Wednesday, December 28, 2016

The Best Performing Sector For 2016

Well with the year almost over I was wondering which S&P 500 sector was in the lead. Surprisingly, or not depending on your view, the Energy sector lead all major groups according to This comes on top of WTI's big rally from the mid $20's earlier in the year, all the way back to the low $50's now.

The next best sectors are Industrials(XLI) and Financials at 2 & 3 with 19.5% and 18.1% gains. The worst groups so far have been Healthcare(XLV) down 3.5%, and Real Estate(XLRE) down 1%. I think it's safe to say they'll all finish the year in their respective spots.

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Sunday, December 25, 2016

TLH Market Review 12/24/16

Well this is the last review of the year.  I'll have a somewhat uneven posting schedule the next few weeks also. 

It's been a quiet week.  Besides the Dow flirting with 20,000 part of the week there really wasn't much going on.  Most of the Western world took unused vacation days to finish up last minute shopping, travel, relax, and prepare for Christmas weekend.  The big money's pretty much finished up their books in the weeks following Thanksgiving, so as expected volume tails off significantly this week and next. 

We did get some economic data.  Q3 GDP was revised up to 3.5% from 3.2%. This isn't a big deal though.  Q3 ended in September and it's already the end of December.  The markets already figured out what happened between June-September. 

More importantly we received Personal Spending, Income, and Core PCE Index.  I didn't like the soft numbers for income which came in flat at 0% when the market expected 0.3%.  Incomes need to grow for the economy to expand.  Either way it's not as if zero's have been a trend so it's not much to worry about yet.  Spending was weaker and that's fine if Savings were increasing. But we got a 0.2% bump in spending after expectations were coming in at 0.3-0.4%. On top of that the savings rate has dipped down to 5.5% from a previous 5.7%.  So the money must be going somewhere. Taxes maybe??? 

Core PCE also had a zero reading.  This is one of the indicators the Fed keeps an eye on and the index has had trouble gaining steam all year.  Inflation continues to be tame and I think that's just the new reality we are in. 

Portfolio News

Once again the portfolio was quiet overall.  Fine with me!  We did get news the Linde AG and Praxair(PX) finally agreed on merger details.  The new company will be worth approximately $65 billion with revenues of approximately $30 billion.  There's talk divestitures will be necessary so maybe we can expect revenues to be 3-5 billion less. Linde AG shareholders will receive 1.54 shares of new company stock for each share owned, and Praxair shareholders will be given 1 share in the new entity for each share already owned. The company's new ownership structure will be split 50/50 between each company. 

I think the deal makes sense for the most part.  The industry is consolidating, and this should give the company better negotiating power at the table with customers.  I'm not extremely excited about the increased currency exposure, but over time this should all even out.  This is long haul investing don't forget.

Have a great weekend and a Merry Christmas, Happy Hanukkah, and Happy Kwanzaa.


The Long Haul Investor.

Sunday, December 18, 2016

TLH Market Review - 12/18/16

Well the markets finally got what they waited 1 year for.  On Wednesday Janet Yellen & Co unanimously decided to hike interest rates for the second time in 10 years.  On top of that the Fed indicated they would raise rates 3 times in 2017, and the dot plot indicated the Fed expects rates to rise into a range of 3.5-4.0% by 2019. The outlook has sent US bond yields soaring as the 10 Year Treasury hit a high of 2.6% for the week. I'm not sure how much more upside is left. Eventually the bond market will digest gains before continuing it's move up.

After years of keeping rates low to stimulate growth it seems there is suddenly a big urge to hike rates in a consistent manner.  Funny is I don't think a lot of people "believe" the economy is strong enough.  Most people still feel left out and behind in what's been one of the most controversial recoveries since the Great Depression.  Either way if the Fed's path turns out to be true that should continue to be a tailwind for the US Dollar which has seen a substantial rally the last few months.

Non-OPEC members agreed to a 558k bpd production cut to help stimulate prices.  The oil markets initially reacted with a strong surge, but then quickly calmed back down for the week.  I must say I love how these countries get to collude against the entire world, and no one does a thing about it but continue to buy more oil.

Oil is still in a long term downtrend from the way I see it.  So I'd like to see how this continues to play out. I'm not concerned one bit about overall energy prices. There is a seemingly never ending glut of ways to provide our energy needs in the near term horizon.  Besides the abundance of coal, natural gas, and oil we also could ramp up the increasingly less popular nuclear energy systems.  On top of that there have been great strides in the past few years with wind and solar energy. I could easily see energy prices continuing to fall in the decades ahead as energy producers of all types continue to fight for our money.

