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The Best of What They Said and I Read week ending 12/25/2016

Short excerpts from articles I found interesting.

I may not agree with the author and the following material is not intended as investment advice.


The Wall Street Journal – Red Alert: Do Not Mix Trading and Politics – December 22, 2016 by James Mackintosh

  • “There were just two problems with trading politics in 2016: the politics and the trading. The Year brought two of the biggest political upsets in decades with the surprise votes for Brexit and Donald Trump, but investors mostly missed both. Worse, those who did call the votes right might still have lost money because of the surprising market response.” 

  •  “Even an investor with advance knowledge of the electoral outcomes would have struggled, said Mark Haefele, global chief investment officer of UBS Wealth Management. “If you had said during 2016 the U.K.’s going to leave the European Union and Donald Trump’s going to be elected president and the stock market’s going to love it, I think few people would have expected that,” he said.”

  • “Not every political trade went wrong. Those who ignored the consensus that the U.K. would vote to stay in the EU were able to make big money from the collapse of the pound, and a Trump-related bet against the Mexican peso also paid off. But Sebastian Lyon, chief of London-based Troy Asset Management, points out that the big Brexit trades – gold up, sterling down, shares down a lot – were reversed when Mr. Trump won. “Brexit and Trump were seen as two very similar outcomes,” said Mr. Lyon, “If you had tried to position for Trump to be like Brexit, you would have been carried out; the Trump [market] reaction was the exact mirror image.”…”

Forbes – Game Changers – Trump On, Risk Off – December 30, 2016 by Richard Lehman

  • “…In the aftermath of the election, most fixed-income investments have traded down significantly…That leaves income investors like me suddenly looking for a “safe space” to invest…

    • If you hold long-term investment-grade bonds, sell these first.

    • If you hold preferreds backed by long-term bonds, sell these next.

    • If you have high-dividend-paying equities, cut your exposure to now more than 10%.

    • If you own munis, continue to hold them up to 20%.

    • If you hold closed-end funds trading near full value, take some profits with a view to getting back in next year at a lower price.

    • If you own high-yield bonds, trim them back to 5%.

    • If you hold REITs, limit your exposure to 10%, and sell mortgage, office and health care ones.

    • If you have MLPs, hang on to the energy-related ones and to closed-end funds that hold MLPs, but limit this category to 10% for now.

    • “Two things to avoid are: thinking you can time the market by switching into equities and forgetting that you bought income securities for income. Ignore price volatility; your cash payouts should remain unchanged…”

Barron’s – For U.S. Stocks All’s Calm, All’s Bright, for Now… – December 24, 2016 by Kopin Tan

  • “…our stock market has a lot less stock. Thanks to mergers and the rising costs of public listings and regulatory compliance, the Wilshire 5000 index now has just 3,620 stocks, down from 7,562 18 years ago. And the supply of new listings keeps shrinking.”

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