InvestMacro Forex News

USDJPY has made three waves of a pull-back from latest high that could be near completion as price tested and already reversed from very important 61.8% Fibonacci support level. We expect to see a move higher from here, ideally in impulsive fashion back to 98.64.
USDJPY 1h Chart-Elliott Wave Analysis

The reason for a bullish outlook is previous five wave rally in wave A) which is called an impulsive move.  Impulses show direction of a trend or temporary change in trend, that’s why we think that current trend is bullish, and that three wave retracement from 98.65 is temporary. Invalidation level remains at 95.75.
On the basic chart below you can see where USDJPY is at the moment.

Written by www.ew-forecast.com | Try ew-forecast.com’s services free for 7 days

Article by Investazor.com

If you are interested in forex scalping and you are a beginner, read our Forex Scalping – Complete Beginner to Advanced Strategy Guide to understand the concept. If you past the first steps it’s time to Choose The Right Broker For Scalping and also the best Currency Pair for your simple forex scalping system.

The strategy presented in this post it is one of the simplest and it can be used on currency pairs with medium volatility and low spreads like: EURUSD, GBPUSD and USDJPY. The recommended time frame is 5 minutes. The systems is a combination of candlestick patterns, which offers reversal signals, and the Relative Strength Index (RSI), which announces market exhaustion in overbought and oversold signals.

The candlestick pattern preferred for this scalping strategy is the Shooting Star. It announces a reversal of the power from the bulls to the bears. This pattern should be searched only on the highs of a trend, it is a bearish signal and it doesn’t matter the color of the candle.

The RSI used it is recommended to have 14 periods. If the number of periods is too small it will give many but of low quality signals, while if the number of periods will be higher the quality of the signal could improve, but the number will drastically drop.

Let’s get to the practical part of the trading. There are 2 scenarios that you could look for:

Look for a Shooting Star, drawn after a strong move, and for the RSI to get into the overbought area. If you get both signal from the RSI and confirmation from the candle stick pattern, open a sell order on the opening of the next candle after the formation, set a stop loss order above the Shooting Star’s upper shadow and a Take profit at 50% of the previous rally.

You can see an example in the image down below.

Again look for the same pattern, drawn after an ascending move, and for the RSI to draw a divergence. These signals do not appear that often on the 5 minutes chart, but the time frame can be reduced to 1 minute. The signals given by the divergences are usually stronger than the ones given by the overbought. Place the Sell Order at the opening of the next candle, set a Stop Loss above the Shooting Star’s upper shadow and the take profit at 50% of the previous move.

You can find an example down below.

Let’s make a short recap of this simple forex scalping strategy :

This system is pretty basic – It is a bearish system but the signals can be adjusted to work as a bullish one too. It works best on currency pairs like EURUSD, GBPUSD and USDJPY and the time frame recommended is a 5 minutes one.

A trader should look for the formation after a strong up move confirmed by an overbought RSI or a divergence on the oscillator. Set a sell order on the opening of the next candlestick; place a Stop Loss above the Shooting Star’s upper shadow and a Take Profit at the 50% of the previous move.

Previous << What Are The Most Profitable Currencies for Scalping <<

The post Simple Forex Scalping Strategy For EURUSD and GBPUSD appeared first on investazor.com.

By HY Markets Forex Blog

The Oil market continues to trade highly volatile on Wednesday, as the WTI crude was seen trading lower for the second day in a row, while Brent dropped for third day. Investors are keeping focused on the FOMC minutes from the latest meeting to get possible hints on the Central Bank’s next step towards the scaling back of its stimulus program.

The North American crude edged 0.49% lower at $104.6 a barrel on New York’s NYMEX.

Brent Crude retreated for a third session and remained below the $110-level, falling 0.61% lower to $109.46 a barrel after its one week low ended Tuesday.

Oil Market – US Stockpiles

Despite the downbeat signals such as the shrinking of the US oil inventories and the tension in the Middle East, investors remain focused on the Fed minutes.

