombre, The Big Bounce, Killshot and Glitz. I can’t remember the first book or story I read that he wrote but it made me a life long fan. Asked to write for the NY Times an article on how to write Leonard obliged with ‘Ten Rules on Writing’. The best was, ‘Try to leave out parts that readers tend to skip.’

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.