Happy New Year, Everybody !!
From 1/1/21 to 12/31/21, S&P500 rose by 31% and during the same time period, our portfolio rose by 47.18%!
The Federal Reserve keeps announcing that interest rates would go up 3 or 4 times but the market has been ignoring those warnings. Sooner or later, the market will decline 30% to 60%. We too will get affected. If you want on the railway track towards an oncoming train thinking you have more time to get out of the way, you are a fool. Except for the mini crash that we saw in 2020 for a brief period, we have not seen a real bear market in a long time so it is understandable that people have a difficult time in believing that we would have a meaningful correction in 2021. I keep buying some put options on the S&P 500 (SPY) as a hedge. Also as interest rates increase, the bond market will fall. To take advantage of this situation, we can short sell the bond ETF called TLT. On 12/20/21, I bought some put options on TLT and on 1/5/22, in 16 days, my put options were up by 95% !!. The part of the market that would be most affected would be technology stocks with no earnings. Cash would be the safest place to hide. We can have a wish list of stocks ready so when the bear market begins, we can start nibbling at stocks that are expected to do well within the next 5 years.
This is what market analyst and astrologer just said about the market, “In the past, it hasn’t paid to fight the Fed when it was in a generous and accommodative mood. I suspect it won’t pay to fight the Fed when it says it is time to get off our addiction to the sugar highs of fiscal and monetary accommodation we have gotten used to over the past decade. It’s not a bad idea to get off sugar. Yet, as Jupiter continues to approach Neptune in Pisces in April, those with the sugar blues aren’t going to go down meekly. Inflation will likely be here a little longer, even after the Fed administers a heavy dose of distasteful medicine. But not to worry. I don’t think the Fed will last long either on this diet. Once Jupiter enters Aries, another fire sign, after May 10, I expect they will go for the sugar again, thinking they proved a point or feeling the heat of Aries now being administered by a government that never wanted to go cold turkey in the first place, especially heading into a mid-term election.” (Merriman weekly report, 1/10/22).
With Fed action, Mid-term elections and covid, get ready for a very interesting 2022!
Have a great month!
Fernando