Well, the line in the sand has been drawn. We should most likely expect low rates until early 2012, when the political climate is focused on the next presidential election.
Yesterday's K-Call might have come off as somewhat bleak in anticipation of the Fed's QE2 policy, but there is a pair trade that looks attractive with rates this low.
My "Call-to-Action" is to go long income-producing equities, such as MLP's (master limited partnership) and REITS (real estate investment trust), while shorting retail names in tandem.
This thematic pair trade should create absolute return in the climate created by the Fed. Consumer stocks traditionally suffer during periods of low rates.
As for the long side of the trade, as we discussed, the older generation will grasp for income and gravitate towards those names that produce it. MLP's and REITS fall into this category.
It is worth noting that traditionally successful coordinated trades have not worked for the most part during this bizarre year. My colleague, Kate Kelly's reporting on prop. desks support this as well as 2010 hedge fund statistics.
But if you listened to our special guest on The Strategy Session yesterday in Centerview Partners' Blair Effron, it is quite possible that the consumer continues to feel the pinch. If this is the case, this investment strategy could work for your portfolio.
As a final note, protective pair trades like this are not the only way to go in this environment. There are still big winners out there as single-stocks. Look for my latest induction into the "One-Decision Club" by the end of the week.
Related Links:
- Fed to Market: Long-Term Rates Can Go Even Lower
- Goldman Sachs May Spin Off Proprietary Trading This Month
- This Global Asset Company is Potentially Lucrative
- Video: Blair Effron
Programming note: "The Strategy Session," hosted by David Faber and Gary Kaminsky, airs weekdays at Noon ET on CNBC.
DISCLOSURE:
Gary Kaminsky does not hold any equity positions.
DISCLAIMER:
The content of this blog is published in the United States of America and persons who access it agree to do so in accordance with applicable U.S. law.
All opinions expressed in this blog are solely the opinions of Gary Kaminsky and do not reflect the opinions of CNBC, NBC UNIVERSAL or their parent company or affiliates, and may have been previously disseminated on television, radio, internet or another medium. You should not treat any opinion expressed by Mr. Kaminsky as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Mr. Kaminsky’s opinions are based upon information he considers reliable, but neither CNBC nor its affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Mr. Kaminsky, CNBC, its affiliates and/or subsidiaries are not under any obligation to update or correct any information provided on this website. Mr. Kaminsky’s statements and opinions are subject to change without notice. No part of Mr. Kaminsky’s compensation from CNBC is related to the specific opinions he expresses.
Past performance is not indicative of future results. Neither Mr. Kaminsky nor CNBC guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment discussed on this website or on the show. Strategies or investments discussed may fluctuate in price or value. Investors may get back less than invested. Investments or strategies mentioned on this website or on the show may not be suitable for you. This material does not take into account your particular investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. You must make an independent decision regarding investments or strategies mentioned on this website or on the show. Before acting on information on this website or on the show, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.
