- Capital Contrarian
- Posts
- Ho Ho Holy ****
Estimated read time: 3 minutes and 40 seconds
In this week’s newsletter:
Market recap
Skills & data used this week
Top holdings: what I am buying & selling
Market Recap
YTD returns:
S&P 500: -19.33%
Nasdaq: -32.9%
Russell 2000: -21.64%
Top holding position US Dollar ($UUP): +9.19%
"Santa rally happens every year"
"Stocks are so cheap now, this is such a great buying opportunity"
To quote the GOAT Michael Jordan: Stop it. Get some help.
No, my process does not look at that chart and trigger a liquidation signal for all my investments.
Also, my process never follows click-bait concepts like a "Santa rally" or allows words like "cheap" to influence my investments.
Repeat after me: what is the current RoC (rate of change) for growth & inflation, what's the future RoC expectation, and how is the Fed reacting
Growth: GDP currently slowing and expected to continue slowing over the next 2 quarters
Inflation: CPI & PPI currently slowing, albeit slowly, and expected to continue slowing over the next 2 quarters
Fed Policy: Hawkish, raising interest rates in order to combat inflation
I will continue to say this in all caps: ALL THREE OF THESE SCENARIOS HAPPENING AT THE SAME TIME IS ONE OF THE WORST SETUPS IN ALL OF MACROECONOMICS.
But who could have seen this coming?
Capital Contrarian historical posts:
"It's not a dip" - June 20th, 2022
"But I'm getting a lower price" - July 9th, 2922
"You're Not Picking The Bottom" - July 11th, 2022
5-6 months ago what were we preaching? The same...damn...thing.
Back then we knew where the RoC for growth and inflation was going. Nailed it.
The Fed is always the wild card, who would have thought they would raise interest rates faster than any other period in history?
That only adds fuel to the fire - and unfortunately Santa comes down the chimney.
Skills & Data Used This Week
Corporate blackout period.
No, not blacking out at their boujee holiday parties (although after their company's performance this year maybe that's not the worst idea).
Corporate blackout period: a defined timeframe where company's are not allowed to repurchase their stock.
Why would a company want to buyback their (in the case of this year, shitty) stock?
To increase the value of the remaining shares by reducing the number of shares outstanding (think supply & demand)
To return capital to shareholders
To increase the ownership stake of existing shareholders
Hey, maybe companies think their stock is "cheap" and now is a good time to buy! L O L
Well, thankfully for our trusty Securities and Exchange Commission (SEC), blackout periods are structured in a way that avoids insider trading.
There are establish laws that prohibit insiders from buying or selling company stock based on non-public information. Insiders include company executives, directors, and other individuals who have access to confidential information about the company.
During blackout periods (before, during, and for a brief time after a company reports) insiders are not allowed to trade their own company's shares. So yes, Elon can't sell Tesla stock right before they tank an earnings report.
Instead, he will just take the tax loss this year before Tesla reports earnings on January 25th. Smart way to navigate his taxes knowing how much Twitter Blue is raking in already!
In The Account | my top holdings
$UUP - US Dollar
Losing strength, and I'm not afraid to admit that. But, it still remains a core assets, just not as big. Currently I am at a 5% position our of a max 12% position for a currency. Even though I've sold a lot, it still remains the highest $$$ holding in my account
$GLD & $GDX - Gold & Gold Minders
Building a nice position in GLD on down days; currently at 5% out of a max 12% (gold is a currency, so max position mimics UUP).
GDX has more volatility, so I am careful with the size of this position. Currently only at a 2% position.
$XLP (Staples), $PINK (Healthcare), $XLU (Utilities)
I've been BTTD in all 3 of these on red days. They are all hovering around 3% positions (out of a max 6%).
On The Radar | positions I want to build / sizing up
BONDS
It's a waiting and watching game, still. Full disclosure I've started small positions in $IEF and $TLT, but they are 1-2% (out of a max 10%). MOVE index is trying to suppress, but yield curve continue to stay elevated.
Off The Grid | removed positions / short selling opportunities
TECH - $XLK, $QQQ, $GOOGL, $META, $TSLA
RETAIL - $XRT
HIGH BETA - $SPHB
CRYPTO - $BITO, $MSTR
HIGH YIELD - $HYG
ENERGY - $XLE, $XOP
Adding energy to the short side as slowing global demand, with easing inflationary pressures, should drop the price of oil. That's bearish for energy companies. Not to mention they will start to head into an earnings season trying to comp historical numbers from 2022. Tech was the bubble of 2022, is energy the bubble of 2023??
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.