2014 First Quarter-A Mood Shift

The year 2013 ended on a high note with the S & P up a whopping 29.6% for the year. The first quarter 2013 saw the S & P up 10%. The Russell that includes small and mid cap securities rocketed up 37%. With that stellar performance investors looked to 2014 with rare optimism. Only 16% of investors were bearish. However, starting on day one of 2014 the markets and the world turned turbulent. The major averages sold off sharply, then recovered to end the quarter barely nudging from their 2013 levels. The Russell did not fare as well. It was down 4.7% for the quarter, pointing to an exodus from small and mid cap stocks. The average investor pulled $4 billion out of mutual funds.

Some of darlings of 2013 saw prices selling well off their highs. Facebook (FB) is down 16% and Tesla off 20%, placing it in sell territory. Investors lost some of their enthusiasm for IPOs. A recent offering, Candy Crush, fell 16% on the first day of trading.

One cloud overhanging the market is the Fed’s tapering program. From purchases of $85 billion per month in 2013, monthly cuts of $10 billion per month has brought purchases down to $55 billion per month. This has taken a large pool of trading capital off the table. The Fed has also given a subtle signal that they would raise interest rates in 2015. This is much sooner than previously stated.

Investor exuberance of 2013 has pushed markets in North America and Europe into overbought territory with a reading 106% of aggregate fair value. By contrast 2013 saw Asia Pacific markets in overbought condition. In 2014 this has flipped and now Asia Pacific markets are in oversold territory with a reading of 92% of intrinsic fair value.

On the global stage we see increasing unrest in Turkey considered a key ally to the West. Then, in short order, we saw the Russian take over of Crimea, a Ukrainian province. Banks in Russia and the West are scrambling to protect their assets. Russian bankers are pulling money from the West and bringing it home to Russia. However, there are large Russian and Ukrainian investors who are fearful of Russian currency curbs and are moving money into the Euro.

The aggregate of these factors has changed the mood of investors as we move into the second quarter. Analysts are shifting their calls to more conservative stocks that can withstand uncertainty in the long run. Names like Unilever NV (UND), Coca Cola (KO), McDonalds (MCD) and Wal Mart (WMT) are mentioned. In the technology you have IBM (IBM) and Cisco (CSCO).

Morningstar considers the energy sector undervalued. They mention names like Ultra Petroleum (UPL), Devon Energy (DVN), Denbury Resources (DVN) Energy Transfer Partners (ETP) and Tesoro (TSO.

For investors, this is wake up call to take a close look at their portfolios. It can be time to weed out the weak sisters and either go to cash of move into more defensive stocks. It could be prudent to place stop loss orders to protect existing profits.

The Fed’s New Policy Changes. What are they Telling Investors?

Could the Fed’s new policy changes signal the end of the bull market? There is a often quoted saying: “Don’t fight the Fed.” If that is the case, perhaps it’s time to step back and analyze exacting what took place this week. The Fed uses two ways to communicate with the public. It holds eight meetings each year. The Chairperson, in this case Janet Yellen, issues a consensus statement on overall Fed policy and issues some guidance going forward. The second and equally powerful communication comes from the minutes of the Federal Open Market Committee (FOMC) whose job it is to oversea the Fed’s market operations and steer interest rates in line with committee consensus.Continue Reading

Markets React to Crimea Vote

The seeming sense of world cooperation we witnessed during the Russian Olympics was shattered on the closing day when President Vladimir Putin began mobilizing troops along the border between Russia and Ukraine. Within days he moved some 60,000 Russian soldiers to the border. In rapid fire, he then announced a referendum to be held in the Crimea to determine if it was to remain Ukrainian or join Russia. The referendum was held on March 16, 2014 with 82% of the vote affirming their choice for annexation to Russia by an overwhelming 95%. The next step will be for the Russian legislators to draw up the annexation documents on March 21st.Continue Reading

Investing in the Financial Services Sector

Since the start of the new year the stock market has been on a bumpy ride with sharp ups and downs. There is an old adage that says: “It doesn’t make any difference who wins and loses, your brokerage firm will always make their commission. The same is true for retail transactions. Whenever you use your credit card, the card company makes money. With that in mind, let’s look at the key stocks in the Financial Transaction Services Sector. These are companies that service large banks, brokerage houses and retail purchases. Here are some stocks that have been moving higher. (Barchart.com)Continue Reading

What is the Buffett Indicator Telling Us About the Stock Market?

After a wild January and February 2014 that saw the averages plunge then recover quickly, we wonder what’s in store for the rest of the year. The pundits and soothsayers have started to polish their crystal balls and peer into the future. Unlike the goldie locks scenario of 2013, this year is froth with challenges and uncertainty. At the end of last year we saw the US Federal Reserve start to taper their bond buying program. Then, Janet Yellen, the incoming Chairperson of the Federal Reserve, noted that she intends to continue tapering again this year. Of the $85 billion in purchases we now have it down to $65 billion per month. The stock market has been fueled to record highs in large part through the steady flow of funds from the Fed’s quantitative easing. Now with this source of revenue slowing drying up, the question on investor’s minds is will the market continue its push into new highs this year or will it stall out?Continue Reading

Growth Stocks for 2014

We are in March now, with a bumpy ride in the past couple of months. The indices were hit hard and now have bounced back to their old highs. The bulls are looking for more buying here to punch the averages into new high ground. Whether a move into new highs is the real thing or just a bull trap remains to be seen. Meanwhile, we’ve had time to do some searching for growth opportunities in 2014.Continue Reading

Investing in Solar Stocks

This week the Ivanpah Solar Electric Generating System started up in the Mojave Desert, 45 miles southwest of Las Vegas, Nevada, making it the largest in the world. It stretches for five square miles and has 350,000 mirrors, each the size of a garage door sitting atop 459 foot towers. The mirrors reflect sunlight to boilers that create steam that runs turbines, which in turn, produces electricity.Continue Reading

Investing in Agriculture Stocks

This week President Obama signed a $956 Billion dollar farm bill. As you can see just by the number, agriculture is a huge business in the United States. Now only do we have the raw commodity producers, but also we have the slew of businesses that bring the food to our supermarkets.Continue Reading

The Financial “Butterfly Effect.”

The “Butterfly Effect” is a theory that postulates that a small change in the initial condition of a system causes a chain effect that can change the outcome of an event. The example often used is that a butterfly flapping its wings in South America can affect the trajectory of a hurricane headed for Texas. In other words a small event can change the outcome and lead to large scale alterations of events.Continue Reading

Refinance Your Mortgage Under the Federal HARP Program

Many Americans are not aware that they can refinance their existing mortgage even if they are “under water” (owe more than their home is worth.) Only 10% of eligible mortgage holders have taken advantage of the program. When the housing bubble burst, Congress passed two laws to help home owners avoid foreclosure. One program termed the Home Affordable Modification Program (HAMP) is specifically designed for owners who are on the verge of foreclosure. It helps to restructure the mortgage so the homeowner can continue to make payments. The second program called Home Affordable Refinance Program (HARP) is designed to help homeowners refinance their mortgages at low rates.Continue Reading