March 11 Post

Hi Again,

We had a 12.9% gain in February 2024.

Once again, after the Feds decision on 2/13/24, Jeffrey Gundlach (“New Bond King?”) stated

the following on CNBC:

 Now real interest rates are reasonable.

 Due to the high debt level, we cannot maintain high rates for long.

 If rates go up, we will have a volatile market.

 Market expected 6 rate cuts in 2024-simply absurd!

 The Federal Reserve care about “optics” so they tend to be less aggressive during election

years.

 3 month CPI annualized rate is going up.

 If PCE (inflation) go up, Feds cannot lower rates.

 2 Year yield shows that in 2 years, interest rate will be less than 1%.

 Last year, “big tech” expected a return of 11% but we only got 1%.

 Probability of a rate cut in May is low now.

 88% of states report unemployment rose over the past 6 months- only states like

Wyoming and North Dakota are doing okay.

 Most bullish on India.

 He recommends 40% in bonds, 25% in cash and 35% in stocks.

Apple after reaching $195 on 12/11/23, dropped to $169 on 3/7/24. China sales dropped by

25%. Less dependent on China is a good thing. If you do not own Apple, it is a good time to

start nibbling and buy more as the price drops. China has been disappointing investors for a

long time. Their youth unemployment rate is so high, the communist party stopped reporting

those stats. Since they cannot revive domestic demand, they are trying their best to tap in to

overseas consumers. Essentially, China (Peoples Republic of China) is exporting deflation.

Larry Williams has created numerous market indicators, including Williams %R, Ultimate

Oscillator, COT indices, accumulation/distribution indicators, cycle forecasts, market

sentiment, and value measurements for commodity prices.[9][10] Williams won the 1987

World Cup Championship of Futures Trading from the Robbins Trading Company, where he

turned $10,000 to over $1,100,000 (11,300%) in a 12-month competition with real money. On

3/5/24, Larry stated:

 This market will go from a “melt up” to a “melt down”.

 Expect NASDAQ to peak around 3/15/24.

 Expect NASDAQ to go down from 3/15/24 to 5/31/24.

2

If we have a serious market correction, before long, we will be able to get to a temporary

bottom. All the people who missed out on this rally are waiting for an entry point. As of 3/1/24,

CNBC reported that we have $6 Trillion in money market funds. People like Gundlach believes

that most of that money will go in to long term bonds but I expect a good percentage to get in to

stocks.

Now to the “darling” of the stock market- Nvidia. On 10/11/22, I bought some at $117. My

strategy was to buy more when the price drops; but I never got a chance. On 3/7/24, it reached a

peak of $926! On 3/18/19, it had a market price of $44! 3/7/24 to 3/8/24, NVIDIA dropped

from $926 to $875 and most “pundits” stated that this was the end of road for NVIDIA.

Nonsense! NVIDIA is the most active stock option in the option market and 3/8/24 was an

option expiry day-that was the cause.

Have a great month!

Fernando

February 12 Post

Hi Again,

Disney! Disney! Remember what I have been mentioning about Disney for the past few

months? Remember how all the best “pundits” and money managers lost all hope and

confidence in Bob Iger and the top managers of Disney? I kept buying (on my personal

account) according to my strategy. I bought one at a certain price when it went down further

(i.e. 10%) sold that and bought 10 at the lower price; and I kept doing this till I got to the

bottom. On 9/25/23 I found the bottom of Disney at $80.74. On 2/8/24, Disney hit $110! That

is a 37+% gain in 136 days!! Poor Josh Brown! He was waiting for Disney to hit $70 to buy !

Now it is difficult to find any “haters’ of Disney. What made Disney shoot up last week? Very

good news came out last week. 50% increase in dividends. Earnings to grow 20% in 2024 (over

2023). Many movies will come out soon. Entry in to the gaming world dominated by teenagers.

Finding partners for ESPN.

How about Meta/Facebook? I did the same with it and when all the Wall Street pundits were

negative on Zuckerberg, I found the bottom and bought it around $85. Experts were saying that

Zuckerberg has lost his way and he is a fool to invest so much on the Metaverse etc. and they

have no way of monetizing etc. That was nonsense. Meta/Facebook always had tools such as

Whatsapp (2 billion+ subscribers) to monetize. When they started laying off people, the stock

went up. Wall Street rejoices in human misery. Now all the experts are saying that Meta should

have never gone down to $85. Last week it hit 478!

Management is so confident in the company's prospects that Meta declared its first-ever

quarterly dividend of $0.50 per share, a yield of about 0.44%. Marketers pulled back on

digital ad spending -- which accounts for the lion's share of Meta's revenue. For the first

time in its history, the company experienced three consecutive quarters of declining

revenue growth, which sent its stock price plunging 64%. However, a rebound in the ad

market and excitement around artificial intelligence (AI) lit a fire under Meta Platforms last

year, sending the stock up 194%. As impressive as its performance has been, this could

be just the beginning. Let's look at several factors that could play into a banner year for

Meta Platforms and why there could be much more growth ahead. The macroeconomic

landscape aside, one of the biggest contributors to Meta's improving outlook was the

efforts it took last year to rein in spending, which CEO Mark Zuckerberg dubbed the

company's "year of efficiency." Initially, management expected full-year 2023 expenses in

a range of $94 billion to $100 billion. However, several revised estimates and much belt-

tightening later, Meta's expenses for the year, combined with the recovering digital

advertising market, had a dramatic effect on Meta's recent financial results. For the fourth

quarter, revenue of $40 billion marked 25% year-over-year growth, while its diluted

earnings per share of $5.33 represented a 203% surge. Meta has already said it expects

its full-year expenses to be higher in 2024, but existing cost controls have already set the

stage for higher profits.ar clocked in at just $88 billion -- which in turn helped boost the

company's bottom line. (Danny Vena, The Motley Fool, 2/10/24)

2

The secret to making money is easy but difficult to do. Over the past 40 years I have

noticed that most Wall Stret “experts” are on the “same page” – at any given time. Also,

known as the “herd mentality”. When you follow the “herd” and when the “herd” goes in to

the slaughterhouse, you also get slaughtered! I am going to love AI on Wall Street as I can

bet against AI and AI will create more of a “herd mentality”. AI is not the “voice of God”. AI

will be the summarization of the collective voice of Wall Street experts. The secret to

making money on Wall Street is to intuitively or analytically know when the “experts” are

wrong and go in the opposite direction-very cautiously, and slowly.

Irrational Wall Street! All the experts expected 8 interest cuts in 2024 with the first one coming

in March 2024! The probability of that happening is very low and if it does, we will have a

worse problem with inflation. As the experts expected rates to drop sharply and fast, the value

stocks, small caps and others that got left behind over the past few years rallied. It seems like

that was very short lived.

After every Fed decision, bond king, Jeffrey Gundlach come on CNBC. I have a lot of respect

for Mr. Gundlach. Here are some of the things he mentioned on 1/31/24:

 85% of the states reported that inflation is on the rise again.

 Yet, inflation is coming down so interest rates will come down.

 Feds took too long to normalize rates and now they might take too long to reduce rates.

 Probably the Feds will cut rates after June 2024.

 Powell not concerned about politics or holding on to his position.

 When people refer to the market as “goldilocks” or “nirvana”, it makes him nervous as

the same happened in 1999.

 Buy treasury bonds but keep away from other bonds.

 Still a 2024 recession is possible.

 Buy 2 to 5 yr bonds.

 ADP payroll data not good. Bonds were down.

 Fed policy of higher for longer is bad for banks; especially regional banks.

 Money printing and higher for longer will have negative effects but those move in slow

motion, taking a long time.

 2028 will be year when deficits will be the main issue in elections-not 2024.

 Treasury real rates are attractive now.

 The US Dollar will remain stable and get weaker when we hit a recession.

 People should invest in the Indian market as it is the most promising economy.

Did you hear that the US commercial real estate market is heading towards doomsday? The real

estate crisis in the People’s Republic of China is very severe. The real estate crisis in Germany

is expected to be worse than the US real estate crisis of 2007. Stay tuned!

Have a great month!

Fernando

January 3 Post

Happy New Year, Everyone !!

2023 was a good year for the “market”; especially for the “magnificent 7”. Our portfolio went

up 53.51% from 1/1/23 to 12/31/23. The “DOW” aka DOW30 went up 13.73% in 2023-

33,148.90 on 1/3/23 to 37,701.63 on 12/29/23. Even though I bought Meta/Facebook when it

reached $85, I did not add it to our portfolio; or else, our gain would have been much greater.

Top 100 on NASDAQ or the NASDAQ100 was up more than 50% in 2023-only second to

1999. As it happened in 1999, we could be getting “too frothy”. It is impossible to find anyone

on Wall Street that is not bullish about 2024. That is scary! As a hedge, I put a little bit of

money in to S&P500 (SPY) put options. Towards the end of the year, assuming that the Federal

Reserve is done raising interest rates, “value stocks” or the 493 S&P500 stocks that missed out

on the bullish run, took part in the bull market. Some expect rates to fall to 0% but that is just a

pipe dream. If we go in that direction, inflation will flare up again and the Feds will tighten

again. We saw this movie in the 1970s with Arthur Burns running the Federal Reserve. Powell

keeps saying that he wants to be more like Volker than Arthur Burns (to kill inflation) but no

one believes him. We have to be cautious. As Warren Buffet says, “ Get fearful when others are

greedy and get greedy when others are fearful”. Even small caps (Russell 2000) had a mighty

gain during the last part of 2023. Most brokerage firms predict that the S&P500 will end 2024

at 5200 and at 6,000 by the end of 2025. Tom Lee who had been the best bull on Wall Street,

predicts the Russell 2000 will go up by 50% in 2024. Professor Siegel is confident that value

stocks will dominate 2024. With all this optimism, we could have a serious correction in 2024

but that would be another buying opportunity. In other words, if the market goes up or down, it

is just a win-win situation. We have to stay calm and act rationally.

On 12/13/23, Josh Brown (good money manager) stated that we could have a recession in 2024.

The Federal Reserve should get the credit for getting rid of a 9% inflation rate with no

unemployment. Once again, we got lucky. Economic slowdown in China and some other

countries, created deflation that got exported to the US. Price of oil/gas is the best example.

One of the smartest people on the “Street” is the new bond king, Jeffrey Gundlach. After every

Fed decision, Gundlach shares his perspective on CNBC. In that tradition, on 12/13/23, he

made the following observations:

 We will have a recession in 2024.

 People expect $6 Trillion in “money markets’ (T Bills) to flow in to stocks but Gundlach

believes that most of that money will flow in to long term bonds.

 Feds will lower rates before inflation gets to 2%.

 Inflation, due to time lags, will go down significantly by June 2024.

 Feds may have to cut rates more than currently expected.

 The economy will undershoot on the downside so stocks and bonds will pivot in 2024.

 Studying trends in the commodity market, inflation could go down to 0% in 2024.

 In 2023, we had the biggest gain in bonds since the 1980s.

 Expect a year of great volatility in 2024.

 Stocks need bonds but bonds do not need stocks. By June 2024, bonds will not need

stocks and bonds will go up.

Have a great 2024!

Fernando

December 4 Post

Hi Again,

Look at our scorecard! In November 2023, our portfolio increased by 15.55%! Prior to August

2023 we had gains but 8/1/23 through 10/31/23 we had a total loss of 13.18% so our November

gain more than made up for our 2023 losses. Like clockwork, in most years, we get a bear

market August through October; and we get bull rallies during the November/December period.

Since the market gains were so strong in November, we should have a correction soon.

Disney! Disney! Time to brag! For the past few months, I mentioned how all “Wall Street

experts” hated Disney and yet I believed in Bob Igor and Disney; and I kept buying Disney on

the way down. Guess what? Now it is difficult to find a “Wall Street expert” who does not love

Disney! On 11/10/23, Yahoo Finance announced, “Disney has its mojo back”! On that day

alone Disney surged by 7%. At the bottom, I purchased Disney at $80.74 on 10/27/23, and on

11/24/23, it was at $96! That is a 19% gain in 28 calendar days! Retail investors listen to the

“market experts”; and even when experts get bullish, retail investors remain pessimistic. They

tend to buy when prices are too high and end up selling at a loss. Per CNBC, 69% of retail

investors are still bearish on Disney. On 11/15/23, CNBC announced that 2 billionaire activist

investors are taking a big stake in Disney. Even if you exclude all other businesses held by

Disney, their parks alone is worth $80 per share. One of the best on Wall Street, Josh Brown,

was waiting for Disney to go down to $70 to buy in to Disney. This is why we have to keep

buying on the way down. As it is said on Wall Street, no one will ring a bell at the bottom. On

11/30/23, after hating Disney for months, Jim Cramer announced, “Disney is my favorite

stock”. Better late than never!

Disney (DIS) stock surged roughly 7% on Thursday after the company reported strong

earnings the previous day and increased its annual cost cutting goal to $7.5 billion, up from the

previous $5.5 billion set in February. Analysts praised the move with Wells Fargo's Steve

Cahall writing the company has its "mojo back" — despite the stock continuing to face multi-

year record lows and another battle with activist investor Nelson Peltz. Cahall increased his

price target to $115 a share, up from the prior $110 — citing the cost cuts, coupled with positive

free cash flow guidance. He reiterated his Overweight rating.” Disney is our #1 media idea,"

Cahall continued. "Bob Iger has been under the hood for about a year now, and the strategy is

taking shape." On the earnings call, the company said it expects free cash flow to balloon to

pre-pandemic levels of approximately $8 billion in full-year 2024, assisted by lower content

spend. Disney expects to spend $25 billion on content next year versus the $27 billion spent in

full-year 2023. Moffettnathanson said the free cash flow guide was the "single most critical

take-away" from the report. Iger said the company will be focused on "four key building

opportunities" moving forward, which will include "achieving significant and sustained

profitability in our streaming business, building ESPN into the preeminent digital sports

platform, improving the output and economics of our film studios, and turbocharging growth in

our parks and experiences business." (Alexander Canal, Yahoo Finance, 11/9/23).

2

As I have been saying for the past few months, my other great find was being long on the ETF

called TLT; iShares 20+ Year Treasury Bonds. It is very difficult to see bond/ETF price

appreciation in the bond market; but we had the best bond market gains since the 1980s! As

rates/yield was going up I keep buying TLT (as bond yields go up the price level goes down);

and I bought my last purchase when the TLT hit $82.93 on 10/19/23, and on 12/1/23, TLT was

at $93- 12.9% gain in 32 days! Unlike what I saw with Disney and other stocks, most money

managers were buying in to TLT; but I got in before most of them got bullish on TLT. When

Bill Ackman was shorting TLT, I was buying TLT. When the Federal Reserve started raising

rates, I shorted TLT with put options and made some good money. This is what I call a “no

brainer”. If TLT goes below $82.93 with higher yields, I will sell what I have and buy more at a

lower price-Easier to monitor my portfolio that way. That is my market discipline. While I wait,

I get a good yield; and this is the 100% risk free instrument in the world (US Treasuries)!

