DIA

The Market – On Its Head

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By Brian Nelson, CFA The sector/theme returns have almost been turned on their head as some of the worst performers in the first few weeks of 2016, namely materials (XLB), energy MLPs (AMLP, AMZ), and energy (XLE), have transformed into leaders through the latest data update, April 21. As we outlined in “Alerts: Adding More High-Quality Exposure, (April 2016)” the dividend “track record” growth craze is on, in our view, and yield-rich exposures from utilities (XLU) to the dividend-growth focus itself (SDY) have rallied more than 9% in the year thus far. The metals gold (GLD) and silver (SLV) have also proved to be good trades out of the gates thus far in 2016, up ~18% and 23%, respectively, though … Read more

Did You Know: Coca-Cola Is Shrinking; Intel Is Growing?

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How fragile is this bubbly market? The long-anticipated Organization of the Petroleum Exporting Countries (OPEC) conference in Doha, Qatar, that would mark the beginning of the end for all of crude oil’s (USO) malaise came and went, and nothing happened. We’ve now had a series of rumors about the potential for production freezes that have driven crude oil prices from the mid-$20s to nearly $40 per barrel, but nothing fundamental has changed. The bump in crude oil prices since the bottom has been almost entirely speculative. Crude oil prices would jump on rumors, and then when the rumor would prove untrue, they wouldn’t give back the gains. It appears hopes, dreams and speculation with a dash of short covering have … Read more

The Bounce in Energy and Potash’s “Surprising” Dividend Cut

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Nothing like Valuentum’s optimistic article last week, January 21, in Barron’s to get the energy markets popping, “Is Kinder Morgan on Road to Recovery,” would you say? Of course, we say that in jest. The equity markets January 28 were defined by optimism that two of the globe’s major energy resource producers, the cartel OPEC and Russia (RSX), would finally come together to alleviate the pain that has been exerted on the price of the black liquid the past 12-24 months with a “meeting.” What we found to be peculiar, however, is that instead of OPEC letting what turned into a “rumor” run, helping to further drive crude oil prices higher, OPEC delegates quickly denied the talk of a potential … Read more

General Electric’s Results Remain “Messy”

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There’s something to be said about a company that can handle just about anything thrown at it. Since the founding of the Dow Jones Industrial Average (DIA) just before the turn of the 20th century, the composition of the 30 stock index has changed more than 50 times. There’s one company, however, that has retained its relevance in the broad market benchmark the longest. That company is General Electric (GE), which has been a staple of the DJIA since 1907, well over a century now. For long-term investors, there’s no better example of a company that has handled just about every market cycle than the industrial giant. In recent years, General Electric has been working to shake off the stigma … Read more

Breaking: Markets in Free Fall

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By Brian Nelson, CFA I was up late last night watching the 10-year Treasury fall below 2%, crude oil drop below $28 (and now below $27) per barrel, and the Dow futures collapse more than 500 points. Asset correlations are going to 1 — so much for modern portfolio theory, right? The benefits of diversification are sometimes absent at the very time you need them the most. If market observers didn’t learn this during the Great Depression, certainly they must have learned it during the Financial Crisis of 2008-2009. That’s why we like cash so much at times. We have a 35%+ cash weighting in both newsletter portfolios. The Dow Jones Industrial Average (DIA) is now down ~400 points (-2.5%), … Read more

ICYMI: 5 Concerns About Impending Rate Hikes

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The first Fed rate hike in nearly a decade came and went December 16, putting an environment of ZIRP (zero interest rate policy) to an end, a policy that grew out of the Financial Crisis and the depths of the Great Recession late last decade. The Fed had paused plans to hike the federal funds rate for much of 2015 as a result, in our view, of getting a more informed read on the potential implications of emerging market developments–namely dislocations in the local Chinese equity markets (FXI) and recessionary conditions in Brazil (EWZ)–and the stock market crash (SPY) in the US in August that sent equities of some of the most well-known stocks including Apple (AAPL) and General Electric … Read more

The Markets Swoon Again

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The broader US markets (SPY) swooned again January 7 as fears of a slowdown in China (FXI), or worse, a dislocation in Asia’s currency markets, and ongoing concerns about the sustainability of some of the most leveraged “players” in the energy complex took the spotlight again. None of this should be surprising. As we’ve done many a time before with the mortgage REITs, namely American Capital (AGNC) and Annaly (NLY), SeaDrill (SDRL) and the latest with Kinder Morgan (KMI), our members are far ahead of developments. That’s our job – we’re not reporters. We strive to get the right information to our members before it becomes “information,” and using the newsletter portfolios as an indication of our views on capital … Read more

Seeking to De-risk the Newsletter Portfolios

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There’s never a good reason to panic in investing, but the 276-point slide in the Dow Jones Industrial Average (DIA) January 4, the worst start to a year since the credit crisis in 2008, reminded us why we hold more than a 30% cash position in both newsletter portfolios at the moment: with a US stock market still near all-time highs, we like having ample capital available to scoop up bargains as stocks inevitably give back some of their gains. The question for us is not whether the broader US stock market will decline from here but whether such a decline will be 10%, 20% or more. After all, the S&P 500 (SPY) has essentially tripled from the March 2009 … Read more

Janet Yellen, the Positive GDP Revision, and Nike’s Swoosh

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Though it may seem much worse, the S&P 500 (SPY, DIA) is down only a few percentage points from the all-time highs set in May this year. We continue to remind equity investors that the US stock markets have roughly tripled from the March 2009 panic bottom only six short years ago, so further declines in the form of profit taking may still be ahead. However, the throngs of investors looking to “get back to even” before selling may account for more overhead supply than we care to admit. Returns have been so wonderful in yesteryears’ upward-sloping bull market that even flat equity market performance may become unbearable going forward, adding to yet more selling pressure. The swoon in late … Read more

The Fed Freezes; Outlook as Bad as Feared or Worse?

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The cheering on CNBC has been short-lived. The sell-off we had expected irrespective of the Fed’s decision has ensued. Selling pressure in the markets may only intensify in coming weeks as uncertainty regarding Fed policy continues to take center stage. Broader market valuations remain stretched, market technicals remain weak, and sentiment is the worst it has been in some time. On September 17, the Fed announced that it has reaffirmed its view that the current 0%-0.25% target range for the federal funds rate “remains appropriate.” Though acknowledging US economic activity is expanding at a moderate pace and that both the housing sectors and labor markets have improved, it also indicated that “recent global economic and financial developments may restrain economic … Read more