Quarterly earnings will dictate market’s direction next week

Fourth quarter earnings results for the nation’s corporations kicked-off this week. Investors will focus on those numbers as they wait for the really big show at the end of next week. Our president-to-be will be inaugurated next Friday with all the usual fanfare. Investors and the markets usually ignore these displays of pomp and ceremony, but not this time. Whether it is the mercurial nature of our new president, or the fact that a lot is riding on how successful he will be out of the gate, the stock market is hanging on every word (or tweet) he makes. Consider his press conference this week. To many, he did not say enough about his corporate tax cutting or spending plans. Traders sold the market down in a hissy fit. The pharmaceutical and biotech sector sold off hard when Trump reiterated that drug companies would be called on the carpet for their pricing behavior. Buyers, however, saw the market’s weakness as an opportunity. As a result, the damage was contained and markets have since recovered. This, I believe, will be what we can expect from the markets in the coming week. Trump’s first hundred days, according to his transition team, are chocked full of initiatives, some, truly revolutionary. I don’t see the markets taking a big fall unless it is clear that all of Trump’s efforts will amount to naught. In the meantime, earnings will drive the averages up (or down) depending on how robust the results actually are. Readers, by now, should know that the earnings game is a rigged casino where earnings estimates are deliberately low-balled so that...

When your broker doesn’t want you anymore

Across the nation, various financial institutions, affected by the new “fiduciary” rules issued by the Department of Labor, are making some tough decisions. Don’t be surprised if your broker informs you they can no longer manage your company’s 401 (K) or other defined contribution plan. This happened to one of our clients just this week. The couples, both self-employed, had used one of the nation’s largest brokers to house and manage their money purchase plans at their companies. A money purchase plan, for those who don’t know, is like a pension plan where employees make contributions based on a percentage of annual earnings. This is standard stuff along with profit-sharing plans, 401(k) s and the like. Corporations use these plans as fringe benefits to reward and encourage retirement savings for owners, managers and employees. All of the above are tax-deferred savings plans and as such fall under the Department of Labor’s new rule (starting in April of this year). The rule requires financial professionals who give advice on retirement accounts to act as fiduciaries for their clients. This means they must act in their client’s best interests ahead of their own financial gain and that of their company’s. They will be required to disclose their compensation and any conflicts of interests as well. In our case, since we are already fiduciaries, we were able to swiftly transfer both the husband and wife’s accounts (worth over $1 million each) to our care and expertise without skipping a beat. We expect that as more brokers and insurance companies come to grips with these new responsibilities toward their client base, we will...

Markets in good shape for now

As the equity markets continue to consolidate around record highs, investors wait for the presidential hand-off on January 20th. This could turn out to be the best thing that could happen for the bulls. Remember readers, there are two kinds of corrections; the kind we have been experiencing for the last three weeks, and the nasty kind that no one really wants to go through. The longer we back and fill, the greater the chances that the next move will be higher. The caveat, of course, is that investors’ expectations will be satisfied, once Donald Trump and Congress get down to work. That could be a big if. So far the only thing the press, the politicians and Donald Trump appear to be engaged in is a discussion on whether or not the Russians tried to hack the DNC and/or RNC. No one has said they got away with it. Come on people, why are we wasting time on this subject? Ask yourselves how many times the United States government has actively or surreptitiously interfered with another country’s election results? My God, American legislatures and presidents have actively condoned all sorts of black ops, bribery and election rigging in other countries for as long as I have been alive. In return, every other country does the same thing with varying success. It is what countries do. The repeal of Obamacare was the other, more substantial, topic of conversation this week. Note, I use the word conversation, as opposed to any action or concrete proposal, from those who want to trash the Affordable Care Act. As I have written in...

The gym is counting on your New Year’s resolution

It’s that time of the year again when people like me; hate people like you. January is the month when all those good intentions to get healthy and fit translate into a 12% bump in health club memberships. If only all those Americans who join gyms this month would stick with it. Sadly for them (but not for me) all those goods intentions dissolve by the end of the first quarter. The health clubs of America get back to normal by March. Actually, 4% of new members won’t make it past the end of January and 14% drop out by the end of February. Well over half of new members will fade by the end of the quarter. The gym owners have no problem with that. They assume that only 18% of new members will hang in there and use the gym regularly. You see, the idea of fitness (as opposed to actually doing it), is extremely popular here in America. We all know that, regardless of our good intentions, the population of unhealthy and overweight Americans grows larger all the time. Over 70% of Americans are overweight, according to the latest statistics. That leaves the fitness industry with a practically inexhaustible pool of potential buyers of their services. Statistics for 2016 indicate that worldwide revenues in the health club industry grew to $81 billion. Over 151 million members visited nearly 187,000 clubs. As you might expect, the U.S. leads all markets in club count and represents about 55 million memberships. Brazil and Germany are our runner-ups.  But health club memberships are also strong in both the Middle East...

Markets square up in yearend trading

It was an uneventful week where some tax-selling, combined with anemic volume, gave us another week of sideways consolidation. There is a good chance that this trend will continue into next week as well. Since the Santa Claus rally came early this year, I was not surprised to see the market’s climb slow down. It is interesting that the prognosis for the markets in January and beyond is all over the place. The bulls believe that stocks will continue to climb through the first 100 days of the Trump administration. At the same time, interest rates will continue to rise and the dollar strengthens, although maybe not at the same pace that they have since the election. If so, we would be looking at a S&P 500 Index at 2,350-2,400 from its present level of 2,250. The Dow would break the 20,000 mark and keep going. Small cap stocks, as represented by the Russell 2000 index, would continue to outperform practically everything else, except maybe the financials. It is a rosy view, held mainly by those who either voted for Trump or have found ‘religion’ since the election. The bears (although even they aren’t that negative) expect markets to consolidate in January and February. Their argument: the markets have gotten ahead of themselves. If interest rates and the dollar continue to climb, they reason, stocks will have to sell-off. The strong dollar will negatively impact companies that depend on exports for profits, while higher rates (say 3% on the U.S. Treasury ten-year note) would provide real competition for the S&P 500 Index dividend yield, which is currently yielding around...