Welcome to September
Historically the worst month for the stock market. I personally prefer a major
correction or crash; as that would enable us to buy in to good stocks at a good price
and make a healthy gain in 1 to 5 years. What is the VIX index? It is the CBOE
Volatility Index. On 9/1/23, it was at a very low 13.09. During August 2023, the
chart made a triple top. Last time it went below this level was on 1/5/2020.
Historically, when the VIX is so low, it is the time to buy a hedge against future
volatility/correction/crash at very low premiums. On 1/5/20, VIX was at 12.10 but
then came the covid scare and on 3/15/20, the VIX was at 65.54! With call options
on the VIX, we could have made a lot of money. Even if you put in $10,000 in to
VIX shares/stocks on 1/5/20, it would have grown to $54,000 by 3/15/20. Probably
with option trading, you could have turned $10,000 in to $500,000 by 3/15/20. At
that time, I did not have much faith in the VIX but in February 2020, I refused to
believe that we were safe from the covid crisis so I put money in put options to
short sell the market and some stocks in other ways; and I turned $3,000 in to
$40,000 in 4 months.
Over the past few months, on a monthly basis, I stated that Disney (DIS) was at a
multi-year low around $85. For several months. It would hit $85 and rise again. As
I stated in the past, it seemed like $85 was a temporary “floor” for Disney. I also
stated that if a stock (or a market) go below a given “floor”, that previous “floor”
now becomes a new “ceiling”. In other words, if Disney stay below $85 for long
enough, the probability is high that it will not rise above $85 for a while. On
8/24/23, Disney fell under $85. After 8/24/23, it never rose above $84.69. On
9/1/23, Disney closed at $81.64. I love this! As it falls, I keep buying. One of the
most astute money managers, Josh Brown stated that if Disney falls below $80, he
will buy Disney. Now most of the big money managers are out of Disney; or they
are on their way out. As it always happens in these situations, as the stock price
falls, more and more so-called Wall Street experts come out of nowhere to say that
this stock will never come back again. We saw this happen with Boeing, Twitter,
Tesla and so many other stocks. If you are astute enough to understand that these
experts are probably wrong and make a calculated risk, you have a chance to make
a lot of money in the market. In 2023, I did this with several stocks; and a good
example is Meta/Facebook. All the experts were saying that Mark Zuckerburg has
lost his way and since he is spending too much money on the Metaverse, their
2
stock will remain low for a long time. I knew that it was utter nonsense. There are
plenty of untapped resources for Zuckerburg-i.e. whatsapp. Therefore, I got in to
Meta at that time and I was hoping it would go down further so I could buy more
but it kept rising. Rarely do I buy more of the same stock when the price rises as I
want to keep my average cost low. My paper gain in less than 6 months is more
than 300%. Now coming back to Disney, I will keep buying as the stock sinks and I
am willing to wait for more than 5 years to make a profit. As with Meta, when big
money managers decide to come back in to Disney again, the price will explode to
the upside. Imagine Disney going down to $50 and then eventually rising to $150!
That is how the sausage is made! Wall Street guru of the 1970s/1980s, Peter Lynch
asked people to get in to turnaround stories before the big guys got back in again.
Remember what Lynch did with Chrysler? With respect to Disney, I have
confidence in the CEO, Bob Igor as I did with Mark Zuckerburg.
During the past few months, I also talked about the short-term trading opportunities
in long-term bond ETFs as interest rose very rapidly within a very short period of
time. As I stated in the past, this is a win-win situation as long as we do not get too
greedy. The ETF or the vehicle I used for this purpose was the ETF known as TLT
(iShares 20+ Year Treasury Bond ). When the Feds started increasing rates I made a
lot of money short selling TLT by buying put options. Now I have a different
strategy. As TLT went down (with the yield rising), I kept buying shares in TLT. I
started this strategy as I do not believe that the rates could go much higher.
However, if that happens, I will keep buying. My last purchase was around 8/20/23,
when TLT went down to about $93. I was hoping and I am still hoping that it would
go below $85. After that TLT rose to $96 and closed 9/1/23 at $94.85. On 8/22/23,
technician Carly Garner stated that Treasuries are too cheap as the 10year Treasury
just hit its highest level since 2007. She is expecting to see a “double bottom” (very
bullish) within the next 12 months. However, in my opinion, with the Congress not
being able to agree on the budget, yields could go much higher than people can
expect at this time.
Most experts expect the market to go down in September; and then for the market to
rise sharply from October to 1/1/24. I do not think it will go down that much for the
“magnificent 7” (the 7 best that carried the market higher) as so many people who
missed out on this bull run are waiting for an opportunity to get in. In the same way,
we may not have a bullish period at the end of the year. Yet most experts expect a
bullish end to 2023 due to “window dressing” where funds start buying the major
3
winders for 2023 so as to give the impression that they were in those stocks all
along- another Wall Street gimmick. Whatever happens, take advantage of the
situation. You can do it if you have 25% to 50% in cash.