That Was The Week That Was- July 2013

 

 

Chasing Yield.

Morningstar had an interview July 25th on their web site with Jeremy Glaser and Josh Peters discussing how rising interest rates affect dividend stocks and their yield. Measuring both capital appreciation and yield the results historically came in what we are seeing now as high yield stocks are being bid up and yield falls. Since the long Treasury has already seen about a full percentage move in the rate cycle this isn’t out of the ordinary results. Still Morningstar concludes that even with this move investors are still collecting dividends even if they’re not getting as much capital appreciation. There are still plenty of consumer defensive stocks that yield 2 1/2% plus.

Year-to-Date

ROBERT C. DOLL, CFA, Chief Equity Strategist, Senior Portfolio Manager, Nuveen Asset Management reported in his July 29th Commentary:

• Expect choppiness in the equity markets for the short term for several reasons:
• Uncertainty over Fed Leadership
• Recent drop in the Japanese Market
• Mixed earnings and lackluster revenues
• Renewed concerns over the debt ceiling
• Current noise in the home builder sector

 

  How Much Cash is Adequate to Hold?

A relation of mine isn’t comfortable unless there is 2 1/2x’s their annual income in money markets and bank cd’s. Most folks would do well enough to keep 3 to 6 month income in short-term liquid assets such as bank checking, cds or money market funds. At most, for the most conservative investor, would I suggest 1 year’s income or budget to be stashed in zero earning bank liquid asset accounts. The rest should be working in dividend paying stocks, mutual funds or medium term individual bonds. Money will double using the rule of 72. If you earn a net 7.2% on your money your portfolio will double in 10 years. If you earn 1% it’ll double in 72 years. That’s the math and that’s the reality.

China’s Market World’s Worst, Losing $748 Billion, Bloomberg reported July 30th. (This may give a clue why Ben Bernanke isn’t too quick to stop buying bonds supporting low interest and the economy). The Shanghai Composite Index, which double in 10 months, ending  August 2009, as the Chinese government poured in $650 billion of stimulus into infrastructure, has fallen 43% off it’s highs. The report added that growth in China is indeed slowing while the government is trying to transform China from an exporter to a consumer driven economy. So far analysts are discouraged on China’s economy vitalization. ‘The country’s stock market is like a ‘dead animal’,said Carter Worth, chief market technician at Oppenheimer & Co. “The likelihood of gains is low,’ he said.

Markets Tuesday Sideways…

Taking a Page From The Warren Buffett Playbook Activist  Investor Bill Ackman is betting 10% of capital on One Stock! AIR PRODUCTS.

Allowing Government Intrusion Into Our Lives is Best Explained By Examining Conservationist Democrat Al Gore Who’s Claim to Fame (Besides Inventing the Internet) is the Modern Toilet. In an effort to save and preserve water new rules on how much water could be used to flush. Toilets Before 1982 Used 5-6 gallons of water per flush. Today’s Al Gore Toilet uses 1.6 gallons. The problem, as we all know, is that it now takes five or six flushes! Now someone please explain to me how the government plans on managing National HealthCare if they can’t get the toilet flush figured out?

The Washington Post reported on July 31st that the US Economy grew at a sluggish 1.7% in 2nd quarter. Business spent more, and the federal government cut less, offsetting weaker spending by consumers. The good news is that while growth remains weak economists think businesses will step up investment in the 3rd quarter, job growth will fuel more consumer spending and the drag from government cuts will fade. Government cutbacks have weighed heavily on the economy the past 12 months.The ongoing fiscal drag is masking private sector health, said Joseph LaVorgna, an economist at Deutsche Bank.

Markets Stormed Out of The Gate Early Wednesday on  a Good Jobs Report and Were Up Triple Digits & Then Gave it All Back on The Fed Downgrading the Economy to Modest. 

A Good Jobs and Manufacturing Reports Charged the Markets Thursday. Whispers that this Bull could keep moving all the way to 2015 were heard Thursday. The Fed isn’t showing any signs of tapering. The Dow was up 126 points, The S&P added  21 and the Naz a 50 point day.  Cody Willard admitted a bubble we may be seeing but wrote in MarketWatch August 1st that this is only the 7th inning. Of course no one knows what the bubble burst will do or even look like. Gold under $1300. 

Jeff Reeves on August 1st pondered why investors dislike this market and provided his five reasons:

• Failure to separate stocks from economy.
• Moralizing over corporate profits.
• Reluctance to buy at top.
• Information overload.
• Stubbornly sticking to a bad call.

Friday’s Jobs Report was Disappointing. Markets dropped as less than expected new hires in early trading but, as it has in the past, the Bulls pushed past the bad news and the markets ended mildly up. Gold ticked up to $1313.

Finally- Apple is back at #1- the world’s most valuable company. Neil Huges reported Friday August 2nd that Apple regained its crown with a marker cap of $ 414 billion last Thursday while Exxon Mobil shares slid 2% and their market cap closed $408 billion. 

QUESTIONS CALL PAUL @ 586 295 0430 or WRITE HIM AT pstanley@westminsterfinancial.com. SHARE THIS BLOG WITH SOMEONE WHO CARES ABOUT THEIR MONEY.

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