Friday, August 27, 2010

Stock Market at Critical Crossroad

(Editor's Note: Paul Schatz, President of Heritage Capital, LLC, in Woodbridge, will be contributing to Fi$callyFit every Friday. Read his biography here)

As I mentioned last week, I am interested in doing an article on real estate and would greatly appreciate your help in answering a few very short questions for 30 seconds if you haven’t already done so. Please click on the link below. There are no right or wrong answers! I’ll report back next week on the results along with my opinion.

In a recent issue of Street$marts, I reviewed my long-term forecast for a stock market peak this summer, but expected at least another significant push higher this month. So far, that call has been a big dud with the market deciding to pullback 5% instead. As we enter the final weeks of traditional summer, the major indices find themselves at an important crossroad.

IF (intentionally capitalized) the stock market has at least one more good rally left, which I still believe it does, it should begin in the next week and have some fireworks associated with it. Stocks are oversold based on a slew of technical measures and sentiment is extremely bearish, which is contrarian in nature suggesting a rally. While I doubt it will be a "rising tide lifting all ships", it should be strong enough to see some sectors make new 2010 highs. In short, as I discussed at length this morning on CNBC, it's time for the bulls to put up, take the ball and run or risk getting mauled by the bear next month.

As I've mentioned before, I continue to find it very interesting and almost curious that high quality corporate bonds, low quality junk bonds and treasury bonds are all making new highs for 2010. This is very atypical behavior for any market, let alone one that is trying to peak. Although I am glad our various programs own all three, it doesn't make me comfortable that the financial markets continue to behave in very unusual and unorthodox ways.

Way back in January, in my "11 Shockers for 2010" I forecasted and expected that longer-term treasury bonds to be the surprise investment of 2010, much to the disagreement of my peers and members of the media. But I really never expected their performance to be as strong as it’s been (up 20% based on TLT), something that's beginning to worry me now, given their parabolic advance. I thought they would return somewhere in the single digits (and they still may if they decline from here), while most other assets struggled along. Their near vertical ascent over the past month based on a dying economy with deflation has the smell of at least short-term trouble brewing sooner than later for treasuries.

Feel free to email me with any questions or comments at

Until next time…

Paul Schatz

Heritage Capital LLC

Friday, August 20, 2010

Game Time: Higher One issues 'Money Makeover' challenge to college students

To help college students improve their money management skills and become financially fit, Higher One has launched an online competition that's meant to be fun and interactive.

Higher One is a financial services provider in New Haven, Conn. that works with colleges and universities to provide financial aid refunds quickly, tuition and bill payments online, on-campus and community purchases with ID cards and programs for learning the basics of financial management.

The company was founded by Yale University students in 2000. It now provides its services to more than 4.8 million students at higher education institutions nationwide.

"Our 'Money Makeover' contest is not only a fun and interactive way to bring financial literacy to our students, but will teach them lifelong skills of financial management that will span beyond the competition, and even beyond college," said Mary Johnson, financial literacy and consumer advocacy program manager for Higher One. "The contest reinforces the importance of setting and actively working toward financial goals-both short and long term-and teaches students the essential skills of budgeting and managing their money along the way."

Here's how the contest works: Students will be asked to submit short video entries that demonstrate why they need a financial makeover and identify the specific goals that they would like to achieve.  Up to five 'Featured Bloggers' will be selected to share their challenges and progress toward their goal.

Peers will be able to follow the Featured Bloggers on their journeys and vote for the individual who they believe has shown the most improvement.

The competition is open to all students currently attending a college or university that uses Higher One’s services in addition to all existing Higher One OneAccount holders. Visit for details and official rules.

  • Four Featured Bloggers will get a cash prize of $500 to put toward their goal.
  • One grand prize winner will receive $2000.
Higher One, in partnership with NYSE Money Sense, the online financial resource of NYSE Euronext, will offer expert information and tips to help students control their debt, create and follow a budget and effectively manage their money.

"We are excited to be a part of the Higher One Money Makeover contest and to team up with a company that has made financial literacy a priority," said David Cautin, chief digital officer of NYSE Euronext.  "Money management skills are essential for the financial future of our students, our economy and our nation. Higher One’s contest will bring awareness to campuses across the country and teach financial literacy to our next generation of leaders."

Featured Bloggers will be announced soon - Oct. 11 - and the blogging and voting period will begin.

The grand prize winner will be announced on Nov.19.

