Our portfolio cleanup moves continue, as we and all investors enter the slow year-end holiday trading season looking for a very different economic climate.
WASHINGTON, December 22, 2016 – We offer yet another brief column today, since pre-Christmas trading action Friday is painfully inaccurate, given low investor and institutional participation and low volume.
As of the 1 p.m. hour ET, all three major averages are continuing their very slight drift lower (~ a negative 0.05 percent each for the Dow, the S&P 500 and the NASDAQ), and there’s really nothing much to do save for some occasional housekeeping, including taking profits in certain areas that are correcting and positioning, when feasible, for 2017.
In keeping with our pattern as discussed in Thursday’s column, we’ve pulled off our position in another of our pair of investment company stocks, namely KKR (symbol also KKR). We sold Blackstone Thursday, getting rid of each position for a profit of roughly 12 percent.
We have listed both stocks as Year-end Bounceback candidates and we still think they are. However, they seem as if they intend to correct into 2017 before heading back up again, so we’ve chosen to sell them now with the intention of buying them back after the new year, as we think that over time, both stocks have much higher to go next year.
We continue to sneak into a pair of conservative positions little by little, given that both of them are ETFs we can trade without commission with our brokerage house. These are Schwab’s TIPS ETF (SCHP) and PowerShares Variable Rate Preferred Portfolio (VRP). Both are bond or bond-like investments whose dividend/interest rates are pegged directly or loosely to Federal interest rates, meaning dividends are likely to gradually rise over time.
So far, both these ETFs have been somewhat disappointing to us, principal-wise. (I.e., the shares have been slipping down as we’ve bought them.) But we are convinced that over time, the shares will rise along with interest rates, as will their yields. So we figured that averaging into positions by acquiring tiny bits—five shares at a time—as they go down with average the entire position down into a reasonable price when the direction reverses, much as one used to do with old-style mutual funds.
The proof is still to be TBD on this pair, but our move looks to be statistically correct in a rising interest rate environment.
One other related investment we’ve been sliding into is PowerShares Senior Loan Portfolio (BKLN), an ETF that functions similarly to the previously discussed pair. BKLN holds investments in fairly short-term senior corporate debt instruments.
Given the nature of these very short-term bonds and bond-like holdings, the yields on any newly purchased senior debt will rise as interest rates rise, allowing BKLN function pretty much like the inflation-protected ETFs, SCHP and VRP. Again, at least for us, BKLN, too, is available without commission at our brokerage, allowing us to sneak into these shares on down days without (presumably) incurring heavy risk.
Aside from enjoying a big (currently + $13.67) increase in the price of our still beleaguered Allergan preferred shares (AGN/PRA)—a joy on a day when trading is lackluster at best—this is likely all we’ll do today unless we can find a deal on a term preferred stock before today’s close.
We’ll likely be back with another short column on the first trading day after Christmas: December 27, 2016. Until then, we wish you and yours the best during our year end holiday celebrations and look forward to real prosperity in 2017 for us all. What a pleasant change of pace that would be!Click here for reuse options!
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