December Idea(s) of the Month

My favorite big bargain, and a bulwark against volatility.

By Travis Johnson, Stock Gumshoe, December 14, 2012

For those who are curious about what I’m doing with my personal portfolio, I should note that I’ve let the cash balance build up a little bit (mostly through savings, not sales), and that I’ve had a couple transactions this week — I sold Teva (TEVA) as their strategy has morphed away from what I would prefer, and I bought more Greenlight Re (GLRE) as I think the fundamental drivers behind that “idea of the month” for November have strengthened and the shares have fallen a bit more. I also shared a quick note earlier in the week because Sprott Resource Corp (SCP.TO SCPZF), which is both a personal holding and an old idea of the month suggestion, had a pretty dramatic announcement that they’re moving to become a a (very high) monthly dividend payer. So … what shall we consider this month?

The markets have had a good year overall this year, and have now recovered from that post-election swoon … but investors are clearly very worried about the “fiscal cliff” and the broader economic consequences of the heavy debt burden of the US government and its citizens, and particularly concerned about whether or not the “fix” for that cliff and whatever bargains are made between politicians over the coming weeks (and years) will bring the Euro-style austerity that has caused rioting in the streets as well as severe unemployment problems and protracted recessions.

They’re also, and most of you are in this boat as well if the analytical folks who study website traffic are correct, close to retirement (most people who read investment newsletters, and who visit this site, probably, are between 50-70 years old) and anxious about the preservation of capital after several market crashes during their “saving years.” Why else would so many investors be desperately pouring money into bond funds, helping to create what is either going to be a Japanese situation (ten years of 0% interest rates, no growth, and stiff upper lips) or the biggest bubble burst in memory (or, of course, something in between — sometimes a balloon can take days to deflate, after all, even if the air rushes out quickly enough that you can hear that persistent whine).

So I can’t stomach bonds of most sorts right now, I’m sure there are some opportunities in fixed income investments on the corporate side, but even junk bonds are pretty ...

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