In Search of the Perfect Investment

I’m not proud, just sensitive to be told gleefully (by many readers) that my June 8  call to “to get out of most equities” sucked bigtime.

Fortunately, I didn’t say “all.”

Irrespective,  the market did not listen and is actually up 3.9% (as measured by the Dow Jones).

It’s clearly not possible to predict every market move. The key is to figure your own risk preference. Mine is less for gains and far more for capital preservation. When in doubt (or beset by gray) clouds, I’m out. But usually not completely. Contrary to my own advice to get out of “most” stocks, I stuck with most of the stocks on the right, especially gold and the high-yielders, which tend to avoid the market’s gyrations and stay flat, including the nice juicy dividends.

Gold is down, sadly. So I was right to recommend getting out of that.

Going forward, I remain cautious, picking stocks carefully, inching my way up.

I remain a fan of the high yielding mortgage REITs. It’s a good time for these things. Ultra-low rates to borrow at. Reasonable 5% or so returns on mortgages. Hence huge spread, and juicy dividends. Latest favorite is Two Harbors (TWO), which is actually less leveraged than my erstwhile favorite, Annaly (NLY).  TWO is yielding 14.6%. Not shabby. NLY is “only” yielding 14.2%. The high yield covers many ills that Mr Market (and Harry) can foist on an innocent stock.

For those  readers who want predictions of boom and more boom, I present:

Despite last week’s rally, investors remain in deep panic.

That’s the message from Citi strategist Tobias Levkovitch, who has updated his proprietary Panic/Euphoria model, which blends 9 indicators of investor sentiment.

He writes:

Indeed, the model fell into “panic” territory a week ago and continued to be in panic this week despite the market’s rally, which statistically argues that there is a roughly 90% probability share prices are higher in six months and a 97% chance of gains in 12 months. On average, stocks appreciate 8.9% in six months and about 17.3% in a year when reviewing data looking back about 25 years versus random outcomes of market gains in the 75% range of likelihoods when studying the same time period. Note that this proprietary metric fell into panic late in 2008 and again in the summertime last year both in front of healthy market moves to the upside. Conversely, it surged into euphoria in both 2007 and 2008, implying forward equity market weakness as well.

Google and Apple are getting ink and excitement. Lots of buzz about Google’s new social networking idea called Google+ and Apple’s upcoming iPhone5, which is moving into production pending a September launch. The new phone will have a faster processor and a better camera — 8 megs instead of today’s 5 meg.  Both stocks seems to be edging up a little.  Lulu Lemon and Netflix are also edging up. Momentum is coming back. Be wary. Remember my goal is capital preservation.

Fun Swiss stuff: The Swiss Helvetia Fund  ( SWZ) made a tender off er for  for up to 1,530,131 of its shares, or about 5% of its  shares. The Offer expired last week. About  15,059,832 shares, or about  49% , were tendered. They haven’t said what they’ll do.  Probably give everyone a pro-rata buyout.

SWZ  is an ETF that invests in the biggest and most successful Swiss  companies. Its number one holding is Nestle. It’s done well.  I tendered all my shares since the payout price (98% of NAV — net asset value) seems to be about 9% higher than where SWZ  is selling at. I figured I’d tender all, then buy them back cheaper. Apparently everyone else did too. My “brilliance” is contagious.

You want dumb? Thousands of travelers leave their laptops at airport security checkins. To “solve” this national problem, Tumi (and other luggage makers) have designed a “solution.”

You don’t remove your laptop from your bag. You simply open it and slide it through.

Now all you have to do is forget your entire bag.

The worst puns.

+ Two Eskimos in a kayak were chilly, so they lit a fire in the craft. It sank, proving once again that you can’t have your kayak and heat it too.

+ Two hydrogen atoms meet. One says, ‘I’ve lost my electron.’ The other says ‘Are you sure?’ The first replies, ‘Yes, I’m positive.’

+ Did you hear about the Buddhist who refused Novocain during a root canal? His goal: transcend dental medication.

+ There was the person who sent ten puns to friends, with the hope that at least one of the puns would make them laugh.  No pun in ten did.

Harry Newton who loves the comments readers leave. Everyone has their own wonderful ideas on how to mess up the economy even more.

I do like that the big companies have figured out the key is threefold:

1. Become ultra-productive.

2. Do more business abroad.

3. Innovate new products.

Cramer likes a bunch of big U.S. manufacturers, including EMR, CAT, MMM, DE, PPG and CMI. He recommends waiting for a pullback. Cramer’s favorite stocks (based on how manyy times he mentioned them in the past 30 days) are CMG, AA, BIDU,  EMC and VZ.