Permanent QE and Zero interest rates.

Like it or not as we see the economy Quantitative Easing and zero interest rates are here for at least another two years and maybe another 8 years plus if Hillary Clinton wins the Presidency in 2016.   Low rates and QE are not positive for growth nor job creation, but they do offer continuing opportunity for those with assets, notably financial assets, to keep gaining wealth. 

As we have noted before we find the current financially engineered political economy a downer for future prospects of young folks seeking employment and for those employed the hope for annual raises of any quality or job promotion of the type know in the past being non existent.   Economic growth needs business conditions to be competitive and consumers with jobs to make growth happen and push interest rates up.  This is not happening now as evidenced by just this week's housing index where rates moved up just a few basis points and the refinancing mortgage business go bust.  There is little to no inflation or business growth so the Federal Reserve has no impetus to push up their zero rates.  Inflation of course is essential to business growth and the ability to cover expenses as they inch up annually even without payroll inflation. 

Ditto for job growth being dead since the ever recycling of money at zero interest rates and no inflation means all business is doing is making the same profits over and over.  Therefore no need for additional employees and no meaningful raises for those already employed.  Small business is not growing and actually slowly losing profits due to the no growth being non expansive.  Corporations, most notably mega cap corporations, are experiencing the same no growth business scenario. However they have the option of reducing share count with the resulting financially engineered increase in profits via the reduced number of people feeding at the trough.  Small business being closely held does not have that option. Large corporations also can spread the same profits over less shareholders and increase the profits paid to each shareholder. 

Now only fools do not see that if one owns shares in mega and large cap stocks the resulting growth in share value and increasing dividends that actually support those capital gains makes for opportunistic investing.  We were asked just last week if we were 35 years old again would we invest or reinvest profits in a standing small business and the answer was a resounding no, when it was so much easier to sit and collect growing financially engineered politically protected capital gain profits from owning stock in large corporations who can play the Washington DC game and small business can not. 

So unless something changes in Washington DC where we elect leaders that go with growth policies we will continue to invest and reinvest in large caps and sit in our chair on the beach and smile.  Sadly many of those who can not see the difference in a no growth financially engineered political economy and a growth economy when voting will likely be those awaiting our needs at the beach.  Yes, I will take a baked potato and large salad with that steak please. 

 

            

 

Looking into 2015

We remain convinced that the market will continue moving upward through the end of the year. In fact we are betting on a continued move upward, with hiccups downward along the way, for another two years.  Mega caps and large caps are being rewarded for being compliant with the Federal Reserve and Obama administration policies see nothing but blue sky ahead. The financial engineering and political economy marches on despite the change in Congress. We will suggest your reading our postings on this idea back a couple months ago when during the stock downturn we loaded up and have been richly rewarded.  We hope you did as well. 

This posting is for targeting some ideas going forward into 2015 so as to position your money and retirement funds for the best returns.   We are fans of lost cost customer driven funds by Vanguard and if you have a choice use their ETF's and funds for your investing of retirement assets.   MGV and MGC are excellent ETF's for placing your money now and for at least the next two years.  Throw in some VOO and sleep well at night.  VFIAX and VEIPX and excellent Vanguard funds for the same purpose.  If you are past 55 years old VWINX is much better than playing the target date funds with still putting money in VFIAX.   We are not fans of target date funds because we believe even at 80 years old all retirement portfolios need a healthy doze of stocks. 

Individual stocks picks default to value based mega and large caps for us if one is picking stocks for your portfolio.  BP here at under $42 is a screaming buy for long term portfolios.  The cost of the Gulf cleanup is priced in as well as the downturn in oil prices.  If there is a better buy in the market now we do not know where.   PRU and MET two large insurance companies are priced for a zero rate economy and sooner or later that will change and with even a hint of a rate increase these two companies with large portfolios to invest will increase profits going forward.   A dash of AAPL since the customers of this company are like tobacco users totally hooked on the products and will pay anything to get the upgrades.   We also like NEWM for long term capital gains.   SF has upside as well for long term gains.  Finally for those past 55 years old buy some NNC for capital gains and a nice tax free dividend. 

Do not listen to the doomsayers keep invested in America and do it smartly by following who is being rewarded by politicians and the federal reserve. 

               

 

Fall Trading Portfolio.