Now for the defense stock RTX. A few weeks ago, all the Wall Street experts got negative on

the stock; and Jim Cramer shouted “sell, sell”. So around 10/2/23, I bought a few shares; and

my strategy was to buy as it declined more. Then came the Middle East war, and the rest is

history. On 10/2/23, RTX was at $70 and on 12/1/23, it was at $82! In just 59 days, it rose by

17%! Now Jim Cramer is shouting that RTX is well reserved for their potential losses and we

all should buy RTX! Better late than never!

Sept 14 (Reuters) - Aerospace giant RTX Corp (RTX.N) on Monday told airlines hundreds of

their Airbus jets would be grounded at any one time in coming years to check for a rare

manufacturing flaw, souring the mood in an industry that was only just experiencing some relief

from supply chain pressures. It is the latest manufacturing defect to hit planemaking this year,

after separate quality issues with another big supplier Spirit AeroSystems (SPR.N). RTX unit

Pratt and Whitney's popular Geared Turbofan (GTF) engines were designed for better fuel

efficiency and fewer emissions. The engines have become popular and now compete with the

LEAP engines produced by CFM International to power the Airbus A320neo. But concerns

over its performance have swirled in recent months after engines faced problem with durability

in hot and dusty climates, requiring more frequent maintenance. In July, RTX disclosed it had

found microscopic containments in powdered metal, used to manufacture high-pressure turbine

discs that are part of engine's core, and presence of which could lead to cracks in the engine.

RTX said at that time that 200 engines would require "accelerated inspection" with 60 days to

fix each engine with a contamination issue. However, on Monday RTX widened the scope of

inspections, to pull around 600 to 700 engines off their Airbus jets and projected repair work to

last up to 300 days per engine. (Pratyush Thakur, Reuters, 9/4/23)

On 11/14/23, CEO of J P Morgan, Jamie Dimon stated that even though inflation is going

down, we are no where close to a desired level; yet on 11/14/23, CPI going down raised the

S&P 500 index. Health insurance went down by 35% but that was due to the new way the

government is making these calculations. Mere cosmetics! Market advances to market decline:

10:1. Very impressive and proof that the market is broadening. Russel 2000 outperformed the

S&P500 by 3.5% on 11/1/4/23- and in history, that has happened only 3 times and only once

3

since 1987! Since 10/27/23 (to 12/1/23), Russell 2000 rose 14% in just 31 days! I think it is

premature; and I rarely invest or trade in “small stocks”. The market is expecting the Federal

Reserve to cut rates in 2024 Q1 but Chairman Powell keeps reminding that rates will continue

to be higher for longer. Even the Regional Bank Index KRE rose by 21% within the past 31

days! I am still shorting the KRE. On 11/10/23. CNBC announced that trillions in commercial

residential real estate will become due in 2024. If interest rates do not go down, there will be

many bankruptcies.

Remember the Fibonacci Queen? Carolyn Boroden, who is renowned for her expertise in

Fibonacci price and timing analysis, Boroden joined the ElliottWaveTrader analyst team in

December 2019. She is a technical analyst and author of Fibonacci Trading, published by

McGraw-Hill in early 2008. Carolyn has been involved in the trading industry since 1978,

starting on the floor of the Chicago Mercantile Exchange. Her work is often featured on the

"Off The Charts" segment of CNBC's Mad Money with Jim Cramer. Carolyn provides analysis

of U.S. Stocks, Equity Indices, Precious Metals and Oil in her Fibonacci Markets & Stocks

service in our ElliottWaveTrader Trading Room. The specific indexes she covers are the S&P

500, Nasdaq 100 (cash/futures), Gold (GC), and Oil (CL). The specific stocks are AAPL,

AMZN, GOOGL, NVDA, and TSLA, plus over a dozen Bonus Stocks, when Carolyn sees a

setup.

On 11/28/23, Carolyn Boroden stated that the S&P500 will go even higher from the current

levels; but it will not go up in a straight line; and any correction we should see it as a buying

opportunity. Boroden also predicts that Tesla will go up to $328. On 12/1/23, Tesla closed at

$239.

Have a great month!

Happy Holidays!

Fernando

November 6 Post

Hi Again.

Historically, worst months for the market: September and October; that is behind

us! We had a reasonable correction; but I expected more of a correction. I made use

of the correction to increase my holdings. On 10/26/23, as a hedge against a big

correction, I bought some “PUT options” on the S&P500 (SPY) index. In just 16

days, they were up by 45%! On 10/3/23, my SPY puts were up 65% in 6 hours!! I

did not sell them as I was not trying to hedge against a minor correction. At all

times, I have a bit of money on “market hedges” so if we have a long, deep

correction as we did in early 2020, I can keep selling and buying more puts to make

use of the correction. As I have stated in the past, many months ago, when most

Wall Street pundits were bullish on banks and regional banks, I was sure that they

are mistaken so I bought 3 Put options to short sell regional banks with the ETF,

“KRE”. When the Silvergate bank collapsed, as I told you in the past, I made a

150% profit on one of those put options and the gain was bigger than the cost of all

my 3 put options so I did not sell the other two. Once again, “higher interest rates

for longer” belief brought down regional banks and on 10/27/23, one of my KRE

put options had a paper gain of 92%. I am not surprised that we had a major rally

around the beginning of November. At that time, the stocks shorted were at an 8

year high! Market crashes do not happen when so many investors and traders are

pessimistic about the future of the market. Over the past 40 years, I have learned

some valuable lessons when it comes to market trading. At times, “wall street

pundits” ask people to buy a stock (or an ETF) when they are ready to sell; and vice

versa. Long before Bill Ackman stated that he was shorting the 20 year Treasury

ETF known as TLT, I was doing it and I mentioned it here. In fact, as TLT was

going down, I kept buying to be “long” on TLT. It is a “no brainer”. In a couple of

years, Feds will lower rates and there will be capital gains on these TLT purchases;

and at the same time, the yield is pretty good(getting paid to wait) . On 10/19/23, I

purchased TLT, ETF at $82.93 per share and on 11/3/23, TLT was at $87.75- that

is a 6% gain in 15 days! It is very uncommon to make so much money in a short

period of time using a bond fund! On 7/1/20, TLT was trading at $171 per share;

imagine going to that level in the future! I do not expect it to happen. For 15 years,

the whole world was at 0% or close interest rates which will cause huge problems in

the world in the future. Now we have to get used to a new paradigm of “higher for

longer”. I was hoping to see higher interest rates on TLT so I can buy more at a

lower price. On 10/25/23, Bill Ackman said that he was selling his TLT shorts as

2

interest rates have peaked. I do not know if interest rates have peaked but most

probably this is a “counter trend rally”.

For the past few months, I have been talking about Disney and that it is better to

buy Disney before the “pundits” change their minds and realize the value of Disney

as a long term buy. Now it is starting to happen! On 9/25/23, I got Disney at $80.72.

On 11/3/23, it was at $85.14- 5% gain in 39 days. On 10/9/23, Billionaire and

market expert Peltz stated that he is putting billions in to Disney. The best is yet to

come. I intend to make a good profit in about 5 years. Money managers have to

make money in the short run; or they can lose their jobs so we have an advantage

over professional money managers. As Treasury yields were rising utility stocks

(where people were hiding for a higher yield) declined rapidly. Why take a risk with

utility stocks when Treasuries gave you such high yield? On 10/3/23. Josh Brown

(astute money manager) stated that XLU (ETF for Utilities) was down 75% and at it

is at its lowest point ever! If the Feds are really at the end of the interest rate hiking

cycle, it would be a good time to think of buying the XLU ETF.

Have you heard of the VIX index? VIX index is the CBOE Volatility Index. As a

general rule, when the VIX index is too low, it is time to expect volatility to go up

and hedge against higher volatility with low premium options on the VIX or buying

the VIX index shares. On 10/16/23, VIX was at 15.72 and on 10/23/23 VIX was at

22- 40% gain in 7 days!

Have a great month!

Fernando

October 2 Post

Hi Again,

Something interesting happened on 9/29/23, at market close; Disney closed at

$81.05! Why is that important? Disney on our portfolio has an average cost of

$81.05! Exact to the penny! Now as Disney goes lower, we can buy more and

lower our average cost and expect bigger returns within the next 5 years. Let us talk

about Disney and investing/trading strategies. Disney is having talks to sell the

ABC network and also trying to get in to a partnership with Amazon. I have

confidence in Bob Igor and not in the Wall Street “pundits”. Beware! I expect to

make a profit in 5 years! If it happens within 12 months, it would be great but we

must have realistic expectations. Why are the Wall Street “pundits” so pessimistic?

Money managers have to show a profit within the next few months or they can get

in to trouble with their ”bosses” and customers. On 3/7/21, Disney was at $197!

Need I say more? The Disney chart is still making “lower highs” and “lower lows”

so the current trend is to the downside and that will give us more buying

opportunities in the future. Looking at the 3 month chart, it seems like it is going to

make a double bottom: which is very bullish for the future.

Now we are in October! The month of terrible market crashes! If we are ready for

the worst, then we are ready for anything. Market is all about “mass psychology”.

Most people trade on emotions. That is why many people jumped to their death

during the 1929 crash. Extreme greed to extreme fear! How can you prepare

yourself for a crash (if it happens or not)? Play mind games with yourself. Mental

body runs the emotional body. If you invest/trade with emotions, you will end up

losing everything. How do you measure your “paper loss”? Most people compare

the last all time high with the current prices. That is all wrong. Recently I heard so

many complain about the September 2023 losses of companies like Boeing ($236 to

$191), King of all stocks, Nividia ($496 to $434), Netflix ($436 to $377) etc. etc.

One year ago, Boeing was at $126. Netflix was at $296 around 1/1/23. Now for the

star of the market- Nividia! Just 6 months ago, Nividia was only at $280 and then it

rose to $493 on 8/31/23!! Now people complain about Nivida going down to $434

during September (historically the worst month for the market)? Their growth is so

high that if you value the stock on a price to earnings (P/E) basis, this is a very

cheap stock even at this level. What will I do if we have a crash? First, as the crash

is happening, as I did in 2020, I will sell my index put options at a profit and buy

more to the downside. I will keep an eye on “good stocks” (i.e. Apple, Meta,

Google, Microsoft, etc.-“The Magnificent 7”). If those drop by about 50%

2

(approx..), I will not only buy the stock, I might even get in to long term call

options. After a crash, there will be a “recovery”; which is called a “countertrend

rally”. Depending on macroeconomic conditions (not so good now), on some of the

stocks we hold, we should sell them before they reach their previous highs. This is

the other mistake made by most people; they wait till they “get their money back”.

Getting out with some losses is better than losing most of your money. During the

initial part of the 1929 crash, Mr. J P Morgan Jr. stated that he had confidence in the

market and poured “millions” in to the market and the trend reversed. Then on the

next leg down, Mr. Morgan kept putting “millions” but it did no good as it was like

standing in front of a tsunami! So the market went down 90%. In 1930, the “Dow”

ended at about 50 (from a high of 350). Around 1938, the “Dow” got back to about

200. Did most people get out at this stage? Oh No! They were waiting for the “good

old days” to return. Around 1940, it was down at 100 again. Then it rose to 200

around 1945 and prior to the it made a “double bottom”. If you had money in the

market in 1929, you only got your money back around 1960! We get in to positive

thinking and wishful thinking but it is better to be prudent with our investments and

trades. It is all about a “calculated risk”. Who was able to avoid the 1929 crash?

Joseph Kennedy; who had a bad reputation but one of the best market players of the

1920s. Just before the crash he was getting his shoes shined; and his shoe shine boy

gave him advice on what to buy/sell on the market! Joe Kennedy knew that the

market bubble was at a top so he sold off his holdings and avoided the crash. Hope

he rewarded that poor shoe shine boy! Probably, like most who lost money in the

market in 1929, that poor shoe shine boy never got back in the market again.

A surging stock market powered U.S. household wealth to a record high

of more than $154 trillion in the second quarter, aided by a rebound

in property values, Federal Reserve data out on Friday showed. Household net

worth rose 3.7% to $154.28 trillion in the period from April through June from

$148.79 trillion at the end of the first quarter, the Fed said in its quarterly snapshot

of the balance sheets of households, businesses and federal, state and local

governments. The data showed households have fully recouped the wealth losses

generated by a crushing bear market for stocks and weaker real estate values

through much of last year as the Fed kicked off an aggressive campaign to rein in

inflation through large, rapid-fire interest rate increases. The Standard & Poor's 500

total return index (.SPXTR), including reinvested dividends, delivered an 8.7%

return in the second quarter, its largest gain since the final three months of 2021.

The equity market's rally added $2.6 trillion to household net worth, accounting for

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nearly half of the overall wealth gain in the quarter. Real estate was the other large

driver, with property values rising for first time since the second quarter of 2022,

contributing $2.5 trillion to the increase in net worth. Household wealth at the end

of June exceeded the previous record high of $152.49 trillion set in the first quarter

of 2022 by about $1.8 trillion, or 1.2%. The data showed the size of households'

cash warchests - comprising a variety of bank deposits and money market mutual

fund holdings - continued to dwindle, declining for a record fifth straight quarter to

$17.7 trillion. Debt levels for households, businesses and governments kept rising

in the second quarter, though the pace of increase varied widely by sector. Total

nonfinancial debt increased at an annualized rate of 6.3% - the fastest since the first

quarter of 2021 - to $71.2 trillion, with households and businesses each accounting

for roughly $20 trillion and government $31.3 trillion. Business debt growth,

meanwhile, moderated substantially, climbing at just a 1.9% annualized rate in the

second quarter, its slowest growth since the final three months of 2020. (US

Markets, Reuters, 9/8/23).

If you have been following “markets”, I am sure that you heard that we are once

again having a bull market in “oil”. In June 2022, I looked at the charts of the 2

“oil” ETFs XLE (Energy Select SDR) and XOP (SPDR S&P Oil & Gas Exploration

& Production) . Chevron and Exxon dominate XLE; and I bought a few shares and

both ETFs went up for more than a year. On 6/2/2023, looking at the 2 charts I

determined that XOP was more bullish than XLE. I was correct! In 2 months, XOP

rose by 20%!

I believe that I am very good at noticing trends. During the past 2 weeks, on most

days the yield on the US Treasury rises by 6.30am PST and then started falling off

during the day. This is a dream come true for traders. I have been using the ETF

known as TLT (iShares 20+ Year Treasury Bond ETF). Over the past few years I

have used options to trade around interest rate fluctuations. This trend will last for

the next 2 to 3 years. On 9/28/23, TLT ended at 88. How low can it go? Since TLT

started in 2003, the lowest level TLT reached was $81 in 2004. It is safe to assume

that we are close to a bottom. Lower it goes, higher the yield! The risk is extremely

minimal. Even if it goes down to 60, I do not mind. More the better! May to August

2020, TLT made a double top around 170! Making money on TLT is close to a

“sure thing”!

