What to do about asset allocation is the one question that I get every day which I absolutely cannot answer.
The reason is simple: no two investors are alike.
The answer varies whether you are young or old, have $1,000 in the bank or $1 billion, are a sophisticated investor or an average Joe, in the top or the bottom tax bracket, and so on.
This is something you should ask your financial advisor if you haven’t fired him already, which you probably should.
Only advisors who read the Diary of a Mad Hedge Fund Trader should merit your attention. At least they’re going the extra mile trying to figure things out.
Having said all that, there is one old hard and fast rule, which you should probably dump.
It used to be prudent to own your age in bonds. So, if you were 70, you should have had 70% of your assets in fixed income instruments and 30% in equities.
Given the extreme overvaluation of all bonds today, and that we are probably just entered a 7-10 year bull market for stocks, I would completely ignore this rule.
Instead, you should probably run a 50/50 portfolio, half in bonds and half in growth stocks. You can get 7% a year or more in yields these days in junk bonds and get a great inflation hedge to boot.
You will also own what everyone else in the world is trying to buy right now, high growth US stocks.
Allocation: Are You Him?
Or Him?
https://www.madhedgefundtrader.com/wp-content/uploads/2018/10/Beer-Drinking.png295295MHFTFhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMHFTF2024-02-07 09:04:242024-02-07 10:31:01Dumping the Old Asset Allocation Rules
Here's a nugget of wisdom from someone who's sailed the investment waters more times than I've had hot dinners: diversification is your best friend. Think of it as the Swiss Army knife in your investment toolkit.
Now, if there's one treasure you'd want aboard your investment ship, it's a dividend stock. Not just any old stock, though. I'm talking about AbbVie (ABBV).
Since it waved goodbye to its parent company, Abbott Laboratories (ABT), in 2013, it has boosted its dividend payouts by an eye-popping 290%. With a yield hanging around 4% and delivering a 130% total return over the past 5 years, long-term investors undoubtedly struck gold.
Unfortunately, 2023 has turned into the kind of year we'd rather forget. The end of Humira's patent was looming like a dark cloud, threatening to rain on AbbVie's parade by letting generics flood the market. The horror, right?
But, plot twist: the anticipated disaster was more of a light drizzle. Despite the competition, Humira still brought in a cool $11.1 billion. Sure, it's a dip, but not the plunge we feared.
Meanwhile, AbbVie's been on a shopping spree, snapping up Immunogen and Cerevel for a combined total that's a smidgen under $19 billion. It's like they're collecting Infinity Stones, diversifying beyond Humira into areas ripe with potential.
And let's not forget their foray into the realm of Antibody Drug Conjugates (ADCs) — the hot ticket in oncology.
While AbbVie’s not throwing around cash like confetti, like some of their peers including Pfizer (PFE), Gilead Sciences (GILD), Genentech (DNA), they're making notable moves. It's a bit like betting on the dark horse; if their ADCs and CNS ventures hit their stride, we're all in for a treat.
Amidst all this innovation and expansion, AbbVie hasn't lost sight of what gets investors' hearts racing — a solid dividend. It's the kind of steady reliability that's as comforting as your favorite cozy blanket.
As if those aren’t enough, the company just threw us a curveball that's got Wall Street buzzing more than my neighbor's annoying leaf blower on a peaceful Sunday morning.
In its recent earnings report, AbbVie not only beat the revenue expectations for its fiscal fourth quarter but decided to sweeten the deal by raising its long-term sales outlook.
Despite the concerns about Humira, AbbVie still posted fourth-quarter earnings that had their investors nodding in approval, even if they were a tad lower than previous years’ glory days. With revenue hitting $14.3 billion, surpassing the street's guess of $14 billion, it's clear the company isn't just hanging in there; it's throwing punches back.
The immunology portfolio, while taking a 12% hit, isn't down for the count, thanks to Skyrizi and Rinvoq. These two rising stars, which are quickly becoming the Batman and Robin of the biopharmaceutical world, are not just filling Humira's big shoes; they're sprinting.
With the duo’s sales surging by 52% and 63%, respectively, it's no wonder AbbVie is adjusting its binoculars and raising its long-term guidance for these drugs to a whopping more than $27 billion by 2027.
That's a $6 billion jump from their previous forecast. If that doesn't scream confidence, I don't know what does.
And just for a bit of perspective, while AbbVie was basking in the glow of success, its peers had a mixed day at the market. Pfizer took a slight tumble, Moderna (MRNA) and Amgen (AMGN) dipped their toes into the red, while Eli Lilly (LLY) floated up, riding a wave of optimism.
So, as we move forward this 2024, you might be wondering, "What's next for AbbVie?"
