Sunday, June 23, 2013

The Best Defense Is Cash On The Sidelines.

This week IBD notes: “Stocks Notch Fourth Down Week In Past Five Weeks”, separately they advised:  The Best Defense Is Cash On The Sidelines”

This week we saw the yield on the 10-year U.S. Treasury bond hit a 15-month peak. This in turn led to the problem with utilities as seen in the ETF, XLU which slid 1.3%, cutting its year-to-date gain to 7.4%.

This is a good reminder that there is no guaranteed safety in "defensive" plays. Any position that has risk can fall. But good dividend payers that are long term holdings does it really matter at all?  If you own it for the dividend, dividend growth and long term price gain, does the price change in a few weeks matter at all?

Last week I noted I could not remember having all holdings for a trade in a negative position. This week did nothing but exacerbate that. Likewise I have to remind myself that no corrections last forever. This one could be over, but only time will tell for certain.

I did add IWM this week that I have wanted to pick up for some time. 

I also added the REIT; AGNC. 

All of the positions for a trade except AGNC are now protected with stop losses to limit to total loss to a range of 7 to 8%. 

I only intended to own AGNC until just before the X-date and pick up the gain that occurs then. This may still be the best plan, but this could be turned into a long term investment. It pays a very nice dividend currently of around 18%, but it is decreasing the dividend and the share price has also decreased. I don’t have a lot of expense with REIT’s

AGNC does not have a long term record but the business seems simple enough and the reason for the drops seems understandable. What I don’t know is how much more will the dividend drop and how quickly will this occur?

What did I see in my weekend review?

The 10-yr Treasury yield is at 2.51 up 3.93%.

IBD (Investor Business Daily) has switched to: Market in Correction.

Copernicus Systems: Short.
Moneys Flows:  All three still pointed own…all still in positive territory, but one is still near zero.

Currently my "Stocks for a Trade" now consists of:

YHOO   -4.11%

AGNC -9.25%

ETF’s for a trade are:

QQQ -4.70%

XLF -3.62% 

IBB -3.84%

SPY -2.51%

What will I do?

With my general optimism on business, I won’t be selling my positions and running for the sidelines. I will let the market decide by letting my stop losses continue. The four down weeks may have been enough of a correction and it it goes down from here the stops will take me to the sidelines.

Dealing with the REIT…not sure, will watch it up until Tuesday and decide then.

Long term holdings such as dividend payers… just setting tight. I don’t let market conditions concern me at all, just profitability and dividend growth.

I hope you have a great week.

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