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James Gornick
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I am an economist who created theorems being bantered about for the Austerity v. Coase oppression investing, and new nest egg investing lifestyle rules. The theorems are measuring affects on markets and human unit plights over these next decades. I have been an analyst for over 21 years.... More
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  • MAKING THE RIGHT CHOICES FACING THE DEBT CEILING 0 comments
    Jan 10, 2013 9:33 AM | about stocks: FB, GOOG, AGNC, AOD, CAT, F, WYNN, ZNGA, AAPL, XLF, GLD, GS, BAC, V

    MAKING THE RIGHT CHOICES FACING THE DEBT CEILING

    Getting it right for the rest of January into Aprils next earnings reports challenges all money managers. There is no such thing as a perfect portfolio. The proper bond and stock balancing have never been as difficult until this current time of DEBT CEILING managing. History states stocks beat bonds over the long run. But bonds belong in everyone's portfolio. You're not a wimp if you own bonds, no matter what your team tells you. Mix of bringing good-quality bonds offer a steady rate of return and, if held to maturity, don't bite you with losses. In bad markets, in down cycles, in times of recession and depression, they are investment of choice.

    The answer comes to preserving capital for buying on significant dips, but diversifying only to a point, but not too much. Remember, too, that diversification comes at a price. The more you diversify, the more your odds of beating the market go down. You need to concentrate on the big decision, not the small one, which spells the difference between investment success and failure. Get the big picture right and the small things take care of themselves. This is the best description of managing the fiscal cliff investment choices.

    The statement for active traders comes with "Sell into a correction, but Buy the Bear Markets". Investors in a bull market often wonder why it pays to be cautious. A simple example will explain it all: A strong market gives you three to four years of positive 20-30 percent per year returns. After 36-48 months, your portfolio has increased from $200,000 to $375,000 (for simplicity's sake, we'll ignore compounding).

    WHEN IS THE TRUE BEAR MARKET COMING?

    The predictions of Harry S. Dent keep playing out through the media recently. Dent was on CNBC for sending a rough Bear Market on the near horizon being the message. We feel Dent is off about one year or too possibly two years; if the central banks keep floating the illusion as we wrote about in the past "Taking Lessons from Harry Houdini".

    We keep the mantra that all prudent investors follow the money. We keep a close watch on block trades revealing the real intent of institutional investors. Wynn Resorts (NASDAQ:WYNN) along with Ford (NYSE:F) and Caterpillar (NYSE:CAT). Look also at Close End Funds like Alpine (NYSE:AOD) for dividend verse return for positive portfolio choices.

    Watch for rising commodity prices, they are bad for stock prices. We love inverted yield curves as they signal bullish runs for utility and other interest-sensitive stocks. Keep in mind the Federal Reserve, through interest rate policy, has a lot to say about the direction of the economy. Generally speaking, when the news is bad as all the news circling with the Debt Cliff looming, and the Fed is continuing their easing on interest rates, it's not a bad time to continue to buy and build the next profits for your portfolio management.

    WHAT HAPPENS IF THE MARKET DIPS or CRASHES?

    Look closely at yesterday's winners that have turned negative, but without the full force of loss of institutional support, the overwhelming mass of opinion has come to believe that something is true. To determine whether or not there is cause for being a contrarian in any given situation, you must first find out whether or not that opinion is universally held.

    The stock issue making it to the top of this list is Zynga, Inc. They don't have a full consensus of opinion of abandon and sell all your shares or short the issue. The chances for this issue to get back up as Facebook (NASDAQ:FB) or Google (NASDAQ:GOOG) has recovered close to their original IPO price brings the risk to reward in focus for Zynga (NASDAQ:ZNGA). We see Zynga either becoming acquired due to their ownership of over 36 patents dealing with the gambling on-line arena or beating many earning projections moving forward. We make this assumption based on their move into the real money transfer of gambling and finding full dollar receivables from gaining advertising dollars from their separation with Facebook.

    Another issue we have been following closely comes with American Capital Agency Corporation (NASDAQ:AGNC) with the (NYSEARCA:XLF) Apple (NASDAQ:AAPL). American Capital brings real dividend boost to clients portfolios. The 91 percent of American Tax Payers are protected by the deal in Washington. All these tax payers still demand good dividend return on their investment.

    We always believe in buying what recovers after a market break, such as Goldman Sachs (NYSE:GS), but once the market begins to recover from the decline, the best stocks lead the way, being the first to move your portfolios in a positive direction. This is the time to invest when more are uncertain of the larger picture moving forward for the global markets. The upside leaders are the ones we look for and move on. We like the stock issues as we mentioned above just for these reasons alone.

    LOCKING IN THE PROFITS COMES WITH SKILL

    The final comment comes with not allowing greed to get in the way of your profits being real and not paper bound only to evaporate. Take the window of 8-15 percent first profit selling mark as the guide to safety. Leave the last 25 percent of your stock holdings for a second profit target to completely sell out the shares owned. This would not be true always for great dividend paying issues, only if you play the ex-dividend date and run with the issue selling on the top of the highs and buying again on the lows. The skill of making winning trades comes with great insurance using options to hedge your longs. Remember, this insurance is cheap in the long run.

    Keep your trades always on the right side of getting them through watching out for the big picture. Keep watching our instablog area for quick changes to our opinion on dynamic market changes.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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