From credit crunch to credit crisis: brace for impact! | Responsible Investor Weekly Newsletter, March 25th, 2023

Responsible Investor is a weekly newsletter and an Apple/Spotify podcast for those who are interested in investing responsibly. Go to responsibleinvestor.dk for more information and to read our disclaimer. This week’s newsletter is titled “From credit crunch to credit crisis: brace for impact!”, and was written on March 25th, 2023.

Weekly summary in a paragraph

All the US stock market indices finished higher in a week which saw a 0.25% interest rate increase by the Fed and a dovish commentary. Consensus sees a 90% probability for a rate hike pause at the May FOMC meeting. The banking sector continued borrowing at a pace which reduced the systematic quantitative tightening by a third. Europe had a strong week despite concerns of the Credit Suisse contagion spreading to Deutsche Bank. 94% of European Stoxx 600 companies have reported Q4 2022 earnings now, with an 8% growth which is superior compared to the US (-5%). The 10-y yield continued its fall and resulted in the 2-10y spread dropping again this week to reach -38 basis points. Recall that the spread had reached -107 basis points just two weeks ago. In corporate news, Activision sees the concerns of its merger with Microsoft alleviated, and Disney announced the layoff of 7000 staff at its ESPN unit.

Asset classes weekly performance

This week the Dow finished +1.18% higher (-2.7% year to date) while the S&P500 gained +1.39% (+3.4% year to date), the Nasdaq rose +1.66% (+13.0% year to date) and the Russell 2000 appreciated +0.52% (-1.49% year to date, we have a 3x short position). Gold finished +2.06% higher (+6.39% year to date, we are long) while Silver gained +4.19% (-4.27% year to date). Oil was -0.67% weaker (-10.51% year to date). The 10-y US treasury yield tanked -6.27% (-10.89% year to date). The European stock market gained +2,89% (+10.5% year to date). The Euro finished +0.79% lower against the US Dollar (+0.5% year to date).

Weekly pitch

If you have been affected by the great financial crisis of 2007-2008, you will remember the challenge of borrowing money over that period: whether it is retail or commercial loans, this is what happens in a credit crunch. A credit crisis, however, is a much serious economic phenomenon whereby the banks themselves struggle to borrow either from each other or from the central banks. The graph below shows that the amount banks have borrowed at the Fed discount window in 2023 has exceeded the 110 billion USD top from the GFC and is near-vertical. The earnings decline and the credit crisis are two reasons to stay nimble if you are invested in the stock market. In order to protect yourself on the downside, responsible investors should raise cash, buy hedges (including precious metals and carefully selected corporate bonds) and be well-diversified.

Weekly Portfolio Update

Here are this week’s movements: we took profits on our Newmont Mining (+8.1%) and ACI Worldwide (+6.3%) long positions; we initiated new long positions on Halliburton, EOG Resources and MP Materials. Sell stops were triggered on our Adobe and Lennar shorts and on our US Banks ETF. Cash, precious metals and hedges amount to 39.5% in our portfolio (reduced compared to last week).

Top 5 Weekly Portfolio Performers

Sanofi +8.44% (Pharmaceuticals)

Sonoco Products +7.95% (Process Industries)

Meta +5.32% (Technology)

Electronic Arts +5.01% (Gaming)

Denbury Resources +4.63% (Oil)

Portfolio Asset Allocation

US Long stock positions 51.5% (increased)

EU Long stock positions 9% (unchanged)

US Short stock position 3% (reduced)

Hedges 7.5% (increased)

Silver & Gold 5% (unchanged)

Cash 24% (increased)

1-year Portfolio Performance

Our portfolio performance over the last 12 months is -4.4% (excl. dividends) vs the S&P500 loss of -12.2%, which corresponds to a +7.8% market beat.

Invest responsibly!!!

Has the Nasdaq just saved the stock market? | Responsible Investor Weekly Newsletter, March 18th, 2023

Responsible Investor is a weekly newsletter and an Apple/Spotify podcast for those who are interested in investing responsibly. Go to responsibleinvestor.dk for more information and to read our disclaimer. This week’s newsletter is titled “Has the Nasdaq just saved the stock market?”, and was written on March 18th, 2023.

Weekly summary in a paragraph

The US stock market indices were mixed in a week which was dominated once again by the banking sector being under pressure despite notable interventions on First Republic in the US, and on Credit Suisse in Europe. The Nasdaq was very strong partly due to a golden cross finally forming on Wednesday, and joins all the other major US indices who already achieved the mother-of-all technical signals weeks or months ago. Europe experienced the second week of decline as the ECB raised interest rates by 0.5%, with more hikes seen ahead due to inflation still being high: this move may help the Fed justify at least a 0.25% hike at next Wednesday’s FOMC meeting. The 10-y yield staged a sharp reversal to the point that the 2-10y spread dropped to -42 basis points. In corporate news, Adobe and Fedex beat Q4 2022 estimates while Dollar General reported in-line.

