OK, the S&P is down roughly 8% since mid September. At that point, there were five major concerns:
• the US election, economy, and econocliff; the Eurocrisis, and the MidEast permacrisis. Despite all of that, the market had been driven steadily higher through the summer for reasons that are unclear to me.
Today, we still have four of the five, with the probabilities that the US economy will sort of struggle along, the econocliff will be sort of smoothed over, and things in Europe getting worse and the Mideast probably getting much worse.
So how say ye, fellow MFOs?
Comments
Apple is still + YTD, but I wonder a bit if it won't wind up being a bigger turn-off to retail than Facebook. Facebook at least largely went in one direction from day one. Apple is the most widely held hedge fund stock and likely the most widely held mutual fund and retail stock. It's -25% or so from the high, but I wonder how many bought higher than this with all the talk of shares going to a thou. Given that it's the most widely held stock, selling seems to just snowball.
This isn't anything against Apple or Apple products, but a smartphone and tablet market that may start to turn off consumers who are faced with a new model every 3-6 months that offers some slight-to-moderate tweaks. Not saying that smartphones and tablet use won't continue to be big either, but that I think over the next few years, people may not feel the need to buy new models as often and maybe not nearly as often. Finally, not saying that Apple is going anywhere, either, but that the story needs something Inew beyond a new Ipad and Iphone and Ipod.
Sears down 18% (20% at one point, I think.)
I added lightly to Marketfield and a couple of other funds yesterday. I also am looking at boring single names (consumer staples, etc), preferably with a considerable emerging market audience. I do continue to like Canadian energy co's, as well as ag names.
MLPs are certainly more reasonable after all the worries about the fiscal cliff and tax policy. Many are rebounding considerably today. The fiscal cliff issue will be pushed yet further out in the future, like everything else, and the problems will grow.
Overall, I think one can buy a little here, but I think there will be more opportunities before year-end. I think if one does invest - especially given that this board is largely near retirement age - it should be with the view that (I think) volatility like what's been seen in recent weeks could absolutely continue for a while.
As the question is related to equities; I believe it is "too soon to tell" as there could be a bit of "worse is yet to come", which led our house to the "not quite yet".
Although not getting the big face slaps this week; as have many equity sectors, many bond types have not had many friends this week either. Today, Friday; is the first day of positives for most bond types; at least as of 1pm.
Sitting tight with what we hold, for today anyway.
Take care,
Catch
Re the cliff: I expect many ups and downs in the process with both sides screaming "No Way!" to demands of the other. Eventually, they'll settle on something, if only to kick her down the road few more feet. More likely: some kicking and some real progress. And, could go beyond the stated deadline, as govt. can always "find" the needed $$ to carry on a while longer.
(*#!*## - Where's Scott? He's really good at this stuff.)
If you go back a week or so some institution(s), HF(s) or large holders probably sold some big chunks of stuff on the concern or possible future tax hikes and what not, perceived or actual. Others jumped in over the next few days not wanting to be left holding the bag or without a chair when the music stopped. I'd almost bet that those who sold the first day saw some good values in the unintended residual damage (MLP's, mREIT's, BDC's fixed income CEF's, etc.) and are adding those things to their holdings.
All of this is just wild guesswork worth every penny of what you paid for it.
Well, MFO is, in it's own right, a groups of analysts with a whole lot of experience garnered over a long period of time. And diversity? A groups such as this has come from all walks of life, with immense experience in survival, both financial and personal. I'm thinking that a poll of this board is bound to produce insights and perspectives that have value, simply based on the type of folks who post here. I may at times agree or not with some of you, but I would never think that any of you are stupid, and I thank you all for contributing to this board.
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Added later: As mentioned before, 60-65% of my investments are considered "buy and hold." Largest three here are DODBX, PRHYX, OAKBX. May do some minor rebalancing in this group once every year or so - but in general leave these alone. The remaining 35-40% is roughly split between cash and traditional equity funds. 20% cash is considered a normal weighting, and I'll vary that depending on my read of valuations. I view this as a way of possibly adding a percent or two to long term returns without as much risk of shooting a foot off.
Only mention this because responses to a question such as this mean more if we have an understanding what the respondent is trying to achieve in "buying" and "selling." Regards
"Find", "Print", what's the difference?
I agree that the issue will be pushed further out in the future,but I'm skeptical of any real progress (I don't expect progress from people who haven't really delivered much of any in recent years.) Personally, I think one can start buying a little here as the market is oversold, but I would not buy because of the discussions today in government being labeled as "optimistic", as that has been seen time and time again with governments here-and-overseas to be proven inaccurate after the initial report of "good news".
I would buy bit-by-bit, and keep in mind one's risk tolerance, as - as I noted above - I think markets could remain volatile. I think large, multinationals (particularly stuff along the lines of a Nestle) remain appealing, and if dividend funds fare worse because of worries about taxes, that's something I think people should consider, as I think ZIRP could continue for longer than expected (2016, according to Yellen the other day). MLPs are doing well today, but if there is more selling, those who can tolerate the volatility of individual names and/or funds may want to take a look if they go much lower.
