Diversification

A Wealth of Common Sense posted a really sound review of diversification http://awealthofcommonsense.com/2018/07/some-considerations-for-investing-globally/

I am in total agreement with many of the key points.  I have been more capital out of US equities both on a valuation risk and a political risk.  One could argue that political risk may not be isolated to US, but diversification has its purposes.  The other element that is worth considering is the historical transitions of the ‘power economy’; the US time may be waning and who knows for sure what economy will assume leadership – China, India, or … this transition seems to be starting …

Lance Roberts on 1H 2018 and Forward

Lance is dangerous for me to read as he exaggerates the echo chamber in my head.  His analysis is much more technical than i could ever imagine pulling off, but our portfolio management actions / bias usually map pretty well.  I was just remarking in my Q2 report that gains for the first 6 months were less than all the action, hype and angst we all lived through those 6 months.  The next 6 months will probably be just as difficult, but Lance has some good S&P risk management advice – a read worth the time, imho.

https://seekingalpha.com/article/4185359-technically-speaking-2nd-half-starts-fumble-recovery

Catching Falling Knives

A recent post resonated with me as I have a tendency to grab the falling knife as soon as it hits my preconceived value target – a falling knife gets my attention for sure.  This was a thoughtful post and with greater discipline, I see adopting similar practices

https://us2.campaign-archive.com/?e=7f31024e90&u=dfffd9e0dc3c1e2bec89cab7a&id=ae0dce1f20

Quote:  “When it comes to stock prices, the key lesson from my experience of making such mistakes of omission and some of commission – and learning from them – is that it is foolish to try to capture the first and last part of a stock’s move.  If you are right in your analysis, and the long-term fundamentals of the underlying business are good (even if the short-term hurts), you can make a lot of money in the middle.  That’s the most peaceful part of the wealth generation process – in the middle, not on the edges.”

Accounting Gotchas in Canada Weed

https://seekingalpha.com/article/4185105-understanding-cannabis-industry-gain-biologicals

This is a great article (the comments criticize as expected but are still worth reading).  For me, i have not even tried to value weed stocks w/ any due diligence / discipline.  It’s always been a speculative trading vehicle and focused on the 3 bigs:  CGC, APHQF,  & ACBFF.  Speculative positions that by pure luck made enough profit to sit on very small positions in all w/ earned capital.  If they make it big, great.  If they crash, oh well … it was fun.

While the exercise of valuing those companies is something people are going to do and it will help us who will not … i think 2019 is the earliest we get anything to make investment decisions on … the big money (tobacco and alcohol have yet to really show their hands)

Value vs Growth – Brian Gilmartin

Brian’s post is timely and as always data-rich  – https://seekingalpha.com/article/4184936-style-box-update-large-cap-growth-vs-value-divergence-getting-lot-attention

I am absolutely value biased so this is obvious in many ways.  The surprise was diving into the holdings of the two ETFs mentioned.  We have different definitions of value factor companies.   I look for companies priced below or at the longer term  value that have high confidence in delivering to the value assumptions (revenue, earnings and dividends).

JVAL- https://seekingalpha.com/symbol/jval

IWD – https://seekingalpha.com/symbol/iwd

Jeff Miller’s WTWA – July 1, 2018

Editorial Note:  I have changed my posting methods starting in Q3.  I will post more often with singularly sourced content to summarize and comment.  My plans and actions will be posted on an event-based cadence rather than a time bound post (i.e., weekly).  Though because Jeff publishes with discipline weekly, the event is weekly.

My weekly walk thru – https://seekingalpha.com/article/4184906-weighing-week-ahead-investors-start-worrying-2020

  • a rollar coaster week and perfectly appropriate to 2018 YTD – up 0.84% with dollops of fear and greed several times that created a false sense of real movement

Speech Recognition  Jeff pointed outward to:  https://seotribunal.com/blog/voice-search-facts-stats/

  • This is incredibly important and interesting moving forward regardless of your platform (i favor 3):  mobile, automobiles, retail
  • I have been watching NUAN for several months at first as a trade and then as trying to figure out how / if they will play here.  Not enough for actionable
  • Look at the section on “Search by Age” … this is telling and obvious but important for this upcoming demographic transition from consumption (for me i think usage models and use cases) by boomers to the millenials as they spending shifts
  • The results on “Smartest” were surprising at first blush, but if one buys into the assumption that the larger, more diverse the data set, it is clear that Google and MSFT would have the larger, better data sets. … where are the other data sets that have yet to be fully monetized?
    • When you mash that data with the SEO element, it gets very interested when  narrowed to a consumer transaction

  • This surprised me as i was expecting to see either flat or increases … an overlay with auto loans in trouble would be a great visual.

