Hi Again,
Winston Churchill, in the 1940s, “Don’t let a crisis go to waste”.
Best buying opportunities in the past : 1973, 1982, 1987, 2008 and now 2020
March 2020 was the best month for the market since the 1930s! Shocked to hear that? So many buying opportunities! It was like being in a champagne Sunday brunch buffet for free! Warren Buffet said that using dirty old boys words which I am not going to repeat here. From day one I have been saying that if we have a deep correction or crash, it is time to get rid of most of the stocks we had in the past and replace them with the bargains that is going begging. Did we hit a bottom? Are we close to a bottom in the market? I do not know and I do not care as it does not matter. Wall Street Great, Peter Lynch stated that we see the highest gains soon after a correction or a crash; and our scorecard (see above excel sheet) is proof of that. Most of the stocks listed in our scorecard hit a intraday bottom on 3/18/20. Carl Icahn said a few days ago that, “Some stocks are just being given away”. Another technical analyst stated that this is the best bargain prices we have seen in 50 years. Looking at our scorecard (in excel), from 3/18/20 to 3/31/20, in 13 days, Uber went up by 94%, Delta Airlines went up by 49%, GE went up by 34%, WYNN went up 68%, Facebook went up by 21%, TJ Max went up by 46%, Boeing went up by 67% but prior to that Boeing went up 100% in 3 days! During those 3 days, Jim Cramer was shouting daily “Don’t buy Boeing” and I kept buying Boeing stock and call options. I was right and “guru” Jim Cramer was wrong! WYNN is down like 50% down from its high and as other casinos they get 60% of their revenue from China and China is coming back. Pretty soon they will run to the casinos with the newly printed trillions of dollars or yuans! Only Apple did not go below our previous average cost of $92.62 which we bought in 2015. All the other new entrants such as JP Morgan, Microsoft, Google, Southwest Airlines, Intel and AMD are good stocks to buy now and reap the rewards in about 3 years-and not before that. If it happens prior to 3 years, it is just icing on the cake. In 2009, when the DJIA was over 8,000 Warren Buffet called a market bottom and it went down to about 7,000 prior to skyrocketing and that was perfectly okay. Then it rose to 30,000 in 11 years. No one rings a bell to announce a market bottom. Can I give you a guarantee that you will not lose anything? No. There are no guarantees in life. Life and investments are always about taking a calculated risk.
For the past 10 years the market went up in a straight light and that is not normal. People who grew up in the depression were always careful about money. FDIC, unemployment benefits and other great programs that were created for most people came out of the depression. Over the next 10 years many rich people will lose everything and then they will realize the value of those programs. If you had money in the market in 1929, it would have taken you 30 years to get your money back.
Most bear markets last 8 to 13 weeks and we are already 6 weeks in to this one. Even when the market was down 500 points, Boeing was up and that is a good sign. Over the last few days for the first time in a long time, there was stability in the bond market. Massive intervention by the Feds buying everything but high yield bonds is starting to payoff. This is excellent news for the stock market. Trump has been trying to bully the Feds to take interest rates negative and if that happens the bond market and the stock market will blow up. The bond market is much bigger than the stock market and it runs the stock market. Europe and Japan had negative rates and it did not do anything for them and all the money flowed to the US as it was the only place with no negative rates.
Jeffrey Gundlach, the king of shorts, stated that he made a lot of money shorting stocks over the past 2 months and now he is completely out of the shorting business. It makes sense. When the market goes up rapidly people who short stocks lose a lot of money.
Did you see the movie, “Big Short”? Did you wish you got a piece of that action? It is baack! It seems like we did not learn anything from our past. Carl Icahn is betting on another big short. Billionaire Carl Icahn is betting against mall owners. He thinks they will be unable to service their debt. A lot many traders have made the same bet and lost millions of dollars, but it’s not something that’s stopping Icahn anytime soon. You might ask how this trade is really happening, and what might be some of the ways you could get a piece of the action. The most simplified way of betting against malls would be to short (bet against) the companies that own the real estate asset. Or, you could just follow the money and do what Icahn is doing: trading on (against) the direction of an index called CMBX 6.
We have to be careful of anything that comes out of communist China. Everything that comes out of the PRC is a fraud and a lie. Financials are not worth the paper they use to print the financials. Have you heard of Luckin Coffee (LK) which was supposed to chase out Starbucks from China? They just started in 2019 and growing very fast opening thousands of stores per day! First of all from a credit perspective starting in 2019, there is a 90% probability of insolvency within a couple of years. Any new company that grows too fast increases that insolvency probability to 99% (Remember Boston Chicken 20 years ago?). Last Thursday, 4/1/20, it came to light that they have been accounting fraud and in one day the share price fell 75%. No April fool’s joke! On 3/31, it was about $28 and now it is at about $5. Jim Chanos, another short selling king, who got his education at Yale and taught Financial Fraud at an ivy league college, and who predicted the Chinese Real Estate crash and Enron’s downfall, stated that all economic data that comes from China is manufactured by the communist party to fool the west. Chanos stated, “Avoid Chinese stocks like the plague”. He also stated that most West Coast (Silicon Valley) companies use questionable accounting practices. He was very negative on Uber where the success of the business model depends on having their drivers work as independent contractors and now that is under attack in California and in some other places. Chanos is still short selling Tesla. Chanos stated that he does not consider the market to be cheap here. He said that now it seems like Trump will lose the election and possibly the Democrats will win the White House with both houses in Congress and when they reinstate corporate taxes, earnings will go lower and increase the PE’s. Per Chanos, at other market bottoms, the PE would go down to 10 but we are not there yet.
Have an exciting April 2020!
Fernando