That Was The Week That Was-4th Week May

 

  Inflation hurts retirees more than any other group. While we’ve been spoiled, the last half a dozen years, that the inflation ‘bug’ hasn’t boosted prices on everything, we’re seeing a noticeable increase lately in the price of food. Food and energy are not included in the calculation of the Consumer Price Increase. The Bureau of Labor Statistics reports that the current methodology used in determining the U.S. CPI is flawed because it is difficult to determine ‘the treatment’ of public goods such as safety and education, and other broad concerns such as health, water quality, and crime that would comprise a complete CPI framework. Fixed income investments in a rising inflation cycle certainly hurt retirees more than any other investment sector.

TIME FOR YOUR ANNUAL REVIEW. CALL TO SET UP A CONVENIENT TIME. 586 295 0430.

Monday saw Markets move higher albeit modestly. It was a boring trading day that started with a telecom making news by buying a television provider ostensibly in order to continue paying its current and substantial dividend to its shareholders (CNBC –talk-5/19). JP Morgan’s Mislav Matejka argued whether or not low yield were good for stocks, according to Barrons.com. This in a strategy session with Goldman and MKM Partners. Nasdaq and small caps experienced a better than expected rally. News of the Chinese Amazon, PayPal, Google et al company IPO whispered for a August debut.

 Right quick it went from Boring to Scary on Tuesday when Philly Fed President Charles Plosser said the Fed was ‘sitting on a ticking time bomb that could severely damage the economy.’'  The Dow fell 200 points as traders digested that bit of news, finally closing off over 130 points in an orderly sell-off.  Plosser is worried that the reserves (about $2.5 trillion) held by the Fed, which are basically doing nothing, may suddenly be ‘borrowed’ as the need for more business expansion is required. Depending on the need and how much is quickly drawn down may cause the Fed to react by raising interest rates sooner than expected. Plosser explained the problem with either a ‘grow to slow or grow to fast’ economic situation always has seen the Fed ‘behind the curve’ in a reactive mode. CNBC, MarketWatch.com, Bloomberg, et al contributed. 5/21

Wednesday Markets rocketed up and took back previous day’s losses. New York Times piece (5/21)reported that Fed officials are troubled by the housing weakness. The concern that inflation was running below the committee’s longer-run objective and was seen as posing possible risks to economic performance. Weakness in housing was discussed including factors such as higher home prices, construction bottlenecks from a shortage of labor to tighter credit.

First it was Titleist then bourbon Jim Beam and now (sob) Ragu…all  bought by Japanese companies. Ragu was owned by Unilever, a Anglo-Dutch conglomerate, that still owns Ben and Jerry’s and Lipton Tea.

Volatility? There is no stinking volatility! The stock market fear gauge has fallen to its lowest level in more than a year (WSJ/5/22). Even as the markets have done absolutely nothing in 2014 the Vix has fallen as investor ‘complacency’ has settled in. Traders are not afraid of anything the market does. The latest survey of sentiment by the American Association of Individual Investors found that investors have been neutral on the market outlook for the longest spell in 15 years. The financial outlook for most traders is that there is little risk of an economic downturn, near record stock prices, low interest rates, steady if unspectacular U.S. growth and expanding if receding Federal Reserve support for the economy and financial markets.

Markets will be closed Monday for the Holiday.

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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That Was The Week That Was-3rd Week May

From USA Today.  Seems that way for a lot of people…

Bad New First - Markets Fell Thursday over 200 points Before Closing off 160+ on the DJIA, the worst pasting in 5 weeks (MarketWatch.com 5/15). The Russell 2000, is, according to experts, in correction territory. The reason for the drop in domestic stocks Thursday had to do with weak economic data coming out of Europe. Mike Larson, of Money and Markets, had a different slant. He reported that billionaire hedge fund manager David Tepper told an audience in Las Vegas that it was ‘nervous time’, and that caused the free-fall. Tepper, who made $3.5 billion last year said that he had taken 40% of his equity assets off the table earlier in the year. In Vegas he told other hedgies, ‘The market is dangerous right now.’ That was enough to spark a free-fall. (5/15) Tepper has respect in the institutional investment community.  Or, it could have been a combination of poor economic news and a strong scary message. Interestingly the VIX was extremely subdued. There was no real fear in the selloff. Here’s the play by play as the week unfolded.

