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Update On Portfolio Positioning And Management


This post is going to contain more than 140 words and is written in a stream of consciousness. Many do not like my writing style.

I generally discuss my portfolio management approach in this 2014 blog: Portfolio Management Goals-Snapshots of Performance Numbers YTD, 3 and 5 Years Cumulative

I am no longer in an asset accumulation phase. My primary investment objectives are capital preservation and income generation, with capital preservation being assigned to a secondary consideration.

I have no inclination to swing for the fences when making investment decisions and am content to play small ball.

I do not buy securities using margin, never have and never will.

My investment portfolio is an extremely diversified worldwide balanced portfolio. I own securities throughout the capital structure. Most of my stocks pay decent dividends.

Due to the Federal Reserve's Jihad Against the Savings Class, which started in 2008, virtually all of my investment grade bonds have been redeemed by the issuer or the call warrant owner for Trust Certificates.

Some of my remaining investment grade bonds were bought when rated junk by the ratings services (e.g. 7.875% Macy's Bond Maturing on 3/1/2030 Bought @ 99.5-Make Whole Protection-FINRA Information, rated BBB+ and Baa2)

My first significant foray into the junk bond market was in 2011 when prices were crushed. I used a ladder and barbell strategy that included a wide variety of bonds, a standard risk management technique. The barbell is shown in a chart at Item 8, Junk Bond Ladder Table (7/25/12 Post). The yield on that basket was then over 12%.

My goal was to simply to harvest that yield without losing money on the bonds. With a few defaults, I was able to achieve that goal due to trading profits, receiving par value at maturity for bonds bought at discounts, exiting some positions before significant losses (e.g Exide second lien bonds), and receiving premium payments to par for optional issuer redemptions.

Without a number of optional redemptions at premiums to par, I would have lost money on the bonds. I was fortunate that further interest rate declines made it advantageous for junk rated credits to pay a premium in order to refinance the bond prior to maturity. Another positive trend was the acquisition of a junk rated issuer by an investment grade one. (e.g. 8.875% Cenveo Second Lien and 9.25% Texas Industries Bond Redemptions at 4.438% and 13.529% premiums to par respectively; Item # 4 10.5% Gray TV Second Lien Bond Redemption at 7.875% premium; Item # 8 7.75% Cricket Bond Redemption at a 14.215% premium; MetroPCS Bond Redemption at a 3.938% premium; Item # 8 8.25% Penn Virginia Resources Bond Redemption at a 4.125% premium; etc.) I also had a few who had near death experiences and managed to pay par at maturity (e.g. AGY Holdings second lien bond).

The combination of buying high yield bonds at a discount and premium payments for optional redemptions saved me from losing money, and those fortunate events are not likely to be repeated hereafter. I am mindful of that luck when managing junk bond gambles currently. Currently, most junk bonds IMO do not provide adequate compensation for their risks.

I could redeploy the junk bond redemption proceeds into an investment grade bond that provides a negative real rate of return before or after taxes.

Instead, I am continuing to dart in and out of junk bonds, taking measured risks for significantly more income. A recent example was described in my last post involving the purchase of four $1,000 par value Linn Energy bonds after their price collapse, placing at risk about $2,500 in exchange for a potential reward in excess of 20% per annum. Update For Bond And Equity Preferred Stock Basket Strategy As Of 7/31/15 - South Gent | Seeking Alpha (Scroll to "LINN Senior Unsecured Bonds")

Pepsico 2019 or Exxon 2019 vs. Linn Energy 2019

I doubt that the Pepsi and Exxon bonds cited above will produce an average and annualized real rate of return before taxes.

1. Risk Management:

I know that this sounds like a simpleton concept, but the key to risk management is to limit the inevitable losses arising from what I call ERROR CREEP and the inability to predict the future. I will happily admit that I am not omniscience and a lot of problems will naturally flow from that human trait.

Every investor needs to find their own way to manage risks.

I first limit risk by performing a risk/benefit analysis that will dictate my maximum out-of-pocket exposure to securities issued by a particular company.

