Trading diary: Stocks, bonds bid adieu to 2016

U.S. markets likely to launch on January 2, 2017 with increased volatility and considerable downward pressure. What to do and how to do it. Plus: Dow Dogs replay.

Stocks, bonds anticipate new Trump Era in 2017. (Image via Pixabay, CC 0.0)

WASHINGTON, December 30, 2016 – Very short column today. (We offered our year-end stock market thoughts and observations over in our companion column should you care to read them.)

As for our Prudent Portfolios, we plan to give them a final day of rest Friday, something we’ve actually been doing most of this week with our motley but mostly profitable selection of stocks, bonds and ETFs, snugging up positions here, getting rid of marginal positions there, taking some money off the table by cashing in on wins we don’t think will continue, at least during the first trading week of 2017 and researching securities we think may provide us with profitable trades and/or inbestments as we cross over to the New Year from 2016’s finish line.

Read also: Stocks fizzle, 2016 ending not with a bang but a whimper

Trading diary:

Following up on our “Dogs of the Dow” column earlier this week, we’ve re-ordered our semi-final list in order of dividend size (based on current yield).

Although you can define and/or choose your own Dog candidates by employing variations on O’Higgins’ original battle plan for investing in these downtrodden stocks is to first order and then choose your barking finalists by lining them up in order of declining yield as of COB on the last trading day of the year. In our case, that happens to be today, Friday, in the case of 2016. (We’ll do our final math this weekend.)

As for that dividend-revised list, here it is as of Friday morning:

Stock/Trading Symbol followed by Current Dividend Yield:

  • Verizon Communications Inc. (VZ) 4.30
  • Pfizer Inc. (PFE) 3.94
  • Chevron Corporation (CVX) 3.67
  • Boeing Co. (BA) Dividend: 3.65 percent
  • Cisco Systems, Inc. (CSCO) 3.41
  • The Coca-Cola Co. (KO) 3.37
  • International Business Machines Corp. (IBM) 3.36
  • Exxon Mobil Corporation (XOM) 3.32
  • Procter & Gamble Co (PG) 3.17
  • Wal-Mart Stores, Inc. (WMT) 2.89

The Prudent Man himself is not certain which way he’ll go this year. He usually picks the top five biggest  dividend-paying Dogs (based on current yield as posted above) to add to the portfolio. In this case, the current top Fab Five would be Verizon, Pfizer, Chevron, Boeing and Cisco.

On the other hand, back in the real, non-Dog Theory world, Boeing could be a volatile holding at least in Q1 2017, given soon-to-be-President Trump’s week-ago shot across the bow at the traditionally cost-unconscious defense and aerospace industries.

Ditto Cisco. Despite its swell dividend, this once and perhaps future tech monster, purveyor of internet black boxes and assorted services to nearly everyone, could be dead meat in 2017, or at least end up trading flat, given its slow, painful transition to a new business model and its elimination of now marginal equipment lines.

Likewise, IBM is in a similar situation and has been for what seems like a decade, even though company once known as Big Blue appears to be much further along in its own transformative process.

At any rate, real players buy all 10 Dog picks, while cheapskates like the Prudent Man usually try to winnow it down to the top 5, given that at least 2-3 Dogs tend to remain Dogs in the succeeding year, meaning flat-to-down, save for those swell dividends. Remember: Given the vagaries of Mr. Market and of life in general, your picks and your investing mileage may vary.

At any rate, we don’t have to decide on all, some, or none until next week when we can finalize the list based on Friday’s closing prices and dividend equivalents. We should not that for entirely exogenous reasons, we’re already in Proctor & Gamble (symbol: PG), which we bought in Q3 as a long-term consumer staple sector hold.

Alternatively, for a basket of stocks from a larger investing universe that still function like the actual Dow Dogs, there’s always that ETF equivalent, SDOG, which is the simpler, easier way to play this game.

That’s it for 2016. See you next year. And may you all have a pleasant and safe New Year’s Eve and Day, 2017.

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Terry Ponick
Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17