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Stephen Mayo
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Somewhere between disaster and "more of the same" is the world we all live in today, and it may go on in this same state for our lifetimes. No black swan, no collapse, no implosion of the Republic. Because there is no knowing I have given up trying to know or predict. I have one goal. Survival... More
  • Looking For The "Buys" - Or Is It Time For SPX? 12 comments
    Jul 29, 2014 11:39 AM

    In all truth I didn't want to get things are stirred up as they became with my "The Day I Sold Everything" post. It just happened.

    That article, with its follow on "Questions Answered," have generated since last Friday, 825 comments. I am not sure if I am embarrassed or just stunned.

    In any event, somewhat overlooked in the excitement, is the idea that I am not looking for the end of the world type correction before re-entering positions. I dumped in a wholesale fashion because overall I was well ahead, and felt like there would be some stocks I might get back into at lower prices, knowing also that I expected some, like AAPL, to get away from me. But with a 19.5% gain in the apple position, I am not afraid to leave something on the table.

    Also, I've had to stop responding to the comments because the time demand was simply too much. I've gone from about 4 followers to 242, I think. They will have the privilege of watching me eat crow if the market goes upside crazy. Meanwhile I have to get back to my real job and to scanning the markets for opportunity.

    My first look companies are currently: KMB, PG, GIS, MMM, COP, CVX, MSFT, KMI, TGT, RDS.B, VZ, BCE, WEC, AAPL, DUK, CLX, ADC, PEP, VNR and ok, maybe KO.

    Recall that my sales were on the Open Friday. Feel free to point out my silliness and tragic error. I'm not going to run away from the wins or losses of my decision, but am probably not going to write another public article until I feel I have some substance to share.

    I will add that if we are headed for a blowoff top, and if a fella wanted to be in the market SPX is making more sense, since I found it hard to liquidate and keep track of the many issues I held. With SPX you could ride the wave, get out with one ticket, buy or sell options, and so on. A cleaner way to trade.

    I had really wanted to buy and hold quality, dividend paying companies, but if there is a nearby bear market, this is problematical. For those who established positions five or six years ago the world might look different.

    But I am back on the hunt for those issues that look to move up, which I guess makes me more of a trader for the moment. That's ok, because I am just seeking profit and safety. Like all of us.

    Meanwhile, if you have any large cap dividend champs you feel are forming buying opportunities, let's share with all.

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Comments (12)
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  • DS Thompson
    , contributor
    Comment (1) | Send Message
     
    Good article. I think the last few days show that you were right on the money (so to speak)...
    31 Jul 2014, 10:45 AM Reply Like
  • Stephen Mayo
    , contributor
    Comments (745) | Send Message
     
    Author’s reply » Maybe SPXU is the better position. I'm standing aside watching for issues that are actually having a short term trend reversal, and which are just inhaling.

     

    Thanks for reading, all the best.
    31 Jul 2014, 11:05 AM Reply Like
  • Paul Franke
    , contributor
    Comments (114) | Send Message
     
    I also sold everything owned on the long side of my portfolios, excluding plenty of gold and silver related positions and miners, on July 18th. I felt a little silly doing it, but the risk of some sort of serious sell-off is skyhigh through October. I hate summer tops, and they often lead to the biggest declines. Sentiment from options trading to investor surveys to margin debt is screaming to get out the last few months. Even the Advance/Decline line has been weak, which hasn't happened in years. Small caps, momentum stocks and financials have all lagged badly the last month - classic top signals.

     

    The question I cannot answer is this a long overdue -10% drop, or something worse like -20% or -30% from the peak? It depends on events on the ground in the Middle East and Ukraine and potential new black swan events (reasons to sell) that may appear any day now. We are quite susceptible to black swan events after 5 years of nearly straight up. Common sense would dictate that conclusion.

     

    I will likely scale back into longs as stocks decline to the 10% correction level, leaving net long holdings to grow on further market drops. That would seem the most sensible course of action. I am following plenty of blue-chips that will get more interesting to own on large discounts in pricing. You can review some of my favorites in the Seeking Alpha stories I have written. I keep a running list of about 150 mostly blue-chips that are fundamentally undervalued, in my way of thinking.

     

    Good luck.
    31 Jul 2014, 05:20 PM Reply Like
  • Stephen Mayo
    , contributor
    Comments (745) | Send Message
     
    Author’s reply » I'll have a look!

     

    Interesting comment, Thank you. I will reread. Make sure I understood. Very interesting.
    31 Jul 2014, 06:01 PM Reply Like
  • Paul Franke
    , contributor
    Comments (114) | Send Message
     
    http://on.mktw.net/1uX...

