That Was The Week That Was –1st Week March

Karen Hube of Barrons.com researched what the 40 top money management firms devoted to wealthy clients were doing in the asset allocation department and came  up with some not so surprising news. More money is being put to work in dividend paying stocks and funds with global reach. Exposure to Europe, needless to say, has been slashed and domestic funds increased. The scale back, according to Hube, has been at least 50%. Still, there are some wealth managers that are picking and choosing certain select European stocks that have fallen especially hard. Wealth managers are underweight Treasuries, which is no surprise since the risk to return is just not there. Also, listed as an almost ‘must have’ is emerging markets debt. On the REIT side apartment housing is finding acceptance. Again the REIT market is more or less a pick and choose area. Finally, cash is set aside for buying opportunities. Probably more in 2012 than 2011 more for opportunity buying than a risk hedge.

Did You Know I Update Your Accounts Every Month using Morningstar Principia? If you want to see your portfolio with risk, efficiency and returns you only have to e-mail or call.

Apple = $620.00 says Shaw Wu, an analyst at Sterne Agee and Leach, Inc. The math is using 12 x’s earnings in 2012 and 2013 plus $100 net cash. There are projections for the stock to go to $1500.

Pessimists versus The Oracle of Omaha Harry Dent, Gerald Celente and Robert Prechter, confirmed half-glass empty –pessimistic kind of guys all have been preaching a cataclysmic end to the U.S.A. and the stock markets. Prechter has been predicting a 1930’s style deflation and stocks could lose half their value. Buffett, on the other hand, is having none of it. On CNBC he said the 2008 economic meltdown was a financial Pearl Harbor and the country and markets have been coming back ever since. It’s a great time to buy a house and own a 30-year mortgage, he said. He also added its a better time today to own stock than 10-years from now and he predicts more people will be working at the end of this year than the beginning.

Markets Fell Monday The Dow fell 18 points, far off its lows of the day. Gold closed under $1700. The S&P 500 was off five for the day. Worries over China slowing down was the catalyst for a slow Monday trading day. Some investors worry that thinks are too quiet. But volume was about what you’d expect for a Monday and the markets did come back, which was creepy kind of trading day. Insiders, according to Mark Hulbert for the Dow Jones, and a Tom Bergeron look-alike, are in a Bear mode and think the next market move is down and not up and are selling shares.

Mark Hulbert. Tom Bergeron

New Update on Apple- $710 Barclays Capital reiterated an overweight on Apple and hike share expectation to $710 a share. With a new iPhone launch due in September the analysts expect Apple to earn a profit of about $75 a share.

The Worst Time to Buy Stocks? According to Randall Forsyth who reported that Walter J. Zimmerman, Jr., who heads technical analysis for United-ICAP thinks the perfect storm is being set up. The following reasons for Zimmerman’s bearishness: The Markets are overvalued, overbought, over bullishness, rising yield syndrome! The criteria for his projection is:

• The S&P is trading more than 8% above its 52 week moving average.
• The index is more than 50% above its 4 year low.
• The 10-year Treasury yield is higher than it was 6 months ago.
• Bullish sentiment stands at 47% versus Bears under 25%
• Escalating tensions with Iran.
• Surge in oil prices.
• And a hint of uncertainty.

( plus a lot of people think its just too darn quiet out there.)

What worries some managers is that investors will get tired of waiting for markets to determine direction and put new money to work at the worst possible time. 

Tuesday Markets Gave Up 200+ It was the worst market day of 2012 on fresh and continuing worries about our old buddy Greece and the impact of a disorderly bond default. It seems you can’t trust anything anyone says anymore and it certainly doesn’t seem to be shameful to lie to the world of investors, which may be the case here. Investors and analysts will be spending the week sorting things out.  On the NYSE ten stocks fell for every one issue gaining. Gold fell under $1700 to close at $1672. European stocks also closed lower as did crude which gave up $2 to close $104.70.

In a confidential memo, dated February 18th, the IIF (an organization of organizations), warned of, ‘very important and damaging ramifications that would result of a disorderly default on Greek government debt.’

