Videos
June 15, 2023 | Daily JAM, Videos |
Today’s Trend of the Week is China Weaker Than Expected. The key part here is “than expected.” In the most recent official government report, Chinese exports were down 7.5% year over year. Economists were expecting a much more modest drop of 0.4%. The semi-annual projections from the World Bank and the OECD (Organization for Economic Cooperation and Development) predicted a slowing for the global economy, but still a relatively positive outlook. However, those projections were based on solid growth from China, which the latest official figures suggest is certainly not a done deal. The World Bank and OECD reports imply that if China’s growth disappoints, world economic growth projections of 1%-2% will be high. At this point, the global economy is leveraged to Chinese economic growth, so if China doesn’t do well, that spreads throughout the world. Low-income countries that cannot pay their debts and are facing higher interest rates are sounding the alarm that they may soon be unable to feed their people. A slowing global economy would essentially amount to a run on low-income countries, which could spread to the rest of the economy. This is a trend to keep an eye on and a good time to make sure your investments are in dollar-denominated assets. (Not that the dollar is in such great shape.)
June 14, 2023 | Daily JAM, Videos |
Today’s Quick Pick is 2 Year Treasuries Follow-Up. In my last Quick Pick, I said that if the Two-Year Treasury yield got up over 4.5, it’d be a good time to buy. Well, on June 6, the yield on the Two Year Treasury hit 4.58, up 68 basis points in one month. There is still a lot of issuance to come, so you may want to go in at half now and half a little later. From June 2-June 13, the Treasury increased the supply of Treasury Bonds by $131 billion in an effort to rebuild its cash position. They’ll continue to issue more bonds through July to meet their goal of $500 billion. The peak here would be sometime in the next few weeks or in July. The reason to buy the Two Year is it’s very sensitive to the Fed and economic changes. You can get a CD with a 5% yield, but the CD won’t earn you capital appreciation. If rates go down when the Fed stops raising rates, treasury yields may go down, but the bond will go up. Right now, be looking for that peak yield, possibly 4.6 in the coming days and weeks. (After the June 14 Fed meeting the yield on the 2-year Treasury rose to 4.69%, I’d note. Looks good to me here for a half position.)
June 14, 2023 | Daily JAM, Videos |
FOMO is back. FOMO (or, fear of missing out), sweeps over the market every so often. And it’s certainly been familiar in the last year or more. Portfolios and investors buy stocks because they’re going up and they don’t want to miss out, even if the stock’s valuation doesn’t really make much sense. Apple recently announced its new VR headset, priced at $3,500 while the competition is closer to $350. The new technology is impressive but whether or not there is a market for this high-priced item is unclear. Kim Forrest, from Bokeh Capital, commented on Bloomberg that “Apple’s valuation hasn’t been compelling for years. You buy it because it mints cash and the gravitational pull of it in the index makes you need to own it to keep up with the markets.” Essentially she says, I don’t like it, but I need it or I’ll miss out on one of the main stocks propping up the S&P 500 at the moment. I’ve talked about the narrow market before and this is another example of core technology companies propping up a sideways market. Investors are flocking to stocks like Apple so they don’t miss out on gains, even though the air between the valuation and price continues to increase. The worry is that FOMO can collapse very suddenly when investors decide they’re no longer willing to pay the high price or we hit a recession.
June 6, 2023 | Daily JAM, NVDA, Videos |
Today’s Trend of the Week is Should You Sell Nvidia? Nvidia (NVDA) has had a great run. Recently, post-earnings, the stock shot up even higher It’s up 44% in the last month, 67% in the last three months, and 166% year to date. The PE on trailing earnings is 203. (The average market PE for a well-liked growth stock is closer to 25-28.) That makes this an making this extraordinarily high-priced stock. However, the forward PE is “just” 84 times projected earnings per share over the next 12 months. That’s below very hefty projected earnings growth. The current growth projection for the second quarter is at 302%; the following quarter is 286%; and for the year as a whole, 132%. So at 84 times projected earnings this isn’t extraordinarily expensive–as long as those projections come through. It’s very hard for a company, even Nvidia, to maintain this kind of growth for very long. Growth in 2024 is only projected at 34%. If we get down to 50% or 30% growth, the market is likely to wake up one day and feel this is a really expensive stock. So keep an eye on guidance for 2024 as we get closer to 2024. (A rule of thumb is that Wall Street analysts tend to look about 6 months ahead in their buy/sell/hol calls on a stock. For now, hold on. Until you see growth projections start to drop below 100%. At that point, even if a stock growing by 50% a year is an amazing future story, a door might be a good thing to find.
