“If you don't understand the details of your business you are going to fail.” – Said Amazon Co-Founder Jeff Bezos
(AVOID THESE INVESTING MISTAKES)
July 10, 2024
Hello everyone,
We all make mistakes, right?
But if you can avoid making very painful mistakes, you can save yourselves a lot of time and money.
So, let’s look at the most common ones to avoid.
Buying overlapping ETFs
Many people like to buy a basket of stocks, which are nicely packed into an exchange-traded fund (ETF). That’s all well and good, but what happens is sometimes investors buy several ETFs without checking which stocks are held in each one. The result can often be you are buying overlapping ETFs, which have a higher allocation to a particular region or industry than you originally thought. Your vision for the long term should be a diversified portfolio, not a concentrated focus in one area.
Buying what you don’t understand
Investing in things that are beyond your understanding can be like stepping into a minefield.
If you cannot understand the asset, you will find it difficult to consider the risks, and possible returns, how to mitigate these, and whether they fit into your investing plan.
You will be vulnerable to scams. Sharks are always lurking in the investment world. They have malicious intent and show no empathy for their potential victims. A lack of understanding of any investment will make you easy fodder for dark knights who are marketing their too-good-to-be-true schemes.
Investing decisions should not be ruled by your emotions. Ask yourself - Why are you investing? Are the expected returns reasonable? Am I being rushed to decide? Step back and take time to consider your choices and make sure they are based on a solid understanding.
All we like sheep – don’t be caught up in panic selling. Understand why you are investing, so you won’t be influenced by the crowd.
Not rebalancing your portfolio
Leaving a portfolio to its own devices can be a mistake. Over time you will find there are assets that no longer align with your intended investment strategy, risk tolerance, and financial goals.
It can result in a portfolio overweighted to an industry that is doing well in the short term, but that may not serve you in the longer term.
Rebalancing your portfolio will bring it back on track to your desired target allocation. Typically, this is done by buying and selling assets within the portfolio.
Of course, it must be remembered, that transaction costs (brokerage fees) and CGT (capital gains tax) implications will apply when you rebalance.
Having unrealistic expectations
Unrealistic expectations can come from a lack of understanding, overconfidence, or being influenced by stories from friends, family, or social media.
Expecting high returns in the short term is unrealistic.
An assumption is that there will only be positive returns. Underestimating risk and the possibility of a downturn can see many people unprepared for it.
Overconfidence. Many believe they can time the market and pick the perfect stocks at the perfect time. Even professionals are burnt by this notion.
Investing is for the long term. It’s not a get-rich-quick scheme. People who want to invest in the market must understand the realistic returns and must be able to sit comfortably with the volatility in the market. Your risk tolerance and appetite to stomach volatility will certainly influence your decisions when choosing your allocation of assets.
Not talking about money
Does it really need to be pointed out that the more you discuss money and financial tools, instruments, and investments, the more educated you become? It should be a compulsory subject in school, and financial institutions should do more to educate the public. (It was only after the 1987 crash that stock market investing and the financial industry started to become more transparent. My family was invested in the stock market at this time and didn’t sell despite the panic. I was also invested in a gold fund, which I have held).
Not understanding the tax implications of selling
We are all familiar with the saying “buy low and sell high”. But are we all familiar with the tax implications of selling out at the highs? Although you receive a 50% capital gains discount on shares held longer than 12 months, there is still planning that needs to be done around when you sell and how that will affect your taxes.
Returns earned from selling shares will be included in your taxable income, which may affect the tax bracket you’re in or any subsidy you might be receiving from the government (such as paid parental leave or childcare subsidies). Any profit or losses from options must also be reported in your tax statement.
It can be prudent to look at what structures you have in place. Do you have a retirement account, a superannuation, a trust? All of these can be used to minimize tax.
Not starting to invest because you think it’s too hard and complicated
Every day you are not invested is an opportunity lost. Time is something you cannot get back. Take small steps and stop procrastinating.
QI CORNER
Queensland researchers unlock secrets of aging in massive breakthroughs paving the way to extending the quality of life and to reduce the impacts of serious diseases.
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Implantable LED device uses light to treat deep-seated cancers
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Something to think about…
Cheers,
Jacquie
Global Market Comments
July 10, 2024
Fiat Lux
Featured Trade:
(DINNER WITH DAVID POGUE),
(TSLA)
The last public event I attended before the pandemic hit was a dinner with David Pogue, the Science and Technology writer for the New York Times. It was a night well spent.
