Triangle Investors

Monetary & Fiscal Disaster

Andy Robinson — Tue, 15 Dec 2009 21:43:30 +0000

I’m going to let this article speak for itself. It’s a long read but well worth thinking through the sandy foundation upon which our currency is built. We need to be in wealth preservation mode until such point that the government reins in its reckless behavior. Unfortunately our investment options are not terrific at the moment. The stock market is still overvalued. However, some protection against inflation can be found in precious metals, commodity stocks, and sound dividend paying stocks which have lagged the surging market since March. I have been accumulating more Exon Mobile on the recent pullback (XOM).

Stages of a Rally

Andy Robinson — Thu, 12 Nov 2009 19:30:55 +0000

The government may be able to keep the stock market party rolling a few months longer with more deficit spending and dollar destruction, but we’re clearly in the later stages of the amazing rally off of the March lows. I’ve found an interesting article that describes the typical stock market rebound after a crash, which they break into three stages. While one should always allocate a portion of money to stocks, I’d recommend over-weighting cash at the moment. I’ve long recommended owning precious metals and commodities as protection against government easy money policies, and would still encourage adding more on dips. When the Fed is forced to remove its stimulus due to deficit restrictions or accelerating inflation, we are likely going to sink back into recession again. If that happens, the stock market will plummet significantly since stocks are by no means cheap by any valuation method.

China’s Red Flag

Andy Robinson — Thu, 01 Oct 2009 13:36:43 +0000

The Chinese economy has exhibited increasing similarities to Obi-Wan Kenobi (help me Obi Wan Kenobi, you are my only hope) for getting the world out of this economic slump. This being the case, it bears paying attention to the Chinese stock market performance as a leading indicator of the strength of our own recovery. The Chinese market, which topped in August and is in the process of correcting, is at best an ominous warning that our party is nearly over. Read this yahoo finance article for some more data and charts.

BS Rally Today

Andy Robinson — Fri, 21 Aug 2009 19:49:18 +0000

We’ll have to see if next week we finally get the beginning of a correction but it’s obvious that Goldman Sachs has a lot of call options expiring today that they needed to make good. The stellar existing home sales reported are mainly bolstered by the low end price points (ie foreclosures and 1st time buyers looking to cash in on government largess). Foreclosures will continue to rise now that 13% of all mortgages are delinquent so we may get even more “great” economic news over the next few months…at least until the first time home buyers money runs out. This bear market rally has lasted much longer than I expected it to, but count it as a gift and use it to take more money off the table and hold cash. I wouldn’t short since this momentum is extremely strong unless you are buying Nov put options as a hedge for an existing portfolio position.

The “Credit Cardholders’ Bill of Rights” and You

Jordan Chin — Thu, 21 May 2009 18:40:26 +0000

Just yesterday Obama signed into law what has been dubbed as the “Credit Cardholders’ Bill of Rights”. This law in effect claims to “restrict credit card practices and eliminate sudden increases in interest rates and late fees that have entangled millions of consumers.” So what exactly does this mean for financial savvy consumers like you? MSN and CreditCards.com investigates…

* Limited interest rate hikes
* More time to pay monthly bills
* Highest interest balances paid first
* Limits on over-limit fees
* No more double-cycle billing and lower subprime fees

http://articles.moneycentral.msn.com/Banking/CreditCardSmarts/What-the-new-credit-card-law-means-for-you.aspx

Prepare for Inflation

Andy Robinson — Wed, 20 May 2009 13:19:35 +0000

In attempting to fix our economic problems of debt and over-consumption, the US government is flooding the country with dollars raised by more debt. The Fed maintains that it will turn off the liquidity spigot at the first sign of inflation, but the political reality is that they will keep rates too low too long for fear of us slipping back into a double-dip recession just when we are starting to emerge from the woods. Although we are likely 6 months away from seeing many tangible signs of inflation (although food prices have spiked recently), now is the time to take active steps to protect one’s purchasing power.

