That Was The Week That Was-2nd Week January

CLIENT BREAKFAST MEETING FEBRUARY 21ST

                        DON’T MISS IT

My annual client breakfast meeting at Sycamore Hills Golf Club on February 21st from 8:30-10 AM. I’ll talk about where markets are heading, what sectors are expected to do well, how well we predicted 2014 and how to create your specific LifeBoat Investment Plan when and if markets eventually tumble. My special guest is Larry E. Powe, attorney at law, principal/partner with Keller Thoma, PC. He will discuss wills, trusts, estate planning and all the essentials. Q&A follows. This is a client breakfast meeting. If you desire to bring a friend please call or e ahead. To reserve seats you must call or email me so I know how many pastries & fruit cups to order. 586 295 0430.

 

 

REQUIRED MINIMUM DISTRIBUTION 2015 AMOUNT AVAILABLE NOW. Investors 70 1/2+ must take a minimum amount out of their IRA each year. That minimum is calculated based upon (1) Previous year-end account value (2) Age of participant. Investors will see this number on their account statement or they can call me for 2015 number.

 

 

Facts on Oil. Jim Cramer clears the sludge from water-cooler opinions and irresponsible financial radio talking heads about the recent tumble in oil prices. Sixteen states benefit from higher oil prices. Six rely on oil for jobs growth. Only 10% of the U.S. lives in those states.One percent of employment growth has come from oil jobs- 2% if you count oil related.Down cycles in oil tend to be self correcting in 18 months. Still, no one knows how long oil will stay at these levels.CNBC 1/9/2015 MarketWatch.com had an article that suggested oil could fall to $20.00 a barrel. 1/11/2015

 

Don’t Take Social Security Earlier Than 70?! So writes Jonathon Clements 1/10/2014 MarketWatch.com in response to reading ‘troubling’ letters from workers that they’ve been taking their social security early and proving they’re ahead of the game. Clements argues that the risk is not dying early but living too long. He declares that working folks should almost always wait to claim the highest monthly benefit which is at age seventy. His only argument is longevity. What he ignores is those workers who: (1) Need income asap (2) Who don’t live to age 90 –or have a long lived family history for whatever fanciful old age Clements has in mind. The reality is -People should take their social security benefits based on need and family history and not through some cockamamie cookie cutter financial plan or what some stranger locked in a room, out of touch with reality, preaches.

 

 

 CNBC reported 1/12/2015 that millionaires are pouring their money into Europe. A survey from the Spectrum Group discovered that Europe is the preferred overseas investment for millionaires. Here’s the breakdown: Europe 19%, China 15% and Canada 12%. The UK was at 9% and Brazil, Australia, Japan and India were all at 8%. The report continued that US, domestic investment, was still the place to be and not that Europe is that attractive it is the ‘least’ attractive of the overseas markets at this time.

 

EARNINGS SEASON STARTED AND FIRST COMPANY TO REPORT DID SO GRANDLY. And in afterhours and days later the stock fell.

Monday Trading was off for the second session following Friday as oil continued to fall. Goldman Sachs cut its crude outlook and Jim Cramer said at the open Monday on CNBC that until all the oil related stocks get downgraded we’re still going to see this volatility swing. Oil closed under $47. Energy, technology and financials led the losses with the DJIA off 97 points. MarketWatch.com 1/12/2015

Ian Robertson of BMW said at the Detroit Auto Show that if California were a country it would be the 6th largest market in the world.

 A 300 point swing Tuesday with the DJIA up 300 and then closing down on lower oil prices. In other news the WSJ reported 1/14/2915 that manufacturing is coming back to the US. The US has lost more than 6 million manufacturing jobs between 1998 and 2010. Manufacturing is also the source of innovation. It accounted for 83% of research and development conducted by businesses in 2013. Health care may continue its run although don’t expect the kind of returns posted in 2013-2014, said Marshall Gordon, health care analyst at ClearBridge Investments in a 1/14/2015 Barrons.com interview.