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Are we heading for a recession? Federal Reserve will not lower rates till we have a

meaningful recession. Initially the unemployment rate increases in California and

then the rest of the country follows. In August 2022, California unemployment rate

was at 3.8% and in June 2023, it was at 4.6%. I expect a recession in Q1 to Q3 of

2024.

Enjoy October!

Fernando

September 28 Post

Hi All,

Don't Panic!!!! Market crashes are fantastic!  20 year Treasury yield (interest rate) has been going up daily and ETF (TLT) value has been going down daily. I am doing great trading TLT. This is the very thing that happened prior to the 1987 crash! Feds are increasing rates, Chinese and Japanese have stopped buying treasuries, we have had most our  crashes in October (peak in August, down September). Now more and more people will sell stocks and buy bonds. Some sound corp bonds are supposed to fetch 6% to  8%.  If we have a crash, it would be a great buying opportunity! Let us hope and pray for a 90% crash (like in 1927-Otober crash)! Don't panic! Don't panic! This is why I always say that we should always keep at least 25% in cash. I was keeping 50%+ in cash. Good luck!

Baron Rothschild, a British banker and politician from the wealthy international Rothschild family, once said that the best time to buy is “when there is blood in the streets.” In simple words, when everyone else is selling, it's a great time to purchase.

September 4 Post

Welcome to September

Historically the worst month for the stock market. I personally prefer a major

correction or crash; as that would enable us to buy in to good stocks at a good price

and make a healthy gain in 1 to 5 years. What is the VIX index? It is the CBOE

Volatility Index. On 9/1/23, it was at a very low 13.09. During August 2023, the

chart made a triple top. Last time it went below this level was on 1/5/2020.

Historically, when the VIX is so low, it is the time to buy a hedge against future

volatility/correction/crash at very low premiums. On 1/5/20, VIX was at 12.10 but

then came the covid scare and on 3/15/20, the VIX was at 65.54! With call options

on the VIX, we could have made a lot of money. Even if you put in $10,000 in to

VIX shares/stocks on 1/5/20, it would have grown to $54,000 by 3/15/20. Probably

with option trading, you could have turned $10,000 in to $500,000 by 3/15/20. At

that time, I did not have much faith in the VIX but in February 2020, I refused to

believe that we were safe from the covid crisis so I put money in put options to

short sell the market and some stocks in other ways; and I turned $3,000 in to

$40,000 in 4 months.

Over the past few months, on a monthly basis, I stated that Disney (DIS) was at a

multi-year low around $85. For several months. It would hit $85 and rise again. As

I stated in the past, it seemed like $85 was a temporary “floor” for Disney. I also

stated that if a stock (or a market) go below a given “floor”, that previous “floor”

now becomes a new “ceiling”. In other words, if Disney stay below $85 for long

enough, the probability is high that it will not rise above $85 for a while. On

8/24/23, Disney fell under $85. After 8/24/23, it never rose above $84.69. On

9/1/23, Disney closed at $81.64. I love this! As it falls, I keep buying. One of the

most astute money managers, Josh Brown stated that if Disney falls below $80, he

will buy Disney. Now most of the big money managers are out of Disney; or they

are on their way out. As it always happens in these situations, as the stock price

falls, more and more so-called Wall Street experts come out of nowhere to say that

this stock will never come back again. We saw this happen with Boeing, Twitter,

Tesla and so many other stocks. If you are astute enough to understand that these

experts are probably wrong and make a calculated risk, you have a chance to make

a lot of money in the market. In 2023, I did this with several stocks; and a good

example is Meta/Facebook. All the experts were saying that Mark Zuckerburg has

lost his way and since he is spending too much money on the Metaverse, their

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stock will remain low for a long time. I knew that it was utter nonsense. There are

plenty of untapped resources for Zuckerburg-i.e. whatsapp. Therefore, I got in to

Meta at that time and I was hoping it would go down further so I could buy more

but it kept rising. Rarely do I buy more of the same stock when the price rises as I

want to keep my average cost low. My paper gain in less than 6 months is more

than 300%. Now coming back to Disney, I will keep buying as the stock sinks and I

am willing to wait for more than 5 years to make a profit. As with Meta, when big

money managers decide to come back in to Disney again, the price will explode to

the upside. Imagine Disney going down to $50 and then eventually rising to $150!

That is how the sausage is made! Wall Street guru of the 1970s/1980s, Peter Lynch

asked people to get in to turnaround stories before the big guys got back in again.

Remember what Lynch did with Chrysler? With respect to Disney, I have

confidence in the CEO, Bob Igor as I did with Mark Zuckerburg.

During the past few months, I also talked about the short-term trading opportunities

in long-term bond ETFs as interest rose very rapidly within a very short period of

time. As I stated in the past, this is a win-win situation as long as we do not get too

greedy. The ETF or the vehicle I used for this purpose was the ETF known as TLT

(iShares 20+ Year Treasury Bond ). When the Feds started increasing rates I made a

lot of money short selling TLT by buying put options. Now I have a different

strategy. As TLT went down (with the yield rising), I kept buying shares in TLT. I

started this strategy as I do not believe that the rates could go much higher.

However, if that happens, I will keep buying. My last purchase was around 8/20/23,

when TLT went down to about $93. I was hoping and I am still hoping that it would

go below $85. After that TLT rose to $96 and closed 9/1/23 at $94.85. On 8/22/23,

technician Carly Garner stated that Treasuries are too cheap as the 10year Treasury

just hit its highest level since 2007. She is expecting to see a “double bottom” (very

bullish) within the next 12 months. However, in my opinion, with the Congress not

being able to agree on the budget, yields could go much higher than people can

expect at this time.

Most experts expect the market to go down in September; and then for the market to

rise sharply from October to 1/1/24. I do not think it will go down that much for the

“magnificent 7” (the 7 best that carried the market higher) as so many people who

missed out on this bull run are waiting for an opportunity to get in. In the same way,

we may not have a bullish period at the end of the year. Yet most experts expect a

bullish end to 2023 due to “window dressing” where funds start buying the major

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winders for 2023 so as to give the impression that they were in those stocks all

along- another Wall Street gimmick. Whatever happens, take advantage of the

situation. You can do it if you have 25% to 50% in cash.

Have a great September!

Fernando

August 9 Post

Hi There Again,

Historic trends matter. Most of the time, the market peaks in August. Usually,

September is the worst month for the market. It will be interesting to see if history

will repeat itself. If there is a significant correction in the market, it will be a buying

opportunity. Whether one makes money in the market or not depends on one’s

discipline. Once again people have gone back to their old system of “buying high

and selling higher”. That is a dangerous strategy. If a good stock (i.e. Apple,

Microsoft. Meta, Tesla, AMD, Nividia) drops by about 50%, then I consider that to

be a good buying opportunity. I bought some of them a few months ago and some

have doubled or tripled within a short period of time. The probability of those going

down to the level I purchased them is very low. I hope they will go even lower so I

can buy more. I rarely purchase more at higher prices and increase my average cost.

I always keep 50% in cash. It is never about maximizing returns but making healthy

gains on your investments/trades.

On 8/2/23, on CNBC, market timer, Larry Willams stated that he expects the

market to go down till mid-October and then rally till 2025. The Dow went up 13

days in a row, and everyone expected it to close higher for another day and break a

120-year-old record streak for the Dow but that did not happen as it went down on

7/27/23.

Last month I gave my analysis on Disney;;and I stated that it has not gone below

$85 in about 14 years. Since I wrote that, during the month of July 2023, twice

Disney hit $85 and bounced back from $85 without going any lower. Right now

Disney is a good buy but it could take years to go much higher but we cannot afford

to wait as we have to buy before the “big money” moves in and take Disney to new

highs. That is how we can make money in the market. Peter Lynch, market guru of

the 1980s, used to tell people to find turnaround stories in the market and buy

before “big money” moves in. I bought Meta/Facebook about 6 months ago when

all the market gurus were negative on the company and now, I have a gain over

200%. If I waited till Meta announced their restructuring changes, it would have

been too late to make money off Meta. In other words, I bet on Mark Zuckerburg

and not on Wall Street pundits. In the same way, with Disney, I am getting on Bob

Igor, the CEO who came back, rather than the Wall Street Gurus.

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In the past, I also talked about Intel. Intel has been dead in the water for years but I

thought that it was close to a bottom. All semiconductors are not equal but Intel

produces about 70% of all chips. AMD, Nividia, TSM are all better and I have

made money on all that but there is a lot of money to made in “turn around” stories

(per Peter Lynch). A few months ago I stated that I started buying Intel and I was

shocked that even Intel call options expiring in December 2025 were so cheaply

priced; which meant that most people were bearish on Intel. Not only did I buy

some Intel stock, I also bought some call options expiring in 2025. I made a 20%

profit on my options and sold them prematurely. If I kept them for a few more days,

when they had their Wall Street call, I would have made a 300% profit (a few

weeks after my initial purchase).

Now the yield curve in the bond market is becoming steeper again. That is

dangerous for the economy and the market. It is normal to see big shifts in the stock

market but that is not so for the bond market. When that happens in the bond

market, we have to pay attention. Are there opportunities? When the Feds were

increasing rates, I made good money shorting the 20 year Treasury through the

ETF, TLT. However, I should have started that years ago. In other wors, I was late

to the party. Then a couple of months ago, I liquidated my “bond shorts’ (TLT puts)

prematurely! Just like what happened with the Intel call options! Take a look at the

TLT chart for the past 12 months. Very interesting! Since 1/8/23, 3 times. It reached

108 and fell! Talk about a triple top! These all show that it is headed lower-lower

long-term bond prices and higher yields! Last week Bill Ackman said that he is now

shorting long term bonds. Maybe he is saying that to attract new investors so he can

sell his positions. In 2020 when the Corona virus crisis took place, he put in about

$70MM in to credit swaps and in 6 months, turned in to $1Billion+! Very clever

investor/trader! I started buying in to the TLT ETF. The option premiums are too

expensive so the risk is not worth taking buying options. If TLT go down further, I

will buy more. From 7/19/23 to 8/3/23, TLT fell from $103 to $94!! This is truly

amazing! That kind of move is very rare in the bond market. Unlike a stock, as it

goes down the yield will continue to go up. Win-Win. On 5/1/2020, TLT was at

$168!! Let us consider this scenario; let us assume the Feds keep raising rates and

the TLT falls to $70 and then due to a severe recession, the Feds lower rates to zero

and TLT shoots upwards to $170! It need not happen in that manner to make money

off the ETF, TLT (ETF for 20year Treasuries). One of the best technicians, Carley

Garner, stated on CNBC on 8/3/23, that Treasuries are bottoming. I bought my TLT

shares 6 hours before I heard her comments.

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Have a great month!

July 5 Post

Hi Again,

Happy 4 th of July!

Take a look at our scorecard! Our scoreboard shows a gain of 8.7% for June 2023!

And a net gain of 39% since 1/1/23! Our portfolio is well diversified; but we hold a

lot of technology stocks that did very well during the past 6 months. Per CNBC,

NASDAQ had the best first half of the year since 1983! In our portfolio, you cannot

see anything that is at a loss. Looking at the scoreboard, the stocks with the best

performance (from the initial purchase date) are as follows: Apple -737%, AMD-

210%. Uber-201%, WYNN-195%, TJ Max-159%, Microsoft- 152%, Delta-148%,

Goldman Sachs-146%, Boeing-137%. Google-137%, GE-133%, Netflix- 131%,

Facebook/Meta- 109%, Tesla-102%, JP Morgan-89% , Southwest, Disney and

Intel are between 9.5% and 24%. This is a good time to buy all those 3. More about

Disney later.

On a daily basis, a million times over, CNBC anchors ask “Wall Street experts”, “Is

this a new bull market or is this a counter rally in a bear market?’. My reply, “it

does not matter; focus on your strategy and discipline”. That is the way to make

money in the market. There is no “stock market”; it is just a “market of stocks”. My

strategy is when a “good” stock go down by 50% or so, start buying it in small

installments. Sooner or later, it will bottom out. If you kept buying more and more

shares as it went down, you will be in a good position when the stock bottoms out.

There is a saying on Wall Street that, “no one rings a bell when the market or a

stock hits a bottom”; but if you listen intuitively, you will hear that “bell” in your

mind/heart. On my personal account, using that strategy, I made over 100% on each

of the following stocks; Tesla (bought when Elan Musk sold shares to buy Twitter),

Meta/Facebook (when market wrote off Zuckerburg for not cutting expenses),

AMD (when the stock fell to $65 as Wall Street chastised it for having an inventory

problem), Neflix etc. Sometimes one has to wait years to get the desired results;

and that is what I had to do with Boeing. If these stocks fall below my initial

purchase price, I will buy more so it a win-win situation. The secret is to keep 25%

to 50% in cash at all times and not to try and maximize gains on your portfolio. On

my portfolio, I have 60% in “cash”.

Greed and “FOMO” destroys many investors and money managers. What is

FOMO? Fear of Missing Out. For individual investors, it is mostly greed. When

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others get a better return on their investments, it is difficult to be satisfied with

one’s portfolio or gains. For professional money managers, FOMO is a huge

problem. Let us assume that a money manager, due to his “discipline” and

“wisdom” does not take part in the market during a bullish period; then his bosses

as well as his customers will lose faith in that money manager which will lead him

to the unemployment office. A good example of this is the summer of 2020. Now

all prudent market analysts state that the market going up during the summer of

2020 was totally irrational. Due to covid, there was no sports betting during the

summer of 2020; and with the trillions of dollars that went out by the government,

sports betting people and companies started using Wall Street as a casino. That was

the first stage. Then computer programs based on trends moved the market higher.

Thereafter, money managers joined in.

Now as promised, let us focus on Disney. Over the past 5 years, I have gone in and

out of Disney. It looks very attractive now. As with Meta/Netflox/Tesla/AMD, all

“Wall Street Gurus” are negative on Disney. For me that is a good sign. Get in now

and when the trend shifts, your gains will increase. Recently Disney got hit by

many waves of bad news. When a stock gets hit by waves of bad news and yet stop

going down further, it is a vey good sign that it is close to a bottom. Selling pressure

is close to getting exhausted. Only the long-term believers are left. During the

month of June 2023, Disney has been moving between $88 and $93. According to

the chart, last time Disney fell below $85 was in 2014! 9 years ago! In technical

chartist lingo, there is a “floor” around $85 for Disney. Let us assume that Disney

falls below $85 to $70 or below and stay there for a few months; then according to

chartist lingo that $85 level becomes a “ceiling” for the Disney price. In other

words, at that stage, it is safe to assume that Disney will not go higher than $85 for

a long time to come. In fact, according to the chart, if Disney falls below $85,

Disney could even go down to $25-which is extremely unlikely. This is how you

can make a “calculated risk”. All Wall Street experts are negative on Disney but

that is music to my ears as I know that as always, they are WRONG! If we lose on

Disney, it is not a big deal; losing a few “battles” to win the “war” is not a problem.

