(SUMMARY OF JOHN’S JANUARY 24, 2024 WEBINAR)

January 26, 2024

TITLE: New All-Time Highs

PERFORMANCE: 

Since inception:  670.74%

Average annualized return:  51.27%

Trailing one-year return: 52.86%

January 2024:  -3.88%

POSITIONS:

(MSFT) 2/$330-$340 call spread

(AMZN) 2/$130-135 call spread

(V) 2/$240-$250 call spread

(PANW) 2/$260-$270 call spread

(CCJ) 2/$38-$41 call spread

(TLT) 2/$90-$90 call spread

Total Net Position 60%

THE METHOD TO MY MADNESS:

Markets are overbought but keep rising for the time being.

All economic data is globally slowing, except for the U.S. presenting as the only good economy in the world.

Oil is still being pulled down by a collapsing China.  Look for improvement in the second half of this year as China starts to pick up.

Domestic plays have gone back to sleep on rates.

Buy stocks and bonds but only after substantial dips.

Commodities and industrials are a second half play.

THE GLOBAL ECONOMY

University of Michigan Consumer Sentiment Index surges up to 78.8 for January, its highest level since July 2021.

US Retail Sales comes in the best in three months, up 0.6% in December, as analysts continue to underestimate the American consumer.

Weekly Jobless claims plunge to 187,000, a 17-month low, underlining the “soft landing” scenario.

PPI falls 0.1% in December, putting the interest rate cutting scenario back on.

Consumer Price Index Flies, coming in at 0.3% for December instead of the anticipated 0.2%, a 3.4% annual rate.

Fed rate cuts just got pushed back from March to June.

STOCKS – New All-Time Highs

SPY breaks to new high on strong consumer sentiment.

Big Tech continues to dominate.

Market will continue to revalue all AI plays.

Bull move could continue into February as investors are underinvested, or even short.

Analysts are vastly underestimating technology earnings, only upgrading in 5% increments creating constant upside surprises.

Domestic plays have gone back to sleep on rising rates.

The flip-flop continues between tech and domestics.

TSLA – if Tesla hits $190 a good trade would be a 150/160 LEAPS two years out. But I would suggest holding off until the dust settles and the price war is over.

BA – LEAPS two years out = double your money.

Market timing index is at 76 – in sell territory, so don’t get greedy.  Be patient and wait.

Don’t try and time the market – keep the AI five stocks.  You generate a tax bill if you sell and may have difficulty getting back into the stock at a good price.

BONDS – Still Fading

U.S. Budget funded for two more months, kicking the can down to March 8.

U.S. Budget Deficit tops $500 billion in Q1.

Bonds could be the big trade of 2024.

After the sharpest 19-point two-month rise in market history, markets are taking a break.

Markets are discounting three cuts in 2024.  May 2024 the mostly likely start date.

Junk bond ETFs (JNK) and (HYG) are holding up extremely well with a 0.50% yield and 18-month high.

John is looking for an $18-$28 point gain in 2024.

Buy (TLT) on dips.

FOREIGN CURRENCIES – giving up gains.

Foreign currencies give up 2024 gains because of the return of higher U.S. interest rates.

A dollar rally could last a couple of months, so a new currency entry point is approaching.

However, according to John, falling interest rates guarantee a falling dollar for 2024.

Bank of Japan eases grip on Bond yields, ending its unlimited buying operation to keep interest rates down.

China markets dive on news that the central bank was forced into the currency markets to support the yuan.

(FXA) to rally on the coming bull markets in commodities.

Buy (FXY) on dips.

ENERGY & COMMODITIES – it’s all about China.

China in free fall is destroying the oil market, the world’s largest energy consumer.

Libya returns 300,000 b/d of production to the market.

U.S. Big Freeze takes 400,000 b/d off the market from North Dakota.

John says that if you throw good news on a commodity and it fails to rally you get rid of it.

This is despite the U.S. government coming in to buy 1-3 million barrels daily for the SPR.

Copper to rise 75% in 2024, say industry analysts.

There is a “BUY” setting up here in energy when the global economy reaccelerates on a lower interest rates world.  Watch (XOM) and (OXY).

Natural gas gives up much of 2024 gains.

PRECIOUS METALS – Interest Rate Hit

Gold takes a hit on rising U.S. interest rates.

Gold needs a return of falling interest rates to resume rally

Investors are picking up gold as a hedge for 2024 volatility.

Gold headed for $3,000 by 2025 but will retreat first from new all-time highs.

Silver is the better play with a higher beta.

Russia and China are also stockpiling gold to sidestep international sanctions.

