Are You Being Scammed?

Estimated read time: 3 minutes and 42 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

The title of my post two weeks ago, "POW! Rate in the Kisser", was A) a nice play on words and B) as good as foreshadowing gets.

"Federal Reserve Chairman Jerome Powell on Friday said the central bank's job on lowering inflation is not done, suggesting that the Fed will continue to aggressively raise interest rates to cool the economy."

"Combined with the crunch of expensive credit, Powell warned households and businesses may feel some pain as interest rates increases continue."

"These are unfortunate costs of reducing inflation," Powell said. "But failure to restore price stability would mean far greater pain" - Yahoo Finance

"Buyer beware" was the cliffhanger I left everyone on from that post. Powell did the thing. S&P roughly -4% since. And he doesn't seem to be stopping....

Teaching Moment

Numbers > Narratives

Hand up, I am an avid reader of FinTwit - while I know the meme crowd uses zero fundamental reasoning for their actions, they are damn funny to follow. Their narratives are a great form of entertainment.

How about Wall Street? Ya know, Cramer and those guys...we do realize they basically fall in the same category?

If you haven't given @CramerTracker a follow on Twitter you are seriously missing out; simply fading the narratives he spews out of his mouth could make you a certified millionaire.

Does anyone remember the Invesco $QQQ commercials during March Madness earlier this year?

I know there are more important things to worry about in this word, but we seriously are living in a world where media advertising pushed the individual inventor in the direction of buying TECHNOLOGY as the economy started to enter SLOWING GROWTH (hint: not a good setup to buy tech).

Had you succumbed to that media brainwashing at the time you would be down ~17% on that investment currently.

So what numbers do we need to focus on?

Put simple, there's not a single number we should be focusing on; instead, we need to be focusing on the Rate of Change (RoC) in all forms of economic data.

• GDP

• Inflation

• Consumer Price Index (CPI)

• Producer Price Index (PPI)

• Housing data

• Manufacturing data

The list goes on! A healthy economy will see increasing RoC - a booming economy will see BIG RoC monthly, quarterly, and yearly.

A recessionary economy will do the complete opposite (i.e. the outlook for the next few quarters).

Focus on the RoC.

But hey, when all else fails "Buy Stocks When It Feels Terrible"! What could possibly go wrong!

Or you could just do the opposite of what this guy says #Timestamped

In The Account | my top holdings

1. $UUP - US Dollar

   1. Talk about ALPHA over the last two weeks with $UUP up almost 3% and the S&P down almost 4%. In these situations I pat myself on the back (because we all deserve a little credit) and take down some exposure. Who dares me to buy some next time it's on sale? I'm currently at 7.5% exposure and have no issue getting back to my max of 12%

2. Utes, Staples, Health Care

   1. These 3 sectors perform well in the economic backdrop we are in/headed towards. So when the market presents you with a buying opportunity, you shed some $UUP and buy something else!

   2. ETFs: $XLU (utilities), $PBJ (consumer staples), $PINK (health care)

   3. Stonks: $GIS, $BJ, $STKL, $MCD

3. $GLD - Gold

   1. I was pleased to get, what I thought, was a great buying opportunity in Gold as rates took a ramp over the past few weeks. Even with rates backing off, which should be a positive catalyst for Gold, it doesn't seem to be acting nicely

   2. One caveat is that gold volatility (GVZ) remains low, which gives me confidence to continue buying on red - it's on a tight leash

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

1. Low Volatility, High Dividend

   1. This week I started positions in $SPLV & $SPHD - two 'factor exposures' that do well in this economic backdrop. They are small positions, about 2% each, so looking to buy on red when the opportunity presents itself

   2. These ETFs are heavy in Utilities and Staples, so continuing that theme

Off The Grid | removed positions / short selling opportunities

1. FINANCIALS

   1. As I stated in the "Teaching Moment" section, inverted yield curve as bad for companies - specifically Banks who lend money. Financials will get smoked if this curve continues to stay inverted so I'm keeping them on the short side of my book.

   2. $XLF, $KRE

2. ENERGY

   1. Here's a new one for the faithful! Economic recessions are historically led in a, for lack of a better words, crash of oil prices. Oil and energy companies are some of the only positive beneficiaries of 2022 - but that's right where I want them.

   2. $XLE, $BNO

It pays to have some exposure to the short side (short selling, puts) on days like Friday....

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.