I read this … and i think a bit too much fear building, but cannot be simply ignored. https://seekingalpha.com/article/4092664-hot-potatoes-dutch-tulips
I have been leaning toward more and more cash based on my own analysis and convictions, and articles like this make it hard to remain balanced and objective. Rational logic anchored in consistent and reliable data is needed, not more emotion (fear or greed).
I am fairly comfortable with my current holdings. I have >15% cash in taxable, and plenty of dry powder in nontaxble accounts as well. I will continue to look for opportunitistic profit taking in the Radar Position 2 companies, and writing covered calls for some others. Over the next few weeks, i think the 10yr Treasury is the key indicator and it will be watched carefully … i read somewhere this weekend that 2.4% on 10yr is a critical point. that is about the point where i am willing to take positions in the 7-10yr durations – investment grade muni and corp (not sure about treasuries).
For new positions or building existing ones, the favorites remain (pending logical entry points): STAG, QTS, MSFT, SWKS, CSCO and APPL. Of all these, MSFT is probably my favorite. Shorts being considered though too early on all 3 right now: THO, NFLX and NVDA.
Here is an interesting article from SA this morning … now the content itself is a bit hazy and incomplete, but there is a very good data insight that cannot be emphasized enough … maybe it could be called the importance of ‘mathmatical context’. In our increasing use of headlines, tweets, and other ‘snackable’ information, context and understanding are secondary. For investors, that surface understanding can cost us …
“Just as logically, there should be some “proportionality” to yield curve tightening. While today’s yield curve would require only an 85 basis increase in 3-month Treasuries to “flatten” the yield curve shown in Chart 1, an 85 basis point increase in today’s interest rate world would represent a near doubling of the cost of short term finance. The same increase prior to the 1991, 2000 and 2007-2009 recessions would have produced only a 10-20% rise in short rates. The relative “proportionality” in today’s near zero interest rate environment therefore, argues for much less of an increase in short rates and ergo – a much steeper and therefore “less flat” curve to signal the beginning of a possible economic reversal.”
here is a pretty good graphic from Bespoke – https://www.bespokepremium.com/think-big-blog/fang-trading-range-screen – the number of OB stocks suggests time for the short side of the market for those wanting a bit of a trade?
Personal Portfolio Commentary
- sold all of my WTR >$33.00 (sell target within Radar Position
- added an incremental slice to T (intend to add more if price continues to drop >of 5.75% yield
- cannot speculate on probability either way)
- T becomes one of largest taxable holding
- targets this coming week
- CTWS liquidation
- NWN liquidation
- Select REIT out-of-money (OTM) call sales
As my weekly update pointed out, i identified 3 companies in my radar #2 space that just did not hold sufficient potential growth rates or income streams. They are on the selling block. Today, WTR crossed $33.00 / sh, and i sold my remaining small position at > $33. More cash in the taxable account where better opportunities are surfacing.
This week may be a bit longer than normal after a week off and too much gnashing of teeth over reallocation decisions.
- Another great roundup of recent analysis and news; many of commentators and referenced sources are in my standard readings. i still believe that Q2 earnings reports will have major influence on all things stocks for 2nd half of 2017 – https://seekingalpha.com/article/4086427-s-and-p-500-weekly-update-fireworks-another-dow-theory-buy-signal
- a short example of why the headlines on a data set may not always tell the whole truth … the disection of jobs numbers is much more important than the overall jobs added or unemployment rate reported. where were those jobs and are they creating growth or maintaining the current picture –
- GE … i own it. think that it’s getting fairly priced (for an entry point), but i just cannot pull trigger to buy more when so much of their business is tied to either oil / gass or nukes. My cost basis is <$14, so i doubt i will sell soon, but can’t buy more. https://seekingalpha.com/article/4086226-general-electric-buy-dip-will-last
- S&P earnings are going to be interesting and as stated before an important pivot point (personally, i am looking at revenue and forward looking statements – not so much the absolute values but the confidence with which companies talk about the next 6 months … less uncertainty or more headwinds, which will it be?). FactSet has the overview data of reportings. https://insight.factset.com/earningsinsight_07.07.17
- Jeff Miller pointed to BLS data on unemployment and astutely points out the margin of error (confidence intervals with the data) … for us data geeks, this is an important view, as so many commentators bounce off an absolute number rather than the range, and the 90% ranges are fairly large. https://www.bls.gov/charts/employment-situation/civilian-unemployment-rate.htm
- Great quote from Jeff Miller’s weekly update this week https://seekingalpha.com/article/4086455-weighing-week-ahead-seinfeld-market
- “Stock market valuation. Stocks overall seem mildly attractive if you consider expected earnings and interest rates. More importantly, some are significantly overvalued and others are attractive. Stock and sector picking are more important than market valuation.”
