First Things First….. – My father always taught me that it was good to give something back to the community if you possibly could. A few years ago I volunteered to coach Pop Warner football for the local town team. Even though it took up a lot of my time, it was a great experience, my team made the playoffs and it convinced me beyond any doubt that coaching is much harder than it looks and….. that I have little chance of being the next Vince Lombardi or Frank Leahy. I only coached one year much to the relief of the Pop Warner organization and some parents who thought their son was the next Tom Brady. But one thing I continue to do, which my father always did when he was alive, is to donate blood to the Red Cross. It’s a simple thing to do, but has enormous value and importance to the medical community. I now have both of my sons doing it regularly. It actually only takes on average about 6 minutes to give a pint. The paperwork and the questions (like “Have you had intimate relations with anyone from Nigeria or England in the last twelve months?”) are annoying but completely necessary to assure non-tainted blood. To speed up the process I have a blood donor card similar to a credit card which is issued by the Red Cross which inputs all of my profile info electronically. If you have never given blood, please give it a try. And if you haven’t “done it in a while,” make an attempt to go back to it. It will make you feel good and it will make a difference in a lot of people’s lives.
Trivia Question….Who is this guy? – While at the signing of the Declaration of Independence, this member of the Continental Congress took great care in boldly and finely signing his name in defiance of the King and said, “There, I guess King George will be able to read that!” Who was he? Answer at the end of this posting.
The Dodd-Frank bill … Now a comment from the former head of the FDIC?… - Those of you who have followed my commentaries know what I think of the Dodd-Frank Bill that “fixed” the banking system. Here is a quote from a July 20th, 2012 article on Yahoo.com from Sheila Bair, former head of the FDIC…. “The Dodd-Frank Wall Street Reform Act, the landmark law enacted on July 21, 2010, was designed to end the kind of risk taking, greed, and avarice that brought us the financial crisis of 2008. Yet, notwithstanding thousands of pages of proposed and final rules to implement this important law, nothing much seems to have changed.” Thank you, Sheila! However, I have to challenge somewhat the “nothing seems to have changed” part. Free checking accounts have disappeared and now banking fees have increased enormously for the average customer like you and me. Have you noticed that? We still have the same scandals like the LIBOR mess and JP Morgan Chase’s trading “mistake.” That bill was a grandstanding farce by two long standing (and TOO long standing!) members of Congress, Chris Dodd (retired, with pension) and Barney Frank (retiring this year, with pension). Thanks, guys! ... Heck of a job!
Copper… How can I play it?…. Should I pick the winner or Spread the Risk? – I have written in past commentaries that I prefer to watch copper more than gold as an indicator of the direction of world economies. Copper is a commodity tied to the industrial production of many products. Unlike gold which has an emotional and a “collectable” side to it, copper (with the exception of the penny hoarding nuts out there) does not. I recently saw the head of gold and copper producer Freeport-McMoran (FCX) in a CNBC interview mention that his cost for mining copper was around $1.50 per pound. So, even at these extremely depressed levels of copper pricing at around $3.50 per pound, they can make a profit. There are many good copper companies like SCCO and FCX which have been beaten down lately and have very good dividend yields. SCCO (Southern Copper) is showing a yield of over 6%. However, if you like the copper “space” but want to mitigate your risk, you could consider a copper company ETF like CU or COPX which both pay dividends. That would spread your risk across many copper companies. For the record, as of July 20th, 2012, I do not currently own FCX, SCCO, CU, or COPX nor am I recommending the purchase of these. These positions are used as an example of investment strategies in the copper space.
When I become President someday….. Another of my Presidential directives or executive orders will be… (effective immediately) all computers will be powered on and off by an “on/off” button. No START buttons (created by computer geeks who think it’s cool) will be allowed. When you want to turn on your computer and go right to work, you will push the ON button. That’s it! When you want to shut it down, you push OFF. No exceptions! That move alone will assure my reelection. Also effective immediately, no man above the age of 22 and weighing more than 180 lbs. (if they are above six foot…. And above 140lbs. if they are 5’ 5” to 6’.. below 140 who cares!) shall be allowed in public wearing a SPEEDO. No exceptions. It was never on my Christmas list anyway. And lastly, any politician caught lying in a campaign will have to take his turn in the county fair dunking booth. Voters will pay one dollar for five balls to throw and get their chance to dunk the politician. That should balance the federal budget in the first year.
“Sell in May… Go away”…Does it hold up? – Many of you have heard the old Wall Street adage to “sell in May and go away.” A recent study by Chris Prybal in Shaeffer’s Trading Floor Blog that traced Dow component performance by month back to 1975 found that for the month of May every Dow stock actually averaged a gain. What was the worst month for the Dow components you ask? September was by far the worst performance month. I continue to believe that has more to do with September marking the end of the third quarter. Many institutional money managers have targets that they hope to hit for the year. If they are at or above the figure by the end of September, many sell to lock in their stats and preserve that performance. They also do a lot of reallocations for the fourth quarter. Trying to bet which way the big money will go at one particular time is usually a sucker’s bet. Pay attention to longer term trends. Watch the bond the market. It typically shows you where the risk-on and risk-off trades are heading.
My thoughts on Romney’s VP pick … – First of all, I doubt most modern day voters even know who Ryan is. That reminds me of a famous Adlai Stevenson story. A reporter was said to have told Stevenson, “Every thinking person supports you.” Stevenson replied, “Yes, but the problem is, we need a majority.” The Ryan pick might make me tune in to the VP debate on TV though.
