The Tasgall Group

I’m sure we’ll all be watching the market closely to see how it responds to the “W” formation that Mauldin pointed out as a significant technical indicator of the overall market trend in the near-term.? We’re at the tail end peak of the “W” and thus at a tipping point, according to this technical analysis.? I’m wondering if the increased emphasis of 401K and retirement investments over the last 5 years isn’t creating a larger and more consistent influx of cash into the market that has historically been privy to, thus creating an environment where the market has a tendancy to drift slowly and steadily upward.? I was trying to interpret the Fed Z.1 cash-flow data this weekend with little initial success.? The data is clearly laid out and readable, but there’s just so much of it and so much out of context to something actionable and tradable that it was difficult to get my head around how to use this information to profit from it.? The general increase in consumer debt is worrisome, but less so if the typical consumer isn’t likely to invest in the market anyway, but who’s company is automatically investing for them and their debt is used to buy products and services that are driving the economy further into the black (double benefit).? This may just be the ramblings of a non-economist, but I have to think that positive cash flow into the markets will create a general rise in equity prices.

A topic that I played around with extensively over the weekend is trading sector ETFs on a small scale.? Now I know the general guidance is to avoid trading sector ETFs since there’s a great deal of market forces unbeknownst to many when you get into sector trading.? The general guidance is to stick to major classifications, like large-cap, mid-cap, small-cap, etc. since it’s too risky trying to time buying and selling sectors.? While it’s true that the risk is greater trading sectors, I think there’s a higher chance for profit as well and ETFs present an attractive medium for trading sector ETFs.

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The new Pension Reform Act, known on the street as the 401K law, will obviously cause major downward pressures on manufacturing and airline stocks which will need to divert signifiant resources into their pensions over the next 7 years or more to meet the new requirements. The law will also be a major lift to firms like Fidelity and Vanguard who offer 401K services (however both companies are privately held, so there’s no equity investment opportunity to be had there). The real question is: will the rise in 401K contributions be a major contributor to a future stock market rally? (more…)

Here’s a run down of the bullet points that make me think the US equities market is headed for a 10% or greater correction: (more…)

With my current >90% exposure in equities, I’m feeling that I’ll be one of the first victims of a bear market.? With the recent minor run-up in the US equity markets, I’m thinking that the time is ripe to move at least a 10% chunk of my US equity exposure out and into either a money market account (like the VMMXX with it’s 5% yield) or into Bonds.? I’m becoming increasingly alarmed at the market conditions now and I’m interested in moving my main holdings out into cash in stages and allow my dollar-cost-averaging approach to continue on with my current asset allocation plan.

What are your thoughts?

I’m thinking that if the market continues to show strength throughout the day, I probably will move 5 – 10% of my Large and Mid-cap US equity positions.? I’m feeling very much exposed on these fronts.? Areas I’m probably not going to touch for now are my Small-cap, Foreign and Energy holdings.? Small-cap has already had a tough year and I’m probably going to keep those relatively untouched for now.? My international holdings are all up around 8 – 10% YTD and showing no clear signs of pulling back at the moment, so I’m planning on leaving these untouched for now.? I still feel that Energy has plenty of upside and I’ll continue to hold these funds for the foreseeable future.

Let me know if you think my concerns are unwarranted or you think I need to lay out my case for why Large and Mid-cap equities are heading for a significant drawndown in the future.

It’s probably too soon to post this, but if I wait to finish my other REIT post then the moment will pass. REIT’s peaked this week and I sold 50% of my REIT holdings on 8/9 (my Tasgall post on the 10th covered this decision). Since then REIT’s have been really hammered and are starting to go what will be a correction at best and a “recession” in the REITs at worst. Their 4+ year run up that at least doubled the REIT market’s value (while halving it’s yield) is likely at an end. I believe that it lasted almost a year longer than it should have. Last Sept I halved my REIT position after things looked just as bad as they do today, only to see things get startlingly better by Dec, so I beefed my position back up again. Now, things are just turning south and I believe that they will continue to do so.

My recent 50% sale was based on the belief that I am right about REITs, and the 50% that I’m still holding is based on the fact that I’m still unaware of all the factors that influence REITs. Plus, it’s nice to have some REITs mixed into my asset allocation and I’ll be purchasing more REITs via dollar-cost-averaging over the next several months to slowly buy back up on the way down. I still like REITs for the long term, but right now they have hit a very rough patch.

It was obvious when Enron went bankrupt in December 2001 that it’s stock was to be avoided.? It wasn’t just because of the details of the scandal, but because Enron didn’t really have much in the way of assets.? Enron sold it’s ideas, it’s concepts, it’s people.

When WorldCom went bankrupt 6 months later due to their spectacular scandals, the stock price plummetted to pennies per share.? After the company entered into Chapter 11, I was fascinated that the stock was still active and actively traded as a penny stock for weeks.? When a few weeks went by with no indication that the stock was going to be delisted, I was influenced by various naive things that I read online that the stock still had value thanks to WorldCom’s extensive assets and MCI division. (more…)

Money Markets are looking really good right now for safe money while we wait for several markets to get over their jitteriness. SECU raised their MM rates to 4.5% (4.6% APR). ING is cruising at 4.35%, but I suspect they will raise within the next 30 days. For parking your money in “cash” in your trading accounts, consider Vanguard’s MM account (VMMXX), which is currently posting a hefty 5.08% yield.

I just drastically scaled back my REIT positions after today’s crushing news from Toll brothers, Bill Gross’ sickening chart (see link within earlier post from Jason) and the additional failure of yesterday’s REIT market peak to hold out. I moved half of my REIT position into equal portions of Money Market (VMMXX) and Total Bond Market (VBMFX).

I’m percolating a blog post regarding REITs but it will take some time to make that post worthwhile.

This is the last batch of fresh Power Ratings that I have to report since I canceled my free trial tonight. I had to phone in to cancel and they guy gave me a hard time and asked tons of questions before he’d submit the cancel request. He tried to offer me a free month if I’d agree to pay for a month, then he wanted all sorts of info about my experiences and wanted me to compare them with other strategies that I’d tried. Anyway, the updated spreadsheet is attached: Power Ratings Worksheet

Continuing my ongoing daily reports on the latest Power Ratings, with the top Power Ratings for 7/14 listed below along with a status report of how all the other PR stocks throughout the week have performed. Please note that today and yesterday were significant down days on the market so I’m not expecting the PR stocks to have performed all that well. (more…)