Tuesday
December 13, 2022

Hello everyone,

The CPI has been released and the markets breathed a sigh of relief as the numbers were softer than expected. Investors are hoping that this is the beginning of the end of inflation. All eyes are now on the Fed.

Bankman-Fried has been delivered more than a slap on the wrist. We have just learned that he has been denied bail in the Bahamas on FTX fraud charges as the judge has cited him as a flight risk.

What a foolish man he has been. Evidently, there was not a lot of grey matter working to determine the consequences of his actions.

He used customer funds to make political donations to both Democratic and Republican candidates. Apparently, he was trying to influence the direction of policies and laws in relation to cryptocurrency and the industry in general

He also stole money from FTX clients and parked it in his own hedge fund.

Well, you might not own a hedge fund, but you might own a property, or even be renting one out. If so, more of the same macro-economics in relation to real estate is in the crystal ball for 2023. Escalating demand and tight supply are likely to see rental increases persist, but more so in the capital cities than in the regional areas.

Higher interest rates are reducing borrowing capacities and reducing property prices. In 2023, expect this trend to continue.

If we look to the long term, when prices decline, interest rates stabilize and wages grow, we hope to see market conditions improve.

Always be mindful of a black swan lurking in the shadows. Hang on tight during the volatility. It, too, will pass.

I’ll be holding a Mad Hedge Christmas zoom get-together on the weekend. All welcome. Will send out the link in 24 hours.

Share your story with other Mad Hedge clients and pick up lots of good hints for trading the market.

All the very best.

Cheers,

Jacque

 

"Never let the fear of striking out keep you from playing the game." - Babe Ruth

 

Thursday afternoon

December 8, 2022

Hello everyone

What’s your preference? Buy and hold or be an active trader?

Some people may have answered both.

It seems 2023 will not be a time to buy and hold. Expect markets to be choppy. Wells Fargo expects the S&P to end 2023 at 4,200. It also says that equity markets will trade as low as 3,410 in the new year. The bank added that the probability of a soft landing is less than 10%. Furthermore, it envisions a sharp recession rather than a drawn-out slowdown.

Let’s talk about women and work and retirement.
Why is it that women earn less than men for doing the same job? I’ve never quite worked that one out. Not only are they discriminated against in income earned, but half of the women in the workforce say they are behind on retirement savings. More than half of women – 58% - receive half or less than half of their pre-retirement income, compared with 44% of men. Just 20% of women receive 7-% of their pre-retirement income, the amount some experts say retirees need to maintain their standard of living. In comparison, 30% of retired men have income that reaches that level.

Why do women come up short?

They are more likely to take time out of the workforce to care for children or aging relatives.
Women tend to work nine years less than men, which can reduce their retirement savings by 35%. This may also have an adverse effect on the amount of Social Security benefits they receive.
And then, of course, there is the wage gap. They earned just 82 cents for every dollar earned by men in 2020, according to the U.S. Census Bureau.
They may dip into retirement savings for emergencies.
They may choose not to marry, which also affects women’s retirement preparedness.

Women need to learn how to trade, so they can look after themselves.

China is set to ease Covid restrictions. What can we expect?
As they relax measures, 60% of people may get infected. They are nowhere near herd immunity. This may result in a drag on the economy and a temporary shortage of labour and increased supply chain disruptions.

Wishing you all a wonderful weekend.

Cheers

Jacque

"To be yourself in a world that is constantly trying to make you something else is the greatest accomplishment." -
Ralph Waldo Emerson

 

Sunday
December 4, 2022

Hello everyone

We’re heading into the Christmas season.  Everything starts to wind down in the markets.

You’ll either be hitting the ski slopes or securing your spot at the beach.  Or it might be something quiet in-between.

Whichever it is, I’m wishing you all the fun in the world.

We got our swift pullbacks in the market on Friday, followed by a move in the same direction.  In other words, short term= take profits, medium to long term = hold your position, for now.

There is often an argument between bonds and stocks over who is right in forecasting direction of markets in the future.  Apparently, the Bond toffs always seem to win the argument and get in first.  The stock market cowboys appear to come off second best – battered and bruised.  So, analysts will look to the Bond market for clarity about what is going to happen with the economy and the stock market.

