There are changes to my personal portfolio from July. Specifically, I’m dropping EPR and CCMNX and adding PHD and BSL. These changes are now reflected in the updated portfolio.

Most stock analysts are weak at Open Economy Macroeconomics and tend to look only at the initial static effect on GDP from increased tariffs on China announced for Sept. 1st. This abstract view underestimates the vastness of the negative macroeconomic consequences of Trump’s tariffs. First, there is the uncertainty effect of erratic tariff policy that decrease investment and economic growth, second, there are specific industry effects on agriculture and technology (for which technology is another future growth driver), thirdly, there is increasing inflationary pressure in general that also puts upward pressure on longer-term interest rates which further hampers growth, fourthly, there is the effect of drawing in the Fed to support the tariffs which reduce our ability to fight the next recession, and finally, there are the initial static effects on GDP the brokers are pointing out. Be prepared, not surprised when the markets suddenly tank. Personally, I think a direct restriction on capital expenditure in China would be a better and stronger approach than tariffs and failed negotiations.

For those thinking that Fed rate cuts will temporarily lead to a boost in economic growth and the markets, which is certainly possible, I have some short-term recommendations from Zack’s rank 1 stocks. These stocks are expected to have about 30 to 90 days of increased relative performance and include: MTRN, ARNC, ENVA, OMP, DVA, and MTZ. Zack’s 1 ranked dividend growth stocks include NGLOY, BBL, BHP, FSUGY, PAGP, ARCC, and BCE. Currently, the top ranked ETFs are PSJ, VIG, JKH, FNY, and VOOG.

Alternatively, you could just hold my dividend re-investment funds and disregard the entire upcoming recession, which is essentially the Warren Buffet approach. In any case, Good Investing!

August 14 portfolio update:

Given recent market weakness I am dropping some funds from my personal portfolio that have smaller amounts of assets under management (AUM). These funds are MGF, FMY, PCM, and FFT. I am adding ETY because it is based on both domestic and foreign stocks. I have updated the portfolio from the July Stock and Fund picks with these changes.

August 15 portfolio update:

I am giving up on any positive long-term gains from MIE, a midstream MLP fund and deleting it from my portfolio of income earning CEFs.

Weeks 3 -4 (Aug. 19 – 30):

Trump is on the skids, meeting his Waterloo by trying the negotiate with the Communist Chinese. The Chinese win by never agreeing to any kind of a deal because that will end Trump’s re-election chances. This opens the door for the next socialist who, like Obama, will be good for gold prices. I’d look at stocking up on GGN because it pays a high monthly yield thanks to its low price and may offer capital gains while the Trump administrations circles the drain and the new socialist regime try’s to make everybody better off by increasing demand for everything through income redistribution while at the same time failing to pay for anything (making their proposals look good only on paper) and thereby destroying real production and supply. In other words, get ready for really long lines, wait times, and inefficiency.

Here is my updated monthly paying income and DRIP portfolio that is pretty much good for any scenario and includes GGN. I also added a risk-managed Eaton Vance fund (ETJ) to the mix.

The table is meant to substitute for an immediate annuity in terms of guaranteed income, with the benefit that you get to keep you capital instead of paying it to the insurance company offering the stream of payments. The first thing after a symbol’s stars, more of which indicates greater safety, is the historic risk/ return so L/H means low risk high returns, for example. My July post explains more about the table. Feel free to use the table however you wish. For example, any of the income funds can be held as DRIP stocks if you just want all growth. You never have to sell the DRIP stocks either because they will just buy themselves up faster during a stock market sell-off. As always, good investing!

The post August Stock and Fund Picks first appeared on MarchéEconomics.

The post August Stock and Fund Picks appeared first on MarchéEconomics.

Trump trade woe’s continue. When companies buy high bang-per-buck (Productivity divided by cost) resources in foreign countries like Mexico, such as with our automobile industry, it maximizes output per cost or, equivalently, minimizes cost per unit of output. In other words, our automobile industry becomes more competitive by using Mexico’s production resources. China has a communist government and cannot be traded with or used for production because the cost of stealing our technology outweighs the benefit of high bang-per-buck production resources. Trump, the isolationist, wants production in China to continue under his negotiated conditions or to be reallocated to the US where low-bang-per buck resources would destroy our comparative advantage in trade. Instead, why not incentivize resource reallocation from China to Mexico. By doing that, we stay competitive and technology theft by government direction will no longer occur. Mexico’s economy will be greatly improved and the incentive to migrate to the US greatly reduced. Mexico may be so grateful it may offer to build Trump’s wall. Unfortunately, Trump’s thinking that Mexico is somehow stealing our automobile and other industry trade prevents him from choosing this strategy. Because Trump fails to understand optimal resource allocation and the sources of comparative advantage in trade that lead to increased US exports, he will make the US and the rest of the world worse off. He may even cause a global recession so get ready.

