That Was The Week That Was-1st Week January

 

UGLY. The year opened with a thud. The first trading day of the new year started ugly and then it got worse. Off 25 points on the DJIA before the bell that escalated to losing over 300 points by the close of business.Oil prices falling below $50 and fears about EUs economy that it would fall into deflation crushed just about everything. Gold and U.S. Treasuries rose. CNBC 1/6/2015

DITTO Tuesday.

 Dow closed down 130 points although it was getting beaten up worse during the trading day. Oil fell –again. CNBC 1/5/2015

 

 

We Got It Wednesday! A nice bounce across all indices with the DJIA +212. Bob Doll said on CNBC that US will contribute more to global GDP than China in 2015. Jim O’Neill  offered up his opinion that oil prices could end the year higher. The futures market is pricing Brent oil for January 2020 delivery at $73.81, according to CME group, around $20 above the spot price. In the Federal Reserve news IBD reported that Fed participants are ‘facing a different landscape than the one they’d met to discuss earlier. Geopolitics and listless foreign economies were concerns. Many participants regarded the international situation as an important source of downside risks to domestic real activity and employment…’ObamaCare is being shunned by the young and unsubsidized. If these numbers are confirmed The Department of Health and Human Services said premiums could spike in 2016. Mortgage applications fell in the week of January 7th down 9.1% while interest rates also fell, making financing attractive under 4%. Source Fannie Mae.

ALL GONE! Yes, we’re even for the year as a huge rally Thursday wiped off all losses as the DJIA posted a 320+ point increase for the day. The S&P 500 gained 2.9% over the past 2 trading days. Equities rallied on news that the Federal Reserve minutes signaled no change in interest rates policy and optimism over employment growth. Bloomberg 1/8/2915. All ten major groups in the S&P 500 index rose today. Tech companies in the S&P 500 gained 2.5%.

 

 The Gap Widens Between the Middle and Upper Classes USA Today opened the year with a detailed report on the health insurance insurance crisis in  America. ‘Employer plans now require workers to pay so much out of pocket that many feel they must skip doctor visits, putting off medical procedures,, avoid filling prescriptions and ration pills – much as uninsured have done.’ The size of the average deductible has more than doubled in the last 8 years from $585 to $1,217. The average worker is faced with such high deductibles that many feel it is the same as ‘not having insurance’.The average deductible can easily  exceed $10,000 a year for families. Median income in the U.S. is around $53,000 and the average total savings is $6,000. Bankrate.com reported that a quarter of all workers have no savings at all. Exacerbating the problem is that fact wages, calculating COL, have not increased in 50 years! Health spending has increased from 5% of GDP in 1960 to 17% in 2013. The crisis in health insurance for workers has snowballed into minimizing the amount of money workers are able to contribute to their retirement plans.  Workers are now skipping care in order to avoid paying the high deductibles. There is no easy answer. All workers are being forced to walk the delicate balance between prioritizing current and future needs.  Information provided by the Pew Research Center and the U.S Bureau of Labor.USA Today 1-2-2015

RETIREMENT PLANNING IS A LOT MORE THAN SOCKING MONEY AWAY. To get ready one needs to do some serious organization. Here are a few tips culled from experience and other sources: Fidelity.com

• Calculate your retirement income needs. It is called a budget and almost everyone ignores this. Pre-retirement income needs are different than what you’ll be spending after you retire. Know the difference.
• Do an audit of all your bills, including mortgage and car loans.
• Make sure you set up an emergency fund. It should be about six months of living expenses, more or less.
• Determine a retirement income plan using all sources. This includes 401k, Social Security, savings and pensions, including past employers and military benefits.
• Calculate health insurance costs and health providers.
• Thinking of part-time work? Understand how it may reduce your social security income.

Client Meeting. Remember when your mother would say when she had breakfast ready?, ‘Do you need a special invitation?’ Okay, here it is! A very special invitation. My annual client breakfast meeting. It’s being held at a a great place, Sycamore Hills G.C., with plenty of parking, a view of the golf course, a super Continental breakfast, it’s always warm and sunny (inside), Larry E. Powe, attorney at law, principal/partner with Keller Thoma,PC., will bring his expertise on estate planning & Trusts to our small, private setting where you can ask questions; and you can also get a sneak peak on how some experts think the year will go in the stock market and what and where you should be invested. I need you to call or e-mail your registration for Saturday, February 21st beginning at 8:30 and wrapping up by 10 A.M. 586 295 0430.

 

8% of the S&P 500 Index Companies Associated with Oil. On CNBC January 2nd Financial experts discussed (1) The strong dollar (2) Oil related industries in the S&P 500 Index (3) Increased Volatility. Larry McDonald, Newedge USA senior director offered up a suggestion that investors hedge their ‘fear-trades’ with energy stocks (that have been beaten up), as he believes the dollar will weaken, the VIX (volatility index) will rise, and energy companies will strengthen. He points to $3 trillion dollars of credit related investments that have been underperforming U.S. equities as a ’bubble’.

 

Monday’s Market Retreat was all about the oil-price decline that was possibly telling investors something bad that they didn’t already know about global growth.As the WSJ explained 1/5/2015, that low inflation and falling prices can have a positive effect in the short term, especially if they’re driven by lower energy prices. The problem is that if people are ‘expecting’ prices to remain steady or go lower these same consumers may put off buying or investing which would lead to weaker economic activity.Global concerns also created on Monday a nervous selloff. Germany has an annual rate of inflation of just 0.1% in December and a negative drop in consumer prices. Worries about Greece again arose and the Euro closed lower against the dollar. It’s not so much that Greece brings anything to the global economies is that if Greece opts out of the euro other countries like Italy and Spain may rethink their involvement.

 

Don’t Worry, Yet!   Energy is only 10% of the market, said Roger McNamee, co-founder of Elevation Partners, Monday on Squawk Alley CNBC. ‘The oil and gas exploration only employs about 225,000 people, so concerns this is going to hurt the economy on the employment side, I think, are unfounded. He went on to say that oil prices would benefit more Americans than it would hurt.

Good News from Byron Wien!  Talking on CNBC Blackstone’s vice chairman said that despite the rough start he thinks the S&P 500 will produce a 15% return for 2015. Currently the index is selling for a little more than 16 times earnings and he believes it can sell at 20 times earnings. ‘ The combination of earnings improvement, a little multiple improvement, we can make 15 percent.’ Wien said.

 

Sophisticated Confusion is what I calls it. This is where you know you should be compiling a list, of stocks that have fallen out of favor but don’t know what or that there are too many that you can’t choose just one or two. Here you should have either help or several resources that keep your list manageable. Almost every amateur investor has this problem. It’s the kid in the candy store syndrome. As a trader you should have entry prices and sell prices. You should also have a diversified list. You don’t want to overload in any one sector – say manufacturing. Try to keep things simple and remember that volatility is always a trader’s friend. Buy low, sell high.. most amateurs do the exact opposite. But you know that.

 

Artist Montreal Freelance Paul Bordeleau.

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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