WSJ ‘Tech Stocks Are Still Too Silly For Some.’ It’s been the youngsters that have fallen out of favor in 2014. Those high flyers that enamored investors with the promise (wink-wink) of super returns have fallen. In the ‘blink’ of an eye, reports the Journal (5/12). ‘We’ve gone from three times silly to times times silly,’ said Mitch Rubin, chief investment officer at RiverPark Funds. That’s because many investors still feel that valuations are too rich. These tech stocks are now cheaper but not cheap. WSJ/5/12 

Monday Market’s Rocked! New highs for the Dow, S&P 500 Index and both the Nasdaq and Russell 2000 were up sharply. According to Barrons.com (5/12), stocks got a boost when China’s State Council offered a blueprint for liberalizing its financial markets. Momentum stocks got a jolt as almost all were up for the day. It was too early to tell if the momentum rally was sustainable. Or, a Dead Cat Bounce.

Bob Doll, Chief Equity Strategist Nuveen Asset Management Provides these facts to the market direction: (5/12)

• Improving trade
• Eurozone on better footing
• House prices are rising
• Impact of both manufacturing and energy are broadening

 Wednesday Indices Fell as Global Bond Rates dropped to their lowest levels of the year (WSJ 5/16). According to Min Zeng, writer for the Dow Jones, sluggish economies in E.U and U.S. have ‘confounded’ central bankers and surprised investors. The yield on the 10-year fell to 2.523%, the lowest in more than 6 months. Scared investors ran to bonds Wednesday as central bankers promised to keep rates low and pumping in more monies into the economies. Joseph G. Paul, chief investment officer at AllianceBerstein, in a Barrons.com, ‘Wall Street’s Best Minds’, explained why he forecasts the 10-year return of U.S. stocks is 7.1% a year. He goes on to explain that low returns are a fact of investment life today and that investors should adjust their perspective to accommodate this new reality.

Finally: The Chart of the Week. This tells the story more than anything on how this market has disappointed so far this year. Chart sent by Talmer Financial. Source Bloomberg- Business Insider 5/17

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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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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That Was The Week That Was –1st Week May

Experts predict that even a million dollars may not be enough to live on for retirement. Most people will never save even a fraction of that and they may just be fine if they don’t listen to the experts.

Retirement planning by the ‘so called experts’ demands that retirees not touch their principal. This has to be ignored if the average family wants to retire in relative comfort. Someone who’s saved $250,000 may only get an income of $10,000 a year, according to the experts. But, using both principal and earnings, on a portfolio that has a total return, on average, of 6% a year, a retiree may be able to get $24,000 a year income for 14.9 years, before running out of money. Do your own calculation using both principal and earnings using any online calculator. Or, go to my calculator section at primaryplanner.com

Money Manager Survey Illustrates Majority of Managers Bullish Over the Next 12 Months.

Report and chart from Barron’s.com April 25, 2014.

Jonathan Golub, chief U.S. market strategist at . RBC Capital Markets said on 4/28, ‘Bull market won’t die until a recession hits.’ And, according to Jonathan, we’re a long way from a recession.

MARKETS CLOSED MIXED MONDAY. APRIL 28th. Ditto Tuesday. Ditto-Ditto-Thursday.

 

Experts, see the chart at the top of the page, like European stocks. Investors may see value to compliment their domestic holdings.

MARKETS UP WEDNESDAY ACROSS THE BOARD.

