This Market Makes Me Damned Nervous
By: Tim McPartland,
Here we are again just 1/2% off the highs of the last 52 weeks in the DJIA (same for the S&P500). With all of the potential issues in the world and corporate profits in the U.S. starting to flatten we have to believe that equity markets are at a high risk area. All of the important news globally seems to stick in the news for about 5 minutes–Greece continuing to teeter on full out bankruptcy, war continues to rage in the sensitive area of Yemen, Syria continues as a mess. Also the oil patch layoffs have claimed over 100,000 high paying jobs, while other hiring is maybe soft. But no one really seems to care until something big hits. Additionally, I think this easy money policy on a global basis is going to be paid for in spades SOMEDAY. But as always you have to be invested as prophecies of gloom and doom have been around for years and they will continue until something hits then the prophets will say “I told you so”. Anyway moving on….
We note that investors are hating on the REITs a bit. While the markets were up near 1/2% today the REITs fell off almost 1%. If we were to get a downdraft of a few hundred points this week the REITs are suseptable to a major smack down. We think that the REITs are simply being called out after a tremendous run–and we agree. In fact we will be selling our portfolio REIT holding Store Capital(ticker:STOR) tomorrow. Brad Thomas wrote an article on Store Capital yesterday and after reading it we think it is prudent to cut this issue now with some possibility of buying it back later. STOR is a triple net lease company–similar to Realty Income, but on a much smaller scale. Their yield has fallen to 4.28% and we have a decent capital gain for the year–so we will ‘harvest’ profits and wait for a potential re-entry.
Today we took a look at the new Teekay Offshore Partners LP preferreds but didn’t pull the trigger yet. It started trading today and on 881,000 shares it bounced between $24.70 and $24.80 most of the day. We like it as ashort term flip (a month or 2). This is not an investment–just a short term $1/share speculation.
How about crude oil prices? A big jump in prices as the inventory build was miniscule last week. So now we have West Texas up 25% from its low and while this is helpful to all the E&P companies it really isn’t going to save distributions as hedges roll off the books of the upstream MLP’s. On the other hand with the turmoil in the middle east prices could explode higher. We are tempted to consider preferreds of some of these MLP’s as we think the preferreds will be ok if crude prices hold here or move higher.
So all in all these are difficult and scary markets (at least to us) and one needs to protect themselves, while at the same time earning a decent return. We stay vigilant