Long-Term Positions And Short-Term Trading, Plus The “Three Asian Cash Kings”

Tom Lydon recently started another excellent article of his alluding to the death of the buy/hold strategy. And it leads to a question, especially as we’re all looking at what is probably going to be a plunge for the next several weeks. Is there any stock or ETF we should really be longterm long right now? Should we allocate 20-40-60% of our portfolio to longterm holds and swing trade with the balance?

If the answer is yes, then thoughtful analysis concludes taking longterm positions in the safest, beaten down dividend payers you can screen. For example, I’m holding Penn Virginia Resources Partner (PVR) (coal) Now that a plunge seems likely, I may have bought it $1-$2 too soon, but I bought it for the longterm and so I don’t really care about a smaller unrealized loss. Altria (MO) is the next that comes to mind.

Confirm as best we can a stock is a safe dividend and buy it soon with minimum downside risk. Yes, WAIT at the moment to see if we fall off the cliff first. Do NOT forget that even some great value low P/E safe dividend-paying stocks will have their prices beaten down to hell as the bear continues these few months. Some won’t budge and you’ll feel wise.

Regarding longterm ETF holds, we should look at healthcare, oil/energy. Recently, there’s attention toward the “Three Asian Cash Kings” China, Taiwan, Singapore, plus Brazil’s iShares MSCI Brazil index ETF (EWZ). These ETFs pay a healthy dividend.

I am compelled as a businessman living in China for almost 10 years to remind everyone of the amazing China FXI (FXI)/Taiwan EWT (EWT)/Singapore EWS (EWS) reality. Yes these three China/Asia markets are not decoupled from a further plunge which could easily happen, BUT these countries are CASH RICH to a degree that westerners truly do not comprehend. There is so much cash here, even in the hands of the lower middle class. They (approximately 100-300,000,000 Chinese, depending on who you ask) go about their business while all around them economics are melting down. Why would a person be that concerned if you also typically had well over $100,000 USD in the bank, owned two or more apartments mortgage free, and could comfortably live on a budget of less than $1000/month which includes eating out very often? Living 9 years ago in Chengdu, China, I had a close friend aged 25, who was the assistant principal of a local school on a salary of USD $250/month. Yet he had $10,000 in his account playing the stock market! Its a different world and mentality.

So position your longterm holds carefully and relax. Then, with precision and discipline, trade indexes, oil, gold/silver with the 2X/3X long and short ETFs such as FAS/FAZ, BGU/BGZ, EDC/EDZ, XLF/SKF, DGP/DZZ, DXO/DTO to swing trade or hedge your longterm holdings.

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