Month: August 2013

This Q&A gives you a glimpse into how market chart patterns can help your trading and investing

By Elliott Wave International

If you’re like many traders and investors, you may not be particularly familiar with price charts. Sure, you see them flash onscreen as financial media announce market moves — but you likely pay more attention to the fundamentals (financial statements, economic news, P/E ratios, etc.) than you do to the technical data.

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Article by Investazor.com

If you are scalper, intraday or guerilla trader, in general short and very short term trader you should pay attention to the economic releases for every day. Keeping an eye over the economic calendar will help prepare your trades or just announce you to stay out of the market.

On Monday Japan will publish its Prelim GDP, estimated to rise 0.9%, and its industrial production. Switzerland will release its retail sales and for the USA the Federal Budget Balance is expected to fall 95.3B.

Tuesday will be more crowded. Japan will publish Core Machinery Orders and the Monetary Policy Meeting Minutes. From the Euro Area we will know the German Final CPI, German ZEW Economic Sentiment (expected to rise at 40.3), the Industrial Production and the ZEW Economic Sentiment. USA will report its Core Retail Sales and Retail Sales, Import Prices and Business Inventories.

Wednesday will start with New Zealand’s Retail Sales and Core Retail Sales and it will continue with Australia’s Westpac Consumer Sentiment. From the Euro Area there will be French and German Prelim GDP, Flash GDP for the Euro Zone. Switzerland will release its PPI and Zew Economic Sentiment, while Great Britain will post the Claimant Count Change, MPC Asset Purchases Facility, MPC Official Rate Bank Votes and Unemployment Rate (which is expected to remain unchanged at 7.8%). USA will publish the monthly PPI, Core PPI and Crude Oil Inventories.

Thursday will bring Retail Sales for Great Britain and for the United States Core CPI and CPI, Unemployment Claims, TIC Long-Term Purchases, Industrial Production, Philly Fed Manufacturing Index and NAHB Housing Market Index.

On Friday the investors will know what is the Current Account, CPI/Core CPI and Trade Balance for the Euro Area. Canada will release its Manufacturing Sales and Foreign Securities Purchases. United States will publish Housing Starts and Prelim UoM Consumer Sentiment.

As you can see, next week is quite full. If you would like to not get caught on the wrong foot you should keep an eye for this publications.

The post What is to be Expected Next Week for the Forex Market? appeared first on investazor.com.

By Profit Confidential

Homebuilder stocks are heading into dangerous territory and investors need to take note—even if they don’t own these stocks—because the move to the downside for this barometer of activity in the U.S. housing market is significant.

The most important factor that sets the fate of the homebuilder stocks is the housing market. If the housing market has growth potential ahead, then you can bet on homebuilder stocks to provide a stunning performance to the upside. If it’s the opposite scenario, with the housing market looking shaky, then homebuilder stocks usually tank. In other words, homebuilder stocks are very fickle, but they are also a great indicator of future activity in the housing market.

Right now, the U.S. housing market is being threatened by the mixed messages the Federal Reserve is sending to the marketplace.

Our central bank has “helped” lower the interest rates by buying bonds and keeping interest on overnight lending artificially low. As a result of this, the conventional mortgage rates in the U.S. declined to record lows—this created an opportunity for those who were sitting on the sidelines to get involved in the housing market. This is what has happened over the past four years.

Now, the Federal Reserve is sending mixed signals of its next action: will it pull back on quantitative easing, or will it continue to create new money and keep interest rates artificially low? There’s a significant amount of speculation around the Fed’s future actions, and this has created a major problem for the housing market, causing mortgage rates to skyrocket in a very short period of time.

Take a look at the 30-year fixed-term mortgage rates tracked by Freddie Mac. In July, they stood at 4.37%. But this past January, the same rates were 3.41%—an increase of almost a third in just seven months. (Source: Freddie Mac web site, last accessed August 8, 2013.)

No doubt, these rates are low compared to their historical average, and those who were around in the 1980s could vouch for this.

As mortgage rates climb now, the cost of owning a home rises, which obviously puts the brakes on participation from would-be homebuyers.

This is bad news for the homebuilder stocks. If those who drive the housing market are stepping back, it’s very likely the overall market conditions will deteriorate, impacting business activity for homebuilding companies.

Please take a look at the chart below.

