Weekly Update, Aug 20, 2017

  • Brian Gilmartin’s analyses are almost always worth reading, and this very short one had a very troubling line – https://seekingalpha.com/article/4100520-russell-2000-teetering-edge  
    • “An interesting fact was thrown out from the panel – from Jason, Chris Verrone, Rissmiller, et. al.: approximately 1/3rd of the Russell 2000 components are now unprofitable? The percentage could be higher, but I also could have heard wrong too.”
    • This got my attention.  If accurate, it feels too much like 1999 for me.
  • Another piece from Brian, that i cannot quite my head around.  Basically he is saying that based on S&P earnigns yield, the 10yr Treasury could increase 100% and still be the lesser value investment.  I was thinking that a 10yr just over 3% would attract my conservatively invested funds;  I could be way off here. https://seekingalpha.com/article/4100466-s-and-p-500-earnings-yield-5_70-percent-week-telling-us
  • Doug Short’s weekly S&P 500graph (curtesy of Jeff Miller) … geopolitical events and too many people looking for excuse to take profits
  • Jeff’s weekly scorecard  … I studied this one and was surprise that 10yr note was same as last week and lower across monthly and quarterly.  
  • Here is an analysis that puts a few things into context:  a) GDP growth rates, b) large company growth rates, and c) the inference that our expectations as investors need to be reset (and if you do not do on your own, then the market will help just like it did in the internet bubble pop) https://www.advisorperspectives.com/commentaries/2017/08/20/imaginary-growth-assumptions-and-the-steep-adjustment-ahead

Commentary

  • I upped my CSCO position by 50% and it is now my largest holding in taxable portfolio … i looked at IBM, CSCO and QTS as the top investments during this last Trump decline.  CSCO i own now at $20.29 cost basis and yielding over 5%.  I also understand their transformation strategy.  I do not understand IBM.  QTS has to decline below $50 before i can be tempted.
  • I reviewed CAH this weekend thinking that i liked it at $69 and now it is <$65.  I could not ‘write the check’ to buy the company.  Their margins are just too thin to fight off any viable competitor from the bottom or adjacent markets, e.g., Amazon.  I am also treading carefully in healthcare given the future US political posturing that will only get worse as folks ready for 2018 election.
  • I also started a very small trading account in a new platform – Robinhood.  First postion was a small pre-earnings gamble on DSW.  DSW got killed on the Foot Locker results, but i am not sure those are apples-to-apples.  I am betting that DSW will not be as impacted as expected … this is true speculation, not investing.

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