Tahoe Market Pulse: Where I was right … well, mostly
From time to time I like to read old columns to see what I predicted and how I did. I’ve been consistently bullish since the column began in 2010. I also named gold as the world’s worst investment (7/30/15). Stocks are up, way up, and gold might be on its way to its fourth straight yearly loss.
One of my most discussed articles was titled “U.S. Treasuries, A High Risk Investment” (3/8/12). The U.S. 20+ Year Treasury (TLT) is about unchanged since then but there have been several periods, including the last few months, that show just how risky Treasury funds can be. U.S. Treasury funds have lost about 20 percent since July! The more rates increase, the more this low yielding fund will fall. The only time Treasuries do well is if there is a financial crisis or if some calamity hits. U.S. Treasuries are the new gold!
Early this year I wrote that preferred stocks would offer this year’s best risk-to-reward investment. That was true, at least for the first half of the year. Until August, the preferreds we listed paid their dividends and increased in value. It was the best of both worlds. And then interest rates began to rise. Fortunately, I warned about high prices on August 4 with “Be Wary of Several Market ‘Mirages.’”
The good news is that preferreds didn’t fall much and are back to their par value, making for an easier entry point. My favorite? RenaissanceRe called half of its preferred “C” issue (RNR.PRC) and I’m sure they’d love to call the other half. I’m a buyer since it trades below $25. With the threat of a call, it won’t fall below $25 by much, even if interest rates rise. RenaissanceRe Preferred C yields 6.1 percent, is rated BBB+, and pays a qualified dividend.
At the start of the year I also expected dividend-paying stocks to outperform. They did … until the election. After the election some dividend payers (financials) did well while others (pharmaceuticals and utilities) lagged. Note: Pfizer and General Electric, two that I like, raised their dividends this month.
I’ll list my 2017 forecast soon enough, but I think preferred stocks, now that they’ve fallen back to par, will do well. It’s also safe to expect more market volatility and even some drama from our nation’s highest office
When tweets move the market, as one did recently for drug stocks, you’ll never know who will be the next target.
David Vomund is an Incline Village-based fee-only money manager. Information is found at http://www.VomundInvestments.com or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial adviser before purchasing any security.