We had one of those “Eve of Destruction” moments Monday, August 24 (the recent low). In fact, things were so grim I felt compelled to post a counterpoint August 23, (though the title may not confer that intent), “Abandon All Hope Ye Who Enter Here.” It had appeared that on Friday, August 21, many had abandoned hope when panic set in, as oil had collapsed (breaking briefly below $40.00) and China melt-down fears erupted after a slight devaluation in the Yuan. The Dow Jones Industrial Average is up nearly 15% from the panic low it hit that Monday. My final thought in the post:
Maybe I am missing something, but I am have trouble seeing the current situation as dire and warranting the panic that has surfaced in the market. Regarding everything that I know to be true and holy, bull markets do not end in panic. They are born in PANIC (which is what we have been seeing the last few days). Bear markets are bred and born in EUPHORIA, of which we have seen little, or none, since 2008/2009.
Ergo, I am not Abandoning hope. I am embracing it!
My Friend Allen
My friend Allen, who does me the honor of reading these posts, continues to puzzle over the lack of any long-term commentary on the part of the media, especially encouragement to those, not necessarily investing for growth, but those investing for income. He suggests that in the absence of good fixed income alternatives or the prospect of a strong resurgence in inflation (in this slow growth world) that there are many great income oriented equities out there.
These offer relative safety, modest growth in income and superior yield…stocks you don’t plan to trade…stocks that anyone with a long term outlook would be happy to hold. Who cares about $30. oil, a weak China or a quarter point bump in the Fed Funds rate when you are sitting on a domestic REIT with a 6% or 7% yield ? These events are just not material to their rent collections. Same holds true for master limited partnerships (MLPs) that do not produce energy (just transport it) yielding 7%+. And, there are scores of utility and good general equity names yielding way-in-excess of the 10-year treasury (whose dividends should also grow over time). All you have to do is be willing to accept volatility and hold over time.
My Answer (and Allen’s): It’s the media and their constant micro focus on the next big trade, inane news items speculated to be affecting the market, and what’s hot and what’s not… totally unproductive babble.
The stocks I listed above are just too dull to merit their attention. But, for investors looking for income, they are truly interesting.
My advice: Think about my friend Allen’s puzzlement. It presents you with an opportunity.
What is your take?
The information presented in kortsessions.com represents my own opinions and does not contain recommendations for any particular investment or securities. I may, from time to time, mention certain securities for illustrative purpose, names where I personally hold positions. These are not meant to be construed as recommendations to BUY or SELL. All investments and strategies should be undertaken only after careful consideration of suitability based on the risks, tolerance for risk and personal financial situation.