Asset classes weekly performance

This week the Dow finished -0.15% lower (-3.9% year to date) while the S&P500 gained +1.43% (+2.0% year to date), the Nasdaq shot up +4.41% (+11.12% year to date) and the Russell 2000 lost -2.64% (-2.01% year to date, we have a 3x short position). Gold finished +4.33% higher (+7.07% year to date, we are long) while Silver gained +3.22% (-6.8% year to date). Oil tanked -7.0% (-14.15% year to date). The 10-y US treasury yield finished a whopping -6.68% lower (-10.49% year to date). The European stock market gave up -2.5% (+7.4% year to date). The Euro finished -0.12% lower against the US Dollar (-0.36% year to date).

Weekly pitch

I am fundamentally a value investor but like using technical analysis to guide entry/exit points in my positions from time to time. According to technical analysis a ‘golden cross’ occurs when the 50-day moving average crosses above the 200-day moving average. Many algorithms use this event as a prompt to buy an asset. Conversely, a ‘death cross’, ie when 50-day moving average crosses below the 200-day moving average, is seen as a bearish sign. As mentioned in the weekly summary, the Nasdaq finally saw a golden cross form this week, and is the last of the major US stock indices to do so after the Dow (mid December 2022), the Russell 2000 (late January 2023), and the S&P500 (early February 2023). The flows in equities were stable this week, and it is possible that had the Nasdaq not experience a golden cross the markets may have had another sharp decline.

Weekly Portfolio Update

Here are this week’s movements: we took profits on our Williams-Sonoma short position (+6.5%); we initiated new short positions on Adobe, Pinterest, Snapchat and Five Below. Cash, precious metals and hedges amount to 40% in our portfolio (reduced compared to last week).

Top 5 Weekly Portfolio Performers

Newmont Mining Corp +14.26% (Precious metals)

ACI Worldwide +13.38% (Technology)

Google +12.58% (Technology)

Microsoft +12.41% (Technology)

Silver +9.38% (Precious metals)

Portfolio Asset Allocation

US Long stock positions 51% (increased)

EU Long stock positions 9% (unchanged)

US Short stock position 4.5% (increased)

Hedges 7.5% (increased)

Silver & Gold 5% (unchanged)

Cash 23% (reduced)

1-year Portfolio Performance

Our portfolio performance over the last 12 months is -3.5% (excl. dividends) vs the S&P500 loss of -11.2%, which corresponds to a +7.7% market beat.

…in case you missed it…

Check out our first 2023 weekly newsletter to read the 5 things I got right in 2022…and the 5 I got wrong.

Invest responsibly!!!

Please donate for the earthquake in Turkey | Responsible Investor Weekly Newsletter, February 11th, 2023

With such a devastating force of nature and ailing shelters, the havoc wreaked in Turkish left at least 23,000 dead, with the count only poised to grow in the coming days. With news like these nothing financially relevant seems relevant, really. So read what follows lightly and make your hearts heavy with grief for those who fell. Donate if you can.

Weekly summary in a paragraph

US stock markets finished lower on Friday after a 3-week and a 6-week rise for the S&P500 and the Nasdaq, respectively. Value continues to underperform relative to growth. Oil higher mostly due to Russia cutting production by 0.5M barrels. The terminal rate is now expected at 5.15% from 4.9% last Thursday. The 2-10y inversion has reached 80 basis points. Economic data published this week threw a spanner in the works of the disinflationary path: it is very difficult to go from 4 to 2% and the Fed does not seems to backtrack from its 2% target. In corporate news, Disney earnings beat expectations on a cost cutting programme while Google got clobbered by losing an AI competition.

Asset classes weekly performance

This week the Dow finished -0.17% lower (+2.2% year to date) while the S&P500 did worse with a -1.1% decrease (+6.5% year to date, we are 1 time short), the Nasdaq tanked -2.4% (+12.0% year to date, we have a 3 times inverse position) and the Russell 2000 lost as much as -3.4% (+9.0% year to date). Gold finished lower -0.1% (+2.2% year to date, we are long) while Silver was -1.6% weaker (-8.8% year to date, we are long). Oil jumped +8.4% (-0.7% year to date). The 10-y US treasury yield jumped +1.9% this week (-1.3% year to date). The European stock market gave up -1.8% (+11.3% year to date). The Euro finished -1.1% lower against the US Dollar (-0.3% year to date).

