That Was The Week That Was-2nd Week May

 A FEW YEARS AGO THIS WOULD HAVE BEEN CONSIDERED IMPOSSIBLE THERE ARE NOW PUBLIC COMPANIES IN THE MARIJUANA RELATED BUSINESS.

Takeovers Fueling Stocks Run in 2014? More M&A activity this year since before the crash. Of course the run is more like a fast walk…

average stock price jumped 18% on the day after the deal was announced. WSJ/5-5-2014 Still others believe there is more cautious optimism bidding up shares rather than fundamentals or earnings. Marketwatch.com 5/5Buffett, on CNBC Squawk, said most of the deals are ‘tax driven’.

Markets Up Monday- slightly- After Being Down Most of The Day. In other news: What stocks the pros short may often give traders an indication of what ‘not’ to buy. Two formidable investors, Gundlach and Einhorn, were reported to have shorted ‘homebuilders and health-information technology’ stocks. The homebuilder story is compelling because it has to do with young people not being able to get good paying jobs and faced with rising rents and college debt. Health-information technology has had a remarkable run and some professionals believe they’ve run too high too fast and in a bubble. (Stories from multiple sources including MarketWatch and WSJ 5/6). REUTERS

Tuesday Dow off 130 points.  Naz off 1.4%. ‘Money and Markets’, a Weiss Research Newsletter, reported on the battle between stocks and bonds. Bond yields are off their highs and stocks are stuck in a trading rut. At the same time metals are doing nothing and the volatility index (VIX) has simply collapsed. According to M&M there are two battles going on between stocks and bonds and one will eventually become the winner. While most believe the ‘bubble’ is in bonds there is no clear conclusion. 5/6

Sometimes the news just comes to me…Brian Levitt, Senior Economist at OppenheimerFunds, sent me an email poo-pooing the ‘sell in May & Go Away’, theory.  He wrote that from 1926-2013 and from May to October that period of time averaged a gain of 4.2%. Those that are quick to sell as soon as May is closing may want to rethink their strategy. Here’s a Morningstar chart Levitt included: from 4/10 S&P 500. chart supplied by Morningstar via Brian Levitt.

WSJ SURVEY-ECONOMISTS SEE GROWTH REBOUND. According to the WSJ 5/9 the U.S. economy is ‘speeding’ ahead this quarter- perhaps faster than 4%. Still investors shouldn’t confuse the stock market with the overall economy. Small caps, according to Anthony Mirhaydari, are sending a bearish signal. If one looks only at the Dow Jones, AM reports, everything looks peachy. Then there is the Russell 2000, which represents the small cap sector. See the chart. And this can be nothing more than investors rotating from small caps to large cap value stocks, which the Dow is comprised.

Jimmy Cramer commented on CNBC Friday that as investors sell the Russell the money is invested in other sectors- specifically Large Cap Value. He isn’t buying that the selloff in small caps will rout the entire market into a crash.

Postal Service Loses $1.9 billion in the first 3 months of this year. So why are we not shocked?

Finally Dow ends up for the week and sets a record close. Naz down for the week.

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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