. . . . The Spring Selloff and Safe Havens. . . .
To all. . .
As I have been predicting for quite some time, there will be a selloff of techs. . . moreso than what we just saw last week. And after evaluating all the possible plays that could run counter to the declines, I have decided I like REITs best.
[My condolences to those that follow the pot-of-gold-at-the-end-of-the-tech-stock-rainbow theory.]
REITS [Real Estate Investment Trusts] and Royalty Trusts are little companies, often on the Amex that have just a few employees to keep tabs on the money and management of their holdings. They own something which is leased to others.
REITS generally own office buildings, apartment complexes, shopping centers, farm lands, prisons, bridges, Park Place and Boardwalk. . . any physical property that can be leased to produce an income.
Royalty Trusts own oil and gas fields, mines, trademarks, patents, music, films. . anything that produces a royalty. . . whether it be physical, creative, intrinsic or intangible.
Such companies exist primarily as a tax haven for the primary owners and principals of these public companies. The liabilities are shared with the shareholders. The owners are paid a handsome salary, plus dividends on the large percentage of stock they hold. . . which is far more tidy than having skyscrapers or shopping malls in their name.
Such REITs and Royalty Trusts often pay a dividend. The share price hardly ever moves. And they are seen as some of the most safe investments one can make in the stock market.
The reasons I believe these will be a good play over the next month[s]are as follows:
I believe that we will re-test the lows on the Nasdaq and break through them to make new lows. . . which will put us once again in jeopardy of facing a recession. . . though I am not inclined to believe that will happen.
I believe, based on historical data, that this will happen within the next 4 weeks. I have learned my lesson about holding even the smallest amount of tech stocks through such a selloff. . . so I wish to be completely out this time. . . but need a place to stick some money. . . .in addition to shorting the QQQ. . . and going cash.
I wish to stay invested throughout the summer as the markets struggle to find their footing. REITS, etc. provide the safety I seek, while paying handsome dividends.
It is good for all of us to learn the importance of REITs in a balanced portfolio. . .and re-allocate a portion of our portfolios to them on a regular basis.
Last April, cyclicals made a big leap only to fall down 3 days later. Cyclicals are another safe place to run, however, many have already moved quite a bit off their 52-week lows. And I believe the Dow will join the Nasdaq in the depths and testing of new lows. . . making the cyclicals not such a safe place after all.
REITs are mostly at their 52-week lows. Many have increased their dividend payouts over the past few years, with very few people noticing. So while their payout has increased, their share price has deflated, making the Return on Equity extremely high. . . and the yield percentage exceptional.
REITs have already shown signs of life with little 1 percent moves each day for the past several days. This is highly unusual and shows we are not alone in our pursuit. It may have been caused by Abbie Joseph Cohen's last call to increase allocation to REITs . . . not that that bears on my decision in any way. . . but just to explain why they may have flinched.
Last April, when cyclicals were shown to be a not-so-safe-haven, investors ran to REITs for a period. Because ALL of these are thinly traded, many with small floats, the swing trade possibilities were tremendous. Some were nearly doubling in single days. . . but keep in mind, there are hundreds of them. . . .so you cannot count on such near-term performance.
I like gold stocks here again. . .better than oil stocks, since oil is already so high. . . gold and platinum. . . and little Ashanti Gold Fields, where their accounting was thought to be messed up. . tanking the price, but later found to be incorrect. . .yet the price is still suffering.
Oil Royalty Trusts I do like, as there should not be any oil producing fields that are not making money in the current economy. So earnings of oil royalty trusts may reflect the
strength in the industry. But this is not the play per se. The safe havens that pay out dividends, regardless of the market conditions is the play . . . beginning over the course of the next week.
Now foreign stocks may be a good place to run. However, when the Nasdaq and Dow tank, it often triggers worldwide declines. And they can be terribly sharp. Bonds would be an OK place to run, but they are about as boring as reading the Postal Code [speaking from experience], and their yield is simply not as attractive as REITs, IMO.
