Risk/Reward Vol..129
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
"Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. To the extent the size of sovereign premia (borrowing costs) hamper the functioning of the monetary policy transmission channels, this comes within our mandate"---quote of Mario Draghi, head of the European Central Bank 7/26/12
"We haven't really come to a specific choice at this point, but we are looking for ways to address the weakness in the economy should more action be needed to promote a sustained recovery in the labor market."---quote Benjamin Bernanke, chair of the Federal Reserve 7/18/12
"China's employment will become more complex and more severe. The task of promoting full employment will very heavy and we must make greater efforts to achieve it."---quote Wen Jiabao, Chinese Premier 7/18/12
This past week I met with subscribers at a golf outing in Indianapolis and over dinner in Minneapolis. At both functions, I was asked why I was so optimistic about the stock market--me, the guy who bailed completely in July, 2011 and again in mid-May, 2012. I directed them to Vol. 127 (www.riskrewardblog.blogspot.com) wherein I stated: "...faced with overwhelming negativity the world's economic and political leaders remain generally and genuinely concerned about a worldwide recession. There is a real sense of urgency to stimulate economies..."
This concern has been on display for the past two weeks, and never more so than in the past few days. On Monday and Tuesday of this week, the Dow Jones Industrial Average fell 100 points on each day on news that Spain's sovereign borrowing costs were exceeding 7%, a dangerous level which makes access to the public bond markets virtually impossible. On Wednesday, the Spanish finance minister was in Berlin meeting with his German counterpart who refrained from uttering his normal accusations. More importantly, on Thursday, Mario Draghi, the head of the ECB, made the above pronouncement---the most direct and unambiguous statement yet that the ECB would do anything and everything (presumably even purchasing bonds directly from sovereigns such a Spain) to preserve the Eurozone. The impact was immediate and enormous. The DJIA closed up 213 points on Thursday and 188 on Friday as support for the statement came from the ever contrary Chancellor Merkel.
On the home front, last week Ben Bernanke made the above quoted statement to Congress, signaling that the Fed, too, would soon be in the stimulus mode. Unfortunately, not even Uncle Ben can remedy the Fiscal Cliff (end of the Bush tax cuts, expiration of the extended unemployment benefits and imposition of across the board spending cuts) which occurs on December 31, 2012. This Cliff will have a significant, negative impact on the US economy. Only Congress and the President can fix it, and they will do nothing until after the election. Strange, is it not. Just like last July during the debt extension "chicken" game, the most irresponsible leaders are the Americans!
Not so the Chinese. Indeed, the statement from Premier Wen above has made me even more optimistic. Here is why:
1) Contrary to popular belief, China is a very unstable country. Indeed, in 2011, there were more than 150,000 (that's not a typo fans) significant civil disturbances in China. Recall, if you will, the revolt in the city of Wukan where the citizenry rioted and violently overthrew the local government which had corruptly sold community pastures to land speculators. The grand bargain in China is that peace will be maintained so long as everyone is employed. Thus the importance of the above statement.
2) It is extremely important that there be no major civil unrest this year. In October, the reins of the country will pass out of Premier Wen's hands. Transitions are always dicey in a totalitarian regime, but especially so in China (notice the recent arrest of the Mayor of Chunking's wife).
3) In 2008-9, when the Chinese export-based economy was threatened by the world wide recession, the central government embarked on a massive domestic stimulus program, promising improved housing and infrastructure. The result was a superheated economy and a real estate bubble which caused China to decelerate its rate of growth in 2011---a deceleration that has now gone too far. Remember, however, that it was this massive internal stimulus in 2009-2010 that drove a huge run in commodities (copper, iron ore, etc.). In 2010, China consumed 20% of the world's non-renewable energy, 23% of the world's agricultural production and 40% of all base metals. The 2009-10 Chinese stimulus also helped propel the profits of those US companies with a major presence in China (Caterpillar, McDonald's, Yum, GM, P&G, etc.)
4) Politically mandated to promote growth and sitting on a huge amount of foreign reserves, China is once again prepared to stimulate its economy. Indeed, on Friday of this week, the city of Changsha (7million) announced a $130billion stimulus plan which includes a new airport, road construction and improved housing.
With the ECB speaking with real resolve (let's hope Draghi can follow through), with Uncle Ben ready to pull the QE trigger and with China needing to keep its masses employed, I see a stable if not increasing stock market. During the market swoon early this week, I bought more COP, LINE, WIN, ETP, SDRL, BACpL, EXC, NYB, AFC and AHTpD. In the words of my favorite stock picker, BOOYAH!