The world’s largest oil consumer US reported a further drop in stockpiles data on Tuesday, while the American Petroleum Institute (API) posted data that showed shrinking fuel inventories. The Gasoline stockpiles declined 3.7 million barrels and distillate inventories declined 1.8 million barrels in the week ended August 16.

Another report is expected to be released today by the Energy Information Administration and it’s expected to show that the US crude inventories shrank by 1.25 million barrels to 359.2 million last week, the lowest since September.

Analysts is expecting to see a fall in US gasoline inventories by 1.25 barrels in the week ended August 16 and Distillate inventories probably increased by 750,000 barrels, while refinery operating rates is expected to show a drop by 0.55 of a percentage point .

The commodity market has been driven by the US stimulus tapering recently as investors are concerned that tapering of the stimulus program would affect the market and lead to a huge slid in commodity prices. The Federal Reserve’s (Fed) quantitative easing (QE) program has been adding $85 billion monthly into the economy which have been helping the commodity and oil market.

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The post Oil Market In Red On Fed Fears appeared first on | HY Markets Official blog.

Article provided by HY Markets Forex Blog

By HY Markets Forex Blog

The European markets are expected to start off mixed on Wednesday ahead of the Federal Reserve’s (Fed) minutes from the most recent meeting, which is expected to be released later today. Investors are keeping focused on the minutes from the meeting to get hints about the timing of the scaling back of its asset-purchasing program.

Futures of the pan-European Euro Stoxx 50 rose 0.09% higher at 2,7901.50 just before the market opened, while the German DAX declined 0.02% to 8,296.30 at the same time. Futures for the French CAC 40 gained 0.17% to 4,039.30, while the UK FTSE 100 futures advanced 0.07% higher to 6,437.80.

European Markets – Fed Minutes

The minutes from the Federal Open Market Committee are expected to be released later today, with possible hints as to when the central bank would begin to taper its $85 billion monthly asset-purchasing program.

Earlier this year, the central bank stated that it would begin to scale back on its asset-purchasing program if the world largest economy continues to show further improvement.

A series of economic data were recently released and showed that the US economy have improved, which also points towards a possibility that the Fed may start  tapering its asset-purchasing program as early as September.

According to the economic data released, the US economy grew by 1.7% in the second quarter while the unemployment rate dropped to 7.4%, the lowest since 2008.

However, the labour market is yet to show an improvement as the prices have been dropping below the central bank’s 2% target.

The Central bank policymakers are expected to decide to start scaling back on the asset-purchasing program down to $65 billion monthly, with further cuts to follow.

The world’s third largest brewer Heinken reported a positive result with operating profit rising from 5% to €1.45 billion, beating analysts forecast of €1.42 billion. While Danish brewer Carlsberg showed a major decline in its second-quarter profit due to the slow growth in the economy and consumer sentiment, its gains came down to 3.44 billion Danish kroner.

To find out more on our product offerings and how you can start trading in the European Market, visit www.hymarkets.com and start trading today with only $50 !

The post European Market To Start Mixed Ahead Of Fed Minutes appeared first on | HY Markets Official blog.

Article provided by HY Markets Forex Blog

By WallStreetDaily.com

“We’ve been tracking this data since the financial crisis, waiting for this moment,” says Nicholas Colas, Chief Market Strategist at ConvergEx.

What “moment” could possibly be so important that it requires a constant vigil?

In short, it’s the precise instant when the rising tide that’s supposed to lift all boats during a bull market, well… doesn’t lift all boats anymore.

It’s something that I’ve been tracking closely myself.

And it’s finally materialized!

Want immediate proof? Look no further than the year-to-date performance for the top 25 companies in the S&P 500 Index. It’s all over the map.

Apple (AAPL) is down 3%. Exxon Mobil (XOM) is up 3%. Hewlett-Packard (HPQ) is up 84%. Coca-Cola (COKE) is flirting with double-digit appreciation – now up 8%. Meanwhile, General Electric (GE) shareholders have been rewarded with a 14.5% gain.

