April 5 Post

Hello Again,

 The net gain for our portfolio for March 2021 came to 11.15% (scoreboard given) and the net gain for February 2021 was 14.32%.

 During March 2021, we purchased more of Tesla to bring down our average cost. Our goal is to make money in 2 to 3 years and be ready to have a paper loss till then. We bought 2 shares of Tesla on 2/26/21 at $675 and we purchased 10 shares at $563 on 3/8/21 bringing down our average cost to $581.67. Already we have a gain of 14.84% in one month or so. I expect Tesla to fall below $400 (or even $200) within the next 12 months and be over $1,000 within the next 2 years. Cathy Woods who has been accurate about her predictions for Tesla for a long time predicts that Tesla will be at $3,000 to $7,000 in 5 years. We added RIOT, Bitcoin substitute 2 months ago and now it is up 166%. On RIOT too, I will not be surprised to see a 66% decline over the next 12 months. As the dollar gains more credibility with rising interest rates and as bubbles get burst, Bitcoin could go down but that would be a buying opportunity. About 4 months ago, the market analyst and astrologer Merriman (who has been advising big Wall Street firms for 40+ years) stated that not to expect the market to allow people to make easy money in 2021 as it did in 2020. A few days ago, I heard the “market guru” Jim Cramer say the same and he was asking people to get out of options. Most people who trade in options do so with short term options. Whenever possible, I trade in options that expire in 2022 or better yet 2023.

 In 2020, NASDAQ was the leader and when it made new all-time highs, the Dow Jones (DJIA) and the S&P failed to do the same (per Merriman, “intermarket bearish divergence”) and now it is the reverse. Investors are switching to the “reopen trade”. It is impossible for that to happen without the old favorite “FANG’ (Facebook, Apple etc.) going down. Better opportunities are with the “reopen trades”. Why make 5% to 10% gain when you can make 50% to 100%+? On 3/12/21, Carter Worth, the technician stated that Tesla, Apple and Paypal account for 17% of the top NSADQ 100 and the top 7 is responsible for 50% of top NASDAQ 100 market cap.  However no one can predict what will happen in the future; as the famous Wall Street maxim goes, “ Just as you think you finally found the key to the market, the market changes its locks”.

 Many predicted that NASDAQ was bottoming and among them was the technician, Carter Worth, who stated the following on 3/4/21:

  NASDAQ broke the neckline to the downside

·  NASDAQ seems to be bottoming. (ETF QQQ up 5% since 3/4/21)

·  Google/Alphabet would be the best “bet” for a buy at this time. (Up 6% since 3/4/21). Travel is heating up and Google gets a lot of ad dollars from the travel industry. Latest round of stimulus checks should “add gas to the fire”. This is better than going with airlines with terrible balance sheets.

Have a Happy Easter/Spring!!

Fernando

March 1 Post

Hi There Again,

 In February 2021, our portfolio had a net gain of 14.32%. During the same period, the S&P 500 went up by 2%. Look at our scorecard, RIOT is up 100% in 26 days. It will go down and then buy more. This market keeps going up without a major correction. “Boy who cried wolf”. Remember? I guess I sound like that (“bubble is coming”) to most people. The only difference is that in that story the boy who cried lost his life but in this case, the people who ignore all the signs of a bubble might end up losing a lot of money. In fact, most prudent analysts have been saying that this is a bubble for a long time. According to history, bubbles end when people who believe in bubble stop believing that we are in the middle of a bubble. Even when we were going through bubbles in the past, there were many who would come up with arguments to show that we are not in bubble territory. I am not saying we should avoid markets during “bubble times”. If you are in the market, do it AYOR (at your own risk). There are many ways to do it and know that what you have in the market is at risk.  How much risk are you willing to tolerate? Are you young enough? In other words, if the market stay down for decades, what is the risk you are taking?

In February, we added items to our portfolio; TSLA (Tesla-Technology) and RIOT (a substitute for BITCOIN or crypto currency). For years, most people thought that Tesla stock craze was abnormal. Even Elan Musk stated that over and over again and then he did a wise thing, he increased the number of outstanding shares (when others were buying back their own stock). Brilliant move! In fact, Gamestop CFO was fired last week for not doing the same thing. Over the past month Gamestop got so much publicity for free and if they paid money for that publicity, it would have cost them hundreds of millions of dollars. Did the CEO or CFO say anything? No. Did the CFO take advantage of this craze to raise cash? No. Gamestop has about 90 million shares outstanding. On 2/26/21, the stock ended at $101 with a market cap of $7B. Prior to 1/12/21, for 2 years, it was below $15 and for the past 5 years (prior to 1/12/21), it was below $35. On 1/27/21, the stock price rose to $347! Then fell to $40 on 2/15/21. If the CFO was wise, he would have increased the outstanding shares from 9 million to about 100 million. Just to exploit the Robinhood idiots. Let us say that the market bought all that 100 million at even $100 per share, that is an increase of $10B to their cash situation. An analyst talking about another stock like this Quantumscape (QS),  stated that the company should have about a million new issues, get the cash, put all the cash in Bitcoins and stop all other operations and be a profitable company for decades to come! If this is not a bubble, we never had a bubble in history. The biggest bubble, “tulip bubble” of 1637 was just a minor correction for those people. I bet there were people who were thinking that a tulip bubble could go up to a trillion dollars. As for Tesla, the technology part is what is good about Tesla; and not the car unit. A few years ago, according to Consumer Reports, Tesla was the perfect car with a score of 100% and in 2020, it was among the 5 worst cars. The only person to predict this amazing rise in Tesla stock price was Cathy Woods who is well respected on Wall Street. Now she predicts that Tesla would go up to $7,000 in 5 years and then to $40,000. From the very beginning, as a student of economics, I have been opposed to cryptocurrencies. Just like Jamie Dimon, CEO of JP Morgan, now I think, “if you cannot beat them, join them”. If Cryptos become a substitute for the money supply, in many ways we are going to be in big trouble. A sharp decline in the world’s money supply will put the whole world in a big depression that we cannot get out of. Also I do not buy the argument that one day hackers will not be able to get in and “steal” all the cryptos. Heard about the Russian hack “solarwinds/microsoft”? Even after all these months, one of the world’s biggest techies, Microsoft is clueless about the total damage! However it is okay to put a little bit of money to exploit the Bitcoin craze. So far our SEC has not approved an ETF to trade Bitcoins or cryptos. However I find that RIOT blockchain does a good job of following the Bitcoin trend. Prior to 11/13/20, RIOT was below $4 for years. It reached $78 on 2/17/21 !! During the same time Bitcoin went from $14K to $48K-which was predicted by my market analyst astrologer Merriman about 4 months ago. Merriman’s “big crash predictions” are yet to happen but my research shows that the predictions he gives each week for the DJIA, S&P and NASDAQ for 2% to 4% corrections are 80% accurate. On 12/23/20 I bought call options on RIOT at $650 per contract and those had an expiry date of June 2021  On 1/7/21, I sold those at a 82% profit in just 15 days! Stupid me!! If I sold them on 2/17/21, I could have sold them at a 1,000% profit in about 60 days! However I did not get out of RIOT, I thought that the options were in a real bubble and overpriced so I bought the stock instead; which went up about 150% in 30 days. Expect RIOT and TSLA  to go down in the next 12 months and then we can buy more and decrease the average cost but never put more than 10% of the portfolio in to these 2 stocks.

I like listening to complex option traders but most of the time I think they take a riskier complex approach when a simpler, better path is available, At times I hear about good strategies and I share them with you. On 2/26/21, On CNBC Options Action, Tony Zhang said that he is going “Apple picking”. We started doing that in 2015 for our newsletter. Tony’s idea is a good one. Apple hit $120 last week and bounced back. Tony wants people to sell “naked put options” on Apple that expire 4/16/21 with a strike price of $120 for the current price of $600. What does this mean? This is like short selling but you have to get your brokers permission to do this. In fact to do a “covered put option”, you have to short sell Apple-which is very dangerous. This is no Gamestop. So going back to Tony’s idea, if you sell a naked put on Apple, as stated above, for each contract you sell, you get $600 in your account. 1 contract = 100 shares. Thereafter prior to 4/16/21, if Apple does not go below, $120, you do nothing and you get to keep your $600 (or multiples of it). Let us say that Apple falls below $120 before 4/17/21 and the buyer of the option exercises the option; then what happens? For each contract you sold, you have to buy 100 shares of Apple at $120. Since you have already received $6, your true net purchase price would be at $114. There are easier ways to make money off Apple options. I have been adding to my call options. Right now best buys are Apple and Boeing. As Jim Cramer says, “people ask can we get in to a stock that will perform like Disney in the future? Yes..it is called Boeing”. I have been going in and out of Boeing and Apple options for the past 12 months. I made some good money on Disney options too but I can kick myself for ignoring a friend who told me to get in to Disney when it was $100 a few weeks ago and now it is around $200. I  could have done great in options. Going back to Apple. Carter Worth, one of the best technicians on CNBC says that it is unlikely that Apple will go below its support at $120. Carolyn Boroden the Fibonacci Queen says that if Apple goes below $120, it is dangerous but she see Apple going up to $160 within the next 12 months or prior. For me, it is not a big deal, as I have some Apple put options with the strike price $90 (June 2021 expiry)  as a hedge. As Apple goes down, I buy more calls and puts so my puts will act as a hedge or a cushion. If Apple goes to $50 or so, that would be the deal of the century!! According to the above mentioned market technician, Carter Worth, the market cap of Apple, Amazon, Microsoft, Facebook etc. (the big techies) are so big and they are in so many ETF’s, the market cannot go up without those stocks going up so one of these days, those stocks will come up as a “come back trade”. However it could go lower or much lower too and  if that happens, it is okay too.

Have a great month!

 

Fernando

 

February 5 Post

Hi Again,

 GAMESTOP!! Whether on Wall Street or Main Street news, Gamestop was one of the number one stories last week! We have heard so much about Republicans and Democrats do not see eye to eye anymore but this situation got Ted Cruz and AOC/Sanders on the same page!

Ted Cruz retweeted AOC’s comments and added “I agree’. If you did not hear about Gamestop last week, you must have been living under a rock or something! Essentially millions of small time traders brought some of the most exclusive hedge funds like Melvin Capital close to insolvency! How did that happen? Have you heard of a “short squeeze”? When a heavily shorted stock moves up, the people who are short have to make a desperate effort to buy back the stocks they “shorted” (borrowed) or lose money in an unlimited manner. If you short sell a stock that has a market value of $100 thinking it is going down to 0 and then find that the underlying stock rose to $10,000, you most probably have to sell all your other assets to cover your “short sale”. New traders (sports gamblers etc. like Barstool people) that came in to the market  in 2020, through social media (mainly Reddit) focused on heavily shorted stocks and kept on buying them to “sky rocket” those prices.

