February 5, 2017 Seeking Alpha

Risk/Reward Vol. 339

THIS IS NOT INVESTMENT OR TAX ADVICE.  IT IS A PERSONAL REFLECTION ON INVESTING.  RELY ON NOTHING STATED HEREIN.

Despite a downdraft earlier in the week, the major indices made a nice recovery at week's end.  The Dow Jones Industrial Average is back above 20,000 and the S&P 500 is again flirting with 2300.  Strong economic numbers including a better than expected jobs report contributed to the rebound.  From my perspective however, the more important development was that the rise in the stock market was NOT at the expense of the bond market.  Why?  Because Wednesday afternoon, the Federal Reserve issued its post meeting press release which bespoke a "steady as she goes" approach.  As usual it contained no firm commitments as to when any given rate increase may occur, but the professionals who interpret these press releases do not see any such move until June.  Indeed, according to the futures market, the possibility of a rate increase in March is pegged at less than 20% while a hike in June is pegged at nearly 70%.  The upshot is that the rate on the all important 10 Year Treasury Bond remained below 2.5% which in turn buoyed the value of much of my rate sensitive portfolio.

I bought more Shell this week despite its disappointing earnings report.  More important to me was news that it had sold over $4billion of oil field holdings over the past several days.  It has now sold more than $11 billion dollars of such assets and is well on its way to reducing its debt by $30billion this year.  Shell borrowed over $54 billion to acquire BG last year as part of  its commitment to reduce its reliance on oil and to increase natural gas production.  The more Shell reduces its debt, the safer its outsized 6.5% dividend becomes.  And it is this dividend that I find most attractive about Shell.

Speaking of natural gas, I initiated a position with Williams Partners (WPZ), a natural gas pipeline company this week.  The past 18 months have not been kind to WPZ.  It went to the alter twice only to be rebuffed by two different suitors at the last minute.  A shake up at the board level now promises to deliver on what many have long believed to be its promise.  Waiting for that to occur is made easier by its healthy 8+% dividend.

So how did I happen upon WPZ and any number of other investments I have made?  Research.  I read the Wall Street Journal and the Financial Times for macro investing trends, but for individual stock picks I find Investment Business Daily and especially Seeking Alpha helpful.  IBD is a paid subscription, but Seeking Alpha is free, located at www.seekingalpha.com
I click on its Stock Ideas page and scroll through the articles until I find something of interest.  Most of the articles are written by amateurs, but typically their research and analyses are spot on.  I try to find at least two commentaries on a given security by different authors before acting on the information, but generally I have found the work reliable.