Tag Archive | portfolio

Markets take the stairs up and the Elevator down

SmartStops comment:  Great article about the nature of our 21st century markets and why one needs to stay protected in a fluid geopolitical environment .  Some interesting graphs are presented.

The article concludes:    Perhaps more than any other time in the last six decades, the fate of markets is inextricably intertwined with the ebb and flow of geopolitics. Investors can no longer hope to conceptualize markets as existing in anything that even approximates a vacuum.

Author’s central point – how much our Fed and central banks get involved:

“True, DM central bank liquidity and jawboning (read: forward guidance tweaking) have thus far managed to suppress the market’s response in terms of volatility, but as it turns out, what central banks can’t do is keep Pyongyang from launching ballistic missiles, keep euroskeptic candidates from marshaling an alarming percentage of the vote in France, bridge the sectarian divide in the Mideast, keep Erdogan from effectively declaring himself Sultan in Turkey, and/or keep things stable inside the Beltway.

So while markets may be conditioned to effectively ignore what’s going on in the world, that doesn’t change the fact that things are getting more unstable virtually by the hour (witness the manic news cycle). Eventually, this will catch up to markets because again, central banks can’t ultimately control geopolitical outcomes.

Read more at: https://seekingalpha.com/article/4074212-wednesday-bloodbath-attack-heisenberg-raison-detre

Is this £406m investment guru the mystery buyer of ‘stock market crash insurance’?

Interesting article out of the UK about what Ruffer who is one of Britain’s leading fund managers and oversees billions of pounds of savers’ cash and has a personal fortune of £406m.  He is reported to be ‘stockpiling’ insurance against a market collapse.

The investor who has been hedging using VIX Option contracts on the US market was unidentified until recently.  He had been dubbed  “50 cent”, after the well-known rapper and musician (and because the contracts are priced at 50 cents each) .  Was recentlly identified in Financial Times as Jonathan Ruffer who oversees the Ruffer investment house.     Read more at:  http://www.telegraph.co.uk/investing/shares/406m-investment-guru-mystery-buyer-stock-market-crash-insurance/

How will you keep your investments protected?

With stocks near a record high, is a change of fortune just around the corner?

Mark Hulbert, who made his career in the investment industry by tracking stock market newsletter writers and predictors has this to say about our continuing bull market and fears of a downturn:

Opinion: Here’s what the oldest market-timing system in stocks is saying now

Published: Apr 13, 2017 8:39 a.m. ET  @ Marketwatch

He focuses on the Dow Theory as the classic “timing” system approach and reassures readers that
“For the moment, it says that all you Nervous Nellies can relax: All three of the Dow Theorists who I monitor on a regular basis believe the major trend remains up”

Of course that’s “for the moment”.

Regardless of who you want to follow in their “predictions” realize that the market is going to react to many different factors. Most important is to get flagged when true “risk” is developing. And that’s where we at SmartStops.net can assist you.

$1M more in your IRA by avoiding major losses

SmartStops Comment:   Modern Portfolio Theory  – continues to have holes poked in it.  Here’s a post by Hedgeable reiterating the importance of missing the worst times in the market.

From their post:  If you merely miss out on 75% of market losses during the two largest crashes of the past 25 years- the dot-com crash and the financial crisis crash- you will have $1 MILLION MORE IN THE AVERAGE IRA ACCOUNT!!!

Hedgeable_Portfolio_without_75_percent_Losses

BaseBall fans will like the rest of the post too.  Read Entire Post

 

If you can’t beat them join them, Best Buy. BBY

by  Chris Georgopoulos, SmartStops contributor

Reading financial articles can be, let’s say boring at times. This article we are going to try to spice it up, let’s play a game of role playing.  Famed speculator, Jesse Livermore once was quoted…

“If I were walking down a railroad track and saw an express train coming at me at 60 miles an hours.  I would be a damned fool not to get off the track and let the train go by. After it had passed, I could always get back on the track, if I desired.” –Reminiscences of a Stock Operator, Edwin Lefevre.  

For this game let’s rename the train, Best Buy stock (BBY: NYSE), the ““I” in walking down the track” we can call the shareholders of Best Buy and the speed of the train, the issues.  The game is scored by the costs of each decision. Whoever has the best return wins!

