Are You Paying Attention?

In this week’s market recap email

1. Market overview/recap

2. Teaching golden nugget

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

4. About me

What Happened This Week

S&P 500 & Nasdaq are flashing green on your screens to finish out a strong week for the market, I guess the bottom must be in and we should all chase this move? WRONG.

Anyone know what the 10 year treasury yield is? Bueller?

Forget the technical aspect of it and just think of it like this - the 10 yr rate is an indicator on economic growth/slowdown

Rates drop when the economy is struggling (lower rates makes it easier to borrow money)

Rates rise when the economy is growing; people have more money so they must be able to afford more to borrow!

July 2020 - COVID, lockdowns, the world seemingly on fire, rates super low

June 2022 - Rates keep going up…but omg the market is down like 20% YTD?!

So it’s costing more to borrow while simultaneously the market is puking? Yeah you’re right, probably nothing….

10 yr was at 3.43 just a week ago…now 3.06…so a massive drop signaling the bond market is sniffing out slowing GDP growth for our economy?

Read my “about the author” at the end, I’m no finance guru. But I have learned that this stupid rate curve can tell you A LOT about how to position your portfolio

Teaching Moment

So there’s this thing called the VIX. Volatility Index to be more specific. I’m sure you’ve heard Cramer discuss it on CNBC so I guess it must be important.

Bottom line, when VIX goes up (volatility increases) you can and will get your face ripped off

When VIX goes down and keeps going down you will probably contemplate quitting your job to become a day trader because you can throw **** at a wall and it will make money.

Let’s take a look at two VIX charts and discuss our FEELINGS and EMOTIONS. This is a safe space.

How did you feel in March of 2020? More specifically, how much money were you losing with VIX at EIGHTY-TWO (VIX @ 82.69 to be specific, nice).

How about November 2021? VIX at 15, good ol’ Patrick Mahomes esque just wheeling and dealing those GME shares like a degenerate

How about June 2022? VIX at 28.72 - that’s nowhere near 80, but if you take a look at history those drastic spikes are rare. So rare that the only other one was during the ‘08 collapse.

Let’s cut to the chase - when the VIX is >30 and stays there, *say it with me* you can and will get your face ripped off.

In The Account | my top holdings

1. Cold. Hard. Cash.

   1. 50% of my money is doing absolutely nothing at the moment. “Why put money into an investment account if you’re not going to invest it?” I’m not sure about you but I hate watching my hard-earned capital just bleed away in investments that are poised to go down in a slowing economy…

2. $UUP - US Dollar Index

   1. Wait, so you are sitting on physical cash but then one of your top holdings is in an index fund that mimics the US Dollar? Uhhh ya think? I’ve been holding this bag all year and it’s up a cool 8.62% while the S&P is down 20.4%. In the industry they call that Alpha - but again, not a finance guy.

3. $GLD - Gold

   1. Gold tends to perform well in periods of economic uncertainty, a “safe-haven” as some like to say. But it hates rising rates - so my eyes are on a falling 10 yr to beef this one up.

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

1. CHINA

   1. Unlike the US economy that is expected to enter a period of slowing growth, China is poised to run the table here with sequential growing over the upcoming months. Markets love growth! And Chinese stocks have already begun their move accordingly…

   2. My top ETFs: KWEB (Chinese internet), KBA & FXI (large-cap), CHIQ (think Chinese Amazon)

   3. My top stocks: PDD (Pinduoduo - Retail), BILI (Bilibili - Gaming)

2. Oil

   1. How about those prices at the pump! Oil got smoked over the last week and we have our first “buying opportunity” in quite some time for a commodity that has been ripping. In general, commodities are starting to soften across the board after an outstanding inflationary run. This is on a very tight leash - and for that reason my position size is only 1.5% of my portfolio in $BNO. I will often put a stop-loss order on this position (basically a way to automatically sell a position if it hits a specific price - all brokers have the ability to do th) to cut myself out of something that is teetering on a potential breakdown. But hey, let's hope it rips and that stop-loss never gets executed!

Off The Grid | removed positions / short selling opportunities

1. BONDS

   1. Simply put, bonds love falling interest rates (we should all be experts on the 10 yr curve by now). Despite rates dropping this week (and bond positions doing well), we would need to see a further breakdown to justify this position. It’s on the sideline for now.

2. TECH

   1. Remember those Invesco $QQQ commercials during March Madness? I sure hope you didn’t succumb to a marketing campaign for an ETF…anything tech related will get massacred in a slowing economy.

   2. How are those 401Ks doing? Ya know, the ones where you pretty much have all of your retirement money invested in Apple, Google, Microsoft, Amazon. I currently have ZERO investments across all of my wealth in those companies - my 401k is sitting patiently in some interest income fund and a little bit of…CHINA. If I wanted to waste part of my paycheck away I would just place a Super Bowl future on the Browns.

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.

About the Author

Two years ago I was Google searching for companies who were rumored to be developing a COVID-19 vaccine. I allocated all of my money to 5-6 stocks hoping that one would hit. One of them, Inovio Pharmaceuticals ($INO), took off like a rocket. In a matter of weeks I cashed a cool 59.75% return. Since selling the stock in April of 2020, $INO is down 75.5%. I had absolutely no clue what I was doing when it came to investing.

Then there was GameStop - boy do I miss those days…my first purchase came on 12/21/20 and well, the rest is history.

I am no financial advisor. My only claim to fame in the finance world is that I minored in the field during college (one of the classes was 8am on Friday mornings and I barely showed up half-sober from the night before).

Since adopting the ever-so-popular WFH lifestyle that I know many of you reading this take part in, I started to take an interest in the stock market because…well…who couldn’t turn their head from watching their account skyrocket from 2020-2021.