Highlights on "What's Happening"
There's no dearth of opinions about "what's happening" in markets recently, especially in the stock market. Before we pass on a few informative remarks we've culled from our recent reading and research, let's not let this rather stunning development pass us by: Oil prices are collapsing - and we don't use the world lightly.
As of this writing, the price of crude oil has dropped over 40% in the last 24 hours. That's 40, as in 4-0. The price is hovering over $10/barrel now. One of our trusted sources passed on this last week: the price of lower-quality (heavy) oil had dropped to $1/barrel. That's 1 as in ONE. And this morning on Zerohedge, there's a report that Canadian oil prices have gone negative. Outside of the fact that "negative" would mean the price is < $0/barrel - that's $0 as in ZERO - I have no idea how that works, or what the implications might be. And I just don't have time right now, as the new market week begins, to spend on reading/researching/analyzing this. But there it is.
OK. Let's start our "informative" remarks. We put "informative" in quotes because you should take these for what they are: information. To put that in context, we refer to to Mortimer Adler's How to Read a Book, in which he distinguishes between information, knowledge, understanding, and wisdom. There's a hierarchy here. Information sits at the bottom, wisdom at the top. Information will never prove valuable to you unless it leads you - in sequence to the next three. If you've never read this book, now might be a good time. It will prove helpful in sorting through the blizzard of opinions out there right now, most of which may not result in your ultimate goal: gaining, at minimum, some understanding of what's going on, resulting in a bit of wisdom. Wisdom, of all these, becomes a permanent addition that you can use in the future, The other three are more fluid, and change over time.
If you're not sure what all that means, then re-read and take some time to think about it. Thinking - always a primary and critical asset - will prove to be an especially critical asset in the days, weeks, and months to come.
Okay, enough of that. Now, here's that information we said we'd pass on, starting with our Weekend/Monday morning review of our client (and our own) portfolios:
Our tactical assets allocation portfolios were up a smidge this week and last - and this without any participation in stocks, as well as outsized positions in cash. Obviously, none of the recent stock bounce put a nickel in our pockets. But that's OK. We're more focused on risk management.
A quick summary of major asset classes follows:
Now for some bullet points from a selection of our "Brain Trust." These are presented in no particular order. And they're not the real "meat" that we've picked up from our best sources over the last week or so. You'll see that there's no full consensus here, even some remarks that seem to contradict themselves. But these are the times in which we live now. So, for what's it's worth:
Guy #1
So there it is. It's a lot of information - and only highlights of what we've slogged through and continue to slog through in our efforts to move from information to knowledge, to understanding, to wisdom.
As of this writing, the price of crude oil has dropped over 40% in the last 24 hours. That's 40, as in 4-0. The price is hovering over $10/barrel now. One of our trusted sources passed on this last week: the price of lower-quality (heavy) oil had dropped to $1/barrel. That's 1 as in ONE. And this morning on Zerohedge, there's a report that Canadian oil prices have gone negative. Outside of the fact that "negative" would mean the price is < $0/barrel - that's $0 as in ZERO - I have no idea how that works, or what the implications might be. And I just don't have time right now, as the new market week begins, to spend on reading/researching/analyzing this. But there it is.
OK. Let's start our "informative" remarks. We put "informative" in quotes because you should take these for what they are: information. To put that in context, we refer to to Mortimer Adler's How to Read a Book, in which he distinguishes between information, knowledge, understanding, and wisdom. There's a hierarchy here. Information sits at the bottom, wisdom at the top. Information will never prove valuable to you unless it leads you - in sequence to the next three. If you've never read this book, now might be a good time. It will prove helpful in sorting through the blizzard of opinions out there right now, most of which may not result in your ultimate goal: gaining, at minimum, some understanding of what's going on, resulting in a bit of wisdom. Wisdom, of all these, becomes a permanent addition that you can use in the future, The other three are more fluid, and change over time.
If you're not sure what all that means, then re-read and take some time to think about it. Thinking - always a primary and critical asset - will prove to be an especially critical asset in the days, weeks, and months to come.
