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 26th, 2022 | I am beating the market this year: are you? | $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

Thanksgiving week is statistically a positive week for the US market and characterised by low volume as trading desks are manned by junior staff. The festive sentiment has overshadowed the bad news about further Covid outbreaks which continue to pour in from China – it seems that only commodities are in sync, with further weakness observed in oil and copper to name two. There is also technical resistance ahead around the 4050-4100 area for the S&P500 which closed at 4026 this week.

The European stock market continued its recovery and has now risen 15.7% from the October 13th lows.

Asset classes weekly performance

This week the Dow gained +1.7% (-5.3% YTD) while the S&P500 rose +1.5% (-14.6% YTD, we are 1x short), the Nasdaq limited its gains to +0.7% (-25.9% YTD, we have a 3x inverse position) and the Russell 2000 lost -1.7% (-14.6% YTD, we are 1x short). $Gold recovered +0.3% (-4.15% YTD) while silver finished +2.8% higher (-6.32% YTD). $Oil tanked -4.9% (+6.48% YTD). The 20-y recovered +3.1% this week (-28.3% YTD). The European stock finished +1.6% higher (-15.7% YTD). The Euro recovered +0.8% on the USD (-6.08% YTD).

Weekly pitch

The performance of the S&P500 over the last 30 years is 9.2% annual return (excl. dividends) which means that a 10,000$ investment made in 1993 would have become 92,000$ today. You could say that this is very good especially if you stay invested and navigate both bull and bear markets. That is the argument of the Vanguards of the world and their ETF products. Successful investors manage to beat the market thereby increasing the average annual return. The power of compounding is immense if you think that a simple +2% year on year market beat would become 166,000$ for that same initial investment in 30 years and a whopping 397,000$ with a +5% market beat.

Weekly Portfolio Update

No movements in our portfolio this week. $DIS celebrated the return of Bob Iger as CEO with a +7.70% weekly gain helping the Dow and the S&P500 outperform the Nasdaq. Cash, precious metals and hedges amount to 42% in our portfolio.

Top 5 Weekly Portfolio Performers

$GPS +8.56% (Consumer-Apparel/Shoes)

$DIS +7.70% (Media-Diversified)

$FIVE +4.40% (Consumer-Discount/Variety)

$CHTR +3.66% (Telecom Services-Integrated)

$THO +3.61% (Building-Mobile Mfg./RV)

Portfolio Asset Allocation

– Long stock positions 58% (unchanged)

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

– Silver + Gold 4% (unchanged)

– Cash 28% (unchanged)

YTD Portfolio Performance

Our currency-adjusted YTD portfolio performance is -5.0% (excl. dividends) vs the European market loss of -7.5% (+2.5% European market beat, expressed in €) and the S&P500 loss of -14.6% (+1.4% 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!!!

November 12th, 2022 | Zero earnings growth for 2023: is this week’s rally short-lived? | $META $FTNT $THO $KSS $GLD $SLV $MP $GILD $AIG $GL $USB $ORI $AJRD $NEM $FCX $DIS

Weekly summary in a paragraph

A mildly positive inflation data point on Wednesday was all it took to send the global stock markets higher and induce weakness in the US dollar. I don’t want to be the Cassandra of the situation here, but one month on month data point does not seem enough to justify a reversal of the general trend though technical analysis would suggest further strength ahead at least in the short term.

It was an even stronger week for the European stock market which was further amplified by strength in the Euro.

Asset classes weekly performance

This week the Dow gained +4.1% (-7.2% YTD) while the S&P500 went +5.6% higher (-16.2% YTD, we are 1x short), the Nasdaq skyrocketed +8.0% (-29.0% YTD, we have a 3x inverse position) and the Russell 2000 gained +4.6% (-16.7% YTD, we are 1x short). $Gold rose +5.2% (-4.4% YTD) while silver finished +3.6% higher (-7.2% YTD). $Oil gave up -4.0% (+18.3% YTD). The 20-y recovered +3.9% this week (-33.7% YTD). The European stock market outperformed the US market indices and finished +9.6% higher (-19.2% YTD). The Euro recovered as much as +4.0% relative to the USD (-11.5% YTD).

