Trading Diary: Our portfolios take a hit on Wall St. chatter

A lousy Wednesday for oils, financials, commodities and even techs. It makes you wonder if index ETFs aren’t really the way to go.

Wile E. Coyote exchanging one cliff for another. (Warner Brothers cartoon still, altered by the author to illustrate a point.)

WASHINGTON, May 31, 2017 – While May trading action ended Wednesday afternoon with a modest downer of a day, our portfolios took a hit due primarily to over-exposure to financials and real estate stocks. But oil took a hit, too, dealing us a pretty miserable trifecta compared to over all market action.

Trading Diary

Our portfolio casualties were considerable. Cliffs Natural Resources (symbol: CLF) took a monstrous hit – the stock was off more than 7 percent at one point – it recovered a bit Wednesday afternoon to close at $5.89 per share, off 5 percent on the day.

Apparently, nearly anything associated with oil or oil-related commodities was sold by Wednesday’s Nervous Nellies. Since CLF is a major source of the iron ore used primarily in U.S. steel products, likely including steel used in oil pipelines and equipment, sellers beat the stock to death today with far greater than average volume.

Read also: Crude oil drop, Paris Accord rumor hit Wednesday stocks

Given that CLF has already been heavily shorted in the last several months, one wonders when the buyers will come in. Actually, they’d begun to show up last week and the stock seemed to be completing a bottoming process. But this morning’s big drop likely caused holders to throw in the towel, giving those short sellers another gift they don’t deserve.

Out of a sense of self-preservation, alas, we helped those shorts out by dumping a few hundred shares ourselves, simply to save ourselves some capital. It was a nauseating loss, though our existing position is still large. In gambling mode, we also picked up a couple hundred new shares right at Wednesday morning’s bottom to compensate. But over all, we’re forced to trim our position.

If we were still in our 30s and could risk the occasional massive loss, we’d have held on. But now that we’re of a certain age, we decided to execute a small, partial bail on this position. Sigh.

Most everything else we own took a hit today as well, although not nearly as bad as CLF, but down is down and we didn’t like today’s market direction. As so many stocks sank badly, violating their chart trendlines, we looked particularly carefully at the oils, dumping Royal Dutch Shell (RDSA, your symbol may vary) for a small profit and part of our position in ConocoPhillips for an offsetting loss.

Real estate reeled today as well, given news of stalling new home sales. As a result, we sold shares of multifaceted REIT New Residential (NRZ) for no gain or loss, just because. We also contemplated taking a rather nice profit (15 percent, give or take) in our large position in Independence Realty Trust (IRT), but decided at the last moment to hold off for at least one more day.

It’s hard to give up this 7.38 percent yielder that actually pays a monthly dividend. But REITS, even the best ones, have been getting eroded lately by dropping home sales and fears that the Fed might not increase interest rates in June like everyone thought. So maybe we’ll leave for now and get back in again later rather than watch our nice profit dribble away.

That’s about it for now. But we’d prefer not to see too many more of these days that look okay on the surface but are murder for our current portfolio configuration. Maybe those folks who just invest in major index ETFs have actually got the right idea.

Here’s hoping for better news tomorrow.

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