With respect to new trends, I have a different strategy. With this AI (Artificial

Intelligence) craze, I put in a little bit of money in to several AI stocks and ETF’s. I

am waiting for them to go down to buy more but they all keep shooting up. There

again it is a win-win situation. Even though Nividia (best in AI) has been always

too expensive (very high PE), I bought some Nividia on 10/11/22 at $117 per share;

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on 6/30/23, I had a “paper gain” of 260%! Experts expect Nividia to fall soon but I

do not think it will fall more than 25% from it’s 6/30/23 high. I am praying that

Nvidia will go below $150 so I can buy more! A calculated risk! Most (5) of my

other AI stocks/ETFs were bought between 5/26/23 and 6/13/23. On one of those I

have a 5% gain and the losses on the rest range from -3% to -1%. When those

losses exceed -25%, I will buy more.

Have a great month!

Fernando

June 4 Post

Hi Again,

I sent out my last newsletter on 5/1/23; and in that I mentioned that per Jim Cramer,

the banking crisis was almost over but I disagreed. I agree with Jamie Dimon, the

CEO of JP morgan that the fallout of this crisis will go on for years to come. On

5/2/23, at 9am PST, the Regional Bank index was down 7% in 2.5 hours! That was

the lowest level for the KRE index since 2020! When the Regional Banking crisis

started, I sold one of my 4 KRE put options (to short sell KRE) at a 150% profit and

I kept the rest as I expected the KRE index to fall further in the future. On 5/2/23,

9am PST, my 3 puts had a paper gain of 140% to 199%! For the past few months,

Wall Street were only focused on the problem faced by Regional Banks due to high

interest rates on short term Treasuries compared to long term Treasuries (now the

Federal Reserve is assisting banks with the capital they need); but my focus has

been on loan losses that are yet to come. On 5/3/23, for the first time Wall Street

started worrying about future loan losses of these Regional Banks.

Plenty of analysts have said the inversion of the yield curve, traditionally seen as

a sign that a recession is coming, no longer matters. Bond King' Jeffrey Gundlach

thinks they're wrong. On 5/3/23, Gundlach stated that banks are paying 50% of

the Treasury Bill rate so many banks will go insolvent in the future; as he stated,

“this is not the last chapter of the regional banking crisis”.

The market is extremely “top heavy” as only a few big mega stocks are responsible

for the market performance in the recent past. As Josh Brown stated on 5/3/23,

the market cap of Apple is bigger than the UK market cap and it is double the size

of the German market cap! Jason Hunter of JP Morgan stated on 5/11/23, that

comparing S&P100 to the S&P500, it is very clear how most investors are shifting

towards a few mega cap stocks. He termed this as a “flight to quality”. According

to Jason this “flight to quality” will be followed by a “flight to cash”; which will

bring down the market to 3500 on the S&P 500 (SPY). Great! A buying

opportunity!

What is the latest craze on Wall Street? Artificial Intelligence (AI) stocks and

ETFs! Some compare this craze to the “crypto craze” we had a few years ago and

some compare this to the “dot-com” craze we had around 1998/2000. All agree

that we are in the “early innings” and this will unfold for years or decades to

come. In my personal account, I put a little bit of money in to some of the AI

stocks and ETF’s even at high prices and if the prices drop in the future, I intend

2

to buy more. Investing or trading is all about taking a calculated risk. As long as

the overall gain is acceptable, we have to live with some losses. In my opinion, it

is always wise to have 25% to 50% in cash to take advantage of sudden

opportunities that appear in the market – as we saw over the past 12 months

when Tesla, Neflix, AMD, Meta/Facebook fell about 50%. On most of those

names, I made a 100% profit within a few weeks or days. Now that Treasury Bill

rate is around 5%, keeping 50% in cash or liquid assets is much easier than it

used to be since 2008.

I feel that we will have an interesting market during the summer of 2023

Good luck!

Fernando

April 30 Post

Hi Again,

I sent out my last newsletter on 4/4/23; and I stated that the banking crisis is not

over. Two days later on 4/4/23, Jamie Diamond (known as the best bank CEO-J P

Morgan) stated, “Banking crisis is not over. Aftershocks will be felt for years”. Yet,

a few days after that, many Wall Street experts started saying that the banking crisis

is over. Last week, the banking crisis was on the news again.

Regulators Prepare to Seize and Sell First Republic. JPMorgan, PNC and Bank of

America are said to be interested in acquiring the troubled lender after it is seized

by the Federal Deposit Insurance Corporation. Federal regulators were racing over

the weekend to seize and sell the troubled First Republic Bank before financial

markets open on Monday, according to people with knowledge of the matter, in a

bid to put an end to a banking crisis that began last month with the collapse of

Silicon Valley Bank. The effort, led by the Federal Deposit Insurance Corporation,

comes after First Republic’s shares tumbled 75 percent since Monday, when the

bank disclosed that customers had withdrawn more than half of its deposits. It

became clear this past week that nobody was willing to ride to First Republic’s

rescue before a government seizure because larger banks were worried that buying

the company would saddle them with billions of dollars in losses. The F.D.I.C. has

been talking with banks that include JPMorgan Chase, PNC Financial Services

and Bank of America about a potential deal, three of the people said. A deal could

be announced as soon as Sunday, these people said, cautioning the situation was

rapidly evolving and might still change. Any buyer would most likely assume the

deposits of First Republic, eliminating the need for a government guarantee of

deposits in excess of $250,000 — the limit for deposit insurance. As of Sunday

(4/30/23) morning, at least a few bidders had been told that they had until noon

to submit their offers, according to two people familiar with the matter. The

Federal Deposit Insurance Corporation did not comment. It’s possible that an

agreement won’t be reached, in which case the F.D.I.C. would need to decide if it

would seize First Republic anyway and take ownership itself. In that case, federal

officials could invoke a systemic risk exception to protect those bigger deposits,

something they did after the failures of Silicon Valley Bank and Signature Bank in

March. If officials decided against that, some economists warned that the

consequences could be serious. “The government needs to act in a way where the

uninsured depositors get their money out in whole,” Lawrence Summers, a

former Treasury secretary now at Harvard, said in an interview on Saturday,

either through a takeover or by a government guarantee.

2

Failing to do so “runs a substantial risk of setting off a wave of further

withdrawals from all but the largest of institutions,” he added. The F.D.I.C.

started sounding out potential buyers late last week as it became clear that there

were few options outside a government takeover, one of the people said. By

Friday, it had asked potential bidders to submit binding offers by Sunday, this

person said. Those potential bidders have been given access to detailed

information on First Republic’s finances, one of the people said. (The New York

Times, 4/30/23)

On 4/28/23, Jim Cramer stated that after the seizure of the First Republic Bank

by the FIDIC, this banking crisis will be over. Even though I have a lot of respect

for Jim Cramer; I disagree 100%. I am in the Jamie Diamond camp as I believe

that there will be fallouts for years to come; especially as the Feds tighten

monetary policy to combat inflation. Or else, as the Feds stated, “inflation will

destroy everything”. Former Fed Governor Dennis Lockhart stated that in 2007,

the Fed balance sheet was at $800 billion and now it is at $9 Trillion. I am

surprised that inflation is not more of a problem at this time. It is going to take a

long time and a bad recession (or worse) to bring inflation down to 2% (Fed

target). Probably the worst part of the recession will hit us by the end of 2023 or

in 2024. On 4/20/23, CNBC reported that 20% of US consumers are buying

groceries with credit cards. According to bond experts, when expectations of a

recession rises, junk bond yields will rise (not high enough at this time), and

when that happens, it will be a good time to get in to high yield bonds. At this

time, we have to be patient and be on the lookout for opportunities In all

markets. When we see an opportunity, we have to start buying/nibbling (little at

a time) on the way down and decrease our average cost. Most people rush in and

buy prematurely due to “FOLO” (fear of losing out). It is okay to miss

opportunities. As it was said in a movie about love, “it is like waiting for a bus;

when you miss one bus, all you have to do is to wait for the next bus”. It is just a

matter of time! We must never get in to overvalued stocks-even if it has been

good to do so in the past. Apple has a high PE of 28; while the PE for Amazon is

extremely high at 72! High multiples come from expectation of robust revenue

growth. Can that happen in a recession? Then we have to be careful about some

industries. Oil and Gas is not a good long term bet as the whole world is moving

away from that industry. Also, we have to be careful of the airline industry. Delta

is the best in the field. On 4/13/23, Josh Brown quoting Warren Buffet said,

“Someone should invent a time machine, and for the sake of capitalism, go back

in time and kill the Wright Brothers”.

Have a great month!

Fernando

April 3 Post

Hi again,

March was a rocky month for the market but our portfolio gained (net) 7.24% in

March. Over the past 3 months, our portfolio had a net gain of over 28%. Look at

our scorecard.

Did you hear about the Silicon Valley Bank failure? If not, you were living under a

rock. I always have a small percentage of my portfolio in options; some as a hedge

and some to take advantage of a special situation that might arise in the future. I

never get in to short term options. Prior to March 2023, all Wall Street “pundits”

were saying that it is safe to invest in bank stocks. I did not expect bank failures but

I expected heavy loan losses for regional banks. On 4/21/22 I bought 2 put option

contracts on the Regional Bank ETF known as KRE and then again on 10/18/22, I

bought 2 more put options on KRE to short sell Regional Banks through KRE.

These options expire in 2024 and 2025. I did not expect to see loan losses till the

end of 2023; the latest. In fact, a week prior to the Silicon Valley Bank failure, I had

a paper loss of about 75% on my “short sell” put options. I expected that. Then

came the Silicon Valley Bank failure and KRE dropped from $60 to $42 in about 10

days! On Friday, 3/10/23, I had an average “paper gain” of about 50% but I did not

sell any of my put options. Next Monday, 3/13/23, panic grew, and I sold one of my

put options with a gain of 150%! I still hold the other 3 options. The gain I got from

the option I sold is enough to cover the cost of all 4 options. As CNBC Jim Cramer

likes to say “ I am now playing with the casino’s money”. On the other hand, I do

not believe that we are done with the “after-shocks” but I do not expect to see that

for many months/years. I also have some put options on the S&P500 (SPY) at all

times as a hedge against a big correction or crash. On 3/9/23 (with an expiry date of

Sept 2023) was at $2.15 (or $215 per contract of 100 shares). On 3/13/23, it was at

$4.30 – 100% gain in 4 days! Also, this crisis is going to lead to tightening of credit

at regional banks. That is going to make the recession worse. Recently we had

massive layoffs of highly paid white-collar workers who will now get about $450

per week in unemployment benefits. Also, regional banks losing their deposits to

the big banks will worsen the upcoming recession as most small businesses (who

employ more than 80% of the US labor force) depend on regional banks for their

banking needs. On 3/24/23, CNBC reported that we had the “biggest rush to cash”

since the 2020 covid crisis as people moved $145 Billion to cash and other assets

such as gold from the time Silicon Valley Bank failed. Federal Reserve also

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reported that big bank deposits increased by $300 Billion and regional bank

deposits fell by $300 Billion since the Silicon Valley Bank failure. Decades ago, it

was very beneficial to get in to pre IPO stocks as almost all IPOs had tremendous

gains when they went public. Then when some companies went public, they got

‘hair cuts” so they remained private with unrealistic prices. On 3/16/23, Jim Cramer

reported on CNBC that Silicon Valley Bank was (1) the biggest inflation creator (2)

allowing the private equity firms in Silicon Valley borrow against their over valued

stocks and buy real estate which were already bloated. On 3/15/23, the “Big Short”

movie guy (excellent movie about the 2007/2008 banking crisis) stated “Don’t’ be

a hero”; meaning do not buy bank stocks at this time. On 3/13/23, CNBC

mentioned that 25% or $45 Billion of Silicon Valley Bank deposits were withdrawn

over a 48 hour period! Due to this crisis, I watched the movie “Big Short” again.

In that movie they showed 2 guys who got information that we are headed for a

banking crisis so they were able to turn $100,000 in to $30 Million in “shorts”! In

that movie, those 2 guys stated, “ People think positive so they under estimate the

negative things that could happen” So true! According to Wall Street experts, all

depositors, borrowers and mangers of the Silicon Valley Bank were in high school

or college during the 2007/2008 banking crisis. As I mentioned in my newsletter

many months ago, when bitcoin was at $60,000, “young people” had 75% of their

assets in Bitcoins and Cryptos! Then Bitcoin fell to $15,000! Live and learn!

Since 1993, I have been working in Credit Risk. Around 2006 I had a friend who

had a problem managing his personal finances and on a monthly basis he had to

borrow from family to make ends meet. He always paid his bills on time to keep his

FICO score at 800. He told me that with a perfect FICO score, with no income and

with no downpayment, he can buy a house. Not only that! His real estate agent

made a deal with the seller and “others” to inflate the sale price of the house by

$50,000 and split it between all parties! I was confused as that goes against all

principles of credit. The argument was that housing prices never go down. Simply

absurd! I did not expect a bankimg crisis and a severe recession but I should have

shorted bank stocks etc.! There will be plenty of opportunities in the future. As we

all know “history repeats itself”.

On 3/14/23, Josh Brown (“Market Guru”) stated that the next crisis will be in

commercial real estate. Most people work to work remotely. We have an over

abundance of commercial real estate. Some are getting converted to residential real

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estate but with the coming recession and bloated prices, that shoe too will drop

soon.

Stay tuned!

Have a great month!

Fernando

March 7 Post

Hi Again,

During February 2023, S&P500 declined by 2.6% and the Dow declined by 4.2%;

however, our portfolio gained by 0.79%.

The stock market has been range bound for more than a year. The Federal Reserve

keeps saying that they will maintain higher interest rates “higher for longer”; but

bond market gurus believe that the Feds will pivot in 2023 and lower rates by year

end. It does not matter what happens, we should look for opportunities and pounce

on them when we see them. On 2/21/23, Josh Brown stated that following computer

driven algorithms is very risky as those computers are programmed to follow the

trends of the past few days. I agree with that statement. Recently the bond market

has been acting prudently and increasing rates in line with the guidelines given be

the Federal Reserve. Interest rates as well as inflation is rising in the US as well as

in Europe – Look at US Treasuries as well German bonds. No one know if this

trend will continue. To take advantage of interest rate changes, I trade the ETF

known as TLT ( iShares 20+ Year Treasury Bond ETF  ). I have made some good

money by “buying put options” to short-sell TLT. If you look at the 6 month chart

of TLT, you will notice a triple top (12/7/22, 1/18/23 and 2/2/23) which could lead

to lower prices in the future. On 12/7/22, TLT was at $109.47 and on 3/2/23 it was

at $99.39.

Most people recognize Jamie Diamon as the most respected bank CEO (Chase).

