Financial News vs. Noise
Another attempt at a rally sold into, the character of this market has definitely changed. We have moved from a period where all dips got bought into a period where all rips get sold. Yesterday I talked about the semi’s and Taiwan Semiconductor in particular.
Not so good.
Rates were up again…
This morning markets are firmly in the red and semi’s look down. Rates also look down. Be interesting to see if either the dip gets bought here, which could signal a bottom, at least for the short term. On the other hand you could also get capitulation selling, especially ahead of a weekend when a Middle East war is still on the table. The only change in my approach is that I have been financing as many of my long positions as possible with call credit spreads. You need a bigger up move to be as profitable, which is fine with the market looking oversold. You can also end up breaking even if the market continues down. There are many ways you could put on a trade like this, here’s an example from a trade I closed out yesterday. WFC is a name I trade on a counter trend basis using Internal Bar Strength, one of my favorite counter trend indicators. The other day it triggered a buy signal. Normally I would just buy a call option, with my risk being premium paid. However, with the market being jittery I instead bought a call spread on XLF, selling in the money calls and buying out of the money calls. This generated a credit. If XLF ended up anywhere between my strikes I lose a predetermined amount of money. If it closed below my strikes, both sets of calls expire worthless and I keep the credit. I then took the credit and bought calls on WFC. Yesterday I got a sell signal. I was down slightly on my XLF calls, but up big on WFC, so I closed the trade out for a nice profit. Not as much as I would have made had I just bought WFC calls, but a lot less risk assuming WFC and XLF both could have declined in tandem.
Speaking of Middle East war, this seems more of the choreographed game that the US, Israel, and Iran are playing. As I have said before, don’t automatically assume that stuff like this will rally oil and tank stocks. Israel Strikes Iran in Narrow Attack Amid Escalation Fears-WSJ
Netflix announced earnings last night and the market doesn’t seem impressed. Seeing some people talking about that being important to the overall market, I don’t think so. I have also heard people talk about how it should be part of the Magnificent 7, again I don’t think so. Not a name I trade, though it would probably work very well in my models. I like to trade themes and not sure where Netflix fits. If you do have a streaming theme my N of 1 puts Netflix below some of the other services out there. I have them all and personally spend much more time on Amazon Prime, Hulu, and YouTube. If you are a bull on the stock, I think this password thing is probably a big deal. Again N of 1, but I thought I was piggybacking on my daughter’s subscription (turns out she set up an account, but used my credit card)) and I had to get a second one. Netflix Password Crackdown Delivers Millions of New Customers-WSJ
Google is a company I trade and could be a name we have in GWGB when it comes out in May. I think this is a big deal, just not sure how at the moment. Google CEO Pichai Calls for Reset After Activist Firings-WSJ
Google CEO Sundar Pichai on Thursday said that while preserving Google’s open culture is important, the company also needs to enforce workplace policies and be “more focused in how we work, collaborate, discuss and even disagree.”
Google wasn’t the place “to fight over disruptive issues or debate politics,” Pichai wrote in an email announcing a restructuring of the company’s devices and mobile software divisions. “This is too important a moment as a company for us to be distracted,” he said.
We helped with the launch and running of NSI which is an emerging market ETF the excludes Chinese companies that make things that could be used against our troops. I think whenever you start using metrics other than investment merit to choose stocks you start down a slippery slope. I also think everyone has a line. For some it’s fossil fuels, for other’s it could be Chinese military. While I do think excluding things like fossil fuels from your portfolio sacrifices returns, I think you can exclude Chinese military and cyberwarfare companies without any sacrifice. Also have lots of issues with how guys like BlackRock do things. Wall Street Steered Billions to Blacklisted Chinese Companies, House Probe Finds-WSJ
A congressional investigation found that Wall Street used billions of dollars of American retirement savings and other investments to buy shares in index funds that included more than five dozen blacklisted Chinese companies.
The probe, conducted by a bipartisan House committee empowered to devise strategies for the U.S. to counter China, focused on BlackRock, the world’s largest asset manager, and MSCI, a compiler of stock indexes. The investigation represented a broad review of how American financial institutions facilitated investment in Chinese companies accused by the U.S. government of bolstering China’s military and violating human rights.
How people continue to try to use bonds as a risk reducer never ceases to amaze me. There are way better ways to reduce risk. The bulk of my portfolio is in T Bills, which are a risk reducer as you have almost no duration risk. The rest is in options strategies, which by their nature are fixed risk. This major bond ETF is getting ‘hammered’ as investors brace for rate-cut delays-MarketWatch
Wall Street analysts are typically useless but all of this negativity around TSLA isn’t helping. Below $150 this morning. Did a podcast with my buddy Jeremy Vreeland yesterday at Bullish Bears and I think he is seeing support in the 140s, hope he’s right because I am not really seeing anything until $100. Tesla’s stock gets downgraded as this ‘potentially painful transition’ looms-MarketWatch
Whenever something is going on in the world I always like to ask myself the question of who benefits. General Dynamics, Northrop Grumman Set for Gains After Israel Strike on Iran-Barron’s
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