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.

As opposed to just kicking the can down the road and giving the Chinese spy company Huawei a life-line, the bullish bias in the market has interpreted the trade truce with China as an actual trade deal . As you know, I’m not in favor of doing any business with the Communist Chinese government or it’s enterprise front Huawei. The Fed rate cut is still on the table and this feeds into the bullishness of the current market. Also, there are many investors that are positioned defensively which means there is lots of money that can be more aggressively allocated if conditions appear favorable.

But just now the foolish Trump administration advanced the idea of new tariffs on the EU. The reason is that Airbus is subsidized and that hurts Boeing. The WTO has authorized countervailing tariffs, but they apply only to Airbus and are intended to offset the advantage of subsidies. Unfortunately, the badly misguided Trump administration sees the WTO ruling as an excuse to put tariffs on a whole array of EU products. This caused the market rally to pause this morning. As Arthur Laffer (a well known supply-side economist) points out, tariffs are a bad thing in the long-run. As an anti-supply-side policy they slow economic activity in the US and around the globe. Already, they have more than offset the positive supply-side effects of US tax cuts and regulatory relief. This will only get worse. The US domestic economy is slowing down and the tariffs, which constrain the Feds ability to reduce its balance sheet in preparation for the next recession, will eventually put us into that recession . . . and with a Fed that has been badly compromised in its ability to offset the recession’s negative effects.

In the meantime, we are still in the short-run. Moreover, the short-run and long-run or only subjectively interpretable periods for which there is no way to predict when one period becomes the other. Thus, one can only keep an eye on relevant data such as declining forward looking market indicators . . . which are starting to diminish consistently. For a short while after an economic downturn occurs, the market will continue to climb before it turns negative as well. This gives us some time, possibly a year or two, before things might turn ugly . . . unless, of course, these tariffs come to an end and we return to the path of globalization, increased domestic and international competition, and long-run economic growth.

Given that long-run (i.e., risk-on) investment is still warranted by the underlying bullish character of this market, consider growth stocks such as TGH, RIO, BBL, CMTL, DIOO, and HIBB. Dividend growth stocks such as OAK, CNSL, PAGP, GEO, SUN, VZ, and NGL are also good bets. A good ETF to bet on is JKH. Good investing!

Week 2 – 3 (July 8 – 19):

The Fed Chief’s testimony made it clear that the Fed must offset the negative effects of Trump’s tariff policies. Since Trump is erratically and unpredictably applying tariffs towards non-trade related issues, investment is declining rapidly. Business investment is the leading aspect of economic growth that increases physical capital, increases the need for labor and jobs, and increases productivity. Productivity, in turn, decreases prices and increases real wages. Uncertainty over when and where tariffs will be applied means that businesses are uncertain about where to move their supply chains or what to invest in. Uncertainty means businesses don’t invest . . . much like when Obama was throwing regulations around erratically and unpredictably. Remember that the Fed had to maintain a zero Federal fund rate then as well. Thus, domestic economic growth is being hampered and upward pricing pressure is growing. That said, no recession is yet in sight and the stock market still appears in good shape. In fact, a lot of money is in risk-off assets and the “all-in” characteristic of a market top does not yet exist.

Growth stocks to look at include RIO, OMP, BBL, BHP, and HIBB. Dividend growth stocks are BBL, CNSL, OMP, and OAK. The best ETFs are PSJ, JKH, and VIG. Good investing!

Week 4 (July 24 – 31):

I decided to include my personal portfolio for generating monthly income and portfolio growth. All stocks and funds are monthly payers and growth comes from those stocks and funds I hold for dividend reinvestment. Growth then occurs from stock/fund appreciation, dividend growth, and dividend compounding. Since growth must occur over the long-run it doesn’t matter what the state of the economy actually is in the short-run.

Notes:  Basically 4 categories follow any stock or fund’s symbol:  Risk/Return, Characteristics, and part of the month it goes ex-dividend.

(1) Number of stars designates my feeling for safety of investment principle, the more stars the better.

(2)  Risk/Returns are L = low, BA = below average, A = average, AA = above average, H = high.  For example, any fund with a low risk/high return would be designated L/H.

(3), Fund or stocks long-run characteristics such as “increasing nav (net asset value)/div (dividend),” IG or NIG stand for “investment grade,” or “not investment grade.”

(4) Beginning 1/3 of the month is BOM, middle 1/3 is MOM, and end of month is EOM.

