Optimal Portfolio Positioning In Q4
Before the bulls dump a cement mixer full of concrete onto the lurid bearish arguments being carelessly bandied about since 2019 kicked off, it's time to review optimal portfolio positioning moving forward. To be clear, apart from the frustrating short-term fluctuations that have more than achieved the markets intent to fry the brains of participants, the 2900 range we have been fluctuating in for some months now is as good a buying opportunity as late-December when Zenolytics was begging investors to load up on technology while ALL of Wall Street was purchasing a permanent plot in the market cemetery for the current secular bull market. Let's review what has happened in 2019: The S&P is up 20% The SOX is up 40% Home construction etf ITB is up 46% QE4 has kicked off, meaning that the Fed has the markets back in a big way and it's not planning on backing off Long-term rates are as accommodative as when QE1 kicked off in 2009 The S&P has been consolidating near all-time highs in as a brilliant a bullish range as possible Pessimism by some measures is the same as during the 2008/2009 crisis Money markets are at record cash levels, meaning there are latent bids galore out there that will come into the market with each successive new high All the meanwhile, the favorite topic remains recession and all the rubbish arguments that have accompanied recessionary fervor since the middle of last year. That's right....nearly 18 months of recessionary arguments. All the meanwhile the markets are cow tipping their way up to new highs, telling investors a completely contradictory story to what the media and a majority of Wall Street analysts are selling. You can take advantage of a market that is screaming from rooftops to embrace market risk in two ways: Sell short safe haven assets, including bonds (we are short), gold (we are short), bitcoin, consumer defensive sectors Go long risk: Semis (we are long), SaaS (we are long), banks (we are long), anything having to do with a mortgage (we are long), anything having to do with building a house, anything having to do with non-recessionary prosperity Positioning for Q4 is simply a matter of allocating away from consensus, media and institutional led fear into what has been and will continue to work in 2019 and well beyond. ...
6 Ways To Deal With The Bouncing Around In A Padded Room Wearing A Straight Jacket Market
We've all dealt with varying levels of market insanity over the past several years. Going back further than that, if you were around for the financial crisis or dot com debacle, you know how crazy markets can get. While the market of 2019 doesn't possess the same levels of blood lust you find in bonafide bear markets, the current market environment has a perversity all its own that is unique to this time period. As investors we are dealing with sets of fundamental, event-driven circumstances that are instantaneous in their delivery through various social media outlets. We are witnessing policy decisions being made on the fly and announced on a whim. We are subject to varying degrees of political and geopolitical crisis that change by the day. It's no wonder then that investors have simply given up on gaming what the market will do from here. It has become an exhausting process that continually leads into a brick wall of nowhere. How does an investor then deal with such a prodding enigma? Fluid approach Situational awareness Understand the dynamics of risk/reward well Tend towards buying into strength as opposed to buying into weakness Stop trading or you will get churned Take everything you hear and see with a grain of salt except for the fact that we are in a bull market. You need a fluid approach to deal with a consistently evolving market. You need situational awareness to deal with the fact that whatever rules or systems you think are solid right now will be turned on their head at some point in the near future. You need to understand the dynamics of risk/reward well because there is nothing else. If you don't understand how much risk you have in each position and perhaps more importantly, how much risk there is in the overall market, then you know nothing. You need to buy into strength because this is a market that runs with what has been working and obliterates what has been not. Just look at all of those poor souls who kept shorting bonds this year thinking that rates couldn't go any lower. Conversely, just look at all those poorer souls who keep shorting the markets, thinking that it can't go any higher. Chumps. Don't be a chump. The market has been going sideways for two years now. In that time, there have been pockets of months where you could trade the markets well within a definable price structure. In the pockets of time when the market puts on a different bullish or bearish mask everyday, simply stay away. It's not bull markets, it's not bear markets....sideways...
From A Pure Demoralization Standpoint, The Market Has Now Gone Demonic
As it stands currently, there isn't an investor in the markets that isn't replaying Q4 2018 in their minds after the market decided to don its face paint, grab a metal spiked club and pummel investors into complete submission. It did this through the obscene act of moving up near the psychologically important resistance level of S&P 3000 in order to not only fail at resistance, but take out the key support level of S&P 500 2945 at the close....all done, by the way, in one sitting. The market managed to get the bulls excited in the first half hour of trading and then proceeded to spend the rest of the day sucking their hearts out through their brain in a steady fashion for the remainder of the trading session. One can't blame investors then for having post traumatic stress syndrome of Q4 2018 almost immediately as the market is going out of its way to remind investors that it can be ruthless in its disdain for sustainable profitability while investing. Of course, the simplest explanation that is being offered for today's dramatic reversal is that the ISM number sucked, we are moving into a recession and all of us are doomed. However, this line of thinking is well understood already. We have seen economic numbers over the past few months that have reinforced the most bearish of economic theses, followed by economic numbers that have reinforced the most bullish of economic theses. In other words, the random vacillation in economic numbers leads an astute investor nowhere fast. It would seem that the economy is just as confused as the markets or is it that the markets are confused because the economic numbers make little sense? I digress. The most important message of today's market is not shocking economic weakness. Rather, the most important message of the market today is that it is going out of its way to reinforce that it hates investors. It has done everything in its power in one single trading session to shoo away investors for fear of being bit for the umpteenth time over the past 18 months. Recently I was watching a video on psychology from Jordan Peterson. I'm quoting loosely from memory here, but he discussed the fact that in his younger years he would frequent bars and met a guy who would come to bars for the sole purpose of getting into fights. The gentleman that pursued bar fights as a hobby found that almost invariably, whenever a bar patron would invite him outside to partake in fisticuffs, there would be no fight. All the bluster took place within the...