Well, if I were a betting man (and let's be honest, investing is betting with extra steps), I'd say we're not likely to see AbbVie pulling a rabbit out of a hat.
But, and it's a big but, we're talking about a company that's as expertly managed as a Michelin-starred kitchen. They've got a knack for serving up share price growth and dividends that leave investors coming back for seconds.
So while AbbVie might not be dangling the next blockbuster breakthrough in front of us, their steady march forward is as promising as finding a shortcut on your morning commute. We might not see the stock skyrocket overnight, but a climb to around $180 per share? That's not just possible; it's on the menu. And right now, with its recent earnings report, it's as good a time as any to pull up a chair to the AbbVie table. Bon appétit.
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00april@madhedgefundtrader.comhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngapril@madhedgefundtrader.com2024-02-06 12:00:322024-02-06 11:09:34Setting The Table For Steady Gains
EXPIRATION of the JP Morgan (JPM) January 2024 $130-$135 at-the-money vertical Bull Call spread LEAPS at $5.00 or max profit
Closing Trade
1-19-2024
expiration date: January 19, 2024
Number of Contracts = 1 contract
I am running through the expiration math on this LEAPS trade for you because we are going to do many more of these this year, so It’s important that you understand it.
Those who did this trade last March and then threw up on their shoes were paid big time for their discomfort. On January 19, the JP Morgan (JPM) January 2024 $130-$135 at-the-money vertical Bull Call spread LEAPS expired at the $5.00 max profit. Investors earned a handsome $250 or 100% in 9 months for each contract they owned.
(JPM) is the class act in the global banking sector, and CEO Jamie Diamond is the best CEO in the country. The regional banking crisis pulled forward any recession and therefore the recovery.
There will be no interest rate rises for a decade. The cuts will start in June and continue rapidly after that. That’s when the economic data catch up with the reality that is happening right now, which is hugely deflationary.
And here is the sweet spot. Fears of a recession increasing loan default rates knocked $20, or 14% off the $145 high in (JPM) shares last year. When recession fears faded in 2023 interest rates remained historically high and (JPM) profits and the share price rocketed.
To learn more about the company please visit their website at https://www.jpmorganchase.com Please note that these options are illiquid, and it may take some work to get in or out. Executing these trades is more an art than a science.
Notice that the day-to-day volatility of LEAPS prices is minuscule since the time value is so great. This means that the day-to-day moves in your P&L will be small. It also means you can buy your position over the course of a month just entering new orders every day. I know this can be tedious but getting screwed by overpaying for a position is even more tedious.
This was a bet that JP Morgan would not fall below $135 by the January 19, 2024 option expiration in 9 months.
Here is the specific accounting you need to close out this position:
Expiration of 1 January 2024 (JPM) $130 calls at……...…$40.31
Expiration of short 1 January 2024 (JPM) $135 calls at…$35.31
Net Proceeds:……….………………….………..………….…..........$5.00 Profit: $5.00 - $2.50 = $2.50
(1 X 100 X $2.50) = $250 or 100% in 9 months.
To see how to enter this trade in your online platform, please look at the order ticket below, which I pulled off of Interactive Brokers.
If you are uncertain on how to execute an options spread, please watch my training video on “How to Execute a Vertical Bull Call Debit Spread”by clicking here at https://www.madhedgefundtrader.com/ltt-vbcs/
The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous.
Don’t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.
Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.
The winds of change are sweeping through the banking industry, driven by a powerful force: artificial intelligence (AI). While AI's potential to streamline operations and enhance customer service is undeniable, it also raises a concerning question – could it lead to widespread job displacement, particularly for entry-level analysts and call center workers?
Automating the Mundane:
AI excels at tackling repetitive tasks with accuracy and speed. In banking, this translates to automating tasks like:
Transaction processing: AI can handle routine transactions like bill payments, transfers, and account inquiries, freeing human employees to focus on complex issues.
Data analysis: Sifting through massive datasets to identify trends, predict fraud, and assess creditworthiness becomes effortless with AI-powered algorithms.
Document processing: From loan applications to KYC verification, AI can automate document analysis, increasing speed and accuracy.
This automation translates to significant efficiency gains for banks. A study by McKinsey Global Institute estimates that AI could automate up to 80% of tasks currently performed by financial advisors, while PwC predicts AI could save the global banking industry $1 trillion annually by 2025.
The Call Center Conundrum:
Call centers represent another area ripe for AI disruption. Chatbots with natural language processing capabilities can handle basic customer inquiries, reducing wait times and increasing accessibility. More advanced AI agents can even engage in complex conversations, resolving simple issues without human intervention.
While these developments are promising, concerns linger about the impact on call center jobs. Some experts predict widespread job losses, while others believe AI will primarily complement human agents, allowing them to handle more complex cases and build deeper customer relationships.
