Destry Witt has been fascinated by the stock market since his college days. When he witnessed the crash of 1987, Destry was intrigued by how such a thing could happen. Now, he periodically releases these Morning Market Comments in which he offers commentary and insight into the market at the time. Read along to learn more about Destry Witt’s thoughts on financial markets!

Dec. 21, 2020

Happy Holidays!

Even though I haven’t been in touch recently, you can find all my past comments on my personal website. Stocks are expensive, and in the short-term, that’s never a good time to buy.  As a result, we’ve done a great deal of profit-taking the past two weeks, and have lots of cash which we look forward to using to buy back some of these great stocks that made us that cash before.

What is different is that the market’s breadth has been much better and that is a bullish indication, but they’re buying those companies that have been crushed by the pandemic. Some, companies are seriously hemorrhaging cash and in many cases, selling more shares to stay afloat (pun intended).  The Russell 2000 has clearly outperformed the S&P 500 and that’s positive too, but no wonder – The S&P 500 just added Tesla Motors (OTC-TSLA) at an all-time high and having just issued another $5 billion shares.  This is not how/when we invest.  Doesn’t mean they won’t continue to go up, but those buyers are betting on a greater fool.

You might be thinking that this time of year I’m usually very bullish due to all the 401k and IRA contributions employees contribute to mutual funds (you know what mutual fund managers do when we give them money), and you would be right.  That hasn’t changed.  It might be a little less this year with more people unemployed or under-employed, but in every rally, there can be a pull-back. A temporary cooling-off where a different type of investor leads the market for a short period of time.  In fact, It’s not unusual to see such occur after the first week of the new year.  If that occurs in 2021, I’d probably start nibbling on some of the darlings if they we’re to overreact to something like a 3 percent pullback in the major averages.  These volatile stocks, which is where we made our money recently, might pull-back as much as twenty percent in that type of scenario.

Want to discuss this idea more, text “pullback” to 360-721-2170

Nov. 16, 2020

A little bit of Apple can go a long ways.  Which is to say that by selling a little Apple, Amazon, Microsoft, any of the expensive Covid Set, and reinvesting those proceeds into travel, retail, and/or restaurants, the market is able to rotate its way to even higher averages without losing much steam.  This rally, if we’re to call it a rally from the 30% drop in March as a result of the government’s response to Covid is still in its infancy.  It’s still dwarfed by 92% of all bear market rallies.

And the market will go higher – regardless of politics, although a stimulus is a must, and a vaccine given.  Because, there is nowhere else to invest.  The last time we had to worry about buying stocks even close to this expensive, Money Markets were paying about 7 percent.  There basically is no money market anymore, and with treasuries at less than 1 percent – you get my drift.  The only thing that makes stocks go up is people buying them.  And people have very few options right now.  So that’s where we spend our time.  On the fringe.  In the fray.  Looking for something that isn’t expensive to invest in.

Nov. 10, 2020

A large rotation began last week causing a spike in media attention, but reducing volatility dramatically.  I’m being silly of course, but the only thing really interesting about the activity was that while one expensive index went up (DJIA), another declined (NASDAQ100), but is still expensive.  The largest index, the S&P 500 was largely unchanged.

Evidence of an expensive DJIA, because I don’t think anybody needs evidence that the NASDAQ100 is expensive, is that Disney (DIS) the poster child of where not to spend your money during a worldwide pandemic is trading at levels similar to where it was prior to the pandemic regardless of massive losses and no expectation of making money anytime soon.

We took advantage of the rotation by getting in some early tax harvesting.  Hopefully there will be more to come…

Oct. 28, 2020

Oh yeah, there’s an election going on!  Generally we don’t expect elections themselves to affect markets.  Rather it’s the policies of the candidates such that if you can extrapolate the economic potential of the policies multiplied by the probability of the candidates success in the election that should drive the markets.  My expectation is that a Trump victory would be beneficial in the short-term.  A Biden win while volatile now, could have a better outcome as early as April or May.

Oct. 26, 2020

Politics, the elections, Covid and the government’s response to Covid – there are plenty of domestic issues to distract us from making appropriate investment decisions currently.  Still the number rule of investing seems appropriate.  Buy low and sell high always works.  The challenge seems to be how we apply it.