Weekly pitch

It was too good to be true, wasn’t it? And often when things are too good to be true they just aren’t. The Nasdaq failed to add a 7th week of consecutive gains and retraced after having delivered what were basically a year’s worth of gains in the first 40 days of 2023.

It is tempting to go all in when markets outperform but it is prudent to either keep profitable positions on a tight leash (do you use automatic sell stops and take profits like we do?) or have cash and hedges in one’s portfolio (see our portfolio asset allocation below). We have beaten the market this week and are protected to the downside should there be more pain coming next week when the January CPI is announced.

Weekly Portfolio Update

Here are this week’s movements: we took profits on Nucor (+9.3%), Qualcomm (+3.2%) and Global Lithium ETF (+7.9%); take profits were triggered on our Pinterest, Peloton, SL Green Realty and Semrush Holdings short positions. Cash, precious metals and hedges amount to 39.5% in our portfolio (increased compared to last week).

Top 5 Weekly Portfolio Performers

ProShares UltraPro Short Russell 2000 +10.8% (3x inverse Russell 2000)

Vix short-term S&P500 future +7.5% (Volatility)

ProShares UltraPro QQQ +6.4% (2x inverse Nasdaq)

Denbury +4.3% (Oil)

Callon Petroleum Company +4.0% (Oil)

Portfolio Asset Allocation

US Long stock positions 44% (reduced)

EU Long stock positions 10% (unchanged)

Short stock position 6.5% (unchanged)

Hedges 7% (unchanged)

Silver & Gold 4% (unchanged)

Cash 28.5% (increased)

Year to date Portfolio Performance

Our year to date portfolio performance is +4.7% (excl. dividends) vs the S&P500 gain of +6.5%.

…in case you missed it…

Check out our first 2023 weekly newsletter to read the 5 things I got right in 2022…and the 5 I got wrong.

Podcasts

You can now listen to this newsletter on Apple Podcasts and Spotify.

Invest responsibly!!!

Apple, Google, Amazon and Microsoft disappoint: who is left to save the earnings season? | February 4th, 2023 Newsletter

Weekly summary in a paragraph

Fifth straight week of upside for the Nasdaq despite most of the Q4 earnings reports from the major tech stocks disappointed, the exception being Meta (which we own). Ford, Qualcomm and Starbucks also missed. The Fed confirmed the expected quarter point rate hike on Wednesday and Powell came across as relatively dovish during the press conference. The most notable data point of the week was the January nonfarm employment which was up 517k vs 190k consensus – a clear underestimation, which would suggest continued strength in the job market and brings the unemployment down to 3.4% (vs 3.6% expected). More than half of the S&P500 companies are yet to report: the next two weeks will be key to assess the extent of the year on year earnings decline for Q4.

Asset classes weekly performance

This week the Dow finished -0.1% lower (+2.4% year to date) while the S&P500 did better with a +1.6% increase (+7.7% year to date, we are 1 time short), the Nasdaq gapped +3.3% higher (+14.7% year to date, we have a 3 times inverse position) and the Russell 2000 gained +3.9% (+12.7% year to date). Gold finished lower -3.2% (+4.0% year to date, we are long) while Silver was -5.1% weaker (-6.7% year to date, we are long). Oil tanked -7.8% (-4.6% year to date). The 10-y US treasury retraced -0.3% this week (-6.9% year to date). The European stock market gained +0.9% (+13.3% year to date). The Euro finished +0.7% higher against the US Dollar (+0.82% year to date).

Weekly pitch

Investors have finally been able to catch a breath after a very positive January. Given the steep climb of these first 5 weeks of 2023, particularly for long-duration tech stocks, one wonders whether the Nasdaq has gone up too quickly. Despite finishing up again this week, the fact that all the four biggest tech companies have disappointed is weakening the bullish sentiment in the Nasdaq, at least in the short term.

It is tempting to go all in when markets outperform but it is prudent to either keep profitable positions on a tight leash (do you use sell stops and take profits like we do?) or have cash and hedges in one’s portfolio (see our portfolio asset allocation below).

Weekly Portfolio Update

Here are this week’s movements: we took profits on Newmont Mining (+13%) and Amazon (+8%); partial sell stops were triggered on our Intel, Mattel, Oak Street Health and Williams-Sonoma short positions. Cash, precious metals and hedges amount to 37% in our portfolio (reduced compared to last week).

