In Search of the Perfect Investment

If you never take ATM cash advances out of your credit card — Visa, MasterCard, American Express, etc.  — call up and set your cash advance limit to zero dollars. That will stop you being hacked and save you half a day of calling every vendor who charges your credit card for things like DirecTV, Amazon, cell service, subway rides, etc.

Muriel and I spent half of yesterday calling all the vendors and changing my Visa to the new one. The old one got hacked for over $10,000 on cash advances. No one at Visa knows how the crooks did it. They certainly didn’t have my physical credit card, and how they got my PIN is another mystery. Anyway we wasted a lot of time.

Yesterday was doing just fine until 2 PM when the Fed released its minutes from a meeting a month ago. Then the market got crazy — shooting up and plummeting down.

This stuff is not predictable, nor pleasant. How Tom, Dick and Harry misinterpret Fedspeak us a joy to behold.

It looks (at least to me) that the market’s rise is over for now, especially as most earnings reports coming in are not ebullient. Translation: Most suck.

Diversification remains key to sanity. Recently, some of my real estate syndications have done extremely well. And I focused on them yesterday.

The key is a a good property, in a good place. There should be some opportunity to guzzy up the place, hike rents and improve occupancy. And you need to be somewhat of a whizz with borrowing, banks and other lenders.  Once “stabilized”, you sell the thing or re-finance it. Return money to investors. It’s a juggling game. We just sold something we bought in 2011. Returned $280,000 for every $200,000 and that was in addition to the annual 8% dividends. Better than a slap in the belly with a cold fish.

Real estate has one big plus: you don’t suffer the daily mood swings you get from the chart above. One of my portfolios yesterday went from a positive $1,000 gain on  the day to a negative $26,000 — all within the span of a couple of hours. Not good for my tender psyche.

I keep reading and mulling. This piece from the Wall Street Journal’s MarketWatch makes huge sense:

Raise some cash, make a list, enjoy summer, by Kirk Spano

If you had become accustomed to reading me every week, you will have noticed I have been skipping quite a few weeks this year. Why? Because a lot of what has needed to be said, has been said. The story really hasn’t changed much all year. Here’s my brief summary, which I talked about throughout the first quarter on MarketWatch and have blogged about at my The American Resource Boom Letter :

+ We know that the four biggest economies in the world – the U.S., China, EU and Japan – are all having relatively slow growth and that the demographics in those nations/region make a growth breakout almost impossible no matter what the governments and central banks do.

+ We know that emerging markets are still smarting from the financial crisis and are still retrenching. This has kept the global growth catalyst, so many of us expect to reignite at some point, dampened.

+ We know that there is an almost direct correlation of Fed bond buying and other stimulus to the rise in the stock market.

+ We know that Fed bond buying and other stimulus will slow down once inflation and employment start to rise.

+ We know that inflation and employment have started to rise – not much – but definitely have started to rise.

So, as I leave for a much needed vacation, I wanted to reach out and let folks know what I am doing that will allow me to travel for 10 days without a computer.

I have sold a lot of stocks.

I still own some stocks of course. As you can see here and here, I am invested in Apple AAPL +0.57% . Between the dates of those two articles, in fact, I made Apple my largest holding at 12% asset allocation. I wouldn’t buy so much of it right now after such a heady run-up, but it is still worth 2% to 4% of a nice 20-stock portfolio.

I also own a couple of small biotechs since I think that biotech is going to continue to be huge as the baby boomers mature and the governments of the world look for ways to contain health care costs. I wrote about one of the companies here on MarketWatch.

I am also invested at about 4% of portfolios in French water and waste management company Veolia VE +7.30% , which was one of my companies to buy for 2013. I was clearly early to the party on that one, having talked about it on Fox Business in December of 2011. My thesis is simply that water infrastructure and waste management will continue to be huge global businesses with above average growth rates and that Veolia appears cheap on valuation and outlook basis.

I just bought puts on the SPDR S&P 500 ETF SPY +0.28% . I have made the December 31 $160 puts 4% of equity portfolios. That is not enough to speculate on a crash, as George Soros appears to be doing, but it will offset most of my long risk on the few stockholdings I have if there is a correlated market correction.

I took out insurance on the stock market via SPY because Europe is entering elections, Japan faces another decade of struggle, China isn’t the growth Goliath to bank on, the Fed plans to taper and U.S. large company growth rates have slowed to under 4%. I think those are pretty good reasons – along with a P/E of 18 on the S&P 500 and that September is a often a crummy month for markets – to think that odds are rising for a short-term correction.

My biggest holding by far at the moment is the U.S. dollar at well over 50% of holdings. Normally, I would like to be in bonds when I need a safety blanket, but we know that most bonds are challenged right now and could face even bigger challenges soon. So what there is no return on capital there. I can take 10 days off and know that I’ll have about the same amount when I get back.

While I’m gone, I have entered some pretty low buy prices on a dozen companies I’d love to own again. If we get a correction while I’m in the White Mountains, I’ll come back to see some great companies in my portfolio with cost basis lower than what I sold at and 15% to 30% lower than today’s prices. In September, I plan to cover all of those companies in the context of why they are great companies long-term and how to buy on market weakness.

My simple advice today is that if you aren’t sure what the short-term holds for the world, raise some cash, make a list, set some limit orders and go have some fun while you wait for whatever is going to happen to happen.

You can find the article here.

More boring blow-by-blow cataract operation news. My operation was Monday. Out of total impatience I went back to the doc again yesterday. He said my cataract operation is doing just fine. But it is still too early for my two eyes to focus together, He prescribed this monstrosity — an eyepatch. I can keep my eye open and I don’t have any trouble focusing — because I can’t see anything.

Meantime, here’s a list of all the things I can and cannot do for the next week or so. It gives excitement a whole new meaning:

I do perceive some tiny progress. But my right eye vision is still blurred and out of focus. The doc said it’s better to keep the eye open than to keep it shut. I’m not patient.I want everything instantly.

The bottom line: If you have cataracts, you need the operation. It’s a one-hour in-an-out deal.  Just don’t expect to be able to see for at least a week. Maybe two. And give up straining at your stool.

My friend is buying some VE today. He likes the yield.