For those that feel like they need to have more cash in their portfolio now due the above mentioned issues, I encourage you to look into your portfolios and liquidate those investments that are high.  Many of the large technology companies, the trillion dollar trio are easy pickens.  Those bonds that yield so little going forward should be easy to sell.  The treasury is buying them by the truck loads in an effort to give you that liquidity.  But keep an eye on what is low and know what it will take to get you back in the market with that new cash.  Its better to make decisions beforehand rather than reacting to the news of the moment.

Small-caps stocks are relatively low because so many of them have been victimized by the government’s response to Covid.  The primary small-cap index, the Russell 2000 was designed in 1984 by Russell Investments, then of Tacoma, Washington, and was comprised of the 2000 smaller companies in the S&P 3000.  It was supposed to be representative of the US economy but perform better.  There are number of funds where we might invest when the timing is right, but the index performs best in November and December.  In fact, on average it makes money in every month until July where it will significantly underperform through October.

Buy low, sell high…

Sept. 2, 2020

Welcome to the Silly Season!  That time of year when anything can happen, and often does – unfortunately to the downside.   If something crazy is going to happen, it’s going to happen in the next couple of months.  September is historically the worst month of the year, with negative performance on average over the last 100 years.

In my opinion, a “V” Type recovery was silly enough, but it happened.  Historically a 20 to 40% drop in the market takes on average 15 months to recover.  This latest correction took just five short months.  Central Banks around the world threw unprecedented amounts of liquidity at the issues.  When you consider that money has to go somewhere, I guess we should have assumed it would go into the most liquid stocks.  They have the least issues with the government’s responses to COVID.  That’s why Apple, Amazon, Facebook, etc are leading.  They’re too well really, but nothing makes stocks go up more than people buying them.  It certainly doesn’t make sense to buy most bonds, nor residential real estate.

As of today, stocks have never been more expensive.  It reminds me very much of the turn of the century when anything with a business plan geared toward the future of online activity went up and up and up.  It’s not entirely that bad, but it’s getting there.  For now however, at least its good-big-liquid companies driving the indices higher.  They are all way too expensive, and there are only a handful of them, but for those invested in the S&P 500, who cares?  I do believe that when Apple, Amazon, etc go down, their gains will be reinvested into many other companies also in the S&P 500 that were able to persist through the government’s response to COVID.


June 16, 2020

We can’t explain everything all the time.  The best we can do is make good decisions.   A good decision is not the one with the best outcome; we can’t control outcomes.  It’s the one with the best inputs.  The best we can do is control the processes that went into making the decision.  Good outcomes are a byproduct of good processes, but not a promise.

The market will be incredibly volatile for the remainder of the summer, and it will be lower at some point than it opens today.  How do I know that?   The V type recovery is very rare.  Most recoveries bounce around for long periods or times – more than a year at a minimum, and why should this one be any different?  Because the Fed is throwing money it?  They are until they aren’t, and if you’re making your bets that the guys that screwed it up the first place are the guys that are going to fix it – well, that doesn’t seem like a good input.

Also, 8 and 9 percent rips over the course of a week are also unusual.  Not that strange things don’t usually happen in the markets, but they don’t usually happen with so many stocks.  Believe me, its not different this time.  Its never different.  It just feels different for short periods.  Eventually stocks will reach their true market values


June 8, 2020

If earnings matter, there’s never been a better time to sell.  And if you haven’t sold by now, you can thank the Fed for orchestrating a magnificent recovery of confidence, and an expectation flop of 10,000,000 jobs – doesn’t make sense.  It’s close enough to May that it still makes sense to sell this rally and wait it out.

May 15, 2020

I’ve been reticent on the subject of “Sell in May and Go Away.”  Not because it isn’t a relevant subject, but the thought never occurred to me to do so with the market down 20% already.  Sure it’s a timely discussion, it is May after all, but the number one rule of investing is to Buy Low and Sell High.  All other rules bow down to Buy Low and Sell High.  There for if stocks aren’t high in May, then we simply go away.  We go away and wait for another a day.

The market will give us many chances in our life time to get it right, but we have to get it right.  We don’t have to catch every 20% plus move in the market, but we do have to catch those that we attempt right.  If we miss, we ride it out and look for another opportunity.  If we catch just one good one over our lifetime, we will outperform the market.  If we don’t follow the number one rule of Buy Low and Sell High, if we sell when the market is down and wait for it to go up before buying just one time, we are nearly certain to underperform the market over our lifetime.