An example is my recent purchase of 4 Linn bonds where I limited my exposure to less than $2,600 and bought the senior unsecured bonds rather than speculating in the common units.

I then have a maximum out-of-pocket exposure to the securities issued by one company. I may hit that limit with senior unsecured bonds, as I did with Citigroup, or with common stock. I will often combine several securities throughout a company's capital structure (common stock, equity preferred stocks, junior bonds, senior unsecured bonds and senior secured bonds)

A primary risk control measure is simply to make informed decisions after doing due diligence. I make enough mistakes after doing original source research and narrowing investment choices in a manner consistent with my investment objectives now.

Investors who never do original source research might as well as play blackjack and split face cards. Sure, they will win a few hands, but the house will end up with their money. Investing process with a story illustration (1/9/2009 Post).

All investors are subject to error creep. The only question is the degree.

And, it is important to Know Thyself. I see a number of investors who talk about how experienced they are and yet they give no indication of having performed original source research before forming their opinions. And worse, they further seem oblivious to reliable and material factual data, and interpret events through an ideological and/or political prism, usually of an extreme right wing tilt. For years I have been reading SA comments that stocks were a bad investment because Obama was the "worst President in American history".

Investors only increase their risks by failing to do research or by forming opinions based on reality creations and inherently biased opinions (frequently at home only in a voting booth) that shape the collection and interpretation of data.

I would add that no one could look only at a long term DJIA chart and identify which party controlled Congress or the political persuasion of the President, or the tax policies then in existence.

Historical Chart Gallery: Market Indexes -

Lastly, I will lighten up when valuations become unreasonable and will routinely sell into parabolic price spikes. Both of those approaches are viewed as risk management techniques.

I gave some examples of price spikes in my regional bank update that had no public information to explain or to justify them. I was also prone to lighten up in that sector due to valuation and concerns about continued net interest margin compression.

2. The Big Picture:

My Big Picture views will drive my asset allocations.

This is in part due to a light bulb going off about 4 decades ago when the Old Geezer was a younger Old Geezer.

I really needed to understand the investment implications of one macro event back in the 1970s, and then make judgments on what to buy.

Problematic inflation was causing both bonds and stocks to fail. Between 1/1/1966 through 7/31/1982, the average annualized total real return for the S & P 500 was a -1.198%: S&P 500 Return Calculator Successful investing was harder during that time frame than any other since then IMO.

I would just note the -1.198% is per year, adjusted for inflation, and includes dividend reinvestment over a period of 6,055 days. Calculate duration between two dates

When living minute and minute through that kind of period, few will have the fortitude to buy and hold. Adjustments need to be made based on a recognition of the powerful long term forces driving secular bull and bear markets.

One cause of problematic inflation was soaring commodity prices, particularly after the Arab Oil Embargo in 1973 which sent crude oil prices into orbit. I still remember sitting in long gas lines to fill up my 1957 Ford, and the price had skyrocketed above 25 cents per gallon. So, the natural thought would be to look at the energy and commodity sectors as potential investment opportunities.

In a long term secular bear market, investment opportunities are limited and whatever is working needs to be identified and pounced upon. Sectors and asset classes that were hit the hardest by inflation needed to be eliminated or substantially reduced in an asset allocation. Long Term bonds were obvious choices for elimination back in the 1970s while an emphasis on short duration bonds using a ladder strategy was a viable alternative to duration risk.

It did not require much thought, and at most a modicum of common sense, to identify the 1966-1982 period as a long term secular bear market with problematic inflation being the primary underlying cause.

One of my best long term calls was made in the summer of 1982, and it was based on an equally simpleton idea. If inflation is causing the long term bear market, then a removal of that bogeyman will set the stage for a long term bull market. I had not bought a stock after purchasing 400 shares of Duke Energy in 1978. In July 1982, I opened an account with Schwab, a "discount" broker who charged $45 per order placed with a touch tone phone.