Our fall trading portfolio is nothing but slow and steady.  We are completing one of our best trading years and see no reason other than keep on trading financially engineered stocks. Below are our current picks with a short comment on each. Almost all of these picks we got in on when the market sold off in October and we are enjoying the fact we believed in our market analysis of the market being ruled by financial engineering and a political economy to keep rolling on. 

AAPL...We continue to hold Apple as our largest holding and have wanted to expand it a bit as well, but the price is starting to get frothy to us and we might just hold off until a sell off occurs.  We are in at $87.50 and $90.  Note that the company bought a truck load of stock back last quarter. 

AFL...Slow steady insurance carrier which we have traded for some time.  We hold it at $57.50.  

BP...We still believe this stock screams buy me at the current price.  Oil per barrel might be down but oil companies like BP will continue to do just fine for the long haul.   Our price $42 as we are a bit underwater here.  As a side note here if oil continues to sell off we will likely take a look at XOM as well.  Sell offs create value of course. 

CSCO...Continues to chug along, raising the dividend, buying back stock. and making us profits.   Our price $23.

FB...A new security to our trading portfolio and unlike most we hold this one was simply a sold off value buy.  Our price at $65 makes us most comfortable long term even in a sell off. 

GS..Did we ever catch this one right.  We got in at a single digit PE and a strike price of $160.   

JPM...JP Morgan has moved up a good bit since we got in at $50.  Even now it is selling at a single digit PE so we will stay in for awhile longer.  Nice dividend and lots of buy backs continue. 

MET...Another of our single digit PE insurance stocks.  They just reported some additional stock buy backs and decent earnings.  We believe the insurance stocks are great buys right now because they will prosper more than any other financial segment when rates are moved up a bit sometime soon.  We are in at $50.

NNC..It has sold off recently,but at $2 under net value and a 5% tax free payout we are happy just staying long and collecting the cash.  We are in at $12.92.

O..Realty Income has moved up nicely in the bounce back and might again be getting rich for our liking.  We are in at $40.

PM...Great well run tobacco company that is headquartered internationally.   We are most happy with the $80 price we are in at along with continue dividend increases and huge stock buy backs. 

PRU..Another solid large cap insurance stock at a single PE, nice dividend, and lots of stock buy backs.  Our price $82.50

SF...Continue to plug along making money, merging with smaller firms, and making us profits.  Price $40.

T.. Steady eddie telecom stock.  Buy and forget, collect the dividends and enjoy the stock buy backs.  Price in at $33

VZ..Same as above.  Price in at $45.

ORCL..We have not traded Oracle yet but it is on our list as a replacement going forward at $38. 

NEWM..We just pounded the table on this stock and continue to suggest long purchase.  6% dividend and long term capital gains potential.  Take a look at a recent posting for full explanation

NEWM is a BUY.

As a stock and option trader we come upon occasionally really nice opportunities for long term capital gains that say BUY ME and BUY ME now.   In some past postings we have mentioned this stock, but feel the need to do so again since their most recent earnings report was solidly what we expected and the stock began to make that move upward. 

New Media Investment Group is a spin off of another media company that did not want the slow growth newspaper business.  But slow growth does not mean no growth and certainly does not mean is not making money.  Newspapers have taken a bad rap in the last decade much of it due to the bad management practices of large chains that got into too much debt buying up large metro newspapers at a premium price.  Almost all the big newspaper chains are on a downward spiral and losing readers, losing revenue, and barely making enough money to pay for the debt load. 

That however is not so with the smaller newspaper business.  Small dailies in small towns and some larger non dailies are thriving.  Trust me on this one as we have almost 4 decades of experience in this field having retired from working with small dailies just like the ones we are posting about here.  If you do not trust us consider that Warren Buffet and several other billionaires are buying up smaller properties and seeking more as they see what we see and that is solid profits that can be reinvested and paid out to shareholders.  Solid profits such as 12% plus annually. 

Up to some time ago there were no publicly traded newspaper companies as far as we knew who specialized in this growing field of opportunity. New Media is the first we found and they are doing just fine.  They recently completed a share offering that boosted their cash pile as they seek additional newspaper buying opportunities.  We expect they will continue to buy newspapers and this time unlike the buyers in the 1990's buying spree they will be buying at bargain prices or at least at fair prices. NEWM  their stock symbol is a worthwhile long term investment here at just under $19.  Add in they pay just under a 6% well covered by cash flow dividend. 

What's not to like a good capital gains opportunity.  A stock that we believe could double in price over the next five years. A stock that pays a good dividend while you wait and add in solid management.  Now do not go out a load up all your portfolio on this stock, but do consider it as part of your overall diversified holdings. 