There are many nuances to all these simple rules.  Many different personal objectives, but these general ideas are our first considerations when we otherwise find ourselves in those uncomfortable times that we inevitably do when investing.  But the risk is worth the return in a diversified portfolio.

Apr. 16, 2020

Yesterday it was announced that Retail Sales for the month of March fell 8.7% – the largest single drop since the record has been maintained.  That report accounted for basically one week of shutdown.  Any guess what April might look like?

It really doesn’t matter.  We’ve seen the lows as long as the government doesn’t run out of money, but it’s still very difficult to predict day-to-day what the markets will do.  In this environment, we want to be able to have something to sell on the up days so we have cash to buy on the down days.

Mar. 18, 2020

It is very difficult to stick with stocks during times like this.  Probably even more difficult to consider buying them, but for those that don’t own stocks, that’s exactly where you need to be.  To be considering buying some stocks, buying something that others can’t stand to own.  Something that others are throwing away.

Yes these are unprecedented times.  I can’t possibly know what I’m talking about because we’ve never seen anything like this.  This is not the Crash of 1987, it’s not 9/11, it’s not even SARs.  From the American perspective, this is truly unnatural.  Never before have we been required to stay indoors, to not buy anything, to lay off our employees, but this too shall pass.  Evidence is that in China, where it all began, outbreaks are on the decline.  They really feel as if they’ve got a handle on this, and we will get there too, with far less human loss than they will have had to sustain.  It’s just a small amount of time and a great deal of volatility.

Most of the lost economic activity we’re experiencing will be made up at the end of the year.  Goldman Sachs economists expect less than 1% drop in the two quarters affected by the virus right now, but enough pick up in the latter two quarters make the year over all pretty decent.  Stocks will once again go up and as they usually do, go up more than we expect we might.

Mar. 13, 2020

The media is reporting yesterday’s collapse in the stock market as the worst day since the “Crash of 87.”  It was worse – it’s essentially a new record since I’ve been investing – since all of us are alive.  We have to go back to 1929 to find such a dislocation of sanity.  In yesterday’s action the bluest of the Blue Chips, already down double digits on the year, Dow Jones Industrial components including Boeing (NYSE-BA) down 25% in 24 hours, Disney (NYSE-DIS), and Delta Airlines (NYSE-DAL) even as Warren Buffett announces he’s been buying more, we’re tossed out wreaking havoc on portfolios.  For what?  Anecdotes!  The hysteria of hyper media.

It appears that 99% of people who test positive for this new strain of the Corona virus will be over it within two weeks.  Those with weakened immune systems will suffer greatly the same as they do when they develop pneumonia.  The communication channels of today, combined with new government regulations of the past 20 years, has resulted in increasing deceptive financial markets, particularly in the stock markets where transactions are virtually free and individuals trade without considering rationale.  Then before those transaction even settle, they’re back in the stock market because they have nowhere else to go.  Bond yields, another contributor to the hysteria, are absurdly low in the long hangover from the financial debacle of the financial crisis which began with policies from Washington DC more than 15 years ago.

Get the government out of financial markets.  They’re not smart enough and are misguided in their incentives to do what we need them to do to support a stable economy and its financial markets.  However like all the recent debacles they have created, this one will be short-lived too.  The FOMC will likely reduce rates to zero next week – many other countries already have.  There will be more and more incentives until the markets near new highs again, because that’s how politicians see things.

Real estate still looks like the best scenario to me.  Equity that requires thought to transact paired up with a low cost of money.

Mar. 11, 2020

This Coronavirus is like Y2K – counterparties are requiring each other to have written policies describing their plans to address the outbreak!  I imagine it’s just a matter of time before the SEC and our state regulators require Reliance Investing to have written policies that our clients are required to sign off on stating that you understand that we are serious with regards to our intent to prevent you from contracting the Coronavirus. 

Perhaps I’m just sheltered, I don’t see it!  I’ve been on planes, been to ballgames, and large conventions.  None of the people that I interacted with believed there was a problem either, but none-the-less, Wall Street has discounted a recession as a result.  The FOMC, the Treasury, and now the White House have taken steps to reduce the economic implications of a slowdown in business activity.  This push and pull on the economy as if it were a rope adds to the volatility, but I suspect will increase the chances of the stock market seeing new highs sooner than we might guess right now – especially with rates at virtually zero.