Chart courtesy of www.StockCharts.com

Since mid-May, the Dow Jones Home Construction Index has plummeted roughly 25%, and it’s in negative territory year-to-date. In addition, the index consisting of homebuilder stocks has broken below a key support level around 430—it tested this level in January, and then broke that support three more times in July.

What’s happening with the leading indicator homebuilder stocks couldn’t be clearer: risk in the U.S. housing market has increased substantially.

Michael’s Personal Notes:

The jobs market in the U.S. economy is anemic; don’t for a second let the key stock indices make you believe the economy has improved.

While the mainstream and politicians are concerned about the numbers of jobs created in the U.S. economy, I look at their quality. Readers of Profit Confidential know this very well.

From my point of view, the quality of the jobs being created in the U.S. economy is very poor and deteriorating.

You see, with all the printing and easy monetary policy, one would assume, over time, the jobs market would improve. At least that was the original intention, but this is not happening. The problematic trend continues—low-wage-paying jobs are prevailing, while those that pay well are lagging behind in the jobs market.

The Bureau of Labor Statistics (BLS) reported that there were 3.93 million job openings in the U.S. economy at the end of June. In May, this number was 3.90 million. On the surface, this is good, but looking deeper into the details, it shows the poor state of the jobs market.

Combined, retail trade and leisure and hospitality industries made up 28% of all job openings in the U.S. economy in June. In May, this number stood at 25% of all job openings. (Source: Bureau of Labor Statistics, August 6, 2013.) Going back a little further, in April and March, job openings in these industries amounted to 24.30% and 23.84%, respectively—clearly a rising trend in the wrong direction.

What about the jobs in construction and manufacturing? In June, combined, these industries made up only 8.9% of all the job openings in the U.S. economy. In March, this number was almost 10%—another trend moving in the wrong direction.

Consider this scenario: For a family who is earning minimum wage, or close to it, they can’t go out and buy a new car, nor can they afford to make payments on it or lock in a 30-year fixed-rate mortgage to “take advantage” of the low interest rates. This family is forced to keep their old car, hoping it doesn’t break down, and rent because they cannot afford mortgage payments…nor would they qualify for a mortgage.

It’s a known fact: consumer spending drives the U.S. economy towards prosperity. The quality of work created in the jobs market remaining poor adds pressure on consumer spending.

When I look at the poor conditions in the jobs market of the U.S. economy, and then look at the rising key stock indices, I see major disparity. Euphoria has certainly taken over this year for the stock market, and we know very well from the past that it won’t end well.

Public companies are sending warning signals, but no one’s listening. As of August 2, 61 S&P 500 companies issued negative guidance about their corporate earnings for the third quarter. This represents almost 80% of all the companies that have provided an outlook for their corporate earnings so far this quarter. (Source: FactSet, August 2, 2013.) The future is not looking good.

Article by profitconfidential.com

By Profit Confidential

The jobs market in the U.S. economy is anemic; don’t for a second let the key stock indices make you believe the economy has improved.

While the mainstream and politicians are concerned about the numbers of jobs created in the U.S. economy, I look at their quality. Readers of Profit Confidential know this very well.

From my point of view, the quality of the jobs being created in the U.S. economy is very poor and deteriorating.

You see, with all the printing and easy monetary policy, one would assume, over time, the jobs market would improve. At least that was the original intention, but this is not happening. The problematic trend continues—low-wage-paying jobs are prevailing, while those that pay well are lagging behind in the jobs market.

The Bureau of Labor Statistics (BLS) reported that there were 3.93 million job openings in the U.S. economy at the end of June. In May, this number was 3.90 million. On the surface, this is good, but looking deeper into the details, it shows the poor state of the jobs market.

Combined, retail trade and leisure and hospitality industries made up 28% of all job openings in the U.S. economy in June. In May, this number stood at 25% of all job openings. (Source: Bureau of Labor Statistics, August 6, 2013.) Going back a little further, in April and March, job openings in these industries amounted to 24.30% and 23.84%, respectively—clearly a rising trend in the wrong direction.

What about the jobs in construction and manufacturing? In June, combined, these industries made up only 8.9% of all the job openings in the U.S. economy. In March, this number was almost 10%—another trend moving in the wrong direction.

Consider this scenario: For a family who is earning minimum wage, or close to it, they can’t go out and buy a new car, nor can they afford to make payments on it or lock in a 30-year fixed-rate mortgage to “take advantage” of the low interest rates. This family is forced to keep their old car, hoping it doesn’t break down, and rent because they cannot afford mortgage payments…nor would they qualify for a mortgage.

