Now that I’ve presented my 2019 game plan and my positioning moves planned for the last quarter, the time is ripe to see the strategies embraced by others. First off the blocks was Credit Suisse with a projection of an 11% upside with some volatility. I can’t disagree with the answer but question the methodology. Their belief is the rise will mainly be on the backs of investors willing to pay up for quality (margin expansion). My belief is that it will be riding the back of productivity increases as a result of the tax plan. At least we both recognize that the Y/Y EPS growth rate is generally not sustainable.
I decided to pause my 3Rs series to review one particular event of this past week. No, not the political spectrum (guilty pleas/verdicts in the US and a new PM in Australia) but the bloodbath incurred in the discount broker space following JP Morgan’s announcement of the commencement of a free trade platform. In the event you missed it, the Tuesday morning market shudder (per Seeking Alpha) was:
Online brokers slump in premarket trading after JPMorgan (NYSE:JPM) says it’s introducing a mobile investing app bundled with free or discounted trades.
JPMorgan +0.7% in premarket trading.
Making the headlines this past week was the atrocious scene along our border. Being an event driven investor, I had to at least take a look at the situation to – at a minimum – determine my exposure and whether strategy adjustments are necessary.
I’m not a prude by any stretch of the imagination but (outside of ETFs) have never invested in tobacco stocks. I have minimal exposure to wine and spirits. While I’m not casting aspersions on those that do, I figure there are more than enough alternatives that better fit my preferences.
The theme for the month was volatility. A couple of ETNs cratered as a result of the high volatility causing investors to lose significantly when using these levered products. “We sincerely apologize for causing significant difficulties to investors,” Nomura said. Credit Suisse stated “investors who held shares of XIV had bet against at volatility at their own risk. It worked well for a long time until it didn’t, which is generally what happens in markets”. Caveat emptor.
During the month, the S&P index dipped into correction territory before rallying to close the month down 3.89%. My portfolio sympathized with the index closing down 5.53%. I never hit correction so my peak drop was less but I also failed to recover as quickly. Probably an area to perform a root cause analysis on at some point. Following back-to-back monthly losses against the S&P, I’m down 3.44% to start the year. Continue reading
With the wild ride in the markets this week, I perused some of the community’s blogs to gauge the reaction. While not meeting scientific norms regarding sample size, I was surprised by the lack of reference to the pullback in 66% of them – including ones with posts as recent as yesterday. Perhaps it’s a lack of funds to take advantage or the deer in the headlights syndrome. One blog, Fully Franked Finance, had a timely piece a few days prior which stated the importance of a ‘shopping list’ – as many others also encourage. I too, engage in a strategy which emulates the ‘shopping list’ strategy. So, what were my moves so far this month?
The market came out of the chutes and barely looked back this month, the catalysts being the realization of the tax plan’s impact on corporate earnings and few earnings reports being significant disappointments. The lower tax rates started trickling into paychecks (average about 3.5%) but the average gas price nationwide increased by roughly 5% primarily due to the weakness in the US dollar (caused in part by the prospects of increased deficits from the tax plan that haven’t been offset by jobs, productivity or GDP gains yet). At least we can watch commercials touting unrealized benefits even though it is way too early for any tangible impact to be realized. Kind of makes me wonder a little. For the month, the S&P index increased by 5.62%% while my portfolio value increased by merely 3.81% putting me behind by 1.81% to start the year. Continue reading
As I wait for the last three dividends of 2017 to post to my account, my final accounting report will delayed into next week. Sure I could just accrue said dividends and release the report but where would the fun in that be? Especially since I can lay claim to being the first official victim of the new tax plan, aka the Tax Cuts and Jobs Act of 2017. As it’s not even effective yet, I guess this is the first – of probably many – unintended consequences to emanate from this bill. This week I’ll also cover my last minute 2017 moves and my first 2018 activity. But first …