WASHINGTON, April 30, 2013 – Wobbly futures, slightly below flatline this morning, would seem to hint at a lower market open this morning after yesterday’s nearly inexplicable blast of irrational exuberance. What to obsess on this morning? “Lower than expected” numbers from Pfizer for the bears, and a surprising batch of positive returns from the allegedly DOA Eurozone. Take your pick.
Perhaps most surprising in yesterday’s action was the upward move in most things oil, after what seems like months of poor action in that quadrant of the stock market. Speculation is that Syria has been pushing things a bit much (gosh, who knew?) and has thus been at least indirectly jeopardizing oil supplies from the Middle East should a wider conflagration break out.
For his part, Syria’s Alawite President-for-Life Assad has apparently used chemical weapons on rebel forces, thus calling President Obama’s bluff after the latter, perhaps unwisely, drew a “line in the sand” should Syria choose to use this stuff. Military and naval movements continue behind the scenes, and Special Forces have been in the geographical area of this conflict for some time. But it remains to be seen if the generally dithering Obama actually delivers on his explicit threat against the Assad regime.
Politics aside, however, investors—human or machine—seemed more favorably disposed to defensive investing in the oil patch yesterday. We’ve nibbled back into a couple of niche refining MLPs that pay or are soon to pay outsized dividends. But we remain cautious as to whether this headline-driven trade has much staying power, dividends notwithstanding.
We’re lightly into Alon USA Partners (ALDW) for the third time since it went public; Calumet Specialty Products Partners (CLMT); Carl Icahn fave CVR Refining (CVRR); Legacy Reserves (LGCY) which we recently traded out of but decided to re-enter; and the relatively unknown Yorkville High Income MLP ETF (YMLP) which holds an eclectic batch of somewhat risky MLPs in a portfolio that saves you the paperwork.
Some of these plays are going ex-dividend as we type this, but if you miss one of those fat payouts, each of these stocks will be repriced somewhat lower on ex-dividend day, so perhaps you can get ‘em a bit cheaper if this kind of investment is for you. Again, no guarantees, and dividends can fluctuate. And further, if the whole market decides to plunge, as it threatened to last week, these stocks will go down, too, though likely more slowly due to the dividends.
A really good hold for us has been Pennsylvania-based multi-fuel utility UGI Corp. (UGI). The dividend may seem a bit paltry at 2.64%, but we bought it when it was lower and when the dividend percentage was, therefore, higher. Dilemma is whether to keep riding it in the hot utility sector or jump off and take the profit.
And yes, utilities have been on a tear lately. These generally most boring of income/yield stocks boast chart action that makes them look like technology stocks. The trend is your friend, and high-yielding utilities as well as (until recently) real estate and mortgage REITs have been gobbled up by investors looking for actual yield as opposed to treasurys, municipal and corporate bonds, money market funds, CDs, and passbook savings accounts if there are any left in this country.
All good things will come to an end, of course, particularly if resources, metals, and agriculture can ever catch a bid in this market. But right now, utilities still seem to be about as good as it gets, and you can get a big batch of them via the XLU ETF.
Eurostocks seem to be having a brief revival this week for whatever reason, so they may be worth a brief play. One of our investing services recommended a really counter-intuitive play, EWI, the Italian stock ETF, but we couldn’t find a good price yesterday. Fact is, this market is so screwy and headline-driven these days (due to HFT nonsense) that logic often doesn’t contribute to stock picking.
We also keep looking at high-flying Irish aircraft leasing firm FLY (company name the same as the symbol). The yield on this stock tends to be just as high flying, although earnings, due to contract expirations and renewals that don’t fall neatly into predicted quarters can sometimes cause an air pocket in this stock. We’ve been in and out (currently out) and our timing has not always been good on this one. Generally, if you can get it in the $11-12 range, that’s good. But currently, it’s flirting with $15-16 on the high side.
All this aside, we’re also about 45% cash in our large account. After all, folks, as we’ve been warning all along, today is the last day of April and tomorrow—in addition to being May Day for all good little socialist boys and girls—is the first day of the annual stock market “sell in May and go away” holiday. We could get a little end-of-month deck chair re-arranging today, but it will be interesting to see if the markets decide to do a real Wile E. Coyote act by diving off the cliff tomorrow morning.
We’re trying to finish an article in our other column, The Prudent Man, that tells the interesting tale of a most innovative new tax scheme in Maryland. Take a glance over that way later today. If we actually get this post up on time, we’ll insert the link in this paragraph.
Have a good one.
(NOTE: Cartoon above by Branco, courtesy Legal Insurrection.)
Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate. He intends to nibble on the preferred stocks mentioned above as the occasion warrants.
Positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.
Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.
References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any article under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.
Follow Terry on Twitter @terryp17
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