1/13/14 – ‘Fishing’ for clients…can be worse than ‘phishing’

Quote of the Day from the Friars Club Encyclopedia of Jokes: “In 1962, all the expression ‘safe’ sex’ meant was that you move the bed away from the wall so you wouldn’t bang your head.” – David Letterman 

Bloomberg Quote of the Day: “Don’t cry because its over. Smile because it happened .” – Dr. Seuss…TB will leave it to you to discern what that means…

This week’s economic calendar is full of important indicators. The highlight of the week will be the December Retail Sales (Tuesday), December PPI (Wednesday) and December CPI (Thursday). We will also get December Treasury Budget (Monday), December Import & Export Prices and November Business Inventories (Tuesday), December Empire State Manufacturing (Wednesday), December Philadelphia Fed Survey (Thursday) and December Housing Starts, December Industrial Production, January Consumer Sentiment Preliminary, and December JOLTs Job Openings (Friday). Courtesy of Economic Advisory Service

Bloomberg Top Stories:

*Suntory Buying Jim Beam for $16 Billion to get Maker’s Mark, Canadian Club–arigato!

*Federal Reserve Said to Probe Banks Over Roles in Foreign-Exchange Fixing

*Ermotti Says UBS Isn’t Considering Spinoff of Its Investment Banking Unit

*Dollar Weakens With U.S. Stocks as Nickel Rallies on Indonesia Export Ban

*Juniper Networks Targeted by Activist Fund Elliott for Cost Cuts, Buybacks

*Stocks Losing Allure for Sorrentino With highest Values to Bonds Since ’11 – heed!

*GM’s Ammann Says Closer to First Dividend Since Suspending Payout in 2008 – so???

*Greenwich Plots Biggest Debt Sale in Hedge Fund Capital’s 358-Year History

*SodaStream Plunges Most Since 2011 as Preliminary Earnings Trail Estimates

*Abortion Foes Rebuffed as U.S. High Curt Won’t Revive Arizona 20-Week Ban – good!  

*Madoff Trustee Appeal for Suit Against Banks Draws U.S. High Court Review

Friday’s Market Summary:

Volume slipped on a day that ended the weak on a devastating payrolls report – although by ignoring the worst labor participation rate in 35 years, one could get excited about the drop to below 7% on unemployment – if one was a fool or deceived by the pundits on CNBC…or ignored the worst hiring in three years! That said, all indices were up, despite several being negative intraday, but the worst performers were the Dow +0.1% and S&P +0.2%, along with NYSE Financials up just 0.1%: the components were even worse: Brokers -0.1%; KBW Banks -0.4% and Nasdaq Banks -0.2%! A trifecta of goats!

NYSE Volume was dipped to a below average 3.33B shares – very light for a payrolls Friday – vs 3.56B vs 3.63B shares – highest since December 20th Real NYSE Volume also slipped to a below average 669M shares vs 697M vs 759M – not only highest but first time above 700M since 12/20! Also, volume was above 600M every day last week! Dow Utilities rose 1.3% vs +0.7%, to take the honors followed by Dow Transports +1.2% vs +1%, The Russell 2000 rose 0.5% and completing the set, the two Nasdaq’s rose 0.4% to end an otherwise forgettable week

Apple continues to trade ‘psychotically’ losing 0.7% vs -1.2% vs Wednesday’s 0.6% gain vs -0.6% vs +0.8% vs -2.2% vs -2.4%. It is now well below the 40/50 day m/a’s and is a significant component of the two Nasdaq’s (especially the 100) and the S&P 500, weighting unavailable.

Advance/Declines and Breadth were both positive. The VIX took a header which could be bullish, but based on the S&P’s performance could be a warning: 12.14 -.75, lowest close since 8/5/13 while range was very low at 12.14-12.80. What happened following 8/5 you ask? It fell 4.5% before bottoming on 8/27 – are you in…or out? As they say: the trend is your friend…but…what trend???

The Nasdaq 100 gained 12.5 points vs -15 vs +10 vs +31 vs -12 vs -25 vs -28. Breadth was slightly positive. Seven members gained more than one index point, while just two lost more than a point: MSFT +3.8 vs -1.7 vs -4.8!!! vs +1.9 vs -5.6! BIIB +2; CMCSA +1.3;  FB +1.2 vs -1.7; ISRG +1.1; BIDU +1.1 vs -1.5; INTC +1;  APPL -2.8 vs -5.6!!! vs +2.7 vs -3 vs +4.4 vs -9.7!!! vs -6.4! vs +5.3! vs -2.6 vs -3 vs -2; AMZN -1.4.

