WASHINGTON, May 4, 2016 – Another relatively short column today as our alter-ego heads out for the Washington National Opera’s third installment of its “American Ring” cycle, Richard Wagner’s “Siegfried,” which starts out inside a decrepit trailer home and ends up with our hero confronting a smoke-belching steam-shovel, the 21st century equivalent of a fire-and-smoke breathing dragon we would guess.
The only fire and smoke coming from Wall Street this week has been the flame and soot of incinerated stock portfolios. Sell in May syndrome seems to be gripping traders everywhere. Of course, today’s lousy ADP employment numbers and China’s ongoing return to the precept’s of Chairman Mao’s Little Red Book aren’t helping.
Neither, perhaps, are the surprising developments in U.S. electoral politics. After Donald Trump’s smash-mouth victory Tuesday night in allegedly rock-solid, conservative, evangelistic Indiana caused Ted Cruz to abruptly “suspend” his own primary campaign, we’ve just received word early Wednesday afternoon that Ohio’s John Kasich is also throwing in the towel.
Bernie “The Socialist” Sanders is still giving Hillary a run for her money on the left side of the aisle, and both his campaign, and Trump’s, prove that the natives out there are restless indeed. Whichever party has the common sense to listen to what’s going on out there for a change instead of digging in for a siege… well, that’s the likely winner this fall no matter what the punditocracy—useless and still clueless at this point—happens to be blathering about today.
This electoral uncertainty is also a likely culprit, at least psychologically, in this week’s market pullback, which seems to be affecting pretty much all sectors of the market. Stocks and those who trade them hate uncertainty, and boy, is that what we’ve got today in a whole lot of sectors and for a whole lot of reasons.
Today’s trading diary
We’re renaming this subsection today to reflect the simple fact that the Maven is telling you what he’s doing and why and not making recommendations. You can’t be too careful these days with the apparatchiks in Washington. Pretty soon, even if your auto mechanic gives you a hot stock tip, he might have to qualify as a fiduciary. No wonder this country is tanking. Too much red tape.
In any event, we’ll tell you what we’re up to and the rest is up to you—although you shouldn’t rely on either the Maven or anyone else as your exclusive source for info. It’s a good way to lose your portfolio, since everybody can be wrong at any given time.
As for us, we’ve pared our portfolios down to the essentials, or what we think are the essentials, namely a batch of preferred stocks, mostly time-limited in duration; a tiny bit of physical gold and silver ETFs, namely SGOL and SIVR, neither of which has been very happy this week after huge runups last week; and our very slowly growing and probably too-big position in Allergan Preferred A (symbol: AGN/PRA) shares.
These latter shares pay a roughly 6 percent dividend and will expire in March of 2018, at which point they’ll be redeemed at full principal value, in this case, a pretty hefty $1,000 per share. That’s a nice payday if you consider the shares are treading water today at around $800 per share. Around that point is where we picked up 3 more shares. Obviously, we’re doing this incrementally.
In terms of a balanced portfolio, between the AGN/PRA shares and all our other preferreds, we’re actually not very balanced. The only more or less “common stock” we’re currently holding is the unfairly hammered (we think) Teekay Tankers (TNK) a high-yielding master limited partnership (MLP) that was hit a few weeks back when its parent holding company reported lousy numbers.
Anything related to the oil patch these days is dangerous, of course, but we like to keep our hand in at least a bit here, so we’ll collect the dividends while risking, perhaps, a chunk of the principal.
Aside from that, markets appear to us to be intermediate term (3-6 months) overpriced and ready to tank. So why should we buy any of this stuff before the markdowns, eh? Our risk in being too heavy in “income stocks” like those preferreds is that at any sign of a Federal Reserve rate hike, these stocks will take it in the ear in very short order. But we’ll take that risk at the moment, since most other sectors look even lousier.
We’ve also been slowly upping shares of SDS, the double-short S&P 500 ETF as a hedge against a May or June waterfall market decline. We’re determined not to be stuck holding the bag when the HFTs decide to go postal again on retail investors. It happened last summer, and it’s not going to happen again.
BTW, via some judicious recent profit taking, we’ve now erased our January-February losses. Nothing to brag about, but right now, breakeven feels good. Though profits are always better.