 Gamestop has no intrinsic value and it was headed towards 0 as most people are buying games online. It was found that Gamestop was 130% “shorted”. How can that be? Big exclusive hedge funds get unfair deals from Wall Street. The focus of regulators and Wall Street should have been on how Gamestop got to be 130% shorted but their focus was on Robinhood traders who will end up bankrupting the last few traders who are not lucky enough to find suckers to buy their holding at a higher price than they bought them at. However it was evident from the volume that institutions and big computer driven programs were involved in it too.  100 million shares of Gamestop was traded in one day! This was not limited to Gaemstop; they were going after all the worthless stocks that are heavily shorted- Blackberry, AMC, Bed Bath and Beyond etc. If you look at the ticker tape after hours, you will see a lot of stocks that rose 25% to 100% in one day- Robinhood traders are at play!We have to keep this in perspective. Market cap of all US stocks come to about 33 Trillion and these speculative stocks only account for about 50 Billion. Many young people stated that they paid off their student loans and paid off their home loans with Gamestop profits. The old guard was asking the SEC to stop Robinhood traders and Reddit conversations. Robinhood stopped trading of these stocks and put severe limitations as they were running out of capital requirements.

 That is when the politicians got involved on the side of the small traders. Old Guard was saying that these Robinhood/Reddit people were putting pension money at risk by bringing down big hedge funds. For centuries, where pension money was invested was heavily regulated. They should not be in 130% shorted stocks and if they are in the market, they should be prepared for all possibilities. On 1/27/21, Social Capital CEO Chamath Palihapitiya who defends the small traders was saying that this “regime change” on Wall Street and defending the rights of the people who drove the big hedge funds (Melvin Capital, Bill Ackman et al) close to insolvency. CNBC estimated that they lost over $50 Billion. Some of the arguments made by Chamath: (1) Reddit did online what exclusive hedge fund managers have done for decades at exclusive close door dinners (2) Why allow these hedge funds to short 130%? (3) Some of these exclusive hedge funds have ridiculous margin requirements as putting $5B and buying $50B worth. This is why the retail investors kept away from the market for so long as they believed it was rigged in favor of the “big guys”. Is this the end of this story? No, not by a long short. To paraphrase Winston Churchill, “This is not the end. This is not even the beginning of the end. This is just the beginning of the end”. Due to Robinhood, we all got commission free trading. Now if the regulators drive away those traders, we will all pay a price so big hedge funds can keep the status quo. However Robinhood people needs to get more educated and experienced. They are even trying to drive up the price of silver (ETF: SLV) as it is very shorted. They are way too young to remember how Billionaire Hunt Brothers lost everything by trying to corner the silver market and ended up living with their sister. Instead of closing out contracts with cash settlements, a common procedure on the commodities market, the Hunts took delivery on silver. They then stockpiled this silver and used their large cash reserves to buy up even more futures. The billions in demand triggered the rise of silver to more than $50 per ounce. Nelson Bunker Hunt (February 22, 1926 – October 21, 2014) was an American oil company executive. He was a billionaire whose fortune collapsed after he and his brothers William Herbert and Lamar Hunt tried to corner the world market in silver but were prevented by government intervention

Without a shadow of a doubt, the stock market is in a bubble. With each passing day, it gets worse but the end is not in sight. It becomes more and more scary. It never ends well and no one knows what will happen after it bursts. In the worst case scenario, as it happened around 1930 in the US, it could take another 30 years to get back to “normal:. If you had money in the Japanese bubble in 1990, you had to wait 30 years or till 2021 to get your money back. This is my biggest concern. Chanos, the expert at shorting stocks say that, “This is the golden age of frothiness”. So true! Herb Greenberg who provides research for companies that short stocks had this to say on CNBC on 1/25/21:

·       We have never seen this much frothiness in our history

·       We have gone beyond trading to speculation to gambling.

·       Most people who drive stocks up do not understand anything about stocks or markets

·       SEC and regulators should intervene for the benefit of the general public.

·       During the shutdown most sports gamblers like “barstool” and “Robinhood naïve” investors are mostly responsible.

·       This will end badly but do not know when that will happens

On 1/11/21, “The Bond King” Gundlach I respect was on CNBC and this is what he had to say:

·       Inflation to exceed 3% in 2021.

·       When inflation goes over 3%, most experts will have to discard the investment strategies they have had for the past few decades.

·       Federal Reserve may find themselves in a position where they cannot help the economy/market. If inflation is not wiped out at the initial stages, it could grow in to hyperinflation and that is the worst for any economy or market. Remember 1965 to 1985?

·       Feds will allow the 10year treasury to go up to 1.5% before they intervene.

·       Feds will control the yield curve

·       Right now 2% of all employment is in Techs but 38% of market cap of all publicly traded stocks are techs

·       “Wealth Gap” between “wealth owners” and “wage owners” have gone “absurd” to “absurd square”

·       Assets should be moved from the US to Asia

·       Bitcoin was bullish but now it too is in a bubble.

Technicians Carly Garner and Larry Williams believe that there is too much bearishness in the bond market and in the US dollar so do not be surprised to see a rally in those areas. Larry Williams studying history states that 88% of the time, the market goes up during the first half of the year. Watch out for the 2nd part of 2021!

 Did you hear about the worldwide computer chip shortage and GM and other auto companies are reducing their output due to these limitations? As they have been doing for decades, China has been trying to corner chip market. It is their intention to have a monopoly on all needed material by stealing intellectual property of all western countries for decades. As analysts say, “chips are for this economy what steel was for the economy decades ago”. Where this will end is unknown to anyone.  Stay tuned!

Have a great month!

Fernando

 

January 5 Post

Happy New Year everybody!

 We had an 18% gain in November and we followed it up with a gain of 5.88% in December.

Our overall gain is at 112.90%. We started buying Apple in 2015 and now our gain for Apple is at 473%. We started buying Uber in 2019 and now our gain is at 255%.  We started buying WYNN, AMD, Boeing Face Book. TJX and Delta in 2020 (March) and they are so far up 214%, 149%, 140%,  99%, 108% and 110% respectively. What was the best sector in 2020? Technology was the best and Energy was the worst. According to long term analyst and astrologer Merriman, Oil is in a long term bull market as it bottomed out in 2020. My advice- Be super cautious with Energy! Also going by the “Dogs of the Dow” theory, energy in the Dow and also Intel might do well in 2021.

 Tesla went up by 700% in 2020!  If you had put $10K in to Tesla 5 years ago, today, you will have more than $230K. Tesla produces 1% of all cars but it’s market cap is bigger than all other automakers combined. Many advisors ask Tesla to buy Ford or Merc.Benz. Elan musk stated that he is not in favor of a hostile takeover but if an automaker makes an offer, he will consider it. It is a known fact that Musk wants to take Tesla private; that may be why he keeps saying that Tesla is overvalued. Musk is gift from God to the human race!

 Another interesting thing that happened in 2020 was the rise in the bond market after March 2020. At that time no one thought the Federal Reserve will “print money” to the tune of $8 trillion and many expected most companies to fail. One of the analysts taking advice from a bond guru who came on CNBC bought Carnival bonds with a yield of 11% around March 2020 and now the yield has gone down to 5%- in other words, a huge gain in those bands he bought 9 months ago. Bill Ackman was crying on CNBC in March 2020 asking President Trump to close down the country for one month to get rid of the covid crisis. Now we find that he is one of the best money managers of 2020. He invested $23MM in credit swaps and in less than 6 months, he turned that in to $2.5 Billion! His overall average gain for 2020 is about 70% so that implies he did poorly on most of his other trades. Analyst/astrologer Merriman says that one of his clients, turned $60K in to $750K in 2020 (by taking his advice).

 Larry Williams is a market technician who specializes in cycles and when Jim Cramer reported on his findings on 12/9/20, this is what I found interesting:

·       Market should start going up from 12/16/20 or so.

·       Till 12/16/20, the market could go down or sideways.

·       From 12/16/20 to the 1st week of January, the probability is high that we could see a significant gains in the market

·       Buy 5 days before 12/25/20

·       Sell retail stocks now as they have gained quite a bit in the Fall as he predicted months ago

·       Time to sell UPS and Fedex

This is what technician Bob Lang had to say on 12/14/20:

·       He is bullish on all casino stocks but some will fare better than others. With the expected better environment with China, casino stocks should benefit. Also aggressive stimulus fiscal programs in 2021, would benefit casino stocks.

·       WYNN-As I stated many months ago, Bob Lang states that WYNN would be one of the best “bets” for the casinos in 2021.

·       MGM- Made a “golden cross” in the chart so Bob is bullish on MGM

·       LVS or Las Vegas Sands- Per Bob, this one is not as good as the others but still look to be bullish in 2021.

I wish you a great 2021!

Fernando

December 5 Post

Hi There Again,

Did you take a look at our scorecard? Our portfolio was up 18.3% in November and we beat all 3 markets- S&P up 9.86%, DJIA up 11.25% and NASDAQ was up 10.79 from 11/1/20 to 11/30/20. Apple after going up for a long time is taking a breather. It has been stagnant for months but “Fibonacci Queen” Boroden expect it to go up to $150 but she does not give time limit but I think it will happen in late 2021. As I mentioned in my newsletter 2 months ago, the Santa Claus rally is going strong.

According to many technicians we are very close to an important high for the S&P500; why? When you take the March low and us Fibonacci numbers, we should peak at 3720 and on 12/4/20, S&P ended at 3699 so watch out for next week! I think a good correction is getting closer and closer and that would be a fantastic opportunity to buy more!

Last newsletter (for October 2020) was issued and sent on 10/31/20. In that I stated that most people are bearish with the elections and are waiting for the elections to have a clear winner to rally but I took the opposite side and I expected an immediate rally.  On 10/31/20, the DJIA was at 26,501 and on 11/24/20, it hit an all-time high of 30,116- that was a rise of 3,615 points in just 24 days! In my last newsletter, I also mentioned that after elections, the market goes up. Some believe that this bully will rally till Q1 2021 and then fall sharply. After March 2020, the market has forgotten how to fall sharply! Finally when it does, watch out!

Here are some predictions made by technician Sebastian on Mad Money (CNBC) on 11/13/20:

·       August 2020 to September 2020, the market went up and so did the fear gauge VIX which is a red flag (market heading for a decline)

·       Week prior to 11/13/20, market went up but the VIX declined-which is a bullish sign

·       Now we have a broader group of stocks going up-bullish

·       VIX for the Nasdaq or VIXN was at 29; normally it is about 23. That bearish for the tech stocks and Nasdaq

·       Huge rally expected for the Dow

·       Not so sure for S&P

·       Nasdaq might not go up

These predictions/observations were made by the technician Larry Williams on CNBC on 11/23/20:

·Retail stocks go up between Thanks giving and Christmas. (This really started early November)

· Amazon has been sluggish lately but expected to rise after Thanksgiving

· Expect Walmart to go up after Thanksgiving. Same true for ,Costco

Happy Holidays!

Fernando

November 2 Post

 Hello Again!

