We said goodbye to a dear old friend a few days ago by swapping out of Plum Creek Timber (PCL) and into American Tower (AMT).
The reason why I owned PCL at all, actually there were several reasons, was because timberland generally has a low correlation to equities and PCL did a reasonable job of capturing that for quite a while in addition to having a good dividend yield. It generally behaved as hoped for on the way down, started out tracking the rally that started in March but has traded in a volatile yet sideways pattern since June.
That isn't necessarily bad in terms of whether to keep it as a long term hold but looking forward I can see some changes in the portfolio. Other than PCL the material sector has been a source of volatility for the portfolio and a good sector to add foreign exposure. With the dollar down so low right here I don't necessarily feel the need to add more foreign exposure in the immediate term, regardless of the sector, right now.
In buying AMT I am adding exposure to an area where I think money has to be spent in the US, increased wireless traffic. And although it is not a terribly volatile stock I expect it to be more so than PCL so if the market rockets higher AMT might go along for the ride a little better than PCL and if the market goes down from here I have the same amount of dry powder.
Not everyone owned PCL but for many of those folks I did buy AMT. I believe it will be an important hold for the next few years.
A while ago I made short buy list of what I expected to buy as time went on and I've generally stuck to it but have made some changes along the way. The timing of these things may turn out to be right or wrong of course, obviously just about any purchase from earlier in the year has generally worked out, but even if the US' recovery is a slow one where are two years from the peak which is a decent amount of time if this isn't the 1930s. I don't think this is the 1930s but if it is I think it would be more like the late 30s so slowly getting more exposure makes some sense.
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7 comments:
A number of different types of infrastructure plays make sense here: I've been looking into some cleantech as well as heavy construction (not buildings).
But don't say that even if this is like the 30's "it would be more like the late 30s" cuz that's bad juju: The period from 1933-37 was a great time to invest - the market and economy crashed again in '37 and stayed down until WWII.
Almost forgot to mention that '37 was the year the government cut back on stimulus and raised rates because they were worried the deficit was growing too large (it nearly doubled from there over the next 7 yrs of course).
The above stated large deficits and weak markets from 1937-45 were worth it. We won. Tyrants lost, except for Stalin and Mao. They won,too.
Another example of government intentions breeding unintended consequences.
Or 'proving' wars only replace one set of tyrants with another or whatever you like but as an empirical economic and business matter 1937-40 was a rather poor investment climate and 1941-45 was not much better unless it was war-related (the recession of '45 cleared out a lot of businesses that couldn't transition to peacetime so it paid to pay attention as always).
FWIW economics and investments tend to be the main topic on investing blogs. JMO
Roger, could I ask if you keep or recommend keeping an investment journal (maybe you're required to)? You mention having several reasons for owning PCL, and I don't know how you can keep everything straight with 50 or so positions. Personally, I've never had the discipline to do so and as I've grown away from setting specific buy/sell targets, I feel a little less need.
Thanks!
i don't keep a trade journal in the way I think you are asking. your comment about keep track of a lot of things I have a routine down that entails spending most of time reading stuff.
my wife figures I spend 75-80 hours a week doing this--really just paying attention--which I love doing but I have no friends or acquaintances who spend as much time on anything as I do with the capital markets.
By 1937, most of the bank problems had passed. We still have insolvent banks. So I think it is wishful thinking that we are past the first few years of the Depression if indeed we are in a parallel 1930s world.
People take the wrong lesson away from 1937. It wasn't the fact that stimulus left the economy that caused it to drop. It was the fact that too much stimulus was there to begin with. It crowded out private capital. Then private capital investment never returned after 1930. Had the government stayed out from the start, private capital would have reappeared shortly after 1930. Just look at 1920-1921. The government stayed out of the economy, and it experienced robust growth after just 18 months of contraction.
The myth that public funding crowds out private capital in a zero interest rate climate where the return for risk can not compete with simply holding on to what you have is surprisingly persistent: Surprising because those who propound this view can only speak in hypotheticals -- in what woulda, coulda been -- or must cherry pick shorter time frames (a la Amity Shlaes) to make a putative case in point. If there were any real-world, longitudinal data supporting the crowding thesis during an economic crisis it might be an interesting discussion but, since there is not, it is not.
The problem is simply this: There is an output gap, a reduction in economic potential; if it is not filled then more and more people become unemployed and, as consumption continues to fall in consequence, a positive feedback loop downward continues unless something intervenes; business will not intervene because it either cannot or will not which leaves only the public sector. Is this really so difficult to grasp or does cognitive resistance come from elsewhere?
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