Risk/Reward Vol. 257
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
"Oh, bring it to me/Bring your sweet lovin'
Bring it on home to me."---lyrics from "Bring It On Home To Me" sung by Sam Cooke
"She's so European/She's one of a kind
And she's so European/I found out today."---lyrics from "She's So European" sung by KISS
"It's going down for real
It's going down for real"---lyrics from "GDFR" sung by Flo Rida
On Monday, the NASDAQ, the technology index, closed above 5000; up nearly 20% over the past 12 months and up 170% since I first began writing this blog in 2010. Oh, such "sweet lovin" it would have "brought home to me" had I invested in QQQ (the exchange traded fund that tracks the NASDAQ) back then. But the news of the NASDAQ attaining 5000 also "brought something else home to me,"--- very unpleasant memories. You see, it was March, 2000 when the NASDAQ last hit 5000. It has taken 15 years to reach that mark again. Back in March, 2000, I was a tech stock devotee and was riding very high. However within a matter of weeks of the NASDAQ hitting 5000, tech stocks generally and mine in particular (remember JDSUniphase, Nortel, Corning, etc.) began to fall. I rode them down to nearly nothing. That was a bitter lesson, but one I have not forgotten. That experience and the Crash of 2009 (which through dumb luck I avoided in its entirety ) have shaped my investment philosophy. Rule #1: Sell any stock before absorbing an 8% loss. Rule # 2: Never forget Rule #1.
If you read financial newspapers or blogs, you have noticed that nearly everyone is advocating exposure to European stocks. Many market gurus believe that the launching of quantitative easing there will have the same effect that it had here; to wit, to drive investors out of bonds and into equities. Indeed, if you have not noticed it before now, you are "finding out today" that Mrs. Market is "so European/She's so European." The exchange traded fund (ETF) that I use to invest in Europe, HEDJ, is up 18% year to date, and I continue to add positions. There are several other ETF's that invest in European stocks (e.g. Vanguard's VGK). I chose HEDJ because, as its name suggests, its holdings are hedged against the deflating Euro which now is worth only $1.08, its lowest point in 13 years.
Investing in oil became a bit riskier this week. Although the price of domestic crude held above $49/bbl., two news stories caused second thoughts in regard my re-entry into the sector. First, the storage facilities for domestic crude located at the US hub in Cushing, OK are nearing capacity. Should domestic oil supply outstrip storage capacity, the price of crude is "Going down for real/It's going down for real.". Some market watchers see a free fall to $25/bbl or lower. Second, the CEO of Exxon stated this week that investors should expect an extended period of depressed oil prices. The impact of hydraulic fracturing ("fracking") has yet to be fully felt even with the cutbacks in production announced recently by virtually every oil exploration and production company. Put simply, oil is becoming more plentiful everyday. I am keeping my oil stocks for now, but will watch crude prices like a hawk.
My discussion above of other market trends notwithstanding, I remain laser focused on the yield on the 10Year US Treasury ("10Year"). A better than expected jobs report on Friday and comments this week by several members of the Federal Reserve's Open Market Committee (FOMC) improved the odds that a rate increase will come as soon as June. The yield on the 10Year is now so portending as it skyrocketed to 2.24% on Friday, its highest close since December 26, 2014. Oh, and don't tell me that the major indices are not impacted by the yield on the 10Year as the Dow Jones Industrial Average gave up 279 points on Friday. It now stands where it was at year end 2014. The FOMC meeting on March 17-18 could be very telling on the timing of any rate increase; so much so that in advance of it, I may reduce temporarily my exposure to the most interest rate sensitive portion of my portfolio. To quote Sam Cooke, when it comes to any interest rate increase
"It's been a long time, a long time coming
But I know a change gonna come, oh yes it will."
And despite my heretofore belief to the contrary, it is looking more and more like it will come in June.
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