Saturday, July 28, 2012
Saturday, July 21, 2012
July 21, 2012 Hungry Like the Wolf
Risk/Reward Vol. 128
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION UPON INVESTING. RELY ON NOTHING STATED HEREIN.
"I'm sick and tired of repudiation/Where upon your orchestration
Leads to endless complication/And causes great consternation"---lyrics from "Stability" by Blondie
"Burning the ground, I break from the crowd/I'm on the hunt, I'm after you
I smell like I sound, I'm lost and I'm found/And I'm hungry like the wolf"---lyrics from "Hungry Like the Wolf" by Duran Duran
"If it takes a lot to keep it going/If it takes a lot to keep it real
Take some time for yourself/And learn to yield"---lyrics from "Yield" by The Indigo Girls
So far the earnings season has been a mixed bag; not great, but slightly better than expected; no huge surprises up or down. As a consequence, the stock market has been stable (the Dow was up 50 points for the week), with stock prices moving on individual fundamentals rather than en masse; "orchestrated" in response to some extragenous event (e.g. the Eurocrisis). Such "orchestration", known in the trade as correlation, "leads to endless complication", and "causes great consternation" to simple folk like me who just want a decent return on investment. Frankly, "I'm sick and tired" of correlation, and I love the recent spate of "Stability".
Since my June re-entry, I have noticed how "hungry" yield seekers have become. In times past, two of my favorite providers of yield have been preferred stocks and exchange traded debt both of which are reported each day at http://online.wsj.com/mdc/public/page/2_3024-Preferreds.html?mod=mdc_h_usshl#C . Open this site, and look at the far right column. Notice the incredible returns achieved so far this year. I captured much of those profits before my May exit, but these stocks have continued to appreciate-- some even above their redemption (call) price of $25. (Read about redemption prices at QuantumOnLine). Yield seekers clearly are "on the hunt." "Hungry like the wolf". Easy pickin's like the vast array of preferred shares of BankAmerica, Citigroup, JPMorgan, etc. have become too expensive for the risk adjusted return (although if you are not afraid of leverage, 8% can be achieved in this space via JPC, a closed end fund). This time around, I've had to "burn new ground" and "break from the crowd".
Yield hunters have also decimated other formerly fertile grounds. Safe, high dividend paying sectors such as wireless telcoms (VZ, T, VOD--although I bought all three at end of week dips), utilities (although EXC still presents some upward potential) and tobacco (RAI, MO) have become too expensive for the return. In order to achieve 6% or higher dividends, one must move up the risk ladder to companies like landline telcoms (WIN, FTR and CTL). Clearly, the expiration of the Bush tax cuts at year end which will result in dividends being taxed as high as 43.4% (currently 15%), has not yet dissuaded investors. Perhaps it's because so many stocks are held in tax deferred accounts (eg.401k's), or perhaps it's because there are no alternative yield providers.
My frustrations notwithstanding, I still seek yield. Believe me, "it takes a pile of dough to keep my lifestyle going". I will need a lot of passive income if I intend to "take some time for myself" in the future. I have had to "learn how (to find) yield" in places other than traditional haunts.
And I have. One can still find refuge in real estate investment trusts ("reits"), but only in the less traditonal, higher risk arenas such as agency reits (AGNC, ARR) and commercial mortgage reits (LSE, CLNY, RAS, SFI, NRF). In this space, I like the preferred issues of reits that pay high common dividends; for example CLNYpA, NRFpB and ARRpA. RQI is a closed end fund that holds many of these stocks, provides diversity and yields a decent return.
Oil and gas, especially oil trusts and master limited partnerships, remain attractive as well. I keep sayin' it, 'cause I belief it! Natural gas will be a big winner. It is clean and plentiful, dominates in the home heating sector and is the only real alternative to coal (for electrical power generation) and oil (for over the road vehicles). It is up nearly 50% since this spring ($2 to nearly $3/mmBTU), and you do not have to be a Whitewalker to know that "Winter is coming" (note the shout out to fellow "Game of Thrones" fans). Pick whatever pipeline company you prefer or buy AMLP, an etf that holds stock in all of them, but do get some exposure to the nat gas tranportation and storage sector. As for a vertically integrated play, I still like Linn Energy (LINE). Wall Street is not enamored with its recent acquisitions, but the Street's dislike simply provides a better buying opportunity.
