The Dow Jones Transportation Average has been sliding for a couple days, under-performing the broad market. Typically the transports are a leading indicator of a slowing economy because fewer goods are moving around the country. It is only 2 days, but worth keeping an eye on as an early tell of the economy.
Sold my ~3% position in General Electric Corporation (Ticker GE). The stock has appreciated about 15% since I bought it in mid-October. I continue to move my IRA towards more conservative waters as my post on Sagflation suggests deflationary pressures are building. In addition, I believe there the potential growth inhibitors in the US of higher taxes, lower spending and falling liquidity over the next year provide the catalyst for a market correction. Of course, there is always European debt or Middle east unrest to send the market lower as well. GE has large international exposure, increasing the risk the company is hurt by events outside the US. The stock is reasonably prices at 12x this year's consensus EPS estimate, although I believe the 15% anticipated growth rate in 2013 is somewhat aggressive.
Showing posts with label GE. Show all posts
Showing posts with label GE. Show all posts
Wednesday, February 15, 2012
Saturday, November 5, 2011
Easy Money Now, Hard Times Later
Following up on the last post, "Freight Trained," I wanted to highlight an article in Barron's that outlines quite well the expansionary monetary policies by most large central banks in the world. I agree with many of the concerns outlined in the article and believe these monetary policies, coupled with the fiscal austerity in many countries, lead to the following in 2012:
(1) Rising commodity prices into the first half of 2012, driving up prices for gas and food,
(2) Higher equity valuations into the first half of 2012 as liquidity inflates the stock markets,
(3) Rising interest rates on longer-term bonds due to inflation concerns and rising stock valuations,
(4) Declining wages as companies control headcounts to offset higher material prices, and
(5) Rising CPI by mid-2012 as companies pass along higher costs to customers,
All this leads to a potentially violent reset of the markets in the middle of 2012, in my view, in-line with my expectations under my Sagflation thesis of slow-to-negative growth combined with more volatile prices. During this phase of Sagflation there may be rising fear that we are entering a period of Stagflation, or high inflation, high unemployment and slow economic growth. I suspect this potential period of Stagflation may precede a period of negative growth and deflation in 2013 and 2014. While worrisome, I also believe the years 2013 and 2014 enable the political and economic re-structuring required to set-up for healthy growth in 2015 and beyond.
Returning to 2012, the potentially violent reset during the middle of the year may occur due to:
(1) Consumer spending falling due to a squeeze between rising food/gas prices and declining incomes,
(2) Debt stifling growth in European countries and with US consumers,
(3) Social unrest stemming from economic hardship in Europe and the US (Occupy movement),
(4) Additional austerity measures legislated in the US and enacted in Europe to reduce debt, and
(5) Diminishing impact, or even reversal, of expansionary monetary policies that appear to hurt growth.
These are my opinions and I lay them out in order to refer back to them in the future in order to track how my perception of the future evolves as unexpected events occur.
With all this in mind, I may exit a few positions that do not benefit from the anticipated rise in commodity prices and steepening of the yield curve. My portfolio currently includes the following:
(1) Rising commodity prices into the first half of 2012, driving up prices for gas and food,
(2) Higher equity valuations into the first half of 2012 as liquidity inflates the stock markets,
(3) Rising interest rates on longer-term bonds due to inflation concerns and rising stock valuations,
(4) Declining wages as companies control headcounts to offset higher material prices, and
(5) Rising CPI by mid-2012 as companies pass along higher costs to customers,
All this leads to a potentially violent reset of the markets in the middle of 2012, in my view, in-line with my expectations under my Sagflation thesis of slow-to-negative growth combined with more volatile prices. During this phase of Sagflation there may be rising fear that we are entering a period of Stagflation, or high inflation, high unemployment and slow economic growth. I suspect this potential period of Stagflation may precede a period of negative growth and deflation in 2013 and 2014. While worrisome, I also believe the years 2013 and 2014 enable the political and economic re-structuring required to set-up for healthy growth in 2015 and beyond.
Returning to 2012, the potentially violent reset during the middle of the year may occur due to:
(1) Consumer spending falling due to a squeeze between rising food/gas prices and declining incomes,
(2) Debt stifling growth in European countries and with US consumers,
(3) Social unrest stemming from economic hardship in Europe and the US (Occupy movement),
(4) Additional austerity measures legislated in the US and enacted in Europe to reduce debt, and
(5) Diminishing impact, or even reversal, of expansionary monetary policies that appear to hurt growth.
These are my opinions and I lay them out in order to refer back to them in the future in order to track how my perception of the future evolves as unexpected events occur.
With all this in mind, I may exit a few positions that do not benefit from the anticipated rise in commodity prices and steepening of the yield curve. My portfolio currently includes the following:
| Weight | Name | Ticker |
|---|---|---|
| ~16% | Proshares Ultrashort 20+ Yr Treasury | TBT |
| ~11% | SPDR Gold Trust | GLD |
| ~4% | Base Metals Double Long | BDD |
| ~4% | Rowan | RDC |
| ~4% | Boardwalk Pipeline | BWP |
| ~4% | Eaton Corp. | ETN |
| ~4% | DOW Chemical | DOW |
| ~4% | Huntsman | HUN |
| ~4% | Prudential Financial | PRU |
| ~4% | Brookfield Asset Mgmt | BAM |
| ~4% | General Electric | GE |
| ~4% | Vale SA | VALE |
| ~3% | iShares Silver Trust | SLV |
| ~3% | Tyson | TSN |
| ~3% | Goldman Sachs | GS |
| ~3% | Ferrell Gas Partners | FGP |
| ~2% | ETFS Physical Palladium Shares | PALL |
| ~2% | Citigroup Inc. | C |
| ~2% | Morgan Stanley | MS |
| ~2% | Pepsico | PEP |
| ~1% | Teva Pharmaceutical Industries | TEVA |
| ~1% | Computer Associates | CA |
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