Time to visit Rome, Paris or Barcelona and save a bundle.

Monumento Nazionale – Rome

You’ve seen in my past posts how strong the US dollar has become. One major benefit is that that Europe, especially Eurozone countries are on sale. Many times we have been jealous of Asian visitors to the US because the dollar was dirt cheap, now it’s our turn. As of today, the dollar is over 30% stronger than Euro in just the last 12 months.

Here are some facts:

1. The dollar will continue to be strong as the Fed raise interest rates
2. The dollar will benefit from the huge glut of oil especially in the US.
3. The Euro will weaken even more as they just start their quantitative easing.
4. The European economy is still weak and even without foreign visitors prices will be down.
5. European hotels are now priced a little less than American equivalent hotels, this is a major reduction.

The world just loves to see us flash those US dollars around.

We hear the stories now and then that some people, outside the US, propose that we change the world currency from the US dollar to say the Swiss Franc, the Euro or even the Chinese Yuan. This talk usually starts after moves by our Federal Reserve to increase or decrease liquidity. The discussion is really foolish. 

The US dollar leads the world for global payments, with a 45% share in 2015, compared to the Euro at 28% and the Chinese Yuan at just 2.2%. However, the use of the Yuan in global payment currency did almost double in the last year. That is a huge increase, however still a tiny factor. 

Our strong dollar has weakened the Yuan from 6.05 Yuan to the dollar in the last year to 6.26 currently. A strong dollar lowers the price of oil since oil is priced in US dollars worldwide. A Federal rate hike in 2015 will further strengthen the dollar. Some of this will come from foreign investors who are currently getting .05% on their foreign bonds vs. our 2-3% yield on our 10 & 30 year bonds. 

A strong dollar has both plus and minuses. In general, modestly rising interest rates, low inflation and a strong dollar have historically been very good for the overall stock market.  Besides its also very nice when you travel to Europe and you get a 25% “discount”.

If you are looking for a way to invest in the strong US dollar, check out this article I wrote in December 2014. The UUP has risen 10% alone since I wrote that story.

King dollar is here to stay.

I am a firm believer that for many people the best investment they can make in the stock market is to just buy a few low expense Index’s and let their money ride until they retire. This same advice is supported by Warren Buffet, Jack Bogle and many others.

But, for those of us that want to spend some time, do our research and try to beat the market there is another option that still offers stability and control. I call it building baskets of stocks. The problem I have with relying on an index is that you get you get the great with the terrible. Large index’s don’t have a choice, they needs a wide spread of stocks and feel comfortable holding poor performers because they primarily don’t want to take the capital losses.

I’ll give you an example of my Industrial Stocks “basket” as compared to the well known Select Sector SPDR ETF Industrials (XLI).

Here are the holdings of the XLI at the end of January:

1. General Electric GE 9.26%
2. *Union Pacific UNP 5.92%
3. *3M MMM 5.56
4. *United Technology UTX5.27
5. Boeing BA 5.25
6. * Honeywell HON 4.21
7. UPS 3.66
8. Danaher DHR 2.95
9. * Lockheed Martin LMT 2.79
10. Caterpillar 2.69

The stocks shown with a “*” are also in my Industrial Basket, along with General Dynamics, FedEx and United Rental (URI). I usually classify FedEx in my “transportation basket” of stocks.

Now let’s compare:

1. General Dynamics is up 32% in last 12 months, Danaher has barely kept pace with the S&P at 14%
2. UPS had a huge earnings miss again in the 4^th quarter, just like the 4^th quarter of 2013, whereas FedEx was up 32%.
3. General Electric was up a disappointing 1% in the last 12 months and Caterpillar was down 13%.

If you want to take the time and do a little homework you can build your own “baskets” of winners, instead of going with the index “average” performance stocks.

In future posts I’ll give you some of my other “basket” choices that also outperform the market on a consistent basis.

Not to be too picky, but the actual high was 5049. To refresh your memory, when the NASDAQ hit its high it held it for just 31hours before it dropped 80% over the next 2 ½ years. Will the same thing happen again in 2015?

I don’t think so for a number of reasons. This is why things are different, even though both the Dow and S&P are at all time high’s.  First of all, in 2000 the NASDAQ traded at 100 times earnings (P/E) multiple, today it trades at about 21, only slightly higher than the S&P 500 18 x earnings. Secondly, Apple accounts for almost twice the market weight of the next biggest stock. Apple is probably one of the most financially sound companies in the world. By the way, Apple only trades at a 14 P/E, far less than the overall market. Of the 240 point rise in the S&P this year, Apple accounts for about 130 weighted points of the increase. A good reason that the number 1 stock in all equity hedge funds and equity index’s is Apple (APPL).

You might be interested in the difference between the top company’s then and now, just check out the “bubble” P/E’s of 2000.

Things look a little different, however Amazon sure looks like a 2000 bubble stock!

I was recently asked to publish my current portfolio allocations; I’ll share them with you with the caveat that everyone’s situation is different.

My current investment goals include:

1. Provide security while taking advantage of market growth.
2. Consistently outperform the market (SPY) in “total returns “on both a quarterly and annual basis.
3. Pick best of breed performing stocks and ride the winners.
4. Exit positions when the economic cycle changes or an individual stock story changes
5. Rebalance the overall portfolio as necessary.
6. Maintain a tax-friendly environment; pay the least amount of fees as possible.
7. Maintain a small exposure to bonds, but include “bond-like” equity’s such as REIT’s and higher yielding S&P stocks.
8. Reinvest all dividends and maintain 5-7% cash for buying opportunities.
9. Always has a “buy” list and quarterly update a “sell” list.

Below is a series of charts showing my portfolio including a few Morningstar analysis of my portfolio. In future articles I’ll further discuss my strategy and some best of breed choices.

Investors either in retirement or planning on retiring in a few years are always looking for ways to insure they have a secure and steady source of income.

Here are some facts for your review:

1. The use of bonds for fixed income has been a favorite option for many years. However, bond yields since the 2009 financial crisis have fallen so far they may no longer be a viable option.
2. Investors may need to generate 6-8% a year in total returns to make sure they won’t out-live their money. Bonds yielding 2-3% just won’t do that for you, especially given the guarantee that bond prices will fall as future rates start rising.
3. Here are 5 blue-chip stocks that you will recognize, they have not only paid dividends for over 35 years, but have also increased their dividends each year for over 35 years.
   1. Procter & Gamble (NYSE:PG) currently pays a 2.99% dividend and has increased its dividend each year for the last 58 years.
   2. Altria Group (NYSE:MO) currently pays a 3.80% dividend and has increased its dividend each year for the last 44 years.
   3. SYSCO Corporation (NYSE:SYY) the largest food distributor in the US currently pays a 3.03% dividend and has increased its dividend each year for the last 43 years.
   4. PepsiCo (NYSE:PEP) currently pays a 2.83% dividend and has increased its dividend each year for the last 42 years.
   5. Clorox (NYSE:CLX) currently pays a 2.72% dividend and has increased its dividend each year for the last 37 years.
4. Each of these blue-chip stocks have a high probability of increasing their dividends each year during the years of your retirement.
5. The nice thing about owning these blue-chip stocks, not only do they pay consistently increased dividends, they may also have capital gains over the years.

Disclosure: I am long PG, MO,PEP and plan on adding CLX in the near future.