Mark Martiak Provides His Confident Views on the Markets on CNBC Closing Bell 07/23/2014

Mark Martiak, Premier Wealth Advisors, shares his commentary on CNBC’s Closing Bell. He show confidence the market will go higher.

You can find more videos of Mark on his blog and on his YouTube channel.

Mark Martiak on CNBC Closing Bell 6/10/2014

Mark shares his commentary on CNBC’s Closing Bell about the fixed income markets in present day.

You can find more videos of Mark on his blog and on his YouTube channel.

 

 

The Rise of Activist Investing

It seems almost every investing era has a signature theme that helps define it. To cite a few: the Nifty 50 era of the 1960s, the Great Inflation of the 1970s, the takeover craze of the 1980s, and the dot.com boom of the 1990s and subsequent bust of the 2000s. While there are certainly a variety of contenders for thematic dominance in the current era, one trend that is rapidly gaining prominence is the rise of the activist investor.

These investors, who include Carl Icahn of Icahn Capital Management, Daniel Loeb of Third Point, and William Ackman of Pershing Square, among others, might be thought of as a counterbalance to complaints related to shareholder unfriendly corporate behavior such as excessive executive pay and lackluster or negligent management.

Unlike the takeover artists of the 1980s, activist investors are not necessarily looking to cause the outright sale of the companies they target; instead, the focus of this new breed of corporate investor is to improve the efficiency of a company’s operations in order to increase its return on capital to shareholders. This is not charity, of course, as activist investors typically are major shareholders in the companies they target, and stand to benefit accordingly if their activism results in higher share prices.

While there has been much debate about the actual effect of the activist investor movement (do they simply increase short term payouts at the cost of long-term profitability?), it seems clear that it has in a number of cases caused corporations to become more focused on increasing shareholder value. This has resulted in activist-driven actions aimed at unlocking value for shareholders such as McGraw Hill Financial’s move to discard lower-margin businesses, or Marathon Oil’s decision to spin-off its refining operations, both spurred by activist investor Barry Rosenstein.

As the activist movement has gained steam, it has even reached the boardrooms of some of the largest and most prestigious companies in the country. Apple, for instance, has found itself under pressure from Carl Icahn to use some if its immense cash stash to benefit shareholders in the form of increased dividends and share buybacks. As Apple has taken steps in this direction, investors have signaled their approval, driving Apple stock above the $600 level in recent trading sessions.

While not every activist effort is successful in producing the desired corporate reaction, the movement has reached a degree of respectability unheard of back in the confrontational days of the 1980s takeover boom, with corporations and large investors in a number of cases working side by side with activist investors to maximize shareholder value. An example of this more cooperative approach was seen when Icahn tweeted that he was having lunch with Tim Cook to discuss his thoughts on the company’s strategy.

While there’s no telling how enduring the movement will be, the activist investor phenomenon seems to be well established at this point, and for investors who stand to benefit from the movement’s ability to get corporations to increase their return on capital, that’s not such a bad thing.

 

 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Will Michael Lewis’ HFT Exposé Change Wall Street for the Better?

With the furor over HFT (High Frequency Trading) reaching critical mass in the wake of Michael Lewis’ book Flash Boys, considering the implications of the controversy surrounding HFT is an exercise well worth conducting. In November of last year at Charles Schwab’s Impact Conference I witnessed the Steve Kroft interview of Michael Lewis that was recently featured on 60 Minutes. I remember thinking at the time that this wasn’t an issue of interest only to a narrow subset of traders, but rather something that deserved the attention of anyone taking part in the capital markets, whether on Wall Street or on Main Street.

Technology Outpaces Regulation

A core takeaway from Lewis’ book is that modern-day technological advances in the form of HFT have, to some degree, outstripped the ability of regulators to police markets and keep them fair for all participants. By taking advantage of super-fast computers and location arbitrage (enabled by lighting-fast connections and the ability to co-locate computers at an exchange), HFT traders have been able to, among other things, front-run the orders of market participants with slower connections, thereby gaining what appears to be an unfair advantage based on technology rather than any superior understanding of market conditions or trends (factors traditionally utilized to enhance investment returns).