June 5, 2023 | Daily JAM, Videos |
Today’s Quick Pick is 2 Year Treasuries. Ten-year Treasuries with a 5% yield may still be a long way out, but Two-year Treasuries now have a yield of 4.5%. Rates may continue to go up in the short-term and the Fed is likely going to raise interest rates again in June or July, but this is a good place to start a position in these Treasuries. You can, of course, get a CD with a 5% yield, but the CD won’t earn you capital appreciation. If rates go down when the Fed stops raising rates, treasury yields may go down, but the bond may go up. We’ll likely see a peak in rates in the third quarter, so at the moment, I think Two-year Treasuries are a good buy.
June 3, 2023 | Daily JAM, Videos |
How Long Can a Dangerously Narrow Market Run? Certainly not forever. But longer than you might imagine. The Nasdaq 100 and S&P 500 have increasingly diverged. The week before last, the NASDAQ 100 (which includes the largest technology companies), was up 3.15% and the S&P was up only .28%. Over the last three months, the NASDAQ 100 was up 18.88% and the S&P was up 6.14%. For 2023 to date through May 29, the NASDAQ was up 31%, and the S&P was up 10%. NASDAQ tech stocks, like Nvidia (NVDA), are driving the index up and that is pulling the rest of the market with it. The remainder of the market, however, is weighed down by warnings of a tough retail economy, companies reporting negative growth, and inflation problems. At the moment, investors are betting on technology’s big growth to avoid problems from a slowing economy, prolonged high inflation, and the Fed’s rate hikes. The result is a very narrow market, with a small number of specific stocks propping it up. History says, that eventually, the market rally will either expand, with more stocks participating, or it will fail because you can’t sustain an upward trend with fewer and fewer stocks. Narrow markets can run for longer than you might think. But it’s not too early to locate the exits.
May 30, 2023 | Daily JAM, Perfect Five-ETFs, Videos, Volatility |
Today’s Quick Pick is Short iShares China Large-Cap ETF (FXI) COVID is back in China with a new peak of an estimated 65 million cases a week. It’s not as bad as the last peak which saw 35 million cases a day, but it’s enough that the economy will take a hit. And China’s reopening recovery was already looking a bit shaky. During the last wave of COVID, the iShares China Large-Cap ETF (FXI) fell to $20.95. The ETF rose steadily from that low on optimism over China opening back up. The economy didn’t bounce back as quickly as expected and FXI has stayed in the $27-$28 range recently. My suggestion is to buy an August Put Option. That will leave enough time for the COVID wave to play out. The August 18 Put with a strike price of 27, trades at just $1.00 or $100 for a contract of 100 shares of the ETF. That price makes this an affordable volatility play on a macroeconomic trend, and I’ll be adding this to my Volatility Portfolio portfolio on my paid site, JubakAM.com, and selling this ETF out of my Perfect 5 ETF Portfolio.
May 22, 2023 | Daily JAM, Videos |
This week’s Trend of the Week is Gold with a Copper Kicker. Going long gold is a good way to go short on the market–gold will go up if the market goes down. Gold mining stocks also have an advantage–an upside kicker–since while mining for gold, the companies also produce a lot of copper. There is growing demand for copper in green energy products like electric vehicles. At the moment, gold stocks are trading on the price of gold alone but miners are adding to copper reserves knowing that it will be a big equity plus. I don’t think these copper kickers are priced into the stocks right now. Newmont (NEM) just purchased Newcrest, which has big copper reserves in Australia and Papua New Guinea, making Newmont not only a global gold leader but also a major producer of copper. Barrick Gold (GOLD) has also increased its copper production substantially. Gold is a great way to hedge the market in the short term, but these copper kickers have long-term upside potential as the cost of copper continues to rise.
