WASHINGTON, July 13, 2016 – In 2016, of all years, the Maven never expected a rally that would take stocks to new highs after the vicious drubbing they took earlier this year. But here we have it. Although it went against his better instincts, the Maven didn’t quite sell it all in May, which is usually a good idea. Instead, he carried a yield-heavy portfolio into the summer after paring down some volatility, and this tactic still seems to be working.
Wednesday’s trading action is flat as of 2 p.m. EDT, with markets trying to assess the real meaning behind Tuesday’s record intraday highs. Is the current mostly positive market action just another one of many big short squeezes in 2016? Are we beginning a new bull market? Or, after a nearly 2-year pause, are we simply resuming the older bull market, which has already run further than any other since modern U.S. trading records have been kept?
It’s all hard to say, really, since market action over the last several years has put national and international headlines in the forefront for determining market direction as opposed to the more “rational” methodologies that used to (almost) always work for savvy and patient investors—methodologies like buy-and-hold, technical analysis (charting) and fundamental analysis (PE ratios and projected earnings and dividends).
Jury’s still out, but our developing “psychological” investing strategy seems to be keeping us out of the biggest investing traps, at least for now.
Action this morning and afternoon has been relatively muted, as yesterday’s big oil price bump was promptly taken back this morning in commodities (futures) trading action, leaving the West Texas Intermediate (WTI) flavor of black gold off over two bucks, down nearly 4.5 percent. That’s taken the joy out of commodities and materials considerably, and many oil and oil-related holdings are backpedaling yesterday’s irrational exuberance.
We wouldn’t mind a “pause” in the action, even if it lasts through the end of this week and into next. That’s because the Republican National Convention opens in Cleveland next week. In the ensuing chaos—which will range from the mouth-foamings of the #NeverTrump dead-enders to the mass destruction of the city planned by the Soros- and SEIU-funded community organizers and racists who spearhead the despicable #BlackLivesMatter terrorists and thugs—next week’s political action may upset markets considerably, as America’s vicious left tries to turn 2016 into 1968’s Baby Boomer Last Hurrah.
Ironically, we think Hillary’s Last Stand in Philly just a bit later this month may offer a similar spectacle. It’s what this country has come to after 8 long years of “racial healing” led by America’s Smartest President Ever.
What all this expected chaos will really do to stocks and bonds is anyone’s guess. But we’ll be finding out shortly, which means now is hardly the time to “go bold” in our portfolios.
We’ll stick with our conservative, yield-overloaded strategy right now and will re-assess our portfolios’ unhealthy overbalance after the conventions are over and the repair crews move in to Cleveland and Philadelphia.
Meanwhile, we did sneak in to tiny positions in a pair of Schwab sector ETFS, SCHH (REITs) and FNDA (fundamental Small Caps). We may give a try today to Schwab’s fundamental emerging market ETF (symbol: FNDE). Since the Brexit fear mongers have momentarily taken cover, there’s a snapback in this badly pummeled sector as materials attempt to recover some ground.
Nevertheless, all these positions are tentative, at least until we can assess any trend we see building. We’ll buy more heavily after the conventions if the current perceptions hold true, in an attempt to rebalance our currently too-interest-and-yield-sensitive portfolios.
But right now, with a Fed interest rate increase likely off the table for a quarter or two, we’ll stick with the boring high-yield REITs and preferreds that have been mostly keeping us out of trouble lately.
Meanwhile, our badly damaged an rather large (for us) position in Teekay Tankers (TNK) has recovered a good bit of lost ground in the last few days, although the stock is still being heavily shorted on every significant up-move.
On the more conservative side, we’re still marginally up on our very large (for us) position in Allergan Preferred (AGN/PRA, symbols will vary according to your brokerage). That’s fine with us, as this currently $850-ish per share preferred will be redeemed by the company in March of 2018 at $1,000. Meanwhile, we’ll happily collect a fat 6.43 percent quarterly dividend.