  • I see same.  There’s been a shift in the sentiment just based on the noise in the media channels.  If you take this as contrarian indicator it fits with the Fear and Greed Trader post and my comments.  My near term rational bias is upward but crazy sideline comments will disrupt rationality as it has of late.

  • Consumer confidence is not contrarian indicator and this will be an important indicator to watch for more supportable trends

  • 10yr holding to <2.90% – too low for me to increase rate exposure at this time, though around 3.0%, i start looking for investment opportunities
  • Anticipated inflation to be watched for continued upward trend
  • Short term technical health degrads … interesting and a surprise

The close:  Market timing is not feasible, but risk recognition is.”

  • Herein is the challenge for us folks – risk recognition is necessary, but not sufficient.  Risk management requires actions.  The key question or challenge for m is how to mitigate the risk AND be comfortable with the opportunity cost of those actions.  Nothing is really free.

Protest and Resist

In the midst of trying to be an active citizen and taking action that support my social principles and values, i stumbled into a dilemma.

The current verbs used to characterize progressive actions in my community tend to be:  Protest and Resist.  Other words like rally, march and gathering are used.  My dilemma is my desire to act FOR something (anchored in my social values and principles), OR join the larger, louder voices AGAINST something (protest and resist).

Forward momentum seems best suited behind actions FOR something.  Agreed, that sometimes obstacles must be removed to allow forward motion, so in that case, AGAINST is necessary BUT NOT sufficient.  I want to more leaders answering with both necessary and sufficient.

Q2 Look Back – Source: Fear and Greed Trader

https://seekingalpha.com/article/4184898-s-and-p-500-weekly-update-mid-year-review-different-market-setting-year-need-change-strategy

This is pretty good surface layer summary across different markets, instruments and  geographies.  I did find it, at least through my lens, more positvie leaning than I see.  I will stipulate though that his S&P view works for me UNTIL the herd realizes that the earnings comps in 2019 are going to be  very hard w/out associated revenue growth.  The window of tax change and earnings thru buy-backs and other engineering is closing .. when?  who knows, but i keep preparing for that transition whether it is fast or slow

 

Will we repeat Japan’s trials?

A great post this morning on how US (all developed countries really) may or may not repeat the trials of Japan as they worked to overcome debt and demographics.  While the precision in this post baffles me (who can really be that accurate), the points and risks are very relevant and something that i am  paying attention to and weaving threads thru multiple sources w/ similar take-aways … conclusion quote: 

“While the four factors identified in my earlier article are bad enough for the US domestic economy and were termed the four horsemen of the apocalypse, the change of trend in central bank balance sheet growth is going to be Thor’s Hammer to asset markets worldwide.  Even robust national government spending in 2019, with a government deficit injecting over $900B into the economy, will not offset the impact of synchronous central bank asset selling.”

https://seekingalpha.com/article/4183679

Weekly Investor Update, June 24, 2018

Actions – Last Week’s Plans

  • Specific Analysis Completed
    • TU – after completing a similar review of RCI, I was leaning toward TU as the better long position (Ring 1 Position).  What became clear is that the tools I was using so far were insufficient.  I am recycling through the methodology and will write it all down
    • CLDR – I know enough about this company to be wary, but do think they may have a decent story if they can break from Hadoop narrative – but this is trade for me at this point.  Others think differently 
    • Thought this was a good perspective on strategy and how one holds themselves accountable to that strategy – I am working to write mine all down (sigh)
  • Actions Taken
    • STM – lost position to stop-loss
    • CRON – sold 1/2 position
    • FIT – sold 2/3 Aug 7 puts (still hold balance and Aug 6 puts)
    • Opened trades:  INFY, TCEHY(long) and WEN (short)

The Clues this Week

  • Equity / Stocks
    • A leading indicator to watch?
      • Brian G with very sound advice about watching Q1’19 earning estimates and their revisions – I want to see the revenue estimates moreover
      • Lance R posted a similar story focusing eyes on Q1’19
    • Redfin is an interesting story — it could be part of a new narrative that I am working on wrt Millennial / Boomer demographic shifts.  This is not like the Dent story that I have received 5x daily, but an actionable line
      • This company, SBUX, may be on the other side of this narrative, depending on how aggressive they can move internationally (China and India).  I am skeptical of this author’s optimism.
  • General
    • Another attempt to identify and predict a leading indicator – while interesting from conceptual view, I do not find it fully actionable
      • Jeff Miller’s WTWA and my commentary
        • What a ride this week and not immediately clear what is the trend – other than react to the daily news
        • This point was subtle and probably overlooked due to the absence of any eye-popping visualization:  Quote:  “Leading economic indicators increased only 0.2% versus 0.4% last month and expectations of another 0.4% increase.”
        • Are student loans a canary or just one of those data sets people like to see as ‘powder keg’?  Read the post Jeff points to
        • Indicators are stable 

The Plans next Week

  • Nothing yet – re-planning the next 60-90 days