• First Q GDP lousy. Only 0.1% versus estimate of 1.2%. Markets should have taken a nappy but…
• Chicago PMI showed stronger manufacturing growth.
• The Federal Reserve issued a statement saying the economy ‘improved’ in the last few months. Which is about the same thing they said in March. 2014. (information from Barron’s.com 5/1/2014).

WSJ reported Retirement Plan Investors are putting more money into stocks since the crash of 2008. Stocks accounted for 67% of all new money for the month of March. 5/2/2014

Bloomberg Reports Jobless Claims Unexpectedly Climbed to a 9 Week High. Personal spending rose as did income for the month of March. 5/2/2014

Barrons.com published Boston based money manager Jeremy Grantham’s essay on stocks and direction of the markets. Grantham’s still bullish and states we could see another 20% upside on the S&P. He also writes that 2008 was a true global asset  bubble and he fails to see that in today’s market. 5/2/2014

The Week closed down. Ukraine overshadowed a surprising job report- that still had some ‘sticky’ bits, such as there were 800,000 less job applicants due to dropping out, retiring or going back to school (CBS News reports 5/2). Investors sold off not wanting to come in Monday morning to invasion news (Bloomberg 5/2). John Manley, chief market strategist at Wells Fargo Funds Management said of the Ukraine situation, ‘I don’t see it going away right away.’

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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That Was The Week That Was-4th Week April

 Bad News First- Week ended on a sour note with the S&P 500 off 0.8%. Halfway through earnings season and its a mixed bag. Friday’s NY Times online reported Wall Street lower on corporate results. In the background a Ukraine non-named official said the standoff with Russia was the beginning of WW3, and that caught the Street’s attention and didn’t help the direction of the markets. Chris Bertelsen, Chief Investment Officer of Global Financial Private Capital in Sarasota, Florida, said, ‘..we were overbought yesterday and so it was another reason for investors to take profits.’ Now for the play by play…

Stress Testing Investment/Retirement Portfolios is all the vogue. Daniel Satchkov, president of RiXrema, a risk modeling and consulting firm, says that investors need to mitigate or accept certain investment stress points. What it boils down to is how fast a portfolio recovers from a major or catastrophic global economic crash. He also suggests when an individual ‘stress’ tests their investment portfolio is not to dwell on ‘what happened’, but what ‘may happen’. Here’s his chart:

Investors who own individual stocks may find this of value but those that are clients of active managed mutual funds may find this exercise impossible due to the lack of control over their individual holdings.

Monday Started The Week Up! Bloomberg reported big deal in pharma as Novartis bought Glaxo Cancer Unit and sold Animal Drug division to Lilly. 4/22. Social media still under Bear attack as 22 Bears tightening their grip on you-know-what-eh? after you-know-who’s buying binge. On opposite side is Credit Suisse upping estimates of the same stock. One of the major banks came out with 20 stocks to buy and hold forever and investors wrote and congratulated themselves on ‘not owning’ a one.

Robert C. Doll, CFA, of Nuveen Asset Management:

1. Less fiscal drag from fed weighting on economy and state and local spending appears to be on the rise.
2. Low inflation should help business and consumer.
3. Corporate profit rising.
4. House prices rise.
5. Manufacturing and energy renaissances are broadening.
6. Headwind from consumer deleveraging behind us.

Carl Icahn sips martini, brags up his company and slips an f-bomb on-air CNBC Tuesday. He also says that activism is vital in keeping companies responsible to shareholders.

Markets Up Tuesday Xross the Board.

David Einhorn’s Hedge Fund Greenlight betting against a ‘group’ of tech stocks that Einhorn calls ‘Cool Kid’.  Bloomberg 4/23 reported that Einhorn did not identify the stocks and also criticized ‘cheerleading analysts’.

