Risk/Reward Vol. 150
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
"I will always be hoping, hoping/You will always be holding, holding
My hand in your hand/I will understand."---lyrics from "Hope of Deliverance" by Paul McCartney
"There is someone/Watching your footsteps
Turn around/Look at me."---lyrics from "Turn Around, Look at Me" sung by the Vogues
"Trying to convince myself/ I've found one
Making the mistake/I never learned from."---lyrics from "Same Mistake" by Drake
Talk about "hoping, hoping!" Clearly, Mr. Market is "holding, holding" on to the "Hope of a Deliverance", with Dow Jones Industrial Average (DJIA) still hovering near 13,000 and the S&:P remaining above 1400. I don't "understand" this hope in light of continued Congressional gridlock on Fiscal Cliff issues and Secretary Geithner's announcement on Thursday that we will reach the debt ceiling on December 31st. Thus, I remain on the sidelines.
As my loyal readers know, I write this newsletter so that "someone is watching my footsteps" as I try to achieve the goal that I set in 2010 and that I announced in Vol. 1 of Risk/Reward (available at http://www.riskrewardblog.blogsopot.com/ ). At that time I stated as follows:
"I am in search of a 6%, pre tax return. Throughout most of my life, this would have been a layup. From 1969 through 1997, the 10 year Treasuries rarely fell below 6%. From 1980 through 1985, they never fell below 10%. So, at this stage in my life all I need is a little inflation. Indeed, right now 90% of my money is parked, waiting for that to happen. Unfortunately, it looks like we are into a prolonged period of stagflation and perhaps deflation. So, Barb and I decided to get off our duffs, and to become more active money managers."
So, let's "turn around and look at me" to ascertain how I did this year. On the capital that I had available to invest on January 1, 2012 ( I do not count the money that Barb mandates that I keep in cash or the additions that I make throughout the year via pension contributions and/or savings), I made a 6.8% pre-tax return from realized gains and dividends or interest. Not bad, considering I was out of the market all together from mid May through mid July and from mid October through the present (a total of 5 months). If I had kept the portfolio that I sold in May intact through today, I would have seen a 12% pre-tax return for the year. If I had kept the portfolio I sold in October intact through today, I would have seen only a 2.4% pre-tax return for the year even considering the profits I took in May..
Did I "make a mistake" in leaving the market in May? I say no---but in so saying, am I "trying to convince myself" that "I've found one" formula that works--at least for me? Should I have "learned from" the sale in May that I exited too quickly? I do not know the answer to that one. I do know that this year, I was very comfortable with my decisions and that I slept better as a result---and never so well as last night. And so, I continue my quest fully realizing that my learning curve is more like a "long and winding road."
May all of you have a happy, healthy and prosperous NewYear!
P.S. How did you do?
Saturday, December 29, 2012
Saturday, December 22, 2012
December 22, 2012 Chain of Fools
Risk/Reward Vol. 149
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
"You lift me up/When I'm on the ground
But as soon as I get up top/You send me tumblin' down
Your love is like a see saw."---lyrics from "See Saw" as sung by Aretha Franklin
"I can see clearly now/The rain is gone
I can see all obstacles in my way
It's gonna be a bright, bright sun shiny day"---lyrics from "I Can See Clearly Now" sung by Johnny Nash
"It's crazy to hold on/When you won't open
So now I'm closed for love."---lyrics from "Closed for Love" sung by Ellie Goulding
Again this week, the Fiscal Cliff negotiations (or lack thereof) turned the stock market into a "see saw". Early in the week, news "on the ground" of a possible deal "lifted up" the Dow Jones Industrial Average (DJIA) more than 200 points, only to "send us tumblin' down" Wednesday on news that the House Republicans were opting for Plan B, a measure the President would not accept. Thursday's modest gains were eliminated on Friday with news that Speaker Boehner had lost control of his caucus and that even the modest tax increases in Plan B were unacceptable to the House. The DJIA closed up 55 points for the week, but was directionally negative.
