This time it is different.

If you have invested or traded securities you have heard that phrase.  Usually in an effort to tell you or explain to you how all the accumulated wisdom of the ages will be wrong THIS time.  Reminds me of the efforts of young people today to tell us this time is different with Obama in charge.  Well they are wrong and guess what the novice investors who try and tell you this time is different that a total collapse is coming or that the end of the world is near are wrong too. 

People and generations follow almost predictable courses. Time and again human nature being what it is has not and will not change.  Humans have emotions and needs and those traits pull them back to the same path each time.  As they way the market is driven by fear or greed.  The key is to be on the opposite side of those emotions when others are on one side.  Yes darn hard to do that.  Frankly however sometimes the best path is to do absolutely nothing and ride the wave. This just happens to be one of those times. 

Today is a perfect example we looked and researched and tried to find a trade to make this morning. Facebook being a prime example as it was getting the crap beat out of it for two days now.  Down a bunch of points and looking all the way a value buy.  But the PE is still ultra high and the price now down enough to really make a difference.  The other point to make is looking at the option chains there is just nothing enticing there either which tells us someone else see the same thing we do.  The market can be smart and when it is you just sit back and ride the gains and smile. 

We are fully invested and fully positioned in our trading portfolio and intend and stay that way.  We loaded up real good during the latest stock market sell off and are enjoying those gains right now.  This political economy and financial engineering is going right on for at least two more years.  Saddle up with extra contributions to your retirement plans in mega cap stocks.  If you are buying individual stocks buy mega cap stocks too.   The insurance companies look strong here and are reporting blow out earnings this week just as I suggested several times before and even after moving up are still undervalued. Refer back to our earlier postings for specific suggestions during the last two months. 

Be wise and do not believe it is different this time. 

We got it right.

We take our lumps when we make bad calls on the market, so we are taking our bows when we got it right.  After a scary sell off for some days last week the markets have settled down to a steady ebb and flow.  We have seen a couple of nicely up days retracting some of the losses of the previous week.  We are also seeing the normal reward and punishment of individual stocks when they report earnings.  Good example is Amazon this morning getting taken to the shed for a very poor quarter.  Frankly we are enjoying listening to people like Dennis Gartman do a mea culpa for their off bear market call.  Even Dougie Kass has been unusually quiet the last week after he said the Oct. 15 low was the start of the end of the world as we know it. Maybe after watching markets and studying this economy and business flow for now over three and a half decades we know something too. 

In the end mega cap stocks and blue chip companies with solid balance sheets and a slow steady crawl forward continue to hold ground and gain a bit too in stock price.  The no growth economy fits right in for these companies and they are increasing dividends and buying back stock to reward shareholders.  Pfizer this morning reported a huge buyback and this followed several others making similar announcements.  Apple last week noted they had bought back literally billions of dollars worth of shares in the last quarter.  These buy backs hold up shares in shaky markets, make earnings per share move up, and are frankly the right thing to do with profits when there is little reason to invest for growth in this economy where there is none. 

Again we state what we have been posting for some time now.  Continue to invest in retirement accounts in mega cap and large cap index funds.  Continue to buy the same stocks individually.   No we are not happy with a Obama led no growth economy, but smart investors play the market you are given and a slow steady 5% to 7% growth ain't bad if you are looking long term.  We find it not bad either for trading since we are back to 12% returns in our trading account.  

We continue to like low PE value stocks.  BP is a steal here at near $40.   AT&T looks good here at $33 and a well over 5% dividend.   NNC is undervalued by $2 per share, pays out a almost 5% dividend and has little downside risk.  Almost any large cap insurance company is priced to buy as well.   As little further out on the risk curve is SF and NEWM, both growth stocks we have been pushing for some months now.   We bought heavily into the sell off last week and have already been handsomely rewarded.   We own AAPL, AFL, BP, CSCO, GS, JPM, MET, NNC, O, PM. PRU, SF, T, and VZ in our trading account now. 

This market has at least two more years to go so stay invested, ignore the cat calls of bear market people, and enjoy the ride. 

Some trades this morning.

We continue to like the opportunities in the market at this lower valuation point.  Still possible to see an additional sell off, especially if something like ebola, Ukraine, or ISIS takes center stage by doing something big like ISIS taking over Baghdad. Bull markets do not end this way, low interest rates, valuations moderately high but not stretched to ridiculous, and of course a Fed that now is looking to boost rates no earlier than later 2015.  

There just is no real reason to crash or move down sharply like 15% or such off highs.  Smart investors, old time hands, who understand investor sentiment and resulting action are saying buy selectively. Leon Cooperman was on CNBC today at noon saying just that and he has made a ton investing in stocks and bonds.  So if you are in the market continue to be there and if you are regularly investing in retirement funds continue to do so and boost that percentage a bit as well. 

