Risk Is To Upside For US Stocks

For second calendar quarter 2017, income portfolio was remade during February replacing staid consumer goods, due only to valuations, with classic growth for expected outsized capital gains (antithetical as it is). No changes for economic outlook or savings allocations (NOTE 1).

Macroeconomic backdrop remains 3+ billion east hemisphere dwellers (among others) chasing consumer conveniences into rising interest rates, worldwide, contemporaneously. Sell bonds, buy stocks and sell hard assets, buy consumables (NOTE 2).

On December 26, 2015, you were herein forewarned on “approaching bear trap” and suggested sale of any allocation to “hard assets, in general.” This is that time. Watch my faves (cool assets) too expensive to buy and on wrong side of macroeconomic backdrop for some years to come (Bunge – BG, Canadian Pacific Railway – CP, Equity Residential – EQR, and Union Pacific – UNP). These should, and will again, yield twice current levels or twice relative to treasuries and for its existing assets remaining equal in time (NOTE 3).

Good income stocks for ensuing macroeconomic backdrop too expensive to buy (hold if your basis discounts current prices by 25 – 40%):

The Hershey Co., WW Grainger, Johnson & Johnson, Colgate – Palmolive, The Kraft Heinz Co., Lockheed Martin, and Boeing Co.

2nd Qtr. 2017 income portfolio:

Celgene Corporation

Cisco Systems

Intel Corporation

International Business Machines

NVDIA Corporation

Skyworks Solutions

United Technologies

V.F. Corporation

Portfolio yield 2.1%, retained earnings 4.2% and return from operations excluding share price movement(s) of 6.3%.

 

Note 1 – Equity average’s index funds previously blessed as alternative to concentrated portfolio, are taking on ETF and mutual fund risk characteristics due to their popularity. Future marketplace dislocations will be exacerbated by herd stampede.

Note 2 – Reminder(s): This portfolio is for income and only for savings which can be committed for at least 5 years. Income taken should be limited to dividends (yield) to maintain future purchasing power and/or an obligation to posterity.

Note 3 – Best reads for understanding purchasing power maintenance by savings allocations into a rising interest rate age is “Investing In Purchasing Power,” Ken Van Strum, 1925, and the complete collection of annual letters to shareholders of Berkshire Hathaway.

 

 

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