Despising Bargain Stocks: Asset Allocation Daily
Summary
- Wall Street Breakfast: Oil has slipped into a bear market.
- Jeff Miller explains how a winning trade position may not appear as such on your statement.
- Thought For The Day: The market’s judgment is never final and is subject to constant revision.
Brazil
“We see the decisive victory by Bolsonaro…as largely priced in by financial markets. Further gains in Brazilian assets will hinge on the new government’s success in pressing ahead with economic reforms, particularly of Brazil’s bloated pension system...” (Christopher Dhanraj)
Chinese Economic Strategy
“It will not hurt China to play the card that the United States is busting up all these deals and imposing all these tariffs, while China is working hard to establish and maintain relationships and supports a more connected world, in the trade of goods and services as well as in financial markets.” (John M. Mason)
Combining Covered Calls With Dividend Stocks
“Please note that this position [in General Mills] looked like a loser for much of the history if you only checked current positions and unrealized losses. The gains from past call sales and dividends are the key part of the strategy.” (Jeff Miller)
Oil Prices
“Price weakness has raised the prospect of OPEC+ reversing their recent policy of producing as much as they can to one where they show more restraint. Already this week, there has been increased noise that OPEC and Russia could look to potential production cuts over 2019.” (ING Economic and Financial Analysis)
Oil Bear Market
“Oil fell below the $60 level overnight, a day after slipping into a bear market. That means U.S. crude is now down by around 20% since early October as rising supply and concerns of an economic slowdown pressure prices.” (Wall Street Breakfast)
Thought For The Day
The new, official bear market in oil is the lead story in today’s Wall Street Breakfast (linked above), and that weakness is seen as the companion of “an economic slowdown.” It almost sounds like this long running bull market is just going to fade away into the sunset. That could happen, of course, but it could also be that, like Napoleon riding back to Paris after his exile on the island of Elba, we’ll be seeing renewed market action. Prediction is beyond us. But in the meantime, energy stocks are cheap. It’s not a blood in the streets scenario, but it’s a classic case of an unloved sector. In my podcast yesterday, I suggested that it could be worth accumulating shares.
I myself am still considering the matter, and have thus made no purchases. But regardless, the fact of the sector’s relative cheapness puts me in mind of an all-too-common investment scenario. How often it is that we despise an investment that is beaten down, then regret having scorned it when it was back up again, having either failed to invest at all or having purchased shares when most of the gains were gotten?
Whether we’re talking about energy stocks today or FAANG stocks tomorrow, let us remember that the market’s judgment is never final and is in fact subject to constant revision. The biggest profits are often the ones we might have attained had we not joined the general disparagement that always accompanies the market’s sales events.
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Disclosure: I/we 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.