We shouldn’t bemoan this development, though. Instead, we should celebrate it. Here’s why…

Index Huggers Beware

Ever since the financial crisis hit, all stripes of stocks – large cap, small cap, international and emerging markets, you name it – have been moving in near lockstep with one another.

Heck, until a few days ago, you’d think Apple and Exxon were the same company, based on how similar their charts looked.

Most asset classes have been moving in sync, as well.

This market dynamic became so widespread that we developed a catchy phrase to describe it, too: The market has either been in “risk on” or “risk off” mode.

During “risk on” mode, investors sell bonds and pile into stocks, commodities and emerging markets. During “risk off” mode, they do the opposite. They bail on all investments in favor of the safety of bonds, particularly U.S. Treasuries.

More technically speaking, we’ve been witnessing a period of strong correlations between investments – really strong correlations.

As Stacey Williams, Head of Foreign Exchange Quantitative Strategy at HSBC, puts it, “When the crisis hit, correlations went to the moon and stayed there.”

But in recent weeks, something major changed. Correlations completely collapsed. And the evidence is everywhere…

Research from Citigroup (C) shows that rolling one-month correlations between the moves of the top 50 stocks in the S&P 500 plummeted from 66% to 12% at the end of June.

Deutsche Bank (DB) says that price swings for individual large-cap stocks in the Russell 1000 Index now sport a correlation of just 30% with the overall Index. That’s down from nearly 60% only one year ago.

Data from ConvergEx indicates that high-yield bond correlations with U.S. stocks fell to just 16% – down from a high of 67% over the most recent three-month period. And emerging markets and international stock correlations fell to 58% and 76%, respectively, from a recent high of 80%.

And Bespoke Investment Group reveals that the “all or nothing days” – when at least 400 out of the 500 stocks in the S&P 500 are up or down in price – pulled a Houdini. They’ve all but disappeared. There have only been 13 this year, based on Bespoke’s last count. That’s down from 70 in 2011.

So what does all this mean?

Essentially, all the index-huggers – who plowed more than $2 trillion into exchange-traded funds that passively invest in various indices – are about to get their clocks cleaned.

Why? Because we’re officially entering into a stock picker’s market, whereby individual fundamentals (not the direction of the broader tide) will determine future prices.

Or, as Colas recently told CNBC, we’re transitioning from a market that rises in unison based on Fed liquidity, to one in which investors are going to start picking “winners and losers on fundamentals.”

The smart money has already figured this out, too.

Case in point: Credit Suisse’s (CS) latest survey of hedge fund investor sentiment revealed that one of the most unpopular stock-picking strategies 18 months ago is now one of the most popular. And 60% of respondents plan to allocate fresh capital to long/short hedge funds in the second half of the year.

Bottom line: The risk on/risk off trade is officially, well… off!

So what’s on, exactly? Stock picking!

And that means profiting from the bull market just got a bit more complicated for the average investor. Simply buying passively managed index funds won’t cut it anymore. Not if racking up maximum profits is the goal.

Instead, investors need to take the time to uncover investments with the strongest fundamentals that are trading at compelling valuations, as they’re about to really shine.

The good news is, you don’t need to look far to find such opportunities. Our WSD Insider portfolios are chock-full of them. In fact, we’ve discovered a strategy that can turn a $50 investment in this market into $3,168… In two days! Go here for all the details.

Ahead of the tape,

Louis Basenese

The post Newsflash: The Risk On/Risk Off Trade Just Died appeared first on  | Wall Street Daily.

Article By WallStreetDaily.com

Original Article: Newsflash: The Risk On/Risk Off Trade Just Died

By www.CentralBankNews.info     Thailand’s central bank held its policy rate steady at 2.50 percent, as expected, saying domestic demand and exports should gradually recover with the current accommodative policy stance supporting economic growth.
    The Bank of Thailand (BOT), which cut its rate by 25 basis points in May amid growing economic risks and a rise in the baht currency, said its Monetary Policy Committee had voted by 6 to 1 to retain the policy rate while one member had voted to lower the rate by 25 points to boost growth.
    The BOT said the Thai economy had “continued to soften in the second quarter, broadly in line with the committee’s previous assessment,” as private consumption slowed due to waning stimulus from the government’s first-car tax rebate and higher household debt.
    Exports from Thailand had also weakened in line with subdued growth in the region.
    “In the periods ahead, domestic demand and exports are expected to gradually recovery, with some risks of delay,” the BOT said, adding supply-side constraints may play a part in holding back private investment and exports.
    “Nonetheless, underlying economic fundamentals and accommodative financial conditions should lend some support to growth momentum,” the BOT said.

