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Strategies for Investing Near All-Time Market Highs


Rick
  • By ~ Rick King

    A great deal of our success in life depends on timing. When investing you must always pay attention to the broader picture and remain diligent when looking for indications the markets will turn. That said, there is no shortage of market analysts that will work relentlessly to convince you they have all the answers. They range from those who present a doom & gloom picture of the global economies to the eternal bulls who have nothing but optimism despite any indication to the contrary.

    One of our members reminded me today that we are entering a new period of uncertainty in the markets. In order to invest we must all try to gauge sentiment and determine what our experiences say will most likely happen next. Most of our experienced kingofalltrades.com members know at this point that the difficulty making any prediction is compounded almost exponentially by human/institutional injection in the markets. Not just high-frequency trading, massive super computers trading in and out of multi-billion dollar accounts faster than you can blink an eye, or even fomenting the markets can be consistently forecast. So now that I have your attention, your question might be: What do I think makes sense at this point in time?

By ~ Rick King


A great deal of our success in life depends on timing. When investing you must always pay attention to the broader picture and remain diligent when looking for indications the markets will turn. That said, there is no shortage of market analysts that will work relentlessly to convince you they have all the answers. They range from those who present a doom & gloom picture of the global economies to the eternal bulls who have nothing but optimism despite any indication to the contrary.


One of our members reminded me today that we are entering a new period of uncertainty in the markets. In order to invest we must all try to gauge sentiment and determine what our experiences say will most likely happen next. Most of our experienced kingofalltrades.com members know at this point that the difficulty making any prediction is compounded almost exponentially by human/institutional injection in the markets. Not just high-frequency trading, massive super computers trading in and out of multi-billion dollar accounts faster than you can blink an eye, or even fomenting the markets can be consistently forecast.


So now that I have your attention, your question might be: What do I think makes sense at this point in time? One lesson we learned the hard way in 2001, 2002, and 2008 was that all record highs and their associated economic bubbles have an equal and opposite reaction. What goes up must come down. The inevitable back and forth, the running of the bulls versus the onslaught of the bears, present opportunities if you pay attention. What did we see recently? A considerable drop in precious metals prices. Now ask yourself why. Nothing happens by coincidence when the largest institutions can single-handedly control momentum on any given day. That tells us that there are games afoot.


Think about this: we have to date seen only a modest recovery, the markets are hitting all-time highs, precious metals show signs of weakening against the dollar, the giants in the investing world have been shifting out of risk, and property is recovering. If you expect a bubble to pop, you plan an appropriate exit strategy. Any subsequent movement down by the precious metals markets typically coincides with strength in global monetary facilities. Few can doubt that the dollar has been devalued and we should by definition be entering a logical inflationary stage. Common sense tells you that an equivalent value of anything equates to more dollars when you consider the intrinsic value of a resource/product stationary.


I believe the larger players are setting the stage for the next chapter in the recessionary tale post 2008. A great many were left holding the bag on the great crash as happened during any previous great crash. The difference now is that the tools have changed. Controlling market momentum has become almost reflexive to the larger institutions. If you expect the dollar to lose value and can predict the inflationary trend's direction, and you can control direction, you back up the truck to a lower level and take what weaker panicked minds would abandon. Most of our readers should remember what staff writer Andrew Montero posted on our forums a few years ago, there is a circle of psychologically inevitable sentiment every major investment firm knows and studies.


The time to invest and get bargain basement deals is when there is blood in the water (any panic run). We've seen slight blips so far in the overall markets indicating that we're getting near the end of another bubble.


Dividend stocks. When rapid growth is not an option, and I don't believe the overall markets are conducive to it, you invest where you can recoup on your investment by way of sheer patience and firm holding. Dividends are going to become important in the coming months. Any company offering a dividend at this point in time is essentially showing a sign of strength. Even if there is a broader market drop, these investments tend to be great opportunities in questionable times, and you can always increase your holdings on any subsequent drop. Now that Sirius XM Radio (NASDAQ:SIRI)continues to provide a dividend and has a strong five year pattern of relentless growth, it is easily on my list. Ford's dividend (NYSE:F)was recently increased and sat at 10 cents on January 28th, 2013. The trend in that company, to me, is less important than the decisions I see prevalent on the board. I like Ford going into the next year. Caterpillar (NYSE:CAT) is also high on my list of dependable investments, and I would make them 2nd on my overall list of solid dividend stocks.