I was not the only stock investor to see that the Federal Reserve had successfully squeezed problematic inflation out of the economy. Interest rates and inflation had started to come back down and the lift off for a 18 year bull market occurred in mid-August 1982 when enough investors came to that realization. The Bond Ghouls needed a decade or so of confirmations before the light bulb went off. (see my discussion in this blog: An Analysis Of The Risk/Reward Balance For Intermediate And Long Term Treasuries - South Gent | Seeking Alpha (Scroll to Risk/Reward Balancing Act)

Low inflation(or declining inflation expectations as in the early 1980s) is a predicate for a stock bull market. The conditions are then ripe for a secular bull market that will need other powerful long term secular forces to energize it and drive its longevity.

Inflation measured by CPI or PCE is low now and has been low for several years. Two Measures of Inflation and Fed Policy-dshort

The market is predicting low inflation into the distant future as shown in the break-even spreads for treasury inflation protected securities. That spread is the market's best guess now of the average annual future inflation rate:

30-year Breakeven Inflation Rate-St. Louis Fed

10-Year Breakeven Inflation Rate-St. Louis Fed

5-Year Breakeven Inflation Rate-St. Louis Fed

Both inflation and inflation expectations are low and that is a major predicate for a bull run in stocks.

When I first started to leave comments here at SA, I would discuss the long term forces in addition to low inflation and inflation expectations that caused me to categorize the current move as the first stage liftoff of a long term secular bull market.

This is one of those comments made in February 2013 that highlighted those forces that still exist now:

Sourced: My Comment to a SA Article Published February 2013: Sorry Bulls, But This Is Still A Secular Bear Market

I view this comment to be important so I will reproduce it here:

Start of Quote:

"I would be more optimistic about the American consumer's ability to spend and/or to save more disposal income.

The nominal amount of consumer debt is still high.

However, the more important statistic is the ratio of debt service payments to disposable personal income (DSR). The DSR ratio has returned to mid-1985 levels and has shown no indication of stopping its decline:

St. Louis FED Chart on the DSR Ratio:

FED Data on the DSR and FOR Ratios:

This simply means that consumers have more money to save and/or to spend since the Age of Leverage began in earnest around 1985 and accelerated to unsustainable levels in the 2002-2007 period.

The key is how much does it cost the consumer to service the amount of debt. The main debt of most consumers is their mortgage, and the cost of servicing that debt has plunged due to refinancing at abnormally low rates.

Households who are refinancing a mortgage at 3.5% for 30 years will be experiencing a profound increase in disposal income for a long time to come.

Household debt as a percentage of GDP has also been declining:

It may pay to be cautious whenever the S & P 500 has gained over 100% in less than four years.

I recall the same kind of discussion about the correct characterization occurring between August 1982 and several years thereafter.

Many believed for a long time that the upward move starting in August 1982 was just another cyclical bull in a long term bear market which simply proved to be wrong. The better view in 1982 was that conditions were ripe for a long term secular bull market based on the Federal Reserve's likely success in squashing inflation, the primary driver of the 1966 to 1982 bear market, and the emerging technological advances, primarily in computers, that would provide a long term impetus for productivity gains and allow for lower interest rates long term.

Even in those long bull cycles, there will be relatively short periods when the market corrects and digests robust gains. The August 1982 secular bull market rally ended its first leg in October 1987, with the S & P 500 moving from 102.42 (8/12/1982) to 328.08 (10/5/1987).

So the initial run in that long term bull market lasted about five years, followed by a correction and a digestion period, whereupon the move resumed upward after the 1990-1991 recession.

The main question now is whether the conditions are ripe for a long term secular bull market. A lot depends on whether an investor believes that the debt and deleveraging issues have been sufficiently resolved or on the path to resolution, similar to the inflation issue back in 1982. Inflation was still a problem in 1982 but the better view was that it would not be a problem in the future. I recall that 15 year mortgage rates were still over 12% in 1984.

Where are we now in the path toward resolving the debt and leverage issues? To make a decision on that issue, all relevant data needs to be considered in the analysis rather than cherry picking only the data that supports one conclusion or the other. Part of that data would include the increase in disposal income resulting from lower debt service payments. Other important data series are also frequently omitted by those advancing the bear case.

