Sunday morning

November 20, 2022

 

Hello everyone,

Welcome to a new week.  We are quickly closing out Spring or Fall, depending on where you are in the world. 

The holiday season will soon be upon us in earnest.  But I wonder will consumers be feeling jolly enough to part with a lot of their hard-earned money?  In parts of Australia, people are being pounded by floods back-to-back and another wave of covid.  Unfortunately, I think climate crisis and covid will be a constant in our lives in the future. Covid may become weaker in its virulence, but the climate disasters will only escalate and become more intense – a lesson not to mess with nature.

Survival gear helps us out when the going gets tough in the wilderness, but what sector do investors turn to when there are macro-economic headwinds?  The pharmaceutical industry could be the answer.  It has a history of doing well in tough economic times.  Large-cap biopharma could be a key sector to own for defensive exposure at a reasonable price, according to Credit Suisse.

They go on to say that U.S. pharma as a group is trading at a price-earnings ratio of 16 times to 17 times while defensive sectors utilities and consumer staples have 18-20 P-E ratios, on average.

There is a history showing U.S. pharma beats the S&P500 during major recessions.  The Van Eck Pharmaceutical ETF is down just 4.7% on the year, compared to a 17% loss for the S&P 500 so far in 2022.  Merck is up 33% this year and AbbVie is up 12% in 2022 with more room to run. Credit Suisse indicates Eli Lilly and Pfizer will outperform.  John’s bio-pharmaceutical newsletter has been stellar in picking stocks that have been bullish this year.  We could be well into 2023 before the macroeconomic trends start to settle.  Consequently, Credit Suisse and John believe large-cap biopharma should remain a solid outperformer in the coming months.  And they go on to say that if there is more clarity in the markets going forward and a solid rally is seen, higher-growth names, such as Eli Lilly, will be insulated from the rotation away from defensives and back into growth names.  In short, you can’t go wrong owning a big pharma stock or ETF in your portfolio if you want to diversify and be defensively positioned.

Finally, let’s consider the ramifications of the Fed’s target of 2% inflation.  When you are focused on one target, sometimes we miss other things or dismiss them as unimportant.  How far can you push something until cracks appear?  Parallel to that push for 2%, a flock of black swans could be circling, and then what? In other words, even though the sun may be coming out from behind the clouds and the economy appears to be in better health, don’t let your guard down.  Be prepared for any shocks that may eventuate. 

It’s all about being defensive.

As always, follow John’s trades and you will be well looked after financially.

Wishing you all a wonderful week.

Cheers,

Jacque

"It is during our darkest moments that we must focus to see the light. " - Aristotle

 

Tuesday morning

November 15, 2022

 

Hello everyone,

I trust you are all in good form.

You’ve learned (or are learning how to make money) with John’s help.  Now you must learn how to keep it.

It’s no good making a great trade, taking the money off the table, and then ego getting in the way and ploughing it all back in the next trade and possibly losing it all. Nobody gets it right 100% of the time.  John is right 80%-90% of the time.  But he does have losing trades and you don’t want to be wiped out during one of those trades.

What to do:

Trade the number of contracts you’re comfortable with (and allow you to sleep at night).

Never bet the ranch.

Set a stop loss. 

Don’t overtrade.

If you are learning, start with paper trading.

Household debt jumps

Debt has surged over the past year due to inflation running near its highest pace in more than 40 years and amid rising interest rates and strong consumer demand.

The biggest contributors to that debt load came from mortgage balances, which rose $1 trillion from over a year ago to $11.7 trillion, and credit card debt, which climbed to $930 billion.

Credit card balances collectively rose more than 15% from the same period in 2021, the largest annual jump in more than 20 years, according to the New York Fed.

What to do:

Do I really need to tell you?  Pay off your credit card.  Do you want to make the banks wealthier by virtue of your money?

What is Cathie Wood up to?

The Ark Next Generation ETF bought 315,259 shares of the Grayscale Bitcoin Trust on Monday.  The trust now accounts for 4.6% of the Ark fund’s holdings.

The price of the trust has dropped more than 80% over the past year, and the fund trades well below the value of the bitcoin it holds.

The collapse of FTX has bruised the crypto industry and many of its participants.  Bitcoin has dropped more than 18% since the end of October.