CEO Jamie Dimon said Thursday that containing inflation remains a work in

progress for the Federal Reserve, while noting the U.S. economy continues to show

signs of strength. “I have all the respect for [Fed Chair Jerome] Powell, but the fact

is we lost a little bit of control of inflation,” Dimon said in an interview with

CNBC’s Jim Cramer during the “Halftime Report.” It’s the first of a two-part

interview with Cramer, with the second installment airing later Thursday on “Mad

Money.” Dimon’s comments came one day after the Fed released the minutes from

its Jan. 31-Feb.1 meeting, which showed members remain resolved to fight

persistent inflation. “Participants noted that inflation data received over the past

three months showed a welcome reduction in the monthly pace of price increases

but stressed that substantially more evidence of progress across a broader range of

prices would be required to be confident that inflation was on a sustained downward

path,” the minutes said. Dimon himself said he expects that interest rates could

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“possibly” remain higher for longer, as it may take the central bank “a while” to get

to its goal of 2% inflation. “The U.S. economy right now is doing quite well.

Consumers have a lot of money. They’re spending it. Jobs are plentiful,” Dimon

said. “That’s today. Out in front of us, there’s some scary stuff. You and I know

there’s always uncertainty. That’s a normal thing.” Those comments contrast with

Dimon’s previous remarks in October. At that time, he said the U.S. economy will

likely fall into a recession in six to nine months. In December, he said higher

inflation was eroding consumer wealth, which would lead into a recession this year.

We can always learn from our past mistakes or “missed opportunities”. In the

future, we can make use of those lessons to better ourselves and make money. All

the best Wall Street Wizards will testify that it is a never-ending process. We must

always keep 25% to 50% of our portfolio in cash to make use of such opportunities.

The biggest missed opportunity for me was not to short sell the over-valued stocks

that had a big debt to equity ratio while and incurring losses year after year. When

the Feds started increasing interest rates, these companies had no choice but

increase their interest payments to survive. With a potential recession, having a

detrimental impact on their revenue, it was a double whammy. Take Carnival

cruises (CCL) for example, it was at $19 on 4/11/22 and on 3/2/23, it is at $10.70.

DocuSign (DOCU) was at $310 on 8/29/21 and on 3/2/23, it is at $61.03. At the

money put option is around $1 ($100=1 contract). Let us assume I bought $1,000

worth at the money puts on DOCU on 8/29/21, today my puts will be worth

$250,000!

In my last newsletter, I mentioned that I gained a lot by investing/trading in to

“good” stocks that fell about 50%- for example, Tesla, AMD, Netflix,

Facebook/Meta. At this time I am closely watching Disney (DIS). On my personal

account, I bought DIS when it went down to $85. On 2/2/23, DIS was at $112. On

3/1/23, it fell to $98. I keep experimenting with strategies. At times, I buy 1 share

and when it goes down another 10%, I buy 2 more shares and keep doing that till

the price hits a temporary bottom. This works! Market gurus say that when the

market or a stock, bottoms, no one will ring a bell; but we can create our own bells

in this manner.

Have a great month!

Fernando

February 8 Post

Hi Again,

Did you see our scorecard? In January 2023, we had a gain of 20.35% ! Almost a 25% net gain since 11/1/22! We have been in a bear market for about 18 months. Nine months ago, when Netflix crashed, all the Wall Street pundits advised us to keep away from Netflix but I purchased Netflix for our portfolio and now in 9 months, Netflix is up by 85.89%! On my personal account, over the past few months I lost some money on my bond/stock “shorts” (put options) but that was more than offset by my gains on my stocks. As I have been advising, when a “good” stock “crashes”( about 50%), it is a good time to start buying (“nibbling”) and as those go downward, you keep buying more to make use of dollar cost averaging. What stocks belong to this category? Meta/FaceBook, AMD, Netflix, Tesla qualify.  On 11/3/22, Meta/Facebook bottomed but I start buying it on my personal account on 10/27/22, and on 2/4/23, I have a paper gain of 90% in 109 days! All the Wall Street experts pessimistic on Meta last Fall! I bought some Nividia on 10/2/22 and now my gain is 80%. NVDA ended at $211 on 2/3/23. NVDA was at $315 14 months ago. On my personal account, for the first time I bought TESLA on 1//3/23 and as of 2/3/23; in 1 month, I have a gain of 79%!

I am a contrarian. The US dollar (USD) has been going down since 10/9/22 (US dollar ETF: UUP) and all experts say that the USD will continue to decline. I disagree. This is a good time to bet that the dollar will rally soon. On 2/3/23, I bought some CALL options on the UUP (expiring 1/19/24 with a strike price of $30) for a price of $60 per contract. 1 contract = 100 stocks. On 10/9/22, UUP was at $30. The US dollar has gone down excessively against some currencies. If Feds keep raising rates, the USD will go up. When Democrats are in the White House, USD gets stronger; and the opposite happens with Republicans in the White House.

At most times, markets act irrationally but that create long term opportunities. Our task is to take advantage of those opportunities not seen by most. One of the most famous stock/bond market cliches is “don’t fight the federal reserve”. But the bond market has a cliché of its own- “Feds give the signal when they will raise rates and the bond market gives the signal when to lower rates”. When an economic expansion is needed, the Federal Reserve lower rates. Then due to lower mortgage rates, there is a boom in housing and that is followed by a boom in durable goods etc. When the Federal Reserve raise rates, they expect the opposite. However, as I have been stating in previous editions, as the Feds increase rates, “bond kings” have been lowering the yields; and mortgages are connected to these bond yields. Finally, what I have been saying can be seen in the economy. On 1/11/23, CNBC reported that in December 2022, mortgage demand surged as home owners took advantage of lower mortgage rates (due to lower bond yields).  The average rate for a 30 year fixed mortgage decreased during the first week of January to 6.42% from 6.58%. If the Federal Reserve listen to Professor Siegel and the “bond kings” and lower rates, we are not going to keep inflation under control for long. Most probably the Federal Reserve will listen to those experts and create a 1970s style economy. Take a look at the ETF “ITB” which tracks home builders; it has been rising since June 2022. Even though many pundits talk as if inflation is headed towards the 2% desired by the Feds, there are many signs to show that inflation will rise again soon. A few months ago, as the world expected a recession in the US and Europe, oil prices went down. People took that as an indication that inflation is going to go down. What happened since then? Not only oil prices went up in the commodity markets, oil prices even went up at the pump! Not only oil, most commodities and commodity stocks rallied. Europe was expected to have a severe recession in 2023, but now the IMF states that only UK will have negative GDP growth in 2023. China is supposed to open up soon which will lead to more inflation. Why is the Federal Reserve dumping more than $95 Billion from their bloated $8 Trillion balance sheet?  Per bond manager, Nancy Davis, the amount Feds increased (balance sheet) exceeded the amount they had done for the prior 9 years! As CNBC’s senior economics reporter, Steve Liesman reports on all aspects of the economy, including the Federal Reserve and major economic indicators. Steve has a nice example to show why the Feds do not want expedite the process of reducing the balance sheet even as the Bond gurus lower the yield; Steve compares the Feds balance sheet to Godzilla in a cage and as long as Godzilla is in the cage, everyone is safe but the Feds have no idea what might happen if that Godzilla gets out of the cage! Excellent example! No guts, no glory! Prior to 2/3/23, even Jim Cramer was saying that the Feds should reverse course as inflation is coming down but 2/3/23 changed all that! The US government announced a “blowout job report”. Non-farm payroll was expected to go up by 187,000 but it went up by 517,000. Jim Cramer stated, “ People who thought that the Feds should think about cutting rates are crazy! Rates need to go higher until the labor market slows down”!

There is another choice; as the Fed Chair Powell has been suggesting, we could open our doors to new immigrants and that will help but the Republican Party and Fox News will not allow that to happen. Some say that this is not like the 1970s. In some ways, it is not but inflation is a big threat. Have you heard of the Phillips Curve? What Is the Phillips Curve? The Phillips curve is an economic theory that inflation and unemployment have a stable and inverse relationship. Developed by William Phillips, it claims that with economic growth comes inflation, which in turn should lead to more jobs and less unemployment. In economics, “full employment” is not when no one is unemployed. Full employment is the lowest unemployment rate that we could have with very limited inflation. In the 1970s, it was about 5%-6%. Then the US economy got very efficient; and we had an unemployment rate under 4% with no inflation. Due to the aging of the US labor force, economists state that we need to open up to more immigrants to have an annual growth rate of  5%. If not, the Feds will have to raise rates to destroy inflation.

Mohamed Aly El-Erian is an Egyptian-American economist and businessman. He is President of Queens' College, Cambridge, and chief economic adviser at Allianz, the corporate parent of PIMCO where he was CEO and co-chief investment officer. On 1/10/23, Mohamed stated “ We need to get out of these distorted markets (stocks and bonds)”. I will not go that far. We need to watch for trading and investment opportunities.

The bond market and most bond gurus expect interest rates to decline during the latter half of 2023 but I was shocked to hear that the “bond king” Gundlach predict that interest rates will go higher during the latter half of 2023. The US yield curve is inverted (short term ones have a higher yield than the long-term ones) and for the first time in history, the Global Yield Curve is inverted. For most pundits, this is an indication that we are headed towards a recession.  I am not too sure. Even if we have a recession, it could be a mild one. According to Gundlach, most of the selling during the latter part of 2023 (bonds and stocks) was due to tax selling and as expected it all came back in early 2023.

For the past 12 months, all Wall Street experts were saying that consumers have a lot of money so banks will not have trouble in the future. At that time, I was wondering if the people with big cash balances were different from the people who were carrying most of the debt. When markets go down, that can have a major impact even on the wealthy. Jim Cramer was saying that in 2022, the Feds had to provide extra security to the officers of the Federal Reserve due to the death threats they were getting from the public. Anyway, there are so many unrealistic conspiracy theories about the Federal Reserve on social media.  Suze Orman, a former vice-president of investments and Prudential-Bache, heads her own financial planning firm, is a columnist for Self magazine. Recently, on CNBC “Fast Money”, Suze was saying that most people in the US are having major financial problems -mainly with debt. With the crazy stock market going up for years and with all the cash provided by the Federal Reserve and stimulus checks ($5 Trillion), people were buying expensive gas-guzzling cars on debt. We are sure to see bad debt losses for many banks and companies in the future. Did you think the rich would be spared? When all bank experts believed that even if all major banks get in to trouble, Goldman Sachs (that cater to the rich), would be spared. Then on 1/17/23, Goldman Sachs reported big loan losses! Profits dropped 69% in one year!

Wall Street gurus like Jim Cramer try to predict the cause of the next crash as crashes happen only when the unexpected happen. Jim Cramer has been saying that when China (PRC) invades Taiwan, we will see the next market crash. Now that the Republicans have a slim margin in the US House, they are threatening to default on the US Debt if the Biden Administration does not agree to severe cuts in Social Security and Medicare. How about tax increases for the rich (those earning over $400K per year as Biden suggested)? For 60+ years it was considered to be suicidal to talk about social security reductions. Trump gave a huge tax cut for companies and stated that it will be used for economic expansion and hiring but years later even Trump agreed that 99% of that went for stock buybacks. CEO pay packages are dependent on stock performance so this is no surprise. On 2/6/23, Biden proposed quadrupling of taxes on stock buybacks. Republican party is complaining about the budget deficit and the debt level. Since World War 2, one and only time we had a budget surplus was when Bill Clinton was President; but the process was started by Herbert W Bush. He went back on his word (“Read my lips”) for the sake of the country.  The US budget deficit for 2022 was $85 Billion and it was $21 Billion for 2021. Just from 1/1/22 to 6/30/22, companies spent $501 Billion (half a trillion) in buybacks!  In 2021, $880 Billion was spent on stock buybacks! These stock buybacks do almost nothing good for the economy. This is just “financial engineering”. There should be a 100% to 1,000% tax on stock buybacks. Apple alone buybacks about $100 billion in stocks each year.

We could have fireworks in the markets in 2023. That is good. Just keep an eye out for opportunities. “Fish in troubled waters!”

Have a great month!

Fernando

January 2 Post

Happy New Year! Welcome to 2023!

We have been in a bear market for more than 1 year. For some stocks, it was even

longer. The S&P 500 hit its last all-time high of 4,760.18 on 12/26/21. On 10/2/22,

we had the last bottom of S&P 500 at 3,639.66- 23.5% decline in about 10 months!

NASDAQ suffered the most. On 11/14/21, NASDAQ hit a high of 16,057 and on

10/9/22, it was at 10,321-35.7% decline in about 13 months! My strategy is to start

“nibbling” (buying in small quantities) of quality stocks that fell sharply. Then keep

buying as it falls and then wait for another 5 years or so to reap the rewards. Also in

this market, we have to differentiate between a stock that seems like a good bargain

to other great bargains that are available. I do not believe that stocks like Apple and

Microsoft have come down enough to make them great bargains; and it is possible

that we will never see that with Apple or Microsoft. At times, we have to wait many

years to see good results. Boeing is a very good example. Most shrewd money

managers like Jim Cramer gave up on Boeing and sold their shares. Currently it is

at $190 with a 114% gain on our portfolio. Maybe in 2 to 3 years it will go back to

its all time high of $400. Netflix is a good example of a “great bargain”. Last time it

hit an all time high was on 10/24/21 at $690. On 4/24/22, it fell to $190 and many

wall street pundits said that they might even go insolvent. On 4/24/22, we made our

initial purchase and as of 12/31/22, we have a gain of 54%-in about 8 months.

During December 2022, we added more to our Tesla and Intel stocks; and we are

watching Meta/Facebook closely to add more in the future. Our new purchases

would show on the February 2023 scorecard. We bought 38 more shares of Tesla on

12/27/22 at a price of $109 per share. Now we have 50 shares of TSLA and if

TSLA falls below $80 per share, we will buy another 50 shares. “dollar cost

averaging”! As I have stated in previous newsletters, Musk is one of the most

intelligent humans on Earth but there is a difference between intelligence and

wisdom. Musk has a habit of shooting himself in the foot. As a wall street expert

stated, now with Twitter, he has a blowhorn to make erratic statements. With the

70% drop in the price of TSLA, Musk is no longer the richest man on Earth. TSLA

had the worst year in 2022! Musk way overpaid for Twitter and for what? So he can

get Trump to join Twitter? Not only TSLA investors were worried that Musk no

longer had the time to take care of TSLA after the purchase of Twitter, Musk had to

sell some of his TSLA stocks for that purchase bringing down the price of TSLA.