Congratulations to those that had the foresight to buy the etf CORN which is up 30% this month as the drought continues.
Here is a list of my purchases this week: RBSpT, CFD, CTL, WIN, FTR, EXC, BACpL, AFC, NRFpB, ARRpA, JPC, JFR, PYG, RQI, AMLP, FGB, ARR, ELSpA, CLNYpA, MFO, T, VZ, VOD.
Like Le Petomane, I make no secret of my love of natural gas. I hope that my attraction proves more profitable than what Deborah Harry (Blondie) experienced:
"Once I had a love and it was a gas/Soon turned out had a heart of glass"
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION UPON INVESTING. RELY ON NOTHING STATED HEREIN.
"I'm sick and tired of repudiation/Where upon your orchestration
Leads to endless complication/And causes great consternation"---lyrics from "Stability" by Blondie
"Burning the ground, I break from the crowd/I'm on the hunt, I'm after you
I smell like I sound, I'm lost and I'm found/And I'm hungry like the wolf"---lyrics from "Hungry Like the Wolf" by Duran Duran
"If it takes a lot to keep it going/If it takes a lot to keep it real
Take some time for yourself/And learn to yield"---lyrics from "Yield" by The Indigo Girls
So far the earnings season has been a mixed bag; not great, but slightly better than expected; no huge surprises up or down. As a consequence, the stock market has been stable (the Dow was up 50 points for the week), with stock prices moving on individual fundamentals rather than en masse; "orchestrated" in response to some extragenous event (e.g. the Eurocrisis). Such "orchestration", known in the trade as correlation, "leads to endless complication", and "causes great consternation" to simple folk like me who just want a decent return on investment. Frankly, "I'm sick and tired" of correlation, and I love the recent spate of "Stability".
Since my June re-entry, I have noticed how "hungry" yield seekers have become. In times past, two of my favorite providers of yield have been preferred stocks and exchange traded debt both of which are reported each day at http://online.wsj.com/mdc/public/page/2_3024-Preferreds.html?mod=mdc_h_usshl#C . Open this site, and look at the far right column. Notice the incredible returns achieved so far this year. I captured much of those profits before my May exit, but these stocks have continued to appreciate-- some even above their redemption (call) price of $25. (Read about redemption prices at QuantumOnLine). Yield seekers clearly are "on the hunt." "Hungry like the wolf". Easy pickin's like the vast array of preferred shares of BankAmerica, Citigroup, JPMorgan, etc. have become too expensive for the risk adjusted return (although if you are not afraid of leverage, 8% can be achieved in this space via JPC, a closed end fund). This time around, I've had to "burn new ground" and "break from the crowd".
Yield hunters have also decimated other formerly fertile grounds. Safe, high dividend paying sectors such as wireless telcoms (VZ, T, VOD--although I bought all three at end of week dips), utilities (although EXC still presents some upward potential) and tobacco (RAI, MO) have become too expensive for the return. In order to achieve 6% or higher dividends, one must move up the risk ladder to companies like landline telcoms (WIN, FTR and CTL). Clearly, the expiration of the Bush tax cuts at year end which will result in dividends being taxed as high as 43.4% (currently 15%), has not yet dissuaded investors. Perhaps it's because so many stocks are held in tax deferred accounts (eg.401k's), or perhaps it's because there are no alternative yield providers.
My frustrations notwithstanding, I still seek yield. Believe me, "it takes a pile of dough to keep my lifestyle going". I will need a lot of passive income if I intend to "take some time for myself" in the future. I have had to "learn how (to find) yield" in places other than traditional haunts.
And I have. One can still find refuge in real estate investment trusts ("reits"), but only in the less traditonal, higher risk arenas such as agency reits (AGNC, ARR) and commercial mortgage reits (LSE, CLNY, RAS, SFI, NRF). In this space, I like the preferred issues of reits that pay high common dividends; for example CLNYpA, NRFpB and ARRpA. RQI is a closed end fund that holds many of these stocks, provides diversity and yields a decent return.
