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

 

Sunday morning

November 20, 2022

 

Hello everyone,

Welcome to a new week.  We are quickly closing out Spring or Fall, depending on where you are in the world. 

The holiday season will soon be upon us in earnest.  But I wonder will consumers be feeling jolly enough to part with a lot of their hard-earned money?  In parts of Australia, people are being pounded by floods back-to-back and another wave of covid.  Unfortunately, I think climate crisis and covid will be a constant in our lives in the future. Covid may become weaker in its virulence, but the climate disasters will only escalate and become more intense – a lesson not to mess with nature.

Survival gear helps us out when the going gets tough in the wilderness, but what sector do investors turn to when there are macro-economic headwinds?  The pharmaceutical industry could be the answer.  It has a history of doing well in tough economic times.  Large-cap biopharma could be a key sector to own for defensive exposure at a reasonable price, according to Credit Suisse.

They go on to say that U.S. pharma as a group is trading at a price-earnings ratio of 16 times to 17 times while defensive sectors utilities and consumer staples have 18-20 P-E ratios, on average.

There is a history showing U.S. pharma beats the S&P500 during major recessions.  The Van Eck Pharmaceutical ETF is down just 4.7% on the year, compared to a 17% loss for the S&P 500 so far in 2022.  Merck is up 33% this year and AbbVie is up 12% in 2022 with more room to run. Credit Suisse indicates Eli Lilly and Pfizer will outperform.  John’s bio-pharmaceutical newsletter has been stellar in picking stocks that have been bullish this year.  We could be well into 2023 before the macroeconomic trends start to settle.  Consequently, Credit Suisse and John believe large-cap biopharma should remain a solid outperformer in the coming months.  And they go on to say that if there is more clarity in the markets going forward and a solid rally is seen, higher-growth names, such as Eli Lilly, will be insulated from the rotation away from defensives and back into growth names.  In short, you can’t go wrong owning a big pharma stock or ETF in your portfolio if you want to diversify and be defensively positioned.

Finally, let’s consider the ramifications of the Fed’s target of 2% inflation.  When you are focused on one target, sometimes we miss other things or dismiss them as unimportant.  How far can you push something until cracks appear?  Parallel to that push for 2%, a flock of black swans could be circling, and then what? In other words, even though the sun may be coming out from behind the clouds and the economy appears to be in better health, don’t let your guard down.  Be prepared for any shocks that may eventuate. 

It’s all about being defensive.

As always, follow John’s trades and you will be well looked after financially.

Wishing you all a wonderful week.

Cheers,

Jacque

"It is during our darkest moments that we must focus to see the light. " - Aristotle

 

Tuesday morning

November 15, 2022

 

Hello everyone,

I trust you are all in good form.

You’ve learned (or are learning how to make money) with John’s help.  Now you must learn how to keep it.

It’s no good making a great trade, taking the money off the table, and then ego getting in the way and ploughing it all back in the next trade and possibly losing it all. Nobody gets it right 100% of the time.  John is right 80%-90% of the time.  But he does have losing trades and you don’t want to be wiped out during one of those trades.

What to do:

Trade the number of contracts you’re comfortable with (and allow you to sleep at night).

Never bet the ranch.

Set a stop loss. 

Don’t overtrade.

If you are learning, start with paper trading.

Household debt jumps

Debt has surged over the past year due to inflation running near its highest pace in more than 40 years and amid rising interest rates and strong consumer demand.

The biggest contributors to that debt load came from mortgage balances, which rose $1 trillion from over a year ago to $11.7 trillion, and credit card debt, which climbed to $930 billion.

Credit card balances collectively rose more than 15% from the same period in 2021, the largest annual jump in more than 20 years, according to the New York Fed.

What to do:

Do I really need to tell you?  Pay off your credit card.  Do you want to make the banks wealthier by virtue of your money?

What is Cathie Wood up to?

The Ark Next Generation ETF bought 315,259 shares of the Grayscale Bitcoin Trust on Monday.  The trust now accounts for 4.6% of the Ark fund’s holdings.

The price of the trust has dropped more than 80% over the past year, and the fund trades well below the value of the bitcoin it holds.

The collapse of FTX has bruised the crypto industry and many of its participants.  Bitcoin has dropped more than 18% since the end of October.

But after the washout, there are often silver linings.  ARK believes in the long-term viability of public blockchains across money, finance, and the internet.  There may be short-term pain, but in the long-term, ARK believes that this “crisis is purging bad actors and will enhance the health of the crypto ecosystem with more transparency and decentralization in the longer term.”

Wishing you all a wonderful day.

All the best.

Cheers,

Jacque

Life is either a daring adventure or nothing at all.  - Helen Keller