That said, come the New Year, we SHOULD "see clearly." The "rain SHOULD be gone", and we SHOULD "see all obstacles in our way." The clarity of just knowing the consequences--1) of a deal or 2) of no deal and a leap over the Cliff-- SHOULD bring "a bright, bright sun shiny day." And once again I SHOULD be off the sidelines and in the market, enjoying a decent return. Unless of course, our collective pain is extended by a minor and temporary legislative kick-of-the-can as suggested by the President after Friday's close. Thus, my use of SHOULD.
As indicated previously, my re-entry, when it occurs, will include a heavy dose of closed end funds (CEF's). My "love for closed" end funds comes after much study and investment therein over the past two years . Like their cousins mutual funds and exchange traded funds (ETF's), CEF's offer instant diversification. As a consequence, I will not go "crazy trying to hold on" to or to track individual stocks. A CEF is created via an intial public offering of a set number of shares. The proceeds from the offering are invested by fund sponsors (e.g. BlackRock, Nuveen, Legg Mason, etc.) into assets that are consistent with the particular fund's stated purpose (e.g. investment in large cap stocks or corporate bonds or senior loans, etc. ). After the initial offering, the fund is "closed" to further investment and "won't open". Thereafter, the shares of the closed end fund itself are traded on the stock exchange. The price of a CEF share varies from day to day depending on a variety of factors. Unlike its cousins, mutual funds and ETF's, CEF's can trade above or below their net asset value. Most closed end funds are income oriented which makes them very appealing to me-- an inveterate yield hunter. Income is generated from dividends/interest paid by the securities owned by the fund, from capital gains from selling those securities and/or from premiums from selling covered calls. CEFs are particularly attractive in times of low interest rates (like now) because they can employ leverage (borrowed funds) to enhance returns---something that mutual funds and ETF's cannot do. Read more about CEF's at www.CEFConnect.com , an excellent educational and research source. Over the next several editions, I will be discussing my choices in detail. Each of them has an excellent track record, and most hold at least a Bronze rating by Morningstar, a highly regarded financial reporting company, to which I subscribe, that tracks thousands of funds.
Within a few days, we SHOULD be unfettered---like Aretha, released from the "chain, chain, chains" of Fiscal Cliff uncertainty . Having been "treated mean" and been "treated cruel" by the "chain of fools" that populate our government, the unknown SHOULD be known, and fundamentals SHOULD dictate market performance. Please, Washington, if for no reason other than R-E-S-P-E-C-T for your constituents, next week either do a deal or don't. Do not prolong the agony.
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
"You lift me up/When I'm on the ground
But as soon as I get up top/You send me tumblin' down
Your love is like a see saw."---lyrics from "See Saw" as sung by Aretha Franklin
"I can see clearly now/The rain is gone
I can see all obstacles in my way
It's gonna be a bright, bright sun shiny day"---lyrics from "I Can See Clearly Now" sung by Johnny Nash
"It's crazy to hold on/When you won't open
So now I'm closed for love."---lyrics from "Closed for Love" sung by Ellie Goulding
Again this week, the Fiscal Cliff negotiations (or lack thereof) turned the stock market into a "see saw". Early in the week, news "on the ground" of a possible deal "lifted up" the Dow Jones Industrial Average (DJIA) more than 200 points, only to "send us tumblin' down" Wednesday on news that the House Republicans were opting for Plan B, a measure the President would not accept. Thursday's modest gains were eliminated on Friday with news that Speaker Boehner had lost control of his caucus and that even the modest tax increases in Plan B were unacceptable to the House. The DJIA closed up 55 points for the week, but was directionally negative.
That said, come the New Year, we SHOULD "see clearly." The "rain SHOULD be gone", and we SHOULD "see all obstacles in our way." The clarity of just knowing the consequences--1) of a deal or 2) of no deal and a leap over the Cliff-- SHOULD bring "a bright, bright sun shiny day." And once again I SHOULD be off the sidelines and in the market, enjoying a decent return. Unless of course, our collective pain is extended by a minor and temporary legislative kick-of-the-can as suggested by the President after Friday's close. Thus, my use of SHOULD.