Top 5 Weekly Portfolio Performers

Meta +24.4% (Social media/Tech)

Gap +12.12% (Retail trade)

Thor +11.04% (Recreational products)

Orsted +8.18% (Utilities, Green Power)

NXPI +8.05% (Semiconductors)

Portfolio Asset Allocation

US Long stock positions 47% (unchanged)

EU Long stock positions 10% (unchanged)

Short stock position 6.5% (increased)

Hedges 7% (reduced)

Silver & Gold 4% (unchanged)

Cash 26% (reduced)

Year to date Portfolio Performance

Our currency-adjusted year to date portfolio performance in Euro is +4.51% (excl. dividends) vs the European market gain of +12.51% and +5.6% in US Dollars vs the S&P500 gain of 7.7%.

…in case you missed it…

Check out our first 2023 weekly newsletter to read the 5 things I got right in 2022…and the 5 I got wrong.

Podcasts

You can now listen to this newsletter on Apple Podcasts and Spotify.

Invest responsibly!!!

If you are getting excited about 2023, read on | January 28th, 2023 Newsletter

Weekly summary in a paragraph

Another positive week for the stock markets around the world. In the US this was helped by positive data points in terms of Personal Consumption Expenditure (PCE), which came in at 0.1%, slowest rise since 2021; the US Q4 GDP increased at an annual rate of 2.9% in the fourth quarter of 2022, after increasing 3.2% in Q3. Bank of Canada is the first to pivot on the tightening policy: who will it be next? Notable Q4 earnings this week included Visa beating and guiding higher (we are long) and Intel which reported disastrous results (we are long two other semiconductors which a leading sector in the market). Looking at quarters and calendar years is arbitrary: if one focuses on the last three months, ie since the cycle lows, the European stock market has outperformed the US indices by 27% (currency adjusted): is your portfolio sufficiently exposed to the European market?

Asset classes weekly performance

This week the Dow finished +1.8% higher (+2.2% year to date) while the S&P500 did better with a 2.5% increase (+2.2% year to date, we are 1 time short), the Nasdaq gapped +4.3% higher (+10.0% year to date, we have a 3 times inverse position) and the Russell 2000 gained +2.4% (+7.2% year to date). Gold finished higher +0.4% (4.4% year to date, we are long) while silver was -2.1% weaker (-3.7% year to date, we are long). Oil was lower -3.4% (+1.0% year to date). The 10-y US treasury advanced +0.2% this week (+3.7% year to date). The European stock market gained +1.0% (+10.1% year to date). The Euro was only +0.1% higher against the US Dollar (1.5% year to date).

Weekly pitch

January is likely to finish with a positive print. But is this impressive rally a bull trap? As interest rates eased, long-duration stocks thrived in these first weeks of 2023 trading due to the P/E multiple expansion. In other words, borrowing money has become cheaper and with the E part of that ratio, ie the Earnings, being substantially unchanged, the P part, ie the Price, has gone up. There is a lot more uncertainty on the earnings side going forward: any sign of weakness in the Q4 earnings expected this week may trigger a sell-off, which is why prudent investors are better off not being fully invested and having cash and hedges in their portfolio (see our portfolio asset allocation below).

Weekly Portfolio Update

Here are this week’s movements: we took partial profits on Qualcomm (+11.53%); sell stops were triggered on our Shopify, Discovery Financial Services and Signet Jewelers short positions. Cash, precious metals and hedges amount to 39% in our portfolio (increased compared to last week).

Top 5 Weekly Portfolio Performers

Global X Lithium & Battery Tech ETF +8.93% (Lithium ETF)

Meta +8.88% (Social media/Tech)

Nucor +8.73% (Steel)

Qualcomm +8.54% (Semiconductors)

Old Republic International +8.48% (Finance/Specialty Insurance)

Portfolio Asset Allocation

Long stock positions 57% (unchanged)

Short stock position 4% (reduced)

Hedges 8% (unchanged)

Silver & Gold 4% (unchanged)

Cash 27% (increase)

Year to date Portfolio Performance

Our currency-adjusted year to date portfolio performance in Euro is +2.9% (excl. dividends) vs the European market gain of +10.1% and +4.4% in US Dollars vs the S&P500 gain of 2.2% (a +2.2% market beat).

…in case you missed it…

Check out our first 2023 weekly newsletter to read the 5 things I got right in 2022…and the 5 I got wrong.

Podcasts

You can now listen to this newsletter on Apply Podcasts and Spotify.

Invest responsibly!!!