Oil and gas, especially oil trusts and master limited partnerships, remain attractive as well. I keep sayin' it, 'cause I belief it! Natural gas will be a big winner. It is clean and plentiful, dominates in the home heating sector and is the only real alternative to coal (for electrical power generation) and oil (for over the road vehicles). It is up nearly 50% since this spring ($2 to nearly $3/mmBTU), and you do not have to be a Whitewalker to know that "Winter is coming" (note the shout out to fellow "Game of Thrones" fans). Pick whatever pipeline company you prefer or buy AMLP, an etf that holds stock in all of them, but do get some exposure to the nat gas tranportation and storage sector. As for a vertically integrated play, I still like Linn Energy (LINE). Wall Street is not enamored with its recent acquisitions, but the Street's dislike simply provides a better buying opportunity.
Congratulations to those that had the foresight to buy the etf CORN which is up 30% this month as the drought continues.
Here is a list of my purchases this week: RBSpT, CFD, CTL, WIN, FTR, EXC, BACpL, AFC, NRFpB, ARRpA, JPC, JFR, PYG, RQI, AMLP, FGB, ARR, ELSpA, CLNYpA, MFO, T, VZ, VOD.
Like Le Petomane, I make no secret of my love of natural gas. I hope that my attraction proves more profitable than what Deborah Harry (Blondie) experienced:
"Once I had a love and it was a gas/Soon turned out had a heart of glass"
Saturday, July 14, 2012
July 14, 2012 The Looking Glass
Risk/Reward Vol. 127
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
"Very superstitious, writing's on the wall/Very superstitious ladder's about to fall
Thirteen month old baby broke the lookin' glass/Seven years of bad luck, the good things in your past"---lyrics from "Superstitious" by Stevie Wonder
"Deep rhythms captivate me/Hot rhythms stimulate me
Can't help but swing it boy/ Swing it brothers, swing"---lyrics from "Swing, Brother Swing" sung by Billie Holliday
"Mirror, mirror on the wall/Who's the baddest of them all
Don't lie to me/I'm a hot commodity"---lyrics from "Hot Commodity" by Trina
Holy Jason Voorhees! Casting "Superstition" aside, the Dow Jones Industrial Average rallied over 200 points on Friday to close even with last week. Obviously, the stock market doesn't suffer from triskaidekaphobia! I admit that I don't own a magic "lookin' glass", but I continue to "ladder" up my portfolio, believing that "good things are in the future--not the past".
As discussed last week, faced with overwhelming negativity, the world's economic and political leaders remain generally and genuinely concerned about a worldwide recession. There is a real sense of urgency to "Stimulate" economies and to "swing" them to an upward trajectory. I say, "Swing it brothers, swing!" For example, in Norway, the president interceded to stop a strike by oil rig workers so that the world's oil supply (Norway is a large exporter of oil---look at Statoil (STO)) would not be interrupted. With the news that China experienced its sixth consecutive quarter of slower economic growth, the ruling mandarins announced that foreign hedge funds would be able to operate in China and that several large industrial projects (including two new steel mills) would be launched. Nothing is more unstable than an idle Chinese population, and China's leaders know it. Alarmed by the closure of several Peugeot facilities, French President Hollande is launching an inquiry and expressing concern over the root problem---a lack of productivity. France's unit labor cost (a measure of productivity) fell 25% versus that of Germany in just the last decade.
Meanwhile, investors remain cautious as the "flight to safety" crowd drove the yield on the benchmark 10 year U.S. Treasury bond to a record auction low of 1.454%. Good luck retiring on that return, Boomers. Those that need a return on their investment need to look elsewhere---and that elsewhere necessarily includes the stock market,
In short, with everything skewing negative, I look for continued stimulus worldwide (the Fed's recent inaction notwithstanding)---and stimulus is good for the stock market. So here were my moves this week.
I remain a huge fan of oil and natural gas. It appears that the underlying commodity prices have stabilized, and the rising stock values reflect this fact. On the nat gas front, Thursday's edition of the Investor Business Daily reported that by next year, Flying J (my favorite truck stop!) will have refit 150 of its 450 facilities located nationwide to accommodate natural gas pumps. This means that eighteen wheelers will be able to go coast to coast on natural gas. UPS also announced the purchase of 48 nat gas powered trucks to handle its Las Vegas to Los Angeles run. I tell you, dear Readers, the nat gas revolution is freakin' (or should I say frackin') happenin'! I bought more AMLP and PGN and added NS on a dip.
On the oil front, the International Energy Agency reported Friday that worldwide oil demand will grow by 1million barrels/day in 2013 (to over 87million barrels/day!). The new demand is driven (no pun intended) mostly by emerging market countries. North Dakota and Alaska, the US's number 2 and 3 producers, pump only 1million barrels/day-- combined. Oil will remain in demand for a long time, and I will add to my COP. I am also hunting for another domestic oil play.