As indicated previously, my re-entry, when it occurs, will include a heavy dose of closed end funds (CEF's). My "love for closed" end funds comes after much study and investment therein over the past two years . Like their cousins mutual funds and exchange traded funds (ETF's), CEF's offer instant diversification. As a consequence, I will not go "crazy trying to hold on" to or to track individual stocks. A CEF is created via an intial public offering of a set number of shares. The proceeds from the offering are invested by fund sponsors (e.g. BlackRock, Nuveen, Legg Mason, etc.) into assets that are consistent with the particular fund's stated purpose (e.g. investment in large cap stocks or corporate bonds or senior loans, etc. ). After the initial offering, the fund is "closed" to further investment and "won't open". Thereafter, the shares of the closed end fund itself are traded on the stock exchange. The price of a CEF share varies from day to day depending on a variety of factors. Unlike its cousins, mutual funds and ETF's, CEF's can trade above or below their net asset value. Most closed end funds are income oriented which makes them very appealing to me-- an inveterate yield hunter. Income is generated from dividends/interest paid by the securities owned by the fund, from capital gains from selling those securities and/or from premiums from selling covered calls. CEFs are particularly attractive in times of low interest rates (like now) because they can employ leverage (borrowed funds) to enhance returns---something that mutual funds and ETF's cannot do. Read more about CEF's at www.CEFConnect.com , an excellent educational and research source. Over the next several editions, I will be discussing my choices in detail. Each of them has an excellent track record, and most hold at least a Bronze rating by Morningstar, a highly regarded financial reporting company, to which I subscribe, that tracks thousands of funds.
Within a few days, we SHOULD be unfettered---like Aretha, released from the "chain, chain, chains" of Fiscal Cliff uncertainty . Having been "treated mean" and been "treated cruel" by the "chain of fools" that populate our government, the unknown SHOULD be known, and fundamentals SHOULD dictate market performance. Please, Washington, if for no reason other than R-E-S-P-E-C-T for your constituents, next week either do a deal or don't. Do not prolong the agony.
Saturday, December 15, 2012
December 15, 2012 Get Back, Loretta
Risk/Reward Vol. 148
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
"Baby, I'm a man/And maybe I'm a lonely man"
Who's in the middle of something/That he really doesn't understand."---lyrics from "Maybe I'm Amazed" by Paul McCartney
"It's hard enough to wake up after awhile
And even though I say I'm feeling fine
I'm locked up, loaded down, short a try."---lyrics from "Short a Try" by O.A R.
"Big man, huh?/But just understand Uncle Sam knows the scam
Couldn't fool me long/I got it goin' on
I'm independent."---lyrics from "Independent" by Salt N Pepa
"Baby, I'm amazed!" On Monday and Tuesday when the only news story reported by the financial press was disappointment in the Fiscal Cliff negotiations, the Dow Jones Industrual Average (DJIA) advanced 93 points. On Wednesday, when the dominant story was the Federal Reserve's decision to extend quantitative easing (QE4), the type of news that one would expect to drive the DJIA higher, the index fell---and continued to fall through Friday even in the face of encouraging employment numbers. What gives with this? But then, what gives with the DJIA remaining above 13,000 points with no Fiscal Cliff resolution in sight? Clearly, "we're in the middle of something that I don't really understand." "Maybe I'm a lonely man" on the sidelines, but I am a content one.
In another attempt to spur economic growth, the Federal Reserve (Fed), with QE4, has commited to bid upon and to purchase $40billion worth of mortgages and $45billion worth of Treasury bonds EACH MONTH until unemployment (currently at 7.8%) falls below 6.5% or until inflation becomes a concern---whichever occurs first. Achieving that unemployment rate could take a very long time with all of the downward pressure on hiring (e.g. increased taxes, Affordable Care Act obligations, etc.). By printing $85billion of new money each month to pay for this up bidding exercise (see "Picasso Auction" Vol. 113 at www.riskrewardblog.blogspot.com for an explanation of this process) the Federal Reserve's balance sheet will exceed $4trillion by year end 2013. This is astounding considering its balance sheet did not reach $1trillion until September, 2008! QE4's resultant higher bond/mortgage prices and concomitant lower bond/mortgage interest rates (remember, higher asset prices means lower yields/interest) may make us "feel fine" for now, but necessarily we will "wake up after awhile" to find that we are "loaded down" with debt. The eventuality of this realization prompted Ray Dalio, the most successful hedge fund manager in history, to opine on Wednesday that his greatest profit opportunity in the future will come from "short(ing)" Treasury bonds. He is planning to do so come year end 2013 when he predicts that inflation will cause the Fed to stop QE. At that time, according to Dalio, the price of Treasury bonds will plummet. I will buy TBT, PST and/or TBF if and when it's time to short Treasuries. In the "shorter" run, I will be keep my exposure to agency morgage real estate investment trusts (e.g. NLY, AGNC, ARR) low. They simply cannot purchase mortgages profitably with the Fed using $40billion of newly printed money each month to keep mortgage bids high and mortgage interest rates low.
