The American dollar is up. US treasury bond prices are up, yields are way down — they fell through the floor yesterday. This means people worldwide are scared. And justifiably so. There’s plenty of awful economic news around — from China slowdown to contracting payrolls, from worsening manufacturing to an awful month of May in the stockmarket. If I lived in Europe, I’d be withdrawing my money from my bank and changing it into Swiss francs, English pounds, or American dollars. (Actually, correction, I would have done that months ago.)
Sometime, there’ll be real blood in the streets and equities will be most attractive. But, right now, they’re not as attractive as they were in March, 2009.
For now the play is to hold a few mortgage REITs (for their yield — see piece on AGNC) and play ailing companies to the downside. Expanded list of shorts:
Best Buy (BBY)
BHP
Caterpillar (CAT)
Deckers (DECK)
Dell (DELL)
Eaton Vance (EV)
Exxon Mobil (XOM)
Facebook (FB)
First Solar (FSLR)
Gold (SGOL or GLD)
Green Mountain (GMCR)
Fossil (FOSL)
Game Stop (GME)
Goldman Sachs (GS)
IBM
JC Penney (JCP)
Joy Global (JOY)
JPMorgan (JPM)
Morgan Stanley (MS)
Patriot Coal (PCX)
RadioShack (RSH)
Research In Motion (RIMM)
SanDisk (SNDK)
Supervalu (SVU)
Terex (TEX)
Best time to start a new business. Look in your own backyard for ideas. item: My local Sovereign Bank branch just got robbed — for the second time — by the same guy. The bank has photos of the guy. They gave them to the police. But the individual cops don’t. They don’t carry iPhones or other smartphones on which they could see the local bank robber and nab him. Time for a new app.
Gold is collapsing. I don’t know why. It’s meant to be the “go to” trade when things go awry, like now.
But it’s fallen, and fallen hard. With India and China slowing, maybe they’re short of money for weddings and jewelry. Central banks in Europe are short of money. They’re probably selling gold to raise a few shekels.
Whatever the story, my inviolate stop loss rule pulled me out of gold a while back. And I won’t get back in until there’s a firm uptrend.
Now is a good time to borrow: My friend is buying a one-bedroom apartment in New York for $622,000. He is borrowing 7 year interest only mortgage at 2 5/8 % a year at a 70% loan to value. He worked his numbers:
+ To rent the apartment would cost him $4,000 a month.
+ To buy it will cost him $2,600 a month.
He expects to sell the apartment within seven years, since it’s for his daughter attending law school. There is no pre-payment penalty.
His mortgage rate is ridiculously low. If he hadn’t bought the apartment, he could borrow the money and buy Vanguard’s high-yield tax-exempt bond fund called VWALX. He’d earn 2n immediate 2.89% dividend yield, possibly a small price appareciation in the value of the fund. My yield YTD on the fund is 5.18%.
Lucky does Hawaii.
Hi Harry,
Had an interesting experience renting a car for our trip to Hawaii next week. First I booked Hertz through Delta when I made my reservation.Chevy Impala.28 days.$1125.00.I started checking around last week for a better rate and booked Advantage.same Impala 28 days $706.00.very proud of myself. Tonight I decided to give Hotwire.com a try again and I just booked and pre-paid an Enterprise Impala, 28 days for $554.00.unbelievable. I called Advantage in Honolulu before I booked the Hotwire deal and ask if they would beat the Hotwire deal or price match it.The agent said take the Hotwire deal.he could not compete. When I went online and checked Enterprise today they quoted $606.00 which is about 400.00 less than when I checked with them a month ago. Oh yes, when I tried to book through AutoSlash online they said there were no cars available.I called them and the fellow in India said he could not help me with a car rental. I asked to be transferred back to the US and, like before, I was transferred to a hotel booking office that did not handle car rentals.
Wedding photography tips. The BIG key is to use flash all the time. It fills in shadows. It makes brides and their mothers look better. The resulting photos are easier to print.
For equipment, choose a powerful strobe, a DSLR (digital single lens reflex) and a large external power pack for your strobe, like the Quantum Turbo Battery. Click here.
For more strobe tips, click here.
I photographed a friend’s wedding this past weekend. Hence this note. I delivered a selection of the photos on Picassa (now called Google+) and the rest on a 4 gig $8 SD card.
Goldman Sachs gives transparency a whole new meaning. I have an investment in a private equity fund called GS Capital Partners VI Parallel, L.P.
Instead of doing the honorable thing, admitting defeat, winding the miserable fund up, and returning the money to its suffering limited partners (like me), Goldman Sachs is expanding the fund. by buying more dubious assets, including:
+ A start-up offshore oil field services provider,
+ A chain of physical therapy clinics,
+ A wind power farm in India, and my all-time favorite,
+ A financial services company in China, which Goldman says “Given the confidential nature of this investment, we are unable to provide more information.”
Read that last sentence again. That’s their exact words. Goldman Sachs is investing my hard-earned money in a secret project somewhere in China doing something with finance. Trading derivatives? Taking bets on flies crawling up a wall? Doing deals with JPMorgan’s trader?
