Will the Fed Move This Week - and what should investors do?

Can the economy deal with a Federal Reserve interest rate hike at this week's Federal Open Market Committee meeting?Yes,the economy can support an 0.25% increase,but we don't think there will be one,Andrew Burkly of Oppenheimer&Co. told CNBC.To me,the risk is essentially longer,not sooner.We're leaning more to a rate increase in the latter part of the year.The sector I like for investing in from all this is the financials.*
The options market suggests that this week's FOMC meeting could be potentially one of the most volatile that we've seen in years,added Stacy Gilbert of Susquehanna Capital Group.We have seen an increase in what I call "crash protection,"and we haven't seen this increase of crash protection over the last couple of years.This is one of the biggest increases that we've seen.
The S&P 500 options are pricing in a stock market move of about 2.25% for a one day move,which prior to the past couple of weeks would have been a notable move in the S&P 500,and something that we haven't seen relative to the Fed in quite a while.So I think there's a lot of uncertainty out there.The markets are pricing this in as a notable event,and portfolio managers and investors are looking at their portfolios saying "What if?I want to be able to sleep at night."*
The Fed's decision will be released on Thursday.Whenever the rate increase comes,it will be the first one since 2006.The US economics team at Morgan Stanley thinks a hawkish pass by the Fed is a 60% probability.In other words,the Fed would pass on a September rate liftoff,citing the recent tightening in financial conditions;while leaving open the possibility of an increase at the October or December FOMC meetings.*
Morgan Stanley (MS),Oppenheimer Holdings Inc (OPY),Susquehanna Bancshares Inc (SUSQ)

Market Prospects December 2014

Jefferies and Company says that generic drugmaker Mylan Labs is the most likely Pfizer takeover target.Pfizer,the world's largest drug company,is also rated a buy by Jefferies.*
Gold has really been pressured by the rising dollar and falling inflation expectations,said Ari Wald,CFA,CMT,executive director and market technician with Oppenheimer&Co.'s Portfolio Strategy Team.The setup is actually there to turn lower again.I'd be selling here for the next few months,Mr.Wald advised.*
The Alpine Global Infrastructure Fund has a five star rating by Morningstar Associates.In the developed markets,the infrastructure is aging;while in the emerging markets,infrastructure is being built for the first time.Canadian Pacific is one of the fund's holdings because the transport of crude oil by rail is growing.Rail allows a flexibility to go to different refineries;while pipelines are point to point.When real inflation rises,that would be the risk to owning shares of Canadian Pacific,said Joshua Duitz,CPA,co-portfolio manager at Alpine Woods Investments LLC.
Social infrastructure firms such as prison outsourcers like Geo Group are also owned by the fund.Geo has 77,000 beds and 6,000 vacancies.*
Mylan Labs(MYL),Pfizer(PFE),Canadian Pacific(CP),The Geo Group Inc(GEO),Alpine Global Infrastructure Fund(AIFRX)

Market Views:Microsoft's Roadmap and Tesla's Prospects

On the the recent slide in the stock market,I don't think it's gonna turn into much,said Andrew Burkly,managing director at Oppenheimer&Co.We're expecting kind of a 5-10% dip.Earnings season's been OK.People are looking to rotate into more of a global capex story.Overall we think the earnings season is turning out pretty well.*
We're not strong on the fundamentals of Microsoft,but on the opportunity for change,according to Rick Sherlund,US Technology Research Team head at Nomura Securities.If you were to take an internal candidate for CEO and pair it with CFO Amy Hood,you could come up with a pretty good conclusion.
I think you need radical changes in the business itself,more services in the cloud.Enhance shareholder value with dividend increases and share buybacks.That gives you the freedom to change more businesses to business light with lowered margins.*
In the long run,you have to bet on emerging markets growth,said Goldman Sachs CEO Lloyd Blankfein.Basically the flattening of the world is getting great opportunity in these countries.*
December's Index of Leading Economic Indicators rose 0.1%,the smallest increase since 2012.December existing home sales rose 1.0%.The national median home price was 198,000 dollars,up 9.9% from December 2012.*
Tesla Motors is selling its Model S electric sedans starting at 121,000 dollars in China.They are being shipped now for March or April delivery.Hong Kong alone took 300 orders in August.China is the number one market for luxury auto sales and has a pollution problem,making it a promising territory for Tesla.*
Asian markets were down in Tuesday trading on worries about Chinese economic data and the Fed meeting later today.US stock futures rose,however,after three straight days of decline.*
Tesla Motors(TSLA)