Not so Fast, said Jimmy Cramer Wednesday morn on NBC’s Today Show. The markets were really reacting to the high price of gasoline. Every economic advance has died when the price of gas goes over $4 a gallon. The Greek problem will be solved and what investors should be concentrating on is the price of oil and ultimately gasoline. The jury is still out on the Greeks, at the end of the week, and may still cause economic disruptions.

Buy & Hold Investor Cannot Die’ According to Mick Weinstein of Dow Jones who writes that the buy and hold investor traditionally does better than anyone except the value investor who have learned how to resist price trends, painful as that may be. In other words, unless you know how to read technical charts, understand fundamentals you are better off allowing a fund manager and a simple allocation work for you.

‘Uncle!’, sez pension managers. Company pension managers are urging Congress to allow employers to put less money into their pension plans. Labor unions are on board, according to Kristina Peterson of the WSJ, to allow companies put in less but not to underfund their liabilities. The problem stems with low interest rates being seen as normal for the foreseeable future and companies use a discount rate to calculate their contributions based on a specific mix of corporate bond yields of the last two years. No word if anyone is listening in Washington.

China revised growth estimates down and the government targeted 7 1/2% growth versus 8%. Worrisome analysts said this new piece of business along with a backdrop of European woes made them concerned about China’s ability to engineer a ‘soft landing’ as it remains a ‘decelerating’ story.

Markets reversed course Wednesday and were mildly up but,,, Michael (The Technician) Kahn, wrote that investors should be vigilant. He points to technical damage done on markets Tuesday, the S&P 500 and Russell 2000, plus the industrials starting to lag the broader market. Don’t be surprised for a quick reversal.

Joe Terranova in his Blog offered investors a look at commodities as an alternative investment. Agricultural sector is his second favorite along with oil and refined products as his best bet for 2012. Investors can buy an Ag ETF or stock in Monsanto and/or Dow Chemical. There are also commodity funds that mimic the commodity index that many client currently own. Still the biggest names in oil and gas are a way to participate. Funds that own oil, gas and coal are another way to play the energy sector.

Not that many years back that the average investor couldn’t buy what was once reserved for the uber-rich. Now everyone can invest in lumber, raw land, commodities and precious metals. These sectors can be bought in mutual funds, ETFs or individual stocks.

 

‘Frothy,’ said Pete Najarian about certain casino stocks on CNBC Thursday. Frothy is not exactly a word used in connection with market action but aptly described where we are in the economic year. Not much is able to knock down where we are, even warnings of war from Steve Forbes who spoke to the Real Estate Strategies conference in Orlando Thursday. ‘Don’t panic if Israel strikes Iran,’ said the editor-in-chief of Forbes magazine. ‘It could get ugly very quickly.’ He went on to explain that Israel does not trust its security to anyone and when the Seven Days war started Israel notified the U.S. only when its planes were in the air. ‘Oil prices and insurance rates for oil tankers will skyrocket,’Forbes warned.

The same Najarian called McDonalds ‘an absolute buy’, on the dip in share price as the company announced that it missed global sales estimates. On the flip side trader Steven Weiss thinks differently and would trim his position saying that the company has been running well in excess of what to expect long term and some money should be taken off the table. MCD closed around $97 a share.

The Japanese Markets are Happy-Happy. Recovering nicely from a tragedy one year ago Japan is looking good, according to Ben Levisohn at Dow Jones writing for the WSJ. Japanese stocks are among the world’s cheapest- almost half of what the S&P 500 index is valued. Japan’s Central Bank has taken a page out of The Ben Bernanke play-book and bought Japanese bonds, making the yen cheaper and more competitive in the global markets. For investors looking to add to their portfolios a position in Japan companies they can do so by buying shares in certain select mutual funds or ETFs. Also Japanese stocks in the auto area could do nicely going forward.