If you know what other market participants are going to do before they do it that is a valuable piece of information, and insights of this type appear to have been used by certain HFT shops to realize large gains by repeatedly booking profits in small increments with little or no risk of loss.

The Regulatory Reaction

The hubbub created by Flash Boys has increased the pressure on market regulators and law enforcement officials already investigating HFT practices, including the SEC, FBI, and New York’s Attorney General, to deal with the issues cited in the book. The outcry over the unfairness involved in some HFT techniques now seems likely to lead to reform of the electronic trading systems underlying today’s markets in an effort to rectify the issues raised in Lewis’ book. While the practices exposed in Flash Boys may not have caused great injury to any particular investor, the ability of HFT shops to make very small amounts of money consistently by getting in front of the trades of other investors allowed them to amass billions of dollars in profits at the collective expense of investors lacking the ability to take advantage of such techniques.

What it Means for Investors

The existence of HFT hasn’t changed the value of focusing on long term wealth creation via the capital markets. Investors who have the discipline to ride out the volatility that comes with investments in these markets shouldn’t let the existence of HFT impinge on their wealth creation strategies. That being said, if regulatory efforts in the wake of Lewis’ book are successful in reining in the excesses of HFT it will be a significant victory for market transparency, as well as serving to bolster investor confidence in the fairness of the capital markets.

Quarterly Market Review: January – March 2014

The Markets

markets image Profit-taking from 2013′s strong run as well as currency and credit problems in several emerging markets threatened to derail the stock market as 2014 began. Those factors, combined with the prospect of less support from the Federal Reserve, a slowing Chinese economy, and renewed Cold War tensions, led to a volatile quarter for equities. After a dismal January, equities regained some strength once Congress avoided a fight over raising the debt ceiling limit. By early March the S&P 500 had hit a new all-time closing high; on the bull market’s fifth anniversary, the S&P was only a couple of hundred points away from having tripled since its March 2009 low. At that point the NASDAQ was up more than 4% for 2014, well ahead of the S&P 500 for the year and more than 5 percentage points ahead of the Dow industrials, which spent much of the quarter in negative territory.However, the rest of March was a great equalizer, narrowing the gaps between the various indices. A slump in tech and biotech stocks handed the NASDAQ its worst month since October 2012 and cut its year-to-date gain to half a percent. The small caps of the Russell 2000 also suffered in late March. However, the S&P 500 proved more resilient, managing to hang on to its 2014 gains.

The international uncertainty lured back money that had been invested overseas in recent years and helped counterbalance some of the fear about Fed monetary policy. Money that had been pulled from bond mutual funds during 2013′s second half began to flow back in during the first quarter of 2014,* helping to cut the benchmark 10-year Treasury yield almost a third of a percent as prices rose. After last fall’s slide, gold rallied from nearly $1,200 an ounce to almost $1,380 before the late-March swoon took it down to just under $1,300. The price of oil gained a couple of dollars a barrel in Q1, ending at just over $100 a barrel, while the dollar remained little changed.

 

MARKET/ INDEX 2013 CLOSE AS OF 3/31 MONTH CHANGE Quarter CHANGE YTD CHANGE
DJIA 16576.66 16457.66 .83% -.72$ -.72%
NASDAQ 4176.59 43198.99 -2.53% .54% .54%
S&P 500 1848.36 1872.34 .69% 1.30% 1.30%
Russell 2000 1163.64 1173.04 -.84% .81% .81%
Global Dow 2484.10 2584.10 .73% .75% .75%
Fed. Funds .25% .25% .25% 0 bps 0 bps
10-year Treasuries 3.04% 2.73% 7% -31 bps -31 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

 