Dow 30 +0.1% vs -0.1% vs 0.4% vs +0.6% vs -0.3%; Dow Transports +1.2% vs +1% vs +0.3% vs +0.7% vs -1.3%!Russell 2000 +0.5% vs +0.1% vs – vs +0.9% vs -0.8%; Dow Utilities +1.3%!?! vs +0.7% vs -0.5% vs +0.8% vs +0.2%; S&P 500 +0.2% vs – vs — vs +0.6% vs -0.3%; Nasdaq Composite +0.4% vs -0.2% vs +0.3% vs +1% vs 0.4%; NDQ 100 +0.4% vs -0.4% vs +0.3% vs +0.9% vs -0.3%.

*NYSE Volume was lower at a below average 3.33B share vs 3.56M vs 3.63B vs 3.48B vs 3.23B vs 2.76B vs 3.06B vs 2.3B vs 2.27B vs 2.04B. The record high (?) is the 4.97B shares of 12/20/13 and Q3 end of quarter while 11/29’s 1.59B is weakest of 2013). REAL NYSE Volume also declined to a well below average 669M shares vs 697M vs 759M vs 699M vs 669M vs 544M vs 624M vs 568M vs 462M vs 424M, from the new 12-month low of 272M. The average since 12/20 is now up to a still weak 571M shares with a high of 759M! The 12 month is 719M shares. Last year there were just TEN 1B+ share sessions! There were 39 800M+ shares in 2013: 18 up, 19 down, three mixed.

*New 52 week highs have ranged from 33-864. They slipped to 411 vs 435 vs 355 vs 316 vs 271 vs 217 vs 201! Recent high is a super-strong 890!!! New lows were lower at a weak 30 vs 44 vs 30 vs 20 vs 30 vs 23 vs 43 vs 78 vs 72 vs 76 vs  60 vs 44 vs 68 vs 81 vs 127 vs 131. Recent high is 353; low 20!!!  

  1. Advance/Declines were positive: +2.5x vs +1.1x vs -1.3x vs +1.9x vs -1.2x (recent range -17.5x to +6x) on NYSE and +1.4x vs -1.1x vs -1.1x vs +2.3x vs -1.7x (recent -4x!!! to +3.8x). Breadth was similar: +2x vs -1.03x vs +1.04x vs +1.5x vs -1.3x (recent -18.6x!!! to +7.2x!!!) on NYSE and +1.4x vs -1.2x vs +1.4x vs +3.8x!!! vs +1.1x (recent -12.8x to +6.5x).  
  2. NYSE Financials +0.1% vs +0.1% vs +0.4% vs +0.4% vs +0.1%; BofA most active – per usual but lower by 0.4% vs +1.5%!?! vs +0.4% vs -1% vs +1.5%??? vs +1.9%???, closing at $16.77 -.06. Brokers -0.1% vs vs -0.4% vs +0.7% vs -0.4%; KBW Banks -0.4% vs +0.7% vs +0.8% vs +0.4% vs +0.4%; Nasdaq Banks -0.2% vs +0.4% vs — vs +0.5% vs -0.7%.
  3. Volatility (S&P VIX) fell sharply to its lowest close and low since 8/5/13! It is well below the 40/50 day (13.61/13.53) and the 200 day (14.40), closing at 12.14 -.75. 12/26’s (TB’s birthday) 11.69 was lowest since 3/15/13!!! Recent high on 1/2 was 16.67! The recent range is 11.83-21.01!!! It peaked at 22.79 on 12/28/12…ytd the range is 11.05 (3/14) to 21.92 (6/24)!

Bonds rallied on the WEAK payrolls and closed strongest since 11/26/13, 10‘s up almost a full point and the 30 yr and long TIP both up well over a point. About unchanged overnight: 30 yr 3.80 -1/32 – high 3.97% on 12/31; the 10 yr 2.86% –, recent high 3.03%! Long TIP 1.39% -1/8. The (record?) low of 0.36% was set on 4/5. The recent high yield: 1.64%! Libor update: 0.239!!!% 3 mos,0.338%!!! 6 mos. BOTH at NEW record lows 0.239%!!! and 0.338% respectively!). Foreign bond yields lower across the board, ex-Spain and Greece but still strong: Germany 1.82% -2; UK 2.84% -3 – recent high 3.03%!; France 2.49% -1; Italy 3.90% -2; Spain 3.82% +2; Portugal 5.27% -4!; Greece 7.59% +6. Recent range NOW: 7.51%-12.57%. Japan …0.69% –. Yen stronger at 103.46 coming off 105.44 last week, bit since 10/1/08!!!