I would not underestimate the huge demand and growth emanating from the growth markets. This is an important factor to consider when making a judgment on the proper characterization of this current cycle.

We are already in a super cycle for growth in those markets that will likely create above average worldwide GDP growth for a long time. The problems now are concentrated in a few developed countries, primarily in their government's respective debt levels.

There was an interesting and long report published by Standard Charter, aptly titled "The Super Cycle Report". It can be found by googling those terms and possibly this link may work (PDF):

The impact from those growth markets is being muted now by the problems in several developed countries, primarily in Europe and the U.S. to a lesser extent.

See also GS Research Paper on the Exploding Middle Class in Emerging Markets (PDF):

End of Quote


I made a similar comment in February 2013 and actually received a comment, made by "designshoe", whose intellect compelled him to say: "quit advertising your Blog. Vix is useless predictor". I had referenced my blog discussion showing how the VIX Asset Model had flashed a sell signal in August 2007 and a green light signal in September 2012. Both were correct as shown by history. I had just published one of my long comments showing factually that the VIX movement has historically had predictive value based on my model and of course those facts are ignored when making a comment that the VIX movement has no predictive value. I have found here at SA and elsewhere for decades that no amount of reliable and material facts can change an opinion formed without any accurate factual information and held with the same fervor as a religious doctrine. Sort of like arguing with a Jihadist. Any fact that does not conform to their belief is per se invalid and untruthful.

Designshoe was not referring to my immediately preceding comment to that SA Article which had no references at all to my blog, just a number of citations to original source data. Instead, he or she was referring to this comment of mine which I view as sufficiently important that I will quote it here:

Start of Quote:

"Historically, once the VIX has moved below 20 for three months, the S & P 500 has experienced a multi-year upward move. I call that movement a Stable Vix Pattern.

The market is currently in such a pattern.

Once that stable pattern has been established, the signal to lighten up is given when the VIX moves into the high 20s (or higher) over several days, which will presage a prolonged period of an Unstable Vix Pattern. I call that event a Trigger Event, simply to denote that a reduction of my stock allocation is in order.

The Trigger Event marks the start of an Unstable Vix Pattern, which will result in a lot of up and down movement in stocks, ending up going nowhere after several years.

The first phase of the Unstable VIX pattern will be a whipsaw movement in the VIX between 20 and 30 with brief movements below 20 and above 30, though that pattern could be broken, as it was in September-October 2008, with a spike into the 40s and beyond, marking the catastrophic phase of a long term secular bear market. That kind of market has to be traded, sell the rips and buy the dips, whereas the Stable Vix Pattern is more of a buy and hold market with nips and tucks. Long term positions can certainly be established, particularly during huge declines, for those with strong hands and stronger stomachs. For the most part, the Unstable Vix Pattern market is for traders.

The VIX data starts with 1990. Since that time, the two historical Trigger Events occurred in October 1997 and August 2007.

Historically, the market recovered from that event and rose, with the VIX falling to below 20. The movement back to below 20 would be a sell signal in the Unstable Vix Pattern. So an investor could have sold out completely or lightened up, in February 1998 and October 2007, when the VIX returned briefly below 20 after those Trigger Events.

I exchanged some emails with Mark Hulbert discussing some articles that he wrote on this subject along with my somewhat more complex model. His model was really simple. Buy when the VIX falls below 20 and sell on a move above 20. I had some problems with that approach so I communicated my thoughts.

See My Post:
Mark Hulbert and the Use of the VIX as a Timing Model

Other relevant discussions:

"VIX and S & P Compared 1990 to 1997"

"VIX Chart from 2007: Alerts and Triggers Major Disruption of Cyclical Stable Bull VIX Pattern"

"Vix Asset Allocation Model Explained Simply With as Few Words as Possible"

I am acting as if March 9, 2009 marked the end of a long term bear market in stocks. Unlike other investors that use cycles, I start the long term bear market in October 1997 rather than 2000 for the reasons set out in this post:

"Dating the Start of the Current Long Term Secular Bear Market"

Initially, for the first two years or of the bull move off the March 9, 2009 low, the characterization of that move does not matter.