Meanwhile, the journal reports that Warren Buffett and Berkshire Hathaway added to their positions in airlines.

Mar. 4, 2020

The stock market is getting comfortable that it has done a decent job of discounting all the potential concerns relative to the Coronavirus.  And a lot of Portfolio Managers seem to be happier without a Sanders runaway.  The 50 bps cut by The Fed wont hurt either.  By making this cut, intra-meeting and so large, the Federal Open Market Committee is basically throwing in the towel.  The President can’t criticize them, they don’t have to evaluate if it was enough – it’s the biggest move they’ve made since the credit crisis in 2008 – corona will not be anywhere near as bad as the credit crisis.

Let’s not anticipate a “V” type recover however.  Managements are still assessing the damage.  They’re doing so with imperfect data.  Authorities in the epicenter are known for massaging the truth.  It will be weeks before the unaffected are calmed down and the full extent of the damage is known, but Wall Street has done a fair job of guessing as it usually does and now we can get back to business.  Fits and starts, new highs by the end of the year.

Mar. 2, 2020

We got it half right!  It was clear the market had gotten in front of itself, but this time of year that isn’t unusual, so we didn’t do enough to get out of the way.  And sometimes while you’re working through the chaos, its hard to separate the good information from the garbage.  The market is not concerned about Coronavirus.  Its concerned about recession as a result of poor public policy towards defending ourselves from the Coronavirus.

It is very unlikely that long-term value has been impaired by this new strain a flu virus, but it does point out the value of diversification in our portfolios.  Last week while the stock market was dropping 1,000 points a day, we closed out two of our real estate investments with over 20% annual returns.  That money can now be reinvested in stocks down nearly 20% and with a bright future.

“Something funny I saw on Facebook, “The Coronavirus won’t last long because it was made in China.”

Jan. 31, 2020

About a 3% pullback since our comment on taking profits in the middle of January, and that’s probably good enough, although the market has a number of issues to be concerned with at the moment.  Current earnings could be better except for those companies that are in the sweet spot of the demographic swing ie Tesla, Amazon, and the ilk.  Commodities?  Forget about for right now … Corona Virus?  Yeah it’s a big deal, but really lessor known flu strands are filling up emergency rooms in this country too.  It’s a pretty big deal and will impact our GDP if not the worlds GDP, but those things are always out there.  They’re part of that ancillary group of variables that are hard to underwrite but collectively always account for up to ½ percent of drag on the GDP.

So the market got a shot of reality.  It pulled back as it always does, but will most likely be higher by the end of April our next nearest guide post.  We’ll be investing from here in those groups of equities that are low and likely to be reasonably higher by then.

Jan. 28, 2020

And we never really know what will cause market participants to change their mind and thus change the direction of the market, but there’s almost always a round of profit taking in January.  Last I wrote I suggested it might have something to do with the Trade Negotiations with China.  That seemed to be the markets greatest concern for the past year – I was half right – China again!  And not to make lite of the thousands suffering from this terrible new flu strain, but the market is now worried about a slowing world economy due to those ill in China that will not be able to participate in the economy and their governments efforts to contain the virus.

We’ve had experience with these type of issues.  Coincidental that the first case of this flu virus popped up in Washington state where I am now?  I’m not sure … during the SARS outbreak 17 years ago almost to the day, it was determined that the first known case in this country was a client of ours also in Washington state.  There is a very clear path to trading our way into the opportunity, and having taken some profits, shored up cash, prior to this recent dip, we’re in a good place to take advantage of what should continue to be a good start to the new year.

Jan. 15, 2020

Nuances surrounding the trade deal with China has been the one thing most likely to disappoint the market.  With stocks near all-time highs, and volatility so low, we took the opportunity to do a considerable amount of profit taking the last few sessions.  On the eve of the historic signing, it doesn’t seem like negotiations are going as well as they might.  Even still the “Buy the Rumor, Sell the News” crowd wouldn’t have any problems pushing things around at these levels if they were inclined.

We’ll stay tuned …

Jan. 8, 2020

Happy New Year!