    Thailand’s Gross Domestic Product shrank by 0.3 percent in the second quarter following a 1.7 percent contraction in the first quarter. On an annual basis, the Thai economy grew by 2.8 percent in the second quarter, down from growth of 5.4 percent in the first and 19.1 percent in the fourth quarter when growth was boosted by government spending and a favorable comparison with 2011 when extensive flooding hit industrial and agricultural output.
    The BOT said the global economy was showing “signs of gradual improvement,” with the U.S. economy expanding and recent indicators pointing to some improvement in China’s economy. The euro area continues to stabilize but recovery is weighed down by the financial health of households and corporates.
    “In Asia, domestic demand slowed, and notwithstanding tentative signs of recovery in exports for some countries, exports generally remained weak,” the BOT said.
    Inflation in Thailand is continuing to decline with the headline inflation rate down to 2.0 percent in July from 2.25 percent in June, continuing a declining trend since mid-2011 when inflation was above 4 percent. The government forecasts headline inflation of 2.8-3.4 percent for 2013, down from 3.0 percent in 2012.
    The core inflation rate in July was 0.85 percent for a seven-month average of 1.18 percent, within the BOT’s target of 0.5-3.0 percent. The BOT forecasts core inflation of 1.7 percent this year, down from 2012’s 2.1 percent.
    The Thai baht has weakened since late April, along with the currencies of many other emerging markets and fears of foreign exchange intervention by Thai authorities, after rising in the first months of this year in the wake of Japan’s aggressive monetary easing.
    From the beginning of 2013 to late April, the baht rose by almost 6 percent, hitting a high of 28.6 baht to the U.S. dollar on April 26.
    Since then it has dropped by almost 10 percent, trading at 31.77 to the U.S. dollar today, and for the year it is down 3.7 percent.

    www.CentralBankNews.info

By MoneyMorning.com.au

Everywhere we looked yesterday it was gloom, gloom, gloom.

BHP Billiton [ASX: BHP] reported a 30% drop in profit.

Coca Cola Amatil [ASX: CCL] has seen earnings fall.

And QBE Insurance Group [ASX: QBE] shares fell 5.5% after posting a 37% drop in first-half profits.

Isn’t there any good news anywhere?

Perhaps one place: the Australian housing market…

It seems ridiculous to say it, but Australian housing seems to be the one market not suffering from a confidence crisis.

As a long-time housing market bear, we hope you can appreciate how difficult it is for us to acknowledge that.

Now, don’t get us wrong. We’re not saying house prices are good value and that you should rush out to secure a million-dollar mortgage. But it’s also true to say that for the most part Australian house prices haven’t suffered the huge correction we predicted in 2009.

That’s when we pencilled in Australian house prices to fall 40%. Aside from notoriously volatile markets such as the Gold Coast, that didn’t happen.

So, what’s next for the Australian housing market? Is it truly a ‘miracle market’ that will never crash? Or, like the one-time miracle Australian economy, is its luck about to run out?

Markets Crash When You Least Expect it

Not according to Terry Ryder at Property Observer. He says that in order for prices to collapse after a price bubble, you need a price bubble to form first. Fair enough. But Ryder says that hasn’t happened yet.

He notes:

‘Three years ago BIS Shrapnel, which makes part of its living from mis-forecasting property markets, declared in 2010 that capital city prices would continue to rise strongly.

‘By 2013 Perth would be up 22% and both Sydney and Adelaide would have added 20%.

