This is something new I'm trying out. Every day I go through roughly 200 stocks/indices/indicators, several times per day, looking for signals, attempting to connect dots and ultimately, hoping to find risk/reward situations that create outperformance.
The title Lies, Damn Lies seems appropriate as when the markets want to reveal any kind of truth, they first do so through blatant lies. Conversely, whenever truth appears apparent, there is likely to be deception involved. In other words, markets are a thief and must be treated like one whenever attempting to interpret their message.
These are simply thoughts (some completely random) as I attempt to connect the dots:
- AG (currently long) is an attractive risk/reward proposition. Silver, as an investment, is severely undervalued according to nearly every measure, most obviously the gold/silver ratio which is near multi-decade highs.
- AGN is broken. It's a value trap with a track record of engineered earnings. Management changes haven't helped. It should be shorted on rallies.
- Gold continues its stealth rally as I type. Question has become is the rally in gold during December a flight to safety which will unwind once the market reverses or is there something more substantial and systemic building that will cause long-term appreciation in the metals complex?
- BH is a company I watch because Sardar Biglari is an interesting character. However, his restaurants are terrible. His business practices seem to be self-serving, as well. The stock price has become a complete, unmitigated debacle.
- BHC seems like a value trap. Too many value investors who have stumbled into it thinking the former Valeant is due to return to its former glory. Seems too easy. There is an angle most are missing.
- Private equity names have gone from beautiful to horrific. Nothing embodies QE beneficiary like PE names that thrive off of cheap leverage. It is only natural that they would suffer the most in a credit/liquidity contraction.
- Emerging markets are flat for the month. US markets are down 12%. Commodity valuations as a sector are around 100 year lows. That valuation gap is poised to close in 2019.
- KKR is more than likely a short candidate on the next rally. The full effects of QT will not be nice until after a period of significant adjustment.
- SFTBY won't fare well in any type of tech contraction. The CEO is brilliant during technology led advances and an absolute liability when that cycle turns. Interpreting all the moving parts of the business and attempting to assign a valuation is an exercise in futility.
- If you look at the FANG names, the declines in these companies have not come close to getting started. In fact, it seems that a majority of investors are looking for entry points instead of points to lighten up or liquidate. That mentality will be subject to dramatic change in 2019.
- Shorting TLT at some point in the next few weeks seems a reasonable proposition. Downside in rates seems cushioned at this point.
- Could the key to the markets rallying in the near term lie in the relationship between equities and the U.S. Dollar? A declining USD may give the greenlight for equities to bottom. An appreciating USD has put a lid on rallies in recent weeks.
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