Weekly pitch

As most of the S&P500 companies have reported Q3 earnings, there is now sufficient data to update earnings forecasts. This week Goldman Sachs revised their S&P500 earnings forecast to the downside ($224 USD) to conclude that they now expect zero earnings growth for 2023. Because stocks follow earnings and earnings expectations, investors will now have to look to 2024 (current estimate is $237 hence +6% compared to ’22 and ‘23) to justify staying invested on the long side.

Weekly Portfolio Update

We initiated three new positions on $NEM, $KSS, and $USB which are already profitable trades. We have also increased our position in gold: if dollar continues its weakness this will send its price higher. Cash, precious metals and hedges were reduced to 37% in our portfolio which rose +2.77% this week.

Top 5 Weekly Portfolio Performers

$META +24.49% (Technology-Social Media)

$FTNT +19.17% (Technology-Software-Security)

$THO +17.38% (Building-Mobile Manufacturing/RV)

$DUE.DE +15.52% (Industrial – Germany)

$KSS +15.24% (Consumer-Dept. Stores)

Portfolio Asset Allocation

– Long stock positions 63% (increased)

– Hedges 9%, though equal to 14% considering leveraged ETFs (unchanged)

– Silver + Gold 4% (increased)

– Cash 24% (decreased)

YTD Portfolio Performance

Our currency-adjusted YTD portfolio performance is -2.2% (excl. dividends) vs the European market loss of -7.7% (+5.5% market beat).

Invest responsibly!!!

October 29th, 2022 | Should you still be invested in Apple, Microsoft, Google and Amazon? | $GOOG $AMZN $MSFT $AAPL $META $GILD $TLT $GL $AIG $CHTR $ORSTED.CO $PINS $BWA $FIS $CMG $V $MBG.DE $CARLB.CO $EL.PA $DSV.CO $GMAB

Weekly summary in a paragraph

It was a tale of two stock markets in the US: while all the major indices continued to rally for the second week in a row, major tech companies reported poor earnings and most importantly week outlook which limited gains for the Nasdaq. Given the hotter than expected inflation data (core PCE came in at 0.5% vs 0.4% consensus) this recent optimism seems largely unjustified although we are heading towards a period of positive seasonality coupled with favourable technicals.

Asset classes weekly performance

This week the Dow gained +3.9% (-11.9% YTD) just like the S&P500 (-18.2% YTD, we are 1x short) and the Nasdaq limited its advance to +2.2% (-31.0% YTD, we have a 3x inverse position). The Russell 2000 skyrocketed +6.0% (-19.5% YTD, we are 1x short). $Gold lost 0.6% (-9.5% YTD) while silver finished flat -0.1% (-16.4% YTD). $Oil rose 3.4%. The 20-y recovered +5.7% this week (-34.2% YTD). The European stock market rose +4.9% (-26.5% YTD). The Euro recovered 1.0% against the USD (-10.9% YTD).

Weekly pitch

The four biggest tech companies in the US stock market all reported earnings this week. There are clear signs of weakness in all four although $AAPL appears more resilient. These are all companies full with an incredible pool of talented individuals though more short-term pain ahead is likely. We had exited our position in $AMZN and $AAPL at the beginning of August, just before they peaked. $META’s earnings were particularly concerning especially the reported losses from investments associated to the metaverse.

Weekly Portfolio Update

After the blowout earnings report $GILD rose sharply and finished with a 19% weekly gain: we have taken partial profit (+26.45%) on our long position. We have also taken partial profits on our short-term $TLT trade (+3.8%). Finally, we initiated long positions on $MP and $AJRD. Cash, precious metals and hedges were reduced to 37% in our portfolio which finished 1.64% higher this week.