And the top performing sector for 2019 was S&P Technology sector, essentially the NASDAQ 100. Most asset classes did well sans currencies as the US Dollar disintermediated all other currencies.   We know big liquid markets like the S&P 500 usually do well after a bad year, but they also do well after a great year as was 2019.  And stocks continue to be in demand even with all the news, however they one piece of news nobody is talking about right now is the expectation for a trade deal with China on January 15th.  It is reaction to trade deal news that has caused the greatest volatility of late, and we have to approach this new deadline with some caution.

Though the economy seems well, the market is good, and stocks don’t seem expensive, it would be unusual for a small, three percent, pullback and the trade deal discussions is just the excuse.  We’ll be more cautious in the days ahead and look for smart opportunities to take profits.

Dec. 9, 2019

Happy Holidays!

It seems as though the markets have sufficiently discounted their concerns about Trade Wars.  Economic data is good enough to keep stock prices at least where they are right now, and at a minimum creep higher at rates were all accustomed to ie about 2.50% a quarter before taxes.

Ten percent as a baseline expectation right now is a good number with which to evaluate other opportunities.

Nov. 18, 2019

And there’s an exception for every rule – obviously the market did not retreat after the last FOMC Meeting as I suggested seemed highly likely.  This is why we don’t look at Event Trading as a Zero-sum game.  The market actually rose the past few week – six weeks in a row now putting the DJIA up 10% since this time last year, obviously with the huge crater between that was last years holiday season.  The S&P 500 is up 14% in the same time, and NASDAQ a positive 17%.

Once again we’re at the point where retail sales will be emphasized in trading decisions.  While a small pull-back relative to Tariff Talk is a current concern, it otherwise seems like the government has its act together at the moment – that is the White House and FOMC, such concern of a significant pull-back is not a concern of mine.  We would buy the dips and not worry about the markets upsetting the holidays at this point.

Nov. 4, 2019

On Wednesday, the Fed signaled it’s done cutting rates for now, but it didn’t answer the most important question currently facing markets: Will 3 rate cuts be enough to prevent a complete global slowdown?

In 1998, three rate cuts were enough to prevent a broader slowdown, and stocks surged 50% over the next two years.

In 2001 and 2007, all the rate cuts weren’t enough to prevent a broader slowdown.

Today, US markets are essentially at all-time highs, but the global economy is clearly slowing. Thursday’s 1.9% GDP print and Friday’s weak Chinese manufacturing PMI (it hit the lowest level since January 2016) showed us that the global economy is clearly losing momentum.

And, despite the optimistic view of the equity markets, it’s not clear, at all, that three Fed rate cuts are going to be enough to stop that loss of momentum. What does seem clear to me is that we really have to pick our spots. With most volatility contributors stubbornly in place Commercial Real Estate stands out as the obvious sector to overweight.

We will learn over the next six months whether the Fed rate cuts were enough, or whether this expansion is already over. Selectively chosen Commercial Real Estate gives us yields unlike no other asset class and principal protection.

Oct. 30, 2019

At the risk of sounding like a broken record, here we are again at new highs in the major indices and the FOMC getting ready to make a decision on whether or not to adjust interest rates.  No matter what they do, some are going to be disappointed and so for a moment, maybe a day – maybe a week, they will sell.  They sell and regroup.  It’s a matter of a lot of other factors as to what they will do after they initially sell, but they will sell.  The market always does the opposite after a Fed Meeting than what it did going into the Fed Meeting.  With the market at a high, it’s an easy decision to make.

We’ve got all our accounts at 10 to 20 percent cash to take advantage of the inevitable.  The deeper the selloff the better, because otherwise stocks are not expensive and a quarter point in short term rates one way or another isn’t going to change the trajectory of the economy.  But the market is expecting a rate cut, and the White House is going to tweet about it no matter the Fed’s decision … if there is no rate cut, we’ll get a real nice dip.

Aug. 28, 2019

Market volatility and the unexpected can cause some investors serious stress.  When dealing with market volatility, it’s important to stick to your plan to avoid mistakes.  Don’t have a PLAN?

We assume in the first place that things will not always go the way we hope.  It’s actually quite rare that everything works out perfectly with any investment. Slow and steady wins the race – observing the whole playing field is most important during times of heightened volatility.  Sticking with your plan will allow you to take advantage of the periods when the stock market is down, and down, and down.  You can put all your eggs in one basket so to speak, but you can’t do it all at once.  So we buy partial positions depending on our degree of confidence.  When highly certain about the investment but not the timing, I just buy about ¼ of the position and almost always in round lots.  If the timing isn’t fortuitous, I’m happy to buy more, because I’m lowering my average price.  If it goes lower I buy another ¼ of the position and look forward to rounding out my overall position at an even lower price.  Getting the whole position at increasingly lower prices is a rare for anybody that’s been doing this as long as I have.  In such a case I feel lucky to buy so low – lower than I dared guess was possible.

