Damn you BHP Billiton, but not you Mitchell Johnson

Happy Monday, Foolish Investors. As well as our cricket team’s success at the Gabba, today we have much cause for celebration…

  • Last week saw another new record for the S&P 500, closing above 1,800. It was the U.S. benchmark index’s seventh straight weekly gain, leaving it poised for the best annual gain since 1998.
  • Janet Yellen, Helicopter Ben Bernanke’s successor, looks to keep the printing press switched on, meaning global interest rates look set to remain low, probably at least into 2015.
  • The S&P/ASX 200’s surge back towards 5,400, and the return of the bull market.
  • QBE Insurance’s 45%+ gain in 2013.

I must admit to being a little weary after spending three of the last four days at the Gabba, cheering on the resurgent Australian cricketers.

It was magnificent, gripping, unexpected drama, with Haddin, Johnson, Lyon, Warner, Clarke and team grabbing victory from what, at 6-132 on the opening day, looked a seemingly totally forlorn and depressingly familiar repeat of recent Ashes clashes.

The return of the stock market bull

The cricket fun is over, for now, somewhat conveniently replaced by some good old fashioned stock market fun.

On Friday in the U.S., the S&P 500 closed at another record high.

On Bloomberg, Karyn Cavanaugh of ING U.S. Investment Management summed up the mood…

“There’s really no deterrent for the market to move forward. There’s not really any bad news. We have a little bit of a pullback and then people jump in and say, ‘Hey, I want a piece of this.'”

So much for a stock market bubble.

On this magnificent Monday, the S&P/ASX 200 jumped aboard the action, surging back towards 5,400. It’s a wonderful sight for the bulls amongst us…

It’s a case of back to the future, back to the good old days of late October, when the ASX was riding high and investors were taking to stocks like Mitchell Johnson was taking to English “batsmen”.

A timely reminder… 2013 has been a very good year

The ASX has been in the doldrums these past few weeks. But for that recent weakness, and even a little investor angst, it’s worth reminding our Foolish readers the S&P/ASX 200 is UP a more than respectable 15% so far in 2013, and that these popular stocks have had a tremendous year to date…

JB Hi-Fi (ASX: JBH) — Up 96%

Flight Centre (ASX: FLT) — Up 82%

Platinum Asset Management (ASX: PTM) — Up 55%

QBE Insurance (ASX: QBE) — Up 46%

Speaking of QBE, regular readers will know my colleague Motley Fool Share Advisor Investment Advisor Scott Phillips has long been a fan of the stock, and an owner himself.

What you may not know is, in both the December 2012 and January 2013 editions of Motley Fool Share Advisor‘s popular best buys now segment, Scott named QBE as one of the stocks subscribers could buy now.

Anyone taking his advice would be feeling pretty chuffed with themselves, not to mention having a chuffed portfolio. A 45%+ gain for an ASX 20 stock in less than a year is very rare, but I suspect shareholders aren’t complaining.

I tip my Foolish jester’s cap to Scott’s stock picking skills.

I confess — I totally missed the QBE boat

At this point, I must make a confession.

I’m less enthusiastic about QBE than Scott, and don’t have the insurance giant in my portfolio.

For me, I’m unable to overlook QBE’s series of recent stumbles as one-off events, thinking there may be some more serious underlying problems that will surface in the months and years ahead.

Steve Markel, of U.S. insurance giant Markel Corporation (NYSE: MKL), winces a bit every time the phone rings, saying “there’s no such thing as a good incoming call in the insurance business.”

I wince every time QBE makes an ASX announcement, fearful it’s another one of those phone calls.

Time will tell.

BHP sails away into the sunset… but I’m still a winner

You don’t lose money by not buying a stock. You don’t have to swing at every pitch.

The market is saying I’m wrong about QBE. That’s fine. Each to their own. There are plenty more fish in the ocean, and more than one way to skin a cat.

Another cat I’m not skinning is BHP Billiton (ASX: BHP). Earlier this year I was hopeful the Big Australian would crash back below $30, enabling me to top up my existing holding at what I think is an attractive price.

