When you’re bearish, the markets are often boring because short strategies are inherently risky. They often involve picking a window of time, such as with puts, or paying interest (÷nds if the stock pay’s them) and having margin accounts and a possibility of early recall if going short. The best thing to do when you expect a downturn is to stay patient and keep more cash on the sidelines. Note that I personally like going short in small amounts from time to time – I’ve been holding November puts in BAC ($15) and FHN ($10) for the last week with a limit sell in case they double – but I’ve only got ~$150 at stake in each one. In general I wouldn’t recommend buying puts as a strategy, but I do like to try different approaches in my own accounts just to get a feel for them. You can often learn more by trying and losing on your own than by reading about it.
Anyway, what I did think was interesting was the 6.6% yield I saw in Verizon (VZ) today. I put in a small order – 25 shares at $28.75 limit – for my Roth IRA. Intel has a 3.1% yield which is somewhat interesting, but I’m going to wait and watch on that for now. I like the income investing theme for these deflationary times, and US stocks with high, but relatively safe yields are often a good bet for a tax-deferred account like an IRA.
If anyone is interested in putting a little more in with a taxable account though, I’d suggest screening for some high-yielding Canadian firms in the utilities or energy sectors. I have no specific recommendations at this time, but the tax treatments won’t change as much as those for US stocks in the short-term and the Canadian Dollar will likely appreciate against the US dollar in the long term.
When buying at a time like this, remember to be patient. This is not a bull market correction that you can jump into and expect to recover, but more likely a leg down following a major bear-market rally. Do not put in too much money at one time, you will want to keep cash ready in case it falls further. If it helps, pick a value such as the March 2009 market low, and tell yourself that you won’t go all in unless those values are reached again. Based off that price you can decide how to space out investment when tiptoeing back into this market. It may also be useful to note as a simple technical indicator that at market bottoms there are usually more bears than bulls, which is currently not the case.
Thank you for the posts – I think that a forum is a great idea, but I’m not ready to figure out how to do it yet. I’ve simply got too much homework due Thursday – and I’ve got to make sure my apartment is clean after my roommate vacates tomorrow (don’t you hate moving?). As for posting – it’s a hobby like reading Rosenberg’s newsletters and the WSJ that I will never really give up or stop – just a quick, small relaxing break. Back to work I guess…