WEAKNESS IN PERSONAL SAVINGS MAY TRIGGER A FURTHER DROP IN THE STOCK MARKET | December 3rd, 2022 | $NUE $HZNP $PLUG $TELL $DIS $THO $MP $KSS $GL $WMT $TGT $GILD $AIG $ORI $USB $CNC $SH $GLD $SLV $SON $NEM $HLT $NXPI $DEN $GPS $FIVE $JPM $CMG $MSFT

Weekly summary in a paragraph

While Jay Powell’s speech lifted the stock markets on Wednesday, nothing really changed in the narrative or the course of action of the Fed. In fact, the positive labour data published on Friday poured cold water over this week’s rally. More critical data is expected over the next 10 days before the traditionally positive seasonality kicks in (aka “Santa rally”), hence caution is key.

The European stock market continues its sharp recovery, has risen +26.5% from the October 13th lows and has now overtaken the S&P500.

Asset classes weekly performance

This week the Dow gained +0.4% (-5.35% YTD) while the S&P500 rose +1.6% (-14.6% YTD, we are 1x short), the Nasdaq did better with a +2.4% gain (-26.6% YTD, we have a 3x inverse position) and the Russell 2000 added +1.4% (-15.95% YTD, we are 1x short). $Gold finished higher this week too and gained +2.7% (-1.83% YTD) while silver is the clear winner with its +8.4% spike (-2.46% YTD). $Oil recovered +7.2% (+7.99% YTD). The 20-y added +3.3% this week (-28.63% YTD). The European stock finished +2.1% higher (-13.74% YTD). The Euro recovered +0.9% on the USD (-7.94% YTD).

Weekly pitch

The US economy is 70% consumer-based hence savings are closely watched as any significant changes may constitute a stock market bell weather. The data published this week is concerning in this respect as the percentage of personal savings to disposable income fell to 2.3% which corresponds to levels not seen since 2005. This weakness in savings may affect earnings for Q4 2022 as well as earnings estimates for next year thereby resulting in a further drop in the US stock market.

Weekly Portfolio Update

Quite a few movements this week: we took profits on $FIVE (+3.7%) and $AJRD (3.6%). We initiated long positions on $PLUG, $HZNP $NUE and $TELL. Cash, precious metals and hedges amount to 43% in our portfolio (+1% compared to last week).

Top 5 Weekly Portfolio Performers

$FIVE +13.94% (Consumer-Discount/Variety)

$META +10.84% (Technology-Social Media)

$SBSW +9.99% (Precious Metals)

$FCX +8.26% (Basic Materials-Metal Ores)

$SLV +7.96% (Silver ETF)

Portfolio Asset Allocation

– Long stock positions 57% (reduced)

– Hedges 8%, though equal to 11% considering leveraged ETFs (reduced)

– Silver & Gold 4% (unchanged)

– Cash 31% (increased)

YTD Portfolio Performance

Our currency-adjusted YTD portfolio performance is -4.2% (excl. dividends) vs the European market loss of -5.7% (+1.5% European market beat, expressed in €) and the S&P500 loss of -14.57% (+2.4% US market beat, expressed in $).

Invest responsibly!!!

November 19th, 2022 | Short-selling Visa and Mastercard: is that a joke or an obvious investment opportunity? | $SQQQ $MP $KSS $GL $WMT $TGT $GILD $AIG $ORI $USB $CNC $SH $GLD $SLV $SON $NEM $HLT $NXPI $DEN $GPS $FIVE $JPM $CMG $MSFT

Weekly summary in a paragraph

The enthusiasm that characterised the previous week market rally was quickly suppressed by this week’s trading as US markets finished generally lower. The earnings beat by $WMT and the earnings miss by $TGT support the narrative of the consumer needing to reduce spend in these inflationary times. The European stock market continued its reversal and would actually now be outperforming the S&P500 was it not for the YTD Euro weakness.

Asset classes weekly performance

This week the Dow gained a meagre +0.1% (-7.68% YTD) while the S&P500 lost -0.5% (-16.8% YTD, we are 1x short), the Nasdaq did worse by falling -1.5% (-28.76% YTD, we have a 3x inverse position) and the Russell 2000 lost -1.7% (-17.94% YTD, we are 1x short). $Gold gave up -1.1% (-4.78% YTD) while silver finished -3.5% lower (-10.32% YTD). $Oil tanked -9.8% (+6.48% YTD). The 20-y recovered +1.1% this week (-32.3% YTD). The European stock market outperformed the US market indices and finished +0.8% higher (-16.59% YTD). The Euro lost -0.4% to the USD (-8.21% YTD).