My recommendation is to add some exposure of precious metals to your portfolio, although longer term aggriculture and energy have terrific fundamentals. Of the precious metals, my top choice is silver (SLV) because it has lagged the performance of gold. Back in 2007 the price of gold to silver was a multiple of 50, but has now widened to a ratio of 72. Silver will serve as an inflation hedge and will get a further boost when industrial demand returns. I have allocated a portion of my portfolio to SLV and am anticipating holding it for at least five years.

Bear Rally versus New Bull

Andy Robinson — Mon, 11 May 2009 19:02:26 +0000

Since March 9th we have witnessed an explosive 37.5% rally in the S&P 500 index on renewed optimism that economic indicators are declining at a slower pace, and that the US is poised to return to growth before the end of 2009. While this may in fact may pan out to be true, the dramatic rally has increased the inherent risk in owning stocks by making them no longer cheap. Historically, we see price to earnings multiples in the high single digits when a bear market has run its course during a recession. Based on analysts’ current earnings projections of $57.17 for the S&P 500 in 2009, we would currently be paying 16 times earnings for the index (which is about the historical average). Buying stocks at an average multiple for what looks like below-average growth potential for at least several years to come appears foolhardy.

My recommendation at this point is to take advantage of the market’s recent move to increase cash (the appropriate level to hold would vary based on individual circumstances). While it’s certainly possible for us to keep rallying, perhaps even as far as 1100 over the near-term, history indicates that we can expect cheaper stock market prices than current levels. It would be prudent to raise some cash while maintaining some market exposure. If the S&P 500 falls below 800, reinvest some that cash we raised now; if we fall below 700 consider reinvesting more. This article takes an interesting look at two previous bear market bottoms in 1932 and 1974. It’s worth appreciating exactly how brutal and lengthy bear markets can be.

No Panicking!

Andy Robinson — Wed, 23 Jan 2008 18:02:49 +0000

Now is the time when normal investors get fleeced. Warren Buffet once said, “Be fearful when others are greedy and greedy only when others are fearful.” Unfortunately individual psychology tends to move along with the pack. When the stock market was skyrocketing in the 90’s, most investors didn’t have the willpower to trim tech positions and reallocate to bonds, cash and defensive equities. The same is true now. It takes willpower to not sell out of the stock market and to keeping adding new positions. The key to investing success is to have the right portfolio mix between different asset classes, which is determined by length of time until retirement and financial goals. I am young and completely in equities. Although this bear market is painful in the short term, I am confident that the stock market will soon find a bottom after a bit more volatility, and that the second half of the year will be marked by a strong rebound as soon as it becomes clear that the worst of the turmoil is behind us.

Investing for Income

Andy Robinson — Wed, 28 Nov 2007 14:28:12 +0000

Traditionally one thinks of using bonds as an income source in retirement, but with yields on the 10 year Treasury note dipping under 4% recently and inflation still a strong concern, other options need to be found. One option that seemed great until six months ago is trading debt quality for higher yields. In an effort to beat treasury returns, financial institutions bundled together lower-quality mortgages and individuals bought high-yield bond funds. In this environment, we still need to shun low quality debt because it loses a lot of value in an economic downturn. I agree with this WSJ article that investors seeking income need to consider picking up value stocks. The recent pullback has given many companies, particularly financials, a much more attractive yield than treasuries. And over time, dividend-paying stocks offer protection against inflation because, as a company’s income rises, so generally does its dividend.

Keep your focus long-term

Andy Robinson — Thu, 08 Nov 2007 14:14:04 +0000

The article Don’t Be Fooled by Randomness reminded me that I, like many other investors, tend to start thinking too short-term with their investments. This is particularly true during volatile and exciting times. When it comes right down to it, the fact that the market is down 4% since I glibly proclaimed myself “all in” is meaningless to my long-term financial well-being. The best way to gain and preserve wealth is to find valuable companies and invest in them for a long time (forever if the fundamentals stay as good as when you first bought them). I will stay the course with my 100% allocation towards equities. This allocation is not suitable for those anywhere near retirement age, but I would recommend taking some profits on government bonds and reallocating towards a heavier equity exposure at the moment.