It makes me sick that I once thought it a good idea to gave Goldman Sachs my money to invest.
Think about the motivation here: Mine is to make a few shekels. Theirs is to pay themselves fees. The more of my money they have, the more they buy, the more fees they earn. They actually made a capital call on me recently — not to buy new companies or expand existing ones — but simply to pay themselves their management fees. What a totally screwed-up system!
To think, I was once so stupid.
Clever presentation using iPads and magic. Click here.
Harry Newton who is sad about the Australian dollar, which has fallen from $1.07 to around 96.4 cents. That drop reflects China slowing (Australia exports a lot to China) and the strengthening of the U.S dollar (a function of the world’s flight to quality).
I have been careful not to play forex (foreign exchange trading). I was pleased when I read this morning The Growth Stock Wire:
The Most Popular Trade Is Going to Explode. Again
By Jeff Clark
About every year at this time, currency traders lose their minds. Then they lose their shirts. It’s going to happen again this year.
The most popular trade in the currency market right now is to be long the dollar and short the euro. At first glance, this seems like a reasonable trade. After all, Europe is on the brink of collapse. And as the continent dissolves, investors flock to the safety of the U.S. dollar. It’s the ultimate “risk-off” trade.
But here’s the thing. the world has a habit of not coming to an end.
Think about it. Back in May 2010, Greece was threatening to default on its debts. Spanish banks were in trouble. Ireland, Italy, and Portugal were facing liquidity issues. The dollar rallied 7%-plus that month alone. That’s an enormous one-month move for a currency. The most popular trade on the planet was to be long the U.S. dollar and short the euro. I warned at the time the trade was going to blow up.
And it did. The dollar fell 10% over the following two months as traders realized the world wasn’t going to end.
Fast-forward to this time last year. The financial disaster in Europe took over the headlines. Greece was threatening to default. Spanish banks were in trouble. Yada yada yada. Once again, traders swarmed to the dollar, and the greenback gained 5% in May.
It gave up all the gains, though, just one month later.
Now, it’s the same old story. Once again, the long dollar/short euro trade is the most popular position on the planet. The dollar has rallied 5% this month, and everyone is talking about the euro collapsing.
Yes, it is 2012 – and maybe the Mayans were on to something – but I just don’t see Armageddon happening while everyone is looking for it. Financial markets do not reward popular trades. (This month’s disastrous Facebook IPO is a good example of that.) So while everyone is looking for continued dollar strength and euro weakness, I think the better idea is to do the opposite.
I’m not quite ready to buy the euro yet. Its downtrend is extended. But it hasn’t quite reached the oversold levels it hit in 2010. And with the Greek election coming up in mid-June, there’s plenty of time for some more downside volatility. but probably not much more.
Over the next two weeks, I’ll be looking for opportunities to put risk back on. Everything that sold off this month as the dollar rallied is going to rally when the “long dollar/short euro” trade blows up. Get ready for a hard bounce in commodities and stocks and a hard fall in bonds and the dollar.
Here's a thought for the weekend……..Austrian Economics anyone?
Harry, good article in today's WSJ about what they call “zombie funds”. That's a fund that is basically dead, but holding some questionable assets while continuing to collect their management fees. Lot of the VC funds formed in the high priced 1999-2000 time frame are in that position today; can't raise a new fund (these 1999-2000 funds if they manage to break even are in the top 10% for that period), and are holding on hoping their remaining assets have real value and will allow a new fund to be raised. Meanwhile they collect their fees.
France? When you could be in New York City!
re: car rentals – I got an Avis rental on the mainland thru Costco's travel site that was a great deal – 3x less than many other sites, including Avis.
harry do not tell anyone to buy vanguard or any other bond fund now is the time to sell you know sell high buy low well we are hige
Harry…I was about to ask you whether we should be considering getting back into Gold again…then I checked the price this morning…nice jump upward.Had to happen.I think I would consider gold “in hand” at this point.
One day doesn't make a trend..
Harry, your friend buying the NY apartment, it's really costing him $4,777 a month, 20% MORE than renting, because that 30% $186,600 down payment (assuming that includes the typically 3-4% closing costs?; if not, add that to the $186.6m) could have made him, invested in Annaly, $26,124 a year or $2,177 a month. He cannot ignore “lost opportunity” costs of what the money would have made elsewhere.
Over that 7 years period he will have paid, by not investing in Annally, $622,000 for the apt. plus $182,868 (Annally missed income) or $804,000. Assuming he then sells for about $880,000, a healthy 40% appreciation over his cost, with a regular 6% commission and again closing costs, he will have just barely broken even. But not really, as the IRS will see a capital gain of about $250,000 and tax him accordingly and slice another $90,000 off his 'profit'.
Vincent
Wow, with all of this bond market turmoil you'd think maybe Robert Rubin would pop up somewhere. Harry, surly you know someone who could contact Rubin, please his country needs him. Of course I'm being sarcastic everyone know it's all Bush's fault. Harry will you be attending the Obama fund raiser tonight?
I'll be watching tennis this evening from France.
Going over on the Concord are you?<grin></grin>