It could be a typical counter-move off the catastrophic phase of a long term bear market, similar to 1974-1976 and 1933 to 1937.

It would be unusual to have a long term secular bull market start from the depth of the catastrophic phase. That phase for the last long term bear market was between September 2008 and March 9, 2009.

By characterizing the move now as the start of a long term bull market, I do not change much of what I am doing. I am trading less which is an important change for me. I was doing 500 to 700 trades per year during the Unstable VIX Pattern and now I may do 100 per year.

I will not lighten up on stocks until there is a Trigger Event, though I may shift among stock classes, such as increasing exposure to emerging markets and selling some individual positions that appear to be overvalued after a significant run up.

The VIX Patterns can occur within the context of long term bull and bear markets and is a shorter term trading signal than the 15 years or so that mark the secular trends. This is how I break it down:

Five Decisions May 1991 to Present (For Those Who do not want to become Traders during the Unstable Vix Pattern)

Stable Vix Pattern: May 1991 to October 1997-Stocks

Unstable Vix Pattern: October 1997 to January 2004-Bonds and/or Cash

Stable Vix Pattern: January 2004 to August 2007- Stocks

Unstable Vix Pattern August 2007 to September 2012-Bonds and/or Cash

Stable Vix Pattern September 2012 to Present-Stocks

Post: VIX-Stable Vix Pattern Formed (September 2012)

South Gent's Comment Published 2/12/2013 at 7:03 P.M to the SA article Titled: The Coming Decade Of Stocks, Part 2-Seeking Alpha

End of Quote


{When leaving comments to SA articles or reading those left to articles that I had given free of charge to SA, I received comments by those in dire need of a brain transplant or some brain rejuvenation juice that would rewire the circuitry. I also attracted assorted trolls, wingnuts and jerks with personality disorders. I have consequently quit that time consuming and unrewarding exercise. No amount of accurate factual information will register with a large number of individuals who prefer to exist in their own reality creation universe anyway. I received zero likes for that last quoted comment which was spot on.}

Vix Asset Allocation Model - South Gent | Seeking Alpha

Trading Strategy Under The Vix Asset Allocation Model: Part 1 - South Gent | Seeking Alpha

Trading Strategy Vix Asset Allocation Model Part 2: Hedging In An Unstable Vix Pattern - South Gent | Seeking Alpha

This brings me to the Big Picture prognosis given by that Vix Asset Allocation Model which is still flashing a green light. Eventually, there will be a Trigger Event that will usher in an Unstable Vix Pattern that will be a difficult market to navigate even for experienced and informed Stock Jocks. I was just a Stock Jock myself since the late 1960s, viewing bonds as another name for some old man's affliction, until I had my brain rewired by listening to Frank Sinatra.

The Trigger Event period (the sell signal) will probably be proceeded by a downdraft in stock prices followed by a significant decline in stock prices during the Event. Historically, a better opportunity to lighten up would occur shortly after the Event as the bulls reassert themselves for one last rally.

S & P 500

8/8/2007 1497.49
Trigger Event Period: 8/9/2007 through 8/21/2007
Closing Low During Trigger Event 1406.7 on 8/15/2007
Closing High Thereafter 1562.47 10/10/2007
Intra-Day Low 666.79 (message from the Devil?) 3/6/09

In the quotes reproduced above, possibly the most important data point for U.S. investors is the DSR ratio IMO:

Household Debt Service Payments as a Percent of Disposable Personal Income-St. Louis Fed

That chart is sourced from this FED data series: Household Debt Service and Financial Obligations Ratios

The FED also has mortgage debt payment to DPI ratio that highlight the same critical trend:

Mortgage Debt Service Payments as a Percent of Disposable Personal Income-St. Louis Fed

A related chart shows the same positive long term force at work:

Household Debt to GDP for U.S.-St. Louis Fed

See also: Long Term Chart Household Net Worth sourced from FRB: Z.1 Releases

What is the obvious implication of households having more disposable income after debt service payments? It means simply that U.S. households have more money to spend without incurring more debt, to save, and/or to pay down higher cost debts.

