Wednesday , February 24 2021
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Tag Archives: newsletter

The Markets May Be Starting To Worry About Rates 02-19-21

From a portfolio management perspective, we have started to raise cash and reduce our equity risk somewhat. Our bond portfolio now has a very short duration, and high cash levels are acting as an early hedge against volatility. We are not getting overly aggressive on hedging risk just yet as the money flow indicators, as shown above, remain supportive. However, that signal is beginning to get more extended, and the market is starting to show early signs of deterioration. As I stated in the...

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Speculative Mania Continues As It “Goes Up In Smoke” 02-12-21

As investors, our job is to navigate the waters within which we currently sail, not the seas we think we will sail in later. Higher returns are generated from the management of “risks” rather than the attempt to create returns by chasing markets. That philosophy got well defined by Robert Rubin, former Secretary of the Treasury when he said; “As I think back over the years, I have been guided by four principles for decision making.  First, the only certainty is that there is no certainty. ...

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Wall Street Wins Again As GameStop Becomes Game Over 02-05-21

Two weeks ago, we discussed selling our index holdings and raising cash to position for a correction. Last weekend, we stated that we expected a rally following the selloff at the end of January. As such, we did put some of our cash holdings to work this past week, increasing exposure to inflationary trades (energy and financials) and reducing our duration risk in our bonds. While I have read many comments about “how we missed the rally,” the truth is we didn’t. Yes, we did reduce exposure...

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Retail Investors Stage Riot Against Wall Street 01-29-21

As I discussed last week, we had positioned for a correction. Again, as noted above, I am NOT saying the markets are about to crash. Here is what we said last week: “However, after the recent runup from November, all of our indicators are beginning to align. Such suggests a 3-7% correction over the next month. Could it be 10% or more? Absolutely. Once the correction begins, we can garner a better understanding of the downside risk.” In our view, the management of risk will pay dividends over...

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Bulls Continue To Push Stocks Higher As Risk Rises 01-22-21

Portfolio Positioning – A Correction Is Coming As noted, a correction is coming. Let me clarify. I am NOT saying the markets are about to crash.  However, after the recent runup from November, all of our indicators are beginning to align. Such suggests a 3-7% correction over the next month. Could it be 10% or more? Absolutely. Once the correction begins, we can garner a better understanding of the downside risk. Over the past year, we have remained primarily allocated toward equity exposure...

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Everyone Is In The Pool. More Buyers Needed. 01-15-21

A Heat Map Of Valuations By Michael Lebowitz, CFA We talk a lot about valuations and their importance, but such discussions can be hard to put into context. Therefore, I have produced a series of charts that visualize various valuations of the S&P 500 companies. Not surprisingly, such also corresponds to the current behavior of Wall Street analysts and investors. Instead of cluttering up the commentary space on RIAPro.Net (30-day Risk-Free Trial), we thought you would better appreciate...

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Bulls Loving The “Heads I Win, Tails I Win” Market 01-08-21

Portfolio Positioning Update With January kicking off with a bang, we are maintaining our long bias with reduced hedges at the moment.  We made some changes to align our portfolio more with our equal-weighted benchmark index during the past week by reducing some of our overweight in technology, healthcare, and communications. While many other sectors of the market are grossly overbought short-term, we added a 5% weighting of RSP (S&P Equal Weight ETF) and SPY (S&P Market Weight) to...

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So Far, The Bulls Are Disappointed In “Santa” (Full Version)

Portfolio Positioning Update With the “Santa Claus” rally wrapping up next week, we are maintaining our long bias with reduced hedges at the moment.  We made no changes to our portfolio mix during the past week except for adding a 5% weight of SPY to our current holdings. Once we pass the end of the next week, we will most likely reduce that position and rebalance the rest of our holdings. With the stimulus bill passed, and checks going out, we won’t be surprised to see a short-term pop in...

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All I Want For Christmas Is A Bull Market (Full Version) 12-25-20

A Record High In Overvaluation SentimenTrader had a great post out this past week, with some more data showing the more extreme overvalued conditions in the market currently. “Sentiment and valuation go hand-in-hand. One impacts the other and creates a self-reinforcing loop until something happens to break the cycle. Over the past 40 years, there have never been more mild, moderate, or severely overvalued companies within the S&P 500.” Bubbles Are Psychological What is essential to...

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Overly Bullish Speculators Front-Run “Santa Claus” 12-18-20

Stuffing Stockings As noted in the chart above, it isn’t just “retail” investors getting overly exuberant about the market, but “institutional investors” are jumping in the pool with them. As I noted last week, portfolio managers are not only entirely long but have leveraged up portfolios to over 100% exposure to equities. While investment managers are “all in,” Wall Street strategists are rushing to ramp up price targets on stocks to lure more retail investors into the market. The “Fear...

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