In the meantime, the best Zack’s number 1 stocks are AU and TALO. The best dividend growth stocks are APAM, AVAL, and NBLX. Pure growth stocks are GLDD and HTZ and the best ETFs are PXMG and FXL. As for myself, I’ll be heavily weighted toward cash. Eventually, like at the end of 2018, that strategy will lead to a buying opportunity while at the same time preserving capital. Good investing!

Week 2 – 3:

Why can’t we just stop dealing with a communist government’s inability to conduct free market trade? They really don’t want to engage in free market trade, which should be clear enough already. Instead, simply incentivize all US companies to cease doing business in China and be done with it. As it is, Trump is trying to cut a hole in the Chinese end of the trade canoe. In other words, the main effect of tariffs or taxes is to distort prices and trade flows which harms both parties about equally, so get ready for some higher prices. To me, it’s like watching a dual where both parties take ten steps, turn, and then shoot themselves in the head. On top of this idiocy, Trump wants to put more tariffs on autos and Mexican production . . . again trying to cut a whole in the other end of the canoe. Ultimately, this must end badly, but just not right away.

In the meantime, some long positions in growth stocks might include: ERIC, NOA, RYI, TGH, MBUU, QD, and SSL. Top ETFs are PSJ, FCOM, and PXMG. Dividend growth stocks to consider include: BMA, APAM, PUK, ad NCMI. Good investing!

Week 4 (May 25 – 31):

People generally underestimate the negative supply-side tax increase policy of increased tariffs and isolationism. It is estimated to cost the average household about $800 per year which offsets the corporate and income tax decreases about equally. Reduced producer regulations remain the only net positive so the pricing in of negative trade effects aren’t trivial and may occur in subsequent rounds of adjustment. Assuming the tariff policy doesn’t lead to a global recession in the short-term, this represents a possible overcorrection and buying opportunity within the domestic economy. Thus you should consider some dividend growth stocks to research and watch such as USAC, GLT, EPM, AEG, VSAT, GTLS, FSI, CNMD, and ABR. Strong growth stocks include NOA, RYI, TGH, VRNT, QD, OSIS, GPI, CUB and JCOM. Some good ETFs are XLP and XLV. A long-term growth mutual fund to consider is CPOBX. Good investing!

The post May Stock and Fund Picks first appeared on MarchéEconomics.

The post May Stock and Fund Picks appeared first on MarchéEconomics.

More trade uncertainty for March 1st and looming government shutdown #2 are on the horizon. Have been all month so haven’t wanted to commit to anything in the stock market. The Chinese will be watching the compromise bill to avert the shutdown so as to guess how soft a deal Trump might accept. For those inclined to be in the market consider ARCH for growth; RC and RIO as dividend growth stocks; and the ETFs IHI and VOT. Good luck!

Week 2 – 4 (Feb. 18 – 28):

It appears that Pres. Trump will come up with some type of deal on trade with China. Unfortunately, it is unlikely that any deal will actually be a good one as Trump doesn’t understand the economics of trade. Still, any deal is better than the status quo. Thus, we will go from really bad, to somewhat less bad, which is an improvement, but far from optimal.

Overall the domestic US economy is still strong, but the stock market is running up to fast to be sustainable. Expect an eventual slow down. Otherwise, expect a sudden drop after a continued run up that is not sustainable.

With this caveat in mind, consider the growth stocks CATM, WIRE, and VIPS (a Chinese stock . . . and the first time I’ve recommended one of those for a long while). Dividend growth stocks include RC, RIO, and SUN. Excellent ETFs are JKH, VGT, and IYW. Good Investing!

The post February Stock Picks first appeared on MarchéEconomics.

The post February Stock Picks appeared first on MarchéEconomics.

Week 1 (Jan 1 – 8):

It is hard to read the market. The Fed still wants to pair down its balance sheet by letting its bonds expire or to sell them. By not buying or selling US treasury’s it will still cause interest rates to rise. Trump still doesn’t understand the more efficient allocation effects of specialization and trade so whatever deals he makes will still make us worse off by decreasing production and increasing prices, inflation, and unemployment. These effects are beginning to show up among exporters and some domestic producers already. Unfortunately, things will eventually get much worse. As a consequence, some predict the market will soon re-test new lows so be prepared.

In the meantime, things appear rosy. If you want to abandon your cash positions, which I am not ready to, then consider growth stocks such as VSI, dividend growth stocks such as CCR, ETFs such as XLV, XLK, and XLF, and small cap growth mutual funds such as SASMX, LAGWX, and PRNHX. Good Investing, but be careful.

Week 2/3 (January 7 – 18):

I’ve been watching this “V” bottom bounce. It is not widely trusted to continue. The rebound or bounce is now at the technical resistance level for the major indexes and appears to need a catalyst such as a US – China trade deal to continue much higher. They way I played the bottom bounce was with dividend paying funds that tend to regain or revert to their means. This results in higher yields and capital gains. These funds have a tendency to growth with the economy and have a defensive nature that makes them grow if things go badly. They are VRP, PEY, OUSA, and several defensive bond – income funds that hold high quality (investment grade) bonds that are relatively short duration in nature. Because it was more volatile (i.e., it sold off more) and has long term growth I also bought a little bit of BST for higher yield and capital gains. I may revert to money market funds again if resistance in the stock market is not breached and volatility suggests another sell-off is immanent.

