Hunkering down

With European markets down big, investors are bracing for yet another awful opening tomorrow. Thus far this year, the S&P is down 9.75 percent -- think about it, losing 10 percent of your money in just 13 trading days.
The "Five for 2008" portfolio is up 1.55 percent this year, mostly thanks to Capstead Mortgage (CMO), up 13.6 percent. This is a stock that does better in recessionary times because its earnings and dividends move inversely with interest rates. Credit risk is low, unless you think FNMA insurance on mortgages isn't worth anything (seems like Congress would never allow a default) But if things get bad enough in the credit markets, wouldn't surprise me to see CMO take a hit too, in which case it might be time to buy more.
The worst of the five stocks has been Pepsico (PEP), down 5.85 percent. Funny, this was our "safety stock." As the only common stock in the portfolio, it suffers from positive beta. The other three haven't moved much this year. In this market environment, that almost counts as a victory.