Why lower highs are bad news | January 21st, 2023 Newsletter

$QQQ $RTX $CPR.MI $SAND.ST $AMZN WSM $CALM $NVDA $KBE $CSCO $DEN $LIT $QCOM $BRK.B $NUE $DIS $THO $MP $KSS $GL $WMT $TGT $GILD $ORI $CNC $SH $GLD $SLV $SON $NEM $HLT $NXPI $DEN $GPS $JPM $CMG $MSFT $META $BWA $LEA $PSQ $SRTY $SQQQ

Weekly summary in a paragraph

The US stock market was a mixed bag, as the Nasdaq rise for the third week in a row was offset by a weaker S&P500 and a tanking Dow Jones. Europe still looks strong, despite this week’s mild decline. The Bank of Japan continues to be unwilling to change its monetary expansion policy. The second week of Q4 earnings only saw a relatively small number of reports, including the surprise beat by $NFLX: next week will be more telling as the large tech stocks report. In other corporate news, $GOOG joined its predecessor tech giants in cutting a significant amount of its workforce. While investors focus on the savings that such companies may benefit from, they often ignore that unemployment leads to less spending, hence revenue contraction.

Asset classes weekly performance

This week the Dow tanked -2.4% (+0.4% YTD) while the S&P500 did better with only a -0.7% retracement (+2.6% YTD, we are 1x short), the Nasdaq finished +0.7% higher (+5.5% YTD, we have a 3x inverse position) and the Russell 2000 lost -0.8% (+4.6% YTD). $Gold finished higher +0.7% (4.5% YTD, we are long) while silver was -0.6% weaker (-2.2% YTD, we are long). $Oil was mildly higher +0.7% (+3.5% YTD). The 20-y advanced +0.3% this week (+4.1% YTD). The European stock market lost -0.5% (+9.0% YTD). The Euro gave up -0.1% against the USD (1.4% YTD).

Weekly pitch

Investors are better equipped when they rely on both valuation and momentum – that’s to say whether a stock is supported by fundamentals and is liked by the market such that it has more buyers than sellers. Many believe that the Nasdaq has bottomed for this cycle: this argument is sustained by the 3-week upside which started at the turn of the year. However, from a technical analysis standpoint, both the S&P500 and the Nasdaq have continued to make lower highs since their respective all time highs in late 2021. Both these indices are yet to see a golden cross form (ie the 50-day moving average cross above the 200-day moving average). Conversely, the Dow and the Stoxx index have experienced both higher highs and a golden cross: in the short term there may be more justification for these indices to move higher thanks to their underlying stocks belonging to the real economy as opposed to the long-duration, tech firms which represent the lion share of the S&P500 and even more so of the Nasdaq.

Weekly Portfolio Update

Here are this week’s movements: we started a long position in $RTX and $CPR.MI; accumulated on $EL.PA and $SAND.ST (which reported a Q4 earnings beat); took profits on $AIG (+19.66%), $USB (+10.96%), $VWS.CO (+5.31), and $GIS (+6.8%); and initiated a sell position on $M, $QQQ and $DFS; while a SL was triggered on our $SI and $LEN short position. Cash, precious metals and hedges amount to 37% in our portfolio (reduced compared to last week).

Top 5 Weekly Portfolio Performers

$GOOG +6.98% (Technology-Internet)

$CPE +6.23% (Oil)

$CSCO +4.30% (Technology, short position)

$DIS +4.10% (Media-Diversified)

$SRTY +3.20% (3x inverse Russell 2000)

Portfolio Asset Allocation

Long stock positions 57% (increased)

Short stock position 6% (reduced)

Hedges 8% (unchanged)

Silver & Gold 4% (unchanged)

Cash 25% (reduced)

YTD Portfolio Performance

Our currency-adjusted YTD portfolio performance in Euro is +2.0% (excl. dividends) vs the European market gain of +6.4% and +3.40% in USD vs the S&P500 gain of 2.9% (a +0.5% market beat).

…in case you missed it…

Check out last week’s newsletter to read the 5 things I got right in 2022…and the 5 I got wrong.

Invest responsibly!!!

Why this earnings season is key to predict 2023 | January 14th, 2023 Newsletter

$AMZN $ACIW $WWE $SLG $WSM $VWS.CO $CALM $NVDA $GIS $KBE $CSCO $DEN $LIT $QCOM $BRK.B $SIG $NUE $DIS $THO $MP $KSS $GL $WMT $TGT $GILD $AIG $ORI $USB $CNC $SH $GLD $SLV $SON $NEM $HLT $NXPI $DEN $GPS $JPM $CMG $MSFT $META $BWA $LEA $PSQ $SRTY $SQQQ

Weekly summary in a paragraph

Second week of upside in a row in this 2023 as last Thursday’s CPI report pleased more the bulls than it did the bears. Despite the disinflation narrative, China re-opening and more resilient than expected European market, the positive sentiment does not seems entirely justifiable.

