Boring, Boring, Boring. Stock Market.

When we talked with our financial advisor yesterday we both searched for words to describe this market and both came up with only one word "boring."  After thinking about it for awhile we decided that indeed that was exactly what we had with both the economy and this market. 

Well we are here to tell you, boring is good, in fact mighty good.  We value the market as fairly priced considering the near zero interest rate environment,  near dysfunctional US Government, and near no growth economy.  The market truly reflects the environment right now.  Let's examine what it means for investors and traders. 

For traders like us we find we must work a lot harder to find trades and score profits.  But we are ahead of last year's pace by a good bit and we expect the rest of the year to be the same.  A boring market means little chance for losses and specifically large losses.  On the other hand it provides good opportunities for above average profits for those willing to do the research and take the time to wait for trades and not chase them.

For investors there is the steady drip of stock market price appreciation via the Obama spending spree/Federal Reserve low rate environment and the financial engineering of corporate stock buybacks and dividend increases. Therefore a regular monthly investment in index S&P 500 funds and letting them drip, drip, drip to gains is the obvious choice.  This certainly is not get rich quick, but it is get rich slow and that is just fine with us. 

Boring is beautiful it seems. 

Searching for Something.

Blah, blah, blah, the financial media blahs on.  Talk, Talk, Talk, the Federal Reserve weaves and turns and does nothing. Obama, Congress, and politics, nothing changes there either.  For about two months we have searching for something to post about and frankly there is nothing there since nothing, absolutely nothing, we have posted about in the last few months has changed.  

Our trading and investing portfolio has changed little.  Since January of this year we have added exactly one position China Mobile, symbol CHL, that within a week after our taking the position the stock rocked up about 10 points and we will take quick profits and go home soon.   We have not moved one iota from our mega and large cap stocks in our long portfolio and only the one change as noted in the trading portfolio.  In either case both portfolios continue they slow steady double digit move upward. The reasons are simple nothing in the economy or politics has moved period. 

The political economy of Obama and the Federal Reserve and almost zero rates is here to stay for at least 21 more months. That continues the generational theft that started in 2008 and continues apace today making those of us with assets safely getting richer day by day in our financial assets.  The financial engineering that is a result of the political economy of low rates and produces bigger than big stock share buybacks and regular increases in profits and dividends continues without any end in sight.  

The fact that here in the first few weeks of the second quarter 2015 earnings reports we get almost universally no increases in top line revenue growth, but almost universally bottom line profit growth tells anyone who has been around this game for more than a few years that few companies are seeing any new customers nor any customers spending more money with them. We indeed have reached the end of Obama and The Federal Reserve's game of tricks and ammunition to juggle figures or push the economy forward.  The bullets are all but non existent, except that if the economy dips again the Fed can restart the bond buying and add to their already $4 TRILLION dollar balance sheet with more bond purchases.  After what looks to be a dead or negative growth GDP in the first quarter 2015 they might have to dip back into that bag.  As they say a Trillion here and a trillion there and after awhile you are talking about real money. 

So where do we go from here.  We continue to stand by our prediction that nary a rate increase will be seen until after the 2016 election and if Hillary Clinton emerges as the winner maybe not anymore after that for eight more years.  Yes readers you heard it here first maybe almost a decade more of no rate increases, no interest earned on bonds, no interest earned in savings accounts, and lastly more asset appreciation for us holding assets. 

Be wise and keep your money in large cap stocks and get them out of bonds.  The only move we might see in the next twelve months is a concerted effort by banks and the feds is to push up SHORT term rates, not long term rates, in a last effort to run the very last hold outs from bonds into stocks and housing.  That is again one more move in the financial game by the politicians to get housing up and moving which is the first sign of economic growth.  Think about that we are years into a so called economic recovery and the powers that be are still trying to get the first thing that moves in an economic recovery moving and that is housing. 

As for us we will soon be heading to the beach to spend some of that lovely money you young folks and fools keep sending us out of your paychecks and future hopes for a better life.  That means we will be spending the young generations future fun money now.  We will send you a picture card young folks if you will forward an address, we already got your money for the stamp.  I believe the current President and the future female occupant of the White House call this "fairness". 

Rate Hikes and the Stock Market

We have been on record for some time that any rate hike from the Federal Reserve is over a year away.  In fact we see none until after the 2016 election cycle.  Even then if it comes it will be quite small with a note from the committee that they are done for awhile.  Here is our thinking. 