Spending sourced from disposable income is better for the economy than what happened in the Age of Leverage that started around 1985:

Debt to Disposable Income- St. Louis Fed

The absolute level of debt has come down at the same time as the debt service payment burden has declined to modern historical lows. Perma bears tend to focus on the first number and conveniently ignore the later that primary originates from the tsunami refinancing wave. And even of more importance long term, home mortgages are being refinanced LONG TERM at extremely low rates. That debt service obligation will remain constant as disposable income increases through increases wages, the return of normal rates on savings and investment returns.

This is just a really simple concept, like recognizing inflation in the 1970s and too much debt in last decade as really serious problems for stock investors.

As more households refinance debt at historically low long term rates, their disposable income after debt service payments will increase and their interest savings will be like having a government stimulus check every month during the life of their new mortgage. When I built my house in 1982, I had to pay cash for everything since the 30 year mortgage was over 16% with a couple of points thrown in for good measure.

When I pointed out the foregoing to one SA Perma Bear, he felt compelled to write an article explaining why more disposable income after debt service payments was a bad thing. (Published 1/1/13: False Hope: Low Rates, Write-Offs Make Americans Richer By Default | Seeking Alpha; Outlook 2013: Americans Are Going Broke | Seeking Alpha Published 12/31/12)

As the old saying goes, you can lead a horse to water but can not make him partake.

I seriously doubt that my comments back in December 2012 had any impact on the bear horde making comments to those two articles. It is always interesting to go back in time and read comments knowing what has actually transpired since that time. The total return for SPY, the low cost ETF for the S & P 500, was 51.26% between 1/1/13 and 7/31/15. A $10,000 in SPY would be worth $15,125.30 while $10,000 invested in a money market fund would be worth about $10,005 at 0.01%, losing ground to inflation every day. Vanguard Prime Taxable Money Market Fund Yield

Sourced: DRIP Returns Calculator

I do know from experience that most Americans, who have invested in cash yielding zilch over the past 3 years or more in some cases insisting for whatever reason that Financial Armageddon will soon strike again, will most likely be needing government assistance when they retire. I hope that none of them want me to bail them out but I will not be around to provide assistance. Besides, I have done enough since 2008 to bail out irresponsible households and the Masters of Disaster who infest our large financial institutions.

I would also submit that an unbiased and objective examination of their investment returns will show that the latest burst was not the first one missed by them. Their ramblings here at SA are based more on their own rationalizations for failure than a useful guide to follow for those interested in achieving their financial objectives.

There are other positive forces present in addition to vast improvements in household debt service obligations. I will just illustrate a few of them:

Personal Consumption Expenditures-St. Louis Fed

The second estimate of second quarter GDP showed that real personal consumption expenditures increased by 2.9% compared to 1.9% in the second quarter. Disposable personal income increased $118.6B or 3.7% compared to +1.8%in the first quarter.News Release: Gross Domestic Product

The service's sector is clearly in an expansion mode:

ISM Non-manufacturing: Business Activity Index-St. Louis Fed

See also: ISM Non-manufacturing: New Orders Index;

Job growth and unemployment are clearly improving:

Civilian Unemployment Rate-St. Louis Fed

4-Week Moving Average of Initial Claims-St. Louis Fed

Improving Trends:

Households: Level of Owners' Equity in Real Estate-St. Louis Fed

Total unemployed, plus all marginally attached workers plus total employed part time for economic reasons9 St. Louis Fed (commonly referred to as the U-6 number)

In Need of Further Significant Improvement:

Share of Labour Compensation in GDP at Current National Prices for United States-St. Louis Fed

Nonfarm Business Sector: Real Compensation Per Hour-St. Louis Fed

Scroll to Labor Productivity and Wages (9/18/13 Post)

The preceding analysis only keeps my stock allocation near the upper end of my range. Each investor needs to decide the appropriate allocation for themselves given their own unique circumstances.

