Six Months Out Of Every Year

Six Months Out Of Every Year

Not sure if my readers know the reference but that is the opening song in Damn Yankees, a fun musical. In the song, it is referring to wives losing their husbands to baseball six months every year. But here, on June 30th, it refers to us making it halfway through what has been a pretty uneventful 2014.

As of this writing, I am somehow up a very snappy 15% on the year (would be 18% without the LMNS fiasco). Obviously it does help to have largest holding, GTAT, up 113%. But other things are working as well, for example my MFI portfolio is up 13%.  The R3K is up almost 7%, so I am pretty happy with the performance as we turn the corner.

Index	Stock	Start of Year	Current	YTD Change	Share
1	GTAT	8.72	18.60	113.4%	9.8%
2	GNW	15.53	17.40	12.0%	7.2%
3	TZA	15.29	13.96	-8.7%	5.3%
4	KLIC	13.30	14.26	7.2%	4.8%
5	AOD	8.10	8.92	10.1%	4.8%
6	BBEP	19.45	22.12	13.7%	4.8%
7	RPXC	16.90	17.75	5.0%	3.8%
8	ATVI	17.83	22.30	25.1%	3.4%
9	NTC	11.76	12.64	7.5%	3.2%
10	TPVG	15.15	16.38	8.1%	3.2%
11	CSQ	10.41	12.01	15.4%	3.1%
12	GPS	40.55	41.57	2.5%	3.1%
13	FSC	9.24	9.83	6.4%	3.1%
14	RIOM	2.18	2.31	6.0%	3.0%
15	TGONF	9.66	10.05	4.1%	2.6%
16	AVG	17.21	20.13	17.0%	2.5%
17	TLM	10.66	10.60	-0.6%	2.4%
18	SNDK	69.32	104.43	50.6%	2.2%
19	SYNA	51.81	90.64	74.9%	2.1%
20	AGX	27.56	37.29	35.3%	2.1%
21	BAC-WTA	6.47	6.86	6.0%	2.1%
22	NADL	9.31	10.62	14.1%	2.0%
23	TSL	12.56	12.83	2.1%	1.9%
24	TIME	22.89	24.22	5.8%	1.8%
25	KLAC	60.57	72.64	19.9%	1.8%
26	HIG-WT	27.75	27.22	-1.9%	1.7%
27	GA	11.24	11.84	5.3%	1.6%
28	WNR	38.59	37.55	-2.7%	1.4%
29	CSCO	22.79	24.85	9.1%	1.2%
30	NSR	$25.82	26.02	0.8%	1.1%
31	RCII	28.78	28.68	-0.3%	1.1%
32	CA	29.29	28.74	-1.9%	1.1%
33	CF	233.04	240.53	3.2%	1.1%
34	O	36.25	44.42	22.5%	1.0%
35	FLR	80.29	76.90	-4.2%	1.0%
36	OIBAX	5.97	6.20	3.8%	1.0%
37	EDV	101.70	104.74	3.0%	0.5%
38				15.1%

At an anniversary date like June 30th, it is always a good idea to think a little bit. Take a pulse. Think strategically instead of just tactically. If I were to list my biggest surprise of 2014 thus far, it would have to be the treasury yields. The ten year started the year at 3% and today it is 2.53%. This is despite a steady tapering by the Fed during all of 2014. What does it mean? I am not a rocket scientist on this stuff. A lot of people point to it as proof the economy is weakening. Bonds are typically used in a flight to safety, so obviously rates dropping means a lot more demand which may mean flight to safety.  This is possible.

Another thought of mine is that we need to think more globally.  Canada is 2.24%, Germany 1.25%, Italy 2.74%, Spain 2.67%, Ireland 2.36% and UK is 2.67%.  If you think about that, you start to realize that US rates really cannot go up sharply. Almost everyone would take the US bond over Italy or Spain if we had the higher yield.  So instead of our lowering rates implying a recession here, it could be that we are more attractive than many other country's bonds.

S I guess I remain unconvinced that the US economy is about to crash and burn, though until we start getting some wage growth and job growth I do expect us to keep limping along at 2%.  So then the obvious next question is whether the stock market has gotten ahead of the economy. It certainly "feels" that way. The past three years have been terrific in the stock market and it is not unusual after three straight very good years to expect a settling.

I think that factor alone has me wary about the market, albeit it may be "different this time". Another point that makes me nervous is the tremendous amount of margin currently being used. When some parties have applied a lot of leverage, it will not be fun if they all try to unwind that at about the same time.

So, I guess at the 1/2 way point, I am happy with my performance and I am guardedly optimistic on the future.   Onwards fellow investors!