The economy is still weak.  Retail sales are lagging and home sales can not get past start.  The media and more importantly the financial media is just flat out ignoring those facts.  The Fed fortunately is not.   Note that home mortgage rates refuse to go past the 4% mark for a 30 year loan. Move above that 4% and home sales drop every time. That in turn keeps a lid on housing values as those two elements are linked. Add in that many young people can not afford a new home while working as a service worker, which are the only jobs being created presently. Retail sales too are not growing as noted by the continuing closing of stores by chains such as Target. Those two financial facts alone dictate the truth that employment is still way below where it needs to be in this country. Despite the headline seeking below 6% unemployment rate the fact that there is no wage pressure tells anyone who has been a long term observer that there are lots of employees seeking the few jobs available.  Now much of this labor weakness is the lack of marketable skills and the unemployed not matching the jobs that are open. Many just refuse to take a job, any job, to keep the money flowing. The UNDERemployment rate is still over 10% and reflected in federal data. 

So with these weaknesses the Fed is unable to push up rates with no demand for loans and no demand for business expansion. This economy is also being restrained by huge regulatory burdens and high taxation of SMALL business put on by the Obama administration where the mass of new job creation always comes in the economy.  The jobs that are there are entry level, which again many young folks will not take due to being over qualified.  The ones that are taking jobs are jobs in the service and restaurant industries as we noted earlier where the wages are low. The Fed also sees a world economy as weakening and Europe, China, Russia, and Japan in economic trouble. Finally the political angle, no way the Fed raises rates in an election year when they need a Democrat to win the White House to keep them appointed to the Federal Reserve Board. 

We again touch on the generational theft that is occurring with the twin issues of low rates which constitute the financial engineering of allowing big corporations borrow debt to buy back stock and the continuation of mega corporations to use profits to buy back more stock and reward those who are shareholders.  Obama's huge deficits and mountain of national debt are rewarding those who are the ultra rich and just want 2% or 3% interest from US Treasuries for their huge asset bases to throw off nice sums of interest to live on.   These ultra rich, like the shareholders noted above, tend to be older gentry rich or the retiree rich in lifetime accumulated assets.  How long we will continue to vote in the people who keep this generational theft going who knows.  The electoral control is now mostly in the under 35 year old voters who seems to be clueless in their foolish actions of electing those who continue the generational theft of using government to pad the rich and retired and take jobs and opportunities for the young. 

In the end those who continue to own stocks, and we continue to suggest large corporations, will prosper and be comforted.  Seems we now afflict the already afflicted and comfort the already comforted.  We who own assets are thinking another eight years of Hillary Clinton and we will be nearing the end so who cares who the Republican nominee is if we can run out the clock doing life this way. Think of it like this, if you hold AT&T and Verizon, both paying above 4.5% dividends you are getting a nice return on your savings.  All the while with the solid safety of knowing the young folks hooked on iphones and such are using their precious few dollars in pay to support you by being coddled and amused with their toys.  The beat goes on. 

Current complete Trading Portfolio, Mutual Fund list, and Watch List.

We offer our current entire trading portfolio, watch list portfolio, and mutual fund list here.  We continue to find the market safe and suggest mega and large cap stocks and stock funds.  Avoid corporate bond funds, real estate, utilities, and anything that can get hurt with a raise in interest rates.  We still believe there will be no Fed raises until late 2016, but ere on the side of caution. The strong dollar will support the stock market for the foreseeable future with the influx of foreign capital. Add in the huge Federal Reserve US Treasury portfolio and continuation of Obama's spending. That political economy and the financial engineering of stock buy backs makes for opportunity in investing and trading for at least another two years.  This generational theft should continue under Hillary Clinton as President assuming enough people continue to buy into this scheme. It is indeed a great time to be a trader and investor if you are past 55 years or age or so. 

AAPL....Apple is our largest holding.  We continue to like this company for the long haul but believe it has traded a bit ahead of itself here and will wait for a pull back before adding more.  However if you looking for long term you will be fine here at just below $130 as the people who buy their products are literally addicted to buying anything new that comes out making for high sales and high profits for as far as the eye can see.  Their stock buyback program is second to none. 

AXP...We believe American Express sold off a bit too much as going forward any of the big three issuers of credit cards are the toll makers for more and more payments by everyone for everything bought going forward.  Amex still has the high volume high ticket card holders which makes for high profits that even Warren Buffet likes. 

C...We like Citigroup for the value and like financial stocks for the upside potential. The big four banks offer almost complete safety due to the "Too big to fail" rules now in place with the increasing dividends and capital gains soon to come when interest rates finally begin to rise. Banks are now fully regulated utilities that have yet to find full value like their cousins electric utilities. 

GCI...We are waiting for the spin off of the newspaper group from Gannett as the spin off will consist of some nicely placed properties that will be undervalued for the profits they will make.  The key is how much debt the new company will be saddled and if not much will allow them to go buy some cheap newspapers out there. We are waiting to see what value might emerge. 

