Friday, June 21, 2013

Thank Ben!

I recently wrote ( early June ) about hoping for a summer swoon in the markets to deploy some cash. Well, it seems the swoon has started. Ben Bernanke, the Chairman of the Federal Reserve, recently announced that the Fed, may start to taper their bond buying from the current $85 Billion/month. The market, in it's typical manic depressive fashion, has taken this as bad news. The markets have been hammered the last couple of weeks ( S&P 500 down 5.1% from recent highs ), as the Fed takes away the punch bowl ( a gusher of cash/liquidity) from the equity party. Stocks have done well the past 12 - 24 months, and have out-run the underlying economy. This pull-back is much needed to recalibrate people's expectations of future profits - corrections are healthy. All of this selling of bonds ( when bond prices fall, yields go up ) and stocks forced people to the safety of the USD. If you own U.S. equities, you will benefit, particularily if you are Canadian. The CAD is headed lower. You will also benefit if you own insurance companies that make more $$$ from higher bond yields. Manulife ( I own MFC), Industrial Alliance and Sunlife all touched 52 week highs, this week during the sell-off. It's a good place to hide. The bond market is telling us that the economy is getting better and rising rates are confirming that. It's a good time to add to existing holdings, that are still undervalued - or start new a position. Just don't buy all at once, buy slowly.

I have recently added to CHK@ $20 and started a new small position in a un-loved U.S. based mortgage insurer.

No comments:

Post a Comment