Update 80: Stocks-Does Higher Mean Less Risky?

February 15 2020
Opinion & Observations

Last Week Next Week…..We saw some indices hit record highs last week but not so much on the big 5 as we saw no new highs in MFT AAPL FB AMZN but did see one in GOOG. Also note; we haven’t made new highs in DJTA (transports) and the Russell (RUT) since 2018….some say the RUT will be a massive catch up trade to the S&P..we’ll see. We did see a bump in the pot stocks last week (Cronos-Tilray-Canopy) and Buffett disclosures saw adds in BIIB, Kroger, GM OXY RH and Suncor & adds in S&P proxies but saw cutbacks in WFC & GS (financials). The semis also made new highs while CSCO got whacked probably concerns about China’s slowdown. Some saw the Virus effects are overblown (Dalio) and others defer to lack of a crystal ball meaning no one can be certain of how this plays out….China’s liquidity binge seems to have helped.
BABA indicates numbers may come down despite PBOC’s flooding the market with liquidity and loans ect. The VIX has a 13 handle which is bullish…a 16-20 handle would be less so…..remember how oil went to 66 right as ARAMCO was trying to peddle $2.5 Trillion of stock and after the deal closed we fell to under $ 50 Crude recently …thinking out loud…after the first of the year money (IRA’s/pensions ect.) gets all in…I wonder if Q2 will start to see a similar fate in stocks?? This week…PMI’s come out Friday…they better be better than Germany’s & China’s!

Stock Market

While no real price evidence yet to base it: we felt as we approach 3400-3600 S&P, we could see more exhaustion but maybe it’s more of a calendar thing as we are in the final months of what typically can be a favorable season for stocks and this time it surely has been. A weekly and or monthly high surrounded by lower highs would generate some type of a formation to trade against along with a VIX reading that’s accelerating not decelerating. Will the belief that the market is way ahead of growth and earnings and the Fed may be approaching a time when adding liquidity will slow or reduce ever resonate? Is Volatility dead or just waiting to pop? Some say there will be a volatile periods ahead with better prices but still holds the longer view of higher prices (3400-38000). Sectors that saw strength in the last week or so were REIT & Utilities while Energy saw a lot of selling and Materials faltered.However one way to adjust risk is to adjust asset allocations. Some say increase bonds & reduce stocks could make sense.

5G Opinion & Observations…….It’s coming and a lot of companies are going to try and benefit while ssome could posssibly falter in its wake. Here’s some on our radar for varying reasons….telephone companies VZ T TMUS NOK ERIC….related telephone AAPL & SSNLF …chip makers-radio frequency (RF) filters-component manufacturers (AKTS, QRVO, QCOM, SWKS, AVGO, INTC,TSM,CSCO….
in addition cloud based gaming (EA, ATVI, ZNGA)…..5G speeds could benefit AMZN, FB, & NFLX……5G gear (KEYS, VIAV, ERIC NOK)…….5G Fiber Optics Technology (GLW, CIEN, ACIA)…Cell Toer Operators..(AMT, CCI, SBAC) and Cloud Computing with the Edge Computing (DELL, NOK)…..so there’s a start and as we get move forward the list will grow and adjust for winners & losers.
Questions-Comments..email [email protected]

Bond Market

Well the issuance of debt has certainly not taken a vacation as investors are now willing to loan the government money for 30 years for 2.06% which is a record low and they are willing to loan money to companies for a low differential to treasuries and in some cases with sketchy balance sheets. Good Move??…only time will tell but if something doesn’t make sense then sometimes it doesn’t last….getting everyone into an arena that’s profitable is easier than getting them out if someone yells out FIRE!!
Some say ride the horse until your statement shows cracks in the Net Value which makes some sense & has worked in stocks & bonds since Q4. 10 Yr Treasury was in a range of 1.6%-2% and now looks like 1.4% and 1.8% could be the new parameters for now.
Our national debt has ballooned from $2 Billion in the 1900’s to $22.72 Trillion by September 2019. More on that in Gold update.

US Dollar

Same story as we have been saying…range of 99.50 -95 and we now are making a run at the upper band where I would monitor it very closely as that 100 mark if exceeded could really be telling us something that not may forecaster have predicted..melt up.
Call it the one eyed man in the valley of the blind…but the Euro-Yen-BP or anywhere else look unappealing until we see GDP turns.

Crude Oil

Last week our suspicions were that they broke under 50 stooped out people then would turn it around..exactly what occurred. Watch Marathon Oil, HAL, OXY, COP, SLB, RDS.A, BP and many others that have been discarded and see if you see value there. One big risk is that Russia and maybe others don’t want cuts and if the Saudis go it alone…a break of $50 again is not off the table..

Gold Silver BITCOIN Copper

Our view i that one of the reasons that Gold Silver & Bitcoin have been advancing is concerns that Central Bankers worldwide have gone nuts with DEBT CREATION and may be in the process of debauching currencies throughout the civilized world.

TAKE A LOOK @ The GROWTH of The NATIONAL DEBT $$$$…ball park figures.
In the 1900-1920–$2 to $3 Billion…1920-1930 ( Roarin’ 20’s)—$20 to $25 Billion…1930-1940 ($16 to $28 Billion) …1940-1950’s we hit the gas $42 Billion to $258 Billion (WWII)….1950-1960—$250- to $275 Billion…1960-1970–$286- to $317….1970-1980—$370 to $533 Billion…..1980-1990—$907 B to $1.8 Trillion (Reagonomics & 1987 Crash)….1990-2000—$3.2 Trillion to $5 Trillion…..
..2000-2010–$13.2 Trillion to $18.2 Trillion (2 Crashes Dot Com & Housing-Banks)…and as of September 2019 it is $22.72 Trillion!!

So what’ going on?….New Cars New Homes Buybacks Vacations Dining Education Health Care Welfare.On BORROWED MONEY?
Do we PRINT AD INFINITUM? What are the Consequences to Stocks-Bonds-Value of Currency? We don’t know but to be UNCONCERNED & COMPLACENT which is truly a worldwide epidemic may be the most dangerous epidemic of modern times.

Keep an eye on these three as we are approaching crunch time in our view. If you buy into that Central banks have essentially
printed us into oblivion Gold and Silver is the place to be with part of a portfolio….then play the break above 1600 and GDX above 30……some say Silver: if a bull market accelerates, has more potential than the Gold…SIL above 34….for us to increase exposure resistance would be good to take out first and don’t forget the Juniors too (GDXJ & SILJ). If you feel China will turn around and the sell off in copper is over then FCX worth a look and ABX has been speaking about increasing their exposure as well

Grains ect

Same story Soybeans holding 850 but unable to clear 950 and sustain…more subsidies may be on the way…ands don’t take your eye off the ball because the planting season & summer season could be a catalyst for volatility. Coffee rolled up/Sugar rolled down.

REMEMBER There is a substantial risk of loss in short term trading and option trading and it is not right for everyone. Consult your brokerage firm, broker advisor, to discuss your own suitability. Past performance is not necessarily indicative of future results.
Use Risk Capital Only.