 Bulls make money, Bears make money but pigs get slaughtered!! Except for this final week in October, the market was really stagnant and boring in October. Finally it came back to life with a modest correction. I do not think it is over yet. It was like a perfect storm. Technically it was ready for a correction. Astrologically it was ready to decline. With the covid 19 situation getting worse with the election coming up soon, it was a perfect storm. Add to that the market did not get the stimulus package it expected from the government. Surprise! Surprise! Most of all, even after this decline, the market, especially the technology stocks are way overvalued. I am talking about “irrational exuberance” which is the favorite cause of market crashes. However almost all expect the markets to fall early next week. I am a contrarian. If everyone is on one side of the boat, I prefer to go to the opposite side. Don’t be surprised to see a rally next week. There are a lot of people waiting for the market to crash so they could have a buying opportunity; and that includes me!

After many, many months, I hear most people are negative on Apple! Whenever that happens, we have to get ready to buy more in the future! Some say Apple will go down to $80! Imagine that! Buy it at $80 and double it in 3 years or less for sure!

On a daily basis I watch a video by Carolyn Boroden aka Fibonacci Queen. It is my understanding that decades ago, she worked with Jim Cramer at Goldman Sachs. She states that according to March’s low, we have not yet come to the expected market top yet but that is close. Her advice to traders, “Not to be too concerned about the long-run and just take one decision to the next”. However long-term investors do not have this luxury. With Boroden, I pay a lot of attention to market indices and also to Apple as I trade in Apple options. She also analyzes bonds, commodities, and stocks like Amazon, Google, Microsoft, Facebook etc. On Apple she has a short term upper target of $121 (even though she is bearish on Apple)  and a long-term target of $147. At today’s prices (after 2020 split prices), we got our initial Apple purchases at $23 per share 5 years ago! After the 2020 split, it became very attractive for option trading. Tesla, just like Elan Musk, is in a universe of their own (too crazy to be in those stocks or options) ! Musk, one of the most brilliant humans alive! Boroden relies a lot on the 5/13 rule. She states that it does not always work but it is very reliable. What is the 5/13 rule? If the 5-day moving average is above the 13-day moving average, then it is bullish for that specific stock or market; and when the 5-day is below the 13-day, it is bearish for that specific stock or market. I tested it out and it works for me too.

Different technicians using different methods come to the conclusion that possibly within the next 12 months (anytime now?) we could have a market top and then the market would drop for 2 years as it did from 2007 to 2009. Merriman believes that DJIA could end up 2,000 to 6,000; and Robert Prechter expect the DJIA to go down to 1,000. 2020 was year when we had a depression coupled with irrational exuberance on Wall Street so intuitively I agree with those predictions. Who will get blamed for such a “correction”? Most probably the naïve Robin Hood investors and traders. I heard on CNBC that these Robin Hood folks boast about their achievements on Facebook etc. and many get their accounts hacked and money stolen! Being young and naïve! As they say, if it is easy for you to move around money with a “click”, then it is just as easy for hackers to steal your money with a “click” too!

Merriman (astrologer/technician) has been writing newsletters etc. for all markets for the past 40 years or so; and he has been doing the same for gold for about 50 years. He has some subscribers who have been with him for 40 years! On 10/11/20 he held a webinar that was attended by people in 10+ countries. He is from Arizona, USA but right now he is with his German born wife in Germany.  Some interesting points from the webinar:

·       New era starts on 12/21/20; that would last for 140 years. Jupiter/Saturn

·       1/11/21 to 2/17/21: “heavy energy”. “Difficult period” . Mars/Jupiter/Saturn/Uranu

·       After March 2021- A better time. “less fear”

·       2007-2009 Decline (53%) was worst since 1929/1932

·       Market should bottom between 2020 and 2023

·       Market should top out by December 2020 (Venus Retrograde) or between February 2021 and December 2021.

·       China hit a top in July 2020

·       US Dollar is in a downtrend; will bottom in 2024

·       Silver does better than gold during the last stages of a bull market for metals. Expect silver to go over $30. Even though it is unlikely, gold could get to $8,000 before declining for 30 years –somewhat like what happened around 1980.

·       Stand aside (no trades) till mid-November or so-Issued this early October.

In 2016, just before the elections, technical analyst Tom De Mark of DeMark analytics made some correct predictions. On 10/13/20. Jim Cramer featured him on his Mad Money program on the “off the charts” section. Here are some of the highlights:

·       Current upward trend is running out of steam.

·       DJIA could run up to 29,400 to 29,550 and then it will run out of steam.

·       The end is close

·       There will be another run up during the week of 10/13, and then the market will decline

·       Right before the election, the market will bottom

·       Just as it did in 2016, there could be a short stagnant period after the election but as it did in 2016, the market could have another rally thereafter

Are we going to have a leadership change in the market? Big techs like Amazon, Apple, Facebook, Microsoft have been leading the market for many years now. One of the big money managers who come on CNBC often that I respect a lot is Josh Brown. He stays connected to some of the most important people on Wall Street. On 10/22/20, on CNBC, Josh was talking about his talk with this “world’s best market technician” (did not name him) who is in charge of technical analysis for Soros. Soros is sure to hire the very best. Per Josh, this technician believes that all the big techs (i.e  Amazon, Apple etc.) made a long term top around July/August 2020 and they will not make all-time highs for many months to come. I am not so sure.

During October some finance and bank stocks came back to life for a while. Why? Interest rates or the bond yield on most treasuries went up and whenever that happens, banking and finance stocks do well.

By mixing stocks and stock options we can create many different avenues of revenue. Most of these methods will be taxed as normal income and not capital gains. I heard something on CNBC and I tested it out and this method has some validity. This guy who owns JP Morgan stocks, was selling call options on JPM, once a month and making a profit of 2% per month or 24% per year plus JPM dividend rate is at about 4% so the net profit is close to 28% per year. Let us say you bought 100 shares of JPM on 10/13/20 at $100 per share at a cost of $10,000. Then you “sell a covered call option contract” (one contract that cover 100 shares for $2 (price range $1.98 to $2.11); which expires 11/13/20 with strike price of $105. Given what happened over the past 3 months, it is unlikely that JPM would go over $105 by 11/13/20; and if that happens, the option will expire worthless and you get to keep your 100 shares and also you have already made a 2% profit within 30 days. Assuming you can repeat the same process month after month (as the guy I saw on CNBC on 10/13/20) , you will be able to earn 24% within the next year. Also you get the 3.56% dividend yield JPM was paying on 10/13/20. What happens if JPM go over $105 (let us say up to $110)? Since you have written a covered call, you cannot sell your 100 shares and most probably the buyer of the option will exercise his rights and buy your 100 shares at $105. So initially you got 2% for an option premium and now you get another 5% for buying at $100 and selling at $105. A cool 7% profit in about 30 days! If you are concerned that JPM would fall by about 25%, you can buy a put option for about $3 (3%) that expire in about 8 months. Nice way to get an income!!

Riding these waves could be risky. Trends can change suddenly. I noticed that Fedex has done better than most high flying tech stocks in 2020. In March 2020, Fedex hit a low around $90 and then rose to $270+!!! A couple of weeks ago, I thought to myself, “better late than never” and bought some call options on Fedex. In 3 trading days, they were up by 75%! However I did not sell them then the decline started. You win some and you lose some! Hope you will win more than you lose!!

 Have a great month!

Fernando

October 5 Post

Hi Again,

It is uncanny! On Wednesday evening Merriman (astrologer/analyst) stated that due to the upcoming full moon, on Friday (10/2), the market could fall and with Trump’s surprising news that is what happened! Reading Trump’s astrological chart, Merriman (a Republican and Trump supporter but very open minded) says that Trump might get much sicker in the future driving the market down but he also cautions but we will not hear the truth. Surprise! Surprise!

I wrote the last newsletter on 9/1/20 (being bearish), and on 9/3/20, all markets declined sharply! That happened after the market went up straight for 3 months!. CNBC show Mad Money with Jim Cramer features a technical analyst once a week in the segment Jim calls, “Off the charts”. On 9/9/20, Jim was talking about a well-known technician called Carly Garner.  Carley Garner is an American commodity market strategist and futures and options broker and the author of "Higher Probability Commodity Trading". What does Carly think of the near future? She is not happy with the market. She is expecting a bumpy ride till 1/1/21. Higher the S&P goes, more worried she gets. 75% for the S&P make an all-time high but it is expected decline sharply thereafter- fast and furious back to 3185 or 2750. Her advice : “Be cautious”

Technical analysis is more important than fundamental analysis but we cannot ignore the fundamentals. Technically the market was ready to decline but there were fundamental reasons for the fall too. For weeks many experts coming on CNBC have been warning of all the IPOs that were expected to hit the market and most hedge funds will have to sell their most profitable tech stocks to buy these IPOs. That is exactly what happened when software company “snowflake” came to market on 9/16/20. It almost tripled on the first day. When it comes to IPOs only the insiders who get to buy prior to the IPO coming to the market make money. Even before Snowflake came to market, it was way overvalued at 100 time’s sales. If I have a company with an annual sales level of $1 million, would you buy my company for $100 million? This is like 1999/2000 period. As Jim Cramer said, “If it is 30 times sales, maybe; if it is 50 times sales, walkaway; if it is 100 times sales, run for your life”! Apple is around 30 time’s sales. A very few stocks are driving the market. When those stock rise in price, so does the market; and vice versa. When Apple peaked a few weeks, the market cap of apple was more than all the Russell 200 stocks! In the past, investment gurus rarely changed but that is not true anymore. Warren Buffet is the God Father of value investing but he bought a 15% stake in Snowflake!

Another 2 sectors we have to look at for fundamentals are Oils and Banks. For years Jim Cramer has been asking people to stay away from oil companies and I disregarded that advice and paid a big price many months ago. As Jim says it, Oil for today is like what Tobacco stocks for 1999/2000- “a leper sector”. Several years ago big college endowment funds got hedge funds to move out of oil due to global warming. According to the IMF, it would take many years for the global economy to get back to the pre-covd19 state. Also the global economy is less dependent on “oils’ than it used to 30 years ago. China has enough oil in storage to last many years. Now out of all oil companies in the US, only Chevron has a solid balance sheet. Not even Exxon can say that anymore! Even during the oil spill crisis BP did not decrease their dividend due to pressure from pensioners in the UK but they did that in 2020. US fracking industry has so much debt, they have no choice but declare bankruptcy. Haliburton got out of US fracking recently. Chesapeake Energy declared bankruptcy 3 months ago. As for banks, how can they make money when interest rates are close to zero? It will be worse if interest rates go negative. Look at Europe and Japan! I am talking about the yield curve. Also with this depression that we are in, loan losses will skyrocket over the next 2 to 3 years. Banks are getting a lot of competition from non-banks. Jamie Dimon of JP Morgan is like the Pope CEO of banks but now JP Morgan’s  market cap is at $284B, while Paypal market cap is at $219B! Did anyone imagine that this was possible 5 years ago!

