With Big Falls the Baby Gets Tossed with the Bath Water

Maybe it isn’t time for a ‘breather’ yet–but the day is young and markets could reverse in an instant.

We note that when there are big falls in the overall stock markets a point is reached after a number of days of selling where even solid companies with great fundamentals begin to get tossed out of portfolios.  Obviously there are some folks that say ‘get me out’–and they mean out of everything.

We note this today as preferred and debt issues (as a group) have been knocked a bit lower today, while they had held up in the last week in the face of common stock selling.  This is occurring while interest rates continue to fall.

When everything falls there simply is no way to maintain gains (unless you are ‘short’).  We have our 2015 Blended Income Portfolio ‘hedged’ with Proshares Ultrashort SP500, but the hedge has been overwhelmed.  The hedge is up $2600 this week (about 1/2% portfolio gain) while the portfolio holdings are off about 1.5%. Needless to say, while the portfolio is outperforming most benchmarks, it has been hurt.  Once again we knew this would be a very tough year.

As always the conservative 2014/2015 Short/Medium Income Portfolio performs perfectly–up 6.13% for the 10 months since inception (this includes all dividends and interest through 8/31).