Okay, enough of that. Now, here's that information we said we'd pass on, starting with our Weekend/Monday morning review of our client (and our own) portfolios:
Our tactical assets allocation portfolios were up a smidge this week and last - and this without any participation in stocks, as well as outsized positions in cash. Obviously, none of the recent stock bounce put a nickel in our pockets. But that's OK. We're more focused on risk management.
A quick summary of major asset classes follows:
-
Fed “aid” now up to $6 trillion + according to
some sources. Stock market short-term response: elation.
-
Stocks: SPY up 3.0% vs. 12.69% last week. So
despite the Fed’s actions, this week stocks did not rise as much as it “felt”
they had.for the week. Nevertheless, PTI now bullish by 10 vs. 3 last week. Has
been hovering around MA for a few weeks now.
-
BONDS: Yields, after backing up last week, fell
again. Trading in a range. Adens still say sell bonds. Dohmen says longer-term
USTs remain safe haven given what’s likely coming.
-
AGG has risen since we bought it. Did so strongly
(1.24%) on Thursday push up for stocks(?!)
-
GOLD: GLD had big correction end of week, but
basically flat for week; remains in range. Adens bullish longer-term; Dohmen
bearish short-term: wait until stocks bottom and developing credit crisis
begins to stabilize.
-
NB: USD remains strong.
-
SLV: Silver/Gold Ratio now 111 up from 109 last
week.
Now for some bullet points from a selection of our "Brain Trust." These are presented in no particular order. And they're not the real "meat" that we've picked up from our best sources over the last week or so. You'll see that there's no full consensus here, even some remarks that seem to contradict themselves. But these are the times in which we live now. So, for what's it's worth:
Guy #1
- Sometimes a crisis is an
opportunity. Sometimes, it’s just destruction. Compares Willa Cathar's character, Alexandra’s Bergson’s, story (opportunity) and
the Dust Bowl (destruction).
-
Re Coronavirus: It’s shut down vast swaths of the
economy and it’s too soon to know whether this will be a time of opportunity or
simply destruction.
-
But then E goes on to recommend a number of
stocks in his RM portfolio that are now “good buys” because of price falls. He
cites his 25% hard stop as a protective measure for various positions. And he
states these companies are great businesses that will snap back.
-
Along the way, he “thinks” we’re close to the
bottom.
-
Comment: He seems to be talking out of both sides
of his mouth on the one hand. On the other, perhaps he simply believes that the
combination of his investment philosophy with the particular stocks he’s
recommended in the portfolio can stand up to this Bear Market, even though not
knowing if it’s generally a good time to buy.
-
Takeaway: One thought occurs: Evaluating risk of
any position when you buy it. If you have a 25% hard stop for positions, then
you need to have enough positions to minimize the impact of the loss of any given
position on the overall portfolio. For example: 20 positions with 25% hard
stops limits each position loss to (generally) 1.25%.
Guy #2
PS
-
These are truly unprecedented times. Going to
hold a lot more cash than ever before in various portfolios until there’s some
evidence the C-virus spread is easing up.
-
For today, only invest in a position that’s a
long-term holding, and only if it still leaves you with lots of cash overall.
-
Recommends investing some of the cash raised in
recent sales into the “best” companies – those whose existence is not
threatened by this severe economic downturn and/or potential change in consumer
buying patterns.
-
Also recommends gold/silver as part of cash
position.
Guy #3
JD – Gold Stock Analyst
-
Gold remains in full-fledged bull market. Gold
increases generally due to “Fear Trade”:
-
Fear of War: Loser’s currency becomes worthless; winner’s
currency suffers from inflation brought on by deficit spending
-
Fear of Recession: Low interest rates means less
competition from income-yielding assets. Recent Yield-Curve Inversions saw
Gold’s price rise in response.
-
Fear of the Unknown: Value of fiat money based on
confidence. Unknowns can influence confidence. How much inflationary paper will
be printed to fund the government? How will C-virus hurt the economy?
-
Current Fear Trade is based on fear of recession
and the unknown.
-
Also mentions silver mining shares portfolio.
So there it is. It's a lot of information - and only highlights of what we've slogged through and continue to slog through in our efforts to move from information to knowledge, to understanding, to wisdom.
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