Sell W.R. Berkley (WRB)
It’s like some insurance industry version of “Night of the Living Dead.”
Zombies keep eating insurance premium increases.
In this case it’s not hordes of zombies that are the menace, but one great big one, American International Group (AIG). The crippled insurer, saved from collapse by a huge infusion of tax payer cash, is hanging onto market share in the businesses that it hasn’t sold off by cutting rates.
And that has had the effect of delaying—no one knows for how long—the recovery in premiums predicted by healthy, conservative insurers such as W.R. Berkley.
I don’t see a quick solution to the zombie problem—Where is Woody Harrelson when you need him?—so I’m going to sell W.R. Berkley out of Jubak’s Picks with this post. (I know by selling now, before the December 14 record date, I’ll miss the 6 cents a share dividend payable on January 5, but the dividend is so small that I don’t think it is a good reason for holding onto the shares for another two weeks. Your opinion may differ. Your call.)
Sometimes doing an excellent job running your own business isn’t enough.
Nervous? Afraid to stay in but scared to get out? Join the club (and read my three strategies for coping)
Feeling twitchy?
Your portfolio is probably full of stocks trading at 52-week highs. And I’ll bet you’ve thought about selling.
And you would do that–except that the stock market keeps going up (well except for the last couple of days), cash pays close to nothing, and it’s hard to find a stock to buy that’s not already trading at its 52-week high.
I think you’ve got three choices at this point in this stock market.
- Sell despite the signs that this rally is likely to run into the first half of 2010. Your money will be safely in cash but you won’t make squat for six months.
- Hold if you’re fully invested and buy if you have some cash in the knowledge that you’re betting on market momentum and global cash flows to drive this market higher even in the absence of reliable forecasts for the economy and earnings in 2010. You’ll be hoping that you can somehow see the turn coming (or that there won’t be a turn) in time to beat the rest of the world’s investors out the door.
- Hold carefully and buy even more carefully when and only when you can find some fundamental facts that say the 52-week high isn’t a ceiling but a stopping off point on the way to a higher high. After all Ford Motor (F) did climb to a new 52-week high at $8.98 a share from a 52-week low of just $1.01 a share. But the stock did trade above $14 in 2004. In that year the company made $1.59 in earnings per share. Wall Street estimates Ford will earn 43 cents a share in 2010. It’s clear that the stock will has upside from here if earnings come through.
I think there are problems with each of these three strategies. But I do think that if you take a dash of this and mix it with a pinch of that, you can come up with a strategy that limits risk and gives you decent upside exposure. Let me lay out that hybrid strategy for you and suggest a few stocks suited to playing mix and match.
After this rally I’m still waiting for signs that the economy is in a sustained recovery
Cash flows and cheap money are enough to keep the current rally going into 2010, I believe.
Comparisons with really, really weak quarters in the first half of 2009 for global economies in general and for company earning in particular favor a continuation of the upward trend in stock prices in the quarters that end in March and June 2010, I believe.
After that, though, things begin to look decidedly dicey—unless investors can see clear signs that the growth we’ve seen in the last half of 2009 is sustainable and is building momentum.
On that, unfortunately, the jury is still out.
Take recent numbers from the North American steel industry, for example.
My guide to how to worry: Know what to worry about and when if you don’t want to get spooked out of a rally–or get killed in a correction
(Originally posted on October 14 but several readers have asked me to repost.)
What me worry?
On a day when the Dow Jones Industrial Average closes above 10,000 for the first time in a year and when the Standard & Poor’s 500 stock index closes within kissing distance of 1100 at 1092 ?
Of course.
When the market is rallying and everyone is getting kind of giddy, it’s exactly when you should be worrying. You don’t want to head for the exits just because an index has crossed some arbitrary number. That’s silly. But you would like to know what the chances are that something will go wrong.
How bad it might be if something did go wrong.
And when. Don’t forget the “when.” Deciding to sell because you’re worried that something bad is set to happen in 12 months is a guaranteed way to leave a big chunk of change on the table.
So what are my worries and what timetable are they running on?
If Germany can’t kick the stimulus addiction, what hope is there for the U.S.?
We all know that for the long-term health of the global economy and financial system national stimulus packages have to end and governments need to begin paying down the debt that they’ve run up during this crisis.
And we all doubt that governments will do any such thing. We suspect that stimulus and subsidies once extended will never be withdrawn and that instead of discovering thrift national governments will tax or inflate or default their way around this mountain of debt.
Anybody looking for signs that the most cynical projections aren’t the most accurate forecasts has to shudder at the news out of Germany in the last few days.
