Stock Market Commentary
I am doing a little selling in a few positions today. I bought them the other week, but I now think the correction in the market is going to last a little longer than I was thinking when I bought them. At the time if the market had gone lower last week I had thought the correction would end. But the move up in the middle of the week makes it more likely that it will now last for another 3-6 weeks. So I think I bought these positions a little early.
Finally we are getting a little bit of a pullback in the stock market and a drop in gold and commodities. I have been wanting to build a commodity position for weeks so I am going to start to buy some commodity stocks today.
I'm buying into the coal and shipping sectors today. Buying:
VLCCF 750 @ 6.71
ESEA 5000 @ 1.00
CNX 150 X 32.91
BTU 200 X 23.13
WLT 140 X 36.16
KOL 200 X 24.15
RNO 350 X 14.27
RNO, VLCCF both pay dividends of over 10%. ESEA pays 5.90%. The others pay 1-3%. RNO is also a coal company.
I just made an $8,000 deposit to my Open Portfolio. If you are new this is a model portfolio I setup using Google Finance to mimic my real trading/investing account. Instead of picks I believe the best way to help you is to show you what I'm really doing. One thing Google doesn't do though is keep up with dividend payments, so a big chunk of this $8,000 deposit is a record keeping deposit to keep up with dividends I've gotten in my trading account this year. Instead of getting checks for them I'm just depositing them in my account.
As I wrote in this weekend's monthly newsletter I think the US stock market at this point has very limited upside and for the short-term the risks are too the downside. I don't want to go through all of the reasons now as I outlined them in the newsletter, but the upside potential for the US stock market right now is like 1550 on the S&P 500, which would be a gain of about 3.3% from here. It's hard for me to justify trying to "play" the market at this point to try to make such a little return.
My view is a little different than Faber's - my guess is we get some sort of dip in February/March and then not much volatility in the US stock market after that. I don't think we are going to see some big crash this year or huge rally this summer once this move dies out. I think the market action will just fade out and we'll see rallies in commodities and world markets which diverge from the US. More on this in my next monthly newsletter.
In fact I see a lot of sectors and stocks in them that look to be lining up to start new bull markets of their own this year. Whenever the market does pullback and have a correction I plan on putting more of my money to use by buying in these sectors and stocks that I think can go up a lot this year.
Russian telecom company Vimplecom (NYSE: VIP) went up over 7% yesterday to break through recent technical resistance. The company released a positive earnings report and stated that it would pay a dividend of 7% in 2013. It announced that it expects to make an additional $2.9 billion in positive cash flow in the next three years.
Jo Lunder, Chief Executive Officer of VimpelCom,said:
The price of gold has been kept down by hedge fund redemptions. These redemptions will end in a week and after that a nasty hand that has been holding the price of gold down will be lifted. As we begin this new year news is starting to trickle out demonstrating that hedge funds as a whole have had a horrid performance last year.
According to incoming data nine out of ten hedge funds failed to beat the S&P 500 last year. According to a recent report by Goldman Sachs their average return was 8% while the S&P 500 posted a 13% gain for 2012.
I just got back visiting Dave Skarica in the Bahamas. I took this video of the sunset off of his deck Saturday night. What is crazy is you can see both sides of the ocean from his house. So you can actually see the sun rise in the Atlantic Ocean and the Caribbean from his house.
I've shared with you lots of information this year - things I've written and things I've read and passed on to you. Most of my success this year has been due to one thing - investing in a place where no one else would, because valuations there were and still are super cheap - Europe.
I bought VIP back in August and it has been one of my best performing stocks. The Russian telecom company has gone up 26% since I bought it. Today it announced that it is going to pay an eighty cents dividend to shareholders of record at the end of the month. That's like a seven percent dividend.
Pretty nice. It's the largest telecom company in Russia and Eastern Europe.
I don't know what is going to happen with the "fiscal cliff." I don't know if Obama and the Republicans will come to a deal before the end of the year to prevent it from happening or not. If it does happen I don't think it will have a huge impact on the economy or the stock market - not in the big picture. However, it probably will cause some short-term selling. Really they don't seem to be to concerned about it.
Today the Fed is going to release a new FOMC statement at 12:30 PM. People are anticipating that they will announce a new QE money printing operation on top of the one they announced a few months ago. They are hoping for a new money pump that will force the stock market to go even higher. You see the US stock market is now fully valued so this is what it takes to make it go up nowadays.
I just sold 275 shares @ FCX for 31.15 in my portfolio. I had about a 5% gain on this position and then yesterday it gapped down huge and fell 15%. The company announced that it was going to buy two other companies - MMR and PXP that are in the energy production and exploration business. The CEO of FCX sits on the board of directors of both of these companies and owns millions of shares in them so it smacks of a conflict of interest. Wall Street obviously does not like the deal as it is punishing FCX stock.