A Bushwhacking for Everyone
By: Tim McPartland,
Just about everyone in sight got hammered by todays drop in equities and honestly it puts us at ease to see that the markets can go down as well as up. For those with lots of experience they know that the neverending march upward will end badly–the question is just when it will happen and how rapidly the fall comes. Obviously these are questions that are impossible to answer–by anyone–regardless of the claims. Today’s 300 point Dow drop really is not much at all–less than 2% on an index that has risen by 100’s of percentage points in the last 20 years, but these days do serve to scare the hell out of the novice investor as CNBC and the national networks play the drop to the hilt as they fight for every last eyeball. They do work hard to keep ‘joe public’ out of the markets.
Interest rates rose almost exactly as we believed they would when we wrote on Tuesday. While we can’t predict economic numbers we can, on occasion, predict how rates will react to a reported economic report. With blockbuster GDP reported on Wednesday we had guessed the 10 year treasury would move up 15 basis points–which is exactly what happened. While the FED minutes and ADP employment reports yesterday really contained nothing surprising the Employment Cost Index came in very ‘hot’ this morning–causing the 10 year treasury rate to spike again, before drifting lower throughout the day. Tomorrow we have the important Employment Situation release and employment is expected to rise by 233,000 jobs. Our expectations are that the release will come about as predicted causing no real change in interest rates. We expect stocks to rise a bit tomorrow–recouping some of todays loss. A cease fire in Gaza, agreed to late today, will be helpful to the equity market.
Todays setback moved the model back by about 1/2%–after doing the same yesterday–so a 2 day loss of 1%. We had mentioned last week we planned to sell 2 common stock issues (General Electric and Proctor and Gamble) and we had done so on the 23rd and 29th which leaves us with a pure cash position of 8.52% with another 4% hidden away in Tortoise Infrastructure Preferred for safe keeping. This gives us near $70,000 for ‘bargain hunting’–although we will wait another day or 2 before acting. Our 1 target right now is Compressco Partners (as we had mentioned last week). After tumbling because of a secondary it now is trading at $22.08 and a current yield of 8.06%. It is likely we will enter a trade for purchase on Monday or Tuesday (all subject to further market developments).
For now we are hanging in there with our positions except as noted above–and looking for opportunities to purchase securities ‘on sale’ such as Compressco Partners (ticker:GSJK). August is a weak month for dividends for the issues we own so we will not gain much in the way of income for the month–and we hope we can maintain the 9.04% YTD gains.
Added Notes – For bargain hunters we are finishing a modification to the MLP and REIT pages which highlights issues falling more than 3%. A quick glance and you are able to begin your due diligence.
Also we have had requests for a list of preferred stocks of Utilities–we will have this list launched in the next week.