"You don’t have to be a Featured Blogger to undergo a money makeover," Johnson said. "Whether a contestant, participant or observer, everyone will have the opportunity to learn invaluable skills about money management and pave the path to a successful financial future."

NYSE Euronext launched NYSE Money Sense, a resource to help people better understand and manage their personal finances, in April 2010. The interactive site includes: a five-lesson course replete with Certification Test, answers to basic Financial FAQs, a guide to other online financial resources and a first-person blog by a young New Yorker trying to get her finances in order.

YOUR Opinion Matters… Where is Real Estate Headed?

(Editor's Note: Paul Schatz, President of Heritage Capital, LLC, in Woodbridge, will be contributing to Fi$callyFit every Friday. Read his biography here)

Sorry for the extremely short contribution this week. We just sold our house and have spent the last 7 days, packing, moving, unpacking and stressing! Closing is scheduled for the 20th so hopefully, it goes off without a hitch. But I am not counting on it!

I’ve been waiting to do a piece on real estate and the various market forces that contribute to pricing, so this seems like a good time for my research with your help. Please click on the link below and answer a few super short questions that may take 30 seconds. There are no right or wrong answers! I’ll report back in the next two weeks on the results along with my opinion.

I am scheduled to be on CNBC’s The Call this coming Monday, August 23, between 11:05am and 11:20am as well CNBC’s Worldwide Exchange this Thursday, August 26 from 5:35am to 5:55am.

Feel free to email me with any questions or comments at

Until next time…

Paul Schatz
Heritage Capital LLC

Thursday, August 12, 2010

Time to Cheer or Jeer?

(Editor's Note: Paul Schatz, President of Heritage Capital, LLC, in Woodbridge, will be contributing to Fi$callyFit every Friday. Read his biography here)

For more than a year, both here, and in my Street$marts newsletter, I've been writing about the potential for this bull run to see its peak between Memorial Day and Labor Day of 2010 somewhere between Dow 11,500 and 13,000 with the possibility of another recession (double dip or whatever you want to call it) in 2011.

With many pullbacks along the way and after the significant May/June correction, which I underestimated the severity, several folks have asked if my forecast has changed. And after Wednesday’s stock market rout, it’s as good a time as any to discuss.

I think some people thought the 15%+ correction could have been what I was looking for later this year and we’ll now see another year or so of bull run, while others asked if the April high was THE peak. In short, it's more the latter. Price MAY have seen its high, but I still believe, worst case, the stock market has more explosive upside action left in the coming few weeks or so.

Here are the three possible scenarios laid out in a chart.

“A” shows the recent weakness ending quickly and a sharp, fast rally ensuing almost immediately. “B” says more of the same with rallies and declines remaining in a well defined trading range. “C” indicates that disaster is already here and stocks are headed below the recent bottom. As I mentioned above, I am going to stick my neck out and say that scenario “A” is my preferred path until proven otherwise. Our investment indicators and models remain positive, so I have to nervously follow along until they indicate otherwise.

Interestingly, the cumulative total of stocks going up and down on a daily basis (advance/decline line) just made a new high, unusual for a market that is trying to peak. While it may be because of how many issues are interest rate based, I've learned the hard way not to so easily dismiss these things. We can ALWAYS find a reason not to believe something.

Also a bit puzzling is the behavior of junk bonds, which are also making new highs. This sector usually sees weakness BEFORE the overall stock market does as liquidity tends to dry up before the final high in stocks, not coincidentally. Like any other curious period, we'll take one day at a time and assess our portfolios as needed.

Sector and sub sector behavior has been very positive with a slew looking for further gains this month. Semiconductors, software, telecom, Internet, financials, real estate, leisure, health care, biotech, staples, utilities, transports, industrials, materials and energy to name more than a few.

Emerging markets have also taken a leadership role with almost every single country on our watch list behaving very well. With our Emerging Markets Program owning Thailand, Turkey and Indonesia, I am more than nervous as this area corrects hard and fast when the buyers step away, something that's getting overdue.

Long time readers know that our philosophy and methodology along with my personality tend to have my confidence level the highest at or near the bottom of significant declines. The more price advances from that point, (assuming it actually does) the more concerned I become as we “dance” closer and closer to the door. While I am certainly not as confident as I was buying with both hands on July 1, I am not as concerned as I was in late April either. That time will come if and when the Dow sees 10,800 or another 500 point rally from here.

