Soos Global Market Musings

Monday, June 15, 2015

Soos Global Investor Update...Monday, June 15, 2015

As a follow-up to the chart I sent earlier showing the price history of the DJIA over the past 2 ½ years, I’ve had a number of email exchanges w/investors who had comments and questions. Below are some cut/pastes from my responses in those exchanges….but first….a friendly reminder from my Compliance folks:

(A Friendly and Important Disclaimer Note (in addition to legal language below): If you’re reading this post and are not currently investing with Soos Global (which, of course, is something we should discuss!), please bear in mind that while we share details on changes made to our portfolios, it's important to consider that our portfolio decisions are taken in a much broader context of our overall portfolio strategies and our assessment of each of our investor's unique financial profiles. As such, what we do, and when we do it, is specific to our investor portfolios and is NOT intended, in any way, as advice for use by others. Readers are reminded that all comments posted here are for information and entertainment purposes only! Any commentary, especially those that include specific mentions of 'buying' or 'selling' or 'positions', is made solely for those limited informational and entertainment purposes, and NOT as advice. We're delighted to hear thoughts and comments. Thx!)

I actually think we’ll give the 200ma a good test this time, and might even break below it…but I don’t anticipate that it would be a long-lived sell-off. Once the Fed actually does it’s dirty work of raising rates, say 25 or even 50bps, I think markets will be more at ease, and then stocks can recover, and then long yields can come down.

I still think that the ‘yieldy’ stuff, such as HYG, JNK, the Preferred ETFs, XLU, the REITs, are all oversold.

I also think EWA( Australia) looks attractive, as does the Emerging Market local fixed income ETF, EMLC.

Finally, SYMC (cyber sec) has fallen back to attractive levels.

If you look at the chart below and focus on the recent 4 or 5 months, it’s basically been a straight-across consolidation….lots of daily ups and downs, but basically, not going anywhere. It finally feels, however, that we’re close to a move out of this band….in my view, first lower, then back up, especially as Q2 and Q3 economic data show meaningful improvements over Q1!

(Continued below the chart>>)

Yes, today’s selloff, I believe, provides some opportunity….for example…. EWA: Been eyeing Australia, looking to add, on expectations that China will do additional stimulus and that should help Australia’s iron ore and other commodity export markets. The housing and employment data has been encouraging too. This ETF pays a dividend 2x per year, and the next one is going exdiv later this month. Following through on plan to scale in on pullbacks.

DVA…had already taken profits on ½ of our position some time ago, and have been looking to exit the balance. Exited today. May re-enter at some point, but we’ve made good profit in this stock and I’m concerned that it could top out here ahead of election campaigning that might bring added attention to government spending on healthcare. Given relatively light cash holdings in the portfolios, I believe using the money from DVA for SYMC is a better risk/reward trade-off.

SYMC…been looking to add to our cyber-security positions, and had taken an initial 1% in SYMC some time ago. The stock has been volatile, and of late, along w/most tech, it’s been hit. Today’s downtrade to <$23.75 appeared to me to be good value, so I added another 1%. With all the recent high-profile hacking situations, such as the Chinese (alleged) hacking of the US Gov’t, I believe that the cyber space will continue to be strong.

WM…there have been reports recently that ‘scrap’ demand from overseas has fallen off, and in turn, scrap prices have fallen. That should weigh on WM. In addition, today’s industrial production data was the sixth straight month of decline, again, something that has and might continue to weigh on WM. So I lightened up the position, taking 1% off the table, leaving 2.4%. The dividend is another compelling reason to hold on, but the real key is the likelihood that as the US economy improves over time, WM’s unique position in this high-barriers-to-entry-space should set it apart to the upside.

NSC…I put the 1% from WM into NSC, which has been badly beaten down in recent weeks. The new regulations in the rail sector have put pressure on all rails, but in NSC’s case, the fall-off in coal transport, has also taken its toll. I think the sell-off is overdone, down nearly 25% from late ’14 highs. Increased position to 3.4%.

If you have any questions, or comments, please keep them coming in!!