It’s a known fact: consumer spending drives the U.S. economy towards prosperity. The quality of work created in the jobs market remaining poor adds pressure on consumer spending.

When I look at the poor conditions in the jobs market of the U.S. economy, and then look at the rising key stock indices, I see major disparity. Euphoria has certainly taken over this year for the stock market, and we know very well from the past that it won’t end well.

Public companies are sending warning signals, but no one’s listening. As of August 2, 61 S&P 500 companies issued negative guidance about their corporate earnings for the third quarter. This represents almost 80% of all the companies that have provided an outlook for their corporate earnings so far this quarter. (Source: FactSet, August 2, 2013.) The future is not looking good.

Article by profitconfidential.com

By Profit Confidential

America has a national debt that is nearing $17.0 trillion. The Chinese own a good portion of this debt. The country also has about $3.5 trillion in foreign exchange reserves at its disposal, according to the South China Morning Post. (Source: “Beijing to create forex investment agency,” China Economic Review, August 7, 2013.)

That’s a lot of money that needs to be invested. But according to the article, the People’s Bank of China (PBC) is looking at the development of a new unit that will help to invest the funds. Currently, investing the reserves is the responsibility of China Investment Corporation, which has invested about $480 billion.

What I see is this: the continued movement of invested capital into foreign countries by China is a strategy for diversification and a means by which the country can get its hands on raw materials and intellectual property. We saw this with the acquisition of mining and oil companies in North America, along with major investments in the oil fields and mines in South Africa.

Call it the “Red Invasion,” but I expect foreign acquisitions to pick up going forward, especially with the creation of another agency by the PBC. Of course, China has its eyes on many companies, but receiving approval for the takeovers is another question.

Even the proposed takeover of pork producer Smithfield Foods, Inc. (NYSE/SFD) by Shuanghui International Holdings Limited was met with some resistance, but now it looks like the deal will go through.

I expect China will focus on acquiring raw materials with its reserves—iron, copper, oil—along with agriculture and industrial outlets. I wouldn’t be surprised to see a rise in shopping trips by the Chinese around the world, especially in resource-rich regions, such as Canada, Australia, the Middle East, and Africa. There’s already talk of building a massive pipeline on the bottom of the Pacific Ocean to carry oil from the tar sands in Alberta to China.

The reality is that $3.5 trillion is a lot of money. With this amount of cash, you could buy Apple Inc. (NASDAQ/AAPL) 8.3 times over, or Wal-Mart Stores, Inc. (NYSE/WMT) 13.8 times over. But don’t worry; the country doesn’t want these kinds of investments. It wants the raw materials and industrials. Plus, there are already many Chinese manufactured goods on the shelves of Wal-Mart.

It will be interesting to see when the buying activity picks up from China—and it will come very soon. The newly formed government is aggressive and open to the West. (Read “China: The New Breeding Grounds for Capitalism.”)

Article by profitconfidential.com

By Profit Confidential

Calling North Dakota “big sky country” would be an understatement. The clouds hang low and there is a density to them that sparks quick contemplation of the floodgates they can unleash.

There is a raw beauty to the prairies, with lush fields of wheat and grasses almost ready to be harvested.

In the Bakken oil region, shiny new pumpjacks litter the landscape. And it’s not just in North Dakota, but Montana and the Canadian provinces of Saskatchewan and Manitoba as well. The commodity is revitalizing the entire region.

But what stands out aren’t the pumpjacks, but all the activity going on around them. It’s all the services that are required to extract and move the oil that grabs your attention, and there is big money being spent to make it happen.

Also, the endless lines of oil railcars, with their shiny new paintjobs, line the Bakken region. One young man I spoke with was particularly enthusiastic about his prospects in the railroad services business. He said that his employer can’t find enough workers for the business they have. He was in full recruitment mode.

Williston is a small, busy town that is very much dedicated to serving the needs of agriculture and the oil patch. Of particular note is the construction going on; countless long-stay apartment buildings are in construction. An existing building advertised a furnished apartment for $700.00 a week.

Also noteworthy is the presence of oil and gas services companies like Halliburton Company (HAL), which has a substantial presence on the outskirts of town. Oil services are a big deal in the Bakken oil region. Everything has to move by truck; therefore, the business of freight in this region is a good one. Massive well valves take up entire flatbed trailers. The huge drilling rigs themselves require an enormous amount of infrastructure just to get set up.