Gold had a very strong session with a high of $1248.50, highest since 12/16/13 and closed at $1246.90 +$17.50!!! Jan. 2’s low was $1181.40 – A MULTI-DECADE LOW!!!  Recent high is $1375.40 back on 9/19. Psych levels: $1200 sup; $1300 res, with major sup at the 40 day ($1236!) and res nearby at the 50 day ($1251!). The 200 day is $1339. Overnight it is slightly weaker but following a high of $1255.30, highest since 12/12/13!!! It is now $1245.20 -$1.70.

Crude finally managed to rally but of no import. It closed at $92.27 +$1.06 from the lowest close since 5/2/12, and lowest print: $91.24 Note 12/27 was first time above $100 since 10/21! The record high of $114.83 was on 5/2/11, the low since on 10/4/11 is $74.95: $93.60 is the midpoint!!! Recent rally high and close are $110.70 and $110.53 respectively. It is way below the three key m/a’s which are now major res: 40 day m/a ($95.83!!!), 50 day (95.62!), they just crossed!!! and the 200 day ($98.98!!!) – the 40/50 still falling and all major resistance! 4/18’s low of $85.61 was lowest since 12/11! The recent range is $85.61-$112.24 since March 1, 2012. Overnight it is weaker at $91.93 -.79. No hope for this puppy!

Overnight markets:

Global equity markets slightly higher; India STRONG, Japan closed: UK +0.2% vs +0.9% vs +0.1% vs -0.4% vs +0.5%; France +0.1% vs +0.8% vs – vs -0.1% vs +0.4%; Germany +0.1% vs +0.8% vs +0.2% vs -0.1% vs +0.6%; Japan closed vs +0.2% vs -1.5% vs +1.9% vs -0.6% vs -2.4%; Hang Seng +0.2% vs +0.3% vs -0.9% vs +1.3% vs +0.1%; Korea +0.5% vs -0.4% vs -0.7% vs flat vs +0.3%; India +1.8%!!! vs +0.2% vs -0.1% vs +0.2% vs -0.5% vs -0.3% vs -0.2% vs -1.2%! U.S. stock futures weaker in yet another narrow range session: DOW -18 (range 31); SPX -4 (8); NDQ -5 (11).

Some random thoughts:

While TB thinks Chris Christie’s actions likely precipitated the action by his staff, after listening to the discussion on all three talk shows, TB will await the results of the investigation. Creeping into the conversation was the fact that it was shown that Obama had no knowledge of the IRS scandal (not much press on that point)…and TB doesn’t even believe it should have ever been an issue that resulted in the resignation of the IRS Commissioner. Why? Because while there majority of the investigations were against conservative PAC’s, there were maybe ten times as many as their were Dem PAC’s – and neither should have been able to have them! Was she really voicing her opposition to the Supreme Courts politically motivated decision in Citizens United which has allowed negative ads – chock full of disinformation – to the point the that candidates can’t even buy media time! Disagree? Well, Sandra Day O’Connor – appointed by Reagan strongly feels it was a bad decision!

You know if you keep your eyes and ears open you never have writers block covering financial markets. Of course, sometimes TB gets a little help from his friends. On Friday night, he got a call from an old college friend asking what TB knew of Fisher Investments. He said that he had not performed well with his 401(k) of about $500,000. He had been getting calls from Fisher – well TB gave him an earful…and Ken Fisher, if you are thinking about suing TB, better think again as this is all documented and public!

First, Ken Fisher has written an investment column for Forbes for more than three decades. He has parlayed that into a mega-investment advisory firm and this guy who started with little…other then a B.A. in Economics from Humboldt State – which won’t buy you much…parlayed that into becoming 279th ($1.8 billion) on Forbes wealthiest 400 Americans list. Hey, Ken…how did you do that? Earnings from Forbes? Your books?

See this guy is adored and has glowing reports from everyone…on his research! Frank Fabozzi who publishes many of the books for the Chartered Financial Analyst series, even gave him an award for his research. Hmmm, just what was that research?