David believes that climate change is no longer an “if”, or a “maybe” but a certainty. The sooner we start adapting our lives to it, the better.
The bottom line is that a big piece of the world is about to become unhabitable by humans, possibly as much as the 20% around the equator. The loss of life could be huge.
Raise sea levels by 20 feet and you lose all the coastal cities of China, a large part of the US East Coast, and most of Florida. The US government will have to end flood insurance or go bankrupt. It is already tearing down oceanfront homes that have filed two or three federal claims. Private insurers have already gone this route.
Many species of fish, animals, and birds have been migrating north and south for decades. Indeed, tropical game fish, like mahi mahi, have been showing up along the California coast in recent years, to the delight of local fishermen.
There has been a massive migration of hummingbirds north to Oregon. Global warming could be halted in decades. But to return to pre-1970 levels would be a century-long project. Ironically, the Coronavirus started on that work right after we met, bringing the global economy to a grinding halt and dramatically shrinking the population. US lifespans shrank in 2020 for the first time in 100 years, by one full year.
We spent a lot of time at Mad Hedge Fund Trader talking about future technologies. It will be a huge net job creator over time, but the disruptions to existing industries will be enormous. Steel workers don’t morph into computer programmers easily, although I’ve seen some of the younger ones do it with enthusiasm.
When I told him I was one of the first Tesla (TSLA) buyers 13 years ago and my name still stood on the factory wall, he reached out to shake my hand and say “Thank you.” He was shocked when I told him most commercial pilots can’t safely fly a plane without a functioning autopilot.
I met David on what was certainly the worst-timed book tour in the history of the soon-to-be published How to Pre- pare for Climate Change. There he offers highly practical advice on preparing for an era of extreme weather events, possible famines and floods, and other climate-caused chaos. Click here for the Amazon link.
The 60-year-old Ohio native has an unusual eclectic background not unlike my own. He graduated from Yale with a degree in music, summa cum laude. He went on to become an itinerant Broadway producer. It was probably his desire for a steady paycheck that drove him into writing, taking a 12-year job at Macworld magazine, of which I was a steady reader.
David published the first Mac for Dummies book in 1988. He went on to write six more of the original “Dummies” books, including those for iBooks, Opera, Classical Music, and Magic. He became the personal technology correspondent for the New York Times in 2000.
David has hosted the Nova TV series for PBS and programs for the Science and Discovery channels. A five-time Emmy winner for his stories on CBS Sunday Morning, Pogue has been at the forefront of new and emerging tech trends for decades. There you can hugely benefit from his annual Christmas technology gift tips.
To learn more about David Pogue, please visit his website at https://davidpogue.com .
“We weren’t treated as humans. We weren’t even treated as robots. We were all just part of the data stream,” said one of 600,000 Amazon fulfillment center workers.
Mad Hedge Biotech and Healthcare Letter
July 9, 2024
Fiat Lux
Featured Trade:
(PLAQUE TO THE FUTURE)
(LLY), (TSLA), (V), (WMT)
It's time we talk about a company that's been hotter than a two-dollar pistol at a Texas gunfight. I'm talking about Eli Lilly (LLY), the pharmaceutical juggernaut that's been turning heads faster than a Wall Street trader spotting a million-dollar bill on the sidewalk.
The last time we chatted about Lilly, we were salivating over their obesity wonder drug, Zepbound. Well, hold onto your hats, because that little pill has catapulted Lilly into the big leagues.
We're talking about an $816 billion market cap. That's not just big - it's “move over Tesla (TSLA), Visa (V), and Walmart (WMT)” big.
Let me throw some numbers at you for better context. Zepbound, which only got the FDA nod in November 2023, already raked in a cool $517 million in Q1.
But that's chump change compared to what's coming - we're looking at projected sales north of $16 billion per year by 2029. That's billion with a “B,” as in “Boy, I wish I'd bought more Lilly stock.”
Still, Lilly isn't content with just one golden goose. Oh no, they've gone and done it again, this time in the Alzheimer's arena.
The FDA gave their new drug, Kisunla, the green light earlier this month, and this one isn’t some. This stuff is like a cognitive Roto-Rooter, clearing out those amyloid plaques that turn your brain into Swiss cheese. We're looking at a potential 35% slowdown in cognitive decline.
Now, as we all know, Lilly isn't the only player in this game.
Biogen's (BIIB) been stumbling around with Leqembi like a drunk at a bar mitzvah, and Lilly's been taking notes. It's called the second-mover advantage, and Lilly's playing it like a pro.