The landscape in this part of the world is obviously changing. As route 1804 comes close to the Lewis and Clark State Park, views of Lake Sakakawea include large gas flares from oil well sites.

And then there is all the simple infrastructure you see around new pumpjacks, like large steel storage tanks, piping, fencing, electricity, security, and construction equipment. It’s the economic activity of spin-offs that you see, not the oil gushing from the ground.

With West Texas Intermediate (WTI) crude oil prices holding steadily above $100.00 a barrel, the business model for Bakken is a good one. Yet with everything in demand (including pricey Bakken stocks), value is skewed and getting the best bang for your buck isn’t so prevalent. (See “How to Make the Current Oil Situation Work for You.”)

Looking at all the activity that goes into creating a working pumpjack, I’d say that services are the way to go from the investor’s perspective. Even a spin-off industry like railroad services is relatively attractive compared to the built-in high expectations of junior Bakken stocks.

In any case, the landscape of the vast prairies is changing quickly. The oil boom has brought renewed prosperity to what has long been an agriculture-only economy. I suspect many locals wish it would remain that way.

Article by profitconfidential.com

By Profit Confidential

Since the third quarter of 2012, we’ve seen the earnings growth of companies in the U.S. economy sharply decline; we’ve also seen corporate revenue growth come to a halt. But public companies working in the U.S. economy have found a way to engineer higher earnings without really selling more goods or services; they’ve introduced a record number of stock buyback programs to boost their per-share profits.

Nice trick, these stock buyback programs, but the grim reality is that profits and revenue growth for corporate America are meager at best, and company executives are still concerned about the U.S. economy. Hence, public companies are stockpiling their cash as opposed to investing it (in anything else but stock buybacks it seems, a phenomenon that does not create economic growth).

At the same time, most levels of government continue to add debt, making the financial stability of future generations questionable. Who will eventually pay for the $17.0 trillion in debt our federal government has accumulated? As always, it will be the tax payer who will be on the hook, further shattering any hope of long-term economic growth for the U.S. economy.

In the current U.S. economy, average “Joe American” is on food stamps or some other form of government assistance because the Great Recession set him back that far; and unlike the Wall Street crowd and those connected to the Street, he hasn’t been able to recover. His job isn’t paying him more, but his cost of living continues to rise.

In America, there has always been one solution to lackluster “economic growth” in the U.S. economy.

It’s the resilience and innovation of entrepreneurship that has saved the U.S. economy time and time again. The locomotive was a great invention, cars were a better innovation, and cars that run on batteries are an even better technology.

In the U.S. economy, newspapers were a great way of delivering the news to the masses; the radio delivered the news more quickly; and TV not only delivered the news, but it also entertained. The Internet is the news medium of today, both because it’s quicker and because you can choose the information and entertainment you want to see and when you want to see it.

American ingenuity is alive and well in the U.S. economy, but the new technologies of the “change-makers” are not financially benefiting the masses anymore or creating economic growth. When Henry Ford created the first assembly line, he eventually created millions of jobs in the U.S. economy. This translated into a robust period of economic growth, in which workers bought homes, filled them with furniture and appliances, had kids, and spent money.

The future for America, as I see it, is more poor people dependent on the government; persistently high real unemployment, because the technology revolution has taken away the jobs; and huge profit opportunities for the technology change-makers.

We all heard the news this week that the Washington Post, a legendary newspaper in the U.S. economy, will be bought by Jeff Bezos, co-founder of Amazon.com, Inc. (NASDAQ/AMZN), a multi-billion-dollar company. Bezos bought the newspaper company for $250 million. Note: this is not a purchase by Amazon.com, but rather by Bezos himself. (Source: Washington Post, August 5, 2013.)

As I see it, the reality of the matter is that Bezos paid $250 billion for a sinking ship. The Washington Post has a significant amount of liabilities, and ad revenues at the company have been rapidly declining.

Print media is in deep trouble in the U.S. economy. Everything these days is going digital. So what did Bezos really buy? He bought editorial content. My bet is that the editorial content Bezos bought will be delivered digitally in the not-so-distant future and that the actual newspaper will eventually stop its print editions, which will equate to big job losses—and more pressure on economic growth.

You have to love technology. But since the “dot-com” boom of 1999, technological advancement has resulted in more job cuts than hires in the U.S. economy. Just look at the last jobs report released by the U.S. Department of Commerce. (See “The Worst Jobs Report in Four Months Does One Thing.”) The majority of jobs created today are in the low-paying restaurant and retail sectors—something that doesn’t equate to real economic growth.