Political Predictions

Yes we really bombed with the May primary predictions.  But this is a new day and new predictions are needed so let's take a look at some local, state, and national races we consider competitive and size them up.  We may be often wrong, but we are never in doubt. 

Johnston County Register of Deeds... Michelle Ball we believe did every event on the county calendar, visited about every nook and cranny in the county, and even did a round the county tour.  Ms. Ball did what we would do as a candidate in a county where it is hard to reach people via the media and that is retail politicking via handshakes and getting face to face with voters. Michelle Denning has also got out , but as best we can tell not to the extent that Ms Ball has done. In our opinion this county has not seen someone as adept at winning votes and doing politics like Ms. Ball since current Sheriff Bizzell.  In the end unless Ms. Denning can find someway to change the dynamics of the race the advantage Ms. Ball has with an R by her name in Johnston County it is likely too much to overcome. 

Seventh Congressional District....David Rouzer has done more than his due diligence in this conservative voting leaning district by getting out and taking nothing for granted.  We expect this race might turn into a laugher in the end due to his hard work.  We frankly are impressed with Mr. Rouzer's not measuring for drapes early and that could bode him well if he wins. 

Second Congressional District...What could have been the toughest race for Rep. Renee Ellmers could also turn into a wider than expected win in this district.  Ms. Ellmers who seems to be the energizer bunny has got out among her voters and business contacts and let people know she wants their vote just like a first time candidate would do.  Her opponent Clay Aiken who we frankly believed could have won this district has been hurt by poor use of resources and not finding a way to make Ms. Ellmers make a mistake that the national media could pounce upon. 

NC US Senate....This race that could have been a fairly easy win by Thom Tillis has been made harder by what he allowed to be done to him in our opinion. He allowed Sen. Hagan to paint him as anti-education early on.  The most important rule in campaigning is to NEVER let your opponent paint you something before you do likewise to your opponent.  All of the education ads are frankly a outright lie, but this is politics and that means hardball is allowed.  Ms. Hagan is frankly a bad candidate and comes across so on in person and on television is a bit better. That is why she skipped the last debate.  Mr. Tillis would have been smart coming out hard and early on at Sen. Hagan painting her as nothing more than a stand in for the unpopular Obama.  The recent ruling on gay marriage is bad timing for Democrats since it will energize some social Democratic conservatives that might have sit home and small numbers will mean a lot here.  We also believe black turnout needs to reach towards 30% of the electorate for Sen. Hagan to win. Sen. Hagan must win Wake by 12% plus percentage piling up votes in their liberal leaning county to win so keep an eye on those numbers in Wake early on.  We have gone back and forth on this race for days and only now believe we see a winner.  The early vote in our opinion was won by a percent or two by Mr. Tillis by older voters coming out strong.  Rural Democrats seem to be breaking late for Mr. Tillis and if that continues as we think it will into the election day run of about 50% of the entire vote Mr. Tillis will pull this one out.  Add in we think that we will know the result by 10 PM or so as others like us will be checking the votes in Wake to check if Sen. Hagan has done well enough there. Yes we are going against many pundits here but we REALLY think this is the end result. 

NC Senate...The Republicans will remain in control of NC Senate, but lose 3 seats.  Loss of super majority. 

NC House...The Republicans will remain in control of the NC House and lose 4 seats.  Keeping their super majority. 

National US Senate picks.  Republicans pick up West Virginia, Montana, South Dakota, Alaska, Arkansas, Louisiana, Colorado, and Iowa.  New Hampshire, North Carolina are close toss ups but should swing if the Republicans are having a good night which we believe they will.  Watch the Kansas race as possible loser for Republicans.  If things are going really well for Republicans Virginia and New Mexico might flip as well. Lastly do not be surprised if Angus King in Maine decides to caucus with the Republicans if they win control. Sen. Mancain in West Virginia might switch parties as well. Finally I count 9 new Republican seats net. 

Important Race to watch...Florida Governor.  If Crist pulls this off beating Scott that says two things.  One Florida voters are out right stupid picking the sleazy Mr. Crist, much like Virginia did with Mr. McCauliff last year.  If Crist wins in Florida that might will bode well for the 2016 Presidential election for Hillary Clinton.  Virginia has turned from red to blue in the last few years and Crist winning Florida would mean that state is not far behind.