In the mean time, there are some other good stocks and funds to consider. These are all Zack’s rank 1s: (1) Growth stocks are: PAG, DELL, RCII and RECN. (2) ETFs are: KIE, BTEC, HDV, OUSA and KBWP. (3) Dividend growth stocks are: BMA, SSW, AY, and ANF. As mentioned, I hold OUSA at the moment.

Even though these recommendations are Zack’s 1s with high growth, value, and momentum scores and high industry rankings, they cannot overpower the trend in the market so buy them only if the market is rising or remains in a trading range. Also, I’d check their technical indicators such as the RSI (relative strength index) and MACD for entry (buy) and exit (sell) points. Good investing!

Week 4 (Jan. 25 – 31):

There is far too much pessimism to expect a re-test of the near term market lows. More likely, the rally off of the lows will continue. Because fundamentals are good among many stocks and the economy, only excessive optimism will signal the rally’s end. For growth, consider DAN. Dividend growth should include taking a look at GMLP, MGP, NEP, and VIV. ETFs to consider are IHI, KIE, and VOT. All stocks and funds are Zack’s #1s with high sector ranks (except for DAN) and excellent value, growth, and momentum scores. Good investing!

The post January 2019 Stock and Fund Picks first appeared on MarchéEconomics.

The post January 2019 Stock and Fund Picks appeared first on MarchéEconomics.

The market is trying to price in the Trump trade protectionism policies.  It has been doing that since January of this year.  The only other politician advocating trade protectionism is Bernie Sanders.  This tells you that such a negative supply-side policy is going to be no good.  Let’s hope that Trump comes to an accord with the Chinese and the EU before we have a global recession.  In the meantime, do like that banks are doing and hold cash (ICSH and JPST) that currently pay about 2.5%.  The problem was never the Fed raising rates.  The Fed must now re-evaluate continuing to raise rates because of the negative effects of trade protectionism which are showing up sooner rather than later.   

Trade protectionism is analogous to promoting lazy and fat kids at a school track meet that are otherwise not competitive.  The good athletes must now miss the track meet and stay in school to do extra homework (e.g., they face retaliatory tariffs).  Only competitive exporting industries will invest and add jobs but retaliatory tariffs make this impossible.  Import competing industries are the lazy fat kids that are not competitive.  No one will buy their stock nor will there be more investment and hiring even with trade protectionism.  Net job loss and higher prices for producers and consumers will be the only results. 

This is consistent with supply-side policies that either increase or decrease the misery index (inflation plus unemployment).  Pro supply-side policies reduce the index while anti-supply side policies like trade protectionism increase it.  (Forget the Philips curve that assumes a trade-off between inflation and unemployment.  It is less relevant old school Keynesianism that assumes the government can manage the economy.  I’ll bet the Fed and Trump cause a recession instead.)

Of course, lets not forget that Bernie Sanders would combine trade protectionism with more business regulations (Like Obama) and higher taxes (Hillary) with the idea that we’ll all be better off under socialism.  Let’s hope the market never has to price in those policies as well.  But don’t hope too much.  Socialists are now the only environmentally oriented candidates and they will get a lot of votes as a result.  Too bad the republicans can’t pull their heads out of the sand about global warming.  Eventually we all face its consequences and must deal with it.  Don’t want to think about the wrecked economy we’ll have if socialists are the only ones taking action. 

Week 2 (Dec. 10 – 14):

If you are still in equities or bonds, you must feel as though you are stuck in the La Brea tar pits.  Soon you will be dead.  If, on the other hand, you have heeded my advise, you are in cash (e.g. ICSH or JPST) and safe.  Only those who are safe will be in position for future opportunities.  Unfortunately, skeletal remains recovered from the tar pits are many.  And that’s the way it is for the second week of December 2018.    

Week 3 (Dec. 19 – 20):

Things looking this bad, including the government shut down, can only mean its time to look at buying some stocks and funds. You might look at MBUU as a growth stock and XLV as a fund to consider. For dividends, consider PTIAX. These are all Zacks #1s.

Week 4 (Dec. 24 – 31):

Trump trade policy headwinds are the only problem causing market uncertainty. Moreover, it is the only problem the Fed has with normalizing its balance sheet by selling credit assets. In other words, Trump is in the way and not the Fed. Given that is the case, the steep sell-off in the markets has created some opportunities. I would take a look at stocks such as JLL, SNE, and RUSHA for growth. Consider the ETF HDV for dividends and growth. Purely dividend growth stocks are DM, GNL, and BRG. These are all Zack’s #1s with good value, growth, and momentum scores. Happy New Year and Good investing!

The post December Stock and Fund Picks first appeared on MarchéEconomics.

The post December Stock and Fund Picks appeared first on MarchéEconomics.