‘Nothing of the sort happened, of course. Three years on, Perth is up about 7% and Sydney a meagre 4%. Adelaide is still down 3%. These are not statistics that support bubble theories.‘

On the surface, it’s a fair argument. It makes sense that a bubble can only burst if you inflate it. However, we’ll make one point. As we’ve seen recently with stock and gold prices, bubbles don’t always burst exactly when you expect.

In fact, it also fair to say that bubbles don’t burst as long as people expect them to burst. The gold price bubble is a great example. Look at the chart below:

Source: Goldprice.org

The gold price peaked in mid-2011. After that it dropped and rallied several times. But it never took out the high price. The assumption in the mainstream was that the gold price was in bubble territory and would collapse at any moment.

It may well have been in bubble territory, but the price didn’t collapse. As recently as late last year, the gold price recovered again and looked strong.

As the money printing continued, it now seemed logical to many that gold would have to remain relatively high. Talk of a gold bubble started to wane…and then it crashed. The event folks had predicted for two years finally happened, just when they least expected it.

Is Now the Time?

To us – in a way – the gold price action looks similar to the Aussie house price action. Only the timeframe is different.

Aussie house prices soared in 2007, they fell a bit in 2008 and 2009 and then surged higher through 2010. Since then prices have seen more modest gains.

Now there’s almost no talk about a house price bubble. In fact, the new theory is that low interest rates will support the market forever (well, not quite).

Perhaps more evidence of the lack of bubble talk is that our publishers have even agreed to publish the controversial analysis of Aussie economist, Phillip J Anderson. He says Aussie house prices are set to enjoy a 14-year bull market run. You can’t get much more bullish than that.

We don’t know if that seemingly outlandish forecast will come true. To be honest, even though we like his argument (it’s the most compelling case we’ve seen in more than five years) we still can’t get past the fact that Aussie house prices boomed due to an unprecedented expansion of credit from the 1980s through to the 2000s.

Simple maths suggests the market won’t repeat that kind of credit growth, because people are already up to their necks in debt. That wasn’t the case 30 years ago when the boom started.

If the housing market crash follows the same pattern as the gold market crash, a house price crash may not be far away. As for a 40% drop, you may think we’d be reluctant to put our name to that big a claim after getting it wrong last time.

But to us, it’s just common sense. There isn’t a single market anywhere else in the world where prices soar and then never fall. The mainstream would have you think the Aussie housing market is still a ‘miracle market’. We don’t buy a word of it.

The Aussie housing market is heading for a fall…it’s just a matter of time.

Cheers,
Kris+

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From the Port Phillip Publishing Library

Special Report: Make the Chinese Pay For Your Retirement
 

Daily Reckoning: A Bond Market Tantrum

Money Morning: How the Election Could Impact Stocks, and Why You Should Ignore It…

Pursuit of Happiness:  Inflation is Not Progress, This is Progress…

Australian Small-Cap Investigator:
How to Make Big Money from Small-Cap Stocks

By MoneyMorning.com.au

Give or take, there are 196 nations in the world. The majority are indebted.

With the exception of some oil rich states that are actually paying down debt, most are accumulating more public debt.

So with every passing day nations add more tinder to the yet-to-be-ignited sovereign debt bonfire.

In 2008 it was the banks that faltered. Too much debt backed by lousy assets led to the GFC. The respective governments of the US, Europe, UK and even Australia stood behind their banks to restore confidence in the financial system.

Sometime in the next one or two years there is a high probability of a sovereign default (perhaps one that’s even too big to bail out). What happens then?

Who Will Stand Behind the Faltering Sovereign Nation?

After attending a seminar on sovereign risk held earlier this year in Basel, Jaime Caruana, General Manager, Bank for International Settlements, said:

‘I personally came away with an even stronger impression of the potentially dire implications for financial markets if sovereign borrowers cannot put their finances back on a stable medium-term footing. The macroeconomic arguments for fiscal consolidation are compelling: with populations growing older and the challenge of making good on open-ended promises of health and pension support, this is no time to be running up debts to risky levels.