Oil is not the only "hot commodity" that I like. The US drought has driven grain prices skyward, and if China continues to stimulate its economy, look for metals to rebound. To cover the entire commodity space, I like the Nuveen Diversified Commodity Fund (CFD) a closed end fund that tracks the Gresham commodity futures model. Explaining that beast is beyond the scope of this publication, but if you like commodities I highly recommend you investigate it. What I find particularly attractive is its broad diversity (oil, grains, cotton, metals, cattle, etc.) and its consistent monthly dividend which yields an annual 8+% return. As noted above, I have no magic "mirror on the wall", but I do believe CFD is the "baddest of them all".
Some random observations:
- I made a ton on RBSpT earlier in the year and am again. It pays an 8.5% dividend currently, and its price is up 7% in just 10 days. I continue to buy.
- As I re-enter this time, I am more conscious of intra-sector diversity, and thus many of my early purchases are sector specific EFT's or CEF's such as RQI (reits), AMLP (master limited partnerships), JPC (preferred stock) etc.
And so it goes. Pervasive negativity has spurred universal concern---which (almost counterintuitively) has made me optimistic. If you have any observations, criticisms or you just think I'm crazy, please email me. After all, in the words of Stevie Wonder, "that's what friends are for."
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
"Very superstitious, writing's on the wall/Very superstitious ladder's about to fall
Thirteen month old baby broke the lookin' glass/Seven years of bad luck, the good things in your past"---lyrics from "Superstitious" by Stevie Wonder
"Deep rhythms captivate me/Hot rhythms stimulate me
Can't help but swing it boy/ Swing it brothers, swing"---lyrics from "Swing, Brother Swing" sung by Billie Holliday
"Mirror, mirror on the wall/Who's the baddest of them all
Don't lie to me/I'm a hot commodity"---lyrics from "Hot Commodity" by Trina
Holy Jason Voorhees! Casting "Superstition" aside, the Dow Jones Industrial Average rallied over 200 points on Friday to close even with last week. Obviously, the stock market doesn't suffer from triskaidekaphobia! I admit that I don't own a magic "lookin' glass", but I continue to "ladder" up my portfolio, believing that "good things are in the future--not the past".
As discussed last week, faced with overwhelming negativity, the world's economic and political leaders remain generally and genuinely concerned about a worldwide recession. There is a real sense of urgency to "Stimulate" economies and to "swing" them to an upward trajectory. I say, "Swing it brothers, swing!" For example, in Norway, the president interceded to stop a strike by oil rig workers so that the world's oil supply (Norway is a large exporter of oil---look at Statoil (STO)) would not be interrupted. With the news that China experienced its sixth consecutive quarter of slower economic growth, the ruling mandarins announced that foreign hedge funds would be able to operate in China and that several large industrial projects (including two new steel mills) would be launched. Nothing is more unstable than an idle Chinese population, and China's leaders know it. Alarmed by the closure of several Peugeot facilities, French President Hollande is launching an inquiry and expressing concern over the root problem---a lack of productivity. France's unit labor cost (a measure of productivity) fell 25% versus that of Germany in just the last decade.
Meanwhile, investors remain cautious as the "flight to safety" crowd drove the yield on the benchmark 10 year U.S. Treasury bond to a record auction low of 1.454%. Good luck retiring on that return, Boomers. Those that need a return on their investment need to look elsewhere---and that elsewhere necessarily includes the stock market,
In short, with everything skewing negative, I look for continued stimulus worldwide (the Fed's recent inaction notwithstanding)---and stimulus is good for the stock market. So here were my moves this week.
I remain a huge fan of oil and natural gas. It appears that the underlying commodity prices have stabilized, and the rising stock values reflect this fact. On the nat gas front, Thursday's edition of the Investor Business Daily reported that by next year, Flying J (my favorite truck stop!) will have refit 150 of its 450 facilities located nationwide to accommodate natural gas pumps. This means that eighteen wheelers will be able to go coast to coast on natural gas. UPS also announced the purchase of 48 nat gas powered trucks to handle its Las Vegas to Los Angeles run. I tell you, dear Readers, the nat gas revolution is freakin' (or should I say frackin') happenin'! I bought more AMLP and PGN and added NS on a dip.
