WASHINGTON, January 26, 2015 − It’s hard to come up with good things to invest in these days, whether you’re dealing with stocks and bonds. Increasing company profits are largely mirages today, driven not by new product introductions by increasing earnings per share by the simple act of buying back shares while laying off more and more employees. Some strengthening economy.
As QE money dries up, all this will become increasingly apparent, and things will turn negative for the markets. January thus far has been a story of rallies that impress but fade quickly, with the bullish excitement quickly extinguished by stronger, bearish trading actions as the pros sell and sell the stocks they’re peddling to the unwashed—stocks they’ve already profited handsomely on.
In today’s markets, gamed equally by HFTs and hardened 1% cynics, you have to play by their idiotic rules. Which today likely means slowly working out of positions in most U.S. stocks, save pharmaceuticals and healthcare companies, both of which helped create the hydra-headed monster of Obamacare and are currently profiting handsomely as a reward for their complicity and duplicity.
But as the Maven often tells people who bitch about their local utility bills, hey, if you can’t beat ‘em, join ‘em. Whether their stocks go up or down, nearly all publicly traded stocks of your local utilities pay quarterly dividends offering light years’ better returns than you currently get on your chumpy CDs and money market funds. So why not plop down some money in that sector, at least for now? On a worst-case basis, the outsized dividends here—ranging from 2.5-6% or so—will at least help pay those damned utility bills, right?
If you want to be a bit more aggressive, follow the logic of greed. Invest in Europe, sort of. They are only now just beginning to impose the kind of QE regimen that the U.S. started years ago, which resulted in the massive jacking-up of the U.S. stock market for no reason at all.
Thus, the Maven’s current mode—follow the logic of greed and invest in Europe. But not quite. If you invest in dollars via ADRs (American Depository Receipts which, oversimplified, are dollar versions of European stocks) things might not work out too well due to the currency translation.
For starters, until things start to stabilize, a good place to look at might be an ETF like HEDJ, which is essentially a basket of great European companies that’s continuously hedged to eliminate the dollar effect.
Again, this is what the Maven is starting to do, not a buy, sell, or hold recommendation. You’re on your own for that. But right now, U.S. stocks could be on the brink of real unpleasantry. Diversifying elsewhere around the globe might be a good way to hedge your own portfolio if stocks decide to take a truly nasty turn in February or even sooner.