One day Jim Cramer, as many have done before him, was comparing 2020 to 2019/2020. Some have been noting the differences between now and then; for example most “fathom” NASDAQ companies did not have any earnings then. According to Jim, what was responsible for the 2019/2020 crash is very much alive now; and in big letters he wrote, “GREED”. I will go a step further and I will say that all big crashes that ever happened in the world came as a result of utter greed of investors and traders. Last month I talked about the biggest crash that ever happened – the tulip crash many centuries ago. Recently on PBS show called “Civilization”, they stated that around 1600, Amsterdam, Holland was the Wall Street of the world where everything was bought and sold. Once again turning back to Merriman, he states that due to Astrology (especially with Uranus which rules NASDAQ), early part of 2021 could be very bad for tech stocks. Using fundamental analysis that could be correct too. By then we would be getting close to a vaccine and more therapies for Covid19 and then it would make sense for people to sell tach stocks that created so much wealth in 2020 to buy “value”, “cyclical”, or whatever name you want call stocks. Boeing, airlines, cruises, hotel chains all could benefit from such a move.  Financials might move up if people expect the Federal Reserve to “raise” or “normalize” rates in the future. Oil stocks might get a temporary lift too. In the market it is quite normal to see people who hated a stock or the market making a U-turn all of a sudden,

Keep that in mind!

September 1 Post

Hello Again,

Please note that Apple split 1 to 4 on 8/31/20 so our past records including the average cost and past purchase values have been divided by 4 to make it a simple adjustment.

"Irrational exuberance" is the phrase used by the then-Federal Reserve Board chairman, Alan Greenspan, in a speech given at the American Enterprise Institute during the dot-com bubble of the 1990s. The phrase was interpreted as a warning that the stock market might be overvalued.

We are in that same position now!

On 8/25/20, On the CNBC show “Mad Money” with Jim Cramer’s “Off the Charts” section, Jim featured the technical analyst for hedge fund managers, Tom DeMark who has a perfect record-especially from February 2020 to August 2020.  According to Tom, US markets should peak within the next 2 weeks (by 9/16?). Technical signs are the same we saw in February 2020 before the peak. Comparing 1929/1930 to 2020, Demark stated that after the 1929 crash too we had an irrational market rally. Considering the time it took in 1929/1930, we are ripe for another crash. No one knows for sure that will happen or not but investors and traders are so irrational, it makes sense for us to have another crash.

Recently Josh Brown sold 20% of his holdings in Apple and Nvidia to reduce his exposure and manage his risk level and he quoted Warren Buffet to show that one has to walk away when the market is irrational-“ At the end game when the party is in full swing and everyone is drinking champagne it is very difficult to walk away from the party but to be prudent, one must get away from the party”. Japanese market topped in 1990 and it never got to that level over the past 30 years.  What was the biggest crash? It was the Tulip crash. Tulips anyone? Tulip mania reached its peak during the winter of 1636–37, when some bulbs were reportedly changing hands ten times in a day. No deliveries were ever made to fulfil any of these contracts, because in February 1637, tulip bulb contract prices collapsed abruptly and the trade of tulips ground to a halt.

Over the course of 2019, Tesla's share of the U.S. automotive market gradually rose to roughly 1.3 percent. If only the U.S. electric vehicle (EV) market is considered, however, Tesla is the market leader in battery-electric car sales for the United States. On 8/21/20, market cap of Tesla is greater than all auto makers in the world! In June 2020, Elan Musk founder/CEO of Tesla stock was overvalued at $700 but on 8/21/20, Tesla ended at $ 2,1049 with a PE over 1,000! I remember in 1999/2000, Yahoo had a PE of 1,000 but they did not survive. This is all due to a stock split which adds no value to the company. When the Tesla IPO came out in 2010, if you had put $10,000 in to Tesla, on 8/21/20, you would have had $1.2 Million! If you had put $10,000 in to Apple in 2010, on 8/21/20, you would have had $103,000. If you had put $10,000 in to Netflix in 2010, by 8/21/20, you would have had about $600,000. Please note that Tesla had a 5 to 1 split on 8/31/20 and per presplit prices Tesla ended 8/31/20 at about $2,500!! This is a bubble!

When corporate insiders buy their own stocks with their money, it is a sign that the future for that stock and company is good; and the opposite is true when “insiders” sell their stocks. A few years ago when the CEO of JP Morgan Chase bank Jamie Dimon bought his bank’s stock with $20MM of his money all bank stocks rose and also the market bottomed.  A few days ago (8/25/20) Apple CEO Tim Cook sold $131.8 Million of his own Apple shares. See what I mean?

Robert Prechter, using the Elliott Wave Theory was able to predict the future of the market for many years in the 1980s; and he predicted the 1987 crash 3 months before it took place. Here are some excerpts from his 8/14/20 newsletter:

When the mindset behind this correlation shifts, interest rates will rise, stocks and metals will fall, and the US dollar will go up.

As we have been reporting for several years, the two most important years indicated for the stock market turns are 2021 and 2022. The year 2022 unquestionably slated to mark a major low.

August 2020 was the best August since 1984 for the Dow and S&P 500 and the best August for the NASDAQ since 2000 !! Remember NASDAQ in 2000? When we had the dot-com crash and those stocks did not even come close to those levels since 2000. We are at the beginning of a great depression. All experts say that even with a vaccine, most of the jobs lost will never come back.  How did this happen? I follow the markets closely. After the March 2020 bottom, all prudent professionals stayed away from the market and advised others to do the same  but the market went up sharply; why? Due to the covid19 crisis, with no sports and casinos, and all working or staying home used the market as a gambling den. Then the professionals had a problem. When the market goes up and when their portfolios do not perform, they get fired by their bosses or from their customers. So the professionals came in to the market in droves. This kind of irrational exuberance can go on for a long time or it could crash tomorrow. No one knows what would be the catalyst for the next crash. Even prior to the February/March crash the market was way too overvalued and prior to January no one was able to predict that a pandemic would act as a catalyst for a market crash. An expert who has studied market for centuries stated that real crashes and deep recession come out of catalysts that no one was able to predict. Tulips anyone? (see above)

Have a great month!

Fernando

August 10 Post

Hi Again,

It is obvious that most experts/technical analysis are very confused with respect to this market. It is like 1999/2000 all over again. There are differences between then and now but as it happened then investors and traders are acting irrationally. I subscribe to 4 good “technicians’ on a daily basis and they are all confused. The least confused is the technician Carolyn Boroden or the Fibonacci Queen and that is because she takes a very short term perspective when it comes to the market. At this time she calls herself a “cautious bull”. Prior to 8/7/20, she was saying that there is “time resistance” for NASDAQ between 8/7 and 8/11/20 and after a long time, there was a minor correction in the NASDAQ on 8/7/20.  Ryan who writes for the “Trend Lizard” and uses the Elliott Wave Theory effectively, used to be a 100% bull till a few weeks ago when he called for a major correction but the market kept going up. Corrections are good for the long term health of the market and longer we go like this we invite another crash. Today (8/7/20), Ryan stated, “Deciphering near-term price action has been tricky, thanks to less than clear price patterns and exceptionally different patterns depending on which the market sector you are looking at.

At this point, it is hard to imagine what it would take to shake this market. This move has ignored bearish price patterns, market sentiment, technical indicators, the 200-day moving average, seemingly negative news headlines, the worst drop in history on quarterly GDP, and the list goes on”. Ryan advises his followers to stay away from the market till there are clear signs to enter the market. Robert Prechter who predicted the 1987 crash states that it is dangerous to be in stocks at this time; and he predicts that in a few years when this “Grand Cycle” ends, the Dow will be below 1,000 (it was close to 30,000 in February 2020). Merriman states that August 2020 is going to be very dangerous for the market and advises everyone to stay away from stocks.  On 8/7/20, Carolyn Boroden, in her daily video states in August 2020, there is a cluster of time resistance days that makes the market dangerous in August 2020 and the last time this happened was in February 2020. We know what happened in March 2020! She also correctly pointed out that for the first time in many months, NASDAQ, 5-day-moving average went under the 13-day-moving average on 8/7/20. This is a warning of danger that is fast approaching. On the other hand if that market has been down and if the 5-day-moving average goes over the 13-day-moving average, it is a “buy signal”. The 4 tech biggies move all markets. The market cap of Apple alone is 80% of the Russell 2000 stocks! Just since 7/1/20, Apple rose 24%! Since 3/31/20, Apple is up 100%!! For a brief period, Apple’s 5-day-moving average went below it’s 13-day-moving average which is a warning about Apple’s future. Some believe that China will react to Trump by banning Apple from China. Big tech companies get 70% of their revenue from other countries. If Apple crashes, it will take down the whole market! Most ETFs are heavily in to Apple and the tech leaders. Let us hope that we will have a deep correction soon.

Have a great month!

Fernando

July 13 Post

Hi Again,

Once again take a look at our score card; in June 2020 we had an average gain of 5.59%, in May 2020 the gain was 6.05%; and that came after a 7.66% gain in April 2020. We are in a very confusing time. There is a big disconnect between “Wall Street” and “Main Street” (economy). Since the end of March, the most prudent investors were avoiding this market but now slowly but surely they are getting back-as it always happen during the last stages of market that is overly bullish. The main reason why the market went up since March is that the Federal Reserve has been printing like there is no tomorrow. In one word- liquidity! How long can this go on? No one knows for sure but I think we could have a 50% to 80% correction within the next 12 months.  Apple, Amazon, Microsoft, Google (Alphabet) and Facebook has a combined market cap that is bigger than the Russell 2000 stocks!! That is scary!

More than 4 year ago we bought Apple at an average cost of $91.50; remember that time? That is the time when Carl Icahn sold all his Apple holdings and all top analysts stated that Apple is no longer a growth company and it is too big to be a growth company. On 6/30/20, Apple was at $364.80- a 293% gain! Our Uber gained 116% in 6 months! Boeing gained over 100% in 3.5 months. Casino WYNN also gained over 100% in 3.5 months.

There has been a lot of talk of all the sports gamblers who got in to market trading for the first time this year. You must have heard of the sports gambler from Barstool, Dave Portnoy. He does not understand that there is a difference between trading and investing. He once stated that Warren Buffet is “finished” as a trader and he is the new king. Warren Buffet was never a trader. Dave has over a million followers on his twitter so they were following his actions and in day trading in 2020, he turned $3MM to $300MM in less than 6 months! Some people were asking the SEC to investigate him. Did you hear about the college sophomore who killed himself over day trading?  I heard that he was trading “naked stock options” and he found that he lost $500K in a day but his brokerage company stated that it was just his understanding as he did not understand options. These are all signs that the market is topping but this could go on like this for a long time. One of the best market technicians I follow call herself a “Cautious Bull”. As she likes to say, “ I do not see any sell signals in NASDAQ”! Now Trump does not boast about the DOW and even he talks of the NASADQ. That shows he pays very close attention to the market.

Have a great month!

Fernando

June 4 Post

Hi there again,

Now we have had gains in our portfolio for 3 months in a row. May 2020 we had a net gain of 6.05%, and in April 2020 we had a net gain of 7.66;  and in March 2020 it was 39.80% for a total net gain for the portfolio at 61.14%. I do not expect this trend to continue. We could see terrific losses in our portfolio within the next 3 years and that will be a time to buy more to have a lower average cost. I have always asked you to keep 25% to 50% in cash but if you are over 50 years of age, you should have 90% in cash. Not in bonds! When interest rates are at 0 with a possibility of going negative, it is not good to be in bonds.