USA reports Mass. Senator Elizabeth Warren’s new book, ‘ A Fighting Chance’, offers insight into the 2008 crisis. Warren writes that it ‘didn’t have to happen.’ She also stated that she could not understand why Washington showed so little concern about how the financial stress affects normal people. When she asked then Treasury Secretary Geithner why the widespread abuses by the major banks in the massive waves of foreclosures, Geithner responded by explaining that they were designed to ‘foam the runway’ for the banks. Obama refused to make her director of the Consumer Financial Protection Bureau, which she fought to create, because she made the banks ‘very nervous.’

 

Do stocks get a boost out of stock splits? John Kimelman in Barron’s.com responded that in the short-term shares are more volatile and suspect to day-traders. Long term shares will settle down to market efficiencies.GE is possibly getting rid of its financial arm and focusing on upping its industrial business. Nothing firm but WSJ reports that the company is looking overseas either buying all or part of a French conglomerate. Finally- Alibaba IPO- how big? It could be the biggest- like ever! Rumors that the company may top Ag Bank of China.

INFORMATION GATHERED FROM SOURCES CONSIDERED RELIABLE INCLUDING BUT NOT LIMITED TO NEW YORK TIMES, BLOOMBERG, BARRONS.COM., MARKETWATCH.COM.. WSJ AND CNBC.

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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That Was The Week That Was-3rd Week April

 

If  a can of tuna fish was selling for ten cents people would be buying as many as they could carry. The stock market is the only place where bargains are ignored.

 

The Week Before Last We Saw A Perfect Example of a ‘Dead Cat Bounce.’  This is an expression that means be careful of buying either stocks or sectors after a trading day  where there was a substantial ‘bounce’ after a huge selloff. Thinking the ‘worse’ may be over investors pile in the day after, hoping for a continuation of a ‘rally’ (or buying on the dip), only to find Mr. Market suckered them in and experience a continuing correction. Before the year began we called for more volatility than we had in 2013 and we sure have been getting that. The interesting thing is that the VIX, or volatility index, has been rather subdued. The VIX is sometimes referred to as the ‘Fear Index’, and ratchets up when markets are in turmoil. Investors may trade the VIX through a number of ETFs. Volatility, it seems to me, is more intraday than day to day. Unless something or event really spooks the market I’d expect a less fearful atmosphere. Trading the VIX, even in these markets, can be most disconcerting.

Better Than Expected Retail Sales propelled the markets Monday. U.S. retail sales up 1.1% in March, biggest gain since September, 2012. Reported by the Commerce Department. Citigroup, the third largest U.S. bank, reported an unexpected profit increase. The news on both retail and banking jump started the markets but saw gains wither almost into negative territory until the last hour of trading where strong buying suddenly brought the Dow up 146 points,  the S&P +22, while gold lost $13.00 and oil was off 1. to 103. It was truly a roller coaster Monday.

Ditto Tuesday’s Action. It was the same story- up, then down and closed up in the final hour, or so. More gloom and doom stories appearing in various online publications. Robert C. Doll, CFA, of Nuveen Asset Management, which the parent company, has been sold to TIAA-CREEF, wrote 4/14:

• First Quarter earnings will likely be unimpressive. But 2/3rds of reporting companies beat estimates!
• FOMC minutes provided a bright spot as Fed Chair Yellen confirmed fed fund rate projection was not considered a policy change.
• Fed deficit fell below 3% of GDP in first quarter.
• Ultimate global risk from Ukraine crisis should be limited.

Bloomberg April 16 Reported,’ Industrial Production in U.S. Rises More Than Forecast.’ And with that the DJIA was up over 160 points and the markets were in the black-again- for 2014. ‘Aluminum demand will continue and the auto sector will probably remain a mainstay for manufacturers.‘

MIXED MARKETS THURSDAY. Bureau of Labor Statistics reported the following five foods marking their largest monthly gains in price since September. 2011.

• Bacon +13%
• Ground Beef +8%
• Oranges +23%
• Coffee –17% but +31% over 4 years.
• Peanut Butter –2% but +30% over 4 years.