The first Q4 earnings reports have started to come in, traditionally kicked off by the major US banks, which mostly surprised and finished higher in the Friday session as well as for the week. While the P/E multiple might have contracted as much as it will for this cycle, the fate of earnings is much more uncertain and it is therefore key to closely watch the Q4 earnings results and forecasts for any sign of weakness.

Asset classes weekly performance

This week the Dow gained +2.0% (+3.6% YTD) while the S&P500 did better with a +4.1% jump (+4.4% YTD, we are 1x short), the Nasdaq finished +4.8% higher (+6.6% YTD, we have a 3x inverse position) and the Russell 2000 gapped up +5.3% (+7.6% YTD). $Gold finished higher +2.9% (5.4% YTD, we are long) while silver was +1.8% stronger (+1.5% YTD, we are long). $Oil rebounded +8.5% (1.4% YTD). The 20-y advanced +1.5% this week (+6.8% YTD). The European stock market beat the main US stock market indices and gained +5.2% (+10.8% YTD). The Euro gave up 1.8% against the USD (1.2% YTD).

Weekly pitch

Stocks follow earnings and earnings expectations. If the earnings of a publicly listed company grow, so does its stock price. That is why the bull market which started in March 2009 and lasted 10+ years: in fact the S&P500 average earnings bottomed back then and have grown year on year. The spanner in the works of this more than decade-long favourable trend has been the sudden rise of interest rates, which has contracted the P/E multiple: that is the main reason why the major stock markets around the world entered into bear market territory in 2022. With the FED expected to soon pivot to a more dovish (or less hawkish) monetary policy, all eyes are now on earnings, especially for 2024 because the markets are forward looking: should the earnings continue to grow, a new bull market will be born; else there will be more pain ahead for investors putting their money to work on the long side.

Weekly Portfolio Update

Here are this week’s movements: we started a position in $AMZN and $ACIW, took partial profits on $PSQ (+5.1%), took profits on $BSX.US (+9.41%), reduced our hedge position in $SH (+3.3%), and initiated a sell position on $WWE and $SLG while a SL was triggered on our $SIG short position. Cash, precious metals and hedges amount to 38% in our portfolio (reduced compared to last week).

Top 5 Weekly Portfolio Performers

$CPE +10.61% (Oil)

$THO +10.19% (Consumer durables, recreational products)

$GPS +9.59% (Apparel of footwear retail)

$NUE +9.47% (Steel)

$CMG +8.75% (Restaurants)

Portfolio Asset Allocation

Long stock positions 54% (reduced)

Short stock position 8% (increased)

Hedges 8% (reduced)

Silver & Gold 4% (unchanged)

Cash 26% (increased)

YTD Portfolio Performance

Our currency-adjusted YTD portfolio performance in Euro is +2.43% (excl. dividends) vs the European market gain of +9.6% and +3.63% in USD vs the S&P500 gain of 4.4%.

…in case you missed it…

Check out last week’s newsletter to read the 5 things I got right in 2022…and the 5 I got wrong.

Invest responsibly!!!

5 things I got right in 2022..and 5 I got wrong | January 7th, 2023 Newsletter

$WSM $VWS.CO $CALM $NVDA $GIS $SRTY $KBE $CSCO $DEN $LIT $QCOM $BRK.B $SIG $NUE $PLUG $TELL $DIS $THO $MP $KSS $GL $WMT $TGT $GILD $AIG $ORI $USB $CNC $SH $GLD $SLV $SON $NEM $HLT $NXPI $DEN $GPS $JPM $CMG $MSFT $META $BWA $LEA

Weekly summary in a paragraph

While the Santa rally did not materialise, the first trading week of 2023 did not disappoint for stock markets around the world which finished higher. In the US the 4 days of trading were choppy with the Friday session bringing it home thanks to the justification which came from falling ISM services and a less than expected rise in the average hourly earnings, both of which offset the strong jobs report.

The stock market rally continued in China, particularly for tech, as investors are bullish on rumours that the crack-down on publicly listed companies may ease. Europe outperformed the US even though its gains were offset by a sharp weakening of the Euro relative to the Dollar.

There is a growing bullish sentiment, even in the Nasdaq who some analysts believe to have found the bottom. With the Q4 earnings season due to kick off next week, investors need to remain vigilant as this will be a key quarter to watch for signs of weakness especially with regards to 2024 estimates: the markets are forward-looking!