From the preceding series of charts, I receive some clues about potential long term investment themes including a resurgence in consumer discretionary spending over a long period of time. For the most part, however, the foregoing does not provide much assistance on my sector weightings and stock selections. I need more information to make informed decisions.

The foregoing is not intended to be comprehensive. I am simply touching on some of the high points.

3. Secular Forces and Sector Allocations:

For me, an important consideration is simply valuation. A few weeks ago, for example, REITs were selling at near an all time high Price to Funds from Operations and interest rates were then rising. That is just one bad combo. I trimmed my REIT exposure and added to my regional bank basket. There has been an obvious and tight correlation between interest rate movements and the performance of those two sectors.

As interest rates turned back down, REITs corrected in price and several of my regional banks went into parabolic upward price spikes. I started to sell some regional bank stocks and buy back some REIT common stocks sold at higher levels. In this way, I am attempting to take whatever the market gives me, taking into account my capital preservation and income generation goals.

In this example, I am looking at the directional change in interest rates and individual security valuations to make sector weighting decisions and to decide what to buy or to sell within those two sectors.

I discuss what I did in two recent Instablogs:

Update For Equity REIT Basket Strategy As Of 7/24/15

Update On Regional Bank Basket Strategy As Of 7/17/15

Another recent set of decisions was based in part on currency movements. Based on a variety of factors, I believed that the USD was headed back up after a brief downturn against major developed currencies.

I consequently quickly reversed course by selling several foreign stock ETFs where I was hoping that a foreign currency would gain strength.

I eliminated the iShares MSCI Poland Capped ETF (NYSEARCA:EPOL); and the iShares MSCI Italy Capped ETF (NYSEARCA:EWI). Two of those purchases are discussed in my SA Instablogs.

Bought iShares MSCI United Kingdom ETF (NYSEARCA:EWU) - South Gent | Seeking Alpha; Bought iShares MSCI Poland Capped ETF (EPOL) With An Investment Strategy Discussion Introduction - South Gent | Seeking Alpha

That type of movement is not based on profit taking but on capital preservation and a belief in a better entry point down the road.

Poland's stock market was also impacted by a recent election. So, I will try again later to implement the investment thesis discussed in the preceding linked posts.

I sold EWU at $19.42 based on a growing concerns about the energy and material sectors that dominant the top ten holdings.

I eliminated all of my Swedish and Norwegian stock positions except for Svenska Handelsbanken AB ADR (OTCPK:SVNLY) that underwent a 3 for 1 stock split after my purchase.

Those eliminations included Orkla ASA ADR (OTCPK:ORKLY); Svenska Cellulosa AB ADR (OTCPK:SVCBY) and Nordea Bank AB ADR (OTCPK:NRBAY). Another consideration with those stocks and others was that I had just received their annual dividend distributions.


I also eliminated AEG whose ordinary shares are priced in Euros:

I reduced my position in Unilever (NYSE:UL) by selling 30 shares at $43.31 (6/15/15), and I eliminated the 100 UN lot at $43.125 (6/2/15).

The UL ordinary shares are priced in British Pounds, whereas UN's ordinary shares are priced in Euros. The UL shares were bought in an IRA since the U.K. does not withhold a dividend tax, whereas the Netherlands does. Dividend Growth Strategy: Added 30 UL At $39.25 Roth IRA - South Gent | Seeking Alpha

I also switched into Merck (NYSE:MRK), using the proceeds received from liquidating 50 shares of Sanofi (NYSE:SNY) and Roche (OTCQX:RHHBY), where I was concerned about the currency risks and I had received the annual 2015 dividend distributions from both SNY and RHHBY while MRK was about to go ex dividend for its quarterly distribution. And, I have foreign withholding taxes withheld from the SNY and RHHBY dividends.