Almost unnoticed in this week's Fiscal Cliff fog was a report from the U.S. Energy Information Administration that in 2012, the United States will increase its crude oil production by 760,000 barrels/day (the largest annual increase in history), and that by year end 2013 U.S. crude oil production will exceed 7,000,000 barrels/day (the highest production since 1992). 'Uncle Sam knows the scam" that OPEC has visited upon us over the years, and should want to escape it. Thanks to cheap natural gas and crude oil from advancments in technology (fracking), we can become the economic "Big Man" again if regulations do not impede us. Until new pipelines are in place, which should allow us to really "get it goin' on", there will be supply and pricing inequities that may depress the stock of some domestic producers temporarily. But ultimately these plays will be big winners---and the U.S. should be energy "independent". ETF's and CEF's that play in this space are high on my re-entry list.
The DJIA remains surprisingly (to me) buoyant, dropping only 20 points this week. I continue to believe that the stock market will experience downward pressure until more clarity on the Fiscal Cliff is achieved. Whether that clarity is provided by a negotiated resolution or a plunge into the abyss, the time for clarity is fast approaching. Once clarity--good or bad---is achieved, I will reenter. Then, Loretta, in the words of Sir Paul, I will "get back to where I once belonged.
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
"Baby, I'm a man/And maybe I'm a lonely man"
Who's in the middle of something/That he really doesn't understand."---lyrics from "Maybe I'm Amazed" by Paul McCartney
"It's hard enough to wake up after awhile
And even though I say I'm feeling fine
I'm locked up, loaded down, short a try."---lyrics from "Short a Try" by O.A R.
"Big man, huh?/But just understand Uncle Sam knows the scam
Couldn't fool me long/I got it goin' on
I'm independent."---lyrics from "Independent" by Salt N Pepa
"Baby, I'm amazed!" On Monday and Tuesday when the only news story reported by the financial press was disappointment in the Fiscal Cliff negotiations, the Dow Jones Industrual Average (DJIA) advanced 93 points. On Wednesday, when the dominant story was the Federal Reserve's decision to extend quantitative easing (QE4), the type of news that one would expect to drive the DJIA higher, the index fell---and continued to fall through Friday even in the face of encouraging employment numbers. What gives with this? But then, what gives with the DJIA remaining above 13,000 points with no Fiscal Cliff resolution in sight? Clearly, "we're in the middle of something that I don't really understand." "Maybe I'm a lonely man" on the sidelines, but I am a content one.
In another attempt to spur economic growth, the Federal Reserve (Fed), with QE4, has commited to bid upon and to purchase $40billion worth of mortgages and $45billion worth of Treasury bonds EACH MONTH until unemployment (currently at 7.8%) falls below 6.5% or until inflation becomes a concern---whichever occurs first. Achieving that unemployment rate could take a very long time with all of the downward pressure on hiring (e.g. increased taxes, Affordable Care Act obligations, etc.). By printing $85billion of new money each month to pay for this up bidding exercise (see "Picasso Auction" Vol. 113 at www.riskrewardblog.blogspot.com for an explanation of this process) the Federal Reserve's balance sheet will exceed $4trillion by year end 2013. This is astounding considering its balance sheet did not reach $1trillion until September, 2008! QE4's resultant higher bond/mortgage prices and concomitant lower bond/mortgage interest rates (remember, higher asset prices means lower yields/interest) may make us "feel fine" for now, but necessarily we will "wake up after awhile" to find that we are "loaded down" with debt. The eventuality of this realization prompted Ray Dalio, the most successful hedge fund manager in history, to opine on Wednesday that his greatest profit opportunity in the future will come from "short(ing)" Treasury bonds. He is planning to do so come year end 2013 when he predicts that inflation will cause the Fed to stop QE. At that time, according to Dalio, the price of Treasury bonds will plummet. I will buy TBT, PST and/or TBF if and when it's time to short Treasuries. In the "shorter" run, I will be keep my exposure to agency morgage real estate investment trusts (e.g. NLY, AGNC, ARR) low. They simply cannot purchase mortgages profitably with the Fed using $40billion of newly printed money each month to keep mortgage bids high and mortgage interest rates low.
