Current Market Environment

We find little to like in this market unless like us you have some assets in mutual funds with exposure to some high quality corporate bonds and larger mega cap stocks.  The valuations continue to be stretched and the market has all but ignored the less than stellar earnings reports of the last month.  This market is precisely the reason smart investors do not try to pick stocks and individual bonds unless you are very experienced in doing so.  Risk happens fast. 

We continue to buy some NNC, a closed end NC muni bond fund, which is undervalued after running up over 8 percent since we bought it about 4 months ago.  With our dividends rolled in we are up a nice 30 percent annual rate on this buy we began in January of 2014.  Just hard to beat just under 5 percent tax free interest and capital gains too. Now trading at just over $13 per share NNC is still about $1 under it's net asset value so there is some room to run here.  We will buy more on any pullbacks. 

Trading in our options account has had only one small loss this year.  We believe this is due to the wide strike prices we are trading and the mega caps we tend to trade.  We also look for low PE stocks such as BP which is one of the few securities we find attractive in this market.  We also find ourselves warming back up to ARCP a triple net lease REIT we traded earlier this year before a nice run up.  It has been trading down recently due to some concerns over earnings which are to be released May 8.  Trading here just below $13 and with a nice 7.8% yield we are looking to move back in post earnings.  

One area where stocks have seen some backtracking are banks.  Banks post Dodd Frank are not a good investment.  They are battling introduction of new rules that all but make banks and many financials nothing more than highly regulated utilities like some state regulate power companies. Add in that with rates so low and no sign of them moving up any time soon there is little spread to make money on loans either. One reason most banks are not lending except to high value customers.  We currently trade JPM and C, but are extra careful not to stay too long in our rental.  Small banks still have issues with the cost of complying to new federal rules. I would completely avoid them. 

Again for most investors the best course is stay the course of regular investments in your 401-k and IRA.  If you are retired consider some municipals and NNC.