Things have suddenly changed. Items:
+ Everyone is dumping gold and silver. They made their money and they’re out. I personally still like gold, but I’m out of silver.
+ The speculators have gone, inter alia, to mortgage REITs:
The nice thing about these (apart from the fact that I have three on my “Stocks I Like” list) is their dividend yields:
NLY — 13.8%
IVR — 16.2%
AGNC — 19.2%
ANH — 13.9%
The nice thing about these yields is the leverage they give you on the pricing of the stocks. They can fall. But until they’ve fallen their yield, you haven’t lost money that year. In actual fact they haven’t moved much in the last 18 months. They tend to bob up and down as their dividend gets paid.
Several readers believe that these high yields “are too good to be true.” I’ve been studying their 2010 balance sheets, which have just come out and I’m feeling comfortable with their businesses. More about this in coming days as I finish my studies. Their annual reports are thick.
Meantime, Annaly (NLY), the large, just reported hugely improved earnings. You can read their earnings press release here.
Things To Be Concerned About Regarding This Market according to Barry Ritholtz)
• Traditional measures of Stocks (P/E, return on capital) suggest stocks are no longer cheap; Longer term measures of valuation — Q ratio, Shiller’s 10 year P/E — show stocks are actually pricey;
• China is on the verge of rolling over, falling nearly 8% in a single session; That wiped out three months of gains;
• Defensive sectors — especially health care, but also staples, telecom and utilities — have found a bid. Often telegraphing a reduction of buying by fund managers;
• Way too much cap weight is tied up in a handful of stocks. Apple (AAPL) is responsible for far too much of the Nasdaq gains than is healthy.
• The rally that began March 2009 — now well over 2 years old – may have gotten ahead of itself;
• The rampant speculation in Silver and its collapse is a reminder that money that piles into a sector very quickly heads out the door ever faster;
• Assumptions about earnings seem to project double digit gains forever;
• The end of QE2 removes a significant bid under equities and bonds. It also will allow the dollar to rally, potentially punishing commodity traders;
• While earnings have been good, future guidance from companies is starting to moderate. This does not bode well for earnings supporting SPX 1400-1500 future levels;
• Speaking very generally, the low volume Markets just feel tired here.
To Barry’s list, I add this morning’s weak jobless claims. he number of people who filed new applications for jobless benefits leaped 43,000 last week to 474,000, the highest level in almost nine months. Yuch.
One play and one musical we just saw.
Jerusalem features a stunning performance by the start, Mark Rylance. the second is s musical about an ultra-sad tragedy — Jewish death in the Warsaw ghetto. Both are worth seeing, though you may not “enjoy” either.
Cinco de Mayo. The fifth of May. Today. It commemorates the Mexican army’s unlikely defeat of the French at the Battle of Puebla. It’s a big celebration with my friends in California’s south. It’s celebrated hardest by rich Californians who think illegal Mexican immigration into California is the source of all California’s crime problems, while employing those very same Mexicans to clean their houses. Go figure.
Classic funny Johnny Carson video. It features Sgt Friday and theft of Johnny’s clappers. Click here and die laughing.
Harry Newton who laments the end of the Cherry Blossom season. Fallen cherry blossoms and my tennis sneakers:
It looks to me as if AGNC (at least) is a very big play on the futures market. In my humble opinion, if you simply own the stock you are like an ant riding atop a soap bubble in a Mississippi River flood. You think, “Wow, I'm movin' now!”
http://www.bloomberg.com/news/…
Way out of my league.
Here at our office the staff in our cafe is dressed up in sombreros and ponchos; even the women have fake paste on mustaches. Somewhat humerous.
I like your comments about the rich Californians and what they think of the “holiday”.
The video clip with Johnny Carson and Jack Webb is fantastic! What comedic talent in Johnny and what a great actor Jack was….classic!!
Cinco de Mayo is a bit of a non-event in Mexico. It's only really celebrated in the city of Puebla where the battle with the French occurred. My Mexican wife who grew up about 2 hours from there is always amazed at how big a deal it is here in the US. She's at home now, and I'll bet it's not even mentioned today.