Long-Term Care Insurance is Expensive. The premiums are costly plus the cost of care is getting pricey. Recently some companies increased their premiums almost 25% to compensate for the escalating cost of care. Then there are companies that were major players in the field and couldn’t stand the losses, namely Met Life and last month the announcement from the Unum Group. Most people cannot afford the cost of long-term care insurance, and others pretend that it won’t happen to them. Now, Prudential, one of the largest marketers of the product, has halted the sale of their individual long-term insurance and is exiting the business. Two things happened: the cost of providing care under the policies and the life expectancy of those receiving care were vastly underestimated. There are other companies that offer LTC policies but clients are cautioned to check claims paying ability and history before committing premiums.

Put In Your Order

With the markets trending higher and higher investors are not sure where to step in and make a buy. A good thing to know is that you can order your favorite stock at a price you find attractive. Let’s say you like ABC but the price is too expensive. Call your broker and order to buy the stock at the price your willing to pay and keep the order in place for as long as it takes by stating, ‘Good ‘Till Cancelled’. If your stock hits that price it’ll automatically trigger a buy. You can do the same with a sell order to protect your position if you feel the markets are too high and expect them to take a tumble. And, yes, you can always cancel your order if and when you change your mind or the markets do it for you.

Gold Holdings Are At All Time High. According to Bloomberg gold holdings in exchange traded funds is at 2.407 metric tons. That comes to about $131 billion.

Jobs strengthened with over 200,000 finding work last month- still its 8.3% unemployment as more people came out looking for work. Stocks were muted Friday, gold closed $1715 and oil finished at $107.42.

Finally- FDIC closed one small bank in Chicago bringing the total in 2012 to 13 closings.

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

That Was The Week That Was-Leap Week

  Why a Leap Year? It’s a method of simply smoothing things out. It takes 365 and a 1/4 days for the  earth  to revolve around the sun and if we didn’t have a Leap Day every four years then every 765 years or so winter would be summer and vice- versa. - I don’t know of one public super popular person born on a Leap Year, do you?

Looking Forward -The Markets Are Expecting A Real Possibility of  a Mild Downturn; unless Friday’s coming jobs report confirms a vertical employment trend. With good news the markets may extend their winning ways. While large cap stocks pretty much marched in place last week small cap stocks fell three percent. From everything I’ve read the  odds suggest a possible 2% upside from here with a mild to sharp decline. Or not. Markets tend to disappoint the majority. 

Clearwire Toast? Clearwire (CLWR) founded in 2003 by cellular pioneer Craig McCaw was supposed to be The WiFi on steroids. McCaw’s reputation and the fact that other companies were highly interested in the concept made this a deal in 2003 that was going to change the landscape of wireless. Now Google sold off all its holdings in CLWR at an enormous lost. The stock once at $30.00 a share closed on February 24th a smidge over $2.00.

  Barrons reports Internet Poker May Not Be Dead but certainly it faces long odds, according to Jim McTague. There was a chance to get the language inserted in the bill that extended the payroll-tax holiday but failed and so now it may be a long hard fight. Among those lining up against Internet Gambling are religious leaders (Election year?!) and Native Americans who have huge stakes in their own casinos. Again its election year and bad timing for proponents of on-line poker. Which makes the Caesars recent IPO a possible long shot.

 Fuller Brush files for bankruptcy. The 106 = year old company known for its door-to-door salesman declared bankruptcy barely two months after announcing a sweeping turn-around. Only 180 people are employed by the firm that once was an American icon.  remember when they’d hand you a free vegetable scrub brush just for saying, ‘hi’.

A recent study found that the gasoline engine is almost as efficient as a hybrid at less far less cost. Bloomberg recently reported that the extra cost of a hybrid versus a gas powered car can’t offset the cost of operation. Consumers don’t want to pay an extra $6,000 for a hybrid when they can get almost 40mpg from a standard auto like a Chevy Cruze.

Taking Money out of your retirement plan and born before 1946 you’ll now owe Michigan tax on the distribution. I wrote about this in 2011 and some folk either didn’t read or forgot. The other thing to remember is your broker is in the investment business and not the accounting biz. See your tax professional.

