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Investing for Income November 28, 2007

Posted by Andy Robinson in : Market Research , add a comment

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.

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Keep your focus long-term November 8, 2007

Posted by Andy Robinson in : Educational , add a comment

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.

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Economic Fundamentals Improving November 7, 2007

Posted by Andy Robinson in : News , add a comment

Another little piece of news that confirms my burgeoning optimism is the Labor Dept report on productivity and wage growth. It hasn’t moved the market this morning, but the surge in productivity (4.9% last quarter) is crucial to avoiding recession. Equally important is that labor costs have eased slightly, which will help calm inflationary fears and allow for more easing if necessary.

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Commodities Rally Getting Tired November 6, 2007

Posted by Andy Robinson in : Market Research , 1 comment so far

I think we’ll touch $100/ barrel oil, but simply because the traders are hyping that benchmark like it’s a foregone conclusion. Therefore money will chase crude until it reaches that mark then sell off steeply. But what does this mean for normal investors? Simply that now is not the time to load up on energy funds or commodities ETF’s. If you’ve owned them for long enough, take some of the gains off the table. I am still long-term very bullish on silver (the exchange traded fund has increased in value 33% since I recommended it August 23rd), but over the next 6 months it will give back some of its gains along with most other commodities. Gold in particular is near the end of its spectacular run.

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Job Growth Strong November 2, 2007

Posted by Andy Robinson in : News , add a comment

The October payroll numbers were released 20 minutes ago and support the bullish argument for this quarter.  Payrolls grew by 166,000 and unemployment stayed the same as last month at 4.7%.  This bodes well for consumer spending, which has softened slightly due to the decline in housing prices, but will still thrive as long as jobs and wage growth remains strong.  I don’t think we need to be unduly worried by the big stock market drop yesterday.  Fundamentals are fine and there’s a lot of money sitting on the sidelines waiting for the 4th quarter rally.  Once it looks like it’s starting, we’re going to move up fast because the fund managers and hedgies don’t want to be left behind.  This is a good entry point to deploy any cash (if you have any on the sidelines).  I’ve been all in for about two months.

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Market trips on earnings and consumer spending November 1, 2007

Posted by Andy Robinson in : News , add a comment

With the Dow down over 230 points (as of 10:20 am) investors might get spooked about today’s grim headlines.  But consumer spending only softened a tiny bit (0.3% growth rather than the expected 0.4%).  Also Exxon missed profits and Citigroup and Bank of America got downgraded.  With a time horizon of even 3 months, and mine is considerably longer than that, today’s dip has got to be considered a boon to investors.  Although it may annoy me to see Bank of America (which I own) to tumble nearly 4% today, I am not concerned about analyst downgrades.  Downgrades tend to be more reactionary to current market conditions than an accurate look into the future.  Warren Buffet did not make his fortune buying stocks in favor with Wall Street.  He bought names when they were cheap and everyone else was a seller.

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