We were in the market this morning doing some trades.  AT&T, symbol T.  Verizon, symbol VZ.  JP Morgan Bank, symbol JPM.  Stifel Nicolaus, symbol SF, and Goldman Sachs, symbol GS.   GS was a new entrant to our trading portfolio replacing IBM which reported bad earnings this morning.  We made some money in IBM but prefer to move on here as we see no comfort in owning their shares at this juncture.  GS is simply a play on the financial engineering we have been posting about for some time now and we believe there is decent upside potential in GS with little downside risk. 

Today Apple, symbol AAPL, will be reporting earnings after the bell and we will take a look at that and will consider another 1200 shares of AAPL Tuesday if the stock sells off.  Apple should be good here for some several quarters so a sell off presents an opportunity to add some more profits.  We already hold 2400 shares our largest holding. 

We remain down a bit in our insurance holdings AFL, MET, and PRU, but still consider them good until our options expire in December.  Also BP, having sold off due to oil price drop, is a screaming buy right now at almost 6% dividend.  

          

Market Sell Off. Our thoughts.

As we have opined in the last few months we believe the underpinnings of this market will keep the recent sell off to a minimum. Yes, it could go to and maybe beyond a bit the widely accepted 10% move downward to make it an official correction or it may not.  In any case if it does go down more consider it a gift for long term investing.  Again we highly suggest mega and large cap stocks.  Just yesterday we made the move to invest our annual retirement contribution in the S&P 500 Vanguard Index fund, so we place our money where our mouths are going.  We are still fully invested in our trading portfolio and will step up Monday to buy some opportunities this sell off has offered up. 

The market is responding to a downturn in the economy right now. Europe is hurting and Japan is still lingering in nowhere land.  But the American retail buyer continues to spend and with the significant move down in the cost of gasoline much of that new found money will be spent just as we move into the holiday season.  That spending will also be a buoy on the market.  Add in that stock buy backs and dividends continue to move forward and expect that to pick up a bit now due to the sell off and the opportunity for large cap companies to buy back stock even cheaper. 

Maybe we are wrong as some pundits are saying now. The biggest bear we follow believes this is the start of a big sell off and he has been right before. But of course bears have called the last ten of two actual sell offs as they say. We believe this is a slow or no growth economy and we have it for awhile under Democratic leadership and it's high taxes and regulation.  Big companies thrive and small business dies.  So until something changes we continue to believe such and this sell off does nothing to change that opinion. 

As the Wall Street Journal noted yesterday we are seeing lots of financial risk taking and very little economic risk taking.  That again due to the issues the Obama economy has pushed on small business which is where most economic risk is taken.  We would expect tomorrow, Friday, could be a roller coaster ride since many traders might prefer to be on the sidelines for the weekend and it is the October options expiration day.  So keep your powder dry at least until Monday if you are buying individual stocks. 

Again if you are a retirement investor follow what we said earlier and buy some mega cap index funds.  If you are an individual stock buyer look around in the sell off for bargains.   We still like the big insurance stocks here for the long haul as they have taken a pounding the last week and screaming buys. PRU and MET are our favorites.  JPM just reported solid earnings this morning and has a low PE and looks good for the long term as well.  The oils have sold off too much and BP looks good here too. Note that low gas prices are here for at least two years as Saudi Arabia is pumping big time in an effort to hurt Russia and also push back on the current US energy boom.  

Other stocks we like right now are AAPL and SF.  APPL has a fixed base of buyers and they are into the latest new phone run so profits are headed up. SF has sold off way too much and now just above $40 is a solid short term and long term holding.    IBM has been taken to the woodshed this week as well and taking a position there could even make for short term profits.  BRK.B, Berkshire Hathaway has sold off here and offers up a good entry point for long term holders. 

Falling interest rates also make for investments in leveraged bond funds.  We still like NNC for North Carolina investors seeking tax free income.  NNC is now selling about $2 per share below net asset value. 

Keep the faith and understand this is a market event and NOT completely an economy event. At least not in the sense of being a big drop in business. Until the political equation changes to be pro-growth there is money to be made in markets like this one however if you buy correctly.  No jobs to be made and low interest rates hurt a lot of young and poor people, but as we continue to opine you play the hand, or market, you are given. 

           

 

Emerald Isle Area Restaurants No. 2

We opined on our choices for best restaurant options for the Emerald Isle area back about two years ago.  Having spent a good bit of time in the area during those two years let's make another run at the list.  This list is not all inclusive, nor is it listed in any order, just a list of where we believe are the best choices and what dishes we like. 

