That Was The Week That Was-4th Week February

Should You as Investors Worry About Russia versus the Ukraine?

Reading Sunday opinions and factoids and other stuff finally came down to the reality of the U.S. markets hit records last week against a ‘backdrop of the crisis in Ukraine, which followed protests in Venezuela and Thailand, and yet another currency crisis in Argentina.’ Randall W. Forsyth in his Up and Down Wall Street Column reported that last Sunday along with reminding us that the Arab Spring, which hasn’t brought peace, prosperity or civility to the area as Syria’s conflict continues. The fact that American investors could care less what happens outside our shores is even more evident as they make the U.S. markets more attractive to investors. Proof was in the Friday markets last which saw a 200 point swing from top to bottom to close positive as news of troops massing on the Ukraine borders was made known to the outside world. More concerns should be on China, its banking and politics. Gavan Nolan, director of credit research at Markit, wrote, ‘The broad economic and financial environment today is very similar to that of the second half of the 1990s, when the equity bull market turned parabolic.’ Finally Forsyth concludes that investors shouldn’t worry until the yield on the 10-year is higher than the long bond.  That, he concludes, isn’t going to happen anytime soon. 

MARKETS DISLIKE DISRUPTION AND THE UNKNOWN. EXPECT VOLATILITY UNTIL THIS CRISIS IS RESOLVED.

 That doesn’t mean the Ukraine crisis won’t, in the short-term, be volatile. Monday, before the bell, S&P 500 futures were off 1%. The WSJ reported early that the European markets saw investors cut their exposure to equities as Russian markets saw the heaviest losses, down 10%. The ruble hit a record low against the dollar. Emerging markets were under pressure as Poland’s stock market fell 3.6%, at the open. Germany’s DAX dropped 2.5%, while the U.K.’s FTSE 100 AND France’s CAC both declined by around 1.8%. Our VIX was also up substantially in the pre-market indicating a huge move to volatility.

 

 

 

Josh Brown writes a blog entitled, ‘The Reformed Broker,’ and the following makes sense as we head into more volatile market action and the previous weeks we’ve seen investors buy stock funds at the fastest pace in three months: ‘Efficient market guys will tell you that rational investors will allocate based on where the greatest returns are and that capital flow will follow value. Over long stretches of time, we can say that money is eventually allocated efficiently –but the journey to get there is where trends and volatility come from. In other words, the efficient market isn’t a state of being-it’s a verb, a process.

‘But in the short –to intermediate –term flows don’t follow value, they follow performance. They chase it. Each week witnesses money being thrown at whatever has worked best during the prior week.’  

Last Monday Markets Rocked-DJIA closed up over 100 points. Michael Kahn’s ‘Getting Technical’ in Barrons.com 2/25 reported: Stock charts suggest rally is for real. ‘The S&P 500 poked its head back into new high ground Monday morning in a broad based advance.’

Five of nine sectors are at or near 52-week highs, suggesting that the stock market advance is broad and many different types of stocks are at the party.

Art Cashing explained Monday’s Melt-Up as being sparked by relief of last week’s options expirations and some short-sellers pulled out of bets that stocks would go down. CNBC 2-24

Hedgies looking at 2 stocks for ten to fifteen baggers and talked about such in 2/24 WSJ on what they expect and when. For speculative risk investors only- so call me.

George Soros went from Euro hater to Euro lover over a weekend last, and talked to a German newspaper. Reported in MarketWatch.com. 2-24. Earliert the billionaire/activist said that the euro was doomed because you couldn’t have a central bank in Europe without a central Treasury. He’s changed his tune and seems to like certain banks overseas but other experts such as Yves Lamoureux, president of Lamoureux & Co., a market advisory company, said he expects further de-leveraging and stock dilutions, and cautions investors to stay away. Get your list of EU banks on your watch list as bargains may not last long and you’ll want to track the sector.

 

MARKETS WERE DULL TUESDAY AND SLIGHTLY DOWN ACROSS THE BOARD.

Wednesday markets mixed. Barrons.com expects markets to grow higher March – April. Jim Strugger at MKM Partners expects the VIX to fall,  as stocks move higher. He said in the Barrons.com 2/26 issue that conditions exist to sell high priced stocks now and replace them with calls that expire in a year.

Good News on Home Supply? WSJ reported 2/27 that bank lending has turned up for land development and construction after hitting a 14 year low last year. It’s possibly a sign that the supply crunch for new homes could ease in the coming months. This may provide some sort of a lid on prices that have been rising and squeezing some buyers out of the market. Several home builders were up substantially last Wednesday. Even existing home values popped from last year as many have been getting recent assessment valuations from the city.

Best Country to Retire? The U.S.A. ranks 19th behind South Korea, U.K. and a few former communist countries. This from some survey I discovered while looking for something else. 

Good Times, good times! As the S&P hit an all time high Thursday. Blew the doors right off 1850 and closed at 1854. Then the folks at MarketWatch.com, where the above chart came from 2/28,  wrote that we should stop shooting for the moon and that S&P 500 reaching 1850 isn’t that important- that after reading lots of scare articles from other writers/bloggers/financial heads that all said it was. Then we get there and suddenly it’s not that important. It’s like making first team varsity and then someone says it’s not that important unless you play for a Big Ten school, the NFL or some other cold water splash.

What’s More Important? Wouter Sturkenboom, strategist at Russian Investment, says: Need growth and earnings to validate lofty validations. What’s going to happen on the Chinese credit front? And then you got the emerging markets headache that just won’t go away with now the Ukraine piling in to the mix. I’m not even going to get into the other doomster that is predicting a 30% drop in the markets in the second half of this year. This especially, and recently, comes from Steen Jakobsen of Saxo Bank, who sees the world a lot differently then others. But, Steen says, there is a good possibility we’ll see 1890 on the S&P before that happens.

That’s one way to take the fizz out of the bubbly…

It was a Roller-Coaster Ride Friday! If you were not paying attention the markets edged up slightly and by mid-day were triple digits to the upside- surprising viewers and then word about Russia and the Ukraine dashed cold water and markets did a and were deeply negative, making the volatility index VIX surge. But by the closing bell and before the President issued his hollow threat to the gangsters of the Evil Empire markets relaxed and ended up positive. Bloomberg 3/1 reported that it was the best period for stocks (February) since last July. Consumer confidence rose, orders for durable goods fell less than forecast in January. Equities in February seemed to be on a mission to trend higher, said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. The S&P 500 closed at record high. The MSCI All Country World Index of stocks was up 4.9%, including dividends, in February, its strongest advance since September. There was more good news as gold rallied (unexpectedly), coffee was up as were several commodities plus European Bonds, advancing 18%, as investors eyed potential monetary stimulus. The U.S. 10-year Treasury closed the month little changed at 2.65%.

INFORMATION GATHERED FROM WSJ, BARRONS.COM, MARKETPLACE.COM, BLOOMBERG, TIME, INC., CNBC AND OTHER SOURCES CONSIDERED RELIABLE.

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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