Dividends and interest keep coming whether the Dow Jones Industrial Average is down 800 points or up 300 points. Most companies will keep paying dividends as long as possible because a cut is a sure-fire way to lose investors and see the price of the stock drop like a rock. Dividends from stocks and interest from bonds are two of the best ways to deal with volatility. You should keep reinvesting the capital your investments throw off. When the market is down, you’ll be able to buy more shares, and this will add to your flow of dividends and interest.  The generally account for about 1/3 of your overall returns.

Avoid selling your investments at the worst possible time – stick with your plan.  It can be tempting to sell when the market is down 10% so that you can avoid the next 20% loss, but it’s a bad idea. Time in the market trumps attempts to time the market.  Rebalance when things are up by selling some of those better performing assets.  Buy Low – Sell High remember?  You may have a strategy of rebalancing quarterly, semiannually or yearly. If you have a target allocation of 75% of your portfolio in stocks and 25% in bonds, a major drop in stocks could leave you with 65% in stocks and 35% in bonds. In this instance, you’d sell some bonds which are relatively High and move the money into stocks. If you’re still in the accumulation phase, you could stop contributing to bonds and put all of your money in stocks until you reach your planned balance. This will keep you from becoming overweight in one area and allow you to maintain diversification.  Your allocation is part of your PLAN.

During market volatility stay the course. If you have a plan, stick to it. This includes making those periodic contributions to your accounts as you would if the market were at record highs. Just wait to make the investments until the market drops – it happens more often than you think.

Real money is made during market downturns. It’s not what you buy, but what you pay for it.  The market always goes up eventually.  I can’t think of one asset class where there hasn’t occurred – ever!

When your portfolio gets out of balance, and it will for better and worse, it’s a good idea to rebalance. If you have cash sitting on the sidelines, a downside-break is always the best time to put that money to work.

Aug. 22, 2019

I’m finding a lot of investors don’t realize that during the second quarter, the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) was passed by an overwhelming majority (417 to 3) in the House – this is really important.  Much of the SECURE Act is designed to make it easier for employers to offer retirement plans to their employees, but it also includes benefits for individual retirement accounts (IRAs) as well. If the bill passes the Senate and is signed by the president which seems a foregone conclusion, it will mean big changes for the U.S. Retirement system.

Going forward the SECURE Act will increase the starting age for taking required minimum distributions (RMDs) from 70½ to 72.  Eliminating the 70½ age limit for Traditional IRA contributions, allowing IRA owners with earned income past age 70 to continue to fund their IRAs.  If the bill passes the Senate and is signed by the president, it will mean big changes for the U.S. Retirement system, and this is only the beginning; consider the implications for Social Security and other age based programs; not to mention the stock market as more investors are able to leave more assets in these important savings vehicles.

Aug. 19, 2019

Sometimes it’s not a matter of what you buy, but what you pay for it.  Last week we were able to invest quite a bit of cash into stocks at levels not seen since late May.  We still feel more comfortable in CRE, but equally confident that stocks bought right, will also provide sufficient returns.

Aug. 14, 2019

You can’t predict the unpredictable.  That is why we’ve maintained high cash levels for nearly a year now, essentially betting on volatility.  There is just too much unpredictable.  Also, with the exception of one bond we’ve been able to find, most are entirely too expensive to own if the investor believes in the Buy Low Sell High rule of investing, which brings us to Real Estate.

Residential real estate, all things remaining equal, is propped up by government subsidized programs and thus challenging to analyze in an asset management perspective.  Commercial Real Estate however, seems to be the sweet spot in our economy.  With publicly-traded REITs performing best since the beginning of the year and interest rates seemingly going to zero, tangible assets providing high rates of stable income are very likely to do well going forward.  As long as the publicly-traded REITs do well, and historically their growth patterns have fits and starts of at least two years, all their non-traded ilk are fodder for take overs.