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Pride comes before a fall? Musk used a leveraged buyout strategy to buy Twitter

for $44 Billion; a third of it came from his bank borrowings! Let us hope that TSLA

will decline sharply in 2023, giving us a chance to lower our average cost. When

you adjust the price of TSLA for all the stock splits it had over the past few years,

TSLA was at $15.43 on 9/30/19 and $28.50 on 3/16/20. Imagine TSLA going down

to $15! Musk can go from the richest man to the poorest man! Many billionaires

have gone insolvent, many billionaires have ended in prison and many super

brilliant people have gone “crazy” in the end. Remember the Hunt Brothers who

cornered the silver market? Remember Leona Helmsley? Remember Howard

Hughes? I do not know if the name Tesla came from the name of the scientist

Nikola Tesla. Nikola Tesla was a Serbian-American inventor, electrical engineer,

mechanical engineer, and futurist best known for his contributions to the design of

the modern alternating current electricity supply system. Nikola Tesla got so crazy

that he had a love relationship with a pigeon. Tesla cars are being sold in many

countries but billions of humans use Twitter. Musk has talked about his asperger’s

syndrome and such people are known not to have compassion for other humans.

Soon after buying Twitter, Musk not only fired 50% of Twitter employees, he

stopped any of them from working from home. Also, he asked all his employees to

work very long hours. Per BBC World News, Musk put in “cots” at Twitter so his

employees could work 24/7! So many employees walked out that on one Thursday,

Twitter had to close till the following Monday. In more than 140 countries, for

“world news”, this was announced giving the impression that Musk is a monster

and one of the worst bosses of this century. On 12/8/22, per Bloomberg, Tesla is

considering margin loans to reduce its debt load. Interest paid on debt for one year

could exceed $1.2 Billion-more than Tesla’s 2021 earnings!

Now for our Intel purchase. From the chart for INTC(Intel), I can see that it made a

double bottom recently. It was $25.20 on 10/10/22 and $25.54 on 12/28/22. Now

we hold 50 shares of INTC at an average cost of $30.53. If INTC drop below $15, I

will buy another 50 shares for our portfolio. Semiconductors are the “steel” of this

century. Currently due to excess inventories, lower demand and so on, we have got

a wonderful opportunity to buy in to these stocks. The Semiconductor ETF, SMH

hit a low of $173 on 10/14/22. Previous high was at $301 on 11/8/21! My favorite is

AMD-which is on our portfolio. The best in the world is Taiwan Semiconductor

(TSM) but it is dangerous as most people expect China (PRC) to invade Taiwan

soon. TSM is down by 50% so it looks attractive.

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Where do we go from here?

David Alan Tepper (born September 11, 1957) is an American billionaire hedge

fund manager. He is the owner of the Carolina Panthers of the National Football

League (NFL) and Charlotte FC in Major League Soccer (MLS). Tepper is the

founder and president of Appaloosa Management, a global hedge fund based

in Miami Beach, Florida. He earned a bachelor's degree in economics from

the University of Pittsburgh in 1978, and an MBA from Carnegie Mellon

University in 1982. In 2013, he donated his largest gift of $67 million to Carnegie

Mellon, whose Tepper School of Business is named after him. For the 2012 tax

year, Institutional Investor's Alpha ranked Tepper's $2.2 billion paycheck as the

world's highest for a hedge fund manager.[2] He earned the third position

on Forbes ''The Highest-Earning Hedge Fund Managers 2018'' with an annual

earnings of $1.5 billion.[3] A 2010 profile in New York described him as the object

of "a certain amount of hero worship inside the industry," with one investor calling

him "a golden god."[4] Tepper revealed plans to eventually convert this hedge fund

into a family office (Wikipedia)

It is difficult to find a single “wall street guru” who does not “worship/respect”

David Tepper. On 12/22/22, per CNBC, David Tepper said that he did not anything

good on the long side in the stock market and he was considering getting in to

shorts. However, a note of caution, as Josh Brown (whom I respect) stated, when

David Tepper changes his mind and reverses his decision, he is not going to let

others know about it. On the opposite side, we have professor Siegel from Wharton

School of business. Jeremy James Siegel is the Russell E. Palmer Professor of

Finance at the Wharton School of the University of Pennsylvania in Philadelphia,

Pennsylvania. Siegel comments extensively on the economy and financial

markets.(Wikipedia) . Professor makes several valid arguments to be bullish.

Number one reason is that there are so many investors who are bearish right now

and taking a contrarian view, could be prudent at this point. However, as Siegel

wants done, if the Federal Reserve pivots that could lead to 2 big problems. First of

all, the Federal Reserve will lose more credibility; and also, before long we will

have a worse problem with inflation; and we will have a 1970s style economy

where the Feds kept pivoting prematurely and creating a huge inflation problem for

decades. Per Jim Cramer on 12/22/22, not only the US Federal Reserve Bank but

most central banks in the world, including Europe and Japan (surprising most

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people) are determined to keep raising rates and decrease their bloated balance

sheets.

As I have stated in the past, I am confused why the Federal Reserve is only

unloading $95 billion per quarter in the bond market to decrease their balance sheet.

While the Feds have been raising rates and unloading items from their balance

sheet, in the bond market, the yields have been going lower and bonds have been

going higher! Let us take a look at the ETF known as TLT ( iShares 20+ Year

Treasury Bond ETF (TLT)), From 11/7/22 to 12/7/22 (in one month), TLT rose by

17%! Unlike stocks, a 17% increase in bonds is extremely unusual. I am not the

only one who is frustrated and confused. At CNBC, they have a team of economists

whose job is to monitor the Federal Reserve Bank and all worldwide central banks

24 hours per day. This team is headed by Steve Leisman. On 12/14/22, extremely

frustrated Steve Leisman (on CNBC) stated, “ I am having an intellectual crisis. As

Feds are keen on increasing rates, bond market keeps lowering rates which does not

make sense and it is like the bond market is giving its middle finger to the Feds”!

There are few people who manage trillions of dollars in bonds and they believe that

the Feds will follow their lead and start lowering rates because inflation has gone

down by a little bit. Bond king and billionaire Jeffrey Gundlach states that the

probability of the Feds lowering rates in 2023 is 75%. That could be true; but we

will have volatile stock and bond markets for years to come. Fed Chair Jerome

Powell stated that he wants to be like Volker and kill inflation for the long term

than what Arthur Burns kept doing in the 1970s. Gundlach and Siegel believes that

Feds unloading $95 billion per quarter is too much and that is creating a liquidity

problem. I do not agree. If there is a liquidity problem, why did the bonds rise so

sharply bringing down the yield?

Decreasing the Federal Reserve balance sheet is also a national defense issue. In

2007/2008 when we came close to a financial market meltdown and when George

W worked with the Congress and the Federal Reserve and started a program to save

the economy, Putin approached China (PRC) and suggested that they both get

together and unload all their US Treasuries which would have led to a real

meltdown in our economy. Per US Federal Reserve, as of July 2022, foreign

governments held 7.5 Trillion USD in US Treasuries. Due to “printing of money”,

the US Federal Reserve balance sheet is at 8 to 9 trillion USD. China (PRC), which

owns an estimated $972 billion in U.S. Treasuries, is the number-two investor

5

among foreign governments. China buys Treasuries to help depress the value of its

currency, the yuan. Russia owns only about 2 billion US treasuries as of December

2022. If the Feds see that the bond market is bringing down the yield, the Feds

should increase the rate of reducing their balance sheet and be prepared for the next

unexpected economic disaster. All prudent people believe that the Federal Reserve

and government stimulus checks saved us from a major depression in 2020 covid

crisis. The Federal Reserve had only an indirect impact on mortgage rates until

2008. Around this time, the Fed began buying Mortgage Backed Securities (MBS)s

directly in order to support the economy, help decrease mortgage interest rates and

add liquidity to the market. A few months ago, Fed Chair Powell stated that the

housing market was in a “bubble”. The US Federal Reserve and most central banks

around the world, with their “money printing” created this problem and a huge

worldwide homeless problem with 520,000 homeless in the US. If you live in San

Diego county, you are sure to see TV ads from “I buy SD.com”. Whatever house

you own, despite its condition, with no banks or mortgages they will buy your

house within 24 hours! Didn’t they learn a lesson from Zillow? Just like in 2007,

they assume they can keep adding to inventories as prices will continue to go

higher. This is another reason why the Feds should not pivot. As Powell stated

when these speculators get out of the market, he can lower rates so middle class

people can buy houses with mortgages and not with 100% cash. Per Josh Brown on

CNBC, the mortgage industry is already in a recession and home builder Lennar

reported that their cancellation rate increased from 12% to 24% from Q3 to Q4 in

2022. With the expected recession, this will only get worse.

Blackstone's real estate fund for wealthy prompts SEC queries-

The U.S. Securities and Exchange Commission (SEC) has reached out to

Blackstone Inc (BX.N) following an increase in investors pulling money from its

real estate fund, Bloomberg News reported on Friday, citing people familiar with

the matter. Earlier this month, the asset manager limited withdrawals from the

$68-billion Blackstone Real Estate Income Trust after receiving too

many redemption requests. The regulator is trying to understand the market

impact and circumstances of the events, according to the report, which added that

the inquiries aren't any indication that the firm is under investigation or committed

any wrongdoing. (Reuters, 12/16/22).

Divine Justice?

UN accuses Blackstone Group of contributing to global housing crisis. World’s

largest corporate residential landlords called out for their practices of inflating rents

and ‘aggressive evictions’. The UN’s housing advisor has accused private equity

firms and one of the world’s largest corporate residential landlords, Blackstone

Group, of exploiting tenants, “wreaking havoc” in communities and helping to fuel

a global housing crisis. In a stinging critique of the role of private equity in the

housing market UN rapporteur Leilani Farha and co-author Surya Deva,

chairperson of the UN Working Group, singled out Blackstone’s business practices

– which they claim include massively inflating rents and imposing an array of

heavy fees and charges for ordinary repairs – as having “devastating consequences”

for many tenants in countries around the world. In a series of letters to Blackstone

and government officials in Czech Republic, Denmark, Ireland, Spain, Sweden and

the US, Farha and Deva accused private equity and asset management firms

like Blackstone and its subsidiaries of undertaking “aggressive evictions” to protect

its rental income streams, shrinking the pool of affordable housing in some areas,

and effectively pushing low and middle-income tenants from their homes.

Blackstone has, in recent years, acquired hundreds of thousands of homes in the

US, Europe, Asia and Latin America, often through subsidiaries, making it one of

the largest and most powerful global players in the housing investment sector. Farha

said the commodification of real estate by private equity investors in recent years

had made housing for many people increasingly expensive and precarious:

“Landlords have become faceless corporations wreaking havoc with tenants’ right

to security and contributing to the global housing crisis.” However, the need to

maximize profits to repay investors typically led to a “constant escalation” of

housing costs for tenants, primarily by hiking rents – in some cases by 30-50% –

and ruthlessly pursuing eviction for non-payment. One corporation issued nearly a

third of its tenants with eviction notices, the letter says. The authors allege that a

Blackstone subsidiary in the US, Invitation Homes, imposes charges for minor

maintenance repairs and tasks such as removing insect infestations. She alleges that

it imposes late rental payments of $100, even if they are just one minute late, or due

to an error in Invitation Homes’ computer system. (The Guardian, 3/26/19).

A few months ago, the Governor of California promised to take measures to stop

Wall Street and other speculators from creating a worse homeless problem-as done

in Canada and New Zealand. Still nothing on that!

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Talking of “Divine Justice”, remember Valeant Pharmaceuticals? During the 2016

presidential election campaign, Trump and Hillary both stated that they would take

action against Valeant and other companies of that nature. They researched and

found companies that have not raised prices in a long time and where the demand is

inelastic and the CEO of Valeant went on a buying binge. Then they raised prices

100% to 1,000%! In many cases the scientists who discover these medicines would

sell those patent rights for a low amount (as low as $1). The stock price rose more

than 4,000%! Some of those drug prices never went down. More than 1

million Americans with diabetes have to ration lifesaving insulin because they can't

afford it, a new study shows (US News, 10/18/22) According to a new study,

released earlier this month from CharityRx, Even all poor people with diabetes in a

poor country like Mexico but that is not true in the richest country on Earth! 79% of

U.S. adults who have diabetes or care for someone who does say paying for insulin

has created financial difficulty.(Forbes,6/20/22). Prior to this scandal, billionaire

investor Bill Ackman used to be compared to Warren Buffet, Valeant deal was so

profitable, he and other billionaire investors gave in to their greed and forgot all

about diversification and put most of their funds in to Valeant. Then within a 6

month period, Valeant’s stock price fell almost ninety per cent, thanks to a toxic

combination of sketchy accounting, political blowback, and slowing growth. Bill

Ackman and other investors lost billions. The CEO and the brainchild of this cruel

business first lost a great deal when Valeant dropped from about $270 to about $27,

then he lost his job. Thereafter Goldman Sachs sold most of his assets as he could

not comply with a margin call. Finally, he got a heart attack. Sounds like “divine

justice”?

So, what to expect from the market? No one knows for sure. Who has a crystal

ball? The market analyst and astrologer for some of the best Wall Street firms for

40+ years, Merriman is expecting big unexpected surprises in 2023-both good and

bad. If the market crashes, then we could get opportunities to buy! This slow grind

to the bottom is not healthy….

Have a great month!

December 5 Post

Hi There again,

We had a 8.45% gain in our portfolio last month (see our scoreboard). Last 2

months we had gains after going down for 11 months. Is the bear market over? I do

not think so. Usually bear market ends with bearishness reaching an all-time high.

We are not there yet. According to Barron’s, “Inflows to US stock mutual and

exchange-traded funds for 2022 through October, on track for the largest annual

haul since 2013!

At times, we have to wait patiently to reap the rewards. Take Boeing for example,

on 2/19/19, it hit an all-time high of $424 but it has been on the decline for a very

long time. However, from 9/30/22 to 12/2/22, Boeing rose by 50% ($121 to $182).

If you look at the chart, it just passed a double bottom. Value stocks are back!

As the market expected, Fed Chair Powell on 11/30/22 indicated that the Federal

Reserve is ready to pause rate hikes; and as expected the market rallied As Steve

Weiss stated a few weeks ago, first the market will rally when the Feds pause

raising rates and then when we get lower revenue/earnings reports in the future,

market will decline again. I agree with that assessment. There is a time lag between

rate hikes and the impact it would have on “main street”. The Feds did not say that

we have seen the last of interest hikes. All depends on the rate of inflation

In my last newsletter I stated how the market guru Joe T bought AMD at $90 and

sold at $65 saying that he got caught to the famous Wall Street “falling knife”. As

Joe T was selling, I started buying AMD (nibbling-little at a time). After Joe T sold

AMD at $65, AMD rose to $76- 17% gain. The chart just made a double top so

expect AMD to fall significantly in the future.

Jessica Inskip is an advanced product specialist within the self-directed investing

space. Jessica is currently the Director of Education and Product for OptionsPlay.

Jessica’s responsibilities include solving key industry issues via creative thinking,

driving the vision of innovative business ideas with a focus on options, technical

analysis and engaged trader experiences. Jessica stated (on CNBC) that the market

will continue its bully rally till 12/16/22; or till 12/31/22. The market is on one of its

Santa Claus rallies. In my opinion, this rally is irrational.