 Imagine this is 10/31/20 at 1pm Pacific Time and the stock market just closed and the CNBC just announced, “I have good news and bad news; bad news is that we have an unemployment rate of 50% and 90% of the publicly traded companies are saying that they will operate at a loss for ten years. Don’t be sad as the good news is that the Dow Jones Industrial Average just closed for the day at the one million mark. From the low of 18,000 on 3/23/20 to 10/30/20, the market rose from 18,000 to one million in 7 months!”. Get the picture? There have been many times when the markets have lost touch with reality or the real economy but what is happening now is simply ridiculous. Wall Street keep making up terms Can you guess the latest “Maxim of Wall Street” which became very popular among the professionals in May 2020? FOMO!

What does that mean? “Fear of missing out”! Get it? When a market is overvalued, most prudent investors and traders stay out of the market but then the market keeps going up and up like the ever ready bunny that cannot stop so after a while all the prudent (or some) start getting back in to the market. Let us say that you are a professional money manager who saw that this is an overvalued market and stayed out and in one year the market was up 100% and then your customers are going to leave you as you will be remembered as a bad money manager. That is FOMO!

Any good technician would say that when these FOMO people get in to the market then the market is ready to take a nose dive. One of the best on Wall Street, David Tepper says that this is the 2nd most overvalued market in the history of mankind and the most overvalued market was the 1999 dot-com market. Prior to that crash someone asked me why is Warren Buffet’s Berkshire Hathaway doing so badly at that time while the market was soaring as there was no tomorrow; and I told him that Buffet is right and the market is wrong.  After 20 years, Intel is still below its peak in 1999/2000! Yahoo had a PE of 1,000 around 1999. A technician that is an expert on cycles (Merriman) states that there is a possibility that the Dow could go down to the 2,000 to 6,000 range within the next 3 years. Elliot Wave expert Robert Prechter that I followed in the 1980s and who predicted the 1987 crash, states that a new super cycle started on 3/23/20 and when that ends the Dow Jones will be at 1,000. On this I agree with Prechter. I also believe that then it would take about 50 years to get back to 28,000 to 30,000 range. Unbelievable? Japan used to be the 2nd biggest global economy (just behind the US) from 1968 to 2010. Japanese stock market hit its highest point in 1990-30 years ago. Since then the Japanese market has been struggling to come up and it is up only 2/3 of the level it had in 1990. If you had $300,000 in the Japanese market index in 1990, now you will have only $200,000. Don’t forget that inflation has eroded most of that $200,000 over the past 30 years. I am quite sure that we are headed that way. Don’t get me wrong; I think our economy will be strong and our companies will be strong but since 2009, investors and traders have been overly optimistic and unrealistic with their investments and trades. The market is nothing but a reflection of “mass psychology” and it has nothing to do with politicians and business leaders. Buyer beware!!

I am following several good technicians for my trading purposes. Expect a lot of volatility-specially between now and October. Right now it is bullish but before July we could have huge correction.

Have a great month

Fernando

May 4 Post

Hi Again,

As I have always been saying, always remember to keep 25% to 50% in cash.

Take a look at our scorecard. During the month of April, our total portfolio had a net gain of 7.66%; and out total net gain (mostly from the 3/18/20 crash) is at 51.39%. As the market guru Peter Lynch said in the 1980s, the highest gain we get soon after a crash. Did the market hit a bottom in March 2020? Probably not; but it does not matter. If the market goes below that we could buy more as long as we keep our average lower than the current average cost. That is the secret! All the professional money managers I respect limit their purchases to the safest companies with rock solid balance sheets that did not decline that much in March 2020 but they also limit their upward potential. Higher the risk, higher the return. However it is very important to limit our exposure to companies that have a likelihood of bankruptcy; and that is why in the highly risky airline section to Delta and Southwest. In March 2020, I made some money by short selling (through put options) American Airlines as I believe that they will declare bankruptcy within the next 12 months. My puts had a strike price of $5. Last week an analyst downgraded American and stated that it is very likely that they would go bankrupt and set a price target for American at $1!

Last month I suggested the Casino, WYNN at $38 and now it is up 138%. At that time China was opening up and they get 60% of their revenue from China. Why did it shoot up? Their CEO was on CNBC with plans to open up casinos in Vegas. This world is full of gambling addicts. I made a lot of money on Disney, first short selling through put options and then on call options as the stock rose. Most people do not have an imagination. I wish I could talk to Disney execs about my idea for Disney. Monday through Friday, I watch or listen to CNBC Wall Street coverage from 4am to 5pm and I have not heard a single person mention my idea. Jim Cramer and other “experts” say that Disney theme parks (where they get 40% of their revenue) will come back only after we have a vaccine for the corona virus. I do not agree. As Amazon does, Disney can use a “fog” to clean out the virus periodically. Now Emirate Airlines give a 10 minute virus test and board only the people free of the virus in to the plane. Very soon Disney should be able to do that for their theme parks. Each theme park is a universe unto itself. If every person within the park is negative for the virus, there is no need for “social distancing” and wearing masks. All the people in the world are suffering from cabin fever so I expect most people would be eager to visit Disney theme parks. Once Disney announces that they have plans to reopen their theme parks, their stock price is sure to skyrocket.

As for my personal investments/trading, I am no longer in individual stocks. From 2/15/20 to about 4/1/20, I tripled my net worth by doing daily trades. I lost a lot and made a lot of mistakes too but that was great as I learned a lot from those mistakes. Now I am totally in to index options and no longer in to stock options (with a couple of exceptions like Disney and Boeing). In the 1980s when I got in to stocks, I wanted to find a way to predict the future of the markets and I found technical analysis. Most people do not understand the difference between “fundamental analysis” and “technical analysis”. In technical analysis. Even without knowing what they are studying they can use the same techniques to forecast the future of stock markets, bond markets, commodity markets, gold, oil, bitcoin etc. Here are some of the aspects of technical analysis (1) Charts study (2) Trends (3) Patterns (4) Moving averages (5) Measuring market strength (6) Cycles (7) Elliot Wave Theory (8) Dow Theory (9) Market Sentiment (10) Fibonacci numbers in charts. I just bought a book titled “Fibonacci Numbers” written by the “Fibonacci Queen” (Carolyn Boroden). She is one of the best technician and she has been doing this since the 1980s.Prior to the 1987 crash I knew that it was coming as I was following Richard Prechter who was using the Elliot Wave Theory.

 From birth, as it was done my parents and ancestors, I was a big believer in astrology and a few weeks ago my astrologer told me about an astrologer who was using astrology plus technical analysis for the market. I tested him out and I find him to be amazing. Many traders all over the world subscribe to his services and now he is going to start publishing in French and German too. Every Saturday I get 2 newsletters from his organization and they tell me what I can expect each stock index to do the following week and the days the market could reverse its trend. At times he contradicts himself due to the various astrological influences affecting at any given moment but with my intuition I pick up what is right for me. He has been amazingly accurate! For example, on Saturday 4/25/20, he predicted the market would go up at the beginning of the week and would start going down from 4/30/20-which was 100% accurate! He was correct about the previous week too. Most people look down on people who believe in astrology but this has been done for thousands of years and I laugh all the way to the bank! 4/25/20 to 5/20/20, my net account balance rose by 30%! Every Saturday, like child waiting for Santa on Christmas Eve, I wait for those 2 newsletters! According to those people, we could see extreme volatility and sharp declines in May 2020 and June 2020 as major planets like Venus, Saturn, Jupiter and Mercury go retrograde. More about this in future newsletters. A good market technician stated on 5/1/20 (on CNBC) , that he expect the market to fall significantly soon- On 5/1/20, the S&P 500 ended at 2830 and he expect it to fall to 2100 (about 30%)! Merriman (astrologer) expect for us to see the market bottom between 2021 and 2023 and the Dow going down all the way to 2,000 is a possibility. Now let us talk about sentiment. Per technical analysis, it is well known that when more than 50% of the investors think the market would go up in the future, market tends to go down in the future (a contrarian view). Over and over again I have seen that this is very true. This is especially true when “retail investors” (mostly naïve investors) are bullish. All the expert professional money managers I respect that come on CNBC are pessimistic about the market and they think the market would go down sharply in the future but they all say that all their customers are calling them to buy the most risky stocks right now! In 1929 before the crash when Joe Kennedy heard that his shoe shine was buying stocks, he sold his whole portfolio and did not get caught to the 1929 crash. As I said when more that 50% are bullish it is negative for the market so do you want to know how many “retail investors” (naïve investors) are bullish right now? 96% !!! The purpose of a market crash is to scare these people and bring some sanity to the market so I have a feeling that we could see the Dow going down all the way to 2,000 prior to 2023! Prior to 2/15/20 we had an unemployment rate of 4% and we have an unemployment rate of 30% now and yet the Dow and S&P is only a few points less than its all time high and a few days ago the NASDAQ was higher for 2020 as if nothing big happened in 2020!! What did Greenspan say a few decades ago, “Irrational Exuberance’? When the market fall to 2,000 or so, all the people would be crying about their retirement funds! Better be safe than sorry! As I always say if you always keep 25% to 50% in cash, you have a shot at recovery one day!

Have a great May 2020 and watch out for a wild ride in the market!!

Fernando

April 5 Post

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

March 3 Post

Hello Again,

 Baron Rothschild, 18th century British nobleman and member of the Rothschild

banking family, is credited with saying that "the time to buy is when there's

blood in the streets."When Trump came to power and boasted the market is going up due to him,

(which is incorrect), I told all of you that one day we will see a “Trump Crash”.

 Presidents get credit for market rallies and blamed for crashes but it is not due

to politicians; it is mostly due to central bankers and mass psychology.

Don’t catch a falling knife though by buying in to a crash! Just nibble.

This is healthy for the long run. Market going up in a straight line for a long

time is not healthy for the market. From day one I asked all to keep at least

25% in cash. Trying to maximize gains is a sure recipe to lose everything one

day. The Corona virus was just a catalyst. The market did not go down 4,000

points or lose over 4 trillion in market cap due to the virus, it did not lose that

much due to any other factor other than  “irrational exuberance” as Alan

Greenspan put it in 1990. I have been warning of this for many months.

Two weeks ago when there were signs of danger flashing with respect to the virus,

market kept going up! I started writing this newsletter on 2/10/20-see below

what I wrote on 2/10 and 2/16/20. Chart and technical analysis with no regard

to fundamentals or other factors is the most prudent way to consider the future

of any market. On 2/16/20 I wrote (see below) that market chartist/technician

Bob Marino predicted that the market could go down by 16%. Guess what?

