June 25, 2021 | Daily JAM, VIX, Volatility |
Investors and traders are less afraid of a drop in stocks than at any time in 2021. The CBOE S&P 500 Volatility Index (VIX), which measures how much investors and traders are willing to pay to hedge against volatility in the S&P 500, is down another 3.32% to 15.44 today, June 25, as of 3:30 p.m. New York time. The drop took out the former low for the VIX for 2021 at 15.65. I have to go all the way back to February 10, 2020–before the pandemic knocked the stuffing out of stocks–to find a lower level for the “fear index” at 13.68. So today I’m buying Call Options on the VIX–which will go up if fear and the index climb for November 2021 with a strike at 19.
June 21, 2021 | Daily JAM, Dividend Income, FCX, Jubak Picks, NVDA, SCCO, Short Term, Special Reports, Top 50 Stocks, Volatility |
After Wednesday’s news from the Federal Reserve, we all know that an interest rate increase is coming–even if we don’t know when. Could be 2022. Could be 2023. And even if we don’t know how many increases we’re looking for in that time period. Could be one. Could be two. The need to revise your portfolio to take that change in monetary policy is obvious. But figuring out how and when isn’t by any means straightforward. What gives? And how should be navigate a period that is almost certainly going to end with a reversal of the lower for longer interest rates that have dominated asset prices for decades? Today, for the last installment in my Special Report: “5 Picks and 5 Hedges for a Falling Market” I’m going to take one last run at how to hedge this market and how to position your portfolio for the developing trends. (I don’t have much hope that this will be the last time I’m visiting this topic, of course.)
June 15, 2021 | Daily JAM, Morning Briefing |
Retail sales fell by 1.3% in May from April, the Commerce Department reported this morning. Economists surveyed by Bloomberg had projected a 0.8% month over month drop. The month to month drop in retail sales was the first drop in month to month sales since February. Retail sales still grew a very solid 23% year over year as the economy continued its recovery from the pandemic recession of 2020.
June 14, 2021 | Daily JAM, Morning Briefing, Short Term |
As of the close on Monday, June 4, the major stock indexes were treading water waiting to here what, if anything, the Federal Reserve might say after the Wednesday meeting of its interest-rate-setting body, the Open Market Committee. (No one really expects the Fed to actually do anything about the monthly schedule for bond purchases or about changing the benchmark interest rate now set at 0% to 0.25%.) The Standard & Poor’s 500 was up 0.18% but the Dow Jones Industrial Average was off 0.25%. The NASDAQ Composite was up 0.74% but the small cap Russell 2000 was lower by 0.54%.
June 11, 2021 | Daily JAM, Morning Briefing |
Yesterday the Standard & Poor’s 500 hit its first new all-time high since early May as investors and traders bought into the reassurance from the Federal Reserve that the 5% year over year increase in the Consumer Price Index was merely a temporary jump in inflation. Today, with the weekend immediately ahead and the June 16 meeting of the Fed’s interest-rate setting Open Market Committee looming on Wednesday, June 16, nobody wanted to get much further ahead of actual news from the central bank.
June 7, 2021 | Daily JAM, Volatility |
The CBOE S&P Volatility Index (VIX) dropped 8.9% on Friday, June 4, to 16.44. It’ up just slightly today to 16.73 (up 1.89%) as of 2 p.m. New York time. That’s, in my opinion, an extremely low reading on the fear index considering how many potentially market moving volatility events we’ve got ahead of us over the next six months. (For a list see my Special Report: 5 picks and 5 hedges for a falling market.) So today, June 7, I’m adding another Call Option on the ViX to my Volatility Portfolio.
June 4, 2021 | Daily JAM, Morning Briefing |
The U.S. economy added 559,000 jobs in May, the U.S. Labor Department reported this morning. That was well above the 266,000 job additions initially reported for April (revised today to 278,000 for the month). That’s enough to damp worries that the post-vaccine recovery is about to stall. But the May total was well below the 675,000 projected by economists. That’s enough of a miss to allay fears that the economy is about to overheat and that inflation is about to spike. So not too cold and not too hot. Just right.
