WASHINGTON, January 28, 2013 – At last we’re getting a downish day today, or at least this morning we are. We’re writing this at about 10:30 a.m. and the Dow is down roughly 24 points right now. The NASDAQ is a bit anemic, down less than 2, and the S&P 500—probably the best general barometer for the market at the current time—is off roughly 5.5. Typically in the current market, down days will conclude as up days after buy programs kick in somewhere between 2 and 3 p.m. But it’s probably time for at least a mini-correction or a breather, so we wouldn’t be surprised if the HFT trading cavalry doesn’t come racing in this afternoon to buy.
The market is allegedly down this morning because sales of existing houses are down. But while that’s generally perceived as bad news, the funny thing is the reason for the sales decline: the supply of available existing houses to sell is way down. In other words, people who want to buy an existing house can’t find one, or at least not easily.
In addition, duh, existing housing inventory is always at least somewhat lower this time of year. December 1-February 1 are lousy months to list, frankly. Ask most real estate agents. (Actually, don’t, they’ll tell you it’s always a good time to buy or sell.)
Bottom line: Nobody particularly wants to contemplate wading into the housing market and its attendant complexities around Christmas in the first place. That’s good news for builders, of course, since they’re creating new supply, which may be why these stocks have been on a tear at least recently.
In the second place, except maybe in the Deep South or the southern parts of California and the desert West, who wants to traipse through a bunch of house, particularly farther north, when they have to trudge through the snow, slop through the slosh, or get their flights postponed or canceled if they’re looking to relocate in another city. And that tends to rule out January, and even part of February, at least way up north. (Or most months of the year for the houses that illustrate this piece, borrowed from a peculiarly interesting website that likes to post pix of homes for the truly weird.)
As soon as things start to thaw, however, inventory will return. It’s almost a certainty. The Maven himself intends to put his worst property on the market in February. Why? February-March listings get out there just in time to start catching the eyes of moms and dads who want or need to relocate to your area. The Maven would have loved to put this particular dog of a property on sale even late last November, but why? It would have sat there unloved for months at which point we’d have to “freshen” it up with what some realtors cagily call a “new price.” It means “price cut,” but that’s disguised by “new price,” much the same way that hardened Marxists change the topic by calling themselves “progressives.” But we digress.
Since we’ve pretty much demonstrated that the housing inventory issue is just another distraction generated by clueless financial writers on deadline, exactly why is the market weak this morning? Honestly? It’s similar to when you ask your kid why he stated an opinion out of the blue on a topic he knows nothing about. His answer is often, “Well, just because…” Or something similar. But that’s the reason for this morning’s decline. Just because.
Or more specifically, just because a lot of people have already made a lot of money this month and they’re taking profits because they don’t fully trust this bull run. As we’ve stated several times, we’ve been dumping this and that ourselves over the last 5-10 trading days, even as we still look for buy candidates that may take advantage of short term opportunities.
Right now we’re still buying and holding various REITs and MLPs, primarily for the yield, plus a utility or two like Black Hills (BKH) which has been pretty good for us percentage wise, plus it pays a fat dividend, too. PFF may not be bad either right now. This preferred stock ETF has stabilized since its main stock constituents, the banks, have been looking less risky and more healthy lately and its current yield—circa 6%—is hard to beat without getting a lot riskier.
For those like us who’d like to at least dabble in some tech, there’s the tech heavy QQQ ETF but there’s a hitch to it. By far its largest percentage holding right now is Apple (AAPL), which continues to look sickly, at least as a stock. So when Apple gets hammered, the Qs get hammered almost as badly. But the antidote is another ETF one of our investment services has pointed out to us: QQEW. Aha! Now there’s a solution. QQEW follows the same index as the Qs, but voilà! It’s equal weight. That is, Apple is still in there, but it gets no bigger weighting in the index than anything else. Thus, QQEW may be a safer way to get involved in a general tech ETF without the slings and arrows of outrageous fortune, otherwise known as Apple stock.
If Apple ever returns to its glory days (which is likely will at some point, at least for awhile), it’ll probably be more fun to go back to the Qs. But for a relatively safe entrée to the world of tech, QQEW is likely a better port in a storm right now.
Aside from this stuff and stuff like it, we’re still more interested in peeling a few things off from our portfolios right now. If you’re in the same situation, more or less, consider taking a few more profits, particularly on up days when you’ll get a better price.
Meanwhile, let’s see what happens on a day where the bulls appear to be taking a rest. If it gets worse later this week, we’ll let you know.
Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate.
Any positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.
Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.
References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any ar500ticle under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.
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