People have to be aware of what's going on in the Middle East (which will hopefully not get worse) and Europe (which I think - in some regards - is getting worse, or at least not getting any better - look at Vodafone's earnings disappointment the other day.)
Agree that the trend is your friend and
it’s either a short term or long term friendship
depending upon your chosen investment school of thought – and we all have one, be it Fundamental, Technical, Macro, Value, Economic, Whacko, or some combination.
My LT portfolio remains long.
My trading portfolio remains short.
A while back I said that I thought the selling would continue and now it appears that the market is due for a bounce. However, from a technical standpoint there are a lot of overhead resistance levels. Unless we see one HUGE up day which causes the shorts to run for the door, several resistance levels will be tested.
Love your thoughts. Shopping for bargains is always interesting but keep in mind some of the downside risks - going over the cliff. war in the middle east. QEnth. economy still in the toilet albeit showing some signs of life.
The first is pretty much priced in, don't you think? Hell, I'm assuming they'll go over the cliff in order to force some action. feh. war? sure looks like it and I do NOT think that this is fully priced in. You've got syria at civil war, egypt now having switched sides, rioting against the monarchy in jordan . . . oh and iran, and all the other 'stans. QEnth? Of course. That's the one given. The Fed will keep this sucker awash in cash so there will be $ looking for a home. Economy? feh. WTF knows.
and so it goes,
peace,
rono
I still have a lot of cash but I am not willing to go all in (to my target allocation) yet. Fiscal cliff might be driving the news, but I am more concerned about earnings and recession in Europe and Japan, which will still be a problem regardless of what happens in Congress.
I am still DCA into the tsp /401k...still 80%stocks 20%bonds
just bought a water bond - cusip 03040WAF2 from schwab: ytm ~ > 7.5%, not too bad but the call could be too long [hopefully I wont die before it mature LOL]
It's interesting, one of my colleague at work about to retire in couple of yrs, she is not a savvy investor but she made a brilliant move, she changed to 80% cash/cd/bonds and limited stocks at 20% in her tsp. Just like rono did prior to the crash. I think it was very wise. probably cannot afford another crash if you are near retirement.
too many variables out there -
fiscal cliff
EU recessions
middle east w/ Jewish state/Hamas/Iran
oil factors
obama factor/obamacare
printing more money from gov EU and US trying to keep afloat
china going down/? new crash
shall we say buy more gold???
My regular taxable portfolio is conservatively positioned (about 60% global equity) and has not changed. I did buy couple of tech stocks (less than 1% of my portfolio) which looked interesting.
I have been buying since the S&P 500 Index has pulled back to the low side of 1400.
I figure, with the ytd high for the Index being about 1475 and the low about 1258 this computes to a mid point of about 1365. As of Friday the S&P closed back of the ytd midpoint at 1360. With 2012 full year earnings projected to be about $100.00 a share on a trailing earnings basis then this would compute to a P/E Raio of about 13.6. Historically it is said, by many, that a normal range for the Index to trade would be a range of 14 to 16. With this, I have been buying within my own portfolio and have raised my equity allocation to about 55% equity form about 45% reducing cash by a like amount. Fixed remains the same at 25%. Within equities I am about 25% foreign.
The broad sectors of the Index that presently have the most value, by my research, are technology, communication services and energy.
Have a great evening ... and, I wish all good investing.
Skeeter
"As of last week, our estimates of prospective return/risk in equities remained unusually negative."
http://www.hussmanfunds.com/wmc/wmc121119.htm
From the letter: "In the Mary Mapes Dodge book titled Hans Brinker, there is a fictional story within the story of a little Dutch boy who, on his way to school, notices a hole in the dyke. Having nothing else to fix the leak, he plugs the hole with his finger and stays there through the night until workers come to repair it. We are now into the fourth year of efforts to print trillions of little Dutch boys out of dollars and euros in order to stop a tide from crashing through a fundamentally damaged dyke. All of this has bought time, but no workers have arrived, and no real repairs have been done."
That's exactly right - but I'm surprised to hear him acknowledge printing trillions and not have positioned the fund for that situation for the last few years. I see nothing to suggest things are going to change either. If they're printing to buy time and avoid difficult decisions, they're not going to face those decisions now - so what makes anyone believe they would face them when those problems have grown twice as big?
I sold my short nasdaq fund Thursday. I will consider reestablishing a hedge at the end of this week or next week, depending on how far this bounce leads. I have a number of things I'm interested in getting (really no new ideas, pretty much additions to existing ideas as of now), but will wait and see if the market takes another move lower before year end.
Re the "Dutch Boy" - Always enjoyed Hussman's writings (aside from some of the technical ****). I think both he and Bill Gross do a real nice job here. In this case, we might apply a couple other allegories to characterize his recent investment calls: "Boy who cried wolf" & "The sky is falling" come to mind.
