 | ||
| | Work the Problem | |
| By Neil George | ||
| Will the stock market ever recover? Where is the bottom for the Dow Jones Industrial Average, S&P 500 or the Nasdaq Composite--which hasn’t recovered since the last market blowup at the start of this decade--and when will we reach it? Too many folks are trying to call bottoms. And others are simply whining about how bad things are. What does that do for us now? Over the past several issues of this weekly report, as well as in Personal Finance, I’ve outlined economic changes that have led to more and more stock market woes. How are you going to keep your portfolio from further implosions? And how can you manage to make a few more bucks despite this challenging environment? Sending cash outside the US isn’t the answer. If you look at European, Asian and other major stock markets around the world, you’ll see that the losses are mounting at even greater percentages than here in the US. In fact, major European markets are down by at least double that of the S&P 500. And in Asia, some are down by at least triple. What about commodities? There’s been a major sloshing as investors cash out of commodities. The result is that that store of value isn’t working right now. Investors who have been hedging with commodities are taking money off the table to seek other solutions. What about Gold? Nope. The yellow metal is down around 13 percent over the past month and a half, which is just as bad as commodities’ performance, if not worse. Perhaps currencies are the way to go. They’re alternatives much like commodities, but take a gander at the major foreign currencies versus the US dollar. Over the past trailing month alone, every single major currency is down against the US dollar--anywhere from just shy of 1 percent to more than 10 percent. OK, now what? Bonds. Yes, bonds are still strong investments. Many of you might have been buying my favorite bonds inside Personal Finance and The Yield Letter, but you haven’t purchased enough. Bonds have always worked year in and year out for the past decade. For example, Pimco Strategic Global Government Bond Fund (NYSE: RCS) has generated an average annual return just shy of 9 percent over the past 10 years. That’s strong compared to the S&P 500’s paltry 3.7 percent or the Dow Jones Industrial Average’s 5.5 percent. How To Protect Your Portfolio From the Coming Election No matter which candidate makes it into the White House, almost every portfolio in America will take a hit. Here’s why… post election changes to the tax law could wipe out companies profits and most investors portfolios. Follow this link and see what specific stocks and industries will thrive under either administration. And it’s not the only bond fund that’s outperformed. I’ve been following several bond plays, and I’ve told you to buy them in recent issues of PF. AllianceBernstein Global High Yield Income Fund (NYSE: AWF), Blackrock Income Opportunity Fund (NYSE: BNA), Templeton Emerging Markets Fund (NYSE: TEI), Western Assets Emerging Markets Fund (NYSE: EFL) as well as the Pimco Strategic Global Government Bond Fund are the plays you need to buy and own right during this stock market turmoil. They pay an average dividend yield collectively in the mid- to upper-7-percent range and have provided returns collectively of around 14 percent for the past year alone. That’s what is working right now. Park It But beyond bonds, there’s another way to work the stock market’s problems: Sell off more of your stocks, and park your cash. We also have to deal with the risk of rising inflation. But there’s a way to park cash and have the full faith, credit and safety of US Treasuries that not only pay a bit more but also give us the ability to outgun inflation. Treasury Inflation-Protected Securities (TIPS) are Treasuries that pay regular interest and a kicker based on inflation during their duration. There are two ways to own TIPS. First, go to www.treasurydirect.com and open an account, which allows you to purchase TIPS directly from the US Treasury. If you were to own individual TIPS, you would see a monthly adjustment to your principal amount based on the direction of the Consumer Price Index (CPI). When the CPI posts what now seems to be an inevitable increase, your principal would be adjusted upward. And if by some change the index falls, your principal would be adjusted downward. You would also receive semi-annual interest payments based on the adjusted principal amount of your holdings. Alternatively, you can incorporate TIPS into your portfolio as easily as you would any other stock through iShares Lehman TIPS Bond Fund (NYSE: TIP). As an exchange traded index fund like the straight Treasury fund above, it invests in a series of synthetic investments that tracks the returns of TIPS with at least a year to reach maturity. And just like individual issues, the principal value of that TIPS portfolio is adjusted on a monthly basis, and it pays out the interest from those holdings on a semi-annual basis. The fund does offer advantages over owning individual issues. The first is that, rather than receiving interest payments every six months, you’ll receive monthly payments given the staggered nature of the funds holdings. There are occasional months when payments aren’t made, which usually coincide with changes in the portfolio. But the fund’s