So what does an investor do about the technology revolution in the U.S. economy—a revolution that is actually bad for the U.S. economy because it takes jobs away from it and causes economic growth to stagger?

As the saying goes, if you can’t beat them, join them. Buy into new technology.

Tesla Motors, Inc. (NASDAQ/TSLA) is an electric car company that manufactures cars using robots in Palo Alto, California. The company delivered 5,150 of its “Model S” in the second quarter of this year, resulting in revenues of $405 million, up from only $27.0 million in the same period one year earlier.

Talk about American ingenuity. Tesla’s Model S received the highest rating ever for a car from Consumer Reports. This is a perfect example of a technology company revitalizing the auto sector of the U.S. economy, not making the cars with lots of people, but with lots of robots. The company has brought a unique product to the market—something that lets the U.S. compete in the global economy dominated by cheap labor.

Bezos revolutionized the book industry with Amazon.com at the cost of unknown job losses as book stores, publishers, printers, and book wholesalers in the U.S. economy closed due to the digitization of print.

The mass manufacturing of cars in the U.S. economy stopped years ago. Tesla is revolutionizing an industry where jobs have already been lost.

And if Amazon.com reached $300.00 a share, maybe $134.00 a share for Tesla stock isn’t a bad price—maybe it’s even a way to “join” the technology game-changers.

Article by profitconfidential.com

By www.CentralBankNews.info

    I think the stock market is poised to go higher and investor sentiment has improved significantly from the recent correction. In my view, the U.S. economy does not require further monetary stimulus; it requires more time for the housing market to balance itself out. More monetary stimulus from other central banks, however, would be best for the creation of a new upward business cycle in the U.S. economy.

By WallStreetDaily.com

Now that two billionaires – Jeff Bezos and John Henry – bought The Washington Post and Boston Globe within days of each other, I wonder how many newspaper gravediggers are suddenly thinking that the industry can be taken off life support.

Personally, as an old-school journalist, I never gave newspapers their last rites.

Neither did stockholders, who enjoyed 40% gains this year on The New York Times Company (NYT) – a move Wall Street Daily’s Louis Basenese referred to as a “resurrection.”

If you’re not a believer yet, here are three reasons you should be…

~Reason # 1: Buffett’s Buying Rampage

Four years ago, Warren Buffett saw the industry going down the tubes and vowed never to buy a newspaper again. He had to eat crow, however, after he acquired the Omaha World-Herald in 2011, a paper he grew up reading. Then he added 25 more in the next two years, spending one-third of a billion dollars on the expansion.

Of course, the $333-million question is, why?

Beyond what he calls an “unnatural love of newspapers,” the truth is, he believes that good hometown news sells – and that the right online subscription model can add a healthy stream of income.

Metropolitan publications that report news from all corners of the world don’t fit his investable profile. That’s the stuff you can always get from the TV. Smaller newspapers like the Tulsa World and Greensboro News & Record, his two most recent acquisitions, actually visit neighborhoods and city festivals.

Buffett believes that people want to read about what’s going on in their own backyards – and they’re willing to pay for it. In that sense, newspapers have a monopoly on quality, local content.

No matter how great their content is, though, if newspapers use a losing business model, they will fail. That’s precisely what newspapers did (and some are still doing) for years. Slow to make changes to their business models after digital news spread like wildfire, they offered printed content online at no cost.

As the saying goes, “Why buy the cow when you can get the milk for free?” Subscriptions sank – and so did advertisers’ dollars, to the tune of 50% since 2005.

Buffett has no intention of giving away a cup, quart, or gallon. That’s where the paywall comes in…

~Reason # 2: Paywalls Lead to Paydirt

Surely, you’ve hit one by now. After reading several articles on a site, a message pops up, warning that you’ve reached your quota of 20 or so free articles, and you must now become a paid subscriber.

The Wall Street Journal implemented a paywall way back in 1997, leading to a 200,000 gain in subscribers in a little over a year. Today, 898,012 pay for online access – a 62.6% leap since March 2012.

It took 14 long years before The New York Times would follow The Wall Street Journal’s lead. Online subscriptions grew to 500,000 after just two years of charging.

Paywalls have finally become standard procedure. In 2012, 350 newspapers used them. And Borrell Associates, an advertising tracking firm, predicts 500 will adopt the practice over the next few months.

