Weekly Update, March 4, 2018

Weekly Update, March 4, 2018

Random Weekly Reads

  • A fairly simple technical view of stocks from Lance Roberts https://seekingalpha.com/article/4153046-bearish-action-emerges
    • Have to agree on the selling pressure weighing on advances
    • There’s that old ‘hate uncertainty’ and we have a huge dollop of that right now
  • S&P earnings keep growing and estimates are not sliding post ER https://seekingalpha.com/article/4153035-big-dispersion-ytd-s-and-p-500-sector-returns-s-and-p-500-forward-estimate-continues-march (Brian Gilmartin)
    • i think that one of the key metrics moving forward should be revenue growth / earnings growth – any wide divergence from 1.0 is a ghost?
  • Bond Bear thoughts  https://seekingalpha.com/article/4153025-bond-bear-growls
    • Great quote or at least it echos my view:  “The secular arguments for low interest rates have been well documented. Globalization, aging demographics, faltering productivity and the mammoth debt overhang have relentlessly pushed the equilibrium level of rates lower. These forces have been persistent for decades and are not about to vanish. Sustainable, rapid growth will require stronger credit creation. Yet, the buildup in debt, both pre-and post-crisis, makes this route unlikely.”
    • Then the always present ‘vision hedge’:  “Bear market or not, yields are unlikely to shoot sharply higher from today’s levels. Cyclical forces are likely to push rates higher, but powerful structural factors will act as an upper bound and preclude a return to pre-crisis levels. Equilibrium 10-year yields are not far north of 3% but a more convincing pick-up in wage inflation or credit creation is needed to move to a 3.5% level. And a move to 3.5% to 4.0% at this late stage in the cycle would require strong global economic acceleration and a regime shift in fiscal policies. You can call it whatever you want, but these outcomes do not spell impending doom. A bond bear market is not the equal of an equity bear market.”
  • Jeff MIller’s WTWA  https://seekingalpha.com/article/4152987-weighing-week-ahead-will-u-s-launch-trade-war
    • The S&P week … what should easily surface is the range this week – there were some good traders that made a boatload of money this week  … i did not trade at all (no dedicated time)
    • Weekly Scorecard

      • Lots of motion up and down during the week, but small moves wtow
    • I agree w/ Jeff that the trade policy uncertainty is a large lead balloon on rates, equity and $ flows.  His comments:
      • “Please read my post on this subject, which reflects my “final thoughts” for today. Undoing free-trade policies would also undo much of the foundation for economic growth over the last twenty years. The support for these policies is nearly universal among economists, business people, and most of the GOP. For example, see this opinion piece from Larry Kudlow, Arthur Laffer, and Stephen Moore. The authors accept that Trump honestly believes in the benefits of these policies, but that he is mistaken.”
  • the admiration of the current FED paradox is getting more and more digital ink … the paradox is pretty well understood; the most probable resolution is the needed analysis imho https://seekingalpha.com/article/4152985-united-states-debt  (make sure you read the comments)
  • Blackrock on bond positioning  https://www.blackrockblog.com/2018/02/23/factors-behind-rising-bond-yields/
    • Quote:  “We see steadily steeper curves and higher rates improving the outlook for short versus long maturities. We particularly like two- to five-year bonds for their yield-duration ratios. Floating rate and inflation-linked instruments are attractive for their potential buffer against rising rates and inflation. We prefer an up-in-quality stance in credit, favoring investment grade over high yield.”
  • This graphic got my attention (from Schwab https://www.advisorperspectives.com/commentaries/2018/03/02/schwab-market-perspective-getting-back-to-normal) – i am not a good technical anlayst but this chart tells me that if 10ry stays above 3%, it’s a new baseline  
  • This was a pretty good post on REITs http://www.seekingalpha.com/article/4152657

Actions and Plans

  • Took new position in VTR in IRA – could have doubled down w/ WELL, took the mini-diversification route.
  • Grabbed more PEGI with great trepidation (low conviction buy with plan to sell higher priced positions after 30-day wash)
  • Passed on more HASI – want to see where consolidates into a bottom first
  • Sold SPY put for >20% gain – very, very small position
  • May start looking at more active option strategy if swings continue

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