Bonds, - a crystal ball asset, - = capital preservation.

The bottom line is that bonds provide a historically less volatile, less risky, and more predictable source of income than stocks.

Bonds become more in demand than dividend stocks during a recession.  This is because owning part of a company through the stock market is riskier than lending money with a bond.  So, an investor would rather invest in a fixed income bond than in the stock market.  Additionally, with interest rates on the rise, bonds will pay higher coupons.

I think I told you a while ago to check out Junk Bonds (HYG).  From memory, the return is about 8%.  Well worth looking at.

So, what does 2023 look like?  Will investors lean towards Bonds or Stocks?

We first must answer the question as to whether the bear market is over.  Inflation concerns may be in the rear-view mirror now, but the economic picture is still far from completely rosy.  Morgan Stanley suggests that investors should consider reducing U.S. large-cap index exposure and look to Treasuries, Munis, and investment-grade corporate credit.    It is a time to stay patient and collect coupon income.

Wishing you all an extraordinary week.

Cheers,

Jacque

"To live is the rarest thing in the world.  Most people exist, that is all." - Oscar Wilde.

 

Wednesday
November 30, 2022

Hello everyone,

I’m watching the World Cup as I type this, and Australia has just scored the first goal (yahhhh!!)

They are playing Denmark. Fingers crossed we win.

There have been many upsets in this World Cup Event, which makes it very exciting. I was in England during the last World Cup. It was a great atmosphere. There were all nationalities in Twickenham and Richmond, and everybody was in high spirits. Just great to see and be a part of.

Jay Powell will speak early afternoon (Eastern time) on the outlook for the economy, inflation, and the changing labour market. Let’s see what effect that has on the market. It seems that he wants a lower stock market and a recession, in order to get inflation under control.

The fallout in the crypto world is still happening. Crypto exchange, Kraken, has laid off 1000 employees.

Do you rely on Buy Now, Pay Later options? Over this last weekend, which was an extension of Black Friday, these alternative payment plans jumped 85% compared with the week before. It may make for a merry Christmas but could hurt your credit rating in the long term. According to Oxygen, an online-only bank, more than half of shoppers made a purchase with installment payment plans, which they couldn’t pay off. 60% of Americans reported living paycheck to paycheck heading into November. These people have no savings and are in dire straits if an expected expense comes their way.

So, the message here is, don’t worry about impressing relatives and friends with gifts you can’t afford. It’s much healthier, both for your well-being and your bank balance/credit rating, if you live and gift within your means. The people you gift to aren’t worried about your financial affairs or your credit rating. In other words, don’t get sucked into the consumer culture. I usually bake or make my gifts, and they are always well received.

Update: Australia wins against Denmark. Now qualify for World Cup round of 16.

Housing and rental stress in Australia are at an extreme. Did you know that it is more expensive to buy a house in Australia than in the U.S.? This situation will get worse before it gets better. Owners are raising rents throughout Australia, which reflects the costs the owner is incurring. It’s a cycle that will be ongoing until inflation peaks and interest rates start to fall. Meanwhile, renters are feeling a lot of pain with some waiting months to secure a place to live. I would imagine that it is now cheaper to buy a house than to rent. You could even rent out a room to help pay the mortgage and give someone a roof over their head. It’s a win-win.

Hope you’re having a great week.

Go AUSSIES.

Cheers,

Jacque

"Two things are infinite: the universe and human stupidity; and I’m not sure about the universe. " - Albert Einstein

"A room without books is like a body without a soul." - Marcus Tullius Cicero

 

Thursday
November 24, 2022

Hello everyone

It’s Thanksgiving Day.

So, rather than talk about the market, the economy and the next Fed move, I thought I would give all the Aussies a few insights into this special American day, as it is not something we are familiar with.

What is Thanksgiving?

It is an American holiday that they celebrate annually on the fourth Thursday of November.

Why do Americans celebrate Thanksgiving?

It is commonly known as a way to commemorate the colonial Pilgrims’ harvest meal that they shared with Wampanoag Indians in 1621 (although there is controversy about whether or not the meal was originally intended to be shared). The Wampanoag Indians were key to the survival of the colonists during the first year they arrived in 1620.