Quarterly Economic Perspective

  • U.S. economic growth slowed in the fourth quarter of 2013, according to the Bureau of Economic Analysis. The 2.6% annualized increase in Q4 gross domestic product was lower than Q3′s 4.1% gain. That helped cut inflation-adjusted GDP for all of 2013 to 1.9%, compared to 2012′s 2.8%. Meanwhile, after-tax corporate profits were up 2% for the quarter–slightly less than in Q3–and a 3.7% drop in corporate taxes last year left corporate after-tax profits up 6.9% for all of 2013
  • Unemployment barely budged during Q1, remaining not far above the 6.5% unemployment rate that the Fed had targeted as a potential threshold for raising short-term interest rates. However, at its March meeting–the first under new chair Janet Yellen–the Fed’s monetary policy committee said any interest rate decision will be based on a variety of economic data, and will likely come “a considerable time” after the end of its bond purchases, now down to $55 billion a month after three rounds of tapering. Most committee members expect the Fed’s near-zero target rate to end 2015 at 1%.
  • In the wake of Russia’s Crimean takeover, European Union countries and the United States agreed to prepare tough economic sanctions that could be imposed if Russia makes further moves to destabilize Ukraine. Also, the G8 nations canceled the summit that had been scheduled to be held in Sochi in June and ejected Russia from the group.
  • European leaders declined to take stronger action to counteract an inflation rate so low that it raised concerns about the possibility of deflation. However, central banks in some emerging-market countries, including Brazil, India, Turkey, and South Africa, raised rates sharply to try to stem capital outflows from their currencies and/or fight inflation.
  • Now you see it, now you don’t: Mt. Gox, at one time the largest Bitcoin exchange, filed for bankruptcy after 850,000 bitcoins–nearly half a billion dollars’ worth of the virtual currency–disappeared faster than Ukrainian flags over Crimean government buildings. However, Mt. Gox subsequently said it had located 200,000 bitcoins in digital wallets used before June 2011.
  • Housing suffered from frigid weather throughout much of the country as housing starts and sales of both new and existing homes saw strong declines during the quarter. However, building permits issued in February–an indicator of future activity–offered shoots of hope, rising 7.7% during the month.
  • U.S. manufacturing also appeared to be affected by winter weather, though by the end of the quarter, two key Fed manufacturing surveys as well as that of the Institute for Supply Management® had shown signs of rebounding. Manufacturing data from China raised bigger concerns. Indications that the country’s breakneck growth could be slowing across the board raised concerns about the potential global impact if reduced demand there affects emerging markets whose economies rely on exporting commodities to China.
  • Overall inflation remained tame at both the consumer and wholesale levels. Both annual inflation rates have hovered in the neighborhood of 1% since October, giving the Federal Reserve plenty of breathing room to keep interest rates low.
  • The Senate Banking Committee’s bipartisan leadership announced plans to replace Fannie Mae and Freddie Mac with a system of government-backed mortgage insurance that would be administered by a new Federal Mortgage Insurance Corp. If adopted, the legislation would require a minimum down payment for FMIC loans, create a mechanism for standardizing mortgage-backed securities based on them, and require private lenders to suffer a 10% loss before insurance payments would be triggered.

Eye on the Month Ahead

As a relentless winter finally begins to release its grip on much of the country, investors may get a clearer sense of whether sluggish Q1 economic data was primarily the result of bad weather or something more troubling. Speculation about the timing of a Fed rate hike will likely continue, along with Fed tapering. Overseas, the state of China’s economy will continue to be a focus, and the potential for tougher economic sanctions against Russia, which could affect global oil supplies, also bears watching.

Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.

DISCLOSURES
All third -party materials are the responsibility of their respective authors, creators, and/ or owners. First Allied is not responsible for third party materials , and the information reflects the opinion of its authors, creators, and or owners at the time of issuance, which opinions and information are subject to change at any time without notice and without obligation of notification. 
These materials were obtained from the sources believed to be reliable and presented in good faith, nevertheless, First Allied has not independently verified the information contained therein, and does not guarantee its accuracy or completeness. The information has no regard to the specific investment objectives, financial situation, or particular needs of any specific recipient, and is intended for informational purposes only and does not constitute a recommendation, or an offer to buy or sell any securities or related financial instruments, nor is it intended to provide tax, legal or investment advice as to the implications (including tax) of investing in any of the companies mentioned.

Securities offered through First Allied Securities Inc., Member FINRA/SIPC,
Advisory services offered through First Allied Advisory Services,
Premier Financial Advisors and First Allied are not affiliated

Market Month: February 2014

The Markets

Screen Shot 2014-03-12 at 4.09.43 PMEquities recovered from January’s losses in fine style. The Nasdaq continued to lead the pack year-to-date, but by the end of the month the S&P 500 had set a fresh all-time closing high. The small caps of the Russell 2000 also had a strong month, leaving the Dow industrials the only one of these four domestic indices down for the year despite its February gains. Unlike its domestic counterpart, the Global Dow barely managed to squeak into positive territory for 2014.