Here's where it gets even more interesting. Lilly's pricing Kisunla at a wallet-busting $32,000 a year. That's not just aggressive, that's “charging-a-bull-with-a-red-cape” aggressive, especially when Biogen's asking a mere $26,500 for Leqembi. That's chutzpah, my friends, but it's the kind of gamble that could pay off big time.
Speaking of paying, let's talk numbers. Lilly's Q1 earnings were impressive, with revenue up 26% year-over-year to $8.77 billion. Net income? A cool $2.24 billion. And they're so confident, they've jacked up their full-year guidance by $2 billion.
That’s not where the good news ends, though. After all, Lilly has proven time and again that it’s not just a one-trick pony. If anything, this biotech and healthcare giant has a stable of thoroughbreds bringing in the big bucks.
There’s Mounjaro for diabetes, which is their star player, raking in $1.81 billion in Q1 alone. And let's not forget about Verzenio for breast cancer, Jardiance for diabetes and heart failure, and Taltz for psoriasis. It's like they've got a drug for everything but mediocrity.
Now, I know what you're thinking. "But John, what about the dividends?" Well, Lilly's just boosted them by 15% for 2024. Sure, the yield looks as thin as a supermodel's waistline at 0.6%, but that's only because the stock price has been on a rocket ride to the moon.
We're talking about a 717% increase in five years. That's not a bull run – that's a full-on bull stampede.
So, what's the best way to play this? Well, if you're looking for a short-term bet, I'd be as nervous as a long-tailed cat in a room full of rocking chairs. This stock's priced for perfection, and Wall Street can be fickle.
But for the medium to long haul? Lilly's looking sweeter than grandma's apple pie. They've got the products, they've got the pipeline, and they've got more momentum than a freight train going downhill.
In the world of biotech and pharma, Lilly's not just playing the game - they're changing it. And in my humble opinion, that makes them a Buy with a capital B.
Global Market Comments
July 9, 2024
Fiat Lux
Featured Trade:
(ALL THAT GLITTERS IS NOW NOT COPPER)
(FCX), (COPX)
Those who followed recommendations to bet heavily in copper plays over the last two years have been handsomely rewarded. Since the move began, Freeport McMoRan (FCX), the top copper producer in the world, has more than doubled.
The logic was very simple. Booming EV sales and the needed tripling of the electrical grid assured that supplies would be challenged for years to come.
The closure of one of the world’s largest copper supplies in Panama last year after a court ruling further exacerbated supplies.
When Chinese speculators targeted copper it was really off to the races.
The red metal has been on a tear since February, picking up some 40%. Similarly, Freeport McMoRan (FCX), the top copper producer in the world, has risen by 55%, and (COPX) has jumped by 67%. That caused the long position on the London Metals Exchange to grow from around 5,300 contracts in January to a high of 71,900 contracts in mid-May
But copper has been sagging of late, ever since (FCX) hit an all-time high of $56 in May. Some of this might be due to normal profit-taking in an asset class that has had a tremendous run. As with many assets since October, things have been too good for too long.
But there may be larger factors at play.
For a start, the much hoped-for Chinese economic recovery never took place. Chinese constriction demand for copper is still at rock bottom, with home prices off 70% and bankruptcies rippling through the system.
And through my own research, I discovered that AT&T has begun scrapping its copper landline system in favor of far cheaper and more efficient fiber optic cable and cellular networks. If (T) were smart enough to take advantage of this, it could unleash as much as a year's supply of scrap copper on the market.
An effort by BHP to take over Anglo America, another big copper producer, fell apart.
If the Panama mine were to reopen in early 2025, that would tip the market from a shortage into a surplus.
Trend following Commodity Trading Advisors have flipped from bullish to bearish putting further pressure on the market.
As a result, the copper market has temporarily come into balance. This could last some months.
Eventually, the shortage will come to the fore once again as the long-term fundamentals are so overwhelming.
Although the market was in a surplus for the first four months of the year, analysts say that will soon change. Copper demand is expected to exceed supply this year and a deficit of around 600,000 metric tons over the next three years is possible. Other forecasts see a shortfall approaching half a million metric tons in 2024 alone.
The bottom line here is that Mr. Copper is not dead, just resting. I’ll let you know when the wake-up call sounds.
“There is a better chance that hockey is banned in Thunder Bay, Ontario, than the USA seeing a sustained 4% GDP growth rate when oil is above $100/barrel,” said Keith R. McCullough, CEO of Hedgeye Risk Management.