Alas, a surging market has put paid to my best laid plans, and today BHP trades at close to $38. On the bright side, it means my family’s existing long-term BHP holding is powering ahead.

Heads I win, tails I don’t lose — it’s a happy Monday indeed.

The interest rate shock that could kill your term deposits, but see the stock market surge higher

That said, you may have seen the story on Macrobusiness with the shock news that Australian interest rates could be headed even lower next year.

Bill Evans is Westpac’s respected Chief Economist. If he’s right, the RBA will cut interest rates to just 2% during 2014.

It’s enough to have you crying into your term deposit

Earlier this year, Warren Buffett said…

I feel sorry for people that have clung to fixed-dollar investments.

With interest rates potentially heading to 2%, Buffett might soon be feeling sorry for you, too.

Over in the U.S., their equivalent of one year term deposits earn a paltry 0.8%.

Zero point eight percent.

No wonder the US stock market is trading at an all-time high. If you want to make a return on your money, you have virtually no option but to invest in stocks.

For all the comfort and safety of term deposits, they are likely to be terrible investments in the years ahead — perhaps even more so than they’ve been over time to date.

I’m itching to put some cash to work

Don’t get me wrong. Cash has good option value, allowing you to pounce on attractive investments if and when they fall to silly prices.

Now, I must admit to not buying much in recent times, contentedly watching my portfolio rise without me lifting a finger.

That said, I am itching to put some money to work in the stock market.

Last week, I placed a few more options trades on U.S. listed stocks, aiming to either earn some income or to buy good stocks at lower prices. The income is great, and I’ve no complaints, but investing directly into stocks is where you can make the really big bucks.

Why adding to your winners and cutting your losers is a great rule of thumb

Our internal trading rules preclude me from buying shares in a Motley Fool recommended stock until at least two days after publication.

In reality, if I do buy, it’s usually weeks or months afterwards that I splash out the cash, sometimes at lower prices, sometimes at higher prices. Even though I missed a couple of our Motley Fool Share Advisor big winners, and I do own one of our rare losing picks, I’ve no complaints at all, my SMSF being up 92% on one of our picks and up 82% on another.

Even better, the 92% winner is now the largest ASX holding in my SMSF — the result of the stock’s appreciation, and that I added to my position via a capital raising.

All of which reminds me of the investing rule of thumb — add to your winners, cut your losers.

Is there finally life in this 69% loser?

Speaking of losers, I’m now down 69% on my investment in rare earths miner Lynas (ASX: LYC). Shocker. So far, I’ve resisted the temptation to grab that falling knife, a decision that has been thoroughly vindicated.

That said, I am just a little bit interested in Lynas at around 30 cents, a price where the stock trades at close to its book value. Earlier this month, director Eric Noyrez snapped up 400,000 shares at 34.5 cents, splashing out $138,000.

I’ll keep watching, waiting and hoping. Lynas has to more than triple for it to get back to my buy price. I’m not holding out much hope.

Just to be clear, Lynas isn’t a stock we’d recommend in our ‘best of the bestMotley Fool Share Advisor subscription-only service, but I enjoy a little risk, hence me adding adding them to my diversified portfolio.

That it didn’t work out so well shouldn’t be surprising to me, given that most mining stocks are one way tickets to the poor house. But at least I didn’t add to my losses, as the stock dropped 10%, 20%, 33%, 50%, 60% and now down 69%…

I’m not getting too carried away…

Despite the Lynas disaster, my portfolio has had a very satisfying 2013 to date. But, I’ve been in this investing game far too long to get carried away with share price movements over such a relatively short period of time.

Yes, like Charlie Aitken of Bell Potter, I too would cheer on ASX 6,000. But, I know ASX 5,000 is possible too.

Still, I am feeling pretty pleased with myself… a feeling I hope will be replicated cheering on the Aussie cricketers again in Adelaide.

With the ASX on the rise today, perhaps it’s The Return of the (Ashes) Urn that can instil the “feel good” factor back into the Australian economy, given the change of government seems to have failed to deliver it?

The Australian Financial Review says “good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit.” Get 3 Stocks for the Great Dividend Boom in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

Of the companies mentioned above, Bruce Jackson has an interest in BHP Billiton and Lynas.

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