Where The Money Is,Mr.Executive

A frustrated Walmart executive reportedly asked where the money is,noting that February sales figures are a total disaster.One place the money is,is in people's gas tanks.Nationwide,gasoline prices are edging up to 4.00 a gallon-if they are not already there and beyond.It is the earliest in the year gas prices have been this high.Food prices are also running quite high.
Another important fact is,the payroll tax has been reinstated by Congress,and most people are making significantly less now-at least four figures less per year.Mr.Executive,that's where the money is.People are counting their pennies,and it's hurting Walmart sales.
It isn't just Walmart that's feeling the closed wallets,either.It's casual dining establishments;it's also the higher end Macy's department store,as well as Nordstrom and Kohl's.More and more retail stocks are deteriorating,according to Carter Worth,Chief Market Technician at Oppenheimer Asset Management.Americans are gonna start feeling this wherever they are on the income spectrum.
Gold prices have also been declining lately.This looks to be just beginning.This is a mess.I think we're going down to 1500.00 an ounce.Dan Nathan,co-founder of RiskReversal.com and a CNBC Options Action contributor,adds that the technicals make you want to stay away from gold right now.
Oppenheimer Holdings,Inc.(OPY)

Should You Buy JC Penney Shares

Brian Nagel,CFA,Managing Director at Oppenheimer,said we launched coverage of JC Penney with an outperform rating.Many of the concerns about the company are already priced into the stock.As I look out,I think JC Penney is headed in the right direction.
Over the next few years,I see earnings of 3-5 dollars a share.They're finding a new store format that's gonna resonate with consumers in this environment.Their balance sheet will buy them some time as they do this.We've given the stock a price target of 30 dollars.
The Q2 results,which will be reported on Friday,will be messy.I think this is another transitional quarter as their turnaround begins to take hold,Mr.Nagel added.
Mr.Nagel is a Senior Analyst in Hardlines and Broadlines Retail.He has a BSBA from Creighton University.Oppenheimer is a full line brokerage,investment banking and wealth management firm.
JC Penney(JCP),Oppenheimer(OPY)

Oppenheimer's Market Outlook

We weren't surprised by the poor jobs number,says Brian Belski,chief investment strategist at Oppenheimer&Co.At Oppenheimer,we have the advantage of investing in actual companies and access to their CEOs.We believe that too many investors are hanging on to the belief that Q2 earnings are gonna save the market.
I don't think the problem is priced in.Given the budget and election concerns,we believe the highs of the year may have already been reached.We still like industrials and tech.We think dividend growth is very important,the U.S.-based large cap names as investors move out of bonds.
We believe tech will provide leadership for the next bull market.We don't think financials will lead,with the strong structural reforms coming to them.The soft patch thinking was reflected in the payroll numbers.Company guidance is likely to be squishy because of that,Mr.Belski projected.
Oppenheimer is a full service investment firm with a history of more than 125 years,providing expertise and insight to affluent individuals,businesses and institutions.From wealth management to capital markets,it has a proud tradition of delivering effective and innovative solutions to its clientele,the company feels.
Brian Belski assumed his current position in March of 2009.A frequent guest on business television,he was previously employed by Merrill Lynch.
Oppenheimer Holdings(OPY)

Oppenheimer Strategist Optimistic About Market

Brian Belski,chief market strategist at Oppenheimer&Co.,says the market overreacted to the Japan events.You have to look back at the Kobe earthquake in 1995.It is positive that the G-7 industrialized nations have intervened to support Japan.
This crisis has not altered our viewpoint.Single digits are still a good way to look at it.This is more of a transition year,a lot more volatile than portfolios are prepared for.
Look at mid-cycle areas that are more domestic-oriented,large-cap high quality companies,more toward domestic industrials that will profit from the problems in Japan.
We are on the precipice of a long term bull market,Mr.Belski believes.
Oppenheimer&Co.,Inc.,a division of Oppenheimer Holdings,is a leading investment bank and full service investment firm.For more than 125 years,they have assisted high net worth investors,businesses and institutions.
Oppenheimer Holdings(OPY)

Beta Trade Is Waning

This current rally is not progressing at the same rate as earlier ones,according to Carter Worth of Oppenheimer.The good eating's been had.We're not getting quite the torque that you would anticipate,given the news.The market keeps bumping up against 1100 on the S&P.People are rotating out of the beta trade-the speculative trade-into the more established,recognizable names.It's a maturing of the rally,Mr.Worth believes.
Everything is starting to participate,in Carter Worth's view.That's where you get into the stall speed.You should double back and pick up large cap laggards such as Wal-Mart.2003 was a big recovery year.By 2004,hyper-correlation broke down.We think this everything trade starts to break down in 2010,Mr.Worth noted.
In fact, the S&P did break above 1100 this morning.It remains to be seen,though,if it can close there.

With Clear Eyes:Medium Term Outlook

Two leading business analysts,Meredith Whitney and Dan Niles,have been giving their medium term outlooks.Ms.Whitney specializes in financial services,while Mr.Niles covers technology.Meredith Whitney,Director of Equity Research at Oppenheimer,says that financials and the economy are so far off the tracks right now,it's hard to see how President-elect Obama could help.If banks modify loans,they will make less,not put capital back into the system.The securitization market isn't coming back.You're gonna actually see mortgage contraction.You're gonna see credit taken away from consumers by a large degree.We've never seen that before,Ms.Whitney observed.

Citi Will Be O.K.

