2014's Trash Could Be 2015's Treasure | Seeking Alpha

2014's Trash Could Be 2015's Treasure | Seeking Alpha



Eric Parnell has written another fantastic article about the stock market.  While the S&P 500 has returned another double-digit gain year, TLT has done even better with a 26% gain.  Investors will run to the safety of long-term government bonds whenever market uncertainty exists.  I have been invested in a 3x long-bond ETF called TMF.  It mirrors what TLT is doing although you will probably not get the 3x returns as advertised.  The TMF gain is still more than TLT.



I hold a core position in TMF, and I also make money by trading in and out of the stock during times of volatility like we had in October and early December.  As Eric mentioned, government bonds will normally be sold in a rising interest rate environment, but that is not what we got this year.  Even while interest rates are supposed to rise in 2015, I think people will still be buying bonds because of fear in the stock market.  I intend to hold TMF, and I will continue to trade part of it during volatile periods.



Secondly, Eric brought up the phenomenal gain of XLU, the utilities ETF.  XLU increased 32% this year on top of a modest 3% dividend.  I am buying XLU Monday morning because I believe the stock will continue to rise.  First, XLU is a defensive stock, and I believe we will still have fear in the market in 2015.  Secondly, the price of oil is expected to stay low throughout the next year, and cheap oil will be good for utilities.  Thirdly, utilities will be making a lot of money during the winter, especially for the companies which are using cheap natural gas.



Thirdly, Eric talked about the tremendous gain of VNQ, Vanguard's REIT ETF.  It gained 32% this year just like XLU, and making more than 30% each year is a stock investor's dream.  VNQ's top ten holdings are mostly business REITs.  This means that VNQ is a lot more stable than other REIT stocks which focus primarily on residential mortgages.  In addition, the economy is doing great, and businesses which comprise VNQ will continue to do well in 2015.  This is another stock that I will also be buying on Monday morning.