     

    Good story explaining the break in market internals and momentum the last few months.
    3 Aug 2014, 11:28 AM Reply Like
  • Stephen Mayo
    , contributor
    Comments (745) | Send Message
     
    Author’s reply » Paul, as a P.S.

     

    It has occurred to me, tho I am too timid to publicly say it, that I'd expect silver and gold to go down with the early stages of a real bear as people meet the need to be liquid.

     

    I wish I was better with the short side. I'd have made a few this week.

     

    Sigh.
    3 Aug 2014, 03:25 PM Reply Like
  • Stephen Mayo
    , contributor
    Comments (745) | Send Message
     
    Author’s reply » Paul,

     

    Cook is interesting. And he lines up with Arch Crawford, the guy who uses astrology!

     

    Always pays to listen to new perspectives, but I suspect I'll side more with Cook, than Arch.

     

    Thank you.
    3 Aug 2014, 03:23 PM Reply Like
  • Paul Franke
    , contributor
    Comments (114) | Send Message
     
    Arch has been predicting the end of the world or a market crash every other year since 1986. He got it right in 1987. If you try to do the opposite of Arch, or Bob Prechter of Elliott Wave fame, who is usually freaked out about change in the world 80% of the time, you will sleep better at night and keep most of your money.

     

    Gold and silver are way overdue for some type of bounce higher. Yes, 50% of the time when the market tanks, gold and silver go down also. Usually the metals fall considerably less in percentage terms however, than the stock market averages. There were bear markets like 1972-74, 1987, 1990-91, 2000-2002 when the metals prices were flat or rising during the stock bear market.

     

    We all know the FIRST reaction by the FED to a drop beyond 10% in the stock market will be NEW MONEY PRINTING. I have some confidence Wall Street will try to jump the FED and start bidding up gold and silver in anticipation of expanding "record" amounts of fiat money creation into 2015. Extra money printing measures are already taking place in China and Europe the last month or two. The U.S. and Japan just need an 'excuse' to double down on money printing madness to keep things going. I find it hard to believe a world racing to cover up out-of-control debt levels with new paper money is a negative for precious metals values. That's my view anyway.

     

    I own plenty of cash, gold/silver, and some inverse ETFs right now. If the stock market explodes higher and gold/silver collapse - I lose money. If the market tanks and gold/silver rise - I make some money. If the market is flat and gold/silver are flat, I tread water or lose small amounts. I have the cash to buy long again at any point, and can convert my short ETFs or gold/silver to longs very quickly. I just don't trust the market after 2-year 40% advance without any meaningful correction (shake out), against an economy that hasn't grown much outside of rising home values.
    3 Aug 2014, 07:35 PM Reply Like
  • Stephen Mayo
    , contributor
    Comments (745) | Send Message
     
    Author’s reply » Soooooo truuuueeeee !!!

     

    "do the opposite" may apply to me too, we shall see.

     

    I'll read this carefully in the AM.
    3 Aug 2014, 08:42 PM Reply Like
  • Stephen Mayo
    , contributor
    Comments (745) | Send Message
     
    Author’s reply » PS what is your favorite short ETF?
    3 Aug 2014, 08:43 PM Reply Like
  • Paul Franke
    , contributor
    Comments (114) | Send Message
     
    I forgot to mention the scenario of a falling stock market alongside a slightly falling gold/silver price will still allow for a positive (gaining) portfolio outcome, which wouldn't be a bad situation as stocks I want to own long get cheaper.

     

    I own SDS as the largest ETF short holding (2x short S&P 500). I figure the current decay [total loss in price] in a flat market environment is about -10% annually right now. The beauty of 2x and 3x shorts is they actually compound in your favor daily, if we get a real bear market. A -20% or -30% market decline over say 2 months, should outline a +50% or +75% return from SDS (give or take), respectively, all else being equal.

     

    The 2x or 3x ETF shorts absolutely do not work for you in a rising stock market. I prefer the ETF strategy over buying Index put options to hedge, which is kinda old school. You can adjust portfolio net long and net short weightings easily by changing your SDS holdings, with today's ultra-low discount trade commissions. Plus SDS and other ETFs can be used in IRA brokerage accounts.

     

    I hold a few 3x ETFs right now, but 2x are the easiest to understand and have much lower decay/costs associated.
    3 Aug 2014, 09:24 PM Reply Like
  • Stephen Mayo
    , contributor
    Comments (745) | Send Message
     
    Author’s reply » Thanks for that input. I'll research that.
    4 Aug 2014, 09:17 AM Reply Like
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