But after the washout, there are often silver linings.  ARK believes in the long-term viability of public blockchains across money, finance, and the internet.  There may be short-term pain, but in the long-term, ARK believes that this “crisis is purging bad actors and will enhance the health of the crypto ecosystem with more transparency and decentralization in the longer term.”

Wishing you all a wonderful day.

All the best.

Cheers,

Jacque

Life is either a daring adventure or nothing at all.  - Helen Keller

 

Thursday, 10th November 2022

 

Hello everyone,

Hope you are all doing wonderfully well.

First, let’s be thankful on Remembrance Day.

There is a lot to get through today, so let’s get straight to it.

John has updated his Long-Term portfolio.

Here it is in a nutshell:

ASSET CLASS

Energy 0%

Biotech & Pharmaceuticals 20%
Bristol Myers (BMY) 5%
Amgen (AMGN) 5%
Eli Lilly (LLY) 10%

Technology
Google (GOOGL) 5%
Apple (AAPL) 5%
Amazon (AMZN) 5%
Square (SQ) 0%

Banks 20%
JP Morgan Chase (JPM) 5%
Bank of America (BAC) 5%
Morgan Stanley (MS) 5%
Goldman Sachs (GS) 5%

International (Long Countries)
Alibaba (BABA) 0%
iShares MSCI Emerging Market ETF (EEM) 10%

Bonds
(SPDR) Barclays High Yield Bond ETF (JNK) 15%

Foreign Exchange
Aussie$ (FXA) 10%

Commodities
Freeport McMoran (FCX) 5%

Precious Metals
iShares Silver Trust (SLV) 5%

Agriculture 0%

==========================================================

ENERGY 0%
Healthcare 20%
Technology 15%
Banks 20%
International 10%
Bonds 15%
Forex 10%
Commodities 5%
Precious metals 5%
Agriculture 0%
Total 100%

Items in red have either been added or deleted recently.

Print this out and stick it on your fridge or on the wall in your office. It will remind you where to park your funds when we have a good entry point. We have had plenty of them recently.

Market rallies 1200 points today as light inflation data hits the airwaves. Even a sniff of lower inflation will get the market feeling jolly. But we can’t break out the champagne yet, I’m afraid. There are still challenges ahead.

It’s all gloom and doom in the house of FTX. There is a litany of reasons this company fell down the well. No board of directors, very poor management, in fact, no real management. Just a hope-for-the-best attitude thinking there would always be an endless pit of funds for anything and everything. Trading could be halted within days. At the time I am writing these withdrawals are still open. Binance offered to help in the bailout, but then quickly thought better of it. FTX has an $8 billion hole. No one would want to touch that in their right mind! Expect more regulation of crypto companies going forward after this mess. And expect cryptos to continue falling before the dust settles.

Next week, I will summarize John’s newsletter which looks at Ten Trends to Bet the Ranch On.

Have a fabulous weekend.

Cheers,

Jacque

P.S. Don’t forget to subscribe to my Post on John’s site. Complimentary period has ended.

If you set goals ridiculously high and it’s a failure, you will fail above everyone else’s success. - James Cameron

 

Sunday morning
November 6, 2022

Hello everyone,

I trust your weekend was a good one.

John’s heading for the start of the week: The Fed Giveth and the Fed Taketh Away.

In other words, welcome to volatility, which will be with us for quite some time.

Another .75% rate hike is on the cards in December.

After that, John thinks we may start to see lower rate hikes, but there are no guarantees here.

Going into the mid-term elections, John is now in a 100% cash position. We also have the Consumer Price Index on Thursday.

A great buying opportunity is setting up in the months ahead.

Financials and Healthcare have been doing well, but technology has lagged.

Technology is for the long term – it may be under the weather for months or years, but it always comes back, as John reminds us, so don’t wipe it completely from your portfolios.

Apple has gone on a hiring freeze. Other names in this sector will follow suit. The winter season in tech will bite workers as the Fed hits the rate rise button.

The Fed is targeting a 2% inflation rate. Listen to the language around the next hike to see if we are closer to lower rate hikes soon.

What’s happening in Twitter Kingdom.

Staff have left or been sacked.

Advertisers have abandoned the social media site.

Conspiracy theories have been front and center on the platform, which creates traffic.

Twitter will launch a new subscription service – Twitter Blue. You will pay $7.99 per month.

Updates are listed as available for users in the U.S., Canada, Australia, the UK, and New Zealand.

