Saturday, August 27, 2016

TLH Weekly Review - August 27, 2016

"Man this market is dull - it's awesome"

Said no one ever!  Actually a lot of people have probably said this privately, but not in public.  Even with some conflicting remarks from Janet Yellen on Friday the S&P 500 moved a scant -0.16% on the day and down just -0.7%(14.71 points) for the week.  Not exactly earth shattering moves.

As we enjoy the last few weeks of summer I'll keep this post light. Especially since the portfolio was very quiet.

On Friday Janet Yellen and Co. gave a few remarks that confused a lot of people. Was she hawkish, or was she dovish? Depends on what you want to believe.

Hawkish - "Indeed, in light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months."

Dovish  "...policymakers and society more broadly may want to explore additional options for helping to foster a strong economy..."

"... future policymakers may wish to explore the possibility of purchasing a broader range of assets."

& No Clue - "our understanding of the forces driving long-run trends in interest rates is nevertheless limited, and thus all predictions in this area are highly uncertain.18 "

The market took the first comment as that means rates are rising sooner than later. I've been in the raise rates camp for awhile.  Then Fed Vice Chair Stanley Fischer went on TV to bolster the possibilities of rising rates. Expectations for a rate hike in September and December both shot up.

The dovish comments are vague I think by design.  They only allusion is in the text is to "tools that have been employed by other central banks". That I think means purchasing additional types of agency debt, and even corporate bond purchases.  Why they think this might be necessary is confusing.  They are preparing for some type of scenario behind closed doors, what exactly I'm not sure of yet.

So I guess it takes us to the no clue statement. The Fed stated in front of the whole world they are horrible at predicting the economy.  I'm not better either, but I also don't have access to the same tools and data they do. I should note this is not the first time that's ever been admitted by central bankers all over the world.

Portfolio News

The portfolio was quiet. There were no earnings reports, no sells, and no adds. It was just a boring week.

One noteworthy item was some volatility we saw in IBB.  This was due to some news out of Mylan regarding epi-pen price increases. Mylan is currently the funds 7th largest holding at 4.20%.  Additionally there were some political talks about price controls. I stated when I first bought IBB that price controls were one of my concerns, and that remains true. Still since May this addition is up 10%, and I expect it to keep heading higher as it works through resistance zones.

Other rate sensitive names in the portfolio took hits this week. HCP, MO, RAI, and BTI suffered the most.  Reason being is these companies hold larger amounts of debt. I'm not concerned, which seems to be the case plenty of times. Remember we are here for The Long Haul.

That's all for now. Get outside and enjoy summer before it's over!

The Long Haul Investor

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