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

$GILD +16.93% (Drug-Biotech)

$CHTR +11.45% (Telecom Services)

$BWA +9.55% (Auto/Truck-Original Equipment)

$ORSTED.CO +9.54 (Green Energy)

$FIS +9.08% (Financial)

This is our asset allocation as things stand:

– Long stock positions 63% (increased)

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

– Silver + Gold 3% (unchanged)

– Cash 25% (decreased)

Our currency-adjusted YTD portfolio performance is -3.8% (excl. dividends) vs the European market loss of -15.6% (+11.8% 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!!!

A successful short term trade on $EHTH

Another week of consistent recovery for the US stock market as well as for many others around the world. I remain cautious and still hold onto some hedges because this sudden reversal cannot be fully trusted and due to it being reportedly fueled by a short squeeze for the most part.

While I like to make investments for the long term, I do occasionally perform short term trades and this week I have managed to pull two off! One of them could be traded on eToro and related to eHealth (ticker: $EHTH ). What happened is the classic short selling amplified by the media, with a stock which was trading at 136$ until last week and dropping to below 100$ on Wednesday. I took the opportunity, bought at 99$ and exited at 114$ over the course of two days ! I believe the stock has the potential to go even higher and if I was a more aggressive investor, I would hold on to part of it, but decided to lock in the profit this week.

20200410

There were two more positions we closed this week, on two of the food-related stocks owned in my eToro portfolio, both with a 5% gain, Conagra Foods (ticker: $CAG ) and General Mills (ticker: $GIS ). These were both sold with the automatic sell function available on eToro. I am ready to get back into these two but when any my positions goes above a 10% gain, I have a take profit ready at 5% in order not to give up all the profit if the stock price goes down passed that mark. I then set up a price alert to be notified if the price goes up again past the sell price and re-evaluate my view on that particular stock.

I am also very satisfied with this week’s recovery in my $WFC position, with a 26% jump in just 4 trading days.

So now I am 49% in cash on my eToro portfolio and continue to look for more investment opportunities. One from my watchlist I am prepared to jump into is $BABA , but that will depend on how next week goes.

Enjoy the long weekend and for those who celebrate it, have a happy Easter !

 

Has the #market bottomed ?

If anyone claims to have the answer to this question, they really don’t know what they are saying because the truth is nobody knows. So the best thing to do is to objectively assess what is going on, to invest responsibly and be patient.

This past week has been another rollercoaster with the US markets rallying more than 13% as you can see from the $SPY (an ETF which reproduces the SP500 index), however the #volatility has not moved much, with a weekly reduction of just over 1% (see $VXX the ETF which reproduces the VIX). This means that it is too early to call the bottom in my opinion.

SPY

All investors who are predominantly long are obviously pleased to see this week’s jump, don’t get me wrong, but there are many examples of rallies which have followed large drops. Look at what happened during the 2008 crisis for example, there were 6 positive jumps between +9 and +19% on the way down. Before the market finally bottomed in Q1 2009 the volatility was greater than 30.

File 28-03-2020, 15.14.28

So what can investors do in the meantime ? Be patient and take one day at a time. As I have a long term horizon and the market has already dropped a lot, I did do some nibbling this past week, focusing on dividend payers with a good valuation such as $BMY, but I still have a large cash position overall as I don’t reckon it is time to go all in yet.

I have also increased my hedges, by upping my position on a double inverse SP500 by 50%. One might ask, why enter or increase a long position on a stock while at the same time increasing a short position ? The answer lies in the time horizon, once again. I invest long when there is upside potential in the long term (most of the times), whereas I introduce hedges when markets are volatile, therefore in the short term. If there is another drop next week, my loss will be reduced; if it goes up again, I will gain less but hedges are typically a smaller percentage of one’s portfolio so the loss is limited. In fact, I wish I could always lose on my hedges !!!

If you are interested in seeing what additional stocks I might get long on when the conditions are right, please keep reading my weekend updates !

Stay safe everyone and invest responsibly.

 

The #US journey towards #energy independence in 2 graphs | #ActiveInvesting