And Borrell confirms that advertising isn’t suffering as a result. If you think about it, there’s little difference from the late 1960s when people rejected the idea of paying for TV and eventually gave in to cable.

Typically, traffic lightens right after the paywall goes up, but within 12 to 15 months, it picks back up.

At $3 to $6 per month for customers, paywalls are expected to bring in a few hundred million dollars or so annually, or 2% of the industry’s total circulation fees. Not a fortune by any stretch of the imagination, but it does provide a steady avenue for growth.

~Reason # 3: Bezos is the Man for the Job

Maybe Bezos can be a superhero and “save the decade” for newspapers. What the industry needs more than anything is a monetizing of new and old, with respect to technology and people.

Market research firm Scarborough reports that 59% of people aged 18 to 24 read some form of the newspaper every week… That’s 18 million people, according to the U.S. Census Bureau. And the number of mobile-exclusive readers increased 83% in 2012 compared to 2011.

Sounds like a growing market in need of some serious tapping.

No doubt Bezos knows how to engage online audiences and make lots of money doing it. His ingenuity may make The Washington Post a poster child for 22^nd Century newspapers.

Perhaps Tom Rosenstiel of the American Press Institute said it best in an interview with PBS Newshour: “So, someone like Bezos, who is now thinking about his legacy – he’s reached a certain age, one of the richest, most successful businessmen in America – is probably thinking about, how do I save an institution and be known for something more than just being rich?”

I hope he has the answer.

Ahead of the tape,

Karen Canella

The post Three Reasons to Say “I Believe” to Newspapers appeared first on  | Wall Street Daily.

Article By WallStreetDaily.com

Original Article: Three Reasons to Say “I Believe” to Newspapers

By The Sizemore Letter

My style is a little different from most contributors to TraderPlanet.  At heart, I’m a value investor, and my holding periods for quality stocks can be months, years, or even decades under the right set of conditions.

This is not to say I’m an ideological believer in “buy and hold” investing, however.  Absolutely not.  But I am a big believer in letting a solid investment thesis play itself out.  If a stock is attractively priced and I judge it to have appealing prospects going forward, then I feel no need to sell it simply because it has enjoyed a recent run-up in price.

But while my approach to the investing process is different from that of a short-term trader, I’m a big believer in a concept that many successful traders follow: scaling.

When you scale in or scale out of a position, you enter it and exit it in stages rather than in a large lump sum, and there are several reasons why this is a good idea.  By taking a small initial position, you can test out an investment idea before committing a large sum of money to it.  This was a favorite tactic of Jesse Livermore, the legendary trader who was the inspiration for the fictitious biography The Reminiscences of a Stock Operator. 

For me, it is more a case of managing my psychological temperament.  Nothing is more frustrating to me than committing a large allocation of my portfolio to a well-researched position only to see it take an immediate nosedive.  I may eventually prove to be right, and the trade may still end up being as profitable as I hoped.  But seeing a new position in the red rattles me and distracts me from the task at hand of managing the overall portfolio.

It is also a way for me to split the difference during times of indecision.  If a stock looks fundamentally sound and attractively priced,  my head tells me to buy.  But if a stock has already had a large run-up or if the market doesn’t “feel” right, my gut tells to wait.  When I have a conflict between my head and my gut, I split the difference by entering a position in increments.  If the stock continues to rise, I have exposure.  But if there is a pullback, I also have my powder dry to take advantage of it.

The same is true of exiting a trade.  I hold several positions I’d love to hold forever.  But now and then, one of those stocks will get a little on the pricey side, or the position will grow to become too large relative to the rest of the portfolio.  In these cases, it makes sense to take a little money off the table.  A trader would call this taking profits; an asset allocator would call it rebalancing.  I call it being prudent.

I’ll leave you with an example.  Mortgage REITs recently took a beating in the market, as investors feared that a hike in bond yields would wreck their book values.  I took the view that any reduction in book value was already reflected in the stock prices of the REITs; as a group, they traded well below their stated book values.

But after the bloodletting in the sector, my gut felt queasy about allocating a large chunk of capital to something that volatile.

Splitting the difference, I’ve been averaging in to the UBS E-TRACS 2x Mortgage REIT ETN ($MORL) over the past month.

Incidentally, I recommended mortgage REITs in TraderPlanet three weeks ago.  I’d like to reiterate that call today.

Disclosures: Sizemore Capital is long MORL.  This piece first appeared on TraderPlanet.

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