Items in italics are direct quotes from the articles below
This year has been a treat for investors, and it could end up even sweeter. The S&P 500 SPX, +0.31% has tacked on 14% so far — and that’s before year-end rebalancing and hopes of a “Santa Claus rally” that could push the index even higher. Even if stocks do little from now on, it could be the best annual gain for the index since 2013. Still, that doesn’t mean you can just pick stocks out of a hat and hope for the best. This earnings season has created plenty of losers along with the winners, and there are a number of high-profile companies right now that have downright spooky outlooks. So which high-profile names have more tricks than treats in store for shareholders right now? Here are five particularly scary stocks I’m avoiding: Tesla, General Electric, Snap, J.C. Penney, and Valeant. The author’s opinion is valid, and it’s good to listen to different points of view to make a more educated decision. Even if you don’t agree with the opinion, listen and ask yourself, what does this person see that I’m not seeing? Take in the information, and make your own decision. Tesla isn’t a company that trades based on its profitability, but rather on sentiment and expectations. But it’s hard to see what the catalyst is to push sentiment, while there remain some very real downside risks. Case in point: Even as the car recently announced a deal to build cars in Shanghai, a move that should objectively be good for investors, the stock closed lower on the day. You may see Tesla as a good buy. Ask yourself am I investing for capital gains? If so for how long? In the case of GE, I spoke with a friend of mine who was in the brokerage business for many years, and his opinion is that if you have enough liquidity and a long time horizon, buy GE. This blog is for education purposes only, so I suggest you do the research and make your own informed decision. Even if you have faith that things will work out in the long term and that GE will turn things around, the dividend is very much at risk. Beyond paying out more in dividends than earnings (under GAAP accounting, not its adjusted numbers), GE is sitting on a staggering $31 billion shortfall in its pension liabilities and will have to pay the piper eventually. All that adds up to a very real case against this stock. Don’t be foolish enough to think the deep declines of 2017 can’t continue for GE in 2018, too. Make time every day to gain new information in an asset class you enjoy, and find ways to execute your investment strategy.
The stock market may never go down again. Maybe not such a far-fetched notion, when you consider the Dow industrials yesterday nailed its 50th record close of the year and paid a visit to the 23,000 milestone, which it looks set to revisit and maybe stick to today. To be sure, being in the trenches of this market since the election has been a bit crazy-making, even if it has made investors some money. And naturally, there is discomfort out there over the speed of gains, such as how the DJIA has overcome a pile of worries to gain 4,700-plus points in just under a year. Given that, taking a step back and a look around is never a bad idea. That brings us to our call of the day from Kyle Bass of Hayman Capital Management, who has a timely warning on an “air pocket” that’s coming as we near the 30th anniversary of Black Monday. “If you look at the all of the different constituencies of the market today, it resembles the portfolio insurance debacle of 1987 on steroids,” he says an interview with Real Vision TV released to YouTube today, but recorded a few weeks ago. The key metric to watch for is when a 4% or 5% decline in equities becomes a 10% or 15% decline. What’s adding concern to this situation is the massive switch from active to passive investing. That means risk is “in the hands of people who don’t know how to take risk,” the hedge fund manager says. The message overall was clearly to cut back on a bit of risk, look at cash, and peel back a bit on where there have been some good runs. In this type of scenario, what is your experience with paper assets? Do you know how to short? Do you know how to use options? How can you profit from a market that falls? Do you have enough in liquid reserves or are you completely in one asset class? If you find yourself getting tunnel vision. Ask yourself what is your legacy and how does this impact eternity?
This week, I’ve included Why is this THE MOST MOTIVATIONAL TALK EVER?? See for yourself from the Video Advice YouTube channel.
“If you think you know it all, you’re a fool for sure; real survivors learn wisdom from others.”
Proverbs 28:26 MSG