I prefer this version of history:
Most people don't know that back in 1912, Hellmann's mayonnaise was manufactured in England. In fact, the Titanic was carrying 12,000 jars of the condiment scheduled for delivery in Vera Cruz, Mexico, which was to be the next port of call for the great ship after its stop in New York.This would have been the largest single shipment of mayonnaise ever delivered to Mexico. But as we know, the great ship did not make it to New York. The ship hit an iceberg and sank, and the cargo was forever lost.The people of Mexico, who were crazy about mayonnaise, and were eagerly awaiting its delivery, were disconsolate at the loss. Their anguish was so great, that they declared a National Day of Mourning, which they still observe to this day.The National Day of Mourning occurs each year on May 5th and is known, of course, as Sinko de Mayo.
Harry- I have been patiently waiting for your response regarding AGNC and its very high yield. This subject was brought up a few times recently by some of your readers. Today comments by you do nothing to illuminate the matter. In fact I am more confused now. You seem to be saying that the very high yield doesn’t concern you because you are protected by the amount of the yield should the stock fall. First that doesn’t address why the yield is so high in the first place. Second- by your logic you have a tax problem. You get a 19% dividend which you will pay taxes on. If the stock should sell off (which it most certainly will given its yield) and you hold the stock you will have a paper loss vs a tax bill. If you sell the stock and take your loss you negate the dividend? Not sure I get that logic Harry. Stocks that pay 19% dividend are screaming that something is wrong. It's like a bond that pays a very high interest rate- they call them junk bonds or distressed debt for a reason. There is a problem , highly risky, and that is reflected in the yield or dividend.
As I said today — and several times before — I am studying these things. I am aware of your concerns and your obvious urgency. Sadly, I do have other things to do.
Meantime, sell them all short, if you wish. Not what I'm doing.
Thanks Harry- seems you have time to tout your favorite stocks, give us movie reviews, tell us what your friends think, and post some pictures of your vacation, family , trees, birds, and flowers. But you are too busy to respond to YOUR Readers. Readers are asking you a simple and direct question. YOUR readers are asking you for an explanation to what appears to be a violation of reasonable investment theory. You yourself have stated on many occasions that if it appears too good to be true it probably is. You tell us to avoid and stay on the sidelines in cash. But you continue to recommend (“stocks we like”) a stock with an unsustainable yield. And if it should go down you rationalize it because of the dividend is high yet a recent comment pointed out the tax disadvantage to your strategy. So what gives Harry? How about you respond to your readers????
As I've said, I have other things to do at present. Second, these mortgage REITS are complex animals. They take time to examine. However, I have a deal for you. Send me a check for $1,000 (you're paying nothing to read this column or to bitch) and I'll respond more quickly. Deal?
Harry- did you really say “these mortgage REITS are complex animals-they take time to examine”????? Shouldn't you do your homework and examine these complex animals before you put it on your website as a “STOCK WE LIKE”? You are correct – your website and your investment advice is free – I guess we get what we pay for. The Title of your website is “In search of the perfect Investment” – I'll keep in mind that you reccomend a stock before you actualy research it when I too am in search of that investment.
I suggest reading Harry's column for fun and ideas but do your own research.
Actually you're getting quite a bit more than you've paid for. Harry provides a great deal of information to his readers. But you need to do your own due diligence. Harry is not here to spoon feed you and act as your PAID personal investment adviser.
What the heck is wrong with you, Garygetsit? I don't think Gary gets it al all! The column clearly states, “More about this in the coming days as I finish my studies. Their annual reports are thick.” WTF???? In business there is always that customer that always picks things apart just for the sake of picking things apart. You know the type – the PITA (Pain In The A$$) that behaves as if he is put on earth to whine about everything…cheese and crackers to go with that, Gary? I encourage you to get a hobby, Gary. That way, you may eventually get it.