We had a slight decrease in the rate of inflation in November so most people

assumed that the Federal Reserve is ready to pivot and stocks and bonds rallied. Fed

2

Chair Powell has stated over and over again that they will act more like Paul Volker

(1980s) than Arthur Burns of the 1970s.

In the 1970s, for the slightest decrease in inflation, the Feds would pivot and start

lowering rates. As Carl Icahn stated on 11/10/22, if the Feds do not keep increasing

rates and pivot for the slightest decrease in rates, we will have a period of

hyperinflation in the future (as we did in the 1970s). The Feds will have to keep

coming back to raise rates and each time they raise rates, they will have to raise

rates to a much higher level. Initially this happened to Volker too; then he raised

rates to about 15% and killed inflation for 30 years. What would the Feds do? No

one knows but depending on what they do, we will know what we can expect in the

future. For the first time in many years, the Federal Reserve stopped buying

treasuries and started selling their treasuries to decrease their balance sheet. Initially

they were going to decrease their balance sheet by $50 Billion in Fall 2022 but they

ended up selling treasuries over $90 Billion. Everyone was afraid that when they

start dumping their treasuries, interest rates would rise sharply. The opposite

happened! They have been raising rates for a while (3% since 6/16/22) and after the

November 2, 2022, 75 bases points raise, they warned that they will keep increasing

rates for many months and will keep rates at high level for many years. The market

refused to believe them as they no longer have much credibility. If they pivot soon,

they will lose more credibility. 11/2/22 to 11/25/22 (23 days), the S&P500 went up

by 4+%! More alarming is what happened in the bond market. Bonds go up when

the bond yield (interest rate) go down. Let us look at 20 yr treasury bond ETF,

“TLT” – On 11/2/22 this ETF was at 96.91 and by the market close on 11/25/22, it

was at 102.61 ! That is an increase of 5.88% in 23 days !! The market keep

lowering interest rates. Most people expect the Feds to increase the interest rate by

50 bases points in December and then be data dependent. Since they follow the

bond market, most probably they will do that; but I have a feeling that they are

concerned about falling rates in the bond market and state they are not ready to

pause increasing rates. If stocks and bonds fell sharply, that would have given the

Feds an opportunity to pause here. In my opinion, we are going to have a1970s style

market. I do not understand why the Feds did not make use of this opportunity and

unload more of their treasuries on their balance sheet. Why is that important?

Currently, after printing so much money, their balance sheet is bloated at 8+

Trillion dollars. If they manage to decrease it sharply, they will be in a position to

help the US economy if we have a deep recession or an economic calamity in the

3

future. Instead of unloading $90 Billion per quarter, they should unload about $1

Trillion per quarter-that is if the market keeps lowering rates.

Now to my favorite punching ball- Bitcoins and Cryptos! Yes, a lot of people made

a lot of money in Bitcoins/Cryptos. $9 in 2009 in Bitcoins would have got you

$6.8Million when bitcoins hit an all-time high of $64,000 (on 11/25/22 it was at

$16,000-75% decrease!) in early 2022 (double top). Even some gamblers in Vegas

and drug lords make a lot of money so that is not a good reason to get involved with

Bitcoins/Cryptos. Within the past 6 months, cryptos value has gone down from $3

Trillion to $800 Billion. When cryptos were flying high, those people borrowed

against their cryptos and also got in to other counterparty relationships with

mainstream financial institutions. Cryptos are totally unregulated and most act like

a big ponzi scheme! Nothing tangible and nothing real! Like all those metaverse

and NFT imaginary things! Some used to say that FTX was the J P Morgan of the

crypto universe! In 2008, Bitcoin was created by a Japanese software engineer

named “Satoshi” but no one can find him. One objective was to create a “stealth”

medium of exchange as a substitute for money that does not go through the banking

system so governments of the world will not be able to tax or regulate the industry.

Now they are asking the US government to regulate Bitcoins and Cryptos. Why?

Simple-getting credibility and respectability.

Did you hear about the FTX debacle? During their hay day, the founder of FTX was

even featured on the Forbes cover as “Warren Buffet” of the crypto universe! FTX

that had more than $32Billion went insolvent on 11/11/22. Many investors are

already writing off their exposure to FTX. They did business in 48 countries with

100,000 creditors. Most pundits expect all financial markets to be affected by the

FTX contagion effect. Do not expect to see this soon. Bear Stearns crisis happened

in March 2008 but the Lehman Brothers crisis that rattled the economy happened in

September 2008-6 months later! Stay tuned!

FTX was created and destroyed by their first CEO, Sam Bankman-Fried. He is only

30 years! Studied at MIT. Just like Elan Musk, very intelligent but there is a

difference between intelligence and wisdom. Even with all the legal cases pending,

Sam appeared on CNBC for a long interview on 11/30/22; and I was wondering

why he was foolish enough to do that. About 30 minutes in to the interview, CNBC

anchor asked him if his attorneys asked him not to do this interview and he stated

that they vehemently opposed it. One man who lost his life savings of $2 million

4

was there to question him. Sam was in Bahamas and did this interview remotely.

No surprise there!

Have you heard of the “Crocodile of Wall Street’Meet the ‘Crocodile of Wall

Street’, Heather Morgan: the crypto rapper and TikToker known as ‘Razzlekhan’

once allegedly laundered US$4.5 billion worth stolen from a Hong Kong bitcoin

exchange. In February, Morgan and her husband Ilya Lichtenstein were charged by

federal prosecutors with alleged conspiracy to launder over US$4 billion in stolen

bitcoin, per CNBC. Morgan, at first glance, is just a regular Wall Street hustler. She

has a degree from the University of California, Davis, and began her career as an

economist for the World Bank in Cairo, Egypt, according to her LinkedIn profile.

Before entering the corporate world, Forbes reported that Morgan also spent time at

the Hong Kong University of Science and Technology conducting seminars about

American culture for students. According to her LinkedIn profile, Morgan also

made stops in start-up tech firms such as Tamatem Inc. and Endpass. The former

economist would later venture into her own Software as a Service (SaaS) company,

SalesFolk, as the current chief executive officer. According to her Muckrack

portfolio, Morgan was once a writer at Inc. and a former contributor to Forbes. In

her bio, she describes herself as an economist, serial entrepreneur, SaaS investor

and rapper who loves robots. On February 8, shocking news rocked the world of

cryptocurrency when the FBI arrested Morgan and her husband Ilya Lichtenstein.

According to CNBC, the couple was accused of a scheme to launder upwards of

US$4 billion worth of bitcoin stolen in the 2016 hacking of Bitfinex – a crypto-

exchange platform based in Hong Kong. Reuters dubbed it the second-biggest

security breach ever of such an exchange. The Justice Department has already

seized more than US$3.6 billion back from the heist, which was the largest financial

seizure in history, per CNBC.

North Korea’s missile program has been mostly funded by stolen cryptos. In March

2022 alone, they gained $620 million from crypto theft. In 2021, it was over $400

million. According to the UN, in 2019, money collected through stolen cryptos

exceeded $2 billion for North Korea. There are universities in North Korea to teach

these techniques to their young people who get jobs in the military. They have

carried out these activities in 150 countries. 75% of their trade is with the Peoples

Republic of China. North Korea also make money by selling arms in the black

market. Their government has converted 2.6 million of their people in to slaves and

these slaves have ben sent overseas to earn foreign exchange for the government of

5

North Korea. These slaves get sent to 58 countries but 80% have been sent to

Russia and China. (Wion Indian news, 11/24/22)

40% of inflation is due to housing (mainly rents). Most of the 8 trillion the Federal

Reserve “printed” inflated assets of the richest people in the country. Multi-billion

dollar real estate “moguls” bought millions of houses by paying cash and then

rented these to the middle class and the poor and kept increasing rents 100% + per

year. Fed Chair Powell stated that after he clears these speculators, he will lower

rates so the people of this country would be able to buy houses with traditional

mortgages. We are not close to that point yet. Have you heard of Vinebrook

Homes?

Residential REITs buy and hold property and then rent the property to tenants using

gross leases. Sometimes they sell properties to upgrade other properties or to make

new and similar acquisitions, but it's always with the goal of improving the rate of

return on their investments. EQR, one of the biggest apartment REITs that uses

money printed by the Federal Reserve and create homelessness in this country by

raising rents over 100% per year was at $91 on 4/2/22, on 12/2/22 it ended at $64.

Most of these REITS have underperformed the S&P500 by 77% recently. If they go

down 90%+, it would make the Federal Reserve comfortable in lowering rates. As it

is there are over 500,000 people homeless in the US.

In February, Jenike Allen traveled to housing court in Cincinnati to try to stave off

eviction from her three-bedroom rental home. Her landlord said she had failed to

pay a rent hike it had told her about, and Allen wanted to assure the judge she had

never received notice of an increase. “We had the exact same story and the exact

same company — VineBrook Homes,” Allen told NBC News. “If I would have told

somebody this, they’d say, ‘You’re making it up.’” Allen’s experience in court that

day was no anomaly, local legal aid lawyers say. VineBrook Homes Trust Inc.,

which owns over 3,000 single-family homes in the Cincinnati area, is one of the

most aggressive landlords in bringing eviction proceedings against its residents,

they say. A big institutional owner of over 24,000 single-family homes in mostly

lower-income areas, VineBrook Homes is a real estate investment trust (REIT) with

properties in 18 states, including Alabama, Indiana, Missouri and Mississippi.

VineBrook Homes was founded in 2007 by Dana Sprong, a Massachusetts real

estate developer and Harvard Business School graduate, and his partner Ryan

McGarry. The company is one of a growing number of institutional investors

6

buying up single-family homes across the country that they turn into rentals. It is

backed by wealthy investors and affiliated with a large real estate and private-equity

firm called NexPoint Capital in Dallas, according to regulatory filings. Purchases of

housing stock by institutional investors like VineBrook have impacts extending far

beyond their tenants, research shows. Ownership by these investors also raises

housing costs across a region, according to 2020 research by the Federal Reserve

Bank of St. Louis. And higher housing costs can contribute to increased

homelessness, a 2020 study by the Government Accountability Office found; it

concluded that a $100 increase in median rent in an area was associated with a 9%

increase in its estimated homelessness rate. Laura Brunner, president of The Port of

Greater Cincinnati Development Authority, an economic development agency,

characterizes VineBrook’s business model as predatory and says it and other

absentee landlords are causing significant woes for renters in Cincinnati. “For

decades, real estate investment trusts and investment funds have been pursuing

office buildings, apartments, retail space, but after the foreclosure crisis, they

started picking up single-family homes cheap,” Brunner told NBC News. “They

realized the leverage is much different when you’re talking about a poor family than

if Walmart is your tenant. It’s easy to bully them, not take care of their needs, evict

them if you don’t like them or raise their rents.” In July 2021, the city of Cincinnati

sued VineBrook to recover over $600,000 in unpaid water bills and fines it owed

for building code violations, litter and trash citations. The suit

accused VineBrook of “negligent, reckless, and intentional conduct” that “interferes

with the public health, welfare, and safety in Cincinnati;” and identified

approximately 50 properties with code violations including hazardous wiring, yards

with grass over 10 inches high, unrepaired roof and fire damage and no smoke

alarms. Compared with other states, Ohio has landlord-friendly eviction laws, legal

aid lawyers say, making it something of a magnet for big real estate investors.

Tenants accused of nonpayment of rent typically receive what’s called a three-day

notice telling them they must move out within that period or face an eviction

proceeding. From start to finish, evictions can take about a month, legal aid lawyers

say. (Gretchen Morgenson, NBC News, 11/22/22)

One solution is to have rent controls and laws limiting the power of speculators to

create these problems. I do not think it is possible to do it at the Federal level.

VineBrooks operates in Republican states. There are over 500,000 homeless people

in the US; and the numbers are growing. Governor of California promised to make

sure that speculators in real estate do not create homelessness in California.

7

Fed Chair Powell once again stated that a part of the inflation problem was the tight

labor market and this can be resolved by opening up to more immigrants.

Republicans will never allow that to happen. As Powell stated, the problem would

get worse as millions of people are retiring early. Most developed countries

(countries in Europe, Japan, South Korea, Most Arab countries etc.) are open to

immigrant workers from third world countries. In fact, countries like South Korea

and Japan teach their languages in poor countries to tap those labor markets. Our

Social Security is dependent on collecting more from social security taxes from

working employees exceeding the cost of the program. Politicians have avoided

cutting social security but now the Republicans are proposing cuts in social

security. That would be a gift to the Democratic Party. Most economists expect a

recession in 2023 but the Inflation Reduction act passed recently might help us to

avoid a severe recession. Government spending on our infrastructure which benefits

the country more than inflationary tax cuts for the rich and the biggest companies in

the US. This comes from Keynesian economics that saved the US from the Great

Depression. Monetary policy is more effective than fiscal policy in stimulating the

economy. Mathematical economics can prove that government spending is more

effective than tax cuts in stimulating the economy and it fair to the middle class and

not the richest 1% of the country. Republicans say that this is inflationary; but we

can make it net disinflationary by raising taxes on the richest who earn more than

$400K per year (as Biden proposed) and taxes on companies. We were all told to

expect a huge red wave. Trump promised a “red tsunami”. Mid-term election

always go against the party in the White House. Democrats should be very grateful

to Hannity/Trump team for nominating “good” Republican candidates. Only

George W did better than Biden and that was due to 9/11. People did not buy the lie

that Biden was responsible for inflation. Unfortunately, Nancy Pelosi lost her

position by a few seats. It will be interesting to see how we will do over the next 2

years. The country should be grateful to Obama and George W and Liz Cheney for

trying to save democracy. Trump has always stated that he really like how dictators

ran countries like China, Russia and North Korea. George Washington could have

easily appointed himself as king but all Founding Fathers wanted to created an

everlasting democracy in the US. If we go in to “isolationism” calling it “America

First”, our economy will suffer in the future. 50% to 70% of revenue of our multi-

national companies come from other countries. If other countries replace the US as

the major superpower, they will make sure that their companies will take the place

held by US companies. As a student of economic history, I can give you many

8

examples. During Biden’s term, our deficit went down by $1.7 Trillion. Since world

war 2, the only time we had a budget surplus was when Bill Clinton was President.

That was initiated by Herbert Walker Bush who went back on an election promise

and raised taxes for the benefit of the country. Since the Republicans did not

support H W Bush when he ran for his second term, George W went on a tax

cutting spree-exploding our deficit. Stay tuned!

Happy Holidays!

Fernando

November 1 Post

Hi Again,

We have been in a bear market for the past 12 months! Our portfolio has been

losing money every month since March 2022 and for the first time we registered a

net gain (+13%) for October 2022! Sharp rallies take place during bear markets!