Also, OV means that it is currently overvalued.  In fact, all funds are CEFs that sell either at premiums or discounts so finding an entry point to buy is a critical step.  Those that had steep selloffs at the end of last December (2018) or from 2007 – 2009 are also better buys during a sell-off.  Still, that may not happen when you want and if you are intending to hold and re-invest, then when you buy matters less because they will simply buy themselves up faster during a selloff and should also quickly regain their pre-selloff prices.  Thus, there is no need to sell them.

The top set of funds are the ones I use to generate monthly income.  The DRIP section are stocks/funds that I intend to hold for growth through appreciation, dividend re-investment, and dividend growth.  If no income is needed, any of the income generating funds can be held for compounding through dividend re-investment.  That said, a fund with a low (L) or below average (BA) return is less likely to grow like one with an above average (AA) or high (H) return.

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

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

Headwinds from trade wars are on the way.  This, as indicated in the February Stock State, is our biggest stock market worry.

Why are tariffs on steal and aluminum such a problem?  Trade theory, not stock market talking heads, is the answer.  Tariffs on specific commodities imposed by a large nation such as the US will effect the global price by reducing demand from a large (the US) importer.  This hurts all steal and aluminum manufacturers in the rest of the world and will lead directly to retaliation.  This starts a trade war.  I would not invest in the market in 1929 when the Smoot Hawley trade act had its worst effect.  International trade contracted by about 2/3s.  All trade related jobs (manufacturing, farming, transportation, shipping, inventory, etc.) were lost.  Export markets disappeared and caused farm production prices to plummet.  Farmers went broke.  A global recession ensued.

Market strategy is to go 100% to cash and wait until the consequences of the coming trade war are over.  You can play with the TVIX, for example, with your cash.  Wait for the TVIX to fall, buy some, and then sell it when it goes up, and then repeat.  That’s the only safe thing to do at this time.  I would normally say good investing, but that is no longer possible.  Good luck!

Marche 4 update:  

Presidents do good and bad things.  For example, Bill Clinton was a pro trader.  That, and the luck of low oil prices and computer technology adoption into work places that increased productivity provided supply side effects that overwhelmed Clinton’s higher taxes, military spending cuts, and Congressional social program cuts.  In effect, contractionary fiscal policy became overwhelmed by positive supply side effects.  Good or lucky aside, Clinton went on to restrict CIA recruiting and eliminated SEC oversight of derivatives.  These policies contributed to 911 and the Great Recession.

Obama attacked the economy while at the same time trying to stimulate it with deficit financed fiscal spending.  The weakest recovery on record occurred, along with a doubling of the US level of public debt.  In other words, before Obama, the US had about a 50% level of public debt to GDP and after Obama The US public debt to GDP ratio jumped to over 105%.  On the other hand, we did get Obama care.

President Trump is no different.  Cuts in Obama’s overregulation and corporate tax cuts are tremendous supply side effects that are good for the economy.  Moreover, expanding the tax base through economic growth will reduce the negative effects on public debt.  By contrast, recent protectionist trade policies are a huge and contradictory offset, mush like the contradictory macroeconomic policies of Obama.  Trump’s trade policies will cost jobs and economic growth even if there is no retaliation.  Users of steel and aluminum now face higher costs which contracts output and reduces employment.  Higher costs are then passed on to consumers.  The total cost to consumers averages about 10 times the value of any jobs saved in the protected steel and aluminum industries, causing the US to lose wealth, growth, and employment.  Worse, trading partners that previously sold steel and aluminum to the US have lost demand from a large importer and will face lower global prices as a result.  They will surely retaliate by imposing tariffs on our exports.

The World Trade Organization (WTO) oversees and enforces all international trade agreements and will soon rule on the legality of the steel and aluminum tariffs.  Most likely they will rule them illegal.  But, if they do Trump, as an isolationist, he may pull the US out of the WTO.  That will undermine the WTO’s credibility and its authority to oversee international trade agreements.  The world trading order may then unravel.  Trade agreements would become unenforceable and many nations may follow the US example of imposing tariffs on imports.  Soon no one will import (i.e., mercantilism where everyone wants only to export and have a trade surplus) and no trade will occur.  The world will then spiral into a deep recession.  Only a reversal of trade policy back to free and open trade will lead to recovery.