"I'm surprised to hear him acknowledge printing billions ..." Yep - agree with you. But isn't inflation pretty much the natural course of paper (fiat) currencies throughout history - with few exceptions (perhaps modern day Japan?). If you have to bet on one long term trend, the odds favor inflation.
Re the market: Agree - caution is advised. - If the numbers hold, 2012 looks to be a pretty decent year for U.S indexes - especially if compared to current yields on cash or short term paper.
Again though, what I find most curious is the answer that I've been looking for for quite some time - and that why Hussman, given all his indicators and studies - has appeared to ignore the effect of money printing. Apparently, he hasn't. Yet, still, the fund wasn't positioned for it. Odd.
My question re: Japan is how sustainable is that situation. It can go on for far longer than one could ever believe, but largely it would appear due to the fact that the Japanese have been buyers and have put a lot of their savings into JGBs. With their population getting older, there's less and less demand, and once Japan has to look for buyers elsewhere, they'll likely only find them at higher rates. Amusingly, you now apparently have adds in Japan promoting men who own JGBs at "popular with the ladies" (http://www.bloomberg.com/news/2010-06-09/women-prefer-men-holding-government-bonds-japan-finance-ministry-ad-says.html) I really do not think that we go into a similar situation as Japan, but I don't think the path that this country is on is any good either.
One should be cautious on the market, especially those who are conservative/retired/etc. I think it's not a bad idea to go "up the need chain" for a while, and move towards individual names (and funds) that are geared towards larger, more established multinationals and consumer staples and generally more basic needs and/or companies that provide value for consumers (Costco, for example.)
A few odds/ends thoughts:
Best Buy looks to be in some stage of over, unless it's taken private (which was discussed by the founder, but so far hasn't happened.) It would appear to be a continuation of consolidation in the retail industry in the US. Sears is likely going to sell itself off bit-by-bit, and I'll say it again - it's unfortunate what was done to a once great US brand. There will be value in all of the brands and real estate and whatnot, but I questioned who would own SHLD when it was over $100 and I don't think there's a tremendous amount of value to be unlocked. There's a number of other retailers (JCP) not faring well, either. Target and WMT and Costco likely have less downside than otherwise if there is another downturn as they've taken share.
Japanese retail company Fast Retailing and its Uniqlo chain may eventually take on Gap, and has an aggressive expansion plan in the US. I don't like retail, but Fast Retailing may be something I look at if its attempts at offering a more innovative experience and reasonable clothes prices continues to take off over time. Another company I continue to look at is Retail Opportunity Investments, a REIT focused entirely on malls that are anchored by need-based (grocery, drug) tenants, the thought being it's a more conservative REIT whose malls largely cater to basic needs.
HP is also likely over, and it continues to speak to the massive shift in tech, with a number of the majors (Panasonic, HP, Sony, Best Buy and a number of others) being left by the wayside as they didn't move with the change to smartphones and tablets.
Water is worth a look for those with a longer time horizon. Interesting article discussing how some businesses (such as ADM) were looking at trouble with their operations because the water they needed from nearby was beginning to get to troubling levels during last year's drought. "While companies in the Great Lakes region and other parts of middle America long counted on water being cheap and plentiful, they now realize they must conserve because finding new water sources is difficult and expensive — if it can be done at all."
Another real highlight from the article regarding the issue: "With half of Minnesota, the "Land of 10,000 Lakes," still in deep drought, the Department of Natural Resources told 50 water users, including several major ones, to stop drawing from rivers and streams in October.
They included a paper plant owned by Sappi North America and a ceiling panel factory owned by USG Corp. The companies declined to comment, but DNR officials said they expressed concern about the future of their businesses."
Additionally, with fracking and other new oil extraction methods require significant water use and concerns over polluting may create opportunities for treatment companies. Those who have an interest would likely be best with a fund to cover different aspects of the sector - and more a small, long-term supporting position than a significant bet.
http://usnews.nbcnews.com/_news/2012/11/16/15217252-drought-water-scare-gets-attention-of-agribusiness-giant-adm?lite
From Shakespeare: "The fault dear Brutus is not in our stars, but In ourselves ..." So - if folks believe his hype and elect to send him their long term $$, the blame rests on their shoulders. (Won't disagree the fund might be a good short term play) Take care.
Mr. Redleaf's view: "...the right strategic direction for the next several years and perhaps the decade is to buy equities and sell bonds..."
Here's link to full commentary:
http://www.whiteboxmutualfunds.com/content/assets/docs/lit/tactical/newsletters/Whitebox-Tactical-Op-Newsletter_Q3_2012.pdf
I share Redleaf's view, so I voted it's time to buy; of course, I've had benefit of watching market rally this past week. To make up for it, I'll go out on limb and predict that next correction will occur after Dow surpasses 14,000.