Friday, March 11, 2016

Weekly Market Review

"A fool and his money are soon parted" Thomas Tusser

I got that quote just a bit wrong when I tweeted it the other day as I was going off memory. Either way it's a true statement no matter the exact phrase.

The market looks to close higher for the week despite still being down for the year. The S&P started the year at 2038, and as of writing is at 2015. It seemed not to long ago everyone thought the world was falling apart as we saw daily 1% + moves in every direction possible. I'm sure there are people that sold out during the recent lows thinking they'd buy back cheaper. I hope they got their timing right.

I don't think we are out of the woods yet. I'm cautious to deploy anymore funds into our current holdings. I'm eyeing a few other stocks for good entries, but I just want to get them a little cheaper. With some patience I think I'll get some of them. I'm trying to be more patient in all areas of life for 2016. So far so good I believe, but I'm sure my fiancee may disagree!

We heard big news from the ECB this week. The Euro rallied and I think a lot of that was covering of positions. Today it's down slightly. I think if anything the expansion of the bond buying program, and other measures raised more questions than anticipated. For one the new bond buying program was expanded in size, length, and issue type. Obviously they were not getting the desired results with the original program. Also this serves as a way for banks to sever ties with riskier debt from companies they'd prefer not to hold. I don't see them parting ways with higher grade debt from companies such as Daimler, BASF, or Nestle. There must be quite a bit of liquidity concerns behind closed doors. I'm also not sure what bank in their right mind would park money at the ECB only to get less of it back. I do not think this policy will increase lending as borrowers need a clear reason to take the money and invest it. With EU growth coming in between 0.5-1.5% on average it's not an enticing proposition. Also banks have the option to move money to different areas such as overseas subsidiaries, store it in vaults, or buy equities. Altogether the situation is delicate out there in my opinion.

We will get some news from the Fed next week. Everyone will be going crazy over a potential rate hike. In reality it will not make much of a difference for many of our companies.  Ask the gentleman buying Baileys and a 6 pack of Guinness for the upcoming St. Patrick's day celebrations. I bet you he will care less about what interest rates are at 5 years from now let alone stop him each year from making the purchase. Of course that will be good for our pick DEO.

The portfolio was pretty quiet for the most part. IBM, CMI, & PYPL have all had nice moves lately. I'd expect some of the steam to wear off in the short term. Also MO, MKC, and PM have been very resilient which is nice to see.  HCP is a stock I've been thinking about constantly. In hindsight I wish I did not make that add. I would have loved to buy under $30 instead. I try to keep things balanced which is why I have not bought again, but that price is still tempting. The stock has moved straight up since it hit $26.  If it gets under $30 again it will force me to reconsider. I do believe the dividend is stable, and not many places can I park my money for 7-8% guaranteed this year.

There were some upgrades and downgrades, but that's just short term noise. I have a long time horizon when I make buys so I'm not concerned what some analyst with a track record I have no clue about thinks. That's the benefit of researching companies on my own. For all those interested there are a lot of good books regarding basic company analysis. For the most part though you need to hone in on a few key metrics, and then gauge them over time. Also never get caught up in what's hot. It usually turns cold very fast.

Cheers!
The Long Haul Investor


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