‘Ominous too are the financial stability implications of sovereigns losing their all but risk-free status. As they do so, foreign investors unload their sovereign bond holdings onto domestic investors.‘

Losing their all but risk-free status? Who’s he kidding? The current ‘barely there’ interest rates have seen government bonds jokingly referred to as ‘return-free risk’.

When the joke morphs into something far more serious, it will unleash the destructive forces of the markets.

Central bankers think they can control the markets. For years the market has responded to the regular diet of dollar bills and ZIRP. Then suddenly something happens out of nowhere and without warning and the market turns viciously on investors.

As quickly as the disruption starts, it ends. The market is still there, but not so the investors who didn’t see the disruption coming.

Eventually, this disruption will happen on a bigger-than-ever scale and the victims will be the governments and central banks.

Why Will This Eventually Happen?

There are many nations with varying degrees of debt to GDP. In addition to existing debt levels, there are those running annual budget deficits to fund promises made in the good times.

Think of existing public debt levels as a series of sand piles – with some piles higher than others. Now imagine more grains of sand (deficit spending) pouring onto the existing piles. Eventually one or more sand piles collapse because the structure can’t cope with more weight.

Each sand pile is unique. One that is high and getting higher (Japan) can remain upright while a smaller pile (Greece) collapses.

As Caruana warns:

‘With populations growing older and the challenge of making good on open-ended promises of health and pension support, this is no time to be running up debts to risky levels.‘

Caruana’s statement acknowledges the obvious. Yet no politician is brave or stupid enough to confront the public with this reality. In the midst of an election campaign all you get is more ‘pork barreling’.

Given that those with the ability to reverse the spending and pay down debt have absolutely no intention or clue on how to do it, it will be up to the markets to deliver the message to the electorate.

Sadly the markets only act when it’s far too late to prevent inflicting severe pain on the economy – look at the unemployment rates and pension cuts in southern Europe.

In the interim governments are happy for central bankers to paper over the cracks and pretend all will be right with the world.

Perhaps the history and economic books are about to be completely re-written on how an exercise in excessive money printing ends.  Perhaps a handful of central bankers are omnipotent over markets. Perhaps governments can deliver on an expanding list of promises to a growing population of retirees.

Or perhaps, bond markets awaken from their slumber and re-price the risk inherent in the debt issued by insolvent governments.

Don’t forget there have been numerous sovereign defaults over the centuries. The sand piles of debt have washed away and the government gets to start afresh. However, it has financially ruined the investors in those sand piles.

Right now it’s easy for investors to think governments and central banks have tamed the market. But history shows no one can tame the market without it leading to unintended consequences…these consequences just haven’t appeared yet.

Personally I prefer to sit behind the safety fence in cash. It’s boring as hell but patience has its own rewards.

Vern Gowdie+
Editor, Gowdie Family Wealth

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From the Archives…

How Many Warren Buffett’s in a Bar of Gold?
16-08-2013 –  Kris Sayce

Two Points to Consider from the Commonwealth Bank…
15-08-2013 –  Kris Sayce

Take Control of Your Superannuation, but Know the Limits
14-08-2013 – Vern Gowdie

Why I’m Glad I Missed a Dividend Stock That Doubled…
13-08-2013 – Kris Sayce

No Profit in the Federal Reserve Divination
12-08-2013 – Dan Denning

USDJPY stays below a downward trend line on 4-hour chart, and remains in downtrend from 101.53, the rise from 95.81 could be treated as consolidation of the downtrend. Another fall to 95.00 to complete the downward movement would likely be seen in a couple of days. Resistance is at the trend line, only break above the trend line resistance will indicate that the downtrend from 101.53 is complete.

Provided by ForexCycle.com

By The Sizemore Letter

With the 10-year Treasury yield hitting new multi-year highs and all dividend-focused stock taking a beating as a result, income investors can be forgiven for feeling a little uneasy at the moment.  It’s unsettling to buy a REIT, MLPs or dividend-paying stock in the hopes of enjoying a nice 4-5% yield only to lose two or three times that much due to price declines.