June 3, 2021 | Daily JAM, Short Term |
Employment numbers today suggest that we could get a Goldilocks May job report tomorrow. The ADP Research employment survey said U.S. private employers added 742,000 jobs in May. That’s the most in seven months. But it is slightly below the 850,000 projected by economists surveyed by Bloomberg.
May 31, 2021 | Daily JAM, Mid Term, Morning Briefing, Special Reports |
Today’s installment includes one hedge (on the ViX) and one stock pick (Lam Research.) Now if you’ve been following along with the logic that I’ve laid out in this Special Report, you know that stocks face months of potential volatility around the Fed’s June 16 meeting (What will the Fed say about ending its $120 billion in monthly bond purchases?), the August global central bankers confab in Jackson Hole (Will the Fed use the occasion, as it has done in the past, to indicate a coming change in interest rate policy?), the Fed’s September 22 meeting (Will the Fed be content to say nothing with the next “important” meeting not until December?) and then the central bank’s December 15 meeting.) That’s a large number of occasions that could set the stock market to worrying again. And then, of course, there’s OPEC and the price of oil, the battle over the recently announced Biden budget, the continued logjam on infrastructure spending, and fact that the pandemic is still running at full speed in countries such as India (and who knows what the return of cold weather and forced winter “togetherness” will do to infection rates in the developed economies of the northern hemisphere.) At 16.74 on the VIX, you don’t need a panic to produce a profit on higher volatility. The VIX was at 22.18 on May 19. And then there are the even higher VIX levels of 27.59 on May 12, 28.57 on Marcy 4, and 28.89 on February 25.
May 14, 2021 | Daily JAM, Volatility |
On May 11, when the Standard & Poor’s 500 was headed for a 2.14% loss on the day, I took a long hard look at selling the downside hedges I own in my Volatility Portfolio. In that portfolio I own a September 17 Put Option on the iShares Russell 2000 ETF (IWM) and two Call Options on the CBOE S&P 500 Volatility Index (VIX) for July 21 and August 18. I came very close to pulling the Sell trigger on one of the VIX calls. (Because the VIX goes up as fear in the market rises (usually on a sell off or worries about an impending sell off, the Call Option on the VIX acts as a Put Option. It will become more valuable as the market falls.) I was in the black on the August 18 Call Option with a strike price of 22 because the Vix had climbed 26.33% on the day to a close of 27.59. I think the decision not to sell was a non-decision. And a mistake. I dithered over it for so long that the market had closed by the time I decided to sell. A sell would have resulted in a profit of 9.2% from my March 23 buy. Not huge but still money. I decided not to sell the iShares Russell September 17 put with a strike price of $215. The ETF would close that day at $218.96 and then drop to a close of $211.75 on May 12. A Sell would have resulted in a gain of 15.6% atom my March 24 buy. Unlike the failure to sell the VIX Call, I don’t think the decision not to sell the IWM Put was a mistake even if it meant foregoing a 15% profit (on a holding period of less than 2 months.) Let me explain.
May 14, 2021 | Daily JAM, Volatility |
I’d like to think that the volatility of last week is all over and a thing of the past. But I don’t think it is. This is a transitional market with sentiment moving toward value, cyclical, and post-vaccine stocks and away from technology momentum plays. And it’s also a market trying to figure out how to reprice all assets in light of a potential move to lower stimulus bond-buying and to raise interest rates at some point in the future. These kinds of transitions don’t occur smoothly and I think we can expect more volatility.
April 29, 2021 | Daily JAM, Morning Briefing |
In the first quarter the economy grew by 1.6%. That’s equal to an annualized growth rate of 6.4% for U.S. GDP. You don’t have to look hard to find the cause. Consumer spending rose 2.6 percent in the first three months of the year, with a 5.4% increase in spending on goods accounting for most of the growth. Americans increased spending on cars, furniture, recreational vehicles and other long-lasting items, as well as on clothes and food