Fairholme Fund, managed by Bruce Berkowitz, had a remarkable run until 2010 when the magic seemed to leave. The fund lost over 32% of its value in 2011 as Berkowitz fired his experienced portfolio management team and replaced them with a ‘buddy’ with no experience. An October, 2011 interview with Berkowitz in Barrons.com  explained how a ‘buddy’ Charles M. Fernandez was able to insinuate himself into the fund management and ultimately cost it billions of dollars. Track record alone doesn’t count for beans…anyone remember Janus?

Words from the Oracle on CNBC Monday morning, ‘ If I could only own one bank it would be Wells Fargo.’ Later Warren Buffett said, “ If it were practical to load up on a hundred thousand single family homes, I would.’ He went on to say that he didn’t know when home values would rebound but was confident that they would. Buffett’s stock Berkshire Hathaway has been shown little respect closing almost 5% down in 2011 and is less than 3% up for 2012.

Again the Little Engine Couldn’t Close over 13,000 on the Dow. Monday last markets sank right at the open over 100 points but came back strong after better than expected readings on housing and regional manufacturing. Still gains evaporated at the close of business and the Dow went slightly negative with the Naz and S&P up in single digit. Gold was also up and oil stayed about the same closing at 108 a barrel.

Michael Kahn @ Getting Technical warns of the yellow flag waving over the transport index. If you’re a Trader this (I wrote about this last week) could spell a mean correction. While attention is on the Dow attempting to close over 13,000 experts had warned us about the failure of the transport index getting above support levels.  Now it seems that the index is going in the opposite direction. January saw steep run-ups in many transport stocks such as Delta Airlines but now those gains are gone. Some analysts think it’s because of rising energy costs.Kansas City Southern, according to technician Kahn is another stock that has broken down and shows a bearish pattern.

Dow Theory states in order for a healthy market to advance shares in companies that make goods need to advance along with companies that delivery those goods. From the above chart readers are able to see the tailing off of the Transports. The divergence starts at February 6th and grows as the S&P moves up and the DJT (transports) move down.

Fast Money Executive Producer John Melloy writes at the close of business Monday that there are more Bears than Bulls out there that believe the markets will be lower in a month than they are today. The S&P is up 9% through the 27th of February, which is almost a full year estimates by many money managers in 2011. Mary Ann Bartels, technical analyst with Bank of America Merrill Lynch, said, ‘Everyone is waiting for the pullback to deploy cash thus- no pullback.’ Katie Stockton of MKM Partners  wrote to clients, ‘those waiting for a correction may be waiting for a while in markets such as these.’

 

Tuesday markets closed above 13,000 for the first  time in four years. On CNBC the news that the Republicans are in disarray and this gives the President a better than 60% chance at staying in office also coincided with better than expected domestic economic data. The Republican in-fighting, according to CNBC, has done irreparable harm to the Party’s ability to present an alternative economic platform. If re-elected some think a selloff in the markets is in the cards for 2013.

Consumer Confidence Index rose to 70.8, the highest level since February, 2011. There was bad news with durable goods orders fell for the first time in four months. Durable goods are cars, appliances, anything that lasts a long time like sporting equipment and furniture. Home prices fell- again-the lowest since the housing market starting coming apart five years ago.

SEC may charge certain banks with civil charges for allegedly shoddy disclosures of the risk of subprime mortgage bonds tied to the financial crisis. T’wernt nothing criminal there….oh, my!

Just the Facts…. Google brags that it has 90 million on its social network site but the numbers hide the real deal according to Amir Efrati at Dow Jones WSJ. Visitors spent about 3 minutes a month at Google+ last September through January versus six to seven hours a month on Facebook each month over the same period of time. Facebook has 845 million active members.