On the oil front, the International Energy Agency reported Friday that worldwide oil demand will grow by 1million barrels/day in 2013 (to over 87million barrels/day!). The new demand is driven (no pun intended) mostly by emerging market countries. North Dakota and Alaska, the US's number 2 and 3 producers, pump only 1million barrels/day-- combined. Oil will remain in demand for a long time, and I will add to my COP. I am also hunting for another domestic oil play.
Oil is not the only "hot commodity" that I like. The US drought has driven grain prices skyward, and if China continues to stimulate its economy, look for metals to rebound. To cover the entire commodity space, I like the Nuveen Diversified Commodity Fund (CFD) a closed end fund that tracks the Gresham commodity futures model. Explaining that beast is beyond the scope of this publication, but if you like commodities I highly recommend you investigate it. What I find particularly attractive is its broad diversity (oil, grains, cotton, metals, cattle, etc.) and its consistent monthly dividend which yields an annual 8+% return. As noted above, I have no magic "mirror on the wall", but I do believe CFD is the "baddest of them all".
Some random observations:
- I made a ton on RBSpT earlier in the year and am again. It pays an 8.5% dividend currently, and its price is up 7% in just 10 days. I continue to buy.
- As I re-enter this time, I am more conscious of intra-sector diversity, and thus many of my early purchases are sector specific EFT's or CEF's such as RQI (reits), AMLP (master limited partnerships), JPC (preferred stock) etc.
And so it goes. Pervasive negativity has spurred universal concern---which (almost counterintuitively) has made me optimistic. If you have any observations, criticisms or you just think I'm crazy, please email me. After all, in the words of Stevie Wonder, "that's what friends are for."
Saturday, July 7, 2012
July 7, 2012 Daydeamin'
Risk/Reward Vol. 126
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
"Three coins in a fountain/Each one seeking happiness
Thrown by three hopeful lovers/Which one will the fountain bless?"---lyrics from "Three Coins in a Fountain" sung by Frank Sinatra
"C'mon people now/Smile on your brother
Ev'rybody get together/Try and love one another right now"---lyrics from "Let's Get Together" by the Youngbloods
"Hot time, summer in the city/Back of my neck getting dirty and gritty
Been down isn't it a pity/Doesn't seem to be a shadow in the city"---lyrics from "Summer in the City" by The Lovin' Spoonful
Although the Dow Jones Industrial Average ended 108 points down from last Friday (falling 124 points on yesterday's disappointing jobs number), I continued my steady (if slow) re-entry into the stock market. This week I bought some more natural gas plays (PNG, EEP, LINE and ETP), the preferred stock of a real estate investment trust (MFO) and of a bank (RBSpT), and some utility shares (EXC).
Why on earth would I continue to buy when the world's economic outlook is so bleak that three central banks threw "coins into the fountain--each one seeking happiness"? Like "three hopeful lovers", the Chinese central bank surprisingly dropped interest rates as did the European Central Bank, and the Bank of England announced a 75billion Pound "quantitative easing" (the purchase of British gilts).
Why invest indeed when Christine Lagarde, the president of the International Monetary Fund, announced that the world outlook was so negative the IMF was reducing its economic forecast? Am I crazy to buy when the global purchasing manager's index (PMI) registered 50.3, its lowest reading since 2009? Am I thinking some "fountain will bless" me?
Perhaps.
But, I am much more comfortable buying today than at any time in the past two months. And here is why. For the first time in a long while, all (I repeat ALL) world political, economic, and business leaders are on the same page. The concern is no longer WHETHER Germany will support Spain, or WHETHER the dollar is stronger than the euro or even WHETHER Apple is better than Google. The concern is universal albeit disconcerting: is the world on the verge of a global recession? And when all of the world's leaders share that same concern, massive stimulus (like this week's actions by the three central banks) can not be far behind. "C'mon people now, smile on your brother!" China would rather face inflation than stagnation, as would the United States-- especially in an election year. And Germany cannot have the outflow of its precious exports diminish. One can debate the long term efficacy of government stimuli, but such actions invariably have a positive impact on stock markets. Money can be made when world leaders act in concert and "try and love one another." I think money can be made "right now." And that, dear Readers, is why I continue to buy--- ever so cautiously and ever so selectively.