The Portfolio

It's kind of nice how our investing style doesn't generate many action items, or news to pay attention to.  It allows me to spend my time getting other productive things done.  The portfolio had a quiet week with no earnings announcements, or other major news.  The IShares Biotech ETF(IBB) seems to be the only thing constantly being talked about as this politically sensitive sector is the subject of never ending whiplash lately.  On top of that a few holdings had some bad news lately which have kept share prices under a lid.

From a technical standpoint the ETF is sitting in a precarious position right now as it straddles the 50 and 200 day SMA's.  If things don't start looking up for this sector soon it may test my patience for than I'd like. The one bright spot from the chart is the ETF is doing a decent job of holding up against it's previous lows and making marginally higher highs.  It's not a perfect chart, but I've seen plenty of companies and industries overcome less than stellar chart action. Hopefully this sector can continue to create lifesaving drugs, and rewards shareholders with the profits.

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The tobacco sector has been lagging of late, and I think a lot of that was due to the impending rate hike and prospects for higher borrowing costs in this leveraged industry. Besides RAI and BTI merging the sector has been quiet as it moves sideways for the most part. Also it remains to be seen if British American Tobacco will increase it's offer for Reynolds America. I'm partially skeptical, but you never know. The industry has seen an uptick in the movement to curb e-cig use. That's expected.

It was nice to see our tobacco/real estate play, Vector Group(VGR), waking up with a 9%+ move the last two weeks. It looked like the stock was sleeping during the ensuing Trump Rally. I was starting to wonder why the stock wasn't moving since the real estate sector overall had seen a decent post-election bump.  

There was no major news out of our other stocks. We are light on retail except for Costco(COST) so we don't need to pay attention to holiday trends very much.  Although the companies last earnings report was very good in my opinion especially when other retailers are considering curbing expansion, or actually closing stores.  Cummins(CMI) has seen a big boost to it's share price lately as it's trading around $140.  Crazy to think less than a year ago the company was going for $80.  I really regret not adding.  Oh well.  Engines aren't going anywhere soon.  And this company makes the best ones in the world while being a cutting edge producer of cleaner, stronger, and more efficient engines.

Since I've been slacking lately I'll do one last review next week, although expect it to be abbreviated. After that I won't be back on a regular schedule until mid-January. The blog will still get it's periodic updates so be sure to keep checking back in. I'm looking forward to calculating the year end results to see how the portfolio stacked up against the S&P 500.  This quarter won't be an easy beat so I'm really anxious to see how this turns out. 

Enjoy all the end of year has to offer. Time with family and friends, and a variety of festivals, should be more than enough to keep us all happy the next few weeks.  The boost to our portfolios is just a nice bonus in my opinion!

Hope your weekend was great!

Friday, December 16, 2016

The Markets End of Year Streak

If you've lived in a box you probably have no idea the S&P 500 is so far up 5 of the last 6 weeks. In fact since the week of the Presidential Elections the market is up by 8%. That's a big chunk of the yearly gain it's seen so far. It's also a respectable gain if  8% was for the entire year. Of course if you owned an S&P 500 index fund you'd have received dividends so your total return is actually higher. As of now it seems a safe bet the S&P will end the year up around 10%. It's currently up around 11%. Let's see if it can continue the trend to end on a high note. 

That's why I think it's important to buy and hold. If you were trying to "time" the market I bet most people would have completely gotten this call wrong the last few weeks.  Especially if you listen to the talking heads that spew out horrible information. I sometimes wonder where they get their info from. 

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Saturday, December 10, 2016

TLH Market Review - 12/10/16

Fear not fellow investors. Despite all 4 indexes hitting new highs this week there shouldn't be a worry abound.  Not just because Christmas and all the many other holidays celebrated this month are near.  Because a higher market doesn't mean a crash is right around the next corner.

I get it. For many the pain and stress of two major free falls, plus plenty of 10% pullbacks, is brandished in their memory.  But if you stuck through thick and thin since January 2000 you'd still be up 124% according to the S&P 500 Total Return Index which includes dividends. A gain is a gain, you can't argue with that.

Friday, December 9, 2016

US Treasury Rally

While it might not be new news to anyone at this point I thought it was worth mentioning the huge tear Treasuries have been on.

Since July, 3 Month Treasury yields have risen an astounding 96.15%! The 2 year, 10 year, and 30 year are showing respective gains too.