Good LEAPS candidates setting up here:  check out GOLD and NEM, SLV, SIL, and WPM.

REAL ESTATE – Ready for Blast off.

Existing home sales come in weak in December MOM, according to the National Association of Realtors.

Sales were 6.2% lower than December 2022, marking the lowest level since August 2010.

Inventory fell 11.5% from November to December, but it was up 4.2% from December 2022.

There were 1 million homes for sale at the end of December, making for a 3.2-month supply at the current sales price.

A six-month supply is considered balanced between buyer and seller.

Real estate is far stronger than people realize.

Refi demand rockets, as interest rates plunge to four-month lows.

Tight supply and still-strong demand have kept pressure on home prices.

ITB – buy any dip – U.S. is short about 10 million homes.

TRADE SHEET

Stocks – buy any dips

Bonds – buy dips

Commodities – buy dips

Currencies – sell dollar rallies, buy currencies

Precious Metals – buy dips

Energy – buy dips

Volatility – buy $12

Real Estate – buy dips

Next Webinar is on February 7, 2024.

“Success is nothing more than a few simple disciplines, practiced every day.” - Jim Rohn

Cheers,

Jacquie

(BUFFETT INVESTMENT LESSON 101 HAS TWO KEY PRINCIPLES)

January 22, 2024

Hello everyone,

It’s been a very wet and stormy January in Queensland this year.  And we now have a cyclone lurking off the Queensland coast about to create havoc with the coastal communities in far north Queensland.   The weather might be all over the place, but the stock market appears to be seeing things very clearly.

Welcome to a new bull market which started back in October 2022.  Bull markets on average last more than 1,700 days, or longer than four years, the data shows.  The median length of a bull is just north of 1,500 days.

The current run has lasted about 15 months, or under a year and a half, thus far.  Investors are optimistic and excitement is almost palpable about the Fed cutting interest rates later this year.  This excitement has pushed stocks higher in recent months.

Bull markets do not show uniform performance numbers.  The longest bull run lasted between 2009 and 2020 – nearly 4,000 calendar days – with an overall gain of more than 400%.  The shortest bull run on this list, which started when the index was just 14 points, was less than two years and resulted in a 22% advance.

Despite the market’s strength, the investor has some concerns in 2024.  The exact path the Federal Reserve will take to lowering interest rates, the presidential election as well as the prospect of possible weakness in U.S. consumer spending.  Data released this week could go a long way toward determining which way the central bank policymakers could lean on policy.  Gross domestic product will be released on Thursday and the personal consumption expenditure prices reading on inflation is out on Friday.

Don’t rule out a pullback and some choppiness in the first few months of 2024.

Earnings this week:

Nearly 70 S&P500 companies are due to report earnings this week.  Among the biggest reports are Tesla, Netflix, and Intel.

Monday:  United Airlines (UAL)

Tuesday: Procter & Gamble (PG), Netflix (NFLX)

Wednesday:  IBM (IBM), Tesla (TSLA)

Thursday: Alaska Air Group (ALK), Intel (INTC)

Did you know _

That one of Buffett’s many investments throughout his illustrious career has included the purchase of a farm.  This farm is situated around 50 miles north of Omaha and was purchased in 1986.  It cost Buffett $280,000, and he estimated that the return from the farm would be about 10% owing to improved productivity and higher crop prices.  Years later Buffett advises us that the farm has “tripled its earnings and is worth five times or more what I paid.”   He went on to say that he still “knows nothing about farming and recently made just my second visit to the farm.”

Buffett’s lesson to followers is that what matters most to any investment is its future earnings.  Another key message from this example is having a long-term horizon for investments.  He advises that “when promised quick profits, respond with a quick ‘no.’”

He explains that “income from the farm will probably increase in decades to come, and the investment will be a solid holding for my lifetime, and for my children and grandchildren.”

Both Warren Buffett and Bill Gates love farmland as an investment.

In north Queensland, you can’t really swim in the ocean without a stinger suit.  You don’t want to get bitten by an Irukandji jellyfish.  It is a potentially deadly sting that can cause cardiac arrest in under 30 minutes.  To date, in south-east Queensland, on the Gold Coast (shown above) and Sunshine Coast, we can swim in the ocean without concerns about these jellyfish.

Cheers,

Jacquie

(THE U.S. CONSUMER IS IN THE SPOTLIGHT THIS WEEK)

January 17, 2024

Hello everyone,

In the U.S. January 15 is a federal holiday – Martin Luther King Jr. Day.  The market is closed. 