Merideth Whitney,an analyst with Oppenheimer,thinks that Citigroup(C) will make it through the financial crisis.Ms.Whitney,who accurately predicted a Citi dividend cut earlier in the year,says the firm is selling assets to make sure it can stay in business.It is not in a precarious position,Ms.Whitney feels.Citi has 200 million customers in more than 100 countries.Almost 50% of its business is outside the U.S..Of its non-U.S. business,almost 35% is in emerging markets,which the company sees as its growth engine.Besides retail banking,Citi offers credit cards,brokerages,investment banking and hedge funds.

Shop Talk

I advertised in the United Arab Emirates this week.I extend a special greeting to you,Arab friends and allies.Your country becomes more important in the business world every year.It's great to host you today.I would also like to remember Michael Metz of Oppenheimer,who died yesterday.A distinguished analyst,Mr.Metz was a frequent guest on business television.He began his career in 1959,but remained active through old age.We shall miss him very much.

A Cascade Of Caution

As the hills of Malibu burn,investors are facing their own persistent hazards-many of them so obscure that even the elite are puzzled.John Mack,CEO of Morgan Stanley(MS),says it will take 6-9 months to figure out what the losses are.We are not out of the woods yet.The credit market has improved,but mortgage securities will take a long time to work through.What is the collateral behind these packaged mortgages? That is the challenge.Treasury Secretary Hank Paulson calls for an aggressive response to the housing crisis.It is a significant threat to the U.S. economy,and is still unfolding.The longer housing prices are stagnant or fall,ther greater the penalty on our economy.Scott Sperling of Thomas H. Lee Partners,a private equity firm,says it is a very dangerous time for his business.It is a time for great caution.We haven't seen the last of the troubles.We have improved a little,notes Paul McCulley of Pimco,but the mortgage area is very restricted.There is a lot of downside on the economy.The equity market is a call option.Asset-backed commercial paper remains a problem,and structured investment vehicles still need to be unwound.To Carter Worth of Oppenheimer,it seems we will go back down to where we were before the Federal Reserve cut interest rates on 9-18.The market is wobbly and increasingly thin,so why rush to buy? Jeffrey Saut of Raymond James notes a big uptick in credit card debt.That suggests the peak of a credit cycle,and a slowdown to follow.To prepare,some investors are looking to the Vanguard Total Bond Fund(BND) for their protection.Others are buying shares of General Electric(GE),which is relatively cheap at this time,pays a dividend and has an international presence.

Dislocation And Danger

As Wall Street goes back to work after Labor Day,the outlook of many analysts remains one of dislocation and danger.Martin Weiss of Martin Weiss Research thinks we've seen just the first shock of the mortgage earthquake.We are only beginning to see a scarcity of credit.We don't have data until it's too late.The mortgage crunch is occurring right now.There has been a blow to the gut of the economy,and it is unlikely the government can stop it.Frank Cochrane of Market Timing Consultants says the market will rally,then fall.The market is seizing on a Federal Reserve rate cut,but it probably won't happen,and the market will fall.We will head down for the next 6-9 months.Michael Metz of Oppenheimer sees the U.S. economy slowing dramatically.There will be a recession because there is a big overhang of debt instruments,and the leverage market has a lid on it.Richard Iley of BNP Paribas notes that we are years away from a housing recovery.The Federal Reserve has underestimated the downturn,and there will be a drag on the economy until 2008.It is the biggest housing slump since World War II.How bad can things get? Between 2000 and 2002,the S and P 500 index fell 47%.Many portfolios lost half their value.One approach for concerned investors is to hedge every stock purchase with a bond fund purchase or savings account deposit.BlackRock's Income Opportunity Trust(BNA) is a broadly based bond fund.Branch Banking and Trust(BBT) offers an eSavings account that yields 4% and includes an ATM card,as well as free online and telephone banking.

Whitecaps On Wall Street

Rough seas have reached Wall Street.There seems little chance of a quick return to the bull market of July,when the Dow Jones Industrial Average crested the 14,000 mark.On Monday,the world's central banks continued to inject liquidity into the credit market.The European Central Bank gave 65 billion dollars,while Japan chipped in 5 billion and the U.S. Federal Reserve added 2 billion more.This succeeded in arresting the decline of stock prices in the short run.Just how the market will progress remains unclear.Robert Stovall of Wood Asset Management says we are in a small credit crunch.This could continue into the fall.Michael Metz of Oppenheimer predicts that institutional investors will shift from elite funds to big cap stocks.U.S. spending has exceeded income,so there will be a major tempering of spending,causing a recession by early 2008.Mark Sunshine of First Capital sees a lot of risk ahead,on account of years of over-leveraging and under-capitalized lending.Many funds were invested in the lowest form of securities.In consequence,fund redemptions will cause downward pressure on stock prices.There could be a series of big redemptions over the next 6-9 months as investors flee to quality.ING Direct offers a no-minimum savings account that is currently yielding 4.52%.Among stocks,Johnson and Johnson(JNJ) and Honeywell(HON) are also good options.