MARKETS CLOSED FRIDAY FOR HOLIDAY.

Questions call PAUL @ 586 295 0430 or write him at pstanley@westminsterfinancial.com. Share this blog with people who care about their money.

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That Was The Week That Was-2nd Week April

  Friday continued the selloff…Here’s the recap.

The Week Started Ugly. Naz off again, and continued it’s worst stretch since 2011. Robert C. Doll of Nuveen, in his Market Weekly Investment Commentary wrote that he thinks we’ll see a sideways market for awhile. Michael Kahn, in Barrons.com, Monday’s Getting Technical, reports, ‘ The Nasdaq is now broken and favorite momentum stocks are toast.’ Yes, dear Reader, these are the stocks that traders adored and ran on hope that earnings would eventually catch-up to price. Cody Willard at MarketWatch, writes about his specific stock shorts and is concerned about the markets short-term but more positive he writes on a ‘momentum stock recommencement probably sometime this summer.’

 

IRA Ruling by The U.S. Tax Court Stuns Advisors and Savers.  For 20-years the IRS Publication 590 was the bible on how you could do certain things with your IRA. It allowed one could have a rollover for each IRA once a year.  The Tax Court says not so. The IRS has now disagreed with its own publication and ordered that individuals may only do 1 Rollover per year no matter how many IRAs you own. A rollover is where you take physical possession of the IRA assets and have to place them back into an IRA within 60 days in order to keep the tax deferred status. Those with multiple IRAs were under the impression they could do a Rollover once a year with each IRA. Not so, sayeth the Tax Court. Only 1 Rollover per year no matter how many IRAs one owns. If someone does two the other rollover becomes a taxable event. Make sure you get guidance before doing a rollover. New updates to the IRS publication will be available in 2015.

No One Knows The Short Term Direction of The Market. Dennis Gartman, editor of the Gartman Letter, told CNBC late last Monday 4/7, that the pullback in momentum stocks in tech and biotech space scared ‘one big bull out of the market.’ He said he wouldn’t be buying stocks until they got much cheaper.He said that the ‘whole world has changed.’ Here’s the problem on April 1st he was raving about the markets on the same CNBC program. Tuesday markets up minimally across the board.

Gotta Ask?  Wednesday Dead Cat Bounce? Dow up Wednesday over 180 points. We will wait and see. So far not much of a real correction. Federal Reserve Video Conference Meeting early March. Very hush-hush where Fed officials discussed abandoning fixed employment percentage as a starting point to increase interest rates. Yellen stated in minute meeting March 18-19 that this in no way changed fundamentals of Fed policy. Here’s what got me excited…AT&T building out an ultrafast Internet in North Carolina. Google also looking at the same market to bring out its version. This will be about 10 times faster than current internet service. Which will mean that I will get ten times more frustrated when it goes down during peak hours. 

I hate it when I’m right about bad things. Thursday stocks got walloped. Anyone who bought into the ‘bounce’ got a big unexpected surprise. Naz was the biggest loser and the list of stocks that lost 4% of more was lengthy. It was a dead cat bounce, and if you didn’t know the meaning Wednesday by Thursday market close you were an expert.

MarketWatch.com published the above chart from The Financial Philosopher. Investors now must manage expectations, wrote Jonathan Burton in his MarketaWatch.com column First Take, 4/11. Thursday’s action saw the Dow off 2% and the Naz off 3%.

JP Morgan missed earning estimates Friday while Wells made theirs. Outside of that there was no real reason for the markets to continue their descent. The DJIA fell another 148 points. This is not the beginning of a recession but a good old fashioned correction. Merrill forecast another 10-15% correction for this coming Fall. Barrons.com 4/12.

Information gathered through sources considered reliable including Businesswire.com, WSJ, Barrons.com, MarketWatch.com, CNBC, CNN and others.

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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