{"id":20200,"date":"2013-05-31T09:08:16","date_gmt":"2013-05-31T13:08:16","guid":{"rendered":"http:\/\/www.technologyinvestor.com\/?p=20200"},"modified":"2013-05-31T09:14:49","modified_gmt":"2013-05-31T13:14:49","slug":"your-next-vacation-the-recovering-economy-out-of-bonds-into-energy-movers","status":"publish","type":"post","link":"https:\/\/www.technologyinvestor.com\/?p=20200","title":{"rendered":"Your next vacation. The recovering economy. Out of bonds into energy movers."},"content":{"rendered":"

It’s screaming recovery out there. I tried to buy another rental apartment on New York’s upper west side. “Sorry, Harry, there aren’t any,” my broker lamented.<\/p>\n

One of my syndicators bought an add-on commercial building in Boston at a five cap. Ridiculously high.<\/p>\n

And then I read this piece in today’s New York Times:<\/p>\n

Economy Stirs Unease<\/strong> By FLOYD NORRIS
\nThe American markets are getting worried again. But this time the fear is refreshingly different.<\/p>\n

The worry is that economic growth may be about to accelerate.<\/p>\n

After five years of a disappointing economy, such a concern sounds too good to be true, and perhaps it is. But imagine what will happen if it is not. We’ve been complaining for years about how slow the recovery is. It would be great if it sped up appreciably.<\/p>\n

But you might not know that if you listened to some of the commentary these days. Those who see a black cloud behind every silver lining can point to plenty of negatives in a good economy. Bond investors will lose money as the value of long-term bonds declines. That will mean that a lot of people are poorer. Banks own a lot of Treasuries, and some of them could suffer as the value of those bonds decline.<\/p>\n

Perhaps rising interest rates will prompt a sell-off in the stock market. Perhaps they will choke off the recovery in housing.<\/p>\n

The federal government will suffer a hit from having to pay higher interest rates as it borrows money. The Federal Reserve, which has bought a lot of long-term government bonds and mortgage securities, will lose money — perhaps a lot of it — as it sells those securities at lower prices than it paid. It might lose so much money that it stops funneling profits to the Treasury, further damaging the government’s fiscal position.<\/p>\n

Added to those specifics is the feeling that we are about to enter uncharted territory. Just as the Fed never before engaged in quantitative easing, it has never before unwound the positions. Who knows if it can handle the challenge?<\/p>\n

“The Federal Reserve will need to carefully navigate through the completion of quantitative easing,” the Organization for Economic Cooperation and Development said this week in its generally gloomy semiannual global economic forecast. “A premature exit could jeopardize the fragile recovery, but waiting too long could result in a disorderly exit from the program with sizable financial losses.”<\/p>\n

Of course, we’ve all known that — someday — the Fed would have to start reducing its positions. But on Wall Street, someday can seem a very long way off. “This was supposed to be next year’s trade,” a hedge fund manager told me this week.<\/p>\n

What made it seem like this year’s trade was the sudden backup in the bond market that began early in May and accelerated late in the month after the Fed’s chairman, Ben S. Bernanke, mused that the Fed might be able to start to backing off the easing program later this year. The yield on 10-year Treasuries, below 1.7 percent early this month, rose above 2.1 percent on Tuesday.<\/p>\n

That may not sound like a lot, but to owners of such bonds, it is a problem. If they bought at the latest auction of 10-year Treasuries, on May 8, the value of their securities fell enough in three weeks to offset more than a year of income.<\/p>\n

That latest drop came on the heels of some surprisingly good economic news, as well an upbeat forecast. Last week, the Federal Reserve Bank of New York said it expected the unemployment rate, now 7.5 percent, to fall to 6.5 percent by late next year. That is earlier than the Fed had expected when it said 6.5 percent was the level at which it might choose to back away from quantitative easing,<\/p>\n

Then this week the Standard & Poor’s Case-Shiller home price index was reported to have leapt 10.9 percent over the year through March. That was the largest gain since 2006, when the housing bubble was in full expansion. And on the same day that was reported, the Conference Board said consumer confidence was at a five-year high.<\/p>\n

There are reasons to restrain enthusiasm about both figures, though. Home prices hit their lows for the cycle in March 2012, so this is a bounce off the bottom. And while consumer confidence is up, it is still well below the levels that seemed acceptable before the financial crisis. During the decade before the economy began to crater in 2008, there were only two months – in 2003 – when the index was as low as it is now. And not all statistics are surprising on the upside; first-quarter gross domestic product was revised a bit lower in the latest estimate, released Thursday.<\/p>\n

The sudden optimism about the American economy — even if it is tempered by fears about how we will handle prosperity — came in part because the economy is not behaving as it did in 2011 and 2012. At the time, signs of strength as the years began were followed by spring swoons. So strength early this year was seen as a setup for another such fall. Add to that the increase in payroll taxes at the beginning of the year, and there was a widespread expectation that the economy would weaken.<\/p>\n