In the short-run, it is difficult to predict how markets or our trading partners will react.  Markets may settle down for a while before there is another round of volatility and sell-offs, or a bigger sell-off triggered by more immediate trading partner retaliation will occur.  Already, the agribusiness sector looks shaky.  Only time will tell.  One must prepare for any and all possibilities.  Trade theory prediction will be more accurate in the long run, but many scenarios are possible.  Even if the WTO rules in Trump’s favor, for example, other nations may sill follow the US example and impose trade restrictions of their own.  Time will tell how the dominos fall, but fall they will.

The post March 2018 Stock State first appeared on MarchéEconomics.

The post March 2018 Stock State appeared first on MarchéEconomics.

The correction or pull-back of about 10% is running its course.  Much of the attention focused on headwinds created by higher interest rates (as the 10 year government bond heads for 2.9% is an overstated concern.  Imagine you are flying a small airplane into a headwind.  The FED has helped you (the stock market) fly faster by buying government bonds (and other dept) to keep interest rates lower.  This builds up the FEDs balance sheet.  Unwinding the balance sheet puts downward pressure on stock valuations and increases short-term interest rates.  This tends to also cause longer term rates to go higher, but more on the basis of expected growth rate increases and inflation.  The higher interest rates in turn, increase the headwinds for your airplane (stock market) making it fly slower.  Thus, the sell-off.

This type of “fiscal-drag” is not likely to become severe.  Our interest rates are greater than those in many other countries and the dollar has stabilized or even increased in value.  From a foreigner’s point of view, a higher dollar value plus higher US interest rates make for an attractive investment.  As foreign investment flows into the US it does two things:  1) It reduces our interest rates because foreigners are now playing the role of an accommodative FED by buying up our bonds.  2) It keeps the dollar from falling too much, or it causes it to increase in value.  This increases the return to foreign bond purchasers and attracts even more portfolio capital into the US.  In other words, the reduction in headwinds is due to foreign portfolio capital inflows.  This allows our small airplane (stock market) to continue flying faster.

Problems of increased headwinds are actually elsewhere.  Increased deficit financing for government infrastructure expenditure is a potential headwind increase because the increased supply of bonds will increase domestic demand for savings and thereby increase market interest rates even more.  Still, this would only attract more foreign savings in the form of portfolio capital inflows from foreign sources and offset interest rate headwinds.  Bigger problems are potential trade wars that lead to retaliation, reduced exports, and net job losses.  Trade restrictions also result in a loss of welfare to consumers through higher prices.  Moreover, losses of consumer welfare are always much greater (by a factor of 10 or more) relative to the value of the few jobs saved through trade protections.  Hurting the consumer and reducing national income will also hurt the overall economy and become a threat to economic growth.  This is the biggest head wind to worry about.  Luckily, offsetting this recessionary head wind s the supply side stimuluses of the tax cut and deregulation policies.

While it is a case of reading the macroeconomic tea leaves in order to interpret future economic growth and earnings potential, it seems that the balance of weight comes down on the side of continued bull-market forces without too much in the way of interest rate or other heads winds slowing down the stock market.

The post February 2018 Stock State first appeared on MarchéEconomics.

The post February 2018 Stock State appeared first on MarchéEconomics.

I am always amused when I hear a stock described as “poised for explosive growth.”  It’s a catchy line but the same holds for any stock in the market.  Odds are, you will be right some of the time.  The only thing I will say about my stock picks is that they are subject to rigorous research and systematic screening and that some of them, even in the short-run of only a month, will perform well.  The others may pick up speed after a longer period.  Thus, I am no longer wanting to offer their relative performance over only a short period such as the previous month.  That said, here are those stocks and funds that you may want to take a closer look at as potential additions to your portfolio.

For growth, consider BIVV, MGLN, IT, AYX, BGG, EFSC, EGBN, TBK, and SF.  For dividends and growth, consider SCI, LAD, PRI and CG.  Growth funds to look at include IUSG, IVW, JKE, MOAT, and IWP.  You also may want to consider a closed in fund (CEF) selling at a discount that yeilds 8.7%.  The ticker is DPG and it is in the defensive utility sector, but still a reasonable consider ration for a portfolio balanced in terms of offense and defense.  Not a lot of people think about that aspect of portfolio balancing or diversification.  MOAT is also an offense/defense fund.  Of course funds also offer more diversification than do individual stocks.

Take advantage of the recent re-set in the stock market, but don’t be in a hurry.  You knew it was going to happen because January was just too good.  Get in front of those sectors, stocks, and funds, that are once again going up.