From the high on the Dow on 2/14 Friday to the low on 2//16 Friday, it was

down exactly 16% or fell from 29,463 to 24,681. I saw another good chartist

on 2/28/20 after the market close and he thinks we could have hit a short term

bottom here but from the chart he concluded that we “capped” at the previous

high or in other words we may not go beyond the previous high for a long time

to come. I have known the value of technicians for 35 years. In 1987, before

the crash taking advice of another technician called Prechter I bought puts

on the market before the crash and they went up by 70% for the crash. Last

week so many on CNBC were saying that since the outcome of the virus is

unknown we have no choice but only consider technical/chart analysis. On

Thursday afternoon and Friday I saw signs in the market that it could be close

to a short term bottom and that was proven correct when the Dow moved from

a minus 1,000 to a minus 300 during the last 15 minutes of the market. As a

hedge against my long term puts that have risen a lot, I started buying index

call options to prepare for a short term “dead cat bounce” as it called on

Wall Street.  When that happens I will December puts because this is not

over yet.  Recently I heard a young money manager saying that during times

when the market is so irrational we should place unrealistic orders but I

have been doing that for 35 years! Let me explain. Two weeks ago Disney was

at $150 and people thought it would go forever. I saw somewhere they get

25% of their revenue from theme parks and when people are avoiding such

places they are sure to get hurt badly. I looked at options and I bought some

put options with a strike price of $55 with a 1/2021 expiry. The probability of

making any money was close to 0 (in my assessment) as Disney could never

fall from $150 to $55 in one year but investors get irrational on the buy side

and they do the same on the sell side. However in my thought process if

Disney fell from $150 to $55 in ten months, my $100 option would grow to

$10,000 !!!! I never expected to make any money from this purchase  24 hours

after the purchase I had a 25% gain and in 36 hours I had a 100% gain! See

people are idiotic! Some expect Disney to fall from $150 to $55 in 10 months.

Another example, AMC theaters; they first dropped but on Thursday they

announced higher revenue/profits so the stock started to rise so I bought

puts on AMC. Already all over the world countries are closing cinemas!

People are irrational on the upside too. Several weeks ago I bought Uber at

$25 and I sold it a few weeks later at $40. When the market was down 3,000

points on Thursday I bought 1 share of Uber for tracking purposes at $31 and

after that for the next 2 days Dow fell 1500 but Uber kept rising and ended

2/28/20 at $34,15 or a 9% gain in a few hours. Why Uber? They have got

good management that is getting rid of their unprofitable business like “Uber

foods in India’. I also bought put options on Uber expecting it to fall below

$25 prior to 1/1/21 due to the virus and other factors. According to Janet

Yellen, former Fed Chair, we could easily be in a global recession in 2020.

Central bankers cannot cure a virus by increasing the money supply. Bet

stock Warren Buffets’s MO is to buy quality stocks and hold them forever but

even before the market went down due to the virus, he was selling; even his

Apple stocks!  When the market  was down 1,000 Buffet said he is still bullish

but we might see a 50% correction when all is done. On Friday 2/28, even

cruise stocks were going up! Investors are idiots. In previous newsletters I

have been mentioning the VIX index or the fear index. Before last week at was

at a very unreasonable 12; even with all the news of the virus in China. Experts

used to say if it goes 32 or so market will reverse it is trend and it will start to

rally. Prior to last week, the highest it reached over the past 5 years was 28.

On 2/28/20, Friday, it reached 40! That too implies we are close to short

term ‘dead cat bounce’(rally). When interest rates are low it is not a good idea

to buy bonds, especially bond funds but due to the environment that existed

for the past few years where Europe and Japan have negative interest rates

with all their money coming in to our treasuries decreasing our treasury yields,

our treasuries bonds have been a great investment –even better than stocks.

take the 20year treasury ETF with the symbol TLT, if you purchases a share

at $136 on 12/31/19, you would have got a 12% return when TLT ended at

$155 on 2/28/20.  Now with everyone expecting 3 rate cuts over the next few

months, you would expect TLT to rise further in 2020 but technical analysts

are bearish on TLT which might be good for stocks. Be very careful of high

yield bonds and funds. 10% of the high yield bond fund HYG, 10% comes from oil and gas companies which are sure to go insolvent over the next few years as $82B in their bonds will mature and they cannot get refinancing for those bonds.       

 Written on 2/16/20:

Technical analyst Bob Marino predicts that there is a high probability of a 16% drop to the downside.

That is a technical analysis, but on fundamental analysis, the market is way overvalued. The value

of a stock or a market is measured by the PE (price to earnings) ratio and now it is at 19. After the

2017 tax cut the multiples increased but revenue and earnings decreased as most of the tax cut went

to stock buybacks and not for increase in operating income or in to the hands of the employees.

Written prior to 2/10/20

As I stated in my last newsletter, the way investors are ignoring an unquantifiable or an

unpredictable risk facing the global economy and the impact that would have on most stocks shows

that we are in a dangerous bubble. In normal times, after making so much gains over the past

10 years, most investors would have taken more measures not to put their past gains at risk. Our

technology have been leading the market for the past 10 years and 70% of their revenue come

from other countries. Some people compare corona virus scare to the SARS virus that hit China or

PRC decades but at that time China was responsible for about 4% of the global GDP and now it is

about 14%. Most stocks are trading at very high multiples and that is because the investors expect

these companies to report continuous growth in revenue and earnings but that is not possible when

global GDP is falling or at risk with an infection like the corona virus spreading fast all over the

world. Most people assume that a cure would be found soon and that is with no basis. Chinese

government is always trying to be in control and a few weeks ago they flooded the global

economy with a quarter of trilling dollars! Even in China the stock markets have risen sharply!

ETF with the symbol ASHR that is traded here reflects the top Chinese markets; and from

2/3/20 to 2/5/20, ASHR rose from $26 to $28! The CEO, Eminence Capital, Sandler who is trying to

acquire Credit Cuisse was on CNBC a few days ago and he was asked if out market is overvalued;

and he stated that most stocks are way overvalued but there are some stocks that are trading at

fair value. That made me think of 1999. In 1999 we were in the middle of the internet or the dot com

bubble. I prefer to buy companies with a PE of less than 20 and less than 10 is even better. Even

though Google was started in 1995, at that time most people were using Yahoo for everything.

I remember that at that time Yahoo had a PE of 1,000! It took about 20 years for Intel to get back

to their previous glory and yahoo never recovered. However in 1999 I was looking at the market

and I was trying to find hidden gems that was being overlooked by most investors. At that time

there was a big scare about all the litigation faced by tobacco companies and all investors stayed

away from tobacco stocks. I did a deep dive in to the finances of Phillip Morris. At that Krafts food company and Miller Brewery were under Phillip Morris and the book value of Krafts was higher

than the stock price of Phillips Morris and it was the same with Miller Brewery. Phillip Morris

dividend yield was at 9%! In the market, people have the herd mentality. After the internet stocks

crashed for years Phillip Morris gained year after year paying a dividend yield of 5% to 9%.   In

1999, only 40% of Phillips Morris revenue came from US tobacco sales. There is a comparison

between 1999 and 2020; at this time, big money managers and well known stock pundits like

Jim Cramer hate all oil companies saying that there is no future with them as the world shifts to

other forms of energy use but like with tobacco, I think that judgement is premature. Exxon (XOM)

has a dividend yield of 5.7% and the stock price on 2/4/20 was $60. About 15 months ago, XOM

was trading at $85-which shows its future potential. Exxon has never decreased their dividend per

share. Another one I bought was BP which recently increased their dividend and now has a

dividend yield of 6.98%! When they had the big oil spill, they tried to lower their dividend and

so many shareholders in UK objected, they decided not to do it as many pensioners depend on

that dividend. Now due to technology, oil companies can get more oil with less people and capital

so there are a lot of layoffs but companies like Exxon and Chevron have no problem keeping

their shareholders happy. At this time Chevron is doing better than Exxon as Chevron has a better

balance sheet and the operating income a Exxon has suffered greatly. At the same time Exxon

expect their previous investments to benefit the company in the future. On 2/8/20, Barron’s had

a deep dive in to Exxon and concluded that the dividend is safe. For executives at Exxon, paying

the dividend and increasing the dividend is a #1 priority.

As I have stated in the past, when we want to take a glimpse at the future of the market (or a stock),

we have to look at technical analysis and not fundamental analysis. One of the best in the field is

Carolyn Boroden who is known as the Fibonacci Queen. According to what Carolyn stated on

2/4/20, we could easily have a 14% correction on S&P 500 index (SPY-top 500 companies) but the

NASDAQ where technology dominates is less risky; and the reason is on the SPY chart, current

prices are below the line for the past 13 day average and it is the reverse for the NASDAQ.

However she stated that if she is wrong, the S&P500 could rise by another 6%.

Some experts foolishly were saying “If Chinese market did not go down over the past 2 months,

there is no need for our markets to go down”. Can you see their mistake? No one can believe

anything that comes from communist China. They arrested the doctor who warned them of the crisis.

They are all about the communist party staying in power forever. They forbid people to sell and the

state keeps buying trillions of instruments and lie. You cannot trust anything that comes out of PRC.

Cronavirus started because they eat bats in communist China!

 Next few weeks will be very interesting. Stay tuned!

Good luck!

 Fernando

February 2 Post

Hello Again,

On 12/30, when the market went up I was sure that investors were irrational about the risks we face

In the market so I bought 2 put options to short sell the market. On Friday morning (12/31), soon

after the market opened the Dow was down 400 points and my put options were up by 48% and my

overall portfolio had a very small loss. At the end of the day on 12/31, Dow was down 603 points

and my puts were up 75% in 24 hours; and my overall portfolio had a net gain!! This is the magic

of hedging!  Over the past 40 years I have seen amazing things in the market what I observed on

Friday 12/31 was truly amazing. There is a company called Lucky (LK) coffee in China which is a

Startup but growing at an exponential recipe which is a recipe for a disaster. Remember what

happened to Boston Chicken? I do not want to be a long term investors in that but since Starbucks

closed 50% of their stores in China and since there are so many fools chasing LK, I bought 1 share

of LK at $27 on 12/31 morning; and at the end of the day, it had a gain! I was expecting it drop 50%

to 75%-that is what prudent investors would have done. Trying to get in too early is called,

“catching a falling knife”. 

Coronavirus!!  We are definitely in a bubble!! During the first part of last week, 12/27 to 12/29, the

market fell due to the Coronavirus that is fast spreading in the 2nd biggest economy and spreading

all over the world. Then came news that we might find a vaccine and the market shot up on 12/31,

how absurd! Even if the virus is stopped prior to 4/1/20, Global GDP will go down 1% to 2% and

that alone is big drag on corporate earnings. Even before this crisis we had doubts about economic

growth for 2020 and now we know that in 2019 we had the lowest growth rate for the Trump

administration. Scientists say that even if we find a vaccine it will be like December when we can use

it for humans. Does the unknown bother investors? Oh no, now they say they are being positive-that

is the new word for greed.

Even with what happened last week, we had a very small gain for January 2020. In December 2019,

I added Uber and Intel and even with what happened last week, Intel is up 6.82% in one month and

Uber was up 22% in one month! How was my call!