Week ahead calendar – All times ET

Monday Jan. 15, 2024

Martin Luther King Jr. Day (U.S.)

Australia Consumer Confidence Chg.

Previous: 2.7%

Time: 6:30 p.m. ET

Tuesday, Jan 16, 2024

8:30 a.m. Empire State Manufacturing Survey (January)

Earnings:  Morgan Stanley, Goldman Sachs

Canada Inflation Rate

Previous: 3.1%

Time: 8:30 a.m. ET

Wednesday, Jan 17, 2024

8:30 a.m. Export Price Index (December)

8:30 a.m. Import Price Index (December)

8:30 a.m. Retail Sales (December)

10 a.m. Business Inventories (November)

10 a.m. NAHB Housing Market Index (January)

2 p.m. FED Beige Book

3 p.m. New York Federal Reserve Bank President and CEO John Williams delivers an opening remark in an event “An economy that works for all: Measurement Matters”, New York Fed

Earnings: Discover Financial Services, U.S. Bancorp, Citizens Financial Group, Charles Schwab

UK Inflation Rate

Previous: 3.9%

Time: 2:00 a.m. ET

Thursday, Jan. 18, 2024

8 a.m. Building Permits preliminary (December)

8:30 a.m. Housing Starts (December)

8:30 a.m. Initial Claims (week ended Jan. 13)

8:30 a.m. Philadelphia Fed Index (January)

Earnings: J.B. Hunt Transport Services, PPG Industries, Fastenal, KeyCorp, M&T Bank, Northern Trust, Truist Financial

Japan Inflation Rate

Previous: 2.8%

Time: 6:30 p.m. ET

Friday Jan. 19, 2024

10 a.m. Existing Home Sales (December)

10 a.m. Michigan Sentiment NSA preliminary (January)

Earnings: State Street, SLB, Fifth Third Bancorp, Regions Financial, Huntington Bancshares, Comerica

U.S. Consumer Sentiment

Previous: 69.7

Time: 10:00 a.m. ET

The holiday-shortened week will focus on the U.S. consumer, with retail sales and bank earnings to be reported.  Stocks continue to digest the hot inflation data as they skirt near record highs.

Retail sales data for December – due for release Wednesday.  Some economists expect an increase of 0.2% for the month, slightly less than November at 0.3%.

So far, the U.S. consumer has been resilient, but when savings deplete, we may see a significant slowing in the economic data.

Some analysts are seeing the U.S. tip into recession this year and the S&P500 tumbling below 4,000 in 2024.  Others, however, see the market churning on to new highs for the year. 

December housing starts and building permits data will also be released on Thursday, giving insight into whether activity in the sector has increased as mortgage rates declined.

More bank earnings are also on deck, which could give insight into how consumers are spending, and whether there are elevated delinquencies.  Big banks, Goldman Sachs and Morgan Stanley will report Monday, as well as several regional banks such as Citizens Financial and M&T Bank.

Another government shutdown deadline greets us this week on January 19.  Let’s hope an agreement can be reached on a funding decision.  Failure to reach a deal could spark a major risk-off move for markets, however, a shutdown is unlikely, as the major players in the government appear to always reach agreement at one minute to midnight.   The market tends to give this government shutdown possibility a sideways glance as it has more important data to monitor.  Treasury yields come to mind here.

Last week’s inflation data was hotter than expected, but stocks appear to be shrugging off concerns about higher rates.  The market is still expecting that the Fed will eventually cut rates later this year.    Some investors are questioning whether the data will eventually nudge the Fed into action the market is not expecting.

In other news:

Microsoft tops Apple as the world’s most valuable public company.

Bitcoin ETF approved. Chart analysts agree that new highs are ahead, even though the crypto may decline initially.

Middle East crisis – U.S. & U.K. strike Houthis.  The U.S. and Britain carried out dozens of air strikes on Houthi military targets last week, widening a wave of regional conflict, ignited by Israel’s war in Gaza.

Big tech layoffs are taking place.

Stocks to scale into for the long term:

Netflix (NFLX): 23 million users, up from 15 million in November and 5 million in May 2023. Several analysts have raised their price targets on Netflix to $600 from $475, which means shares could rally 21.8% from last week’s close.  Shares have surged 48% during the last 12 months.  Analysts argue that over the medium term, the pace of acceleration will show growth in 2024. 

Dell (DELL): best positioned in the hardware sector - to benefit from investment in Gen-AI technologies; the company will also benefit from an acceleration in storage demand in the hardware space, which should further benefit Dell.  Morgan Stanley has an overweight rating on shares.  The stock has nearly doubled over the last 12 months and was up 1.8% last Friday during premarket trading.

