Soos Global Investor Update...(Monday, May 4, 2015)

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Overall cash levels in CORE and IRA Strategies had grown of late (as of today, CORE had cash  >4%, IRA >7%) especially on the heels of the liquidation of the TRN position after they were issued subpoenas by the DOJ.  (Btw, I’m monitoring the situation closely and if the legal issues get resolved, I will revisit.  I remain quite positive on the rail industry in general).

Overall, I think equities, while not in a bubble stage, are certainly getting pricey, especially after this past earnings season where though there were many ‘beats’, the reality was that expectations had already been driven down to very low levels, and furthermore, forward guidance, in many cases, was very bleak! 

Recent econ data in the US has erred on the weaker side, which only exacerbates the forward outlook on earnings.  One offset, however, might be that many multi-nationals that had been hurt by a strong USD in Q4 ’14 and Q1 ’15, could see the opposite in the form of relief as the USD has softened in the early weeks of Q2.  I expect the USD to weaken further as US growth remains very slow, and as Europe starts to pick up.  On that note, econ data in Europe has been picking up lately (which was anticipated by European equity markets for the past couple of months).  I think once Greece’s situation is resolved, the ECB’s QE program will continue to underpin a rally in European equities.  I’m considering buying VGK (a European ETF) at or around these levels ($56.93).

On the theme of a continuingly weakening USD, I remain positive on EM.  I think that local EM fixed income markets, still yielding much higher than US and Europe, will be the beneficiaries of foreign capital flows in search of higher yields.  I also think that China will respond to their recent spate of weak economic data and will do additional stimulus measures.  That should help EM countries in general, and should have a very positive impact on Australia, which, in any event, has had relatively good economic data of its own, with expectations that the RBA might still ease further.

In line with all of that, I did the following today:
PFF and PFXF…used cash in IRA Strat to add to preferred positions.  The intent is to earn higher income on this money for now,  and if equities should retreat, I would consider tapping these positions to buy equities at lower levels.  The price performance of these ETFs has been quite defensive, so I want to add at this time while equities are at increasingly ‘pricey’ levels.

EWA…started position based on expectations of China stimulus and RBA easing and further improvement in Australian economy.  Div yield has been good and is expected to be paid in June.

EMLC…the weaker USD story ought to help this local currency fixed income ETF.  Very high div.  Still trading not too far from 52-wk lows.  Again, China stimulus ought to help too.

Will keep you posted.  If you have any questions or comments, please email me.

Best,

Ed

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(Please note: This article is solely meant to be thought provoking and is not in any way meant to be personal investment advice. Each investor is obligated to opine and decide for themselves as to the appropriateness of anything said in this article to their unique financial profile, risk tolerances and portfolio goals).
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Additional Disclaimer: currently long many stocks/ETFs including PFF, PFXF, EWA, EMLC..  Positions may change at any time without notice.