It's Probably Nothing

Estimated read time: 2 minutes and 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

YTD returns:

• S&P 500: -23.63%

• Nasdaq: -31.91%

• Russell 2000: -24.33%

• Top holding position US Dollar ($UUP): +18.24%

Let's take a break from listening to whatever BS is spewing out of Cramer's mouth and dive into some data:

Below is the latest ISM Manufacturing reading. This metric is used to understand the health of the largest manufacturer's in the country based calculations that take into account new orders, inventory, production, etc.

Reading >50 = expansion

Reading <50 = contraction

You don't have to be a "chartist" to see the direction we are headed. And quite frankly this shouldn't come at a surprise as we enter sequential growth deceleration in our economy.

Slowing growth means less demand; less demand means more inventory; more inventory means less need to produce. Voila, a recession (grey shaded areas).

So just like every week I'm starting off this section with more data to suggest we are headed in the wrong direction...and I'd be foolish not to mention my favorite topic: RATES.

It's probably nothing....

Teaching Moment

Every investor should have a game plan.

Bill Belichick doesn't go into a matchup without studying every facet of his opponent. He understands what has been working and will continue to work; not to mention, he doesn't dare waste his time with something that he knows is s***. He has a game plan and he sticks to it.

For my investment strategy, game planning revolves around position sizing. I set rules and I stick to them - no exceptions.

Specifically, I never go above my pre-determined maximum size for a single security:

All of these percentages are viewed as"% of total capital":

• These are examples and NOT current holdings

Currency: 12-13% - Dollar, Gold, Euro

Fixed Income: 10% - Bonds

Equity: 6-7% - Stonks

Commodities: 4% - Oil, Natty Gas, Copper, Bitcoin (yes, it's a commodity) The best part about investing is that you get to pick and choose how all of these % add up to 100 - but setting a limit on each individual security will allow you to manage risk a little easier. Essentially, you're avoiding the scenario of "having all of your eggs in one basket".

And if you've had the unfortunate pleasure of having said eggs in said basket (i.e. everyone's 401k invested in large-cap Tech) welp now you understand.

In The Account | my top holdings

1. $UUP - US DOLLAR

   1. I'm not sure we've seen a better buying opportunity in the USD than what we saw this week. I dropped from my max on the melt up last week in $UUP (12% to 8%). Now I can buy more back towards my max (currently 10.5% position). Buy low, sell high. Rinse. Repeat.

2. CASH

   1. The physical cash balance went down because I was buying more $UUP. Cash to buy cash, because we like that positioning during recession risk!

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

1. NONE

   1. VIX remaining at or > 30 is NOT a buy signal

Off The Grid | removed positions / short selling opportunities

1. TECH - $XLK, $QQQ

2. FINANCIALS - $XLF, $KRE

3. BASIC MATERIALS - $XLB

4. RETAIL - $XRT

5. HIGH BETA - $SPHB

6. CRYPTO - $BITO, $MSTR

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.