The Panic Zone

Estimated read time: 3 minutes 11 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

As expected, the Fed raised interest rates by another 75 basis points. Rather than rant about interest rates, look no further than our prior post on Monday 'The Secret of Big Banks' about why raising interest rates into an economic slowdown is #bad.

Daddy Powell stated that raising rates is sustainable as this isn't a 'typical recession' with our strong labor market.

Uhm.....smash that link below

Facebook (Meta lol), Apple, Amazon, Netflix, Google all slashing jobs. Good thing FAANG never stood for anything important - very bullish job market outlook Mr. Powell! Raise those rates even more we can handle it!! (not)

Teaching Moment

Ding ding ding

9:30 EST - US stock market opens

You've been hawking futures all morning, probably painting some narrative from CNBC on why they are red or green. You're antsy to make that first trade of the day - what will you do first? Panic sell something because it's down big? Buy something because of FOMO?

Guess what I'm doing from 9:30-9:45 every morning - making breakfast.

Let's forego the intermittent fasting jokes and get right to the point. The first 15 minutes of trading in the financial markets is when all of the emotions let loose.

If there's one thing I know about the market it's that numbers > narratives.

Let those who panic sell at 9:31 have their fun, it very well could be your gift to buy low at 10:00 (assuming trend and macro economic conditions support buying it).

Let those who FOMO buy at 9:31 have their fun, it very well could be your gift to sell high at 10:00 (assuming trend and macro economic conditions support shorting it).

It always amazes me what difference 15 minutes of patience can do - especially in times of market turmoil, increased volatility, and uncertainty.

15 minutes could wipe out BILLIONS in wealth; I'd be hard-pressed to say it typically does the opposite.

In The Account | my top holdings

1. Cold. Hard. Cash.

   1. Same ****, different week.

2. $UUP

   1. See above....

3. $SJB

   1. This is a play on shorting high yield, which historically does very poor in slowing growth environments. I'm towards my max position (6%) as this is screaming "overbought".

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

1. BONDS

   1. Once off the grid entirely and now back on the radar. I mentioned in last week's post that I am long $BAB - that's looking great so far. With the MOVE index (i.e. Bond volatility) starting to come down + the 10yr curve getting pounded (long end of the curve dips on slowing economic growth) I'm eyeing up everything and anything Bond related....when we get a 10yr bounce. Yields down = bonds up.

   2. We don't chase on a move, we wait for the bounce. 10yr towards 3% is when I start positions in $TLT, $IEF, $LQD

2. LOW BETA/DIVIDEND

   1. When the VIX bounces within the goal posts of 20-30 there are 'investable' sectors. It's when VIX >30 where literally nothing will work. So as we understand the economic backdrop over the next 2-3 quarters (slowing growth) what works with VIX bouncing up & down in the 20s as economic growth is slowing? Low beta and high dividend securities.

   2. Top tickers in this category: $XLU (utilities), $XLP (consumer staples) $SPLV/$SPHD (low beta & dividend ETF - top holdings are utilities and staples!)

Off The Grid | removed positions / short selling opportunities

1. CHINA

   1. Plain and simple, I got the timing wrong here. There's nothing fundamentally wrong with Chinese data, they are expected to enter sequential periods of accelerating growth which is bullish. But I respect the market signal too much to 'hold the bag' on this one. So for now, I'm out - but rest assured I will be back.

2. COMMODITIES

   1. When the economy starts to show deteriorating growth AND inflation, commodities will (they already have) come off their highs. Whether it's oil, food, metals, there are plenty of shorts out there. My top tickers I am bearish on include: $CPER (copper), $SLV (silver), $BNO/USO (oil), $BTC (yeah, it's a commodity...)

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.