Speaking of WHETHER or should I say WEATHER, what "a hot time, this summer in the city!" Can you imagine the kilowatts being generated and the amount of natural gas being consumed to generate them? But to me, this "is not a pity" because I bought Exelon ( an unfairly disfavored electrical utility paying a 5.6% dividend) and the host of natural gas stocks listed above. I have said it before, but it bears repeating---natural gas is the future of this country. It is plentiful, cheap, domestically produced, immune from competition (I consider Canada "domestic"), and burns cleaner than coal. As long as we consume heat and electricity, this fossil fuel will be needed. Any well financed participant in the industry; be it a producer, pipeline or storage facility will do well especially considering how much in the "shadow"natural gas related shares have been recently. And as a bonus, most pay awesome dividends while you wait for the stock to appreciate.
I like that world leaders are desperate for economic growth. The corporate quarterly report season starts Monday afternoon with Alcoa reporting first. If second quarter earnings disappoint (which I believe they will), we will see more stimulus. In the words of the 'Spoonful, right now seems "custom made for a daydreamin' boy"---like me.
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
"Three coins in a fountain/Each one seeking happiness
Thrown by three hopeful lovers/Which one will the fountain bless?"---lyrics from "Three Coins in a Fountain" sung by Frank Sinatra
"C'mon people now/Smile on your brother
Ev'rybody get together/Try and love one another right now"---lyrics from "Let's Get Together" by the Youngbloods
"Hot time, summer in the city/Back of my neck getting dirty and gritty
Been down isn't it a pity/Doesn't seem to be a shadow in the city"---lyrics from "Summer in the City" by The Lovin' Spoonful
Although the Dow Jones Industrial Average ended 108 points down from last Friday (falling 124 points on yesterday's disappointing jobs number), I continued my steady (if slow) re-entry into the stock market. This week I bought some more natural gas plays (PNG, EEP, LINE and ETP), the preferred stock of a real estate investment trust (MFO) and of a bank (RBSpT), and some utility shares (EXC).
Why on earth would I continue to buy when the world's economic outlook is so bleak that three central banks threw "coins into the fountain--each one seeking happiness"? Like "three hopeful lovers", the Chinese central bank surprisingly dropped interest rates as did the European Central Bank, and the Bank of England announced a 75billion Pound "quantitative easing" (the purchase of British gilts).
Why invest indeed when Christine Lagarde, the president of the International Monetary Fund, announced that the world outlook was so negative the IMF was reducing its economic forecast? Am I crazy to buy when the global purchasing manager's index (PMI) registered 50.3, its lowest reading since 2009? Am I thinking some "fountain will bless" me?
Perhaps.
But, I am much more comfortable buying today than at any time in the past two months. And here is why. For the first time in a long while, all (I repeat ALL) world political, economic, and business leaders are on the same page. The concern is no longer WHETHER Germany will support Spain, or WHETHER the dollar is stronger than the euro or even WHETHER Apple is better than Google. The concern is universal albeit disconcerting: is the world on the verge of a global recession? And when all of the world's leaders share that same concern, massive stimulus (like this week's actions by the three central banks) can not be far behind. "C'mon people now, smile on your brother!" China would rather face inflation than stagnation, as would the United States-- especially in an election year. And Germany cannot have the outflow of its precious exports diminish. One can debate the long term efficacy of government stimuli, but such actions invariably have a positive impact on stock markets. Money can be made when world leaders act in concert and "try and love one another." I think money can be made "right now." And that, dear Readers, is why I continue to buy--- ever so cautiously and ever so selectively.
Speaking of WHETHER or should I say WEATHER, what "a hot time, this summer in the city!" Can you imagine the kilowatts being generated and the amount of natural gas being consumed to generate them? But to me, this "is not a pity" because I bought Exelon ( an unfairly disfavored electrical utility paying a 5.6% dividend) and the host of natural gas stocks listed above. I have said it before, but it bears repeating---natural gas is the future of this country. It is plentiful, cheap, domestically produced, immune from competition (I consider Canada "domestic"), and burns cleaner than coal. As long as we consume heat and electricity, this fossil fuel will be needed. Any well financed participant in the industry; be it a producer, pipeline or storage facility will do well especially considering how much in the "shadow"natural gas related shares have been recently. And as a bonus, most pay awesome dividends while you wait for the stock to appreciate.
I like that world leaders are desperate for economic growth. The corporate quarterly report season starts Monday afternoon with Alcoa reporting first. If second quarter earnings disappoint (which I believe they will), we will see more stimulus. In the words of the 'Spoonful, right now seems "custom made for a daydreamin' boy"---like me.
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