Lazzaras Pizza...We continue to find this little pizza and sub shop on the corner of Coast Guard Road and Emerald Drive a good pick.  The pizzas are always well topped with ingredients and the crusts good, if not quite crispy enough for our liking. The ease of getting one piece at a time is a plus if just wanting to get your pizza fix.  Small dining area that is comfortable, but they do offer outside seating that is nice in season.  The subs are ok, but we do not find ourselves wanting to dine of their subs unless it is a rainy night which makes for a quick trip for us.  Does close some in off season. 

Church Street Deli and Pub...This little place is in downtown Swansboro and we have liked it every time we have been there. Quaint and cozy little dining area and bar.  The food is excellent and we especially like the hot dog selection.  Anyone will feel comfortable here and find it a good place to sit, talk, and relax. 

T&W Oyster Bar...We really like this seafood restaurant about five miles out on Highway 58 from Emerald Isle.  The seafood is always quite good and the servings are plentiful.  They have good baked potatoes too. Try the hush puppies, but be careful not to fill yourself up with them prior to the meal as they are quite good and addictive.  The owner is most personable and comes by the table to check on your meal and chat.  We love the sorta seafood camp feeling you get in the place.  Fireplace in the winter makes it a good winter choice too.  Open nightly and on Sundays at noon. 

Village Market...Great little place that has excellent selections for higher end deli foods of all types.  Much of the food is made in house and the staff is friendly and helpful.  They have regular lunch specials that are good and do not forget to try their breakfast choices.  Small dining area that is a nice place to dine, talk, and just sit awhile. 

Mikes Restaurant...One of our favorites on the island.  A great place to eat breakfast and the price is right too.  Be sure to try their home potatoes which alone are worth the trip. The breakfast plates are plentiful and good for morning appetites.  We understand the coffee is good as well. The wait staff is friendly and the place just really good for eating well and enjoying the morning.  Frankly their lunch menu looks good too, but we can not tear ourselves away from the breakfast to try them so far.  Note the place closes at 2 PM. 

Rucker Johns...We come back to RJ's over and over.  Simply put the best place to dine on the island in our opinion.  The food is priced right, the quality excellent, and we have never been disappointed in any food choice.  Add in that the staff is well trained and attentive.  The manager generally drops by to check on your meal.  The place is very comfortable to dine and we honestly believe the food choices are so good we could almost dine here daily forever and never get bored.  Check the daily specials online.   Our favorites are the steaks, notably the prime rib.  We also heartily suggest the Tuscan Turkey sandwich as well.  The salads are well prepared and good choices, try the honey mustard and hot bacon dressing as it is first rate.  The baked potatoes are always cooked to perfection.  The Shrimp Bisque is a almost to die for soup choice if it is on the menu that day.  Having dined there a good bit and listened to comments from fellow diners we believe their might not be a bad item on the menu so take a chance.  Open year round. 

            

Interest Rates..Where are they headed.

This is a question we get asked at least once a day.  Frankly it is the easiest question to answer as well.  Rates are going nowhere.  They can not go down since they are at basically zero and they are not going up either.  Why? 

This goes back to the economy we have now.  The political economy that we opined on several times in the past couple of month is here to stay for some time.  The Obama economy, strangled by regulation and supported by trillions of Federal Reserve dollars, has not and can not achieve take off on it's own status.  What transpires is that mega cap stocks are making profits and with no growth economy to invest in are plowing those profits back into share buy backs and dividends.  Small business which took the brunt of the huge Obama tax increases, struggling with regulatory pressure, Obamacare rules, and not able to buy their freedom politically from such issues are hurting and hurting bad.  The fact that almost all new jobs come from businesses under 100 employees and they can not grow means they like their mega cap brethren have no reason to borrow money.  Not borrowing money means there is no pressure to push interest rates up there either. 

Note the struggle banks and mortgage companies have every time they try and build profits from higher home lending rates.   Last year they finally got over the 3% 30 year loan level and up above 4.5% to only find home buying dried up due to the higher rates.  Builders have seen huge drops in demand in the last 6 months due to those same rates.  Today rates are hovering just a few hundred basis points above 4%.  We frankly would not be shocked to see a 3% handle in the next few months.  There is just no demand in housing and without housing the economy just sinks further into no growth. 

Now if you hold stocks, mega and large cap stocks, you are doing very well.  Low interest rates have forced almost everyone into stocks.  Frankly if you own a CD or a Treasury Bond right now we wonder about your smarts.  Stocks being held up with buyback's, dividends, and low rates have a floor and we are currently fully invested in such thinking.  This market is a trader's dream, a little up and a little down with no worries of any real move either way. 