Weekly pitch

If inflation imposes an immediate burden on the consumer, credit card debt is its long-term yoke. Credit card debt default rates have been increasing since Q2 2021 and while they are way below the highest levels seen in this bull market cycle, they are expected to go up. The next quarterly print is due next week. Most investors typically focus on the long side, even in bear markets, but sometimes investment opportunities are on the short side: credit card debt defaults may offer such an opportunity even if it means shorting stock market darlings like Visa, Mastercard and American Express.

Weekly Portfolio Update

We sold three positions: $KSS (+3.4%), $MP (+4.2%) and $GL (+13.47%). We increased cash and hedges, in other words our profit-taking did not go back into more investments, at least for now. Cash, precious metals and hedges now amount to 42% in our portfolio.

Top 5 Weekly Portfolio Performers

$GPS +11.32% (Consumer-Apparel/Shoes)

$WMT +5.37% (Consumer-Major Discount Chains)

$AJRD +4.36% (Aerospace)

$GL +3.66% (Insurance)

$SQQQ +3.29% (3x inverse the Nasdaq)

Portfolio Asset Allocation

– Long stock positions 58% (reduced)

– Hedges 10%, though equal to 15% considering leveraged ETFs (increased)

– Silver + Gold 4% (increased)

– Cash 28% (increased)

YTD Portfolio Performance

Our currency-adjusted YTD portfolio performance is -5.6% (excl. dividends) vs the European market loss of -8.4% (+2.8% European market beat) and the S&P500 loss of -16.8% (+3.0% US market beat).

Invest responsibly!!!

October 22nd, 2022 | What do declining 2023 and 2024 earnings estimates mean for your portfolio? | $FCX $FTNT $SAND.ST $TGT $JPM

Weekly summary in a paragraph

The stock market staged a significant rally this week with most indices finishing 3% or more higher, in part fuelled by a rumour that the Fed is going to become less hawkish in December. Is it yet another bear rally? Only time will tell, though something seems to have changed now that the fed funds futures are reaching 5%. Earnings season is now in full swing and 165 S&P500 companies will report next week.

Asset classes weekly performance

This week the Dow gained +4.8% (-16.5% YTD) while the S&P500 did slightly worse +4.7% (-21.3% YTD, we are 1x short) and the Nasdaq outperformed both +5.2% (-32.2% YTD, we have a 3x inverse position). The Russell 2000 recovered +3.5% (-24.1% YTD, we are 1x short). $Gold gained 0.8% (-8.4% YTD) while silver skyrocketed +5.5% (-14.5% YTD). $Oil inched 0.5% higher. The 20-y fell by -5.5% this week (-34.7% YTD). The European stock market staged a +6.0% comeback (-30.3% YTD). The Euro recovered 1.4% against the USD (-13.8% YTD).

Weekly pitch

Stocks follow earnings and earnings expectations. Declining earnings put pressure on stock prices and so do higher interest rates. So far, the ongoing bear market has mainly been caused by higher interest rates but if earnings start rolling over, the downward slope may steepen. For 2024, analysts now expect 250$ in earnings for the S&P500 which corresponds to a 9.9% appreciation relative to the current price assuming a 16.5 multiple. Earnings estimates continue to decline as time goes by, though, which reduces opportunities for appealing returns.

Weekly Portfolio Update

We covered 1/3 of our short position in IWM with a 22% gain, thereby reducing the overall weight of hedges in our portfolio. We also initiated a trade on TLT as there is a potential short-term shift in sentiment. Cash, precious metals and hedges now amount to 40% in our portfolio which finished flat this week while the market fell.

Here are the top 5 performers of our portfolio this week:

$FCX +15.88% (Basic Materials-Metal Ores)

$FTNT +11.68% (Technology-Software-Security)

$JPM +9.93% (Banks-Money Center)

$TGT +9.27% (Consumer-Major Disc. Chains)

$SAND.ST +8.61% (Specialty Industrial Machinery)

This is our asset allocation as things stand:

– Long stock positions 60% (increased)

– Hedges 9%, though equal to 15% considering leveraged ETFs (decreased)

– Silver + Gold 3% (unchanged)

– Cash 28% (decreased)

Our currency-adjusted YTD portfolio performance is -2.3% (excl. dividends) vs the European market loss of -16.5% (+14.2% market beat).

Invest responsibly!!!

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