Analysts on the Brink?
Entry-level analysts who analyze financial data, prepare reports, and conduct basic research might be more susceptible to AI displacement. AI-powered algorithms can perform these tasks with similar accuracy and speed, raising questions about the value proposition of human analysts in such roles.
However, the role of analysts might evolve instead of vanishing. Analysts could leverage AI to gain deeper insights, focus on strategic tasks, and communicate findings effectively to stakeholders. This requires upskilling and a shift in focus from data crunching to data interpretation and communication.
The Human Edge:
Despite AI's remarkable capabilities, it lacks the human touch essential in many banking interactions. Building trust, navigating emotional situations, and providing personalized advice are areas where human expertise remains irreplaceable.
Furthermore, regulations, ethical considerations, and the need for explainability in AI decisions necessitate human oversight and guidance. Banks will need to strike a balance between automation and human interaction, ensuring both efficiency and a positive customer experience.
Navigating the Transition:
The potential job displacement brought about by AI necessitates proactive measures from banks, governments, and individuals:
Upskilling and reskilling initiatives: Equipping existing employees with AI skills allows them to adapt to the changing landscape and transition to higher-value roles.
Education and training programs: Preparing future generations with relevant AI skills ensures a workforce equipped to thrive in the new reality.
Safety nets and social support: Governments and institutions must provide support systems for individuals who might lose their jobs due to automation.
The Future of Banking Workforce:
While AI might replace some entry-level banking jobs, it's more likely to transform the roles than eliminate them entirely. The future workforce will likely involve a hybrid model, with AI handling routine tasks and humans focusing on complex problem-solving, relationship-building, and strategic thinking.
Embracing AI as a tool, investing in workforce development, and ensuring a just transition are crucial steps to navigate this technological revolution. By doing so, the banking industry can leverage AI's power while safeguarding its employees and ensuring a human-centered future.
https://www.madhedgefundtrader.com/wp-content/uploads/2024/02/Screenshot-2024-02-05-165353.jpg6961045Douglas Davenporthttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngDouglas Davenport2024-02-05 16:38:212024-02-05 17:08:28The Robo Revolution: How AI Is Reshaping the Banking Workforce
They put any sense of concern to bed with its brilliant performance this past quarter.
They are the new poster child of tech as they blew away every meaningful metric that so-called analysts grade tech on.
They are even the newest dividend stock which might be the most absurd part of their performance.
Growth is their new forte and the $200 billion rise in market valuation in one day is the stuff of legends.
How did they make this happen?
Revenue jumped 25% in the quarter from $32.2 billion a year earlier, as the online ad market continued to rebound.
Meanwhile, the company’s expenses decreased 8% year over year to $23.73 billion, and its operating margin more than doubled to 41%, a clear sign that cost-cutting measures are bolstering profitability.
Net income more than tripled to $14 billion, or $5.33 per share, from $4.65 billion, or $1.76 per share, a year earlier.
Meta said it will pay investors a dividend of 50 cents a share on March 26. That comes after cash and equivalents swelled to $65.4 billion at the end of 2023 from $40.7 billion a year earlier. The company also announced a $50 billion share buyback.
Sales in Meta’s Reality Labs unit passed $1 billion in the quarter, though the virtual reality unit recorded $4.65 billion in losses.
I found it highly positive that Meta took getting lean very seriously as they really gutted staff numbers to the delight of the balance sheet.
Talking to many people in the know, META has been overstaffed for quite some time so much so that many at Meta had nothing to do all day.
The 22% year-over-year decrease in staff levels is a sign of things to come and this is just the start.
In the next few years, I do believe that Meta will shave down staff levels to what would amount to 85% less than COVID levels.
Part of Meta’s financial recovery over the past year was driven by Chinese retailers, which have increased spending to reach users across the globe.
Management said advances in artificial intelligence have helped reinvigorate the ad business, which is growing faster than rival Google’s. In Alphabet
’s earnings report Tuesday, the company said Google ad revenue increased 11% from a year earlier, a slower expansion than analysts were expecting.
Meta will continue to invest in AI and in building up its computing infrastructure.
This is the new META and they finally got all their ducks in a row.
Emphasizing what matters is what the stock wanted and they delivered in droves.
They get a green check mark for cutting costs, reducing headcount, spiking operating leverage, tripling profits, improving ad business, moving along the AI business, and delivering a new dividend.
That was just one quarter and if they can keep hammering away on these selective items, then META stock will be one of the best buy-the-dip stocks in the entire equity market.
Meta has been a stock I have wanted to get into for a while and entry points are few and far between.
The individual performance suggests that tech is stronger than first believed and might I say even cheap with all this untapped growth on the horizon.