- Watch for Brian Gilmartin’s update later today for S&P earnings update http://fundamentalis.com/?p=7050
Top Watch Items for this up-coming week (possible entry points)
- ETF – EMB
- REIT – STAG (this selection is biased toward my narrative, rather than absolute value entry point – target @ $25)
- IOT – still up in the air between (T, CSCO and SWKS) … if i had to bet on it today, i would select both CSCO and SWKS
- Health – PFE (my position is 2/3 complete), though from a delta to target pricing perspective, OMI is better priced (just not convinced yet of OMI business promise)
- Consumer – TJX and TSCO (but read below)
Recent falling knife catching exercises – a mini post-mortem
- TSCO has been one of my recent disasters. I bought it all the way down, basically starting at $58/sh. I thought a floor was established $51.50, but when the price declined to $51, i sold 50% (the most expensive shares) taking a 12% loss. Commentary: i recently made two mistakes (VOD and CAH) selling too soon, so i held TSCO longer than i really wanted to. My initial stop was pegged at $52, and i did not pull trigger. My take-away is to have a more formal 3-phase dashboard when prices are pushing on sell limits — and hold myself accountable to taking the prescribed actions (not ‘hoping for a bounce’)
- Yellow Alert = <-2% loss
- Orange Alert = <-5% loss
- Red Alert = <-7% loss
- Action can be taken at any alert level, but a sell must be triggered at Red alert.
Possible trimming and cash building
- WTR above $32.50 and ideally >$33.00
- NWN above $62.00
- CTWS above $57.50
Jeff Miller’s Weekly Indicators
This is an interesting graphic … not sure the value other than “hmmm…”
A bit short this week, as there’s too much going on beyond Wall St.
- a sizable group of indicators, and a short summary: “The nowcast for the economy remains positive, as does the near term view, with both stocks and jobless claims leading the way. The longer term forecast remains neutral to positive, shading a little closer to neutral based on the tightening yield curve, less robust growth in real money supply, and the miss in corporate profits.” Source
- Two things here (Factset): a) Europe growing and b) positive forecasts coming out of S&P Q1 earnings. One can rationalize pollitically and economically why growth is moving away from US. Aggregate indicators like this can be misinterpreted and misused … i see these like tail / head winds that need to be considered when looking at specific companies. The industry data sets are important, however. Source
- Jeff Miller’s posted weekly snapshot
- A great overview of BMO, my fourth largest stock holding with cost basis of $53.19 / 5.19% yield – https://seekingalpha.com/article/4077038-schedule-canadian-banks-part-1-6-bank-montreal
- Not sure i agree w/ this perspective on Convertibles, but was worth the internal dialogue. Source – i looked at ETF, ICVT, for a quick reference: low yield, low analyst ratings, and a steep positive price slope (where’s the value?).
- A good fist-full of data – http://brooklyninvestor.blogspot.com/
Will come back w/ a post on last week’s catching falling knives.
Commentary -> I did follow thru and removed a bit of INTC from taxable account and sold the remaning CAH. I also took profits on the UMPQ trade position that i took – gross return was ~7% for a <30 day hold; this could be a repeating pattern between $16 and 18. As much as i wanted to take a couple of new positions (expanding current ones too); the prices just did not hit my trigger target so i held off … of interest right now: T, VZ, VNQ, O, FPI, and TSCO (on the latter, i have yet to convine myself that a) rural US will avoid further declines and b) TSCO can hold sales against the others, e.g., WMT, AMZN, HD … i am also watching ETFs carrying China, India and other emerging markets. I have yet to find the best way to invest there.
Watching ahead next week … mostly irrational moves and reactions to macro and political perceptions. One observation is that since the US election, the market has reacted to perceived / anticipated events more than to fundamental facts. I will stay focused on the facts, and react when others ignore them and create opportunities.