You may notice that I don’t recommend trading options.  Those are for traders not investors.

Good investing!

Week 2 (February 12 – 16):

Things look like they are picking up again.  Even the hotter inflation number, which I was waiting for, failed to slow the market for long.  For dividend growth stocks, consider MAIN (pays monthly), KIM, SEP, and OTC: TRSWF.  For growth take a look at SODA, ETFC, ALL, and JPM.. Funds I like are IVW, IWF, and FNI.  Some oversold reits that now pay higher yields are VTR, OHI, and STWD.  Good Investing!

Week 3/4 (February 20 – 28):

Switching from one regime in which the government tried to stimulate the economy with expansionary monetary and fiscal policy on the expenditure side and at the same time kill the economy with overregulation on the supply side to a replacement regime in which contradictory macroeconomic policies become consistent supply side policies that lead to real and expansionary economic growth associated with an actual economic recovery is, to the stock market, somewhat like sailing through seas where the Atlantic and Pacific oceans collide.  Eventually, the stock market will adjust to a long-awaited real economic recovery as opposed to an asset bubble that formed because money only flowed into excess bank reserves and the stock market.  The “sea change” involves more volatility and concerns over inflation, the dollar’s falling exchange value (which is good for exports but inflationary for imports), and rising interest rates in the bond market that signal the end of the bull market in bonds.  Already, betting on a long declining VIX has wiped out some unwary investors.  Quixotic fears of heightened inflation, higher interest rates, and overly aggressive FED tightening will eventually fade.  Until then, expect a bumpy ride.  Earnings and economic fundamentals have improved significantly and the stock market will eventually catch up.  Buy on the dips.

Stocks to consider for growth are MA, RCL, and CTSH.  Dividend growth stocks to look at include:  AM, MMLP, SKT, FUN, BPL, and EPD.  Leading funds are FV and SOXX.  Just so you know I don’t like guns or cigarets so I avoid recommending their related stocks.  In the meantime, Good Investing!

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

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

Bond sector money flows are one way to see how this might happen.  As the FED sells bonds to reduce its balance sheet and increase short-term interest rates, the value of unmatured bonds will decrease.  This is because the value of a bond varies inversely with the market interest rate for those bonds.  Moreover, either the interest rate can change and cause the value of bonds to change in the opposite direction of the interest rate change or the value of the bond can change and cause interest rates to change in the opposite direction..

An example of an interest rate change that causes an inverse change in bond values is as follows.  If you have a $1000 bond that never matures and pays a stated or fixed return of $50 per year, the corresponding market interest rate must equal 5%.  This gives $50/.05 = $1000.  Only the stated return of $50 is a constant value.  Both the $1000 bond value and the market interest rate of 5% are inversely related variables.  By contrast, if the market interest rate climbed to 10%, this same unmatured bond would now be worth $50/.10 = $500 in the open market.

This process is underway at the FED.  Specifically, as the FED sells bonds to decrease their value and thereby drive up interest rates we can expect people to sell unmatured bonds to avoid the expected capital losses.  The bond market is huge in that it is about twice the size of the market for stocks.  Cash from bond sales must go somewhere and most of it will go into stocks and drive the price of stocks higher.  At some point, on the other hand, those holding stocks will see higher rates on less risky bonds as a better alternative and the money that flowed into stocks will reverse and  flow back into the now higher yielding bonds.  This will look like what happened during the stock market crash in 1987.  The crash may cause a sudden V-shaped sell-off as in 1987 in which stock buying followed the sell-off.  On the other hand, it may cause a recession so that the stock market has a flat, bear market bottom.

One way to prevent the FED from causing a sudden and severe stock market sell-off from its activist monetary policy is to require the FED to follow a monetary rule that will maintain a so-called “neutral” short-term interest rate.  Such a rule might be related to the difference between a target inflation rate such as 2% and the actual inflation rate and the difference between a full employment GDP growth rate and the actual growth rate.  This is the Taylor rule.  If, for example, the actual inflation and GDP growth rates are above their respective target rates the FED would be required to sell bonds and cause an increase in short-term rates.  If, on the other hand, actual inflation and GDP growth rates are below their target rates then the FED would buy bonds to increase their value and thereby decrease short-term interest rates.  In both cases, it follows the monetary rule rather than to act with discretion.  Having the FED follow a monetary rule means that the state of the economy determines FED actions.  without the rule, FED actions tend to involve attempts to actively manage the economy based on the whims, fancies, assumptions, political influences, attitudes, or beliefs of the FED chief and board of governors.