Asset classes weekly performance

This week the Dow gained +1.45% (+1.45% YTD) just like the S&P500 (+1.45% YTD, we are 1x short), the Nasdaq finished +0.98% higher (+0.98% YTD, we have a 3x inverse position) and the Russell 2000 gapped up +2.4% (+2.4% YTD, we are 1x short). $Gold finished higher +2.4% (2.4% YTD) while silver was -0.6% lower (-0.6% YTD). $Oil fell sharply by -4.1% (-4.1% YTD). The 20-y was markedly higher with a +3.7% gain this week (+3.7% YTD). The European stock market gained +4.7% (+4.7% YTD). The Euro gave up -1.5% against the USD (-1.5% YTD).

Weekly pitch

5 things I got right in 2022:

Sold $AAPL and $GOOG close to the peak (August), plus other long-duration stocks which do not do well in a rising interest rate environment
Hedged, including raising cash
Sold short $TLT
Monitored the markets more closely than I would do in a bull market
Followed macro trends and invested accordingly, for example in oil and energy stocks in general

..and 5 I got wrong:

Did not hedge enough and early enough
Did not exploit the energy rally enough and missed the opportunity to invest in LNG stocks
Was too attached to some of my historical long positions without sufficient justification
Covered the $TLT short too early in the year
Partly missed the rally in commodities

Weekly Portfolio Update

Here are this week’s movements: we started a position in the Danish company $VWS.CO, we accumulated on our long position in $META, took profits on the $CSCO short position and initiated a sells position on $WSM. Cash, precious metals, hedges and short stock positions amount to 41% in our portfolio (reduced compared to last week).

Top 5 Weekly Portfolio Performers

$NEM +11.53% (Precious metals)

$FCX +11.26% (Precious metals)

$MC.PA +10.44% (Luxury)

$THO +10.24% (Consumer durables, recreational products)

$SBSW +9.38% (Precious metals)

Portfolio Asset Allocation

Long stock positions 59% (increased)

Short stock position 4% (increased)

Hedges 9% (unchanged)

Silver & Gold 4% (unchanged)

Cash 24% (reduced)

YTD Portfolio Performance

Our currency-adjusted YTD portfolio performance in Euro is +0.22% (excl. dividends) vs the European market gain of +3.2% and the S&P500 gain of 1.45% (+0.27% US market beat, expressed in $).

Invest responsibly!!!

Lessons learnt from beating the stock market | December 31st, 2022 Newsletter

Weekly summary in a paragraph

The last trading week of 2022 in the US stock disappointed: despite a strong leg up in the Thursday session, the Santa rally did not materialise and all the major US market indices were mildly lower. Some late earnings report dominated the news in a week characterised by low volume due to the holiday season: $NKE surprised while $MU disappointed.

The Bank of Japan made another unexpected move by launching ‘emergency buys’ of 2 and 5-year bonds. Mild weather in Europe have helped ease the pain of a still unresolved energy infrastructure and base load crisis.

Meanwhile in China a total U-turn on Covid restrictions is allegedly causing millions of deaths with consequences on policies all over the world. Investors need to watch this development as it may impact earnings as well as commodity prices.

Asset classes weekly performance

This week the Dow lost -0.1% (-8.58% YTD) just like the S&P500 (-19.44% YTD, we are 1x short), the Nasdaq retraced -0.3% (-33.03% YTD, we have a 3x inverse position) and the Russell 2000 finished flat (-21.40% YTD, we are 1x short). $Gold finished higher +1.4% (-1.23% YTD) and silver gained +0.8% (+2.14% YTD). $Oil continued its climb with a +0.9% gain (4.24% YTD). The 20-y lost -2.6% this week (-30.04% YTD). The European stock finished -0.3% lower (-15.86% YTD). The Euro gave up -0.8% against the USD (-6.14% YTD).

Weekly pitch

The year that just ended was one the of the worst for investors long stocks and bonds – here are a few lessons learnt along the way: 1) a rising interest rate environment hurts intangible, long-duration stocks much more than companies operating in the so-called real economy; 2) dollar strength negatively impacts on precious metals and emerging markets; 3) the war economy accelerates de-globalisation and is one of the contributors to sustained high inflation; 4) hedging is a critical tool available to investors that allows them to follow a risk-based approach. Many of these themes will continue to dominate in the new year, or at least for part of it, so if investors want to beat the market in 2023 (just like we did in 2022), they need to adopt an active (as opposed to a passive, ‘buy-and-hold’) approach to investing and hedge.