What’s going on in the Home Builders Category….? – There was an article this month recently in Bloomberg that stated that home builder stocks were soaring even though new home sales were till down 50% below their 40 year average. I’m skeptical to say the least. These stocks have been beaten down for good reason. We still have an enormous inventory of distressed properties on the market and about to go on the market. The last thing we need is more new homes. However, if bottom fishing in a beaten down category appeals to you, you might want to dip your toes into an ETF like XHB. It contains many of the top names in home building and thus spreads the risk around the category instead of trying to pick the come-back winner. Sometimes the come-back winner goes bankrupt (remember my post on Patriot Coal?). For the record, I am not recommending that you buy into that category right now. But if you must scratch the itch, at least spread you risk and be cautious.
From the Gregory Peck file…. – Gregory Peck and a friend entered a crowded restaurant to find no tables available. The friend, not wanting to wait and more than anxious to eat, whispered to Peck, “Just tell them who you are.” Peck replied, “If you have to tell them who you are, you aren’t anybody.”
Will the Euro survive? Not so fast… – It’s summertime. Don’t be fooled. Europe for the most part takes the summer off. They always have. News from Europe is subdued currently. A July 27th article by Desmond Lachman put the European mess in perspective. He states… “…the marked deterioration in market sentiment toward Greece, Italy, and Spain can leave little doubt that these risks will more than likely materialize well before the Nov. 6 U.S. presidential election. And this will occur despite ECB President Mario Draghi's repeated incantation of the mantra that the European Central Bank will do whatever it takes to save the euro. The dismal economic and political news coming out of Greece suggests that Greece's days in the euro currency arrangement are numbered. Private analysts are now projecting that Greece's economy will contract by over 7 percent in 2012 and its rate of unemployment will exceed 24 percent of its labor force by year-end. This would follow a 16 percent decline in the Greek economy over the past three years, which Greek policymakers are now correctly characterizing as the Greek equivalent of the U.S. Great Depression…. If, as seems more than likely, the European crisis does come to a head over the next couple of months, President Obama might learn that what goes around in politics all too often comes around. For much as he was swept into the White House some four years ago by the Lehman bankruptcy in mid-September 2008, he very well could find himself swept out of office by a European crisis this fall over which he has virtually no control.” More and more commentators are predicting a major turn of events in Europe this fall. I remain cautious and suggest you do also.
From the “I wish I had thought of that line” file…..– We have all experienced something like this situation at least once…… During a symphony concert, the famous music critic Henry Taylor Parker had the misfortune to be seated near some persistent talkers. After he had taken enough of it, he turned around in his seat and said to the annoying offenders, “Those people on stage are making such a noise I can’t hear a word you’re saying.” Great line!
Are the Rich Currently Hoarding Cash?– A CNBC article on August 8th by Robert Frank pointed out that …. “the One Percenters are hoarding three times as much cash as they were two years ago. They are investing just 44% in financial markets – down for 76% in 2007.” I’m not sure the point of the article. Are we all supposed to do what the 1% of the population does? It’s a little like all those who focus on taxing these people more. It is supposed to make us feel better. What it does is it pushes them into tax exempt income vehicles or drives them away to seek a lower tax place to live (taking their money with them!). This economy will get back on track when the great middles class starts believing that the country is on the right track. Current polling shows that almost 70% believe we are on the wrong track. Our economy is “consumer spending” based. There are precious few rich people out there. That’s why we call them the One Percenters. If the other 99% start hoarding cash, stop spending and stop investing, the result would be another Great Depression. I don’t frankly care how much cash Bill Gates has in money markets. There are great investments available which pay great dividends. Get paid while you wait. Trust me, the rich do that all the time but nobody writes stories about that.
What’s going on at the Fed?.... – A recent article pointed out the level of disagreement of the Fed area mangers on the subject of how much and/or if the Fed should be doing more to stimulate the economy particularly. The disagreement between the president of the Dallas Fed, Fisher and the Boston Fed president, Rosengren illustrates the dilemma. Fisher has said, “I believe we (the Fed) have done enough!” While Rosengren believes the Fed should continue to buy bonds (aka: quantitative easing, or QE3) until the unemployment situation improves. Bernanke is walking a fine line here. He’s not likely to take further action unless there is a stronger consensus among the group of Fed presidents or the economy slips rapidly back into recession. Either way, interest rates should remain very low for the foreseeable future.
From the Dorothy Parker file…. – A young man looking loftily around at a party said, “I’m afraid I simply cannot bear fools!” “How odd,” said Dorothy Parker. “Your mother could, apparently.”
Do you offer a “Stock Only” Managed account? – Yes! For those who prefer to invest in stocks, bonds and ETF’s on an individual basis as opposed to mutual funds, etc., I do have stock portfolio accounts that are co-managed with the Investment Policy Committee at Westminster Financial. These accounts are strictly fee based accounts and therefore, commission free. They utilize option strategies along with both technical and fundamental analysis. They are set up and maintained based on your risk tolerance, time horizon and income needs. Careful consideration is given to tax deferred accounts like IRA’s and taxable accounts. If you would like more info on these types of accounts, please contact me so we can discuss them.
Answer to the trivia question…. – none other than John Hancock, the first governor of Massachusetts
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*The opinions and forecasts expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions. This newsletter is not to be construed as an offer to sell or the solicitation of an offer to buy any securities and should not be construed as a recommendation of any specific security. Information provided is obtained from sources deemed to be reliable, but Westminster Financial Securities, Inc. (WFS) does not guarantee the accuracy or completeness of the information or make any warranties with regard to the results to be obtained from its use. WFS shall not be liable for any claims or losses of any nature, including, but not limited to, lost profits, punitive or consequential damages. Past performance does not guarantee future results.
Sr. Vice President, Investments
Westminster Financial Companies
264 South River Rd. - Suite 550
Bedford, NH 03110
Tel: (603) 232-8308
Fax: (937) 898-0119