Almost unnoticed in this week's Fiscal Cliff fog was a report from the U.S. Energy Information Administration that in 2012, the United States will increase its crude oil production by 760,000 barrels/day (the largest annual increase in history), and that by year end 2013 U.S. crude oil production will exceed 7,000,000 barrels/day (the highest production since 1992). 'Uncle Sam knows the scam" that OPEC has visited upon us over the years, and should want to escape it. Thanks to cheap natural gas and crude oil from advancments in technology (fracking), we can become the economic "Big Man" again if regulations do not impede us. Until new pipelines are in place, which should allow us to really "get it goin' on", there will be supply and pricing inequities that may depress the stock of some domestic producers temporarily. But ultimately these plays will be big winners---and the U.S. should be energy "independent". ETF's and CEF's that play in this space are high on my re-entry list.
The DJIA remains surprisingly (to me) buoyant, dropping only 20 points this week. I continue to believe that the stock market will experience downward pressure until more clarity on the Fiscal Cliff is achieved. Whether that clarity is provided by a negotiated resolution or a plunge into the abyss, the time for clarity is fast approaching. Once clarity--good or bad---is achieved, I will reenter. Then, Loretta, in the words of Sir Paul, I will "get back to where I once belonged.
Saturday, December 8, 2012
December 8, 2012 Who Knew
Risk/Reward Vol. 147
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
"Don't ask me why/No more questions
Just accept it for the way it is"---lyrics from "Words" by Pink
"He got that super bass/Boom da boom boom
Boom da boom boom bass
Yeah that's that super bass"---lyrics from "Super Bass" by Nicki Minaj
"It's a pain in my gas/It's killin' me so fast
All my hard earned money just thrown away
Blame Bin Laden or Sudan, Iraq or Iran"---lyrics from "Pain in the Gas" sung by Billy Ray Cyrus
This week Mr. Market showed significant support for the President. On Wednesday, within minutes of the President's comments that the Fiscal Cliff could be resolved in one week if the Republicans accepted that the upper two tax brackets will be increased, the Dow Jones Industrial Average (DJIA) went from negative to positive, ending the day up 86 points. There were "no more questions" regarding this claim. "Don't ask me why." Mr. Market "just accepted it for the way it is." Indeed, thereafter stocks moved steadily upward aided by a favorable employment report on Friday. The DJIA is now only 2.5 % below where I exited in October.
This week Goldman Sachs opined that, contrary to what others have said, the "super" cycle in "bass (base)" metals will continue. For those unfamiliar with the "supercycle", much of the three year "boom da boom" experienced by emerging markets has been driven by demand (primarily from China) for base metals (e.g. copper, zinc, iron ore) mined in emerging market countries (e.g. Chile, Brazil, Australia, etc.). With the political change in China complete and a commitment from the new regime to promote development, Goldman Sachs believes that the "boom da boom" in "bass" metals will experience a renaissance. Goldman's statement notwithstanding, one of world's major copper miners, Freeport-McMoRan (FCX) took a different tack this week by making two large acquisitions (PXP and MMR) in the natural gas exploration and transportation sector. The stock market punished FCX for uncoupling from copper, but its foray into natural gas may make sense for the reason set forth below.