As long we the economy is not characterized by stagflation in which the actual inflation rate is above target and the actual GDP growth rate is below target, the Taylor rule will work as guide to FED actions.  In a period of stagflation any monetary or fiscal expenditure stimulus aimed exclusively at the expenditure or aggregate demand side of the economy will fail because only an increase in inflation will occur.  Instead, policies with predominant effects on the supply or production side of the economy are effective because they increast the GDP growth rate and reduce inflation.  Such policies may include tax cuts, but policies such as reducing regulations that, in turn, reduce production costs and incentives for greater private investment that increase productivity, which also lowers production costs,are effective.

Fiscal expenditures on public infrastructure investment also increase productivity and lower production costs.  While the short-run effects on aggregate demand are inflationary, the longer-run effects are on the supply-side of the economy through increased productivity and lowered production costs put downward pressure on inflation while simultaneously stimulating  production and GDP growth.

The post Activist Monetary Policy Conundrum first appeared on MarchéEconomics.

The post Activist Monetary Policy Conundrum appeared first on MarchéEconomics.

In the near term, the January 19th government funding issues looms as a potential road bump that may increase volatility.  Trump has the Democrats in a tight spot in that they want DACA and will only get it if they agree to fund the border Wall.  Don’t expect that to go smoothly.

This tax cut, like the Kennedy tax cut and Reagan tax cut in the early 1980s will have longer lasting supply side effects than the deficit financed fiscal expenditures under Bush and Obama that occurred on the basis of Keynesianism.  Obama doubled the national debt but didn’t get any significant economic growth to show for it.  This is because he tried to kill what he tried to stimulate.  Regardless of the misguided Obama, Keynesian fiscal stimulus multipliers have only short-run effects because multipliers go quickly to zero and the expenditures never increase economic activity enough to pay for themselves.  On the other hand, supply side policies are not limited to tax cuts..  The more recent regulatory reductions reduce costs, increase market opportunities, and have long-lasting supply side effects.  They may also be a larger and more long-lasting effect than the tax cuts.  Thus, it could be that the market is actually underestimating the supply side stimulus effects of the Trump agenda.  Any infrastructure expenditure will also increase productivity and have long-lasting supply side effects as well (along with the usual short-run expenditure effects). Unfortunately, the Obama debt build up to greater than 100% of our GDP limits the likelihood of any such expenditure making its way through congress.

On the negative side.  Bull markets will come to an end if there is greater than a 20% sell-off.  The best way to protect your portfolio is to increase the percentage of cash you hold or go completely to cash before it happens.  Short of such a big correction, any sell-off within the context of a bull market will be smaller and have a V bottom implying it is short-lived.  Those you can ride out.  All indications are that you can, if you have cash, buy these dips until it is time to get out of the market entirely.  I’ll let you know when I see that time approaching . . . possibly by this Spring or Summer.

January 23 update:

GDP growth is about to double that of the previous administration and we now have an actual economic recovery and expansionary business cycle phase for the first time in 10 years.  Basically we have switched from a monetary stimulus bubble in the stock market caused by contradictory macroeconomic policies.  These are an expansionary expenditure side policies (fiscal and monetary stimulus) versus contractionary supply side policies (i.e., regulatory overreach) under Obama that led to money growing into bank reserves and the stock market but not to loans and  investment.  Under Trump we now have consistent stimulative policies on both the expenditure and supply sides of the economy that create a real expansion that includes private sector investment rather than merely a stock market bubble.  In other words, the tax cut plan will have a short-lived multiplier effect on the expenditure side of our economy and a longer run supply side effect through greater investment, growth, and jobs.  Coupled with decreased regulatory compliance costs, another long-run supply side effect, the implication is to put cash to work.   Continue to buy the dips. 

The post January 2018 Stock State first appeared on MarchéEconomics.

The post January 2018 Stock State appeared first on MarchéEconomics.

Do not follow the herd, especially if it appears panicky.  You’ll just run off the cliff with everybody else.  If spent all your cash because you thought this correction would be like previous ones that were short in duration, just act like Warren Buffett and be patient.  All good things come to those who wait.  Amazon and Facebook both sold off earlier this year.  Jumping out of them when they did just cost you money.  They soon bounced back and if you held on to them rather than sold them you made more money.