Government Policies Have Stymied the Middle-Class Income Growth.  The average family, Sen Warren said on January 7th, makes less money today than they did a generation ago. Providing tax breaks and other economic benefits to corporations and the wealthy, instigated under President Reagan under the ‘trickle-down theory’, have not worked. Economists Thomas Piletty and Emmanuel  Saez checked the data from millions of tax forms filed since the 1980s.

According to one study the bottom 90% of American earners had a lower income in 2012 than they had 30 years ago. PolitiFact rated Warren’s statement as Mostly True. It is impossible to pass on higher health costs, keep a lid on worker’s wages and then expect them to save significant percentage of income for retirement while raising a family and paying for college education. Government and business know this but little is being done.

 It’s been that kind of year. Volatility has been churning fear…. for amateur investors and not the floor traders, according to Kenny Polcari in his op ed piece CNBC 1/14/2015. He writes the news is not that alarming and there is no panic on the trading floor. What there is is frustration. Polcari lists frustration with fiscal policy, monetary policy, interest rate policy, lack of leadership and mixed messages from the Federal Reserve.

 

We’ve been through this  before. Oil fell Wednesday and bounced a bit but the Dow was still off over 250 points at the close. Reports that retail sales softened in December may have been a bit off- putting. Much of that weakness may have been at the gasoline pump as reported by the Commerce Department. Still that news was the reason du jour for the markets to tumble. Déjà vu, dear reader. WSJ 1/15/2015 The decline in September-October 2014 was 9.6%. Remember how we bounced?

These are the times that the average investor should relish buying equities through their retirement plan as they get these great prices. Shares in public companies are the only thing that people don’t rush out to buy when they are on sale. A grocery store offers ten cans of Albacore tuna for a dollar and they have to have a SWAT team at the front door. You offer up a Blue Chip stock at a 10% discount and people run for the exits thinking something is wrong.

Just remember what Warren Buffett said about stocks and houses. You don’t check the price of your home everyday and shouldn’t do it with your stocks if you’re a long-term investor.

The Big News Thursday was so stunning that the reasons and explanations were absent from most US financial news sources. Only by going to the Financial Times and the BBC News Center could I get a clear explanation. The Swiss franc soared in value because of the action of the Swiss Central Bank, aka Swiss National Bank. The news created chaos throughout world stock and currency markets. Here’s why. The Swiss Central Bank in September, 2011 saw such an inflow of capital as investors looked for a safe haven that they decided to set a ceiling of 1.20 Swiss francs to the euro. The reason is that a strong Swiss franc was hurting their export business. The bank bought foreign currencies and sold the franc. It has become one of the five largest holders of foreign reserve in the world. Then Thursday, and without  fanfare, the bank announced it was abandoning its practice of supporting the SF because of the weakened euro and, at the same time, lowered key interest rates from –0.25% to –0.75% (yes that’s negative meaning it’ll cost more to have your money held at a Swiss bank). Immediately the value of the SF exploded upwards. The news surprised everyone including the head of the International Monetary Fund who called the move, ‘a bit of a surprise.’ The Swiss franc predictable went from buying 1.20 francs to 0.8052 francs, but later recovered to buy 1.04 francs. Some Swiss stocks took a tremendous hit. In the U.S. the amount of exposure we have is considered minimal. Overall this confuses currency traders and several have gone out of business, according to the news reports in Barrons.com and MarketWatch.com. Some experts, as reported in the Financial Times, think that the European Central Bank governing council meets this week, they could launch a program of quantitative easing which could possibly put more pressure on the Swiss than ever before. This could be considered a Black Swan event as something coming out of the blue and no one having it on their radar or even considering a Central Bank would do such a thing without telegraphing it to their global partners. That’s what makes this such a scary event.

Markets continued their fall Thursday and lost 100 points + on the DJIA.

 

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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