All was quite on the European front which was likely one reason for the large gains. Rumors started swelling late in the week about a potential Spain bailout which the markets appeared to like.
Frankly we were so oversold that a bounce was likely expected and traders did not disappoint. What we found to be interesting is that by the end of the week people were talking about if you should be selling into the rally? [see Art Cashin: Suckers Rally?]
As we mentioned in our weekly commentary last week it really depends upon your frame of view and weather you are in this market for the long-term or short-term.
With the rest of the world in upheaval the US seems to be the best house in a bad neighborhood. US multi-national companies are keeping the earnings growth going through productivity improvements and keeping labor costs in check. Although this week's productivity & cost report show productivity slowing with the economy but also labor costs coming down as well. With commodity prices heading lower due to suspected slow downs in both China & recession in Europe, that will only help aid in the profit machines.
We have talked about being in Agriculture, Dividend Payers, and Selected Technology names at great length here at DWCM over the course of 2012. If you look at our current holdings in the DWCM fund you will in essence see a sea of red especially come from our technology positions. Ag names have been a mix while our dividend paying positions have done the best.
We are not giving up on our tech positions just yet. However we have not been adding new capital to them either. We are taking a wait and see approach as everything moves in macro steps rather than on company specifics.
This was a week where we purposely planned to not be active in the markets because we just didn't know what direction we would go in. Rather than take on additional risk, we chose to protect our cash position of 45.4%.
Looking at our option positions, once again you will see allot of red mostly led by two names Google and Apple. However don't forget that much of the gains in the DWCM Fund this year were driven by our option positions in Apple $AAPL, Disney $DIS, and Chipotle $CMG.
Reviewing the past view months we wish we would have sold more of our profitable positions before the summer swoon. There were a handful of positions that we were carrying large positive gains on only to have them wiped out. This is the fine line with looking at short-term swings vs. long-term strategies.
There are always lessons to be learned in the markets. We will certainly use this one going forward.
The Week Ahead
I didn't mention this last week, but last Saturday was my CFA Level II exam. I won't get the results back until the end of July but I am glad to have some additional time back to focus on DWCM and my family. The CFA experience has been a grueling process and I will have to make a determination as to weather I continue or not. Bonus to readers, posts should return on a consistent and high level basis.
All eyes are on Spain over the weekend. If we receive news that a bailout is eminent which only means a short-term crisis is adverted we could be off to the races on Monday. We see no end in sight and certainly no long-term solution for the European crisis. And with that hanging over us our markets will continue to try and muddle through as the US deals with it's own economic and political opportunities.
The upcoming week contains a decent amount of economic reporting activity. There are quite a few sentiment surveys out which could lead the markets in one way or another. The initial jobless claims report will be a bit interesting this week as the four week average has been up the last two weeks.
- Mon - N/A
- Tue - NFIB Small Business Optimism Index, Import and Export Prices
- Wed - Producer Price Index, Retail Sales, Business Inventories
- Thu - Consumer Price Index, Jobless Claims
- Fri - Empire State Mfg Survey, Industrial Production, Consumer Sentiment
DreamWorks Capital Management Update
REGISTER NOW for the quarterly seminar "401k & 403b Rollovers, You have Options" on Monday June 18th at The Community House located in Birmingham, MI. The event is free and you can register by calling TCH at 248-644-5832 or you can email me directly at pfenner@dwcmllc.com. We hope that you will consider this great event and learn more about the services we offer here at DWCM.
REGISTER NOW for the quarterly seminar "401k & 403b Rollovers, You have Options" on Monday June 18th at The Community House located in Birmingham, MI. The event is free and you can register by calling TCH at 248-644-5832 or you can email me directly at pfenner@dwcmllc.com. We hope that you will consider this great event and learn more about the services we offer here at DWCM.
Have a Great Week!
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