Feel free to email me with any questions or comments at

Until next time…

Paul Schatz
Heritage Capital LLC

Friday, August 6, 2010

Wal-Mart… THE Answer?

(Editor's Note: Paul Schatz, President of Heritage Capital, LLC, in Woodbridge, will be contributing to Fi$callyFit every Friday. Read his biography here)

As a very quick follow up to the last two week’s contributions, Financial Regulation...What It Means to You and America and Financial Regulation Follow Up… Good News!, the good folks at Casey Research pointed out some hidden trap doors that those sneaky and questionable Congressmen threw in.

“Under the new financial regulatory law, the SEC is now exempt from Freedom of Information Act (FOIA) requests. So if the SEC screws up, like it did in the Madoff case and countless others, and you file a FOIA request to find out what went wrong, the SEC is under no obligation to comply.

President Obama claimed that this new financial reform bill he signed into law the other day would increase transparency. But at least one provision will do just the opposite of what the president claimed.”

Additionally, “starting on January 1, 2012, all companies will have to file a 1099 for every transaction that exceeds $600, which would create a reporting nightmare for thousands of companies and absolutely crush small businesses.”

Finally, somehow Congress even surprised me by adding language requiring Wall Street firms to hire women and minorities, as if somehow that would prevent another crisis? Put that in the column of government run amuck. Maybe we should add that provision and amend the constitution?!?! How on earth does that belong in Financial Regulation? And I would guarantee you that most of those voting “yes” had no clue it was included. Well done, Chris Dodd and Barney Frank. You’ve stooped to a new low!

Sorry for the digression…

The following email has made its way around the Internet. Thanks to Richard Mooney for sharing again. I think we can all agree that Wal-Mart is far from perfect, but it's hard to argue that they are very smart and shrewd business people. Although they clearly have hurt mom and pop businesses all over the country, they really transformed our economy in so many ways.

Here's the email text:

1. Americans spend $36,000,000 at Wal-Mart Every hour of every day.

2. This works out to $20,928 profit every minute!

3. Wal-Mart will sell more from January 1 to St. Patrick's Day (March 17th) than Target sells all year.

4. Wal-Mart is bigger than Home Depot + Kroger + Target +Sears + Costco + K-Mart combined.

5. Wal-Mart employs 1.6 million people, is the world's largest private employer.

6. Wal-Mart is the largest company in the history of the world.

7. Wal-Mart now sells more food than Kroger and Safeway combined, and keep in mind they did this in only fifteen years.

8. During this same period, 31 big supermarket chains sought bankruptcy.

9. Wal-Mart now sells more food than any other store in the world.

10. Wal-Mart has approx 3,900 stores in the USA of which 1,906 are Super Centers; this is 1,000 more than it had five years ago.

11. This year 7.2 billion different purchasing experiences will occur at Wal-Mart stores. (Earth's population is approximately 6.5 Billion.)

12. 90% of all Americans live within fifteen miles of a Wal-Mart.You may think that I am complaining, but I am really laying the ground work for suggesting that MAYBE we should hire the guys who run Wal-Mart to fix the economy. Think about what’s been going on in government over the past 10 and 20 years…
a.. The U.S. Postal Service was established in 1775. You have had 234 years to get it right and it is broke.
b.. Social Security was established in 1935. You have had 74 years to get it right and it is broke.
c.. Fannie Mae was established in 1938. You have had 71 years to get it right and it is broke.
d.. War on Poverty started in 1964. You have had 45 years to get it right; $1 trillion of our money is confiscated each year and transferred to "the poor" and they only want more.
e.. Medicare and Medicaid were established in 1965. You have had 44 years to get it right and they are broke.
f.. Freddie Mac was established in 1970. You have had 39 years to get it right and it is broke.
g.. The Department of Energy was created in 1977 to lessen our dependence on foreign oil. It has ballooned to 16,000 employees with a budget of $24 billion a year and we import more oil than ever before. You had 32 years to get it right and it is an abysmal failure.

As I mentioned earlier this summer, I am working on an interview I did with Spencer Tillman, playfully titled, Superman is Alive and Well and Living in Sugarland Texas! I hope to have more details next month.

I am scheduled to be on CNBC’s The Call this Monday, August 9th, between 11:05am and 11:20am.

Feel free to email me with any questions or comments at

Until next time…

Paul Schatz
Heritage Capital LLC