Trading Diary: A fine line between investing profit and loss
WASHINGTON, February 27, 2017 – We read a stock market analyst’s comment on the CNBC web site today that made us nervous:
“‘We have transitioned from an interest-rates driven bull market to an earnings-driven bull market. That’s the main story,’ said Jeffrey Saut, chief investment strategist at Raymond James. ‘I think we’ve got another six, seven or eight years in this bull market. If you run the models … you could see 4,000 on the S&P.’”
This is just the kind of overconfident proclamation that can lead to a major stock market correction if too many people jump on board the investment train with this kind of cockeyed optimism.
As we’ve noted in our other column, when President Trump addresses a joint session of Congress Tuesday evening, Americans will be expecting to see some real leadership from both the President and the disorganized, asinine members of his party when it comes to buckling down and solving the crush of booby traps and epic disasters sown for them over the past eight years by the decisively anti-American dictatorship of Barack Hussein Obama and his like-minded thug-ocracy.
Alas, we give the Stupid Party (the Republicans) a 50-50 chance at best for prevailing and showing real leadership for the very first time since they lost the entire country on the heels of the Great Depression. The Great Recession and its dismal, Obama-caused aftermath, gives the Republicans the best chance ever for the Republicans to do what the Democrats did in 1932 and then forever; namely, dominate the political conversation for nearly a century thereafter.
They give every indication that they’ll blow this last, best opportunity, nattering and chattering against one another while scoring points on conservative ideological purity, paving the way for left-wing Democrat radicals to complete the destruction that Barack Obama hath already wrought.
With positive thoughts like these, and with Jeffrey Saut’s prediction of a bull market that will never end, we continue to take the prudent action of paring wobbly stocks and ETFs from our portfolio.
We sold our modest positions in “fundamental” (smart-beta) Schwab ETFs focused on small caps (symbol: FNDA) and foreign stocks (FNDF) Tuesday morning to lock in moderate profits. Ditto our modest position in the large Midwestern utility First Energy (FE), where we locked in a roughly 7 percent profit and collected a nice dividend (nearly 5 percent annualized) as well.
We continue to look over our holdings to raise a bit more cash here and there. We’re not ready to do a full-scale bailout at this point, and many of our holdings (like Apple [AAPL]) still look as if they’re ready to rock and roll. But caution is the watchword here, as political antics have been over-the-top nonstop since January 20, pushed and prodded by the kind of utter nonsense that can derail the strongest of stock market rallies. Like this one.
We’re also watching the nasty action in two—actually three—of our positions, those in Marathon Oil (MRO), Newmont Mining (NEM) and Silver Wheaton (SLW).
After going through a very rough 2016 and reporting additional losses in its most recent quarter, Marathon looks to be turning things around and, indeed, plans major capital investments in 2017, which is not the sign of a doomed oil company at all. Yet investors continue to dump these shares. That said, it seems to have bottomed. We just wish it would climb a bit, as we’re down about 7 percent on this one right now, close to one of our key bailout points. Still holding for the moment.
Ditto the situation in NEM and SLW. Both mining companies have been hit hard, with NEM getting smacked the hardest due to a negative earnings surprise. Reading between the lines, however, its most recent quarterly numbers were largely the result of the company’s closure of an increasingly unprofitable and mature Peruvian gold mine, meaning that they decided to take the P&L hit to the books now rather than later.
But investing in precious metals, miners and ETFs in that arena is a volatile prospect at best, and volatile to the downside is what we’re getting now. Fingers crossed. In an environment like the one we’re in now, it’s always best to hold a bit of gold and silver or proxies like the companies that mine these metals (or the ETFs that follow them).
On the other hand, precious metals are likely still being gamed by some big, mysterious players (like maybe some multinational central banks and a few of their secret commercial bank pals). So they’re not reacting anywhere near the predictability traders used to expect back when this writer was a youthful broker still learning the tricks of the trade.
Many of those tricks have changed now, and that’s most certainly true in the precious metals sector. Ergo, we remain a bit nervous about the recent action in Newmont Mining and Silver Wheaton; although not nervous enough to bail quite yet.
Marathon, we think, will eventually climb out of the sticky tar pit it seems to have gotten stuck in a month or two ago. We think.
No buys today, no shorts either. Fingers crossed on that Tuesday Presidential address to Congress.