The Best Offense is a Strong Defense
Cash is defensive. But bank accounts still don't pay a yield. Some other options to consider.
The Best Offense is a Strong Defense
You’ve probably heard that line before. It’s generally applied to things like sports or war. But it can be applicable in other areas as well and I think until we get a verbal pivot to Federal Reserve dovishness, the best offense might be a strong defense in the capital markets as well. I’ve added about a half dozen ideas to the live portfolio that is available for paid members. All of them offer nice yields with much less capital depreciation risk in my opinion.
Some of you might remember the article Capitulation Event Coming from mid-April. In that article I specifically pointed out three things in the S&P daily chart that I found to be bearish and noted that I had de-risked some of my stocks and some of my crypto. Following that article, the S&P continued to sell-off by another 700 points or so over the course of the next two months.
If you recall, back in April I specifically cited that the S&P had given up not just the 200 day moving average, but also the 50 day moving average in the same daily candle. That was in addition to the low of day close. There is similar activity in the chart now. The 200 was kissed and triggered a reversal earlier this month. On Friday, the S&P closed below the 100 day moving average and yesterday it gave up the 50 Day as well. Bulls need a move back above that today, I don’t know that we’re going to get it.
While I don’t think the S&P is going to give up another 700 points from here, I do think given what Powell said at Jackson Hole last week and what the market response has been so far are both indicative of more pain to come. Watching how the market behaves today will be interesting. While the only way to really protect investment dollars is to just sit in cash, a full cash position isn’t typically recommended even in an environment like this. Custodians rarely pay a meaningful yield. This brings us to defensive ideas that could potentially generate returns. I’ve added six such ideas to the live portfolio that you can access here:
While the year to date performance of these stocks vary, an equal-weighted portfolio of each of these 6 names is actually positive this year and has an 8.6% yield at current share pricing. That’s a pretty good potential total return if these stocks continue to perform the way they have this year (not a guarantee). What is notable is the quant ratings from Seeking Alpha continue to look solid:
ARCC: 4.82
BSM: 4.57
CTO: 4.96
MPLX: 4.66
CSSEN: N/A
LBRDP: N/A
These Seeking Alpha Quant ratings are on a scale of 1-5 and are described like this:
Ratings based on Seeking Alpha's Quantitative Models evaluating over 100 metrics, Published Daily
I believe CSSEN and LBRDP lack Quant ratings because they’re not common stock shares; but don’t quote me on that. Anyway, I’m just sharing some ideas that I personally have exposure to. Month-end newsletter dropping tomorrow - I’ll share some other general investment nuggets in that post.
Disclosure: I’m not an investment advisor. I merely share what I do and why I do it. You shouldn’t take anything I say as investment advice and always do your own research when making investment decisions. Cryptocurrencies, tokens, STONKs, and digital trinkets could all go to zero. I have no job and I live in my wife’s basement. I’m the last person on the face of the earth who you should listen to for financial advice or life advice.