Global Market Comments
December 18, 2018
Fiat Lux
Featured Trade:(THE CHRISTMAS RALLY GOT STOPPED AT THE BORDER)
(TLT), (TSLA), (AAPL)
(THE PASSIVE/AGGRESSIVE PORTFOLIO),
(ROM), (UYG), (UCC), (DIG), (BIB), (UGL), (UCD), (TBT)
Posts
Global Market Comments
November 26, 2018
Fiat Lux
Featured Trade:
(THE MARKET OUTLOOK FOR THE WEEK AHEAD, or ARE WE IN OR OUT?)
(FB), (AAPL), (AMZN), (NFLX),
(GOOG), (SPY), (TLT), (USO), (UNG), (ROM)
Global Market Comments
October 25, 2018
Fiat Lux
Featured Trade:
(THE LAZY MAN’S GUIDE TO TRADING),
(ROM), (UXI), (BIB), (UYG),
(THE NEXT THING FOR THE FED TO BUY IS GOLD),
(GLD), (GOLD), (GDX), (ABX), (NEM)
Global Market Comments
July 5, 2018
Fiat Lux
Featured Trade:
(TRADING FOR THE NON-TRADER),
(ROM), (UXI), (UCC), (UYG)
Global Market Comments
July 2, 2018
Fiat Lux
Featured Trade:
(THE MARKET OUTLOOK FOR THE WEEK AHEAD, OR THE FUTURE IS HAPPENING FAST),
(HOG), (TLT), (ROM), (MU), (NVDA), (LRCX),
(SPY), (AMZN), (NFLX), (EEM), (UUP), (WBA),
(THE WORST TRADE IN HISTORY), (AAPL)
What if you want to be a little more aggressive with your investment strategy, say twice as aggressive? What if markets don't deliver any year on year change?
Then you need a little more pizzazz in your portfolio, and some extra leverage to earn your crust of bread and secure your retirement.
It turns out that I have just the solution for you. This would be my "Passive/Aggressive Portfolio".
I call it passive in that you just purchase these positions and leave them alone and not trade them. I call it aggressive as it involves a basket of 2x leveraged ETF's issued by ProShares, based Bethesda, MD (click here for their link).
The volatility of this portfolio will be higher. But the returns will be double what you would get with an index fund, and possibly much more. It is a "Do not open until 2035" kind of investment strategy.
Here is the makeup of the portfolio:
(ROM) - ProShares Ultra Technology Fund - The three largest single stock holdings are Apple (AAPL), Microsoft (MSFT), and Facebook (FB). It was up 80.95% last year. For more details on the fund, please click here.
(UYG) - ProShares Ultra Financials Fund - The three largest single stock holdings are Wells Fargo (WFC), Berkshire Hathaway (BRK.B), and JP Morgan Chase (JPM). It was up 38.42% last year. For more details on the fund, please click here.
(UCC) - ProShares Ultra Consumer Services Fund - The three largest single stock holdings are Amazon (AMZN), Walt Disney (DIS), and Home Depot (HD). It was up 3.71% last year. For more details on the fund, please click here.
(DIG)- ProShares Ultra Oil & Gas Fund - The three largest single stock holdings are ExxonMobil (XOM), Chevron (CVX), and Schlumberger (SLB). It was DOWN 9.20% last year. For more details on the fund, please click here.
(BIB) - ProShares Ultra NASDAQ Biotechnology Fund - The three largest single stock holdings are Amgen (AMGN), Regeneron (REGN), and Gilead Sciences (GILD). It was up 40.49% last year, please click here.
You can play around with the sector mix at your own discretion. Just focus on the fastest growing sectors of the US economy, which the Mad Hedge Fund Trader does on a daily basis.
It is tempting to add more leveraged ETF's for sectors like gold (UGL), to act as an additional hedge.
There is also the 2X short Treasury bond fund (TBT), which I have been trading in and out of for years, a bet that long-term bonds will go down, interest rates rise.
There are a couple of provisos to mention here.
This is absolutely NOT a portfolio you want to own going into a recession. So, you will need to exercise some kind of market timing, however occasional.
The good news is that I make more money in bear markets than I do in bull markets because the volatility is so high. However, to benefit from this skill set, you have to keep reading the Diary of a Mad Hedge Fund Trader.
There is also a problem with leveraged ETF's in that management and other fees can be high, dealing spreads wide, and tracking error huge.
This is why I am limiting the portfolio to 2X ETF's, and avoiding their much more costly and inefficient 3X cousins, which are really only good for intraday trading. The 3X ETF's are really just a broker enrichment vehicle.
There are also going to be certain days when you might want to just go out and watch a long movie, like Gone With the Wind, with an all ETF portfolio, rather than monitor their performance, no matter how temporary it may be.
A good example was the flash crash, when the complete absence of liquidity drove all of these funds to huge discounts to their asset values.