See what I wrote on 1/10/20:

Complacency! That is what is happening with investors right now and this is very dangerous.

Most people call it resiliency and that is not true and just a bogus justification. Proof of that came

when Trump killed the top general in Iran and Iran threatened to take revenge and nothing happened

in the market. This is different from the time Iran bombed Saudi oil fields as that had no direct impact

on us. On that Jim Cramer asked his followers to be cautious and increase their cash position and

be careful about what might happen in the future-“risk off”. Jim got blasted by his followers for being

“too negative” or pessimistic. This clearly show that we are definitely in a bubble but bubbles could

last years or could fall apart in a few days. It is always good to be cautious. One of the analysts I

admire stated, “I got to show that I am in to risk management”.

On 1/10/20, for the first time the Dow went over 29,000 for the first time. It only took 37 days to go

from 28,000 to 29,000! Out of that 1,000 rise, 6 stocks were responsible for 950 or 95%! 85% of

the S&P 500 stocks are over the 200 day average so most stocks are taking part in the rally.  This is

a momentum driven market. Now unlike one year ago, Chinese, European and Japanese and some

‘emerging markets’ have been on a bull rally.

On 1/14/20 technical analyst, Sebastian who was watching the rise of the market with the change in

VIX index (fear index) stated that as the market goes up the VIX index is going down. Not only the

VIX is going down VVIX (commodity market fear index) is also going down so even when all

the prudent market watchers are being very cautious after such a market rise, the technical

analysis show that market could rise even further. That was correct at least up to 1/17/20.

However Sebastian noticed that at times with bad news the index changes sharply so his conclusion is that the market could go in to a correction without a lot of notice. 

I do not know what to expect next week. If investors are rational we could see a market correction of

1,000 to 3,000 point but that is unlikely because most investors are not rational. These days everyone

wants to get in to the market and that is very dangerous and a sign that we are at a market top. Just

before the 1929 crash, a shoe shine boy was telling old Joe Kennedy (father of President Kennedy

 and the man FDR trusted as the first head of the SEC) about his investments and Joe Kennedy

quickly sold off his holdings and did not get caught to the 1929 crash. Remember if you had money

in the market 1929, you only broke even in the 1960s. Better to be safe than sorry. Be cautious!

January 2, 2020

Happy New Year and welcome to a brand new decade!!    If you invested $1,000 in Netflix stock, on 1/1/10, today that investment would have grown to $4,000,000!! To make this newsletter truly unique, I share my personal experiences with the market-my observations and experiments. For the past 35 years I have had a lot of faith in market technicians. The good technicians are extremely expensive. As I stated about 2 months ago, when the Dow Jones was around 27,000, a good technician Happy predicted that we would “melt up” to 29,000 soon so I bought a call option on the Dow Jones or DJIA (symbol DIA) that expires on 1/21/20 with a strike price of 29,000. Most people did not expect that so I got 2 options for $100. On 12/27/19, the Dow was around 28,700 and I sold my options. For one reason as we get closer to expiry date, it becomes very risky and in the market, volume was dropping significantly which is a bad omen-“price follow volume’. I made a 104.48% profit in 51  days! My timing was perfect, on the next day, 12/30/19, the market fell 200! Out of the past 20 years, only 7 times did the market go up on 12/31. People say that the market went up so much in 2019, it cannot happen in 2020 but historical data shows that it is quite possible for us to have a good year in 2020 but the future is unknown to all.

Over the past 4 months, our portfolio grew by 19.87% (without dividends)!!

Another strategy I have used during the past 35 years is to look for stocks with long term potential but stuck in a range. On these stocks, if you buy at the low end of the range, sell at the high end and wait patiently to repeat the process, one can make a lot of money. At this time, many believe that one day, maybe in a few years (or more) Schlumberger (SLB) could more than double but most prudent investors who invested in it, got out totally disappointed. When I looked at that chart, I noticed that 2 times in 2019, the price fluctuated between $30 and $40 (that is a 1/3 move up each time!).  Theoretically one could have made a 67% profit in SLB this year by trading! Last time SLB was around $35, I bought the stock and sold it when it reached $40 making a 13% profit in 18 days !! Now most brokerages do not charge commission so even if you buy one share, there is no additional cost for buying and selling. In the 1980s, it was amazing that we got discount brokers but now we are so lucky to have brokerages that do not charge any commission at all! In 2019 alone, Apple rose by 85%!! After helping the stock turn around and holding the stock for a long time when Carl Icahn sold all his Apple and when all analysts stated that Apple is no longer a growth stock I asked you to increase your holdings to lower our  average cost to $92.62 and on 2/31/19, Apple ended at $293.65!! I want to add Intel to our list this month. It could easily go down by 50% but if that happens, it would be a blessing in disguise as you can buy much more and lower your average cost. Intel has a forward PE of 13.84 and current PE of 12.29.  Compare that to popular PE of AMD at 241 !!  Some analysts  expect Intel to catch up and sky rocket in 2020. About 20 years ago I worked for a man who used to work at Intel financial analyst. He made so much money from the Intel stock, he bought a house with his gains-which saved him from the 2000 tech crash. Some analysts expect Intel to sky rocket in 2020 but with such a low PE, it is value investing! I also added Uber to our portfolio. Uber is facing many challenges all over the world and just about 6 months ago, Uber was trading around $48 and it ended 12/31/19 at $29.74. Many experts expect Uber to go down further and not go up in price for another 2 years but I am skeptical. Over the past 40 years I have seen experts say that stock would rise in a couple of years and if you wait that long you will miss the boat on making money. My advice is start “nibbling” now and as the price drops buy more to lower the average cost. Never buy when the current price is above our average cost which would make it difficult to make money in the long run. One does not really make money in the long run by getting lucky or finding opportunities, you make money by having a good Investment or trading discipline. If Uber price go back to $48 as it was in the summer of 2019, you would make a 60% gain! We had a 30% gain (with dividends) in 2019. Historically after such a year, the following year we could have a 6% gain. If the market goes down, it is just a mere opportunity to buy more!

Have a great month and year!

Fernando

December 1 Post

Hello Again,

During November 2019, our portfolio increased by 5.87% (see our score board); and over the past 3

months we had a gain of 14.51%. That was with a diverse portfolio where Schlumberger  is at a loss of

41% and Ford is at a minor loss. Over the past 3 months, the Dow Jones Index gained 6%. In this

market only a handful of money managers have beating the DJ index.  Now where are we going

from here in this very old bull market? Is 2020 going to be good to investors as 2019? Right now

the biggest question is what is going to happen with the trade war. Most people say that as this hurts

China more than the US (China is having the lowest economic growth rate in 40 years –at 6%),

China will be willing to agree to the phase one of the agreement in December. I have my doubts.

Trump has an election in 2020 so Trump could try to have an initial agreement with China. In China,

We have a dictator who just appointed himself as President for life. China is upset about US support

for the Hong Kong protesters and they have threatened to take action to show their displeasure. If

China escalate the trade war, then we could see a significant drop in the market but that would be a

good buying opportunity. Also in a couple of weeks The Brits will have a parliamentary election and

that might change the global picture. Now we are heading for year end and 2019 was good for the

market. Between now and 12/31/19,big money managers will do a lot of window dressing. They

will sell the stocks that were down for the year and even if they did not experience the big gains in

the stocks that did well, they will buy in to those stocks so that others will think that they bought

them long time ago to get the 2019 gains. Perception is reality.

I want to share something that is important to all investors. This is something I learned from my

past-over and over again. In the future, if the investment advisors that you respect tell you that a

certain stock or an industry will do very well in the future but the short term outlook is not good,

start putting in a little bit of money in to those stocks (“start nibbling”). It is important not to put

too much or you will get caught to the “opportunity cost” (the cost of not putting your money

 elsewhere). I have paid the price for accepting their advice and waiting to see better results. Recently

I was thinking of medical marijuana stocks. One day when the US Federal Government makes it

legal, many mainstream multi-billion dollar companies could get in to this field by buying out

existing companies which will send their stock process skyrocketing. I was thinking of buying in

to these stocks when they all dropped significantly. The cause was over supply and the demand was

far less than expected. Then the analysts I respect most stated that in a couple of years it would be

good to buy but not now. At that time I thought of buying at least one share per stock and watch it as

it declines and buy more with time to have a low cost average. I waited too long, a couple of weeks

later, one of those companies reported very good earnings and all the stocks in this category, shot up

sharply-some went up as much as 50% in 2 days. The main cause for the amazing rise was ‘short

covering”; since most were pessimistic about this whole sector, many people were short selling all

these stocks. “short covering” is like getting caught with your shorts down! These people had to rush

to buy these stocks so their losses would not be astronomical. After that I bought one share each of the

following good stocks in the industry (ticker symbols): CANOPY, CRONOS, TLRY and

GW PHARMA. Even after I bought these, all of these kept rising-some over 10% in a week.  When Facebook first came to the market there was so much hype I waited till it went down to $18 to buy but at $25 or so I sold as all the pundits were saying that Facebook will take years to monetize and till then

the risk outweigh the gains as they could go the same way as “My Space”. Then out of the blue,

Facebook announced that they have found ways to monetize and the stock skyrocketed and never

looked back. Today Facebook (FB) is at $201!

Recently I saw a report on the domestic oil industry, especially the fracking industry. Prior to 2015,

on a monthly basis I used to do a deep dive in the US fracking industry and I was amazed at their

debt level. The industry was counting on high energy prices forever, interest rates around zero

forever and the demand being always good for oil.  Very soon Saudi Oil company will be having an

initial public offering- first in Saudi Arabia and then in other countries. Their market cap is larger

than all of US based oil companies put together. All US oil fracking companies are drowning in a

sea of debt. Oil wells are going down significantly. Most of their debt is in junk bonds and billions

will mature in the next few years and there is no way they can reissue new bonds to take of these

maturing bonds. We are heading towards a disaster. Due to this change big oil servicing companies

such as Schlimberger and Haliburton have been in big bear market for a long time with no end in

sight. In our own portfolio Schlumberger is at a loss of 41%. Tread carefully!

Let us hope we will have a great santa clauss rally as some technicians have predicted!

Have a great month!

Fernando

 

November 14 Post

Hello Again,

During October 2019, our portfolio increased by 4.73% (see our score board) and that was after

a 3.91% increase in September 2019.  The total average gain from “day one” (in our portfolio) is at

71.97%. This is a very diversified portfolio. We have, health, auto, oil, banking, country ETF,

entertainment, commodities and technology/consumer goods. Some have temporary losses but one

day when others are not performing well, these could end up being the stars of our portfolio. I asked

you to sell GE due to information on accounting fraud but now it seems like that claim is not true.