It is the end of summer 2005, Best Buy is approaching $80/share and the future couldn’t be brighter. The tech bubble burst is ancient history, the housing market is hot, interest rates are low and every house in America is an ATM for consumer spending.  You are on the railroad track…there isn’t a train in sight! 

It is now the beginning of fall 2008; Best Buy has fallen to the mid $40s in defiance of the market making new highs and there are rumors of problems in Mortgage backed securities.  (Note:  Sidestepping risk is now made possible with the release of SmartStops.net  which if had been available would have had you out in the $70 range in 2005).  Your friend has made a fortune flipping speculative properties in south Florida and Las Vegas, but you see he is worried. He still has five houses on the market with almost no personal income… (You know how this story ends)  You can hear a train coming and it sounds like it’s really moving!

Only a few months later, Best Buy is trading under $18/share!   The rumors are true; the housing market has crushed the stock market. It seems nobody thought housing prices would ever go down and the economy is on the verge of total failure. You can now see the train, its moving fast and finally you start to consider if you should actually get off the tracks.

(SmartStops.net   issued two Long-Term exit signals in 2008 the first January 4, 2008 at $46.80 and on September 16, 2008 at $40.68. That’s a  $22 per share savings by sidestepping risk.)

It is two years later; Best Buy is trading back in the mid $40s. Read More…

Autozone is definitely “in the Zone” but are there risks?

originally posted at Minyanville.

by Chris Georgopoulous, SmartStops contributor

Autozone (AZO: NYSE), a retailer of automotive replacement parts and accessories has seen an unprecedented appreciation in value over the past few years while most equities have been punished from an economic recession.  While the success of Autozone’s stock, management and business model are unquestionable there is still one question that needs to be answered; “Will it continue? “

Most businesses experienced negative effects from this past economic recession, Autozone triumphed.  The marketplace for new cars dried up quickly when personal income and spending dropped. With less money in the pockets of consumers, the more they had to rely on their aging autos. Aging autos need to be constantly fixed, and where did consumers go to replace those batteries, headlights and fuses? That’s right, “Get in the zone….Autozone”! 

This macroeconomic factor is the foundation of the growing demand, but it wouldn’t have propelled the stock alone. A competent management focused on using this ever growing cash flow to aggressively repurchase shares, open new stores and concentrated on maximizing same store sales figures. The stars aligned for Autozone and they took advantage of it.

 

Autozone (AZO) SmartStops Long-Term chart

Simple Moving Averages to highlight; 20=$292.10, 50=$271.55, 200=$178.82

The same success can be seen in the technical and fundamental analysis of their stock. From its lows in early December 2008 the stock has increased from the mid $80s to over $300. The Stock has not once broken its 50 day SMA, which was tested for the first time in 2 years during the most recent market correction.  Once tested the stock quickly rebounded in defiance of the overall market and broke to new highs.

Fundamentally the market may even be discounting the stock’s value.  Yahoo Finance lists the next five years growth rates at around 15%, Read More…

Listening For The Footsteps of A Pullback

With the market largely treading water over the last 10 years and investors experiencing several gut wrenching corrections over this period, it is no wonder that investment psyche has evolved from one of buy and hold to buy and protect.

Unlike a roller coaster, in investing the fun comes with the ride up, not with the nail biting ride down. Yet in the past 18 months alone buy and hold investors experienced a 30% decline in Google, a 46% decline in Ford, a 50% decline in Cisco and a 67% decline in Bank of America. Not a lot of fun here. Especially when you consider it takes a 43% gain to make up the ground on a 30% pullback.  As a result of this experience, investors find themselves asking, why ride out these storms if I don’t have to? How can I do a better job at identifying and sidestepping risk?

Traditionally, investors have turned to the VIX as a tool to help forecast market sentiment and risk levels. Unfortunately, the VIX often spikes in unison with significant market pullbacks providing little forewarning. The financial industry has responded with a slew of new and creative solutions that aim to help investors gain visibility and better listen for the footsteps of the next pullback. Following we take a quick look at three novel solutions, one which combines fundamental analysis with crowd sourcing, one which analyzes market sentiment, and a third that leverages technical analysis to identify periods of above normal risk. Read More…

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