Financials. Banks depend on sentiment as much as any investment. Buyer beware. Due diligence is needed when investing in any security, but near the top of the market indices' new highs doesn't speak greatly to wisdom.


Certain cycles have developed in the past few years that tend to show consistency. One is the increase in natural disasters and the resultant services and resources needed after each. I will not touch upon Global Warming or enter that battle in this article. I believe anyone has the right to their opinion, but as investors perception must always be a consideration. Perception, coupled with fact. Whether there is a specific reason or not, there has been an increase in the number and frequency of natural disasters. Hurricane prone areas provide investors with opportunities, and that is a cold hard fact. Ahead of July, I feel comfortable holding shares of Walmart (NYSE:WMT), Home Depot (NYSE:HD), and Lowes (NYSE:LOW).


Exchange Traded Funds. Although temptation may seep into overall sentiment, I don't feel strong about ETF's right now. The issue I have with ETF's is that they are exposed right now to overall market trends. This may sound counter-intuitive, but think of it this way: If you are more selective at a market top, you have a chance to ride any market downtrend more safely than otherwise. Broader investment strategies mean you risk large portions of those ETF's getting sucked into the maelstrom. I'd rather make educated decisions and place my money where I have unique opportunities to preserve capital.


Oil/Natural Gas/Energy and related technology. Tesla (NASDAQ:TSLA) has shown surprising strength. Despite my love of Ford, I find the logical side of my brain pulling me more toward Tesla. I had mentioned my fondness of Tesla in the past at KOAT, not because I'm a renewable energy fanatic, but because they show signs of sound management. To have progressed this far, this fast, against head-winds from the renewed strength of global automakers and stabilization of the oil markets, Tesla has impressed me. The world's transportation needs are undergoing a transition. There will be turbulence. With new resources coming online domestically, and recent advances in battery technology at the academic and corporate levels lead me to believe we're on the edge of a new wave of energy technology. Rather than invest in the automakers directly, I believe there will be opportunities in the next several years to invest in this new tech. Look carefully at the IPO's coming out in the next few years.


Communications. All hail Google. Google "Glass," and other wearable technology are on the horizon. Not OVER the horizon, but literally a stone's throw away. Keep your eyes on what begins to develop in the telecommunications markets. One example: Verizon. Any company that can edge silently into a state as large as Alaska while no one is looking (towers are going up right now with expected activation of 4G LTE this summer) deserves a look. They stand to instantly gain substantial revenue and I predict the local providers, Alaska Communication Systems Inc (NASDAQ:ALSK) and General Communication Inc (NASDAQ:GNCMA) will likely not know what hit them. Both are planning to pool their resources against the onslaught of Verizon (NYSE:VZ) in 2013. The odds are stacked against ALSK and GNCMA, most likely they will become short opportunities. I expect revenues to jump as VZ works out the kinks in the system through 2014.


Real estate. Physical property is something tangible you can touch, manipulate, and utilize during any downturn. Interest rates are at a substantial low, and I don't think we'll be back at these rates for a considerable time once they start rising. I am calling for 2013 to become a major resurgence in the strength of the housing market. Strength should build through Spring into Summer and fade slightly during the normal Winter lull.


Entertainment. During any moderate turbulence or downturn, the masses will look for something to provide relief from daily stressors. Zynga (NASDAQ:ZNGA), although highly speculative right now, has some potential for rapid growth if they turn things in the direction we've seen signs of. Online gambling may be the savior of this overlooked gem. I must add, however, that you must absolutely take precautions and consider this a very speculative move.


Disclosure: As always, due diligence and dedicated research are a must when investing in anything. You must never invest based solely upon another's advice or opinion, even mine. Pay attention to the markets and educate yourself. Be patient and invest only what you can lose. If your anxiety or risk aversion lead you to sleepless nights stick to solid tangible investments at the lower risk end. I have positions in Sirius XM Radio, Ford, VZ, CTIC (trading swings), and Zynga. I plan to adjust my investments at a moments notice, so all of the above are subject to change based on market conditions. If you find any of this information useful, feel free to join kingofalltrades.com as a Gold Tier Member to gain other useful insights from myself, Relmor, Andy, or Johnny I.

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