When was Thanksgiving first celebrated?

Besides the original meal shared in 1621, Pilgrims held their second Thanksgiving in 1623 to celebrate the end of a long drought. Additional feasts of giving thanks for various reasons were given in subsequent years as well. However, technically, the first official designated Thanksgiving was celebrated much later – in 1789. According to the National Archives, Congress asked President George Washington for a National Day of Thanksgiving. Thursday, November 26, 1789, was, therefore, declared the “Day of Public Thanksgiving.”

What is Thanksgiving all about?

Thanksgiving is all about reflecting on blessings and acknowledging gratitude.

How did Thanksgiving become an annual national holiday?

Americans can thank writer and editor Sarah Josepha Hale, for her successful efforts in establishing Thanksgiving as an annual national holiday. She lobbied officials at both the state and federal levels to create a fixed National Day of Thanks on the last Thursday of November.

When did Thanksgiving become an annual national holiday?

President Lincoln declared on October 3, 1863 that Thanksgiving would be an annual national holiday. He explained that “in the midst of a civil war of unequalled magnitude and severity, the American people should take some time for gratitude.”

Why do Americans eat turkey on Thanksgiving?

There are a few explanations for this. Historical letters indicated that turkeys were part of the original meal that was shared between the Pilgrims and the Wampanoag Indians. Letters from William Bradford, the governor of Plymouth in 1621, detailed this event.

Turkeys were plentiful which made them a convenient main course.

In her 1827 novel entitled Northwood, Hale explained a New England Thanksgiving in detail, including the description of a roasted turkey “placed at the head of the table.”

Do Indigenous Americans celebrate Thanksgiving?

Native Americans were having harvest feasts long before Pilgrims arrived. Some tribes, like the Sioux, will gather and give thanks for food and life, but others steer clear of marking this specific day as a time of celebration. This is not a surprise as only 16 years after the shared meal between the Native Americans and Pilgrims, over 500 Wampanoags were massacred in a brutal act of retaliation for the murder of one of the settlers who the other settlers believed was killed by the Wampanoags. And the violence did not stop there.

According to History.com, after many raids, land theft, and wars against Native Americans by the “late 19th century, fewer than 238,000 indigenous people remained, a sharp decline from the estimated 5 million to 15 million living in North America when Columbus arrived in 1492.” Facts like this help shed light on why many indigenous Americans observe a different holiday on the exact same day as Thanksgiving – the National Day of Mourning.

What is the National Day of Mourning?

According to NationalToday.com “Every year on the National Day of Mourning, Native American people in New England gather to protest. To them, Thanksgiving serves as a reminder of the unjust treatment that Native Americans have received since the 1620 Plymouth landing.” This observance (sponsored by the United American Indians of New England and attended by many non-native allies) has been happening in Plymouth, Massachusetts, since 1970. During the day, “Native speakers are invited to give these speeches about the past, as well as current obstacles their people have overcome.”

America and Australia have a lot in common in relation to their indigenous populations.

So, now you know all about Thanksgiving. It is a holiday centred around being grateful for your loved ones, appreciating good fortune and creating special memories with your family/friends, being thankful for the food you eat, watching football, and making a Black Friday gameplan (a bit like people plan for the Boxing Day sales).

Finally, let’s enjoy some quotes about Thanksgiving.

"Food is the only universal thing that has the power to bring everyone together." - Guy Fieri

"After a good dinner, one can forgive anybody, even one’s own relations." - Oscar Wilde

"The more we express thanks, the more gratitude we feel. The more gratitude we feel, the more we express thanks. It’s circular, and it leads to a happier life." - Steve Goodier

"A moment of gratitude makes a difference in your attitude." - Bruce Wilkinson

"Be thankful for what you have. Your life is someone else’s fairy tale." - Wale Ayeni.

"We must find the time to stop and thank the people who make a difference in our lives." - John F. Kennedy.

"I am grateful for what I am and have. My thanksgiving is perpetual." - Henry David Thoreau.

Wishing you all a wonderful weekend.

We’re into December next week, the final month of the year.

All the best and take care.

Cheers,

Jacque