Are you planning to buy any stocks during the downturn?

Update 10/5/2015: Two large moves up, the one today a “gap” up, ends the “barely-a-bear-market” correction, largely based on postponement of Fed rate increase into next year.  That means the advice below is out of date – unless prices again retreat near to the levels where they were the middle of last week.  Eventually the Fed will increase rates, so unless there is some huge gain in corporate profits, the headwinds are still present.  Based on the chart below you can see the S&P 500 is about half way back to “where it was” and at a level where it has been hanging out whenever the mood was not too horrible.  It’s premature to say a new uptrend is established.  However, it does look like a confirmed double bottom, the 2nd slightly higher than the first.


Are planning to acquire any assets during the downturn?  It appears to be a typical inventory cycle, a temporary reaction to Chinese growth slowing as planned from 7% to 4% (still pretty good), moderation in a long run up in U.S. growth, year 3 of the election cycle, and the temporary oil glut which cannot last (only Denmark of all exporters can balance its budget at current prices).

Income producing securities have taken hard hits also.  Some of them are oil related.  Others leveraged on interest rates and expecting the Fed rate hike.  Quite likely the reaction on both counts is over done.  We are also in the typical September-October lull in mood among investors.

Here is a review of oil stocks that pay dividends.  Big stable companies.  On the 2nd page it discusses BP, which pays 7.7%.  This might be reduced, but nevertheless BP looks like the biggest gainer over the next two years.  It is much better managed than it was 5 years ago.  If you want to not put all your eggs in one basket, buy some of the Conoco Phillips COP yielding over 6%.  Beats a bank account.  Oil is not going to crash dramatically from here.  Might be slow going up but with dividends who cares.  Shell has pulled out of the arctic.

MORL might be volatile, but with over a 21% dividend, you only have to invest a little bit to generate cash.  Consider two things about this ETN.  It doesn’t have volatility losses like an equivalently leveraged ETF.  It’s reasonably safe to hold barring a great depression.  And the equivalent volatility is 1/3rd of what it looks like on paper compared to a 7% dividend, and 1/6th as great compared to a 3.5% dividend payer.  For example, you’d have to invest 5 times as much money in 4% payer Exxon (XOM) to get the same cash flow.  If XOM declines 10%, that is the same dollar decline as a 50% decline in MORL. In 5 years you will have your capital returned, and in 6 years you have a 20% profit in dividends, even if the value goes to zero after that.  It takes about the same amount of time to make 20% with a 3.5% dividend payer.

Another stock I have held for a long time is HTGC, currently yielding over 11%.  That is higher than their historical average.  It is diversified, but not as much as MORL.  But it is in venture capital and MORL is real estate, so you could nibble a little of each if you need some income.

Here is another article on dividend stocks.  AT&T is paying 5.8% and stands to have some cap gains over the next year.  The have acquired Direct TV and generally their business is not phones anymore, except cell phones of course.  I don’t own any of this and don’t like the company, just mentioning it in case you don’t like oil.  I live in Houston, after all, oil capital of the Western Hemisphere.

Ford is paying 4.6%.  The company is still controlled by the founder’s family, and is defacto the most successful car company in the Western Hemisphere, with Chrysler owned by Fiat, and GM being a new reorganized company after bankruptcy in which all prior shareholders were liquidated.  Looks like a 50% gain might be available.

Why not just by a dividend ETF?  There are some listed in my book.  You can check them out and see what they are paying currently.

Anything you buy between now and the end of November is likely to go up.  Trump is going to be president.

I can’t really do much.  I bought oil a little early at the first bottom.  (I’m always early, a lifelong investment problem.)  But it looks like my Russia stocks might pick up.  Putin really looked good in the Charlie Rose interview, and I’ve told Natasha that since he is again using the word “partner” in regard to the U.S., however much he might criticize us, it’s OK again to travel there.

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