It was ‘Hang On’ Tuesday Because the Market Ride Just Got Wilder! The DJIA suffered its biggest one day loss in five months as investors started pricing in a rate hike by the Federal Reserve by the middle of the year. The dollar also rose against five of its six rival G-10 currencies in a continuation worry about Europe and the Fed tightening. (MarketWatch.com 3-10-2015). Any Market Gains have been stripped in the one day action. The Dow was off 333, Naz-83 and the S&P 500 Index was off 35 points at the close. Investors have yanked $7.1 billion from mutual and exchange traded funds tracking American shares and sent $35 billion to other markets this past quarter. (Bloomberg.com 3/10/2015). The S&P 500 is down 0.7%, trailing all other 23 developed markets except for Greece. The dollar hit an almost 12 year high versus the euro and the highest in 7 1/2 years against the yen. Analysts are projecting S&P 500 earnings fall for the first three months of 2015. It would mark the first period of negative earnings since 2009. (Bloomberg.com 3/10).
It took a few days but Thursday Markets ignored all the financial ‘noise’ and bounced strongly with the Dow up 260 points, Naz +43 and the S&P 500 Index + 25. Gold was also up a few dollars and oil settled up to close at $47.20 a barrel.
Stuff you heard and read about but maybe didn’t really know…
DEVALUATION OF CURRENCIES IS DEFINED AS A ‘NATURAL PROCESS’ IN THE HISTORY OF FINANCIAL MARKETS.
The Ben Bernanke did it and the EU has followed suit along with Japan, China, Switzerland, Brazil, and lately, Denmark can’t print it’s money fast enough, according to recent news sources. Nations are scrambling to make their money cheaper than their neighbors. These are global wars with casualties of an enormous scale. Currency wars can and do last a long time. According to Investopedia, sometimes as long as 15-20 years. No real winner is ever really declared. One of the biggest devaluations was in the 1930s when nine of the leading world economies devalued their currency. Devaluation of a country’s money is also called: Beggar Thy Neighbor. Because what is good for the country that devalues their money is bad for its neighbors. Joan Robinson coined the phrase back in 1937 to explain the then devaluation process. The 1930s gambit slashed currencies by 40%, which did help to stabilize and revive economies. Today it’s a classic ‘Beggar Thy Neighbor’ strategy by Central Bankers. If you are a country, such as the U.S. with a strong dollar, trying to sell your products overseas while competing with countries with a weaker currency, you lose business. Fortunately the US is able to sell many of the products it produces to its own people, most other countries cannot do that. Eventually the U.S.corporations will hue and cry and Congress will pressure the Federal Reserve to do ‘something’ to make us more competitive globally. And, you bet, they will. Right now the dollar has hit an 11 year high against the euro and is stronger by 24% over our neighbor Canada. In other words a $1,000 suit in Canada will cost you about $750 U.S. And, you don’t want to be getting your change in Canadian coin and bringing it back to spend in the U.S.
The problem with this currency war is we don’t know where it’s headed or how it will end. Some economists insist it can only end badly. History has not proven that, although the Swiss unlinking their franc from the euro and the result was a 30% drop in the euro against the franc and billions of dollars were lost. A handful of currency trading firms also evaporated along with their customer’s money.
Currency wars do not create growth. They are Central Bankers method of stealing from their trading partners for a momentary advantage until those same partners steal back from them.Info from Daily Reckoning 1-22-2015, plus info from WSJ, The Times, Investopedia ,etc.
REQUIRED MINIMUM DISTRIBUTION 701/2.
Check your IRA statement for amount you need to minimally take in 2015. If you have multiple IRAs you can combine the total 2015 RMDs from one account. Penalty for not taking RMD IS 50% of the RMD.
WHAT DO STOCKS DO MONTHS PRIOR AND AFTER A RATE HIKE?
A Fannie Mae Mortgage Fairy Tale?
The WSJ Reported in Review & Outlook Tuesday on how the U.S. unit of Japanese bank Nomura is refusing to settle with the U.S. government for ‘allegedly misleading Fannie Mae and Freddie Mac about the risks in mortgage backed securities prior to the financial crisis.’ In 2011 the Federal Housing Finance Agency sued Nomura and 17 other financial institutions for exactly that. The other 17 banks did cave and wrote checks for almost $18 billion. Nomura said they’d rather go to court. In a filing last fall counsel for Nomura said that in reality it was Fan and Fred that were the culprits. The two agencies were actively shopping ‘particular’ pools of mortgages that would help them meet affordable housing goals set by the the federal Department of Housing and Urban Development. (You remember that political push where everyone, no matter their job or income, deserved a home.) Nomura has proof that Fan and Freddie sought risky loans in order to please their political partners and enrich themselves with fat interest-rate yields. The government disliking the fact that Nomura is not rolling over like its counterparts dropped their claim for damages from the suit. Nomura claims this case is bogus, and according to the WSJ a Washington shakedown. WSJ 3/10/2015 Review & Outlook. The bank that won’t buckle.
Investor’s Business Daily Announced the Premiums for ObamaCare Will Increase an Average of 8.5% per year over the next three years 2016-2018. IBD 3-10-2015
IBD March 10, 2015.
Working Class Gives Up on Obama, Fears Job Losses. 
So much for the ‘bottom-up prosperity’ policies.
Wednesday was Hump Day in the Markets as none of the indices could close out positive after a horrendous previous trading day Tuesday. The Dow, Naz and S&P 500 all ended slightly down at the close. What was interesting was the interview with Goldman Sach’s Gary Cohn on CNBC’s Squawk Alley, who said he was ‘freaked’ out by the negative interest rates sweeping Europe. Yes, negative interest! As those EU yields fall U.S. Treasuries become more attractive. This rush of capital has in turn forced U.S. yield's down. Mike Larson at Money and Markets, reported that 1.2 Trillion euros worth of EU bonds sport negative yields. If you want to take a mortgage out in Denmark, the bank may end up paying you. If you want to deposit money then you’ll have to pay the bank interest rather than the other way around. One Danish banker told the WSJ, according to Larson,’ Paying our customers zero or positive interest is very bad for profitability.’ The Goldman official pointed out that negative yields make it hard for insurance, asset management and pension business to generate a return. info MarketWatch.com, CNBC Squawk Alley,and Money & Markets, Afternoon Edition 3/11/2015.
TOP SECTORS FOR INVESTORS IN TURBULENT STOCK MARKET?
Michael Kahn, Chartist at ‘Getting Technical at Barrons.com’ wrote that small caps, biotechs and chip stocks should hold up well. Barrons.com 3/11/2015.
If you ignore what’s happening in the markets don’t be too surprised by your investment statement. Investors should be aware of their portfolio investment risk and diversification. Investing in common stocks whether individually or through mutual funds requires owner oversight and understanding.
Finally the WSJ reported Friday that business leaders, economists and policy makers are convince the euro’s drop is helping turn the tide at least a bit in Europe’s favor.On the other hand major U.S. corporations with major foreign revenues are finding it harder to compete.The strong dollar also poses problems for the Federal Reserve putting downward pressure on inflation, giving pause to the Fed’s raising of rates this summer. WSJ 3/13/2015
Questions call Paul @ 586 295 0430, or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about your money.
SECURITIES OFFERED THROUGH WESTMINSTER FINANCIAL SECURITIES, INC. Member FINRA/SIPC.
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