Risk/Reward Vol. 135
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
"Singin' songs loud on the way to the game/Wishin' all the things could still be the same
Chinese home runs over the backstop/Kakua on the ball and soda pop"---lyrics from "Mudfootball" by Jack Johnson
"Overture, curtains, lights/This is it the night of nights
No more rehearsing/And nursing a part"---lyrics from "This Is It", the Bugs Bunny Overture
"A transition is occurring/And I am not blind
As the pendulum swings/A new age we enter"---lyrics from "Update" by the Beastie Boys
"Overture, please". On Thursday, Mario Draghi, the president of the European Central Bank (ECB), stole the show by announcing (finally!!!) that the ECB was prepared, on its own, to buy sovereign debt from troubled nations (read, Spain and Italy) under its inherent authority to preserve the Euro. No need to seek permission from Germany; no handwringing with the French. So long as each country abides by fiscal promises to be made to the International Monetary Fund and the European Commission, the ECB will buy unlimited amounts of such bonds. In the words of Mr. Draghi, the ECB is now the official "backstop" against a monetary collapse of the Eurozone. Immediately, the stock markets were "singin' loud on the way" to a huge day. By the close on Thursday, the Dow Jones Industrial Average reached a point it had not seen since December, 2007! Buyers believed "all things could still be the same" as back then--before the Lehman Brothers meltdown. Let's all hope that the ECB's commitment is not a "Chinese home run" (slang for a foul ball hit over the backstop).
The ECB's bond buying commitiment is one of the three legs necessary to support a healthy stock market and about which I have been writing since June. One of the others, a massive Chinese stimulus package, likely will not be forthcoming before the Communist Party Congress scheduled for mid October ( A $150billion infrastructure program was announced yesterday, however) As for the third leg, resolution of the U.S. Fiscal Cliff, nothing will occur until after our November elections. One word of caution is warranted in the interim. If the stock markets continue to shine, the Federal Reserve may hold back next week on an anticipated quantitative easing (QE) program despite the disappointing jobs numbers issued yesterday. If Fed Chair Bernanke does not pull the QE trigger, the stock market could be negatively impacted, but not enough to warrant an exit. Let's hope for some more QE and pray that some extragenous event (e.g. Israel bombing Iran or the German Supreme Court declaring the ECB bailout unconstitutional) does not disrupt this great run.
Following on a theme I addressed last week, the information available on the Web is truly amazing. I often access the homepage of a company the stock of which I am contemplating purchasing, click on the "Investor Relations" tab and look for "Presentations". These powerpoint or pdf card decks are as illuminating as an "overture, the opening of curtains or the shining of lights". Oh, management has clearly "rehearsed and nursed" these slides, but they are extremely informative, nevertheless.
I took advantage of dips in the prices of MHRpD, NS, EEP and TAC occasioned by secondary offerings to buy more of each this week. So, John, how does one know about these secondary offerings in time to take advantage of the dips. Easy. I list all of my stocks in the "Portfolio" section of SeekingAlpha.com and have "Updates" sent to my email account automatically. Thus, when "a transition is occurring, I am not blind." I buy "as the pendulum swings" to a favorable price.
One reader emailed me this week asking how my taxman keeps his sanity. Good question. Before anyone embarks on an aggressive program like I have adopted, one must identify a competent tax person who is familiar with master limited partnerships, real estate investment trusts, oil trusts and business development companies. Ironically, I received my 2011 tax returns this week (I always get an extension). They were 1/2" thick! Yes, Dear Readers, we need to simplify the tax code. Oh, and as for the cost---about the same as our anniversary dinner at Charley Trotter's. Well worth it on both accounts.
It was a great week to be invested, with the Dow Jones Industrial Average ending up 216 points. Standing firm in these uncertain times tries one's resolve, but so far, it has been worth it. Remember what the Beastie Boys preach:
"You have to fight for your right to party."
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