There will always be noise out of Washington but the domestic and global economy is strong and getting even stronger so there is no recession.  Earnings were generally good and are continuing to improve.  Economic data support continued growth and expansion.  Which matters more in the long-run, short-lived political noise, a tax bill, or strong economic and company fundamentals?  You know the answer so invest accordingly.

In the mean time, profit taking and panicky selling will get over with when it does.  This will only be good for the market.  Be ready for that.

December 27 update:

Positioning for next year is the theme.  Mostly, commentators favor tech and financials.  Zacks estimates 4 S & P 500 sectors may double in 2018.  These are Energy, Materials, Rate driven financials, and information technology.  The most attractive sectors according to Zacks forecasters are Information technology, Consumer discretionary, Materials, Industrials, and Energy.  Funds and stocks in my portfolio that are consistent with these areas are FTEC, WLK, FAS, BA, CAT, SEDG, NAIL, DXC, PAYC, HASI, CRM, TXN, SOXL, NVDA, VMW, SKYY and FAS.  For greater stability I also hold a lot of STZ, which fits into consumer staples and consumer discretionary quite well.  You should check your own portfolio for diversification, stability, and emphasis.  The stock market always looks ahead and so to should you.

It is likely that tax cuts that lead to increased earnings and stock buybacks during 2018 will reduce PE ratios (the increasing in earnings) and make the market look less overbought.  Scarcer stock will make the market want to go up for that reason as well.  The US economy is steady with increasing rates of growth and earnings which supports stock prices.  The bull market is held with skepticism by many which is also good because it means the bull has more room to run.  Invest accordingly.

Some general principles are to stay diversified among economic sectors (eg., tech, finance, industrials, international, money) so that any type of rotation out of one area such as tech is offset with buying into other areas.  Keep some cash on hand for dips and pull-backs.  As opposed to a rotation, significant sell-offs might be hedged by using cash to buy TZA or TVIX.  Good investing and Happy New Year!

The post December 2017 Stock State first appeared on MarchéEconomics.

The post December 2017 Stock State appeared first on MarchéEconomics.

Outlook and Strategy for June 7, 2017.

Sell-offs or market adjustment in high-flying tech and semiconductors is noticable. Stocks such as ATVI, EA, ADBE, RHT, ADSR, MU, PYPL, NVDA, LRCX, and AVGO have had the fastest run-up and are at the greatest risk for a sell-off or correction. Howver, the bigger name FAAMG stocks that include Google, FB, Netfix, and Amazon have led the sell-off. Questions to ask are 1) are these stocks over valued, 2) what are the implications for the rest of the market, and 3) what do stock and market fundamentals tell us.

I’ll address these three questions in order. First, no, these stocks still have high rates of earnings growth and do not seem overvalued on that basis. Moreover, overall stock earnings are still strong and earnings should to continue their strong rates of growth. July earnings season will be what to watch. Second, the overall market is now driven by earnings growth in travel and leisure (millennial spending on experiences), health care expenditures on insurance, hospitals, biotech and pharmaceuticals, capital investment in emerging markets (a strong area of growth), oil and gas derivatives, the “stay-at-home” economy where expenditures on content streaming and video games is strong, the military defense sector thanks to the N. Korean problem, aerospace, housing where demand exceeds supply, e-commerce due to a change in consumption patterns, and banks due to modest FED tightening. The only weak sectors are autos and traditional retail. Thus, the overall market has more positives than negatives concerning economic growth drivers. Third, market history tells us that late stage market expansion tends to occur in tech and semiconductors, thus we must be concerned that a sell-off in these might lead to a broader sell-off. Also, technical chart analysis shows a tightness in the trading range of the major stock indexes. This implies increased volatility ahead. The risk is that negative news out of Washington leads to a negative break out and wide-spread selling. So read the blog post entitled “Look Out Below” for your own benefit in the event that military action against N. Korea occurs.

That about sums it up. Good Investing!

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July 21, 2017 market update:

We haven’t had a 5% – 10% correction in the S&P 500 for more than a year. some think that a major crash is due because we haven’t had one in 10 years. The crash scenario is unlikely because of the slow recovery that is now only beginning to accelerate, earnings reports are generally good and improving, we still have low interest rates, and consumer spending and expectations are strong.

The correction scenario would actually be good, allowing the bull market will remain as the major market thesis and will even become stronger because of it.