If I did not sell my personal call options, I could have made a profit of 500% by now. Then again,

If the same thing happens, I will do it all over again and the reason is that in investments, the

discipline is more important in the long run than making money in the short run. The gain that can

be seen on the scorecard is purely a comparison of purchase prices to the current prices; and that

is misleading. To take the total gain, we have to take the dividend yield as a compounded interest

rate.  The dividend yield on some of our stocks are: Glaxo Smith- 4.42%, GM-3.95%, Ford- 6.75%,

Exxon- 4.77%, Chevron- 3.91%, Schlumberger- 5.54%, Valley National- 3.8%, Apple-3.08%. I am

not listing our stocks that pay less than 3% dividends (i.e Bank of America). Compare all this to the

10 year treasury paying about 2% and 80% of the developed countries having negative rates on their

sovereign bonds.  Now assuming that these dividend rates were constant for the past 5 years, taking

the compounded interest rates, let us calculate how much you have gained from dividends that is

not seen on our scorecard. Solely on dividends, for the past 5 years you would have gained (magic of compounding!):

·       Glaxo Smith-24.14%

·       GM-21.37%

·       Ford-38.62%

·       Exxon-26.24%

·       Chevron-21.14%

·       Schlumberger-30.94%

·       Valley National Bank-20.5%

·       Apple-16.38%

For the past few years only a handful of stocks had significant gains. Recently most stocks in the

market are on the rise-much wider participation. This is very healthy. A couple of weeks ago, a

well known technician predicted that very soon the Dow Jones Industrial Index (DJIA) would

reach 29,000; and at that the DJIA was at 27,500. He also stated that high dividend stock would

lead the rally; and he recommended Walgreens and Dow Chemical. At that point Jim Cramer said

that he would not recommend Walgreens as CVS was better. One week later Walgreens and Dow

Chemical were much higher. This is the magic of technical analysis/chart analysis. The people

who make fundamental analysis their primary method of selecting stocks put the cart before the

horse.

Have a great month!

Fernando

October 27 Post

 Hi Again,

Different sectors are in recession and many sectors are in an economic slowdown but the overall

economy is not expected to get in to a recession as the Federal Reserve is doing everything possible

to prevent a recession in the US. Manufacturing is in a recession for sure. There is a slowdown in

transportation. As you may have noticed, Schlumberger has been in a bear market for a long time

and this shows what is happening in oil and drilling in the US. There has been a lot of oil well

shutdowns in Texas. During the recession created by the mortgage crisis, the only bright spot was

Texas with its booming Oil industry. In 2008, we had 156,588 oil producing wells in Texas. In 2015,

It peaked at about 193,000. In 2018, it was down to 187,000. Now on a monthly basis, it keeps going

Down significantly. Fed Chairman expect US GDP to grow more than 2% in 2019. In most countries,

The tool of using monetary policy to stimulate the economy is over; and that is due to negative

interest rates in most countries. However the US Federal Reserve is not out of ammunition. Recently

I asked a Sr. VP at Western Mercantile Bank if we are heading towards a recession and what they

expect in terms of their revenue for the next 12 months; and he said that they expect their revenue

to grow 20% over the next 12 months. I thought he was overly optimistic but after our conversation,

the Federal Reserve embarked on another program for which that asked not to be called a “QE

Program” to reduce short-term interest rates so banks could lend more and make more money. During

the QE program after the mortgage crisis, the Feds bought 10 year and 20 year treasuries but this

time around the Feds are buying at the very low end Treasuries. For decades, Feds lowered interest

rates to stimulate the house building and buying market which in turn leads to economic growth in

the total economy. In 2018 the Feds started to increase interest rates and home building stocks

took a dive. On 12/24/18, ITB (index for home builders) hit a low of $29.99. On 10/8/19, it was

at $45.27- 51% gain in about 10 months!! Chasing momentum stocks is not a prudent investment

strategy. On the other hand being a contrarian one has to be careful “not to catch a falling knife”.

I was thinking of adding Fedex to our portfolio but I am not sure about Fedex. Last time it reached a

high was on 1/16/18 when it reached $274. Now it is at $150. However the PE is still too high at 88!

A couple of months ago, a Fedex pilot told me that he does not see an economic slowdown affecting

Fedex. He said that business with China has been going down for a few years and it is due to

many companies pulling out of China due intellectual property theft. He also said that there has

been an increase in business with India and Africa. According to this pilot, planes to South Africa go

full but come back empty (all exports from the US) but planes to India gets full both ways. I told him

that their CEO told Wall Street to expect lower revenue figures in the future and he replied, “That is

not what we hear from our bosses”. Interestingly just a few days the FedEx CEO once again told

Wall Street to expect lower revenue figures in the future. If you look at the bigger chart of Fedex,

starting from 1976, the chart made a triple top which is not good for the long term. At this time the

market is close to an all time high and a severe correction would be very healthy for the market but I

do not know if that is in the cards for us.

Have a great month.

Fernando

September 9 Post

Hi Again,

 Insiders, especially CEOs, do not sell stocks of their companies because a recession is coming; they do that when they have reason to forecast a bleak future for themselves. When insiders are buying it is good to buy the stock and the reverse is also true.

New York (CNN Business)The leaders of Corporate America are cashing in their chips,doubts  grow about the sustainability of the longest bull market in American historyCorporate insiders      have sold an average of $600 million of stock per day in August, according to TrimTabs Inv. Research, which tracks stock market liquidity. August is on track to be the fifth month of the yr in which insider selling tops $10 billion. The only other times that has happened was 2006 & 2007,

the period before the last bear market in stocks, TrimTabs said.

The Institute for Supply Management’s purchasing managers index fell to 49.1 in August from        51.2 in July. A reading below 50.0 signals contraction in the industry. This was the first contractionary reading since August 2016. A similar manufacturing index from IHS Markit            fell to its lowest level in nearly a decade on Tuesday. However, “ISM is no stranger to false signals,” Renaissance Macro’s Neil Dutta presciently observed back in 2016.    While a sub-50 ISM is bad news for folks in the industry and a troubling sign       for the economy, these indices need to fall a lot further before they signal that     the U.S. economy is in recession. “A PMI above 42.9 percent, over a period of time, generally indicates an expansion of the overall economy,” the ISM said. In a note to clients           on Monday, Pantheon Macroeconomics’ Ian Shepherdson noted: “It's entirely possible for manufacturing to be in recession—as it is now, and as it was in from Q1 2015 through  Q2 2016—while GDP growth runs at 2% or more.” “Manufacturing now accounts for only      about 12% of GDP, 15% of capex, and less than 9% of payrolls,” Shepherdson added. (Yahoo

Finance, 9/4/19)

The golden question is “Are we going in to a recession?”.  What is the definition of a recession?

Two consecutive months of negative GDP growth. At times certain parts of the economy or

geographical parts of the country could be in a recession. When defense spending was cut

in the 1990s after the end of the cold war, places like Southern California went in to a

recession. These days, 2/3 of the economy is in the service sector and it has been growing

monthly for the past 110 months up to September 2019 (including August 2019). Some

analysts believe that if manufacturing and other sectors affected by trade wars start laying

off employees, it will impact consumer spending (70% of GDP) and we will find ourselves

in a recession. So far we have not had a single quarter of negative GDP growth.

Once again let us consider what technicians have to comment on the immediate future of

the stock market. Technician Carter of CNBC states that first we will test the lows of June

2019 and then we might test the December 2018 lows (S&P 500 at 2350); and if we go to that

level, it would mean that what we had was a “bear rally” and we were not in a bull market.

Several technicians have been showing that the S&P 500 chart is forming a big “wedge”.

On 8/29/19, Sven Henrich, technical analyst, stated that this “wedge mega phone” broke to the

downside, we could have a big crash but if we move to the upside, we could have a huge

rally to the upside. In other words, in 6 to 12 months, we would be at a much higher or a much

lower level than today. Analyst Northman stated that we are currently seeing a “screaming

sell signal” as 9 economies are already in a recession. If the S&P500  falls to 2300, that is a

21% “crash” or a correction. I monitor the VIX index at all times. It is quite interesting how

The fear level increases and decreases in the market. Many analysts believe that if the VIX go

Over 30 it would be very bad for the market. Then again I will not be surprised if people ignore

all this and send the market skyrocketing on the upside. One year before the dot com crash happened, it was very obvious that market was way overvalued but it kept on going up. I prefer

companies with good values and if possible a PE below 20 but never one with a PE over 50.

Just before the dot com crash, the PE on yahoo was at 1,000! Then google replaced yahoo as

the main search engine and yahoo never regained its previous high.

On 8/16/19, on CNBC, Former Chief Economist for the IMF (World’s Reserve Bank) and former Governor of the Reserve Bank of India (23rd) stated the following:

(1)In the past, the bond yield curve inverted as investors wanted a higher return on the short

term than the long term which was the basis for using the inverted yield curve to predict a

recession but now the yield curve is inverted as heavy influx of foreign and domestic cash flows

in to the 10 year treasury is making the 10 year yield fall below the 2 year treasury (2) If Trump

does a temporary deal with China as a cosmetic venture, the market will lose confidence

(3) Current conflicts: USA vs China, Trump vs Fed Reserve and Fed Reserve vs market

(4) Other economies have an impact on the US but the US is not that much affected

(5) For decades monetary stimulus on housing and autos had a major impact on the economy

but now that effect has gone down significantly as we saw during the last recession.

Interestingly the current Chief Economist at the IMF is also Indian but she was a professor

at Harvard.

On 9/6/19, Fed Chair Powell talking from Switzerland stated that the probability of the US

economy going in to a recession is very low and he expect the growth rate to remain between

2% and 2.5% till 2020. He also expects inflation to be around 2% (his target). If it goes below

2%, the Feds might take action. Feds fear deflation more than inflation.

Over the past 6 months, gold(GLD) and utilities (XLU) did very well-they are both up about 20%

In 6 months!  

We are going through a unique period in time. The yield on the 30 year treasury used to be

Over 3% for decades and now for the first time ever, the yield is at 1.91%. International tourism

spending in the US is one of the few areas where the US is running a surplus with $251B.

Seasonally adjusted GDP is expected to be down to 2% in 2019 from 2.9% in 2018. The main

reason for declining yield on bonds and the rise in the dollar is the huge capital inflow from

other countries in to the US. Total sovereign debt is at $60 trillion and 25% of those bonds are

in countries with negative interest rates so cash keeps flowing in to the US. However for the

longest time, the bond market has been on the verge of a bubble. Mark Yusko of Morgan

Creek Capital, on 8/15/19 stated that over the past decade or so many companies bought

back their own stock by issuing bonds as interest rates were low but these companies might

have a problem issuing new bonds to replace the maturing bonds. 

The bottom line is that the probability is high that we might see a rally right now but with

Everything going on globally, it is hard for me to believe that the market will not have a volatile

Time over the next 4 months. However volatility provides opportunities. The Chart of the Dow

Is very bullish for the moment with a “w” forming.

GE- I stopped covering GE in this newsletter. Investment discipline is more important than

making money in the market. When there is  “credible” (subjective) evidence of accounting

fraud, one should sell your holding of that company. In my opinion, the charges leveled against

GE is credible. We cannot disregard the evidence solely due to the fact that with this

Information, short seller stand to gain millions of dollars. There could come a time when it is

safe to get back to GE.

Have a great month!

Fernando