GILD...Gilead Sciences is a undervalued drug company that is becoming the big player in bio.  There is risk, but at a single digit PE much of that is priced in for their blockbuster profit making drug line. 

GS...The big bank not included in the big four too big to fail group but offers good value and the opportunity to gain from the bank advisory services. Goldman Sachs also has the blessing of a deep attachment to Hillary Clinton the assumed next US President. 

INTC...Continues to pump out profits, stock buybacks, and is involved in almost everything digital. Yes there is concern about Intel not being involved enough in mobile however we believe the death of computers is an assumption that will not happen. 

JPM..We like JP Morgan best of all the big four banks. It is value priced and has great management. 

MEG..Little known television station owner is primed to make some big money in the coming 2016 political season.  There is high risk here and we are waiting to see if the stock sells off and gives us an entry point where risk is less. 

MET..Metropolitan is the biggest insurance player out there, notably in the life insurance business.  The low PE means it is value priced and like other insurance companies is primed to make some good profits when interest rates kick up and their premium pool can gain from higher rates. 

MSFT...Microsoft under new management is getting smart about future business.  The next Windows upgrade will be the last as the company begins to concentrate on cloud services and other higher value tech business. 

NEWM..New Media Investments..Simply put our favorite stock for future capital gains.  This small newspaper acquirer is using stock sales and little debt to buy newspapers on the cheap. We are leveraging up more in this small cap stock.  Do not underestimate the opportunities in smaller newspapers who still have a monopoly status in their markets and are making good profits. 

NNC..Our go to North Carolina Muni Bond fund.  This closed end fund is undervalued by almost $2 per share and pays right at a 5% tax free dividend.  Here is a great place to collect cash and wait. 

ORCL...Oracle is the big fish in the software pond and therefore when anyone is upgrading or rebuilding their products are a must buy.  Value priced. 

PM..Phillip Morris is the largest international player in the tobacco industry. Despite some pullback from being hurt by currency risks this company is very shareholder friendly and does big buy backs and increases dividends regularly. 

PRU..Prudential is a large player in the insurance industry.  It is undervalued and ripe for a move upward when interest rates finally make the move upward. 

SF..Stifel Nicolaus has been on a consolidation binge for some time.  We like this stock and management a lot due to it's skill at folding in acquisitions and it's savvy for finding smaller players in the financial industry to fold in to slowly make SF a big player in the stock market game. 

T...AT&T..continues to be a steady eddie stock with slow growing dividends and safe place to park capital. 

TCAP...Triangle Capital..We really really like this stock. Great safe dividend, fabulous management, and good capital gains potential. 

VZ..Verizon..Large telecom stock which we have been trading for a long time. Steady growth, solid dividend, and sleep well at night. 

VEIRX...Large cap Vanguard value fund with lots of dividend paying stocks.  The Equity and Income fund is a good choice for dividend income, stability of principal, and better than average capital gains. 

VFIAX..This Vanguard Fund is the S&P 500 index fund.  Basically owning percentages of the largest 500 companies in the US.  Stability, growth with the market, and as Warren Buffet says betting on the health of the American economy going forward.  Absolute essential fund for every portfolio. 

VWIAX...This Vanguard Fund is in our opinion the best one for stability of principal while giving you some solid dividend and bond interest income.  Wellesley Fund is 60% stocks and 40% large cap corporate bonds.

                 

Triangle Capital and New Media Investments

We highly suggested a handful stocks for purchase in 2015.  Two of which were Triangle Capital and New Media Investments.  Both of these companies are proving us right as we get first reports of income and dividends for the first quarter.  Let's take a quick look at what we know now and what one might expect for the next few months from these two stocks. 

Triangle Capital is a well run, maybe one of the best run, companies we know.  Late in 2014 the stock sold off down into the upper teens price due to what we consider a small credit concern in the last earnings report.  There was also concern about rising interest rates would eat into their income going into 2015.  Both of these concerns have proved pointless as the credit issue has not popped back up and we now know interest rates are staying put for the foreseeable future. We are on record of saying interest rates are going nowhere through 2016.  Triangle Capital has yet to report earnings for the last quarter and is scheduled to do so in early March, but they have stated the first quarter dividend and added a nice 5 cents to the regular payout.  In all we believe TCAP is a buy right here before the earnings report and the 10% dividend looks safe.  We expect the shares to top $25 before year end and maybe ease up close to $30.  In all a nice annual profit. 