overall performance makes up for it. Given the rapid clip of inflation and a better than 10 percent yield, iShares Lehman TIPS Bond is a high yielding parking place right now. And for those who believe Lehman Brothers isn’t in the best shape, note that the iShares Lehman TIPS Bond Fund just tracks the index. It certainly doesn’t belong to any form of an asset in the beleaguered investment bank. Indeed it’s a fund with separate assets managed by Barclays. Some Stocks Still Work There are some stocks that are still bringing in strong profits. I’ve been doing some research for PF subscribers on a host of stocks that come from two of the most distinct ends of the US stock market. You can read all about this in a two-part series in the Sept. 10, 2008, issue of PF, which will be in your mailbox Wednesday Sept. 10, and posted on the Web at pfnewsletter.com Saturday, Sept. 6. For Personal Finance subscribers and Wealth Society members, Pay Me Weekly continues past the Dead Guys of the Week in the Market Roundup section, which runs through the stocks, bonds and funds inside Personal Finance. If you’re not receiving the Market Roundup, contact customer service at personalfinance@kci-com.com to be placed on the distribution list. And if you’d like to see more about our research and picks and pans inside Personal Finance, take a peek at www.pfnewsletter.com, or contact customer service for a sample issue by e-mailing personalfinance@kci-com.com. The Spoils After all the blood, sweat and tears you’ve shed to keep your portfolio intact, how about a little spoils for your trouble? Join me on a cruise this coming December. If you haven’t been on an investment cruise with me before, you haven’t had the pleasure of sharing a bottle of something French with a nice cigar as background music plays and our ship plies the waters of one of the seven seas. And in the morning, we can get on with the business of figuring out how to make the most of the markets along with my pals Elliott Gue and Roger Conrad. Even though 2008 has been a difficult year for many of our favorite stocks, bonds and funds, we can commiserate and plan our regrouping for 2009 over a glass of cognac and a fine cigar while cruising the warm waters of the Caribbean. We’ll talk about out what investments will help our portfolios grow while enjoying warm waters from Miami, on to island stops including St. Barthelemy, through the Panama Canal and finally to Costa Rica. Click here for details. You Don’t Have to Settle for Uncertain Puny Yields There are 22 stocks in my Income Portfolio. 13 are producing double-digit gains and four are red hot and producing triple digits! And for the record –– only one is negative. And this year is no accident. I’ve given my readers 14% average returns over 19 years but this year is the shaping up as the best opportunity since 1994! Go here and see how you can double your income by investing in the safest stocks on the planet. Dead Guys of the Week A man who knew how to tackle some of the most challenging occupations and came out on top died after a historical life of 81 years. If you’re a car nut like me, the name Phil Hill resonates. And I’m very sorry to report his death. Along with his peers Dan Gurney and other legendary race drivers, Phil won numerous major Grand Prix events around the world, including successive wins at Sebring and Le Mans. Beyond his success on the racetrack as well as developing the best race and road cars, Phil shared his wisdom in the pages of several of my favorite journals, including Road & Track Magazine. Larry Abraham, who helped lead many investors and political junkies through some of the most turbulent economic times over the past four decades, has died at 69 years. He was fellow newsletter editor, author, political advisor and media mogul I’ve known for many years. When I first met him with our mutual friends, the departed Jim Blanchard and the alive-and-kicking Martin Truax--at the Atlanta Investment Conference, I was constantly impressed with the depth of his knowledge and his drive to write and lecture about our nation’s troubling leadership. He was also one hell of a golfer. He took the same professional passion to the links, and he was often disappointed when we paired up because I could never raise my handicap to his level. Upcoming Events Fall is the perfect time to enjoy Washington, DC’s outdoor treasures and catch a glimpse of nature’s splendor. And this year you can enjoy the immediate aftermath of the presidential election in the seat of the federal government. Join Roger Conrad, Elliott Gue and me for the DC Money Show Nov. 6-8, 2008, at The Wardman Park Marriott. Click here or call 800-970-4355 and refer to priority code 011363 to register as my guest. I’ll also be appearing at the following events:
Errors/Omissions: I always welcome being called on facts, figures and commentary from readers and look forward to your feedback. I can be reached by e-mail at: paymeweekly@kci-com.com. Send This Issue To A Friend | ||
| You’re receiving Pay Me Weekly at finan4@finanmart.com because you indicated your interest in having a a subscription to this publication. If you no longer wish to receive, please click here. Please do not reply to this message. To contact us, please use our contact form. Copyright 2008 KCI Communications, Inc. | ||
Pay Me Weekly - Work the Problem
