One tequila, two tequila, three tequila, FLOOR

Estimated read time: 3 minutes 45 seconds

In this week’s market recap email

1. Market recap

2. Skills/methods I used this week

3. What's in and what's out of my portfolio

What Happened This Week

Confidence is king.

You're a few drinks deep, the blonde chick is eyeing you up from across the bar, and you just pumped out a few push ups in the bathroom - confidence couldn't be higher

We've all had this feeling before (I swear the pushup part isn't true); so can the same be said about consumer confidence?

Let's take a look at a few metrics of confidence within the market:

You don't have to be an expert to read these charts - they're foreshadowing that the consumer has taken too many tequila shots and is about to PUKE

What's even more concerning is the consumer (which includes the morons buying $BBBY this week) are finally realizing that the economy is heading in the wrong direction.

Will the consumer panic? We all know what happens when people panic (hint: PUKE)

Teaching Moment

Ratioed \verb\

"Being revealed as an idiot on Twitter by having a high ratio of comments to likes and retweets" - Urban Dictionary

This is a great example of the wrong kind of ratio - instead, let's talk about the right kind of ratios...the ones you want to be looking at for your portfolio

Ratios, and more specifically stock ratios, are used to understand which side is larger than the other. Ya know, elementary school math - numerators and denominators. One goes on top and the other on the bottom (nice)

Let's take a look at a ratio that has worked well this year: long US Dollar, short Tech

To create this chart I used stockcharts.com and entered the symbol UUP:QQQ

$UUP (US Dollar) = numerator, $QQQ (Mega Cap Tech) = Denominator

Voila - YTD comparison of the Dollar vs. Tech

Imagine this chart is a stonk - would you have been happy buying this in January?

More importantly, would you have BOUGHT THE DAMN DIP at the green circles? Man does it feel good to bring back that saying...

If you answered yes to both of those questions, congratulations you like to make money

Put simply, ratios help you understand which securities are outperforming others. More importantly, a ratio can give you a great opportunity to generate alpha

Alpha = simultaneous longs going up as shorts are going down 

Stay nimble on Twitter with ratios...but use them to make $$$ in your portfolio

In The Account | my top holdings

1. $UUP - US Dollar

   1. It was a smart decision to build this position back towards my max for a currency (12%) last week. Now I can shed some exposure to buy something else - see next two bullets. Current positioning ~8%

2. $GLD - Gold

   1. Gold has earned a spot back in the portfolio this week after I previously cut it loose a while back during a 10 yr curve melt up (gold hates rising rates). Now we have a "bounce" in the 10 yr curve after it got sliced like a hot knife through butter. We see those as buying opportunities - $GVZ (gold volatility) has also suppressed which gives me confidence to buy here. Targeting 3-5% of my portfolio to $GLD for now.

3. BONDS

   1. The same concept for gold applies for bonds - we are positioning for a downward movement in the 10 yr curve after its bounce this week. Remember, the 10 yr curve will move to the downside as growth slows - which is where the economy is headed!

   2. In the accounts: $BAB, $LQD, $EMB, $IEI - 15% of my portfolio

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

1. LOW BETA / HIGH DIVIDEND / DEFENSIVES

   1. These sector styles back test well in economic declines, they've just been on a steady run and I do not chase!

   2. $SPLV, $SPHD, $DEF

Off The Grid | removed positions / short selling opportunities

1. ANYTHING EUROPE

   1. Europe is typically a few steps behind the Fed in decision making, but behold they started to raise rates into a...wait for it...economic slow down! Short the **** out of Europe.

   2. $EPOL, $EUFN, $EWG, $EWQ, $EWP

2. RUSSELL 2000

   1. The Russell 2000 is the stock index that tracks "small cap" companies. When the economy slows these companies are some of the first to jump ship as their balance sheets can't support a slowdown.

   2. $IWM is your ticker here, short the **** out of the Russell.

3. FINANCIALS

   1. As I stated in the "Teaching Moment" section, inverted yield curve as bad for companies - specifically Banks who lend money. Financials will get smoked if this curve continues to stay inverted so I'm keeping them on the short side of my book.

   2. $XLF, $KRE

4. ENERGY

   1. Here's a new one for the faithful! Economic recessions are historically led in a, for lack of a better words, crash of oil prices. Oil and energy companies are some of the only positive beneficiaries of 2022 - but that's right where I want them.

   2. $XLE, $BNO

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.