Boeing (BA) is in oversold territory with an RSI of around 34 as investors ditched the stock after a door plug blowout during an Alaska Airlines flight over a week ago raised broader industry alarm.  Shares were battered last week finishing more than 12% lower, which is the stock’s worst performance since May 2022.  The Federal Aviation Administration ordered the temporary grounding of more than 170 Boeing 737 Max 9 aircraft for inspections over a week ago.  Boeing stock has dropped more than 16% over the first two weeks of 2024.  However, most analysts see a turnaround ahead, with an overweight rating and price target implying shares can rally nearly 25%.  Boeing is one of the largest aerospace companies globally, and this is a compelling factor driving growth.  Its history, technological expertise, as well as its market presence, give the company an important competitive edge. Price target = $280-$300.

Microsoft (MSFT) Just keep scaling into this stock on all pullbacks.  A must-have in your kit.

I hope some of you took my advice and bought into Spotify, BlackRock, and T-Mobile.  They rallied well last week and will be great holds for the long term.

Our Trip to Eungella.

We drove up to Eungella last weekend.  It is a World Heritage National Park.  Quite stunning.  Many international visitors stop at the Pinnacle Pie shop on the way to Eungella – a now famous landmark.  We bypassed the Pie shop as we wanted to spend the time enjoying the National Park.

We enjoyed an early dinner and coffee here after our day out at Eungella.

Looking towards Mackay and the Pacific Ocean in the background.  Eungella is about an hour’s drive from Mackay.

Eungella National Park information board

We spotted a platypus in the water – the first time I have seen one in the wild.

Hikes in Eungella.

Walking along Eungella tracks.

Sculptural features in the National Park.

Cheers,

Jacquie

(SENSIBLE INVESTING TIPS BY BUFFETT TO START THE NEW YEAR)

January 10, 2024

Hello everyone,

I want to sink into your psyche today some investing advice by Buffett.  You would do well to write these on a piece of paper and stick that on the wall above your computer or your desk and read it every day.

We might know the hard and fast rules of investing, but life has a habit of tipping the scales sometimes, where we temporarily lose our balance and are not thinking clearly, and these are the times we sometimes slip up in our ability to stick to the plan and the rules. 

So, let’s jump into those tips.

1. Design a broad portfolio.  The goal of the non-professional investor is not to pick winners – but rather own a cross-section of businesses that in the aggregate are bound to do well.  This is why Buffett always advises investors to invest in a low-cost S&P 500 index fund, which will achieve this goal.    He suggests checking out Vanguard.  Interestingly, Buffett revealed 10 years ago that he would direct 10% of the cash to go into short-term government bonds and 90% to a low-cost, S&P500 index fund.

2. Steer clear of the financial salesperson.  Professional money managers and advisors (on Wall Street or indeed anywhere) are incentivized to recommend various securities.  The fact is that they rarely beat the market.  Buffett’s words here: “You just have to recognize you’re dealing with an industry where it pays to be a great salesperson…There’s a lot more money in selling than in managing…if you look to the essence of investment management.”  (I learned this lesson the hard way and am now very wary).  And please note, that more than 95% of financial newsletters are rubbish, written by people with no investing experience. 

3. You don’t need to be a Math genius. Buffett says you don’t need to excel at technical analysis or mathematical calculations to find great stocks.  Buffett comments that “if you need to use a computer or a calculator to make the calculation, you shouldn’t buy it” (the stock). 

4. When you buy a stock, you own part of the business.  Buffett only buys something when he grasps the intrinsic value of an asset, or the discounted value today of the cash that a business generates in the future. 

5. Market action is largely driven by emotions.   Fear and greed should guide investors on when to buy and sell.  Buy when there is fear and sell when there is greed.  Simple as that. (For long-term investors, just average in and stick the investment in the bottom compartment of your cupboard).   Buffett reminds us of the fact that math and a high IQ don’t necessarily help.  So, leave the ego boxed up if you topped your class in Math – it may get in the way here...  Buffett’s words: “Higher mathematics may be dangerous, and it will lead you down pathways that are better left untrod.” He goes on to remind us that “we do not sit with spreadsheets…we just see something that obviously is better than anything else around, that we understand.  And then we act.”

6. After a loss, move on.  Look forward.  No extra detail is needed here.

7. Steer clear of declining businesses.   When Buffett started on his investing journey, he used to buy cheap, failing businesses that he called “cigar butts.”  But that strategy is not beneficial in the long run.   Real money is going to be made by being in growing businesses, and that’s where the focus should be.  Buffett is now known for seeking out wonderful businesses that he could buy at fair prices.  He transformed Berkshire Hathaway from a small, failing textile mill into a near-$800 billion multifaceted juggernaut.