Mid-week, the Department of Energy (DOE) issued a report that advocates an expansion of natural gas exports. As loyal readers know, thanks to hydraulic fracturing ("fracking") and horizontal drilling, the United States has gone from being an importer of natural gas at $12/mmBTU in 2008 ("a pain in my gas") to being bloated with it. Indeed, natural gas traded below $2/mmBTU earlier this year before production was curtailed. Energy independence could be ours at last if we support natural gas usage in service vehicles and semis and if regulation doesn't "kill it so fast.". If we don't achieve energy independence, don't "Blame Bin Laden or Sudan, Iraq or Iran." Blame ourselves. Despite a surplusage of natural gas, heretofore only one company, Cheniere Energy (LNG), has been granted permission by the DOE to construct a natural gas exporting facility. This week's report should benefit other companies interested in exporting this abundant resource, most notably Dominion Resources (D).
Gauged by the market's recent move upward, I may be the last person who believes that plunging over the Fiscal Cliff is still a possibility---and/or that a plunge will result in a significant market drop. But recall, if you will, a mere 16 months ago. Mr. Market believed that the Debt Ceiling crisis would be resolved before the August 2, 2011 default date and that a debt downgrade would be avoided. It was not worth the risk to me, so on July 29, 2011 I liquidated when the DJIA was at 12,240. (See Vol 78 www.riskrewardblog.blogspot.com). Washington played brinksmanship over the succeeding few days and a week or so after my liquidation, the DJIA closed at 10,2019---a 12% drop from my exit point. Lest we forget, this is the same President and the same Congress that caused that fiasco. Consequently, I am biding my time---on the sidelines. I know what I want to buy and am eager to do so, but I am in cash until a Cliff resolution is reached.
Please, Washington, listen to Pink, and:
"Get this party started."
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
"Don't ask me why/No more questions
Just accept it for the way it is"---lyrics from "Words" by Pink
"He got that super bass/Boom da boom boom
Boom da boom boom bass
Yeah that's that super bass"---lyrics from "Super Bass" by Nicki Minaj
"It's a pain in my gas/It's killin' me so fast
All my hard earned money just thrown away
Blame Bin Laden or Sudan, Iraq or Iran"---lyrics from "Pain in the Gas" sung by Billy Ray Cyrus
This week Mr. Market showed significant support for the President. On Wednesday, within minutes of the President's comments that the Fiscal Cliff could be resolved in one week if the Republicans accepted that the upper two tax brackets will be increased, the Dow Jones Industrial Average (DJIA) went from negative to positive, ending the day up 86 points. There were "no more questions" regarding this claim. "Don't ask me why." Mr. Market "just accepted it for the way it is." Indeed, thereafter stocks moved steadily upward aided by a favorable employment report on Friday. The DJIA is now only 2.5 % below where I exited in October.
This week Goldman Sachs opined that, contrary to what others have said, the "super" cycle in "bass (base)" metals will continue. For those unfamiliar with the "supercycle", much of the three year "boom da boom" experienced by emerging markets has been driven by demand (primarily from China) for base metals (e.g. copper, zinc, iron ore) mined in emerging market countries (e.g. Chile, Brazil, Australia, etc.). With the political change in China complete and a commitment from the new regime to promote development, Goldman Sachs believes that the "boom da boom" in "bass" metals will experience a renaissance. Goldman's statement notwithstanding, one of world's major copper miners, Freeport-McMoRan (FCX) took a different tack this week by making two large acquisitions (PXP and MMR) in the natural gas exploration and transportation sector. The stock market punished FCX for uncoupling from copper, but its foray into natural gas may make sense for the reason set forth below.
Mid-week, the Department of Energy (DOE) issued a report that advocates an expansion of natural gas exports. As loyal readers know, thanks to hydraulic fracturing ("fracking") and horizontal drilling, the United States has gone from being an importer of natural gas at $12/mmBTU in 2008 ("a pain in my gas") to being bloated with it. Indeed, natural gas traded below $2/mmBTU earlier this year before production was curtailed. Energy independence could be ours at last if we support natural gas usage in service vehicles and semis and if regulation doesn't "kill it so fast.". If we don't achieve energy independence, don't "Blame Bin Laden or Sudan, Iraq or Iran." Blame ourselves. Despite a surplusage of natural gas, heretofore only one company, Cheniere Energy (LNG), has been granted permission by the DOE to construct a natural gas exporting facility. This week's report should benefit other companies interested in exporting this abundant resource, most notably Dominion Resources (D).