We see nothing that could change our minds on this scenario for at least another two years, even if the Republicans take over the US Senate.  We agree Hillary Clinton will win in 2016 and therefore will continue this crony capitalism with high regulations and high taxes.   The only thing that could make growth and most importantly job creation move upward would be a pro-growth new administration.  

So simply put we as mega stock investors are sitting fat and happy with Obama in office and a Clinton scenario.  Just more profits, more dividends, and more easy trading ahead in the windshield.  Yes we are screwing the young folks and the poor people but this economy is the one you got.  We suggest if you have investing assets place them in mega cap stocks and large cap index funds for retirement plans and get on board this ride.  

              

Market Downturn. What to do now?

The market has sold off a good bit the last week and some investors fear a crash or at least a serious correction.  We expect neither and we suggest you go back and read our two posts on the political economy back in July for starters.  The central point is the economy is not growing, but companies are making profits.  Companies have few reasons to invest for growth or future employees so they turn around use those profits and buy back stock, lots of stock.  Point is as stock prices move down expect the same companies who have bought back stock to keep up and maybe even quicken the pace. Stock buybacks reduce outstanding shares and increase stock values. 

Where to invest here?  Simply as we have suggested before if you are working and putting money in a retirement asset plan continue to do so and please pick a good index fund.  If you are looking to buy individual stocks pick those that are turning over big piles of cash regularly and have good valuations.  We like stocks such as CSCO, ORCL, AAPL, and IBM.  All these are good long term technology picks.  We also like PRU and MET, two insurance stocks with upside potential.   BP down here near $40 is a steal.   SF offers some significant growth potential in the financial area.   PM is cheap as well nearing $80.   JPM offers a solid bank value.  T, O, and VZ are great long term income and growth picks.  BRK.B is like having a stock as a mutual fund and would make a great retirement growth pick stock.  We really like NNC down below $13 for good upside capital gains and tax free income.  Lastly if one is looking for some opportunity at a big capital potential try NEWM. 

We have positions in all these securities or plan on doing so in the next month. 

               

 

Trading Portfolio Fall 2014

Our trading portfolio has changed some over the last month as we have dropped some stocks and added back some old ones as those old names have sold off a bit and reached value territory. 

AIG...new entry to our portfolio with a single digit PE.   Yes one will notice we have four insurance based stocks in our trading portfolio now. All like AIG are single digit PE and have upside potential when interest rates go up in the meanwhile they are at a point where downside risk is minimal. 

AAPL..Our largest trading position.  Apple at this point in the cycle has little downside risk and rich option premiums.  The only fear comes at some point in the cycle where traders start taking long term capital gains, which is a few months off. Still a fairly low PE of around 14 and we have a strike price of $87.50

AFL..This insurance stock continues to be a steady eddie for us producing regular income with little risk. Strike price of $57.50 might be lowered soon. 

BP...We are back in BP after the recent court decision finally put a high end figure on the fees that will get paid for the Gulf spill.  The best part is that payment is years out and the stock is trading again at a single digit PE.  Best value in the oil patch and we have it at $42.  Little downside risk even in a market selling off oil. 

IBM..We are not true fans of this tech company, but we love their stock buy backs and the huge footprint the company has worldwide.  Our price is $175. 

JPM..Still the best bank in the country.  Another single digit PE and our strike price is $52.50.  Bad news is priced in on this one. 

MET...Insurance giant which is trading in a single digit PE.  We like it because it is value priced with little downside risk and has upside potential if interest rates really do move up. Strike price of $50.

NNC..We continue to hold a very large position in this closed bond fund. With the recent sell off due to interest rate concerns we will be buying more soon once we believe it has set a bottom in price. 

O...Due to interest rate rising fears this stock has come back down into our price territory of $40.   We love Realty Income and its monthly dividend. 

PM..Another stock that has come back into our price zone at $80.  Phillip Morris has been hit by currency rate concerns as well as the new E cigs.  Both we believe it can overcome with its huge cash flow. 

PRU..Another insurance biggie. Does the insurance idea come through here? Insurance with large holdings of stocks, bonds, and other securities does much better with higher interest rates which helps them make more cash from these holdings.  Our strike price is $82.50

SF...We continue to trade Stifel Nicolaus because we like the company.  The management has proved to be wise in bolt on acquisitions and making money.  Our strike price is $40. 

SHLD...We are underwater in this stock.  We have made a good bit of money from this stock, but it looks like we will be burned this time and good with a strike price of $29.50.  Sears Holdings might really be going down. 

T.. Solid telecom stock at $34. 

VZ...Ditto solid telecom stock at $47. 

All these stocks would make good choices for your portfolio except SHLD.