Check out the long-term charts, and you can see the damage that was wrought by high frequency traders on that cataclysmic day, down -53% in the case of the (ROM). Notice that all of these discounts disappeared within hours. It was really just a function of the pricing mechanism being broken.
I have found the portfolio above quite useful when close friends and family members ask me for stock tips for their retirement funds.
It was perfect for my daughter, who won't be tapping her teacher's pension accounts for another 45 years, when I will be long gone. She mentions her blockbuster returns every time I see her, and she has only been in them for five years.
Imagine what technology, financial services, consumer discretionaries, biotechnology, and oil and gas will be worth then? It boggles the mind. My guess is up 100-fold from today's levels.
You won't want to put all of your money into a single portfolio like this. But it might be worth carving out 10% of your capital and just leaving it there.
That will certainly be a recommendation for financial advisors besieged with clients complaining about paying high fees for negative returns in a year that is unchanged, or up only 1%-2%. Virtually everyone has them right now.
Adding some spice, and a little leverage to their portfolios might be just the ticket for them.
It's Time to Spice Up Your Portfolio
I have long advocated my ?Buy and Forget? portfolio for those who are terrible at trading.
This is where you buy just six self hedging, counterbalancing exchange traded funds and then rebalance once a year (click here for the article).
But what if you want to be a little more aggressive, say twice as aggressive? What if markets don?t deliver any year on year change, as they have done this year?
Then you need a little more juice in your portfolio, and some extra leverage to earn your crust of bread and secure your retirement.
It turns out that I have just the solution for you. This would be my ?Passive/Aggressive Portfolio?.
I call it passive in that you just purchase these positions and leave them alone and not trade them. I call it aggressive as it involves a basket of 2x leveraged ETFs issued by ProShares, based in Bethesda, MD (click here for their site).
The volatility of this portfolio will be higher. But the returns will be double what you would get with an index fund, and possibly much more. It is a ?Do not open until 2035? kind of investment strategy.
Here is the makeup of the portfolio:
(ROM) ?- ProShares Ultra Technology Fund - The three largest single stock holdings are Apple (AAPL), Microsoft (MSFT), and Facebook (FB). It is up 13.7% so far this year. For more details on the fund, please click here: http://www.proshares.com/funds/rom_daily_holdings.html.
(UYG) ? ProShares Ultra Financials Fund - The three largest single stock holdings are Wells Fargo (WFC), Berkshire Hathaway (BRK.B), and JP Morgan Chase (JPM). It is up 6.2% so far this year. For more details on the fund, please click here: http://www.proshares.com/funds/uyg_index.html.
(UCC) ? ProShares Ultra Consumer Services Fund - The three largest single stock holdings are Amazon (AMZN), (Walt Disney), (DIS), and Home Depot (HD). It is up 18.3% so far this year. For more details on the fund, please click here: http://www.proshares.com/funds/ucc.html.
(DIG) -- ProShares Ultra Oil & Gas Fund - The three largest single stock holdings are ExxonMobil (XOM), Chevron (CVX), and Schlumberger (SLB). It is DOWN 38.2% so far this year. For more details on the fund, please click here: http://www.proshares.com/funds/dig.html.
(BIB) ? ProShares Ultra NASDAQ Biotechnology Fund ? The three largest single stock holdings are Amgen (AMGN), Regeneron (REGN), and Gilead Sciences (GILD). It is up 15% so far this year, but at one point (before the ?Sell in May and Go away? I widely advertised) it was up a positively stratospheric 64%. For more details on the fund, please click here; http://www.proshares.com/funds/bib.html.
You can play around with the sector mix at your own discretion. Just focus on the fastest growing sectors of the US economy, which the Mad Hedge Fund Trader does on a daily basis.
It is tempting to add more leveraged ETFs for sectors that are completely bombed out, like gold (UGL), which has pared 27% of its value in 2015, and commodities (UCD) which is off 15%.
But it is likely that these despised ETFs will move down before they move up, especially going into year end.
There is also the 2X short Treasury bond fund (TBT), which I have been trading in and out of for years, a bet that long-term bonds will go down, interest rates rise.
There are a couple of provisos to mention here.
This is absolutely NOT a portfolio you want to own going into a recession. So you will need to exercise some kind of market timing, however occasional.
The good news is that I make more money in bear markets than I do in bull markets because the volatility is higher. However, to benefit from this skill set, you have to keep reading the Diary of a Mad Hedge Fund Trader.
There is also a problem with leveraged ETFs in that management and other fees can be high, dealing spreads wide, and tracking errors huge.
This is why I am limiting the portfolio to 2X ETFs, and avoiding their much more costly and inefficient 3X cousins, which are really only good for intraday trading. The 3X ETFs are really just a broker enrichment vehicle.