Gauged by the market's recent move upward, I may be the last person who believes that plunging over the Fiscal Cliff is still a possibility---and/or that a plunge will result in a significant market drop. But recall, if you will, a mere 16 months ago. Mr. Market believed that the Debt Ceiling crisis would be resolved before the August 2, 2011 default date and that a debt downgrade would be avoided. It was not worth the risk to me, so on July 29, 2011 I liquidated when the DJIA was at 12,240. (See Vol 78 www.riskrewardblog.blogspot.com). Washington played brinksmanship over the succeeding few days and a week or so after my liquidation, the DJIA closed at 10,2019---a 12% drop from my exit point. Lest we forget, this is the same President and the same Congress that caused that fiasco. Consequently, I am biding my time---on the sidelines. I know what I want to buy and am eager to do so, but I am in cash until a Cliff resolution is reached.
Please, Washington, listen to Pink, and:
"Get this party started."
Saturday, December 1, 2012
December 1, 2012 Hostage
Risk/Reward Vol. 146
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
"It's quarter to three
There's no one in the place except you and me
So set 'em up Joe
I got a little story you oughta know."---lyrics from "One for My Baby" sung by Frank Sinatra
"I can change your life, make it so new
Make you never want to go back to the old you
Ciroc and lime, give it a lil' time
And she gonna transform like Optimus Prime"---lyrics from "I Can Transform Ya" by Chris Brown
"Can you guess my name?/And can you guess my trade
Well, I won't rest before the world is made
Arm in arm the angels fly/Keep me falling from the sky
Steel Monkey"---lyrics from "Steel Monkey" by Jethro Tull
The stock market is a hostage of the Fiscal Cliff rumor mill. This week's stock chart tells a "little story you oughta know". At noon on Tuesday, the market was trading in positive territory, "set up" by good housing and consumer confidence news---the type of information that should drive market action. Two hours later, Senator Harry Reid held a press conference where he stated little if any progress had been made in resolving the Fiscal Cliff. By "quarter to three"(EST), the market had dropped over 60 points and ended the day down 86. The next day the market continued downward until President Obama stated that prospects looked good for a resolution. The stock market rose on the news and continued generally upward until Friday when Speaker Boehner flattened it by stating that Fiscal Cliff discussions were going nowhere. Honestly, when it comes to D.C. its seems "there is no one in the place" who is looking out for "you and me".
The Dow Jones Industrial Average ended the week up 16 points. But, I remain on the sidelines. I have read nothing that makes me believe that either side is ready to compromise on Cliff issues. The President has stated that an increase in the top two tax brackets is a sine qua non of any resolution. He has remained steadfast on this point for more than a year. I don't see him relenting. Politically it would be foolish for him to do so. Keep in mind that Barack Obama sees himself as a "transformative" President. With Democrats controlling both houses of Congress during his first two years in office, he was a veritable "Optimus", passage of the Obamacare being a "Prime" example. "Give it a lil' time" and you will see how Obamacare has "changed your life." Going forward, he will not be satisfied unless and until he transforms how wealth is distributed in this country. But, as the past two years have shown, he can do nothing with a Republican controlled House. So how best to rid himself of those pests? Either make them abandon their "no tax increase" pledge and thereby incur the wrath of their Tea Party base or have them commit political suicide by holding fast to that pledge and vaulting the country over the Cliff for the sake of the wealthy that populate the upper two tax brackets. The President wins and the Republicans lose---either way. As I said, prospects for compromise don't look promising.
When I do reenter, I won't be a "Steel Money". World steel production capacity is currently 1.8 trillion tons with 350 million tons of additional capacity coming on line in 2013. Worldwide consumption is only 1.5 trillion tons, 46% of which is consumed by China which naturally has a preference for using domestically produced steel. Steel production overcapacity was highlighted this week as France threatened to nationalize one of Arcelor Mittal's French steel mills scheduled to be closed as redundant. Seeing itself as an "angel", the French government does not want employment to "keep falling", even if steel prices do.