Wednesday The Ben Bernanke spoke and markets turned lower. Gold sank $77.00 an ounce or over 4%, one of the biggest reversals in the last 2 years. Bernanke gave no hint of future Fed help and all indices turned lower except for the dollar. Art Hogan, at Lazard Capital, said that revised GDP numbers point to 3% growth. Experts are now using Apple as a Nasdaq bellwether. As goes AAPL so goes the index. The same is being mentioned for IBM and the S&P 500 index.

Stuck in a Long-Term Bear Cycle?

According to Teeka Tiwari the markets may go another 50 points on the S&P 500 but he believes the cycle is ready to move lower. The right time to buy, he says, is on the panic sell-offs. He thinks that we are now at the upper end of the Bear secular market trading range and offers the above chart to prove his case.

Bank of America is experimenting with new ways to pry fees and income from customers. A program called Essentials is being tested where fees of $9, $12, $15 and $25 will be charged but waived if certain mortgages, balances or credit cards are utilized.

A Huge 10-Year Treasury Sale hit the markets on Wednesday. Either someone had a ‘fat finger’ (0ppsy) or an allocation of some 80,000 June-dated futures were sold around the same time The Ben Bernanke started his talk. The impact of the trade was temporary.

John Daly had the funniest line last week, ‘Every time Mitt Romney opens his mouth he sounds more and more like Thurston Howell, III ‘

 

Buy the Market, not the Rally,’  John Shinal at Dow Jones writes that there is a strong argument to be made for 2012 including attractive price to earnings and earnings to growth estimates. But, if your out of the market it may not be the time to buy at the top of a 4 month rally. Historically, Dirk Van Disk, chief equity strategist at Zacks.com said, looking at yields the S&P 500 is ready to double. He also advocates that if you believe in the market you should also believe in tech. He says that he loves the large cap dividend players like Microsoft, IBM and Cisco. My clients have access to nicely managed tech funds that include the above plus Apple….

Markets were up huge at the open on Thursday but closed at their lows of the day. While the economy picks up there are rough spots ahead including the European problem, instability in the Middle East (a rumored oil pipeline fire in Saudi Arabia caused price hikes in the after hour trading Thursday). Another worry is that personal income increases are not sufficient to support much additional spending. The Commerce Department did state that wage and salary income in January was 5% higher than a year earlier, the fourth straight month of gains. Also, home builder Taylor Morrison, Inc. said the company has resisted the urge to start buying up developed land. A caution CEO Sheryl Palmer said that was borne out when the housing market quickly lost momentum in early 2010.

How Can This Be? In the USA, land of the free, home of the brave, over 45 million of our citizens are on food stamps. That comes out to 1 out of every 7 people. Go to your favorite supermarket and one out of every seven shoppers is using a food stamp card. In some states 20% of everyone who lives there, like in Mississippi, are on food stamps. Reason tells me that once the economy recovers there’ll still be more people on assistance that weren’t there before the economy went bust. Somehow this is just not right.

Divorces Climb…Baby Boomers!

Sign of the times or is the economy. According to AARP a 2004 survey found women 66% of the time were filing for divorce.

YELP IPO scores! The news Friday was how strong Yelp came out of the box and the Internet shopping and restaurant review site was up over 60% above their IPO price of $15.00. The truth is all the action was prior to being offered to us -the huddled masses. The bidding was done by those that got the true IPO price and as soon as it came out to trade shares  flat-lined.

YELP Hype may be just that as Nigam Arora of Dow Jones writes that better opportunities are available. Google should be on everyone’s radar, especially with its ownership of Zagat, a restaurant review service. Then there is Facebook….

Friday Markets Closed lower. Shorts came out of the woodwork Friday as the Dow was off along with all indices- finishing the week at 12,978 a tad  off their lows of the day. Gold was down, again, closing at $1712 an ounce as was oil, as tensions relaxed in Saudi Arabia. But, this energy play isn’t over as hard liners were re-elected in Iran and the President reiterated that he wouldn’t tolerate their nuke ambitions.

Finally- FDIC closed 1 bank in Georgia last Friday. This brings the total to an even dozen as compared to 23 in 2011 for the same time period. Either things are getting better or we’re running out of banks….

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.