|Dow||+26.65 to 17,804.80|
|S&P 500||+9.44 to 2,070.67|
|Nasdaq||+16.98 to 4,765.38|
|10-YR Yield||-.028 to 2.176%|
|Gold||-$0.50 to $1,194.30|
|Crude Oil||+$2.41 to $56.52|
There’s nothing I like more than a great deal. I don’t care if it’s at the grocery store … in the stock, bond and currency markets … or anywhere else!
The trick is to make sure you don’t hesitate. Instead, you have to POUNCE on those opportunities when they present themselves!
One example is the fabulous wireless phone deal my family just got from Sprint (S, Weiss Ratings: D+). All the aggressive advertising the company has been doing prompted my wife and me to hit up the local wireless store.
We were so impressed that we ported over our numbers from separate Verizon (VZ, Weiss Ratings: B) and AT&T (T, Weiss Ratings: B-) plans, and combined all four lines into one family package. The result? We will save more than $100 a month!
|Everyone likes a good deal.|
We also got brand new iPhone 6s and 6 Pluses as part of the package. And after more than a week of testing – testing that included a 500-plus-mile roundtrip to north Florida – I can say that the network quality is just fine. I’ve only had one dropped call, and ran into only one or two minor dead or weak-signal zones for data … in the middle of nowhere.
So what about investments? Well, I’ve been highlighting things such as the iShares MSCI Mexico Capped ETF (EWW) recently to illustrate the magnitude of the emerging market collapse of recent weeks.
But it’s much more than that. Everything from junk bonds to emerging market debt has been hammered recently, just as I warned they might on multiple occasions in the past year or two.
The thing is, though, at some point the moves get so extreme – and the declines so severe – that you have to start thinking opportunistically. You have to take advantage of everyone else’s panic, and start buying because you’re getting the best deals in years!
|“You have to take advantage of everyone else’s panic.”|
Take the Alerian MLP ETF (AMLP), an exchange traded fund made up of master limited partnerships (MLPs). MLPs mostly make money from transporting, storing and facilitating the movement of energy products.
They don’t care if gasoline is going for $4 a gallon or $2, or if crude oil is $100 a barrel or $50. As long as those products need to get from Point A to Point B … and these guys can collect the “tolls” paid on that movement … they make attractive investments.
You can see in this chart that AMLP has gotten crushed since the summer. It plunged a couple of bucks from $19-and-change. Then earlier this week, I spotted massive panic selling and an extreme surge in volatility.
|Click chart for larger version.|
That’s the kind of thing that has only happened a couple of times since this ETF hit the market in early 2010. But investors who took advantage of the opportunities provided by the panic selling were rewarded with generous capital gains and handsome yields!
So I took the volatility surge as a signal to get long some additional energy shares in one of my services. They haven’t looked back since – and neither has AMLP (I cut this chart off as of two days ago to show the washout; but it closed today at $17.40versus an intraday low on Tuesday of $16.01).
Can I guarantee that was the low forever and ever for AMLP? No. No one can. But I do think these kinds of opportunities are too juicy to pass up – and just like the great offer from Sprint – you have to capitalize on them when they come along!
So what’s your take? Does the recent panic selling smack of opportunity to you? Or is it just the first in a series of selloffs that’s likely to hit energy stocks, MLPs and emerging markets?
Also, have you ever stepped into the panic-selling breach – and made or lost a bunch of dough as a result? If so, in which asset classes or stocks? Tell me and your fellow investors at the Money and Markets website so everyone can learn from your experience.
|Our Readers Speak|
I love reading the comments at the website when there are so many interesting stories out there, like now.
Reader Bill S. weighed in on the controversy over the movie, The Interview, saying: “Very easy to see why much of the world hates our arrogance. That film should never have been made and is a classic example of the lack of sensitivity with the money hungry film producers.
“I am certainly no fan of North Korea. But I wonder what our reaction would have been if North Korea had produced a film showing the killing of our President. My only disappointment is they are only losing 50 million dollars which is pocket change for them.”
In retort, Reader Fred said: “North Korea runs concentration camps … in 2014. I am not in the least worried about Hollywood offending their leader with comedic satire. Would we have worried about offending Adolf Hitler with satire? If you were talking about many other countries, you might have a point. But not N. Korea.”
Meanwhile, Reader Tom sounded off on the central bank actions that helped launch the furious rallies on Wednesday and Thursday. His take: “These central bankers are getting desperate. They now are acting like day traders, intervening with every dip in the stock market.
“Think about all the bubbles out there: The U.S. bond market, the U.S. dollar, junk bonds, the U.S. stock market and even the housing market is looking frothy again, etc. If one of these starts to unwind, the rest must surely follow.”
One key area of danger, according to Reader H.C.B.: Emerging market debt. His take:
“Most of the debt in emerging economies is private vs. bank debt, plus corporate bonds. So, large investors (Non Bank Financial Organizations such as pension funds, mutual funds) rather than banks lenders currently have the most at risk in EM debt. 70 percent of EM debt financing and loans are denominated in U.S. dollars and made within each country rather than from large developed nation banks overseas. So, as the dollar further appreciates and local EM currencies devalue, the cost of servicing these debt instruments grows.
“There could be a liquidity squeeze in EM countries (not enough dollars). This is where the next financial crisis could erupt if the U.S. dollar goes up high enough (U.S. Dollar Index of 100 or higher).”
Finally, Reader Holygeezer warned about the potential for things to come crashing down once the sugar high of intervention wears off. The comments:
“With moves in the market like these, there no longer is any semblance of an economy based in any kind of reality. The markets are nothing but an addict stumbling around looking for any kind of fix and occasionally getting one. Just wait until it really shoots up some toxic stuff and begins its final death rattle. It is coming one of these days.”
Again, I want to thank you for the well-thought-out comments on a variety of topics. I personally think satire is fine, and Sony should not have caved on showing this movie considering it was never meant to be some big political issue – just a goofball comedy.
When it comes to the markets, these repeated doses of central bank liquidity are obviously papering over longer-term issues. But a day of reckoning is approaching now that the U.S. Federal Reserve is going to have to raise rates. Expect that to lead to some volatility and turmoil.
Finally, while emerging market debts are a concern – and I have warned for the greater part of two years to avoid major EM debt ETFs – the price collapses we’ve seen recently have me sniffing around for opportunities. After all, it’s possible the lion’s share of the fears and risks will be priced in soon – and that could be a great time to pounce!
Anything else on your mind regarding these issues or other recent columns? Then hop on over to the Money and Markets website. Since I will be on vacation next week, let me also take this time to wish you a safe and happy holiday season!
|Other Developments of the Day|
Which U.S. companies could lose out thanks to the Russian ruble crisis? CNN Money takes a look here, listing everyone from Apple (AAPL, Weiss Ratings: A+), General Motors (GM, Weiss Ratings: B-), and ExxonMobil (XOM, Weiss Ratings: B). Several European firms – from Siemens (SIEGY, Weiss Ratings: B) to Ikea – will also potentially lose untold millions on their Russian operations.
Pakistan went on the offensive in its restive Khyber frontier region, killing 62 militants in the wake of the recent Taliban school massacre.
Interesting piece here from Bloomberg that looks at how oil companies hedge against price declines. The general idea? Hedges can be complicated and if prices fall too far, you may find yourself with much less protection than you hoped for!
Here are some more thoughts today from the Washington Post on whether America (though technically, Sony Pictures) basically “caved” to North Korea by yanking the movie “The Interview.” Good read, regardless of your belief.
Any thoughts on these topics? Or others that are scrolling by on your TV screen? Then hop on over to the website and weigh in!
Until next time,