Despite my recent dire predictions, the stock market has remained remarkably steady; now down only 3.6% from when I exited in October. I may have overreacted, and frankly nothing would please me more should that be the case. I would have preserved my desired profit level for the year and lost only one quarter's dividends in return for sleeping well for three months. To me that would be a satisfactory result. That said, I continue to believe that we stand a 50/50 chance that our lame duck Congress will send us over the Fiscal Cliff and into unchartered waters. Should that occur, the market will surely plummet, but I will be kept afloat by my cash position. If the worst occurs, I will not be grasping for air through some "Aqualung", "feeling like a dead duck, spitting out pieces of broken luck." (Jethro Tull)
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
"It's quarter to three
There's no one in the place except you and me
So set 'em up Joe
I got a little story you oughta know."---lyrics from "One for My Baby" sung by Frank Sinatra
"I can change your life, make it so new
Make you never want to go back to the old you
Ciroc and lime, give it a lil' time
And she gonna transform like Optimus Prime"---lyrics from "I Can Transform Ya" by Chris Brown
"Can you guess my name?/And can you guess my trade
Well, I won't rest before the world is made
Arm in arm the angels fly/Keep me falling from the sky
Steel Monkey"---lyrics from "Steel Monkey" by Jethro Tull
The stock market is a hostage of the Fiscal Cliff rumor mill. This week's stock chart tells a "little story you oughta know". At noon on Tuesday, the market was trading in positive territory, "set up" by good housing and consumer confidence news---the type of information that should drive market action. Two hours later, Senator Harry Reid held a press conference where he stated little if any progress had been made in resolving the Fiscal Cliff. By "quarter to three"(EST), the market had dropped over 60 points and ended the day down 86. The next day the market continued downward until President Obama stated that prospects looked good for a resolution. The stock market rose on the news and continued generally upward until Friday when Speaker Boehner flattened it by stating that Fiscal Cliff discussions were going nowhere. Honestly, when it comes to D.C. its seems "there is no one in the place" who is looking out for "you and me".
The Dow Jones Industrial Average ended the week up 16 points. But, I remain on the sidelines. I have read nothing that makes me believe that either side is ready to compromise on Cliff issues. The President has stated that an increase in the top two tax brackets is a sine qua non of any resolution. He has remained steadfast on this point for more than a year. I don't see him relenting. Politically it would be foolish for him to do so. Keep in mind that Barack Obama sees himself as a "transformative" President. With Democrats controlling both houses of Congress during his first two years in office, he was a veritable "Optimus", passage of the Obamacare being a "Prime" example. "Give it a lil' time" and you will see how Obamacare has "changed your life." Going forward, he will not be satisfied unless and until he transforms how wealth is distributed in this country. But, as the past two years have shown, he can do nothing with a Republican controlled House. So how best to rid himself of those pests? Either make them abandon their "no tax increase" pledge and thereby incur the wrath of their Tea Party base or have them commit political suicide by holding fast to that pledge and vaulting the country over the Cliff for the sake of the wealthy that populate the upper two tax brackets. The President wins and the Republicans lose---either way. As I said, prospects for compromise don't look promising.
When I do reenter, I won't be a "Steel Money". World steel production capacity is currently 1.8 trillion tons with 350 million tons of additional capacity coming on line in 2013. Worldwide consumption is only 1.5 trillion tons, 46% of which is consumed by China which naturally has a preference for using domestically produced steel. Steel production overcapacity was highlighted this week as France threatened to nationalize one of Arcelor Mittal's French steel mills scheduled to be closed as redundant. Seeing itself as an "angel", the French government does not want employment to "keep falling", even if steel prices do.
Despite my recent dire predictions, the stock market has remained remarkably steady; now down only 3.6% from when I exited in October. I may have overreacted, and frankly nothing would please me more should that be the case. I would have preserved my desired profit level for the year and lost only one quarter's dividends in return for sleeping well for three months. To me that would be a satisfactory result. That said, I continue to believe that we stand a 50/50 chance that our lame duck Congress will send us over the Fiscal Cliff and into unchartered waters. Should that occur, the market will surely plummet, but I will be kept afloat by my cash position. If the worst occurs, I will not be grasping for air through some "Aqualung", "feeling like a dead duck, spitting out pieces of broken luck." (Jethro Tull)
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