August 23, 2023
(SUMMARY OF THE GREAT ROTATION – AUGUST 16, 2023 WEBINAR)
August 23, 2023
Hello everyone,
Webinar Title: The Great Rotation
Thursday, September 6: San Diego luncheon.
Performance: -4.70% MTD
Year to Date: 60.8%
Since inception: +657.99%
Trailing one-year return: +92.45%
Average annualized return: +48.15%
Method to My Madness
Rotation underway from Big Tech to industrials, commodities, and energy.
Tech sell-off should be brief/short-term.
Rising interest rate fears are pushing Bonds down.
The Fall may present an excellent window to buy stocks. Make sure precious metals and commodities are at the top of the “buy” list.
Be patient – wait for the set-up.
If you’re interested in SNOWFLAKE wait for a bigger dip.
John’s suggestion – buy TLT LEAPS at 90.
The Global Economy – Bouncing
Nonfarm Payroll drops to 187,000 in June. One year low.
Headline unemployment rate returned to 3.5% - a 50-year low.
Inflation jumps to 0.2% in July and 3.2% YOY.
Rents, education, and insurance (climate change) were higher while used cars were down 1.3% and air fares plunged by 8.1%.
PPI rose 0.3% in July.
Deflation hits China – economy struggling post-COVID.
Stocks – Correction Time
U.S. seeing big equity outflows. Approx. 15b fleeing the market. They believe the party is over for 2023.
Moody’s threatened downgrade of regional banks.
Albermark (ALB) to boost Lithium Production with a new filtering technology at an Arkansas plant to meet exploding demand from EV makers.
Berkshire Hathaway (BRKB) posts record profits up 38%.
Rivian (RIVN) beats, losing only $1.08 a share versus an expected $1.41.
Biden cracks down on tech.
Buy Adobe on dips.
Freeport McMoran (FCX) – looking like a great LEAPS trade at this level.
Keep buying Berkshire (BRKB) on dips.
Emerging Markets (EEM) strong buy here.
BONDS – Probing for a Bottom
The falling interest rates/rising bond prices are delayed after Fitch downgrade and hotter than expected economic growth at 2.40% for Q2.
U.S. Debt downgrade from AAA to AA+ by Fitch rating agency for only the second time in history.
Bonds (TLT) took a hit – but they are still the safest and most liquid investment in the world when held to expiration. Keep buying 90-day T-bills = 5.2% risk-free yield.
Still looking like 3.50% yield by the end of 2023.
Junk Bond ETFs (JNK) and (HYG) still holding up extremely well with a 6.5% yield.
According to John Bonds are still likely to hit $110 by year-end.
Foreign Currencies
Japanese Yen is headed for multi-year lows at 150.
Investors flee to safe-haven short-term investments.
Any strength in U.S.$ will be temporary.
Look for new dollar lows by the end of 2023.
Buy FXE, FXB, and FXA on dips. Avoid FXY.
Energy and Commodities – Reborn Again
Natural Gas soars to a new 2023 high and accomplished an upside breakout on all charts. European gas prices have just jumped 40%. An Australian strike shut down an LNG export facility.
Oil may break out to $100.
China expects LNG Price Spike later this year due to coming supply shortages and a recovering economy.
Exxon Mobile Corp. (XOM) –LEAPS territory.
Precious Metals – Take a Hit.
No Fed Action to lower rates undercuts precious metals. Interest rate rises in Europe and Australia aren’t helping either.
Gold is headed for $3000 by 2025.
New drivers are soon to be falling interest rates and the demise of crypto. Silver is the better play with a higher beta.
Russia and China are also stockpiling gold to sidestep international sanctions. A severe short squeeze in copper is developing, leading to a massive price spike later in 2023.
Real Estate – Coming Back
Home Mortgage rates hit a 22-year high at 7.24%. The existing home market and new home market is on fire in anticipation of the coming rate fall.
Rising rents still the big input into the Fed’s inflation calculation.
Case Shiller rose by 0.7% in May.
We are at the beginning of a decade-long demographic-driven bull market in residential real estate.
Economic growth and market performance should improve in 2023, but things may get worse before they get better. So, there may be some strong cross currents ahead.
Cheers,
Jacquie