"But I'm Getting a Lower Price"

Estimated read time: 4 minutes 32 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

Math question: If you lose 10% in an investment, what percent do you need to gain to get back to break even.

Answer: +11.11111% to get back to breakeven

How about losing 20%?

Answer: +25% to get back to breakeven

Do I need to keep doing this exercise for those who keep "getting the lower price"? Because last time my math checked out, it's going to take a large gain for your 401Ks to get back to where they were this time last year...

The point of investing (or not, see my top holdings below) is to protect and compound YOUR MONEY...not lose it.

Skills/Methods I Used This Week

Volatility can tell you a lot about a market.

More specifically, trending and rising volatility is often viewed as negative for the economy. Some people love the volatile setups - others lose their hard earned capital as a result of not being prepared for sudden spikes in Vol.

The Volatility Index (referred to as VIX) is the leading indicator for market future S&P 500 volatility

Why do we hate volatility?

Volatility = the standard deviation of outcomes

As the standard deviation of outcomes goes up, bigger and badder things can happen

Over the course of 2022 we have seen the VIX hover in between 20-30 with occasional spikes above that.

VIX > 30 = Your 401k looks like the red sea

Volatility<20 is where the GameStop HODLers rejoice

Anything that ticks can be measured from a Vol perspective, which personally helps me decide if something is investable or not.

For example, the indicator for Gold volatility is $GVZ

While Gold ($GLD is the symbol used to trade it) did break out to the upside along with volatility on March 8th, it's gone straight down since then as Vol has remained elevated.

Not even falling rates (Gold loves falling rates) has been able to boost the asset price.

I know that, theoretically, Gold should be performing well in our current economic state - but who cares what "should" be happening? Point is that it's not. So I'll wait until Vol cools down until sizing this position back up.

It's very important to note that not all Vol is the same - VIX and GVZ will have different "levels" that indicate whether or not they are investable. Without boring everyone to death, the motto here is that assets with trending and rising volatility will be difficult to invest in.

In The Account | my top holdings

1. Cold. Hard. Cash.

   1. Who would have thought that sitting on straight cash doing absolutely nothing would be a smarter investment than the S&P 500? I'm no betting man (that's a lie, especially during football season) but I like the idea of cash sitting on the sidelines during highly volatile markets.

2. $UUP - US Dollar Index

   1. So there's cash. And then there's $UUP, which is like cash but it strengthens during periods of economic uncertainty. So my cash is making...cash. Simple, right?

3. CHINA

   1. Ok now this one is getting fun - remember, China has an open road ahead of them with sequential growth so we want to be buyers of China on all dips. That's right, BTTD (buy the damn dip) in China! Been a while since anyone (intelligently) used that acronym!

   2. I currently am holding $KWEB, $KBA, $PDD, $BILI, $FXI, $CHIQ at ~2% of my capital each. So that's ~15% of my portfolio exposed to:

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

1. BONDS

   1. My last post had bonds under the 'Off The Grid' section. Now they move up to The Radar. Why? In short, yields have been falling since mid-June (yields down = bonds up).

   2. So why am I not dumping my cash into bonds right this very second?? Why wait?? VOLATILITY is still rising and trending. Bond volatility is measured by something called the MOVE index, and that **** looks like a meme stock...I will add once I see the index start to fall (and more importantly trend that way).

Off The Grid | removed/reduced positions & short-selling opportunities

1. OIL

   1. It was a fun trade while it lasted, but I sold the last of my exposure to oil & energy stocks on 6/29. Oil has been one of the last commodities to start breaking down. Leave the supply/demand narratives at the door and focus in inflation slowing from here. That's no bueno for anything in the commodity basket.

2. $XRT - Retail ETF

   1. Retail stocks will begin reporting their earnings for Q2 over the next month; their "comps", or 'comparisons' to last year when the economy was re-opening, are near impossible to beat. Don't be fooled if a retail company "beats on earnings" - what investors hate to is growth slowing compared to prior times. Have fun topping last year's comps....

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.