In the next couple of years it seems like the best risk/return scenario would be in those few Location Location Location opportunities and the distressed REIT space we’ve been allocating to for the past year.  We want to first buy those that we already know the few institutions in the business want to own also.  Its more work, but I can’t remember the last time I lost money buying low…

Aug. 6, 2019

We eluded to this concern recently of a less than positive market in the current quarter, and we’ve tried to be positioned well to take advantage of it.  We can always speculate as to what might cause it. That gives some investors confidence to make decisions, but from the perspective of Reversion to Mean, it doesn’t matter what the cause is; there’s always something.  That’s why we only buy low, and try to sell high.

My guess was that there would be a five percent pullback, we got that and then some, but volume was great.  Greater than we saw in the 4th quarter rout, and that leads me to believe that this bout of selling is not over yet, even though we may get an up day or two.

Jul. 22, 2019

The third quarter is historically the weakest of the year. Given the recovery rally, which made up for the governments mistakes of the 4thquarter, it’s difficult to expect more.  The current economic recovery and bull market are now the longest in history. Wall Street analysts estimate a 3% drop in Q2 EPS but expect them to rise by 2.5% at the end of the year. However with elevated geopolitical tensions, ongoing trade disputes, and global economic growth worries, anything could start another selling frenzy.

The single most known-concern of the market currently is the pending FOMC meeting.  Market participants expect some amount of rate reduction.  If the Fed disappoints investors there’s a full 5% air pocket under current prices.

Jul. 9, 2019

Definitely curious discourse coming from the White House meant for the FOMC Chairman.  Doesn’t bother me at all, but hard to handicap how all the other market participants around the world may see it.  I guess a hundred DJIA points a day isn’t too much to be concerned with…

Jul. 2, 2019

The Market has finally figured out the White House and is agreeable. This being a holiday shortened week, odds favor more upside.

May 13, 2019

Sell in May and go away?  CNBC just reported that the month of May hasn’t been down since 2012, but we also haven’t really seen our highs in May as we did this year.  We sold a lot a week ago due to purely technical indicators.  We’ll look for a substantial dip before considering reinvesting in stocks.  There aren’t a lot of compelling values out there.

May 7, 2019

The market does the opposite after a Fed Meeting of what it did going into the meeting.  And, it does best between November and April.  Given the trade talks and stratospheric run it had since the correction in the 4th Quarter, a little pull back in here seems reasonable.  In most cases we have considerable cash so we can relax and observe right now.

May 1, 2019

Tread lightly Mr. Chairman – tread lightly…

If ever there was a difficult situation for the Federal Open Market Committee, this is it!

With the markets at all-time highs, interest rates and unemployment rates at all-time lows, and the world’s largest company announces better than expected earnings, your boss and the President of the United States wants you to lower rates dramatically and buy back more bad debt – assuming there is any.  Punt – that’s all they can do and what they probably should do.  I wouldn’t say anything more than they have to, and get the heck out of there!  To borrow from an Infantry term, “Live to fight another day.” 

Apr. 22, 2019

Welcome back!  I for one appreciated this three day weekend, but also looking forward to what comes this week.

Lots of earnings this week, and of course the market is going to react more to what these companies project about the future then what they say about this latest quarter.  From a strictly Reversion to Mean perspective, projections will have to be better than expected to keep the current trajectory (after the worst 4th quarter remembered the market is within 1% of all-time highs).  That seems like a low probability.

Reducing exposure to riskier and non-corp stocks seems reasonable.

Apr. 15, 2019

The Dow Jones Industrial Average advanced greater than 1% Friday on the back of a Disney’s (NYSE-DIS) announcement which somehow caught the market off guard. This current market environment amazes and frustrates me.  There has been no better telegraphed move in the past 20 years then the fact that DIS would get into the Online-Content Streaming business in a big way, but further to not anticipate that they would do it well, is simply evidence of how the average Wall Street PM has no more common sense than most Main Street-ers.

So now, as it should be, markets are within striking distance of new highs towards the end of the best part of the year (November through April).  Given this holiday shortened week, it seems fair to assume we continue to do well this holiday shortened week.  The market is closed on Friday.  And a break is welcomed after getting all our taxes and extensions filed today.

Mar. 29, 2019

Are you going to be disappointed if there isn’t a recession?  I would be – we just paid for a recession!  Where’s out recession?  Sure its largely over now, but that fourth quarter was a real mess, and a perfect example of how the market is frequently wrong.