The second month of cuts in the Fed’s bond purchases seemed to have little impact on the benchmark 10-year Treasury yield. Meanwhile, gold saw a rebound from its recent losses, gaining almost $100 an ounce and hitting its highest level so far this year before settling back a bit to end at roughly $1,320.

 

MARKET/ INDEX 2013 CLOSE PRIOR MONTH AS OF 1/31 MONTH CHANGE YTD CHANGE
DJIA 16576.66 15698.85 16321.71 3.97% -1.54%
NASDAQ 4176.59 4103.88 4308.12 4.98% 3.15%
S&P 500 1848.36 1782.59 1859.45 4.31% 0.60%
Russell 2000 1163.64 1130.88 1183.03 4.61% 1.67%
Global Dow 2484.10 2389.81 2484.68 3.97% 0.02%
Fed. Funds .25% .25% .25% 0 bps 0 bps
10-year Treasuries 3.04% 2.76% 2.66% -1 bps -38 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

The Month in Review

• The U.S. economy grew a bit more slowly in Q4 2013 than previously thought (2.4%). According to the Bureau of Economic Analysis, that put growth for all of 2013 at 1.9%.
• The 113,000 new jobs added to the U.S. economy nudged the unemployment rate down 0.1% to 6.5%. Meanwhile, the Bureau of Labor Statistics said the labor force participation rate rose slightly to 63%, and the number of long-term unemployed fell by 232,000 during the month.
• Congress agreed to avoid renewed conflict over an increase in the debt ceiling by passing legislation that resolves the issue until March 2015.
• Tokyo-based Mt. Gox, at one time the largest Bitcoin exchange, filed for bankruptcy after days of suspense after its website went dark. The company said hackers may have made off with roughly 750,000 bitcoins owned by customers and 100,000 of its own–the equivalent of nearly half a billion dollars’ worth of the virtual currency. Meanwhile, Federal Reserve Chair Janet Yellen told a congressional committee that the Fed has no authority to regulate Bitcoin but suggested that Congress could look into doing so.
• Manufacturing showed signs of slowing in the United States, where durable goods orders were down for the third of the last four months thanks to a decline in transportation-related orders and the Institute for Supply Management’s gauge fell more than 5%. Meanwhile, Markit/HSBC’s survey of Chinese purchasing managers showed contraction there, though seasonal distortion may have played a role.
• Housing suffered from frigid weather throughout much of the country. Housing starts, building permits, and sales of existing homes all saw declines, though new-home sales were up slightly for the month and construction spending also rose.
• Inflation remained well within the Fed’s comfort level. The biggest monthly increase in the cost of electricity since March 2010 pushed up consumer prices by 0.1% for the month, putting the annual rate for the last 12 months at 1.6%. Meanwhile, the Bureau of Labor Statistics said the wholesale inflation rate was up 0.2% in January, but the annual rate was only 1.2% over the last year.

Eye on the Month Ahead

The Fed will meet again in March and may have to decide whether weaker economic reports in the last month or so were a function of bad weather or signs of something more significant. Also, the situation in Ukraine could affect the psychology of the markets.

Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.

 

IMPORTANT DISCLOSURES
All third -party materials are the responsibility of their respective authors, creators, and/ or owners. First Allied is not responsible for third party materials , and the information reflects the opinion of its authors, creators, and or owners at the time of issuance, which opinions and information are subject to change at any time without notice and without obligation of notification.
These materials were obtained from the sources believed to be reliable and presented in good faith, nevertheless, First Allied has not independently verified the information contained therein, and does not guarantee its accuracy or completeness.
The information has no regard to the specific investment objectives, financial situation, or particular needs of any specific recipient, and is intended for informational purposes only and does not constitute a recommendation, or an offer to buy or sell any securities or related financial instruments, nor is it intended to provide tax, legal or investment advice as to the implications (including tax) of investing in any of the companies mentioned.

Securities offered through First Allied Securities Inc., Member FINRA/SIPC,
Advisory services offered through First Allied Advisory Services,
Premier Financial Advisors and First Allied are not affiliated

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2013