RAX:  I reduced my position to a regular size for me.  This is more than a regular speculative play in that I believe in the story long term, but it was at too large a size (almost double my core positions) to be comfortable for me.

JCP is worth a spec buy down here.  We have absorbed a LOT of bad news.  This level has proven to be a base.  Of course, this could change if we get even more negative surprises on cash usage ("burn").

ANY bit of good news and the stock will be up 10-20%.  Short interest is high (so that will provide some upside if we get any good news).

There's a story about PIMCO raising their treasury weight to the highest it has been in a while.  I agree with this move though for myself, I would move further out the curve than the 10 year.

Rationale:

Economic growth will continue to be anemic as it is also undermined by weak global growth.  The "babble" you may hear about ending QE, is just that.  There is NO evidence that economic growth is coming back!!!  The Fed has emphasized that they want concrete evidence not "expected" growth, but actual growth.  The employment going down to 6.5% which is what they stated as being a goal of theirs will not be enough in and of itself.  If unemployment goes down because the denominator is going down (the number of people in the workforce) that is unsatisfying.  All that means is that there is a larger group of people that have given up looking for work.  That kind of improvement would be pernicious and long lasting.  Unfortunately, that is where we are heading and in that environment, 30 year treasury rates north of 3% are worth buying.  TLT below 117 is a good buy.  I will wait for that level again and look to buy a bit.

Better yet, I like buying well run companies that pay their shareholders.  They will continue to become more efficient and improve earnings even though top line growth won't be great.

Options continue to be a cheap way to hedge or gain exposure.

Bad number of course, so let's take stock:

Negatives:

-Global growth still not helping.  In fact US is probably the only engine right now (not new, really).

-Austerity on the fiscal side in Europe and the many in the US pushing for this as well.  This is counter-balanced with the loose monetary policy being run by the US and now Japan has joined in.

Positives:

Corporate health is excellent.  Continuing to become more efficient.

Bond yields are low.  This helps in repairing balance sheets.  I suspect this effect is mostly played out.  I don't think there is much more to be wrung out here.

I am BUYING down here.  Bringing my equity weight up above 40%.  I keep getting pummeled by RAX and AAPL - I must be a masochist, but I do believe in the stories here.  What I should do is bring their weight down to smaller impact, and replace it with S&P (SPY).

Equities are the best odds game in town.  Nothing guaranteed, of course, but the best odds.  Treasuries (long duration-TLT) still ok as the global growth picture is the dominant factor here.  The TLT has had a nice run up in the last few days, so there may be a pull back.  Unfortunately, I sold all of mine so I have none to sell.

If I need cash to buy stocks, I would sell some of the high yield (JNK,HYG) that have done relatively well here.

Interesting read.  Perhaps a bit harsh, but it's a good reality check on not always following the "hot" money.

http://www.pimco.com/EN/Insights/Pages/A-Man-In-The-Mirror.aspx



Some basic rules which have worked well for me over time:

-Do your own homework

-focus on actual results rather than perhaps rosy forecasts

-don't forget fees and especially avoid layers of fees (for example a mutual fund that invests in ETF's)

-index funds can be very cost effective

-things are never as bad as they seem nor as good as they seem, which is another way of stating Buffet's be greedy when others are fearful and fearful when others are greedy.

-don't get carried away by any one idea

Here are some sector returns:


                                                                                                                     QTD           YTD

iShares Dow Jones U.S. Aerospace & Defense Index Fund ITA             -1.27%   8.47%
iShares Dow Jones U.S. Basic Materials Sector Index Fund IYM             -1.89%   -0.13%
iShares Dow Jones U.S. Broker-Dealers Index Fund IAI                     -0.36%         17.48%
iShares Dow Jones U.S. Consumer Goods Sector Index Fund IYK       0.56% 14.49%
iShares Dow Jones U.S. Consumer Services Sector Index Fund IYC       0.36% 13.10%
iShares Dow Jones U.S. Energy Sector Index Fund IYE                      -0.42% 10.50%
iShares Dow Jones U.S. Financial Sector Index Fund IYF                        0.13% 12.26%
iShares Dow Jones U.S. Financial Services Index Fund IYG                      -0.30% 11.46%
iShares Dow Jones U.S. Healthcare Providers Index Fund IHF                3.78% 16.31%
iShares Dow Jones U.S. Healthcare Sector Index Fund IYH                        1.62% 17.69%
iShares Dow Jones U.S. Home Construction Index Fund ITB               -1.63% 11.06%
iShares Dow Jones U.S. Industrial Sector Index Fund IYJ                       -0.97% 10.61%
iShares Dow Jones U.S. Insurance Index Fund IAK                                0.37% 15.97%
iShares Dow Jones U.S. Medical Devices Index Fund IHI                        0.37% 13.62%
iShares Dow Jones U.S. Oil & Gas Exploration & Prod Index Fun IEO     -1.50% 13.91%
iShares Dow Jones U.S. Oil Equipment & Services Index Fund IEZ       -1.45% 11.01%
iShares Dow Jones U.S. Pharmaceuticals Index Fund IHE                        0.83% 14.15%
iShares Dow Jones U.S. Regional Banks Index Fund IAT                       -1.03% 10.22%
iShares Dow Jones U.S. Technology Sector Index Fund IYW       -0.64% 3.28%
iShares Dow Jones U.S. Telecommunications Sector Index Fund IYZ        0.37% 1.08%
iShares Dow Jones U.S. Utilities Sector Index Fund IDU                        0.01% 13.42%

Pretty striking underperformance on the tech, telecom and telecom.   Tech was weighted down by AAPL. Excluding AAPL, the rest of the sector was up about 7% which is not significant of a level of underperformance.

I think Basic materials is underperforming because of the lack of global growth prospects, but it also is a bit misleading as the Dow Chemicals, Freeport McMoRan and Newmont mining have hurt returns.

In any case, it can still be helpful to look at sector returns in order to try to puzzle together an overall picture if what is going on in the economy.

My conclusion is that the market was up fairly evenly across the board so this is a rally that has a lot of legs and not dominated by any one story.

I am updating monthly performance.  Good month in absolute terms but not versus my "benchmark" where I suffered to the tune of -0.70%.  Still taking on water from AAPL and RAX and VALE now, but the div payers are doing well.  I also dropped my equity exposure from 30% to about 10% and that cost about 0.15-0.20%.  Some underperformance also from paying option premium, but I suspect that to be fairly small.

My current equity exposure is about 23% or so because the options have taken me up there following the trend.  I have been selling into it and keeping it from getting too high (which has cost me money, but then hedging always does).

Interesting article on money flow and the implications on stock prices:

http://seekingalpha.com/article/1307551-where-s-the-hot-money-drained-from-apple-stock-can-behavioral-analysis-find-it?source=intbrokers_regular

VVR has been one of my favorites.  Floating rate senior loans is their investment arena.  I believe in the story, but I am concerned with the hefty premium to NAV.  In addition it is a leveraged fund so it is riskier by nature.  Over half of the 25% return in the last year has been from the premium expansion.  I will be looking for alternative funds to invest in this space.  BKLN is one that I am invested in as well and it trades at parity with NAV.

EVF is a candidate
VTA is also one.

Their fees are slightly higher but they are trading much closer to NAV (net asset value) so one will have a bit more protection if things go sour.  They both have leverage, but it is around the same as VVR.  The leverage part does not scare me so much as the potential for a change in sentiment that could see premiums go away.