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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).
Disclaimer: Please read and consider important information related to all communication made by Soos Global on this site by clicking here.
Additional Disclaimer: currently long many stocks/ETFs including NSC, SYMC, WM, EWA, EMLC, XLU, preferred REITs, HYG, JNK. Positions may change at any time without notice.

Food for thought....In 2 1/2 years, the DJIA meaningfully broke 200ma only once.....And now????

MORE CHART THOUGHTS TO FOLLOW....STAY TUNED.....

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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).
Disclaimer: Please read and consider important information related to all communication made by Soos Global on this site by clicking here.
Additional Disclaimer: currently long many stocks/ETFs. Positions may change at any time without notice.

Friday, May 8, 2015

Soos Global Investor Update...Friday, May 8, 2015

TGIF…yes, because the weekend awaits with summertime weather in NY (finally)…but also TGIF because of today’s NFP data. Stocks are really enjoying the NFP number, which, though it was in line and last month’s number was revised lower, had enough in it to happy about…the labor situation is improving just enough to keep the economy grinding forward, yet not fast enough that would cause the Fed to hike too much. Wage growth remains below the level that the Fed wants to see, and there are still no inflation pressures. So both stocks and bonds like this number!

I’m still not all that excited about buying too much more in the equity space up here (we’re still @ 80%+ of AUM)….recall what I’ve said about earnings, guidance and valuations. But selectively, yes, if I see good value. Otherwise, I’m still on the lookout to trim some positions if the markets’ rally creates oversized weightings in our portfolio, and use that cash to add to and/or diversify into some of the things I’ve mentioned in recent missives….Europe (VGK), Australia (EWA), EM local currency debt (EMLC), cyber-security such as Symantec (SYMC), the rail sector such as Norfolk Southern (NSC) and Trinity (TRN) (Note: TRN has recovered significantly from the pounding it took last week when the DOJ issued subpoenas in an investigation into possible misconduct in dealing w/government officials. Once there’s more visibility on this situation, I’d consider re-entering, but as a ‘policy guideline’, I generally stay out of situations that are riddled w/litigious risk).

I have beefed up our so-called defensive positions (what I collectively call our ‘yieldy stuff’…things that ought to hold up well in equity selloffs, and in the meantime, pay a healthy dividend). I expect to continue to do this, especially until my view on long-term rates changes….again, as I’ve written of late, I don’t see solid ground for long-term rates to rise, so on rate backups, for example, USTsy 10yrs over 2.2%, I’m inclined to buy that space.

Will keep you posted….and please email me w/any questions or thoughts. I’d be delighted to engage more dialogue on any of these topics and/or on any other positions in the portfolios.

Best,

Please continue to visit Soos Global Market Musings for updates.

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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).
Disclaimer: Please read and consider important information related to all communication made by Soos Global on this site by clicking here.
Additional Disclaimer: currently long many stocks/ETFs including SYMC, NSC, EWA, EMLC, 10yr Tsy.. Positions may change at any time without notice.

Monday, May 4, 2015

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

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,

Please continue to visit Soos Global Market Musings for updates.

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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).
Disclaimer: Please read and consider important information related to all communication made by Soos Global on this site by clicking here.
Additional Disclaimer: currently long many stocks/ETFs including PFF, PFXF, EWA, EMLC.. Positions may change at any time without notice.

Tuesday, April 7, 2015

Soos Global Investor Update....(April 7, 2015)

Soos Global Investors: below are a few of my thoughts on markets overall, and in some cases, on specific positions in our portfolios.

Today's data in Europe, EuroZone (EZ) manufacturing PMI, beat estimates. This raises expectations that EZ economic growth is picking up, expectations that have already been bolstered by ECB QE kicking in. The Euro has bounced off recent lows and appears to be finding some floor from which to recover after having been sold-off aggressively in the past year (from levels of 1.4000 to 1.0500, and now 1.0850. See chart below).

