tag:blogger.com,1999:blog-2986124651030959736.post5608826245734288185..comments2024-03-29T08:03:35.151-05:00Comments on Stocks, Bonds & Politics: Zurich Financial/Sold 50 AREPRE at $24.8-Regular IRA/Added 100 TICC at $9.75-Main Taxable/Bought Roth IRA: 50 BOI at $16.72 and 50 AIY at $24/Paired Trade: Bought 100 ARCPP at $22.76-Sold 50 BMLPRJ at $21.05/Added 66 ELB at $25.07 to Bring Position to a 100 Share Round Lot TENNINDEPENDENThttp://www.blogger.com/profile/17444227958539559639noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-2986124651030959736.post-81696937395569020452014-04-18T12:26:39.589-05:002014-04-18T12:26:39.589-05:00Peter: I will not use the double short stock ETFs ...Peter: I will not use the double short stock ETFs to hedge anymore. I used them profitably, starting in late 2007 and continuing into 2008, but found them to be horrific products in that they lost tracking soon after purchase. Anyone using them as a hedge would need to do only for a brief period and be extraordinary lucky with their timing. <br /><br />I was able to exit the positions profitably by more or less timing entry and exit points to the movement in the VIX. The simple model was to sell the double short stock ETF when the VIX moved toward 30 and then buy them back when the VIX fell below 20. While that was working fine when the VIX was in the Unstable VIX Pattern, Phase 1, it left me without any hedges when the VIX started to soar after Lehman's failure, since I had sold the position on a spike toward 30 before that event and did not have an opportunity to reinitiate before the skyward burst. The VIX hit 31.7 on 9/15/2008 and had risen to 80.86 by 11/20/08. I have no similar guidance now with the S & P 500 in a Stable Vix Pattern. <br /><br />The market is proving to be remarkably resilient. I can not recall anything like it. The S & P 500 closed at 1,123.53 on 8/19/11 and at 1864.85 yesterday. That is a 66% gain in less than 3 years without a single 10% correction. This should make anyone cautious and to reset their future expectations of stock total returns.<br /><br />The VIX model is keeping me invested in stocks, but I am focusing more on income producing common stocks like REITs. Some of the other recent buys like COP, which is up almost $900, could be based on valuation criteria irrespective of the market averages. <br /><br />I have also used the robust stock rally to sell some stock CEFs that I wanted to get rid of anyway. So selling an underperforming mutual fund into this kind of strength is one way to pare the stock allocation some. However, given the large number of REITs bought over the past few months, and some other dividend paying stocks (e.g. COP, PEP, NVS), I am net up in stocks but not by much after selling recently some another stock CEF which I will discuss in a future post. <br /><br />By focusing on income generation, with a sizable bond and cash allocation, I will not be impacted much by a stock correction of 10% to 20% and would simply view that eventuality as a potential opportunity. <br /><br />There are investors who have substantially pare or liquidated their stock holdings expecting a correction. Many pundits have been predicting tops throughout the past five years. So, what can you say now. How far would the market have to go down now before hitting the September 2012 level, which was when several gurus were calling a top. In other words, the market will not act according to these forecasts, and may go up 30% before correcting 10% to 15%. I noted in the last weekly blog how far over the Wall Street oracles were in their predictions for 2013. All that anyone can say is that there will be corrections, long term bull and bear markets, cyclical bull and bear markets, dips of 4% to 10% that will cause Perma Bears to come out of hiding and say "I told you so", and worse of all, the 45% relatively quick catastrophic declines. I have gone through 3 of those and I am just 62 years old (1974, 2000-2002, 2008-March 2009). I have been through 2 long term secular bear markets, and more dips and corrections that I could possibly remember now. All of the foregoing has happened and will always happen. TENNINDEPENDENThttps://www.blogger.com/profile/17444227958539559639noreply@blogger.comtag:blogger.com,1999:blog-2986124651030959736.post-82267645694686917732014-04-17T21:45:00.305-05:002014-04-17T21:45:00.305-05:00Southgent,
Thanks for your insights. How do you ...Southgent,<br /><br />Thanks for your insights. How do you think this needed/anticipated correction will play out and over what period? Also, notwithstanding your negative view of SDS ...etc. do you plan to take any preemptive strike? <br /><br />Regards,<br />PeterAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2986124651030959736.post-56318069625338209942014-04-10T22:26:56.657-05:002014-04-10T22:26:56.657-05:00Peter: I define a catastrophic decline as 45% or g...Peter: I define a catastrophic decline as 45% or greater. I would be more aggressive after one of those which I do not anticipate and view as highly unlikely at this point. Nothing is impossible but I am not worried about that scenario coming to past. <br /><br />The market needs a 10% to 15% correction followed by several months of churning. <br /><br />China and Russia are my two biggest concerns at the moment. <br /><br />I view myself as an opportunistic buyer and seller. The degree of my rotation into stocks would depend on the opportunities presented, and more opportunities are offered as the decline increases. <br /><br />Most of the stocks that interest me are blue chips and they are not falling much. Most of the declines are in the fluff Nasdaq names, along with a few overvalued areas of the market, including small caps. <br /><br />Depending on what happens, I may use some cash to buy stocks and/or I may pare bonds to buy stocks which was what I first did in February 2009 when I sold several investment grade bonds rated "A" or better and used the funds to buy stocks in March. If some REITs go up during the decline, which may happen assuming bonds continue to rally, I may pare that allocation