The only reason for a crash or recession would be an internal economic shock due to the Fed increasing interest rates too fast. This appears unlikely because Janet Yellen (the Fed chair) is a liberal dove. An external economic shock due a geopolitical event is not likely, but always a small possibility. That is why some hold gold or cash. Unfortunately, a geopolitical catastrophe is not predictable, hence why recessions are also not predictable. Thus, the best market strategy now is to continue to buy good stocks such as my weekly picks on any dip or pull-back.

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The post July Stock State: Outlook and Market Strategy first appeared on MarchéEconomics.

The post July Stock State: Outlook and Market Strategy appeared first on MarchéEconomics.

Stock picks for the 1st week of July, 2017 (July 3 – 7), with markets closed July 4, 2017.

The tech sell-off created buying opportunities. July, week 1 stock recommendations must include AAPL. I’d also consider TREE, TCMD, NTES, ANET, JD, JPM, CRIUF, and ARCC. ARCC is a large, solid business development company that pays about 9.3% and has also pulled back recently, making it a good buy. CRIUF is a Canadian utilities company that pays about 8% and offers dividend growth. Moreover, it is a defensive stock for those worrying about a stock market bubble. I also think the toy company Nintendo (NTDOY) is worth a strong look as it has a lot of hardware and games in its pipeline going into Christmas, analysts expect next years earnings to be huge, and it has sold off a bit recently. Good Investing!

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Stock picks for week 2 (July 10 – 14): I’d consider looking at OSUR as a growth stock. Then I’d consider the monthly dividend payers GAIN, MAIN, RFI, FFC, PPF, ETW, EXG and ETY as these also tend to increase in asset value over time. Quarterly dividend payers HQH, QQQX, and STK also tend to increase in value over time. Two of the best dividend growth stocks (i.e., rapid dividend growth) to buy are VLO and LRCX. LRCX has the greatest long-run asset appreciation potential as well.

Nintendo (NTDOY) looks as though it might be bottoming out. I’d watch for a double bottom or a “dead cat bounce” before climbing in too heavily. Most Analysts indicate positive increases in growth over the next two years that will eventually attract buyers. Before that, NTDOY is a toy company with a lot of new and really good stuff to sell going into Christmas. In particular, it has at least eight newly developed games. (I was just in Los Angeles where these games were on display and handily beat their competition.) I expect that it will eventually take off in a positive direction, but be patient in the meantime. Eventually, even the recent sellers will want to come back in.

Good Investing!

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Week 3 Stock Picks:

Stock tickers to research and consider adding to your portfolio for this week are AAOI, IMED, HACK, KTOS, JPM, C, KEM, IT, MKSI, FNG, and NLY. NLY is a highly recommneded, high yielding mREIT with good dividend coverage. The others are growth oriented stocks or funds. FNG is a brand new ETF based on FANG stocks that you should try to buy under $21.00.

The best returns from a global perspective are from first, emerging markets and second, Europe. The US stock market is still a bull market due to the slowest and weakest recovery on record, still low interest rates, and a reversal of socialist over-regulation. Thus, it is still a buy on the pull-backs market, but one in which you should target those stocks with the best opportunity to succeed. For example, KEM and AAOI are Zack’s rank number 1 stock recommendations and for that reason must be strongly considered. That said, all of my recommendations have a high probability of success and that is why I recommend that you consider them with the same level of expectation.

A note on Nintendo (NTDOY). One Seeking Alpha (SA) stock analyst expects it to reach $60 by this Christmas. I’d buy it before it again breaks $40.

Good Investing!

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July 2017, Week 4 Stocks to Consider: A solid growth fund for those not wanting to pick individual stocks is CLQZX. For stock pickers wanting growth, WUBA, TCEHY, EXTR, and OCLR are great stocks to consider (i.e., to research). Those wanting dividend growth stocks (i.e., the stocks grow in value so you have capital gains and their dividends grow in value as well so you have increasing yield on cost), then take a look at NTAP, BA, TXN, CC, and SRLP. More on the high yeild side, although they have a track record of increasing dividends are OXLC, TICC, PNNT, BX, and BPT.

Nintendo (NTDOY) appears to be comming off its bottom. It is not too late to get in. The remaining upside range from now until December is approximately 20% – 50%.

Good Investing!

Smarteranalyst.com

The post July 2017 Weekly Stock Recommendations first appeared on MarchéEconomics.

The post July 2017 Weekly Stock Recommendations appeared first on MarchéEconomics.