May 18, 2023 | Daily JAM, GOOG, Top 50 Stocks, Videos |
Today’s Quick Pick is Alphabet (Nasdaq: GOOG), better known as Google. Morningstar calculates Google is trading at a 24% discount right now. Recently, the 50-day moving average moved above the 200-day moving average, showing momentum in the stock. There’s a perception that the stock had been unfairly pounded by AI hysteria because people believed Google wasn’t keeping up with Microsoft and its search business would suffer. Google did, however, come out with its own chatbot products and maintained some relatively slow growth. While ad revenue was down about 1% in the first quarter, total revenue was up about 2.6% year over year. The slowdown in the economy as a whole gave the impression that Google’s ads were slipping. I mentioned in yesterday’s video, we’re seeing a lot of Hedge Fund managers adding to their Google positions in the first quarter. I own the stock in my long-term portfolio and will likely add to my position. In the next year or two the stock will likely make up the difference between the current price of 120 and the Morningstar fair value of 154. You could consider this a value play.
May 17, 2023 | Daily JAM, GOOG, Videos |
Today’s topic is Value Over Growth. Hedge funds reported their first-quarter portfolio changes to the SEC and we’re starting to see those reports. Hedge Funds are a good indication of where institutional money is going and what their thinking is. These reports show that hedge fund managers are starting to move to value over growth. There are outliers but hedge fund managers like Steve Cohen at Point72 and Nelson Peltz from Trian Management were exiting or cutting their growth stocks and adding to their positions in value stocks like Google (Alphabet NASDAQ: GOOGL) and GE (NYSE: GE). Paul Singer at Elliott Investment Management exited both of his high-yield ETFs and reduced his exposure to Valaris (NYSE: VAL) an ocean drilling company. I saw other managers starting to reduce their exposure to energy and drilling companies as well. Going into the second quarter, after taking profits from first-quarter rallies, the pattern looks like institutions will be looking more closely at stocks that haven’t had big run-ups and could be considered to be value stocks (Alphabet?) vs putting new money into growth stocks.
May 15, 2023 | Daily JAM, Mid Term, Videos |
This week’s Trend of the Week is Credit Squeeze. SLOOS (Senior Loan Officer Opinion Survey), a Fed survey, asks bank lending officers what they’re seeing in the credit market for commercial industrial loans. In the most recent survey, 46% of these officers report that their banks are making it harder to get loans. This is a textbook example of Hyman Minsky’s credit cycle. After a period of booming lending, the credit cycle returns to a period of tightening credit, often coinciding with eye-opening events like the Silicon Valley Bank failure, and a slowing down of the economy overall. The SLOOS report also showed a 56% drop in demand for commercial loans in the first quarter–an indicator that companies are aware that loans are harder to come by. Companies are having real trouble raising capital which is resulting in merger and/or acquisition deals for early-stage companies and employee layoffs as CEOs and CFOs attempt to hoard cash. The signs are that the Fed is taking notice of this contraction in the credit market and is starting to factor it into rate hike decisions. The Fed may decide it doesn’t need as many interest rate increases as it originally thought if the supply of credit is shrinking quiickly.
May 10, 2023 | Daily JAM, Videos |
Today’s topic is Lots of Volatility – But It’s Not Tradeable. The market has not been responding as expected to recent events. On Friday, May 5, a combination of a chaotic market, a banking crisis, and job numbers that were much higher than expected, resulted in a completely unexpected market reaction. On previous behavior, these higher job numbers would have led to a conclusion that the Fed would continue to raise rates. Stocks would have tumbled. But Friday this time, we got a big rally in the news in the report. The market is vacillating between belief in a recession with banks failing, and belief in a strong job market where the Fed continues to raise rates. That’s created a scenario of wild swings, driven more, I’d argue, by where prices have been recently than by any trend in the news. You can see this in the VIX. The “fear index” rise as banks struggled but the jobs report said that it was alright to bid bank stocks (and the market in general) higher on the day even if the regional banking crisis is a long way from over. I’d prefer to trade volatility when “all” it requires is getting the direction of the news correct. Bu,t the current market requires getting both the trend in th news and the markrt’s reaction to that trend right in order to make a profit. That’s harder than I’d like and it seems prudent to wait for more predictable (and tradeable) volatility.