I discussed the SNY and RHHBY buys here:

Dividend Growth And Diversification Strategies: Bought 50 Roche (OTCQX:RHHBY) At $32.99

Bought Sanofi (SNY) at $46.69: Dividend Growth Strategy - South Gent | Seeking Alpha

So I booked profits in those two stocks and bought Merck. As a layperson with no medical training whatever, I can not ascertain which of those three companies has the best pipeline. All look good to me. I also have a heavy Swiss Franc exposure through my ownership of Novartis and a similar sized position in the CEF Swiss Helvetia Fund (NYSE:SWZ).

I last discussed SWZ in an Instablog here, including updates in the comment section and in my recent CEF basket update published here:

Update On Closed End Fund Basket Strategy As Of 7/28/15 - South Gent | Seeking Alpha

Going Slightly Deeper Into Swiss Franc Priced Assets: Added To The CEF Swiss Helvetia Fund (SWZ) - South Gent | Seeking Alpha

My last discussions involving NVS are dated but can be found in my blog and in an Instablog here:

Dividend Growth Strategy: Novartis - South Gent | Seeking Alpha

Item # 1 Added 50 NVS at $76.72 (12/23/15)

I will not be discussing the Merck purchase since that is beyond my current format here. I own 110 shares with 30 of those bought in the Roth IRA.

I would simply reference the treasury's website to show current interest rate trends in 2015:

Daily Treasury Yield Curve Rates

Aggregate valuations for REITs can be found in the Lazard monthly report: Lazard.pdf That link will take the reader to the most recent month usually.

I do not see the CAD or the AUD recover on a sustained basis without an improvement in commodity prices.

I am neutral on the Euro at the current exchange rate.

The Swiss Franc is being manipulated lower by abnormal monetary policies by the SNB that currently includes negative deposit rates.

I will also try to decipher trends by looking at the DXY chart and Bloomberg Dollar Spot Chart:

Dollar Index (DXY) Interactive Index Chart; Bloomberg Dollar Spot Index

I have no technical training. It just look to me that the USD was going to turn back up in mid-May after touching 92 (DXY Chart).

The upturn is more pronounced in the Bloomberg Dollar Spot chart which includes more currencies than the DXY. That one clearly shows a turn back up in mid-May. BBDXY Quote

When looking at a five year DXY chart, I currently categorize the up move in the USD since last summer as a parabola. Based on experience going back to the 1980s and selling into the Japanese stock parabola (too early I might add), I believe that parabolas will collapse upon themselves. The question is always when.

Up moves in those charts indicate USD strength against a basket of foreign currencies.

I never believed that USDs parabolic spike was justified by the possible .25% rise in the FF rate or possibly two more .25% raises next year. Currency traders started that tall tale about a year ago, when the spike started and nothing has happened in over a year.

The mood may be changing with Friday's wage report for the second quarter. Now, the story gaining traction is that the Fed may postpone a .25% increase. Jeez, the dollar is taken to a ten year high against major currencies based on a possible FF rate increase of .25% sometime in the future? But perceptions can frequently travel around the world and take root before reality has an opportunity to put its boots on.

I also sold into parabolic spike in Chinese stocks. I noted in my CEF Update paring my position in the China Fund (NYSE:CHN). I also eliminated the Matthews China Dividend Fund;Investor Fund Price Today (MUTF:MCDFX):

This post is long enough. I will be taking a week's vacation before I publish again, but I will be responding to comments left to one of my Instablogs. I will be publishing blogs on the five categories listed in my profile in that order. So regional banks will be the subject of the next blog.

Disclaimer: I am not a financial advisor but simply an individual investor who has been managing my own money since I was a teenager. In this post, I am acting solely as a financial journalist focusing on my own investments. The information contained in this post is not intended to be a complete description or summary of all available data relevant to making an investment decision. Instead, I am merely expressing some of the reasons underlying the purchase or sell of securities. Nothing in this post is intended to constitute investment or legal advice or a recommendation to buy or to sell. All investors need to perform their own due diligence before making any financial decision which requires at a minimum reading original source material available at the SEC and elsewhere. Each investor needs to assess a potential investment taking into account their personal risk tolerances, goals and situational risks. I can only make that kind of assessment for myself and family members.