and use the funds to rotate into other sector (s). So, in short, it depends. I evaluate my options continuously. <br /><br />I have not tallied the numbers, but I have increased by bond and bond fund allocation over the past several weeks and those securities may do well in a stock market correction which has been true so far on the last three down days. Those securities along with my cash allocation and preferred stocks are cushioning the decline for me, which I will discuss in some detail in Saturday's weekly post. <br /><br />On the last three down day (4/4, 4/7 and 4/10), the S & P declined 4.48%, while my main taxable account was down just 1.16%. I captured almost all of the S & P's gain on 4/5. I am more likely to capture a small gain in the S & P 500 than a large one. So I am not really down hardly at all so far, which is another consideration. My portfolio is hopefully designed to avoid 75% or so of a significant decline but to capture most of the upside except on major up days when I may capture half of the S & P 500 move. TENNINDEPENDENThttps://www.blogger.com/profile/17444227958539559639noreply@blogger.comtag:blogger.com,1999:blog-2986124651030959736.post-73901303722002677562014-04-10T20:11:06.536-05:002014-04-10T20:11:06.536-05:00Hi Southgent,
If market does correct, are you sta...Hi Southgent,<br /><br />If market does correct, are you staying with your nip and tuck approach or are you going to be a more aggressive buyer? Would your approach be different from that after a catastrophic decline?<br /><br />Thanks,<br />PeterAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2986124651030959736.post-28779775110162925832014-04-10T17:28:22.950-05:002014-04-10T17:28:22.950-05:00Steve: I just wrote a section in my weekly blog di...Steve: I just wrote a section in my weekly blog discussing today's hit, which will be published on Saturday. <br /><br />The S & P 500 is at the top end of a fair value range. A number of Nasdaq stocks are well within bubble land territory. <br /><br />There has not been a correction of 10% or more since the summer of 2011, which is an unusually long period to go without one, particularly given the huge move since September 2011. <br /><br />Possibly the precipitating cause today was a story that did not receive a headline. Putin reportedly sent a letter to European leaders arguing that he might have no choice to shut off natural gas to Ukraine which would shot off most of the flow to western Europe. Putin said that Europe needs to work out a deal to pay what Ukraine owes or else. That was the clear message, stated in slightly more diplomatic language. <br /><br />He increased Ukraine's bill by $17B or so to recoup historical discounts granted to Ukraine for Russian's lease of the naval base in Crimea. And according to his logic, since Russia seized Crimea in violation of the Budapest Memorandum and international law, and annexed it into the Motherland, Russia should be paid those discounts retroactively since it no longer needs a lease from the Ukraine. <br /><br />Only a madman would make such a claim. <br /><br />The correction in 1987 was a one day affair. I remember it vividly even now. I tried to place an order using the phone late in the day, when the averages were down 20%, but there was no way anyone could tell me the current prices since the tape was running way behind. It was total chaos. Only market orders were then allowed at Schwab. That cyclical bear market was in part a valuation correction since the S & P had moved up too far since August 1982 (100 or so to 330 or so) We have experienced a similar percentage move up since March 2009 and valuations are not very appealing at current prices. There was a major contribution from computer trading schemes hatched by the Masters of Disaster called "portfolio insurance" that accelerated the decline and caused a one day crash. The VIX model gave a warning in the Spring of 1987 with a Trigger Event. Today's move up in the VIX was mild and still well below 20 and nowhere near Trigger Event territory. <br /><br />Generally, bull market corrections are swift, lasting a few weeks or months. A typical pattern can be found in the corrections from 2010 and 2011. I prefer those quickies. <br /><br />A long term secular bear market can start with a much longer and far deeper down move, such as 1929-1932 (down 86.2%) or 2000-2002 (down 49.1%). <br /><br />http://advisorperspectives.com/dshort/updates/Four-Totally-Bad-Bears.php<br /><br />Those are the worst, and I do not expect that to happen now. Putin does have the power to undermine the incipient worldwide recovery in furtherance of his clearly stated desire to restore the borders of the former Soviet Union and he is probably the most important actor on the world stage now. Hopefully, he will not carry through with his threats against Western Europe unless they play ball with his Hitler like foreign policy initiatives. TENNINDEPENDENThttps://www.blogger.com/profile/17444227958539559639noreply@blogger.comtag:blogger.com,1999:blog-2986124651030959736.post-79450378222979388012014-04-10T16:03:59.279-05:002014-04-10T16:03:59.279-05:00April 10th--
Today the markets got hammered with t...April 10th--<br />Today the markets got hammered with the S&P down 2 % and the vix over 15.<br /><br />The Private sector jobs report looks good ; back to -pre 2008 levels. I could not find a good "reason" why there was such a hit today? Except valuation.<br /> THe comments on Breakout from Yahoo said that there is no buying; that there are no stocks to hide out in today. They were saying that this is the start of the correction ; they pointed out that Certain big Firms are rushing IPOS to market at the low range of price, even at the risk of some loss of reputation Just to get the " Liquidity" out of the investment.<br /><br />It would seem to me that a real correction would begin alot more subtly than this.<br /><br />I wanted to get your opinion on what the correction was in 1987 and if there is any pattern that you have seen for a valuation only corrections.<br /><br />thanks much Steve G. Anonymousnoreply@blogger.com