Market Monitor

The dog days of summer are definitely starting to set in despite the cooler than usual temperatures in the East this week.

Yesterday there was big news in big tobacco industry as Reynolds American, Inc. (NYSE – RAI) struck a deal to buy Lorillard Inc. (NYSE - LO) for about $25 billion, excluding debt, that will make the new merger a powerhouse Company controlling about 90% of the market.

We will not proclaim to be soccer (futbol) experts, but as our regular readers know we love to comment on sports in general. Germany’s 7-1 trouncing of the home team Brazil in the World Cup was unparalleled in the event’s history given the fact that these are two of the superpowers of the sport. Every foreign national we know says the closest thing we have to the hardcore fandom of soccer fans is big time program, or blue blood, college football here in the states. The closest comparison we could draw to this game along those lines is Florida’s trouncing of Ohio State in the national title in 2007, 41-14. How does this humiliation affect the Brazilian psyche? The nation has the Olympics in 2016 so there is not much time to sulk. The message is life goes on and Brazil is still a hot bed for potential growth.

Several weeks back we mentioned the ‘sin’ plays, with defense being one sector to get some gains out of this summer.

On July 3, 2014, USA Today’s website ran the following screaming headline on its front page, “Dow power! Stock gauge tops 17,000 for 1st time.” 

To me, that was the final straw in a market that has been overbought.  I looked for a suitable way to go short the market and found something that was down the most that day.  Whatever goes down the most on good news is bound to come up the most when the euphoria fades and investors experience “Buyer’s Remorse.”

Alright, we realize that Team USA soccer lost to the fighting waffles the other day in the World Cup, but Independence Day is tomorrow and we say let the patriotism keep flowing through the weekend.

In Monday’s Guide we pointed out the vast underweighting of small cap tech in the Russell Microcap Index.

A Core/Satellite Portfolio (see previous article, “The Best of Both Worlds”) is an alternative investment strategy for investors in today’s volatile market.  To build an effective core/satellite portfolio, start with biggest part of the portfolio, the Core. Then, add Satellites to enhance performance and fill gaps left by the Core holding.  This blog will focus on selecting a Core investment using this strategy.

Earlier this week we commented on ETF and features of the core and satellite portfolios in the Market Monitor.

Oil and gas are not going anywhere. In Monday’s Guide we featured and highlighted some prior picks as well as reiterated our strong opinion that this sector is still a great place to find winners, despite the selloff yesterday.