Long-term rates are creeping up slowly – it is difficult to tell whether the increases in 30-year bond yields over the past couple months will be part of a longer-term trend, but I believe this will be the case as people become leery of lending money to the government for the long haul.
I will have more to write about this in my year-end report.
Finally, I have been slowly deploying some cash, specifically in the oil and gas sector. I had identified an opportunity back in September, and set some orders slightly below market but they were not filled. It was frustrating to see that company trade above, and indeed it is about 25-30% above where I had originally wanted to purchase it. C’est la vie.
More recently, there were a couple low-volatility equity opportunities in the oil and gas sector that I believe are trading at the low band of their fair value range. One in particular seemed fairly attractive and appeared to have their “yield premium” excised from them. As readers here know, I have been seeing many companies that have their equity overpriced because of the market paying a significant premium for yield, and it is important when shopping for stocks that you do not pay this premium.
Conversely, it seems that there may be a discount for companies paying zero dividends or low dividends (other than well known issuers such as Apple and Amazon!), so I have been paying attention to the zero-or-low yield equity market. I am just as happy to take money in the form of capital gains rather than dividends.
On the fixed income side, I have not seen anything attractive. The fixed income market has been drier than a summer afternoon in the Las Vegas desert. I could string together a short-duration low-risk portfolio of debentures that will yield a pre-tax yield of approximately 6%, but there would be zero opportunity for capital appreciation. The only other speculative opportunity I saw earlier was in First Uranium notes, but even this has been priced to a market-efficient level given its high risk nature.
It is not the most pleasant of times if you are forced to deploy cash at present. Patience, and the ability to keep your cash for a better time, is the name of the game.