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00april@madhedgefundtrader.comhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngapril@madhedgefundtrader.com2024-02-05 14:02:112024-02-05 14:58:05The New Tech Darling Meta
“You get a reputation for stability if you are stable for years.” – Said CEO of Meta Mark Zuckerberg
https://www.madhedgefundtrader.com/wp-content/uploads/2023/11/mark-zuckerberg.png588376april@madhedgefundtrader.comhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngapril@madhedgefundtrader.com2024-02-05 14:00:082024-02-05 14:58:00February 5, 2024 - Quote of the Day
(THE SECTORS FAMILY OFFICES ARE FAVOURING in 2024)
February 5, 2024
Hello everyone,
Welcome to another big week of earnings.Media and consumer names feature this week.
Disney, McDonalds, and Uber Technologies are among the 94 S&P 500 companies due to report this week.230 S&P500 companies have already reported their 4th quarter numbers.Of those, 75% have exceeded expectations. (All times: Eastern)
Monday, Feb 5, 2024
9:45 a.m. PMI Composite
9:45 a.m. Markit PMI Services
10 a.m. ISM Services PMI
Australia Interest Rate Decision
Previous: 4.35%
Time: 10:30 pm ET
Earnings: McDonald's, Simon Property Group, Estee Lauder Companies, Tyson Foods, On Semiconductor, Caterpillar
Tuesday, Feb 6, 2024
Euro Area Retail Sales
Previous: -0.3%
Time: 5:00 am ET
Earnings: Chipotle Mexican Grill, Prudential Financial, Fortinet, Enphase Energy, Eli Lilly, GE Healthcare Technologies, Ford Motor.
Earnings:Motorola Solutions, Expedia Group, Ralph Lauren, T. Rowe Price Group, ConocoPhillips, The Hershey Co., Philip Morris International, Tapestry.
Friday, Feb 9, 2024
Canada Unemployment Rate
Previous: 5.8%
Time: 8:30 am ET
Earnings: PepsiCo
An ever-increasing number of wealthy individuals has contributed to a boom in family offices in the last few years.
In the United States, in the last three years alone billionaires are 46% richer than they were in 2020.
Studies show that the ultra-high net worth population overall declined in Asia last year, but rose in India, while Europe and America recorded smaller declines.The combined net worth of Asia’s super-rich population was at $12.13 trillion, above Europe’s $11.73 trillion.
Family offices typically cater or investors with $100 million or more in net worth.According to a 2023 study by KPMG, 26% of family offices most commonly manage between $251 million and $500 million in assets, while 65 manage over $5 billion.A 2022 report citing various estimates said that family offices were managing more than $6 trillion in wealth.
So how are family offices allocating right now and in the next few years – in the face of major global shifts?
UBS notes that the current trend among family offices is a return to fixed income as a diversifier, although stocks in developed markets remain the most important asset class.
Currently, UBS states, that the most favored diversification strategy globally is high-quality short-duration fixed income.The bank also states that family offices are planning to buy more developed market bonds over the next five years.
The table here shows how family offices are planning to change their asset allocations in the next five years, according to UBS’s 2023 survey.
Citi points out that most family offices have started to shift toward higher-risk asset allocations, which is in line with Citi going overweight on stocks in December for the first time since 2020, as it expects earnings growth to broaden across sectors.
One type of fixed income that family offices are positive on right now is U.S. investment grade credit of long duration and high quality.
There is also more hedging in portfolios now than two years ago, with clients using macro trading strategies tied to geopolitical uncertainty.
What type of assets are family offices looking to buy in the next few years?
Japan stocks are one area.The ‘Japan thesis’ is built around resurgent inflation, and resulting wage growth, which has created better purchasing power for Japanese corporates.Also, better corporate governance.
Japan’s stocks had a bull run last year, and it’s continuing into this year, touching new 33-year highs.
According to Citi, other themes that family offices are bullish on include health care and longevity, the energy transition, and generative artificial intelligence.
Overall, Citi says, that tech led the way as 63% of family offices stated it as their preferred sector to invest in, with real estate coming in second (42%), and health care in third position at 40%.
Providers are showing that alternative assets are also becoming more popular with family offices, such as private equity, private debt, and infrastructure.Private equity is a play on lower interest rates, given so much of the returns from this asset segment are driven by cost and availability of debt.UBS explains that family offices are primarily investing in private equity through funds, which deliver diversification and the ability to enter markets where the family office does not have in-house expertise.
Markets are largely expecting the U.S. Federal Reserve to start cutting rates this year, after a protracted period of hiking.
There is a very high degree of risk involved in trading. Past results are not indicative of future returns. MadHedgeFundTrader.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of MadHedgeFundTrader.com may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies.