The Marina in Mackay

My son, Alex, at the Mackay Marina

Cheers,

Jacquie

(TECHNOLOGY SECTOR SET FOR MORE GROWTH IN 2024)

January 5, 2024

Hello everyone,

Happy New Year!

We are all on the lookout for where to put our money in 2024.  Will it be technology or another sector or perhaps a variety of sectors that provide good value?

I believe technology will be a growth area in 2024 and beyond. Artificial intelligence will be the catalyst that propels stocks on an upward trajectory for many years to come.  There is a tailwind here too, as investors are betting on easing financial policy, including several cuts from the Federal Reserve in 2024. (Are they locked in as a definite? – not yet).  In late 2023 the market read the writing on the wall regarding future Fed policy found its legs and brought great profits to many who were disciplined and patient.

So, let’s look at the stocks to start scaling into this year.

Your toolbox should have some of the following:

Google (GOOGL)

Microsoft (MSFT)

Nvidia (NVDA)

Oracle (ORCL)

Amazon (AMZN)

Arista Networks (ANET)

Meta Platforms (META)

Advanced Micro Devices (AMD)

Super Micro Computer (SMCI)

Dell (DELL)

Broadcom (AVGO)

Micron Technology (MU)

Palo Alto Networks (PANW)

Salesforce (CRM)

The technology sector may not mirror the performance of 2023, but many portfolio managers are optimistic about another rosy year for the sector as rates fall, sentiment improves, AI matures and investors hunt for growth.  AI may be where all the action is.

Stock giants are funneling money into new businesses and initiatives within the AI sector. Alphabet has rolled out Gemini and Microsoft has launched the Co-pilot tool, which adds AI capabilities to its Office 365 suite.  The data networking infrastructure provider, Arista Networks, - one of my recommendations last year - gained 94% in 2023.  Average into this stock.

It’s worth remembering that the 2024 election cycle could prove another major boon for mega caps Meta Platforms, Alphabet, and Amazon as candidates and companies increase advertising spending to capture voters.

Consensus targets for the big names imply more upside in 2024.  For example, Analysts believe Meta could rally 8% after almost tripling in 2023.  Additionally, analysts see Microsoft rallying 11% and Amazon 18% this year after huge moves in 2023.

Do you think Nvidia has run too hard?  Don’t ignore it.  There is still gas in the tank for this stock.  Wall Street targets imply another 35% upside for this stock.  The chipmaker is trading at about 25 times earnings over the next 12 months versus about 34 times at the end of December 2022.

Don’t ignore other opportunities out there.  Advanced Micro Devices (AMD) and Super Micro Computer (SMCI) rallied 128% and 246%, respectively, in 2023.  Dell (DELL) and Hewlett Packard Enterprises (HPE), like the aforementioned, are stocks to scale into this year. 

Security will never go out of fashion as there will always be cybercriminals launching cyberattacks on companies.  Optus in Australia was just one of the companies that fell victim to a cyber-attack in 2023.  MGM Resorts was another that got hit.    These crimes will become more sophisticated as AI develops.  While it’s a major pain in the neck for companies and consumers, it could prove a major positive for cloud and cybersecurity companies offering tools to repel these attacks. 

This puts Palo Alto Networks (PANW) in prime position.  Crowdstrike (CRWD) is also another stock that should be in your kit in this area.

AI has become a growth engine for Salesforce (CRM).  We are at the beginning of decades of innovation in software.  The sector is well positioned in 2024.  Improving IT budgets and a general recovery in spending should assist the software space as companies will need to set aside funds to spend on infrastructure to prepare data for harvesting in the AI world.

Our Road Trip

My son, Alex, and I have been on a road trip for the last week. We are driving up the Queensland coast to Mackay. We drove from Brisbane up to Bororen (about a four-hour drive), which is just west of Maryborough, and stayed the night there in a beautiful homestead. On the way, we drove through some very heavy downpours, but after the rain cleared, we enjoyed some very picturesque scenery. 

A stunning rainbow to signal the end of the rainstorm.

The rain cleared but the clouds still hugged the mountain tops.

A lone cockatoo atop a dead tree after the downpour. 

On the coast at the township of 1770.

The lookout in 1770.

Behind our homestead in Bororen – one hour west of 1770.

Koumala Hotel – 50 minutes south of Mackay in central Queensland.

Cheers,

Jacquie