It Can't Be That Easy?

Estimated read time: 2 minutes and 44 seconds

In this week’s newsletter:

1. Market recap

2. Skills & data used this week

3. Top holdings: what I am buying & selling

Market Recap

YTD returns:

• S&P 500: -17.45%

• Nasdaq: -29.66%

• Russell 2000: -19.78%

• Top holding position US Dollar ($UUP): +10.63%

In case you haven't noticed, the S&P 500 was down 5 out of the last 7 days post Powell's speech last week.

And after the 3%+ rally post his speech, the S&P 500 is down -3.9%.

If you got FOMO and bought after that rally, I feel sorry for you. That's not an investment strategy, not with VIX at ~20 in a bear market (yes, we're still in that).

Now let's be clear on one thing - in no way would I ever suggest "buy buy buy" when VIX >30. What this chart assumes is that the VIX will go from 30 to 20 over a given time period. Yes, that happened recently. No, that's not going to happen all the time.

If this chart showed buying at VIX 30 an selling at VIX 40, it would look like (if not worse) than the red line. 

Skills & Data Used This Week

Inverted curve.

I've talked about it many times but it's always a great one to recap. Personally, I think this is the most important data point in all of macroeconomics. More people need to understand what's happening with the divergence between short-term and long-term interest rates. Period.

Let's recap why this is BAD

First, an inverted yield curve raises the cost of borrowing. When long-term interest rates are lower than short-term rates, banks are less likely to make long-term loans. This means that consumers who need to borrow money for a long period of time will have to pay higher interest rates. This can make it difficult or impossible for some people to obtain loans for big purchases like homes or cars. In addition, the cost of credit card debt and other types of consumer debt will also increase.

Second, an inverted yield curve can lead to lower returns on savings and investments. When long-term interest rates are low, savings accounts, CD’s, and other investments will have lower returns. This can make it more difficult for consumers to build up their savings. It can also reduce the amount of money they have available to invest in stocks, bonds, and other investments.

It's not a coincidence that an inverted yield curve signals recession - NO ONE CAN BEAT THE INVERTED CURVE

In The Account | my top holdings 

1. $UUP - US DOLLAR

   1. Still here, but not at max position. We got a decent time to reload last week but the fact of the matter is there are other things to buy now (which is a first).

2. $GLD - GOLD

   1. Currently sitting at a 3% position waiting for a ramp in the 10yr rate to add more. I've also added a small position in $GDX (gold miners) that correlates with physical Gold. That position is only at 1%; it has more volatility, therefore smaller allocation

3. STAPLES

   1. I've beefed up this position considerably over the past week between $XLP, $MCD, $WMT

On The Radar | positions I want to build / sizing up

1. HEALTHCARE - $XLV, $PINK

2. LOW BETA - $SPLV

3. HIGH DIVIDEND - $SPHD

4. METALS - $PPLT, $SLV, $XME

5. BONDS

Off The Grid | removed positions / short selling opportunities

1. TECH - $XLK, $QQQ, $GOOGL, $META

2. RETAIL - $XRT

3. HIGH BETA - $SPHB

4. CRYPTO - $BITO, $MSTR

5. HIGH YIELD - $HYG

Until next week....

-BW

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.