With the Fed largely out of the way of the economy now, all we have to fear is Brexit.  We’ve been worrying about Brexit long enough now.  It’s time to put that behind us too.

Mar. 21, 2019

The market does the opposite after an FOMC Meeting of what it did going into the meeting (at least its supposed to).  In this case, its called profit taking.  And how perverse?  The Fed as much as says they won’t raise rates at all this year which seemed to be what the market wanted; still they sell.  Now they’re selling because if the Fed isn’t raising rates, there must be something wrong … Wrong!

Wrong is right!  There’s nothing wrong with the economy and the market often acts unpredictably.  There are many participants in the market with motivations different from you and I, and unfortunate for me, a lot less experience now.  Anyhow, everything is fine.  The FOMC doesn’t have as much power as we try give them and with the Fed on hold now, the market should do just fine.  We’ll keep an eye out for rising interest rates, but you and I both know, rates can go much higher and not really hurt anything.

Mar. 12, 2019

Another big drop yesterday, but not a new drop.  The recent lows of two weeks ago matched the lows of February and April. Since the popular indices have been generally grinding back and forth hopefully building a positive pattern, a more solid base from which stronger hands can take over and work higher.

There are many types of investors in the markets.  Investors with many different objectives, but we only have the markets we have.  We hope they accommodate everybody, but sometimes they do not.

Mar. 6, 2019

Nowhere near recession, but its clear now that the markets great concern in the fourth quarter was a slowing economy.  Last week fourth quarter GDP came in far greater than expected, but lower than the previous quarter, which was lower that the quarter before.  Year over year GDP was up, but it probably won’t be up this year.  Not unless there is more stimulus from Washington DC which seems unlikely. In this environment Value oriented investments tend to outperform.  So it doesn’t matter what you buy – its what you pay for it.

And there still are lots of dramatic values in the market because the economy never got any were near frothy.  And with bonds still so unattractive, stocks will continue to be highly correlated.  We just expect a better risk/return environment in Value oriented higher yielding stocks.

Nov. 15, 2018

It may be helpful to recognize that a large portion of the drop in our portfolios is attributable to Apple and Amazon, both of which have had very good earnings since the recovery began several years ago and give us no reason to believe they won’t continue to do to well.  Its hard to recognize where the opportunity lies when other market participants have been pounding their negative drum beat, but consider that soon the market and media will begin reporting on holiday shopping trends and results.

It is inconceivable to me that Apple will sell less product than last Christmas, nor is it even a consideration by anybody that Amazon wont set new records on Black Friday and through the Christmas buying season.  Resuklts are likely to be substantially better than anybody has dared to guess to date.  I run out of fingers when I try to count all the retailers that have gone out of business in the past year and half – who do you think is going to get the lion’s share of that business?

Changing the narrative will likely cause the markets to shoot up, and now Chairman Powell seems to appreciate the damage they have done.  Expect the Fed to at least sound more Dovish soon.

The average gain October through December is better than 6 percent.  Given that we have to come out of a hole, finishing the quarter with a 6% gain would be huge!  That average takes into account a lot of negative over the years – we only have a little negative currently.

Nov. 13, 2018

Another big drop yesterday, but not a new drop.  The recent lows of two weeks ago matched the lows of February and April. Since the popular indices have been generally grinding back and forth hopefully building a positive pattern, a more solid base from which stronger hands can take over and work higher.

There are many types of investors in the markets.  Investors with many different objectives, but we only have the markets we have.  We hope they accommodate everybody, but sometimes they do not.

Nov. 2, 2018

The market is borrowing problems from the future.  It is clear from recent economic data that the US economy is doing well.  That makes it easier for US business managers to run their businesses profitably.  Clearly interest rates are much lower than they’ve ever been in such an economic environment and the Federal Open Market Committee will likely raise rates until they are normalized.  These things in and of themselves are not bad and have nothing to do with why stocks have been going down recently.  Rather it’s the reaction of various market participants that is causing stocks to go down.

I think you all know that there is more risk in selling stocks than buying stocks.  That’s why there are more anecdotes about “if only I had I kept that stock,” or “I remember when Microsoft and/or Apple etc was $20 a share.”  Likewise, it doesn’t make sense to be a wholesale seller of stocks in this environment, and that’s why most mutual funds underperform the market and there are no famous hedge funds.