A Look Into The Belly Of The Bear

Irrational Pessimism

Before moving on to a more complete discussion of ‘the belly of the bear’, I thought a real-time view of ‘irrational pessimism’ might be in order. I have one and it is a doozy. Now a ‘doozy’, loosely defined, is “something unique.” Unfortunately, or fortunately for those left with money to buy, there are many doozy values out there in the market these days.

My doozy of the day is Energy Transfer Partners (ET-$12.24, NYSE). ET closed last Friday, December 14, at $14.57. It was recommended in last week’s edition of Barron’s Magazine as one its top 10 best investment ideas for 2019. Last week the stock dropped $2.33 on absolutely no news. It currently yields a hair under 10%. Just on a yield basis the stock, when it was recommended last week, was very attractive at an 8% yield versus 2.78% on the 10-yr. Treasury. Why would you sell this stock with a 10% yield and improving fundamentals versus 2.78% on the 10-yr. Treasury when the 10% yield has a possibility of growing over time? Look’s like irrational pessimism to me. Meanwhile, there are situations like this showing up in many other sectors of the market BTW, that 10-year yield was in place when the Fed moved the rate on Fed funds up to 2.5%. Also, I might point out the yield on the 10-year has dropped almost 1/2 of one percent since the Fed’s last quarter-point bump in the funds rate (September 27, 2018). How does this square with all the pundits screaming that the Fed’s aggressive moves would cause a spike in rates that would kill the economy?

A look into the belly of the bear

If you are looking for perspective on the market, a discernment between what is real and what is imagined, I highly recommend  the work of Fear and Greed Trader and this week’s post, “The Oracles Have Spoken, Can Anything Save The Bulls?”

He makes the following point in his current article:

1 2 3
View single page >> |

Disclaimer: The information presented in kortsessions.com represents my own opinions and does not contain ...

more
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.
Boaz Berkowitz 10 months ago Contributor's comment

Thanks Bill!

Bill Kort 10 months ago Author's comment

Thanks Boaz. I’m all set now, getting both notifications of new followers and comments. I appreciate your help.

Alpha Stockman 10 months ago Member's comment

Do you blame #Trump for the political instability? And do you think anything will change while he is president?

Bill Kort 10 months ago Author's comment

Alpha S., Thank you for your readership and your question. I try to keep kortsessions apolital because using political leanings and convictions to set an investment course is usually a bad idea. For example there were a lot of people after the 2008 election of Barack Obama who were basically saying that he had no clue as to how to address the economy and that we were heading for disaster. This was especially the chant on the right. Of course, they were wrong. The S &P 500 triple during the Obama administration. Likewise there were those who felt the Trump administration would be a disaster ( including yours truly). Fortunately, he did not take me too long to figure out the tax cuts and on bridled free-market economics where the focus of the market, i.e. Profits. The market was not focused on the presidents bona fides and character. It was all about making money.

On a short-term basis however the market does care about certain things the president says and does especially as it involves trade and the federal reserve. Ergo, these comments become fodder for this blog.

As to your question, my answer is may be no. My sense is that the current shut down is really putting the Republican Party in a very bad place. There is an answer to their problems, should they choose to take it, and that is to override the president’s Veto of the continuing resolution. In the meantime, as long as the Senate will not confront the president, it’s business as usual. Also, a lot of that which emanates from the White House pure bluster. The market’sReaction to the current shut down would seem to indicate that it is no longer paying attention.

Of course, the outcome of the Mueller investigation is a wildcard. We live in interesting times.

bk

Zev Bannett 10 months ago Member's comment

Great article. Looking forward to checking out Energy Transfer Partners.

Bill Kort 10 months ago Author's comment

Thanks Zev. I appreciate your readership. A more interesting idea, if you’re looking for diversification and income would be A closed and fund, the Tortiose Midstream Enrgy Fund (NTG). This is a diversified portfolio of master limited partnerships. Their largest holding is energy transfer and they are diversified. You don’t have to worry about a K-1 with this fund and it is yielding over 12%. This is an industry that has been through the ringer and rightfully so.But, it’s come out the other side with much better fundamentals and a retail shareholder base but totally abandoned it Christmas Eve 2018.

Thanks for checking in.

bk