Japan spends $42 billion to support the Yen. It didn’t work. The Yen will remain weak so long as interest rates remain near zero.

The Russian economy is shrinking as sanctions continue to take their toll. Convicted criminals are now being called up to fight in the war against Ukraine.

John’s stories from his personal life are always interesting. Here is another.

In 1971, John worked for an LA County Coroner, Thomas Noguchi. He was known as the “coroner to the stars” having famously done autopsies on Marilyn Monroe and Jane Mansfield. John did the night shift and there was free housing at the coroner’s department. The work was not for the faint of heart. In one job John writes about, he and his co-worker were asked to go and pick up a 300-pound man who had died of a heart attack and had been undiscovered in his home for a month. As John describes, they each grabbed an arm and a leg and went to move the person on the count of three. On doing so, however, all limbs were severed from the deceased body. When John asked for gloves for health and safety reasons, he was fired.

What an interesting attitude to workers some companies have!!

Wishing you all a fantastic week.

Cheers,

Jacque

"If you cannot do great things, do small things in a great way, " says Napoleon Hill

 

Hello everyone,

It was .25% points rise in Australia on Tuesday by the RBA.

What will it be on Wednesday by the Fed?  .75% or .50%

The market is treading water today waiting for the announcement and the press conference.   

The job market is still hot with job openings surging in September, despite the Fed’s efforts to cool the market.

So, we just must wait.

Continuing from where I left off on the story about climate change and what our future will look like.

Let’s think about Africa for a moment.

Droughts and heat waves and thriving economically are just not a match anywhere.  According to the African Development Bank, the continent is already losing up to 15% of its economic growth because of climate change.  

At just over one degree of temperature rise, climate change may already have worsened global income inequality by as much as 25%.

It will become increasingly dangerous to work outside in the hottest part of the day.   Many residents will be trapped indoors because of the heat.  Governments may introduce policies related to outdoor labor as the world gets hotter.  

When I worked as a jillaroo in outback Australia, both jackaroos and jillaroos started at around 4am in the morning in peak summer months, rested in shade or inside during the heat of the day, and then worked again from about 3-4pm up until 9:00pm.  It was the only safe way to do the work in the heat. 

 

And what about our reefs?

In the new world, there will probably be zero living coral reefs.

This will have far-reaching effects.

Food harvested directly from corals supplies protein for hundreds of millions of people today.  And maybe a quarter of all global ocean biodiversity depends on reefs, all of which are believed to be imminently endangered.

The world’s oceans will grow more acidic which will affect the marine food chain.

 

How high will sea levels rise?

Greenland contains enough ice to raise sea levels by more than 20 feet.  And the Antarctic would raise them considerably more than that.  But we won’t see a lot of that this century.  Already tens of billions of tons of ice are melting into the oceans every year but given the size of the planet, the rate feels slow.  

There is one thing we do know and that is that the sea levels will continue to rise – forever.

 

Our food

At two degrees of warming, yield declines are expected for most staple crops.  Some are estimating that 40% of today’s cropland is expected to experience severe drought at least three months a year by 2050.

These challenges will bring about new seeds, new fertilizer, and new farming methods.

 

Weather disasters

More intense, more frequent.

…over a third of the world’s population would be hit with severe heat waves once every five years. (NYT)

None of us will ever forget the 2019-2020 Australian bushfires, which killed approximately three billion animals.  Do you remember the effect of the smoke over Sydney?

 

Ferries couldn’t run

Fire alarms in office buildings were continually set off by the smoke

It was a health hazard to walk outside.

The NYT reports that in India, there could be 30 times as many severe heat waves as today lasting five times as long on average.

Solar and wind power will be the energy of the future.  But other forms of energy could also be possible.  Think about green hydrogen, geothermal or next generation nuclear.

Battery technology will be updated and modernized.

The demand for Lithium could possibly grow eightfold by 2030.

There are projects planned for drilling for minerals at the deepest parts of the ocean floor, and China is even thinking about sourcing elements from the moon. 

A quarter of a million people could die annually from climate-related causes.

The climate impacts are only half the story.  The other half will be told by our response to climate change.  We won’t stop the constant climate crises in our world now, but how we manage them and build a future around them will be critically important.

Cheers,

Jacque

 

Learning never exhausts the mind.

Leonardo da Vinci