Fisher, not to be confused with Irving Fisher, (the economist who lost his shirt in the 1929 crash, along with Lord Keynes, and who said just weeks before that disaster that ‘stocks had reached a new plateau’), says the only thing you need to know about investing is the ratio of the stock price to revenues. Ok…that is no worse than thinking EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), which is adored by all those CFA analysts, and can also be described as cashflow, or as long as your revenues are rising your company has value…isn’t that special. Try not paying your taxes or the interest on your debt – which this method minimizes as what good is cashflow if you have to pay it all out? Anyway, you decide.

Besides the inquiry from TB’s friend, back in March 2008, TB got a referral for an investor that was concerned with his Fisher investments. TB knew little but researched it and found that he had solid returns but also that it was hard to get that information. Certainly not from the company and if you Google it you will find that to get information you have to contact them, and from that point on the only way to rid yourself of their calls is to enroll! Specifically, while he had those good returns, there was no data that supported them in a fashion that one could dissect. While stock were rallying up until September 2007, once they began their decline, they did little to preserve those gains. This as the S&P not only declined by 12.4% but had you reinvested dividends you would have seen your portfolio lose 23% of its value!!! That is not a normal occurrence and one that an experienced money manager should try to mitigate, right?

One of their promises is that they ‘tailor’ the clients portfolio to their individual needs. Not so, as many will tell you…it goes into their MSCI World Stock index funds. Bonds? Who needs them…stocks are the answer. They publish lots of glossy reports that don’t provide investment returns in a way they can be analyzed. Once you contact them for information, you are besieged by phone calls from non-registered employees who simply try to get you to enroll. If you show interest you are given a registered one, or invited to attend a luncheon/dinner so you can meet other investors. It is hype, pure and simple, but it makes the ‘mark’ feel important. Once you get in and if unhappy try to close your account you have to run a battery of people trying to tell you how positive they are on the stock market…especially if you tell them you are shifting to bonds…they berate you.

Here is an example of how they report returns in their newsletter, Fisher newsletter:

  (cannot put up table as it is an image. It shows 10 years performance of MSCI World Index Go to link above)

Source: Thomson Reuters, 12/31/2000–12/31/2011, MSCI World Index.

Returns for:                    Prior Years Winners   Prior Years Losers  MSCI World Index

10 Yr Cumulative Returns:    +25.0%                          +7.3%                  +50.0%

10 Yr  Annualized returns:        2.25%                             0.7%                      4.15%

(remember you had inflation and possibly taxes to pay during that time, why would any reputable money manager report returns that way?…unless…). Their letter says:

“The next time you feel the urge to make an investment decision based on recent performance, think again. Remember: “Past performance is no guarantee of future results,” and try to think holistically. Think more forward looking, and remember to match your strategy today to what you think will happen in the future—don’t drive forward while fixated on the rear-view mirror.”

In other words if we had a bad year just ignore it and look at our long term results.

Not only is the performance appalling, (Fisher bases his investing on the MSCI Index and Forbes analyzes his returns annually, using his top ten holdings: MSCI World (roughly 90%) along with his other top ten holdings, equal weighted). GIGO= Garbage In, Garbage Out! Investors have a hard time finding their actual returns except manually and if you were adding or withdrawing money, that can be difficult unless you have it on a program, as most advisors do with their money.

Worse, Fisher’s minimum account size is $500,000 with a fee of 1.5% and sometimes a 1% up front fee. Is that subtracted from the returns above? TB doesn’t think so. RIA’s are required to report returns net of fees if used in advertizing. But these are not his actual returns but the returns of the underlying ‘index’ – thus not under the rule.

TB is not accusing Fisher of anything, but he is asking: why don’t you make data available to prospective clients  – and more importantly your existing clients – that is useful in determining their actual returns and what they might expect?

He really created a stir when during the worst financial crisis since the Great Depression, he wrote that job creation may actually be detrimental to the stock market. That is because he feels that productivity gains are impeded by creating jobs. Go Humboldt!

http://www.huffingtonpost.com/2012/12/06/ken-fisher-forbes_n_2251630.html

TB is not writing this to be vindictive against Mr. Fisher or his company, only to provide additional information to someone who is considering investing there. Inquiring minds want to know. Also read the comments of current and former employees

How can someone have the returns he professes to have, still have the need to advertise and flood the google pages with his own hype, so it is difficult to separate fact from fiction? Being in business that long and IF his performance is that good, word of mouth should be sufficient. Would like to know ratio of marketing people to analytical staff. Hint: the investment committee is three people, one is head of operations.

Have a great day!

TB

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