The financial industry should be fairly safe, however, recently leading issues have run up a good bit, so they are not immediately attractive to me. . . though after initial decline they could look better.
Energy Stocks may do well, though historically I just don't see it. . . and as for undervalued tech stocks. . . the smaller the market capitalization, the more the risk and if this decline is anything like last years, the declines will be slow but steep.
Does anyone here remember my call of how steep selloffs would be last year?. . . . on Yahoo, AOL, CMGI, EXDS, RNWK, QCOM, ATHM, etc.??? Man, I took alot of grief for that call. . .calling them down as much as 60 percent. But history shows that my call was nearly perfect. Each one of the stocks returned very close to the buy targets I set. . . it took some a month to get there. . . and others as much as 5 months to finally hit bottom.
As I said, this is a lonely profession. Many will give me grief on this call. . . .some have already sent PMs, asking if their baby would be spared. Still others have again begun proclaiming their disagreement with my calls. . . fresh after having been proven wrong . . .by the severity of last weeks decline of techs. . . and the dramatic increase in value plays since mid-March.
Now that our cards are on the table. . . .I don't get my jollys by predicting gloom and doom. . . and those that have been here longest remember how often I have been the lone bull. . . running from board to board saying, "WAKE UP! Its time to buy tech again. . . the bull train is loading up and will pull out of the station with or without you."
But at the same time, I cannot compromise my calls based on individuals with love affairs of their portfolios. The day that happens, I will be of no use to anyone. So I must continue calling them as I see them and being out here on my limb.
Now I could be wrong. I did miss the December roar in techs. . . having favored the slow selloff into Y2K, with a early January roar. . .and it turned out to be the exact reverse of that call. So it can happen.
Everyone should make their own decisions, based on their own due diligence and the best available analysis. It is not easy to make money in the markets. . . at least not any more. . . these days it takes bold decisions and quick reactions. . . and vision.
Since day one, this thread has been about ACTING BEFORE the market. . . rather than REACTING to it. And that is why so many of those here can claim bigger returns than those anywhere on the net.
Last year, our untraded long portfolios made it look easy when they outperformed every mutual fund. But this year, in order to repeat the performance, it would take some severe hands-on trading. . . [currently, I am not set up to maintain theoretical daily trading portfolios. . . ]
It takes work in the current EXTRA VOLATILE market, to see gains. We won't make it sitting on our laurels. And, unfortunately, we won't make it sitting on our hands either. The buy and hold strategy that worked so well last year, is, this year, destroying many of those gains. Anyone demanding to maintain a buy and hold strategy, needs to use a modified strategy, which hedges against the holds during these Super Volatile times. . .short-selling as a hedge to lock in your gains. . . or covered calls to lock in your gains. . .releasing the hedge during the times when the markets make their greatest strides. . .and returning them when the markets turn to retest lows.
This coming week will present many swing trade opportunities. However, I am inclined to go heavier into just 2 or 3 stocks that I can watch very carefully. . . as opposed to my buying baskets of 15 or 20 stocks like last week. This is due to the narrowing of the rally as the week unfolds. Each tech stock will peak out at a different time. . . NOT when the Nasdaq peaks. . . .so playing the swing trades during earnings week will be a challenge for even the most seasoned vets.
Over the summer, we will be looking for buying opportunities on the best-of-the-best tech stocks. . . [not necessarily the same names as this year]. . .and pick a new crop of undervalued techs to play through the next season. Hopefully, we will identify a sector or two that bucks the trend as fibres did last summer. . . so we will have something of interest to follow during the traditional summer doldrums. . . .which occur when the major market players leave the markets and often the country between about April 15 and October 15. . . [with the majority being gone from Memorial Day to Labor Day]. We may or may not play the July earnings rally or "summer rally". . .as I have personally never prospered much from it.
Yes, tech stocks will return. . .and you can again hug your babies. . . but for now, just consider sending them to summer camp.
As always, I welcome both supportive and alternative views.
I do not wish for anyone to be hurt by the markets. . . but pray prosperity and good health to all those that read my posts. . . .
Best wishes all,
Rande Is |
