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Investment Pancake
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My investment process is (1) own rock solid businesses with healthy earnings and that pay me dividends, (2) spend less than I earn, and (3) reinvest what I don't spend into similar businesses, at the lowest price available at the time. I avoid selling, or dipping into principal.
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  • 200 day resistance
    The S&P 500, having risen to test the 200 day simple moving average, is observing the area as technical trading resistance. It typically wakes some days to establish an area as resistance, but if the 200 day continues to hold, it is likely that the markets will fall lower from here from a simple trading perspective. With September and October as historically weak months, that scenario seems particularly plausible. On  the bright side, though, it seems markets are almost universally viewed as being likely to fall in the near term. Assessing the overall market tone, and investor sentiment, is practically impossible, but there are sufficient annecdotes out there to confirm that most people appear bearish. That may be the best news for equities markets, given that from a macroeconomic and technical perspective, and also as a matter of valuation, equities are not particularly attractive at this moment.
    Sep 07 10:18 AM | Link | Comment!
  • Dow 10,000 Under Attack. Again
    It seems silly, doesn't it? But whatever the reason, the market has decided to stake the 10,000 level on the Dow Jones as a place to pit it's next great battle. Will the area hold as resistance, now having failed as support? And what difference does it make anyway. The market has been bouncing around this key level for over a decade, so I doubt that whatever happens will be anything special this time. 
    All that said, retail investors are abandoning stocks, the economy appears to be in trouble, investor sentiment has taken a dive into the potty and best of all, a confluence of technical indicators point lower - maybe far lower - for equities pricing. It seems to be shaping up to be a very unpleasant September and October this year. Or it sure feels that way.
    The hope, of course, it that the market shakes out whatever is left of the weakened bullish hand, and does so quickly. If so, the last quarter of the year could present a potentially compelling entry point to equities.
    At the moment, I am still maintaining yield assets predominantly in my model portfolio - preferred, bonds, MLP funds, BDC interests, and a very, very scant allocation to equities. Overall, 40% of the portfolio will remain in low risk bonds and cash, with 50% into riskier yield assets. Only 10% is deployed into equity, although that allocation should be increased dramatically pending a possible September meltdown. Already, I am staking out solid companies with strong dividends, and ETFs that are based on companies with ten to twenty year histories of consistent dividend increases. Should we see the Dow fall towards 5,000 or lower, it could mark the once-in-a-generation entry point that has been long overdue these past thirty years. Similarly, if equities can hold above water in the face of these strong headwinds, it could also mark a reasonable entry point to up the equity allocation and reduce the bond and cash portion of the portfolio. Indeed, after a decades long feast, the party in the bond market is surely nearing its end, which could leave equities as the best play in town. The main question vis-a-vis equities is, in my mind, tactical rather than strategic. That is, while sharp declines appear probable in the near term, the ten year outlook for equities, relative to bonds at least, appears highly favorable. But as with most things in life, there is no difference between what an idiot and a genius does - the only difference is WHEN they do it.
    Aug 26 4:18 PM | Link | Comment!
  • More Gloom and Gnashing of Teeth

    After a nearly 300 point tumble today on the Dow, the articles and posts I read today seem fairly unanimous that this is the start of the big collapse, the one that will sink the stock market and, potentially, the United States itself. The pessimism borders on maniacal despair - perhaps not surprising after a wretched decade characterized by one crisis morphing into the next. I also read that retail investors are liquidating stock and hoarding up cash in droves, suggesting that we have possibly reached a point when an entire generation of investors throws in the towel and walk away. If so, that would normally mark the end of a secular bear market, which is what we've been in for the last decade. It is reason for optimism. 

    But that optimism may come too early. Markets can certainly decline further, and are nowhere near the valuation extremes of the late 1970s or early 1930s. Not that they need to be, but the point is that lower can get lower yet. 

    Technically, at least, markets held it together more or less at their 200 day exponential moving averages, although they sliced through their 200 day moving averages like a hot knife through butter. The MACD is now negative, signaling further downward momentum is possible. With technical signs ambiguous, it seems a very treacherous time to try and navigate the markets. More clarity may come if and when the 50 day exponential moving average drops below the 200 day exponential moving average, and when the 20 week simple moving average and exponential moving average drop below their 40 week counterparts.

    Technical analysis is not always accurate, but has been over the past decade. It may be worth assuming it will continue to be, until it isn't. Particularly if you believe that possibly, the maniacs are correct this time, and the United States is on the brink of collapse. Walking around the street at lunch time, though, it doesn't feel that way, but sitting in front of CNBC, it sure does.

    Aug 11 4:38 PM | Link | Comment!
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