During times of turbulence, it can be helpful to take a peek over the shoulder of a successful investor you respect to see how they are reacting.  You shouldn’t mindlessly ape what they are doing, of course.  But following their trading moves can give you a sense of perspective.

With that in mind, let’s take a look at three investment gurus to see what dividend-focused investments they are buying—or perhaps not buying.

No guru list is complete without a mention of the Sage of Omaha, so I’ll start with Warren Buffett.  I wrote a short piece last week outlining some of Buffett’s recent purchases, though most of the comments centered around non-dividend paying companies such as Dish Networks (DISH).

Interestingly, none of Buffett’s major new additions are “dividend focused,” per se.  Suncor Energy (SU), one of his larger new holdings, pays a modest 2.3%.

Perhaps his most promising dividend payer is his old standby—Wells Fargo & Company (WFC).  Buffett has owned Wells Fargo for years, and it is currently the largest single holding in his portfolio.  He’s been adding to the position throughout 2013, and he snapped up nearly 5 million shares last quarter.

Wells Fargo may seem an odd choice as a “dividend stock,” given that the company yields only 2.5%.  Like most banks, Wells Fargo slashed its dividend during the crisis to conserve capital. Yet since 2011, Wells Fargo has been aggressively raising its dividend, from a $0.05 per quarter in February of that year to $0.30 per quarter today.  The dividend is now nearly back to pre-crisis levels.

We can’t expect the dividend to rise by a factor of six again over the next two years; those sorts of jumps only happen when you take those first steps out of crisis.  But I do expect the bank to deliver better than average dividend growth for the next several years.

Next on the list is one of my favorite value managers, David Dreman.  If you’re not familiar with Dreman, you should be.  He wrote the book on contrarian investing, and I mean that literally.  His Contrarian Investment Strategies is a classic any serious investor should have in their library.  He’s also a regular contributor to Forbes.

So, what has Mr. Dreman been buying?

One position that caught my eye is Mack-Cali Realty Corp (CLI), a real estate investment trust specializing in office and light industrial properties.

REITs have gotten pounded in the recent “taper” turbulence, and Mack-Cali is no exception.  In the past three months, the stock has lost a quarter of its value.  But as the consummate contrarian, Dreman appears to view the sell-off as an opportunity.

In looking at Dreman’s portfolio, it is clear that he does not take large, overweighted positions, and his overall investment in Mack-Cali is fairly modest.  Still, it is telling that he is buying REITs at all given the recent volatility in their share prices.

At current prices, Mack-Cali yields a juicy 5.6%.  Though disturbingly, the dividend was recently cut by a third.  I like David Dreman, and recommend you read his books.  But as a general rule, I don’t like to buy REITs with falling dividends.  In fact, I like to see a long track record of growing dividends.  I would gladly take a Realty Income (O) or a National Retail Properties (NNN) over Mack-Cali.

Speaking of Realty Income, I noticed that my favorite REIT recently popped up in the portfolio of quantitative hedge fund legend Jim Simons, the CEO of Renaissance Technologies.

Renaissance Technologies returns over the years have been mind-blowing.  If fact, if I hadn’t already been familiar with Simons, I would have assumed his returns were bogus.  They seem too good to be true.  Simons’ Medallion fund became the stuff of legends by generating annual returns in excess of 35%since 1988…and that was after the fund’s hefty fees were taken out.

Renaissance Technologies added shares of Realty Income in the second quarter. Given Renaissance Technologies’ fast-moving trading style, it’s possible that they already liquidated the position.  Still, other gurus have been snapping up shares as well, including Ray Dalio and Steven Cohen.

Because of Realty Income’s position as a “bond substitute,” its share price has been hit particularly hard among REITs.  The same is true for its peers in the conservative triple-net retail sector.  But at current prices, Realty Income yields 5.4%  And I should emphasize that this is one of the most consistent dividend payers (and serial raisers) you can find on any stock exchange in the world.  This is a REIT that skated through the 2008 meltdown with nary a scratch.

I suspect that were I to write this article next quarter, I might find quite a few new smart money gurus among its owners.

Disclosures: Sizemore Capital is long O and NNN.

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