Eureka, TX, Cemetery. Memorial Day 2012
I Have Been Out of Town. For most of the month of May, I have not been at home. I had to go to Phoenix to settle my Dad's estate. In case you think this blog looks different than the one you are accustomed to seeing, Blogger changed the format of Blogspot, and I am having to re-learn some of the things I thought I already knew. Anyway, I plan to do better during June and return to my weekly schedule. For this post, I am reverting to my customary habit of writing about financial matters.
Sell in May and Go Away. This is a shopworn cliche that reflects the seasonal tendencies of the stock market. In most years, the summer months beginning with the first of May results in a market down trend. For my own portfolio, I tend to ignore this rule; however, I am not surprised when the market does drop at this time. On March 23, my post was mainly a comment on the energy markets; however, it might be appropriate to call your attention to the fact that, since that date, the Dow has dropped 5% 13080 to a closing price of 12419 today. According to the "experts," this drop is due to more than just seasonal adjustments. It reflects the scary situation in Europe in which several governments are on the verge of bankruptcy due to the huge amounts of debt these governments have built up in order to provide an impressive list of benefits for their citizens. Those of you who think we should do more to establish a society where the government provides those benefits might be well advised to consider what has happened there as governments attempt to institute austerity measures. These are meeting with increasing resistance from citizens who feel betrayed when the government can't afford to provide the promised benefits.
Enough Politics. I also want to call your attention to the fact that I pointed out the huge disparity between the price of a unit of energy provided by natural gas and that provided by petroleum. I predicted that it was absolutely necessary for the price of gas to increase or the price of petroleum to drop. I am surprised that this has happened so quickly. Natural gas increased 25% from $2.00 per million BTU on March 23 to $2.50 today. Crude oil, on the other hand, has decreased 16.7% from that day's $105 per barrel to today's price of $87.5 per barrel. Given an approximate price of gasoline at $3.80 in March, a 16.7% decrease should reflect a current gasoline price of $3.17. This indicates that there is room for a decrease; however, before we get our hopes up, we should remind ourselves that there are seasonal factors that might tend to keep prices higher until the summer driving season is over.
Recommended Investment Strategies. I'm sure my clients aren't surprised to find out that I am standing pat with my investment program of cash flowing investments. Any stock I will either emphasize dividends or covered call options, or a combination of the two. If neither opportunity exists, I will pass. I hope those of you who have followed this blog will give me another chance to re-establish a more regular schedule. Health permitting, I promise to do better in the future.