European stocks have rallied YTD, reflecting renewed optimism about European economic prospects. As you can see in the chart below, the ETF of European equities, VGK, has rallied YTD. What's not as evident, however, is that part of the upside was lost due to the EUR currency weakness over that time period. Looking ahead, if the EZ economy continues to improve and the EUR is able to continue its recent rebound, then VGK could have meaningful upside through 2015. I'm still of the view that the EUR has fallen too much (USD rallied too much), and that EZ's economy should continue to slowly improve, therefore, I'm watching this situation closely as a new add to our positions.

When that time arrives, I would expect to consider using an ETF (such as VGK) that diversifies the risk across several countries and industry sectors. I wouldn't hedge the EUR exposure inherent in that position since, as I've mentioned, I think over time the EUR will rally back. (fyi…there are ETFs that provide the same exposure to European stocks but embed a currency hedge to protect against a fall in the EUR, and if my currency view should change, I'd consider those alternatives).

One final note regarding Europe: our current exposure. On a direct basis, it is quite limited. Namely, we own Unilever (UN) and Telefonica (TEF)….but our 'indirect' exposure is more meaningful given that many of our large, multi-national holdings have significant business footprints in Europe (and, correspondingly, in most cases, in Emerging Markets, where our direct exposure is also very limited). Until recently, I've felt that this 'indirect' exposure was the better risk/reward tradeoff, however with improving growth prospects and current valuations, that could change.

With Q1 over and earnings starting to be reported in coming days, I'm a bit concerned about earnings disappointment. That said, the concern isn't too high since many analysts have lowered earnings estimates throughout the first Quarter as more and more companies announced sober guidance. With broader US stock indexes still at or close to historic highs, any meaningful disappointments in earnings could result in a market selloff, though any selloff would likely be mitigated by the market's reaction that weakness in the US economy would delay a Fed rate hike. So this balancing act between strong/weak economic and corporate earnings growth vs expectations of Fed rate hikes, in my view, is likely to keep the equity markets somewhat volatile, but within reasonable ranges close to current levels. Correction? Certainly possible. Debacle? Some new catalyst would have to emerge for the outlook to migrate to this extreme.

Clearly, individual stocks' volatility will vary and when I perceive an overreaction by the market, in either direction, I expect to adjust our positions accordingly.

In that light, our Walgreens (WBA) position has performed quite well, and is currently the highest percentage holding in the portfolio. I expect to maintain a strong position in WBA, though I might consider trimming part of it at higher levels.

I'm still looking to exit Davita (DVA), having sold ½ of it earlier this year, as I continue to prefer valuations and potential in other sectors. I'm concerned that the further we get into the Presidential race, the more talk there will be about cutting Federal funding for all kinds of Medicare, Medicaid, Obamacare issues. It will be very challenging to anticipate which stocks will be the winners/losers in those debates, so with this kind of anticipated lack of visibility, I'm looking to exit healthcare for now, and at best maintain only small opportunistic positions over time as they become available.

I have been looking to add some biotech, though I still believe that the sector, after having been the outperformer of 2014, is still too pricey. Many street analysts refer to it as being in a 'bubble'. Whether that's true or not, I do think we'll see some sector rotation out of biotech into other sectors that have ytd underperformed, most notably, energy. If that happens, and in turn, biotech cheapens to reasonable valuations, I'd be interested in adding an ETF of the sector (such as XBI…see below), in that way diversifying the individual company risk of FDA approvals, new-product testing, etc.

Finally, I continue to like the 'yieldy' assets in our portfolio such as fixed income ETFs, preferred stock/bond ETFs, a convertible closed end fund, a utility ETF and some REITs. As I've been saying for some time, the Fed's need to raise short-term rates is likely to be minimal for quite a while, and while that's going on, in the face of world where the risk of 'Deflation' continues to outweigh 'Inflation', I remain a fan of longer-term fixed income and yieldy assets.

As always, if you have any questions, please email or call.

I look forward to keeping you posted.

Best,

Please continue to visit Soos Global Market Musings for updates.

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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).
Disclaimer: Please read and consider important information related to all communication made by Soos Global on this site by clicking here.
Additional Disclaimer: currently long many stocks/ETFs including UN, DVA, WBA, TEF. Positions may change at any time without notice.