Thursday, July 16, 2009

Blah, Blah, Blah.......

Gheesus, do they ever shutup? Blah, blah, blah. The talking heads are driving me crazy. The head & shoulders top didn't hold as it bumped into the 50 day moving average that was being manipulated by the non-correlated hedge funds hoping that the core PPI didn't collide with the Obama administration's healthcare plan. None of that crap has any bearing on investors. Short term traders and computer trading programs maybe, but not investors and businessmen.

An investor needs to get the big picture correct and not listen to the drones on TV, except for comic diversion. Debt overload was a big picture event and we are still suffering from that trend. A continuation of deleveraging and Obama's spending is a problem that can't be ignored by investors. Increased taxation cannot be avoided since spending cuts are out of the question. Reduced leverage, high taxes, and growing unemployment are not the ingredients of an improving economic picture. Without a growing economy you can't justify high P/Es. Cash continues to look attractive and comforting.

My gameplan includes solid dividend payers, like WMI and FLO, yielding 3-4%. Writing covered call income on that same portfolio.Vanguard Ginnie Maes as the prepayment risk isn't high, the duration short, it's government guaranteed, and the yields are attractive. Add in some selected, shorter maturity, corporate bonds and you get a portolio that yields you 4ish%. I am happy with that return because I'm getting a return. The stock market is not going to give me a return as I expect to see it go lower over the next number of years.

Also, while I don't see wage and price inflation coming, I do see increased interest rates due to the reduced credit worthiness of federal, state, and local governments. Short duration investments will allow for a nice bond ladder in future years.

My remaining equity holdings are few and watched carefully. These positions are mostly for intellectual stimulation and gamesmanship as I will probably lose money, but I need to think I'm smarter than other investors. The big picture says bad economy and higher taxes so get out even though the 200 day moving average is about to form a teapot pattern and everyone will get rich again.

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