Weekly Portfolio Update

Here are this week’s few movements: we initiated a long position in $CALM, took profits on our $NVDA short position (+9.5% gain) and a stop loss was triggered on $PLUG. Cash, precious metals, hedges and short stock positions amount to 44% in our portfolio (unchanged compared to last week).

Top 5 Weekly Portfolio Performers

$CPE +2.92% (Oil)

$JPM +2.15% (Banking)

$META +1.95% (Social Media)

$LEA +1.72% (Auto Parts)

$CHTR +1.55% (Communications)

Portfolio Asset Allocation

Long stock positions 56% (unchanged)

Short stock position 3% (unchanged)

Hedges 9% (unchanged)

Silver & Gold 4% (unchanged)

Cash 28% (unchanged)

YTD Portfolio Performance

Our currency-adjusted YTD portfolio performance is -9.47% (excl. dividends) vs the European market loss of -10.43% (+0.3% European market beat, expressed in €) and the S&P500 loss of -19.33% (+3.8% US market beat, expressed in $).

Invest responsibly!!!

IS THE SANTA RALLY ONE WEEK LATE ? | December 24th, 2022 | $NVDA $GIS $SRTY $KBE $CSCO $DEN $LIT $QCOM $BRK.B $SIG $NUE $PLUG $TELL $DIS $THO $MP $KSS $GL $WMT $TGT $GILD $AIG $ORI $USB $CNC $SH $GLD $SLV $SON $NEM $HLT $NXPI $DEN $GPS $JPM $CMG $MSFT

Weekly summary in a paragraph

Mixed results in the US stock market this week: while the Dow finished higher, the S&P500 was mildly lower whereas the Nasdaq closed markedly down and is in the red for the third straight week. Good performance for precious metals and related stocks. The jobs report indicated resilience in the US labour market and the inflation data points were either in line with expectations or mildly hotter.

The Bank of Japan shocked the world with its decision to end its long-standing money printing policy. Oil showed its strength after Russia declared that production could be cut to counteract the price cap decision by the EU. All of this while the largest ever US equities outflow was recorded.

Meanwhile in China there are reports of record 34M Covid infections in a single day as well as growing concerns for headwinds due to the virus surge. Can a belated Santa Rally in the last trading week of 2022 relieve the pain of a so far rather negative month of December?

Asset classes weekly performance

This week the Dow gained +0.9% (-9.11% YTD) while the S&P500 fell -0.2% (-19.33% YTD, we are 1x short), the Nasdaq retraced -1.9% (-33.04% YTD, we have a 3x inverse position) and the Russell 2000 finished flat (-21.96% YTD, we are 1x short). $Gold finished marginally higher +0.3% (-2.46% YTD) and silver gained +2.2% (+0.84% YTD). $Oil showed its strength with a +7.2% gain and is now back in positive territory for this year (3.03% YTD). The 20-y lost -4.6% this week (-30.04% YTD). The European stock finished +0.3% higher (-16.80% YTD). The Euro recovered +0.3% over the USD (-6.31% YTD).

Weekly pitch

This week’s market behaviour should serve as a reminder that nobody knows what happens next, even when estimates or predictions are met. Investors should follow a risk-based approach and hedge. Simply put, hedging means investing on the opposite side of your main portfolio, though for a smaller proportion, in order to limit losses if the market turns against you. While this reduces your profits when you have the wind in your back, it does offer a parachute when the opposite occurs. Many of those who are beating the market in 2022, like us (see below), have hedged and are either in the black or simply less in the red. The Santa Rally may well just be one week late but why risk and not hedge?

Weekly Portfolio Update

Here are this week’s movements: we took profits on $GILD (+35% gain) and partial profits on our short position in $SIG (+10.88%); we started short positions on $NVDA and $GIS. Stop loss was triggered on $TELL. Cash, precious metals, hedges and short stock positions amount to 44% in our portfolio (increased compared to last week).

Top 5 Weekly Portfolio Performers

$CHTR +9.50% (Communications)

$NVDA +8.24% (Semiconductors, short position)

$SQQQ +6.49% (3x inverse Nasdaq)

$SBSW +6.16% (Precious metals)

$NEM +3.71% (Precious metals)

Portfolio Asset Allocation

Long stock positions 56% (reduced)

Short stock position 3% (unchanged)

Hedges 9% (unchanged)

Silver & Gold 4% (unchanged)

Cash 28% (increased)

YTD Portfolio Performance

Our currency-adjusted YTD portfolio performance is -9.17% (excl. dividends) vs the European market loss of -10.43% (+1.3% European market beat, expressed in €) and the S&P500 loss of -19.33% (+3.9% US market beat, expressed in $).

Invest responsibly!!!