There are also going to be certain days when you might want to just go out and watch a long movie, like Gone With the Wind, with an all ETF portfolio, rather than monitor their performance, no matter how temporary it may be.
A good example was the August 24 flash crash, when the complete absence of liquidity drove all of these funds to huge discounts to their asset values.
Check out the charts below, and you can see the damage that was wrought by high frequency traders on that cataclysmic day, down -53% in the case of the (ROM). Notice that all of these discounts disappeared within hours. It was really just a function of the pricing mechanism being broken.
I have found the portfolio above quite useful when close friends and family members ask me for stock tips for their retirement funds.
It was perfect for my daughter who won?t be tapping her teacher?s pension accounts for another 45 years, when I will be long gone. She mentions her blockbuster returns every time I see her, and she has only been in them for five years.
Imagine what technology, financial services, consumer discretionaries, biotechnology, and oil and gas will be worth then? It boggles the mind. My guess is up 100 fold from today?s levels.
You won?t want to put all of your money into a single portfolio like this. But it might be worth carving out 10% of your capital and just leaving it there.
That will certainly be a recommendation for financial advisors besieged with clients complaining about paying high fees for negative returns in a year that is unchanged, or up only 1%-2%. Virtually everyone has them right now.
Adding some spice, and a little leverage to their portfolios might be just the ticket for them.
It?s Time to Spice Up Your Portfolio
Since I am in a major patting myself on the back mood, I thought I would rerun a piece I ran last October entitled ?Apple is Ready to Explode?. This is back when the shares were trading at a lowly $490 a share.
Since then I have been urging readers to get in on the long side at every opportunity. They are now up a mind boggling 43% from that timely recommendation. They are laughing all the way to the bank.
?You have to be impressed how Apple shares have been trading during the Washington shutdown and the debt ceiling crisis. While other highflying technology stocks have crashed and burned, Apple has held like the Rock of Gibraltar.
Is this presaging much better things to come?
After the bar was set extremely low in the run up to the iPhone 5s launch, there has been an onslaught of good news. The first weekend sales came in at a staggering 9 million units, nearly double analyst forecasts. That?s a lot of units to be wrong by.
This has led to a series of broker upgrades by Cantor Fitzgerald, Cowen & Co., Piper Jaffray, Sanford Bernstein, and most recently by Jeffries. Entrenched bears are slowly an inexorably turning into bulls. Targets range up to $780.
During the summer, when the shares were trading in the low $400?s, Apple emerged as the largest buyer of its own stock. Still, it only made a dent in the $60 billion the company has dedicated to the program.
Of course, corporate raider and green mailer Carl Icahn (he lived in my building in Manhattan and was always a bit of a jerk) wants Apple to buy $160 billion of its stock, about $36% of the total market capitalization. But with a position of only $2 billion, Carl doesn?t have enough skin in the game to get anything more than a free dinner from CEO Tim Cook.
Still, the more Icahn bangs the drum about the value of Apple, the more money he sucks in. His blustering has probably added about $50 to the stock price. That works for me.
Like the Origin of the Universe and the 105-year long losing streak suffered by the Chicago Cubs baseball team, the cheapness of Apple shares is one of those mysteries that baffles investors. Sure, you?d expect some natural profit taking after the meteoric 15 year run in the shares, from $4 to $707. But a 46% drawdown is a lot, and many would say too much.
The company has eye popping net profits of $3.5 million per business hour (click here for the most recently quarterly announcement). Some one third of it capitalization, or $150 billion, sits in cash in European bank accounts.
That works out to $165 of the current $490 share price. This brings the ex cash trailing price earnings multiple down to a subterranean 11.8 times, or a 25% discount to the 16X market multiple. The dividend yield of 2.5% still exceeds that of the ten year Treasury bond. This is absurdly cheap.
Anyone who makes their living looking at the numbers has been loading up on the stock for the past eight months. Even permabear and short seller, Jim Chanos, has been buying on the theory that both Apple, and competitor Samsumg, together have been demolishing the Wintel architecture.
I think there is something important going on here. Apple is bringing out the next generation iPad in two weeks. Product refreshes for the iMac, Macbook, and Airbook in coming months are already well known. Every time an announcement of an announcement is made, the stock spikes $10.
But the 800-pound gorilla in Apples earnings stream is the iPhone, which accounts for more than 70% of its profits. The wildly successful 5s and 5c launches will take total smart phone sales from around 36 million in Q3 to at least 56 million units in Q4. The analyst community is nowhere near these numbers, so they are substantially underestimated the profitability of the company.
Apple has already cracked the China market for cash buyers with the latest upgrade of its wireless operating system. The whale here is a deal with China Mobile (CHL) with its 740 million customers, which has been to subject to on again and off again negations for years. Still, Apple has already told its manufacturers to add china Mobile to its approved carrier list.
