THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN
"Sell in May and go away"---Investment Adage
"The sky is falling in! The sky is falling in!"--Chicken Little
"Know when to hold 'em, know when to fold 'em, know when to walk away"---Kenny Rogers
Conventional wisdom preaches that the summer months are not great for investors: that most money is made in the period November through April. Nothing about this year disproves this adage. The Dow fell for the fifth consecutive week; sinking 2.3% just last week and over 5% since the end of April. With disappointing news on the jobs front, a slowdown in growth in China, a debt crisis in Europe, stubbornly high gasoline prices and a game of "bluff poker" being played in D.C. over our debt ceiling, there is no reason for optomism.
But what to sell? Due to the makeup of my five Baskerville portfolios (purpose: 7% annual return), I have actually been positive 3 of the 5 weeks as investors seek safer returns. I am down a total of 1/2 of 1% (0.4% to be precise) over the past 5 weeks across my entire holdings. As reported over that time period, I have shed most of my "growth" stocks (primarily tech) housed in the Cloncs Fund (purpose: principal appreciation). What is left in Cloncs are staples (Coke, Yum (KFC)), energy plays (Chevron, BP, Conoco-Phillips and Norfolk Southern) and gold. Frankly, the preponderance of "widow and orphan" high yielding common stocks (tobacco, utilities, telecoms, etc), preferred shares ( financials, insurance and energy exploration), real estate investment trusts, oil trusts, and exchange traded debt (insurance and financials) housed in the Baskervilles have worked as designed. The 5% negative correction in the Dow over the past five weeks, in light of the huge run up from November through April (I am still up over 10% for that period), does not seem out of line considering the adage above and the steady stream of bad news. As a consequence, I am holdin'---at least for now.
On a longer horizon, I do have concerns.
One is whether China is ready to re-accelerate its economy. A series of articles in the Financial Times this week was very illuminating on the tug of war at play between the hard line communists and the capitalists (who have held sway for the past several years). This struggle is not over, and how it unfolds has huge implications considering how much the world has come to rely on China's economy as it transitions from an exporter to a consumer. A slowdown in housing development, alone, in China (which accounts for a huge percentage of its steel and copper consumption) could rock the world--literally. China consumes for use or production nearly 50% of several of the world's commodities---cement, iron ore, coke, steel and copper. Think what a slow down in those items would bring.
A second concern is the growing drumbeat by environmentalist here and abroad over "fracking". This is the revolutionary drilling technique that is used to extract oil and natural gas (including liquids) from shale. It promises to be one avenue of energy independence for America, unless derailed by heretofore groundless environmental concerns. Keep a vigilant eye on this.
Good luck, Henny Penny (Turkey Lurkey and Foxy Woxy, as well)!!!
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