New Media Investments we believe has one of the smartest game plans anywhere.  They are using equity raised from shareholders, not debt from banks as newspaper chains have done in the past, to fold up newspapers into an ever increasing group.  The key here however is NEWM is buying in the sweet spot of the newspaper business, small to medium sized weeklies and dailies.  We have been pushing purchase of this stock for sometime now and we have been proved right. The stock is now up over 10% from our suggested purchase price just two months ago and the that does not include the dividend.  The company just reported earnings this morning and they were excellent showing gains and nice expense control.  They also raised their already nifty dividend to 30 cents per quarter getting them back to over 5%.  The dividend is supported by a solid cash flow.  NEWM is buying newspapers for 3 to 5 times cash flow which would be unheard of in the past regarding newspapers. These newspapers are making 8 to 12 times cash flow so one can see they are immediately adding to NEWM's cash flow.  Such is the dynamics of the newspaper business today.  We spent over 3 decades in the newspaper business and have been pounding the table that small dailies have a monopoly status in the markets they operate and none other than Warren Buffet supports our thoughts as he is buying up these newspapers as well.  Go out and buy NEWM today and you will get a nice dividend and should see above $30 share price by year end.  Might even push $35. 

We have a position in NEWM. 

Your best investment right now.

We have been here before about three years ago and once again this once in a lifetime opportunity comes forward.  We really think this is your last chance to get in on this incredible deal in the next maybe 80 years.  So consider doing so before it passes you by this time.  We expect this is worth at least $100000 to your pocket too and almost anyone can get in on this opportunity. 

What we are suggesting is buying a home to live in and taking out a 30 year loan.  The 30 year loan can still be had under 4% if you move on it now.  We personally have a big fat 30 year home loan under 4% and will not pay the loan off until the very last day of the very last payment being due. Borrowing under 4% for 30 years is like free money in that one can bet interest rates will rise back to a normal 6% or so at some point and maybe higher if inflation takes off.  So using someone else's money, like your bank's money, for that long is simply the best bet for an investment right now. 

Add in that in many markets it is still a buyers market as many house buying prospects are likely more like suspects in that they can not qualify for a loan.  Good credit and some money to put down and you got a pre-approved loan nowadays and the opportunity to use that leverage to negotiate from a strong position with home sellers who are needing to sell. 

Finally last and certainly not least we are still on record saying the 30 year fixed rate home loan will soon be history.  Federal support of these mortgages ends sometime in 2017 as it stands now and past that point mortgage lenders will not want to take on the risk of a 30 year loans, especially under the Dodd Frank financial laws passed in 2008. 

So go find a new home, not a house to invest in, but a home to live in.  Take out a 30 year cheap interest loan and know you have done the best thing you could do with your money right now. One can also expect that you will get some additional home price appreciation if you pick a good quality home, keep it up, and buy in a good neighborhood.  All in all a win win. 

Fox in the hen house!

This must be another gilded age and frankly we are glad to be right where we are at this moment.  We continue to trade and invest and see nothing but gains.   We are of the opinion that much of these gains are stock and fund picking that has proved to be right.  Read back over some of our recent posts and you will note a concentration on mega cap stocks and municipal bonds, which have proved to be excellent vehicles for profits in this environment.  Financial engineering via stock buybacks and higher dividends rewards those in the mega cap selections and low rates delivered via political decision making by Obama and The Federal Reserve have helped make the mega caps richer and richer and give municipal bonds holders well preserved profits from lower than low rates.  It is indeed a blessing to be here. 

In this case the fox in the hen house gets the chicken and runs to safety without a shotgun raised nor anyone complaining. The thing is that we have been raiding the hen house for some months going into years now and still no danger for the fox. Our trading portfolio having moved into now the third trading month of the year has tilted ever so much towards undervalued financial's JP Morgan, Citibank, American Express, Goldman Sachs, Met Life, and Prudential exactly those stocks getting rewarded by the Obama administration and soon the Clinton administration.  Ditto for the move into technology, Apple, Microsoft, Intel, Oracle, AT&T, and Verizon, again those getting byes on regulation and taxes polices from the Obama and who in turn contribute to his political leanings.   We finish out our current trading portfolio with New Media Investments a company raking in cheap medium and small sized newspapers where we believe the sweet spot lies.  We would also like to note our stock of the year pick Triangle Capital is up over 10% since we suggested purchase only two months ago.  It is good to trade and profit with the politically connected and rich in this new gilded age. 

Yes as we have said before there are huge numbers of people without employment and it will remain that way since the purpose of current political policy is not to gain jobs but to keep people on the government dole and down on the plantation voting for the current administration and next administration in power.  In the meantime it remains good to be the fox who can make endless runs to the hen house taking candy from babies and participating in the never ending generational theft.