I think the stock is beginning to discount the launch of the iPhone 6, which is still a distant 11 months away. That will take the company another generation ahead, with an expansive six-inch screen and a blazing fast A8 processor, leaving competitors in the dust.
The business is so big that my favorite airline, Virgin America, has initiated nonstop service from San Francisco to Austin. I?m told the plane is always full. That?s where they make processors for the new phones.
All of this leads me to believe that Apple will be a major mover in 2014. The chip shot is $600, and we get a real head of steam into the iPhone 6 rollout, we could match the old high at $707.
You can buy the stock here with some comfort. If you are hyper aggressive, try playing the weekly call options on the next breakout. The more cautious can settle for the Technology Select Sector SPDR ETF (XLK), or the ProShares Ultra Technology 2X leveraged ETF (ROM). Apple has major weightings in both of these ETF?s.?
For the link to the original story, please click here.
So Where is the Power Button on this Thing?
You have to be impressed how Apple shares have been trading during the Washington shutdown and the debt ceiling crisis. While other highflying technology stocks have crashed and burned, Apple has held like the Rock of Gibraltar. Is this presaging much better things to come?
After the bar was set extremely low in the run up to the iPhone 5s launch, there has been an onslaught of good news. The first weekend sales came in at a staggering 9 million units, nearly double analyst forecasts. That?s a lot of units to be wrong by.
This has led to a series of broker upgrades by Cantor Fitzgerald, Cowen & Co., Piper Jaffray, Sanford Bernstein, and most recently by Jeffries. Entrenched bears are slowly an inexorably turning into bulls. Targets range up to $780.
During the summer, when the shares were trading in the low $400?s, Apple emerged as the largest buyer of its own stock. Still, it only made a dent in the $60 billion the company has dedicated to the program.
Of course, corporate raider and green mailer Carl Icahn (he lived in my building in Manhattan and was always a bit of a jerk) wants Apple to buy $160 billion of its stock, about $36% of the total market capitalization. But with a position of only $2 billion, Carl doesn?t have enough skin in the game to get anything more than a free dinner from CEO Tim Cook. Still, the more Icahn bangs the drum about the value of Apple, the more money he sucks in. His blustering has probably added about $50 to the stock price. That works for me.
Like the Origin of the Universe and the 105-year long losing streak suffered by the Chicago Cubs baseball team, the cheapness of Apple shares is one of those mysteries that baffle investors. Sure, you?d expect some natural profit taking after the meteoric 15 year run in the shares, from $4 to $707. But 46% is a lot, and many would say too much.
The company earns an eye popping net profits of $3.5 million per business hour (click here for the most recent quarterly announcement). Some one-third of it capitalization, or $150 billion, sits in cash in European bank accounts. That works out to $165 of the current $490 share price. This brings the ex cash trailing price earnings multiple down to a subterranean 11.8 times, or a 25% discount to the 16X market multiple. The dividend yield of 2.5% still exceeds that of the ten year Treasury bond. This is absurdly cheap.
Anyone who makes their living looking at the numbers has been loading up on the stock for the past eight months. Even permabear and short seller, Jim Chanos, has been buying on the theory that both Apple and competitor Samsumg together have been demolishing the Wintel architecture.
I think there is something important going on here. Apple is bringing out the next generation iPad in two weeks. Product refreshes for the iMac, Macbook, and Airbook in coming months are already well known. Every time an announcement of an announcement is made, the stock spikes $10.
But the 800-pound gorilla in Apples earnings stream is the iPhone, which accounts for more than 70% of its profits. The wildly successful 5s and 5c launches will take total smart phone sales from around 36 million in Q3 to at least 56 million units in Q4. The analyst community is nowhere near these numbers, so they are substantially underestimating the profitability of the company.
Apple has already cracked the China market for cash buyers with the latest upgrade of its wireless operating system. The whale here is a deal with China Mobile (CHL) with its 740 million customers, which has been to subject to on again and off again negations for years. Still, Apple has already told its manufacturers to add China Mobile to its approved carrier list.
I think the stock is beginning to discount pending the launch of the iPhone 6, which is still a distant 11 months away. That will take the company another generation ahead, with an expansive six-inch screen and a blazing fast A8 processor, leaving competitors in the dust. The business is so big that my favorite airline, Virgin America, has initiated nonstop service from San Francisco to Austin. I?m told the plane is always full.
All of this leads me to believe that Apple will be a major mover in 2014. The chip shot is $600, and we get a real head of steam into the iPhone 6 rollout, we could match the old high at $707. You can buy the stock here with some conform. If you are hyper aggressive, try playing the weekly call options on the next breakout. The more cautious can settle for the Technology Select Sector SPDR ETF (XLK), or the ProShares Ultra Technology 2X leveraged ETF (ROM). Apple has major weightings in both of these ETF?s.
