Every once in a while I receive feedback from readers of this column inquiring why I spend so much time talking about macro events and not about individual “Green” stocks.
The answer is pretty simple: The Macro events in the world today, especially in Europe are dominating every investment thesis. In addition, in the US we face a potential crisis as our debt looms larger to the point where it may be unsustainable without a sharply weaker Dollar or lower Yuan.
These are issues that are so large, larger than most of us have ever faced in our lifetime that they overwhelm any individual stock analysis, including those of “Green” stocks. Plus, for years I’ve been warning against Alt energy names that relied upon government support. Only a nitwit could fail to see the link between shrinking budget outlays and the high risk that support for Green projects could disappear.
Investing should be viewed though the lens of a realist not through one jaded by hope or wishful thinking.
Our retirements deserve no less.
Eventually this time will pass which will allow us to focus on individual stock selection but in the meantime if you wish to entertain yourself there are a number of website solely devoted to Green Stocks. Just keep this in mind: We eat our own cooking at RMHI.
No positions
When markets start to change character as they are right now, its wise to revisit and possibly change your perspective. I’ve been outright bearish for quite a while but long term data suggests that the type of strength we’re seeing in US equities could be the start of something substantial.
My belief is that investors are coming to grips that we are not about to plunge into recession soon and that stock prices had built into their values a full fledged recession. Hence stocks are adjusting to valuations of slow growth. In addition many measures of sentiment were down at March of 2009 lows…..need I say more?
There no room for ego here and discipline trumps conviction. My TZA was closed out today at $39.75 for a loss of $6. However in its place we are reasserting our customized portfolios for what will hopefully be at least an intermediate termed rally. My expectations are a rally into January.
Stock selections include:
TESS
CLUB
HIT
CRD.B
DK
NTL
FRP
SUSS
IEP
Long all positions
Brad
If it isn’t enough to bear after hearing the news that Ashton Kutcher no longer follows Demi on Twitter the esteemed Economic Cycle Research Institute says we’re in a recession. Surprisingly this has met some very intelligent opposition in none other than Doug Kass who believes the current data does not support the case.
To be a good investor IMO means that we should be realists and face our reality and consider that hope is a four letter word.
With current earnings estimates for the S&P 500 for 2012 at $110, a stagnant low growth economy could bring them to $97-$100 range and its my view that if that is the case then the markets will likely make further lows.
According to Sentimenttrader.com the average peak to trough for the S&P 500 is 23.9% while our current loss is 17.9%. If we get real particular and factor in only recession induced bear markets within the painful confines of secular bear markets then the average loss drops to over 40%.
Personally, I don’t know if we’ll drop another 20% but I think its likelier that John Lackey shows composure on the mound and regains his old winning ways than the S&P 500 holding its August lows.
Looks like we’ll be trading on the Darkside for the downside for a while to come.
Long Terry Francona
Short John Lackey
We are still holding the TZA which is now at $52.9 in most client accounts, for a very nice $8 gain in just a few days. At present I’ve entered a stop order to sell at $52.5 to preserve our gain in case the markets give up like the Red Sox in the 9th inning.
The current trading environment is very similar in nature to what we experienced in 1987 and 2008 post crash. Back then we experienced a sawtooth trading environment with weekly whipsaws reflecting economic news changed daily, not a place for long term investors to add new positions. Markets need time to heal and its very very rare for them to simply bounce back up after a significant selloff.
I’ve been very hesitant to talk about individual stocks for a couple of months since we have very few full positions for client accounts. As the recent TZA trade reveals, the last two best trades I’ve made have been in Inverse Exchange Traded funds. Stocks still seem heavy to me and our investment models are still bearish, earnings are still coming down and in my opinion still have a much greater downside.
In the meantime I’m quite content to make money with Inverse ETF’s while the 11000 – 12000 trading range continues for the SP 500 index.
TZA sold just now at $52.5 nice
Formerly long TZA
Short Red Sox
Long San Francisco
Evergreen Solar bankrupt….Solyndra bankrupt….Was it possible to see the collapse in the Solar stocks coming? Yes it was and I’ve mentioned this frequently for better for the better part of three years. It all boils down to the fact that you don’t want to own investments that rely heavily on government subsidies for their survival. You especially don’t want to own those investments during periods of financial austerity. The solar stock industry relies heavily upon subsidies from the US, China and Europe, with all three in either recession/depression or on the brink this outcome was inevitable.
For as long as I’ve been practicing SRI (over 20 years) I’ve been uniform and adamant that investing proactively is contradictory to effective long term investing. Investing including Socially Responsible Investing is about handling risk intelligently and dispensing with the rose colored glasses. Eventually every investment will turn against you and how you decide to cope with this inevitable turn will largely dictate the degree of your long term success. Being emotionally married to an investment is a sure and quick way to the poorhouse, you’d have been much better off supporting the company as a consumer not an investor.
Is there a survivor and a longer term winner in the bunch? Probably First Solar
Investing in Solar or Alternative energy now is nothing more than a spectator sport for the time being.
No positions.
Shocking to me is the fact that the US remains one of the strongest markets in the world as of today, strong on a relative basis if not absolute. Despite the headlines and Euro risks the US markets continue to tread sideways. Either there is disbelief that Euro contagion risks will not suck us under and that the current decline in US earnings estimates will only be a shallow decline. Neither issue can be proven right now so my mantra of being defensive is still in place.
I’ve been using this minor market strength to add to defensive hedges (SDS) and slightly reduce market exposure. Charts remain broken with the SPX sharply below the 200 day moving average. I’m currently immersed in conducting research into the effects of using moving averages into our investment strategies.
This is not a good time for investors to act upon the urge to be contrary. While I’d love to be heavily invested in every portfolio, broken markets take time to heal. 2008 was a great example, while the crash occurred in the Fall it took six months for the 200 day m.a. to decline to a reasonable point, in addition the earnings were allowed to bottom and finally turn up.
There is no reason to fear bear markets when you take a proactive approach. For about 30 years I was almost exclusively a long-only investor. But getting kicked hard in 2008 was more than enough to turn me into a more flexible investor. When this bear finally expends itself there will be a major rally where returns will be stunning, but we must exercise one the hardest of disciplines: patience. Ugh.
Long SDS