But so far, anyway, it has not. …<\/p>\n

The rise of the stock market since late last year has produced more than its share of doubters, who complained there was nothing in the economic data to justify the increase. Perhaps, Mr. Barbera said, “it will turn out that the inexplicable rise of the stock market turns out to indicate the market correctly anticipated” the improvement in the economy.<\/p>\n

I’ve been fooled before by this economy – notably in early 2011 – and perhaps the latest “green shoots,” to recall what Mr. Bernanke thought he saw in 2009, will again prove to be temporary. But for now it is nice to hear concerns about a surprisingly strong economy, rather than what we have heard for most of the last five years.<\/p>\n

To read the full piece, click here.<\/strong><\/a><\/p>\n

My favorite bond fun had a good run.<\/strong> <\/span>I’m completely out. It’s tumbling for now. But soon, like all bond funds, it will plummet. It was a nice ride. Yield on it had gone from over 4% tax-free to just over 2% now. Too much capital risk.<\/p>\n

\"VWALXOut\"<\/a><\/p>\n

In tech it’s all about “buzz”.<\/strong> Netflix has it. Qualcomm doesn’t.<\/span> Of all the big tech, QCOM has done the worst recently, not participating in the recent mini-boom. <\/span><\/span><\/p>\n

\"QualcommThisYear\"<\/a><\/p>\n

A friend asked “why?” I replied:<\/span><\/span><\/p>\n

Its earnings are improving. It has no debt. It’s in the right place at the right time. Its P\/E at 18 is slightly higher than its earnings growth of 17. Its dividend yield is 2.2%.<\/p>\n

You could easily argue that it’s fairly priced.<\/p>\n

We need something dramatic to get it out of its funk. I thought I saw that collection of new products at the Consumer Electronics Show in January. But I was wrong..so far.<\/p>\n

I have pared my holding in QCOM down.<\/p>\n

You could also argue that since it sells to other businesses — like cellphone makers — it will never have a hot consumer product. And that’s what you need. Think Apple when Steve was alive. Hot new consumer products. Think Microsoft when Bill was running it.<\/p>\n

Places to spend your next vacation: <\/strong>Now you know what to do with all the money you’ve made in the market. <\/strong>View these on a big screen.
\n<\/strong><\/span><\/span><\/p>\n

Cliff camping.
\n\"CliffCamping\"<\/a><\/p>\n

Jumping on the Trolltunga rock in Norway<\/p>\n

\"TotRockNorway\"<\/a><\/p>\n

Ice climbing a frozen waterfall<\/p>\n

\"Inceclimbing\"<\/a><\/p>\n

Extreme skiing at Grand Targhee, Wyoming<\/p>\n

\"Extremeskiing\"<\/a><\/p>\n

Climbing picture taken from Gaston Rebuffat’s book<\/p>\n

\"vintage\"<\/a><\/p>\n

Blake Aldridge dives 29 metres (95 feet) from the rock monolith during the Red Bull Cliff Diving World Series in Portugal.<\/p>\n

\"diving\"<\/a><\/p>\n

Glacierboarding<\/p>\n

\"glacier\"<\/a><\/p>\n

Favorite recent New Yorker cartoon.<\/strong><\/span><\/p>\n

\"Kickstarter\"<\/a>
\n\"\"<\/a>
\nHarry Newton whose doc won’t fix his cataracts. They’re not gone enough. However, he did “fix” them with new stronger glasses. He made me three pairs. One for distance. One for computing. And one for reading. I’m a high my-op. The computing is distance plus 1 diopter. The reading is plus 1.75 diopters. This morning I’m using the reading glasses for computing. The others are too strong.<\/p>\n

I love franchises. The man from Budget Blinds installed some yesterday. Not cheap. But first rate quality. Interesting to hear him answer his cell phone, “Budget Blinds,” as though he were sitting in an office, not in our driveway.. Susan loved his blinds so much she ordered a bunch more. Bob Poulin, franchisee, told me it’s his business’ “occupational hazard.” The lady of the house sees how good the blinds are and orders a second batch.<\/p>\n

The French Tennis Open continues this week on ESPN2, NBC and The Tennis Channel.<\/p>\n

The weather where I am — Spencertown, NY — is gorgeous. We’re taking a long weekend. I’ll be researching on two stocks Cramer liked (I liked his logic) — MWE and UNP. All about the boom in moving local gas and oil around the U.S. I see this as our hottest investing opportunity. Most likely, I’ll take that VWALX freed-up money and put it here.<\/p>\n","protected":false},"excerpt":{"rendered":"

It’s screaming recovery out there. I tried to buy another rental apartment on New York’s upper west side. “Sorry, Harry, there aren’t any,” my broker lamented. One of my syndicators bought an add-on commercial building in Boston at a five cap. Ridiculously high. And then I read this piece in today’s New York Times: Economy […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-20200","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=\/wp\/v2\/posts\/20200","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=20200"}],"version-history":[{"count":0,"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=\/wp\/v2\/posts\/20200\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=20200"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=20200"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=20200"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}