Who is Carolyn Boroden?.. Carolyn Boroden is a commodity trader advisor

and technical analyst – she is well known in the trading world and for good

reason. Known as the Queen of Fibonacci, Carolyn began her trading journey on

the floor of the Chicago Mercantile Exchange in 1978. She has witnessed many

changes over the years and is an expert when it comes to how trading works. On

10/11/22, on CNBC, she predicted that the market is long due for a “real

bounce” soon. From 10/12/22 to 10/28/22, S&P 500 rose by 9% in 16 days! No

wonder she has been the “queen” since 1978! During the same period, technicians

Carter Worth and Merriman were expecting a decline in the S&P500. On the same

day (10/12) Carolyn predicted a “real bounce”, Carter Worth (leading technician on

CNBC etc) stated that the market is not oversold so “sell, sell”. On 10/13/22,

market (DJIA) fell 500 points in the morning and ended the day with a a 800 gain.

This is a classic turnaround in trend. The question is for how long?

On 4/29/22, we bought Netflix for this newsletter at $190.26 after it had a major

drop. Even though the stock market has been in a major bear market for the

past year or so, since 4/29/22, our Netflix holding is up by 55.35% - in just 185

days! .This is why I am a strong believer in “buying/nibbling when there is blood

on the street”. 60% of Netflix revenue come from overseas. They are not doing well

in the US and Canada but they are doing great in many other countries. Now they

are going to have a lower rate for people who are willing to watch Netflix with ads.

Also they will drop people who share passwords-which is a big problem in other

countries. They have 30% of the global market share and YouTube is the 2 nd highest

with 20% of market share. Most Wall Street experts believe that Netflix will

overtake Facebook when it comes to ad revenue. Netflix ended on 10/28/22 at

$296. On 11/14/21, Netflix was at $678.80! The new low priced ads containing

service is supposed to take ad revenue from Facebook/Meta. TikTok has already

taken away most of their ad revenue. As they did in India, the US government

should ban TikTok from operating in the US. It is safe to assume that China (PRC)

is using TikTok to collect information on all our young people and they will not put

it to good use. However, in the future we would consider increasing our

Facebook/Meta and Intel holdings as we are showing a loss on those stocks on our

scorecard.

Ever since I started writing this newsletter, I have been asking everyone to start

“nibbling” when stocks or markets go down and limit your purchases to low amounts or else

you will get to the famous wall street maxim, “falling knife”. Let me give you a good real life

example by telling you what happened to the money manager, Joseph (Joe) Terranova. Joe

Terranova is a series regular on CNBC's Fast Money and the Chief Market Strategist for Virtus

Investment Partners, a $25 billion Hartford-based asset management firm. Prior to joining

Virtus, he spent 18 years at MBF Clearing Corp., where he was the director of trading and

managed more than 300 traders. For decades, we all knew that the secret to making money in

the market was to buy low and sell high but prior to this bear market, the market was acting

irrationally for years and Joe T even published a book “ Buy high, Sell Higher”. This a sign of a

market top. On 7/28/22, Joe T bought a big chunk of AMD at $97 saying he sees a better future

for AMD. On 10/7/22, AMD fell to $61 and Joe T was complaining that he was wrong on AMD

and he got caught to a “falling knife”! Joe T lost 37% just in 71 days! I have been going in

and out of AMD stock and I think AMD is sure to be a big winner in the next 5 to 10 years.

Prior to 10/7/22, I purchased AMD when it was at a net average cost of $65 but I also purchased

some PUT options on AMD as a hedge with a strike price of $45 (that expire January 2024). As

the AMD stock price declines, my put price will rise. Perfect hedge! If I add my paper loss of

AMD to my paper gain of AMD put options, my net loss is less than $25! I expect (or better

yet-HOPE!) that AMD will continue to decline in the future. On 11/21/21, AMD hit a high of

$154! Yes, it is possible that AMD will never reach that level again; but I think it will exceed

that level in 5 to 10 years.

Treasury-market liquidity is drying up and it’s going to get worse. The problem is bigger than it

seems. Liquidity in the U.S. bond market, the world’s largest, has been deteriorating since the

Federal Reserve began raising interest rates earlier this year. The end of massive monthly bond

purchases followed by the start of quantitative tightening has worsened the problem as the Fed

tries to extricate itself from Treasury and mortgage markets after buying a third of each.

Treasury Secretary Janet Yellen recently said she was “worried about a loss of adequate

liquidity in the market,” as Treasury supply booms to fund government spending but regulations

limit big financial institutions’ willingness to serve as market makers. At the same time, traders

see the potential for another 2% in rate hikes by March 2023. What is happening amounts to an

“illiquidity spiral,” says Greg Barker of Concoda, a geopolitical and financial newsletter. As the

Fed reduces Treasury market liquidity, volatility creates more illiquidity, which leads to more

volatility, he says. The Merrill Lynch Option Volatility Estimate, or MOVE, index, shows how

violent the action has been. The index, which captures bond-market volatility much like

the Cboe Volatility IndexVIX –4.66% , or VIX, does with the stock market, is trading at the

highest level since mid-2009. Some strategists say this is just the beginning. “The USD [U.S.

dollar] wrecking ball will force central banks to defend their currencies,” says Richard Farr,

chief market strategist at Merion Capital, as the dollar continues to rise as the Fed aggressively

raises rates in the face of inflation. “If central banks must defend their currencies, they will sell

Treasuries to raise USD. The act of selling Treasuries is bearish for bonds [meaning yields will

rise], and we believe this worldwide phenomenon is barely even out of the starting gate.”

Moreover, Deluard says a surging dollar threatens a major source of demand for U.S. stocks.

Private-sector defined-benefit pension funds have been selling some $400 billion of stocks

annually, a trend that’s spreading to the public sector, he says. Pension-fund outflows have been

offset by purchases of U.S. equities by the rest of the world, with sovereign wealth funds and

foreign central banks amassing large holdings over the past 20 years. But the bear market and

dollar shortage will cut this source of demand, as dollar-denominated assets are sold to defend

national currencies, he says. Now, everything is getting hit at the same time, says LaVorgna.

That comes on top of a separate problem. The personal savings rate fell to 3.5% in August,

roughly half of what it had been in the decade before the pandemic. As ongoing liquidity

problems portend lower asset prices, LaVorgna says households that can save will increasingly

do so at the expense of economic growth. The impact is potentially significant, given that stock

ownership is concentrated in wealthier households and the top two income quintiles represent

60% of overall consumption. “As long as the official policy is to make the stock market go

down, so that people are less wealthy, so that they buy fewer things, so that prices stop going

up, all while doing nothing about fiscal policy (tax cuts given by Tump), we believe the correct

posture is to be bearish on stocks and bullish on inflation,” he wrote. Concoda’s Barker notes

that the U.S. continues to issue twice the amount of bonds a year compared to pre-Covid. As

increased supply is issued into increasingly illiquid conditions, higher yields and Treasury-

market instability is ahead, he says. That’s a conclusion from which Fed-pivot dreams are born.

But the optimistic view is too shortsighted, with the problems fueling Treasury-market

illiquidity, bond yields, and inflation so pernicious. (Lisa Beilfuss, “The Economy”, Barrons,

10/24/22)

Talking about US Treasuries! In my own way I try to find strategies that will work in this bear

market. When interest rates go up, what happens to bond valuations? They go down! Making

money by short selling the bond market is a “no-brainer”. We can do this in the stock market by

using bond ETFs. Most people prefer to trade the 20+ year bond ETF, iShares 20+ Year

Treasury Bond ETF (TLT) as it is very liquid. I really should have started doing this in July

2020 but better late than never. On 9/22/22, I bought TLT put options (to short sell TLT) with a

strike price $95 (at that time, the price of TLT was at $103) . On 10/14/22, in just 22 days, my

“paper” gain was 46% !! Too early to sell. Since 1/1/22, I have made 5 other trades on TLT

and sold one at 0 profit and gains on the rest : 18%, 47%, 94% and 146% (average time

held: 90 days) !! During the same period the stock market (S&P 500) fell 24.68! It is prudent

to assume that interest rates have to go higher in the short term to tame inflation but at times,

market conditions will lower rates and that will give me more and more opportunities to short

sell TLT with put options.

I love to study option tables. By studying option tables I can get a good idea of what might

happen in the future. Are most people bullish enough? Are most people bearish enough? Are

they rational? In early 2020, when covid hit China (PRC) I started buying put options on

Disney and made a 845% profit within 3 months! Once again, I discovered something

interesting on 10/14/22 with respect to TLT options. I was looking at the TLT options expiring

1/17/2025. On 10/14/22, TLT ended around $98.50. First for all, you lay people, let me explain

the definition of open interest. Open interest is the number of options or futures contracts that

are held by traders and investors in active positions. These positions have been opened, but

have not been closed out, expired, or exercised. I always get in to options with a lot of “open

interest”. On TLT option table for “call options” (expecting the TLT price to go up due to

decreasing interest rates) that expire 1/17/2025, the open interest on options with a strike price

of $160 was 2,220 ! Open interest on all other call options came to less than 1,000! This is

amazing! Let me explain in laymen terms; out of all “traders” who are in TLT call options,

more than 2/3, expect TLT to go up more than 60% before January 2025 and have a significant

lower interest rate by then. Last time TLT was at $160 was in November 2020. There was a

“double top” on the TLT chart (Feb/July 2020) and TLT came crashing down with the Federal

Reserve raising rates to combat inflation. How can I make money with this information? As I

make money by short selling TLT in the short run, I will start nibbling at TLT ETF or call

options. Bond market volatility will give immense opportunities to make money in TLT trades

for the next 3+ years!

Here is another possible strategy we can employ to make money with TLT options that are

connected to US Treasuries. The ETF known as TLT (20 year treasuries) closed at 93.63 on

10/21/22. 2003 to 2009 TLT would reach 96.30 and not go beyond 96.30. So it is safe to

assume that when rates normalize, TLT could go back to the range of 81.70 to 96.30. This

knowledge could give us many opportunities to trade this ETF with call and put options. For

every 100 shares of TLT you buy, you can “write/sell” I covered call option on TLT. For

example, for 500 shares of TLT, you can “write/sell” 5 covered CALL contracts of TLT for

any strike price and for any contract expiry date. Choices! Choices! Studying option tables as of

10/21/22, Options expiring January 2025 with a strike price of $95 was at $16.50. So let us

assume you bought 100 shares of TLT at $93.63 for $9363. Now you can “write/sell” 1 covered

call option contract at $16.50 for which you will immediately receive $1650. From this point

forward, you have many options- pardon the pun. If you want you can just take a vacation till

January 2025. You have already received a 17.62% profit! Not bad for a 14 month trade! Prior

to January 2025, if TLT goes over $95, the buyer will exercise these options; and it is automatic

sale of your 100 shares at $95 (for which you paid $93.63). That is another 1.5% (approx.)

profit on this trade. So the total gain is over 19%! Let us assume that TLT does not go over $95

prior to February 2025, then you can pocket the 16.5% from the option premium and you get to

keep your 100 shares to repeat this kind of trade in the future. In an option premium price you

have 2 components (A) intrinsic value (B) time value. In other words, as we get closer to

January 2025, the price of this option price could go down; also if TLT falls, this option price

will fall. Then you can buy back the covered call option that you “wrote/sold”. If it falls to

$8.25, you can buy back the call option and make a 100% profit-it is like buying at $8.25 and

selling at $16.50; you sold first and then bought it later!

Where are we going from here? What will happen to our financial markets? S&P500 chart

shows a recent double bottom so the stock market could go up significantly in the short run. For

how long though? Sooner or later we have to consider the fundamentals. Remember the golden

rule? Don’t fight the Feds. The financial markets are fighting the Feds. As the former Governor

of the Bank of Israel stated, if the US Federal Reserve pivot to please the market, they lose all

credibility -which is already damaged as they took so long to take action against inflation. There

is no separation of economics and politics. Oxford University that started teaching economics

for undergrads, had a BA degree in Economics, Politics and Philosophy. Rate of inflation is at a

40 year high. All prudent economists (including those who work for the Federal Reserve) know

that 80% of the problem was created by the Federal Reserve by “printing” over 8 trillion dollars

in the recent past. 15% of the problem was created by the huge tax cuts for the rich and the

corporations; and only 5% due to stimulus payments sent to 85% of the US population who earn

less than $50K per year. Fed Chair Jerome Powell admitted that it was wrong for them to wait

so long to act against inflation stating that “inflation was transitory”. I saw many Republican

ads stating that Democrat congress men and women stated that inflation was transitory. By

fooling the masses with these lies, if the Republicans win control of the congress in 2022, it

would be terrible for the middle class and the poor. Democrats can only blame themselves as

they did a very poor job of explaining this situation. They could have used what happened in

UK to make a case against the Republican policies of tax cuts for the rich and cutting essential

payments to the middle class and the poor. Liz Truss who came to power in UK to reintroduce

Reaganomics lasted only a few days in power and becoming the UK PM to hold office for the

shortest period. When she announced tax cuts for the richest people, markets destroyed the UK

currency and the IMF warned the UK government that this will destroy the UK economy and it

is extremely unfair to the middle class and the poor at the expense of the wealthiest people in

UK. According to a certain political theory, if the control goes to the Republicans in 2022,

there is a high probability that Democrats will keep the White House in 2024. The stock/bond

markets are behaving as if the Federal Reserve will pivot soon and start cutting rates in 2023.

Do they realize that the Federal Reserve is trying to tame a rate of inflation that is at a 40 year

high? Jerome Powell stated that he is more like Volker than Arthur Burns. Volker had to raise

rates to 15% to tame inflation. 40% of inflation is due to the rise in housing/rents. Most of the

housing gets bought with cash by billion dollar funds and real estate billionaires and they are in

to price gauging. This has nothing to do with the lack of housing. Fed Chair Powell stated that

he will increase rates to destroy these real estate speculators and then he will lower rates so

most people will be able to afford housing again. They created this problem by “printing” over

8 trillion dollars. So we are sure to see a lot of volatility in stock and bond markets over the next

few years! That is not a bad thing! This is going to be true for all countries. In fact, I have been

buying put options on the ETF known as EEM (Emerging markets) and already I can see gains

in my put options. There is a time to sow the seeds and there is a time to reap the harvest. When

a stock or a market crashes (i.e. Netflix), it is time to “nibble” (buy a little at a time) and know

that in 3 to 5 years, you will be able to reap the benefits of your investment. However, if you

buy too much, you will get caught to the famous Wall Street, “Falling Knife” and lose

everything! While you “nibble”, you can also buy some put options as a hedge or insurance. We

are going to have an exciting future! Be optimistic!

Have a great November and enjoy Happy Thanksgiving!

Fernando

October 2 Post

Hi Again!

Welcome to October- the month of big market crashes (1929 and 1987) !! Most people perceive market crashes as terrible but that is not prudent. There are 2 major advantages in having a crash: (1) Wonderful buying opportunity that will reward you within 5 years! (2) Instead of having a very long, grinding, bear market, this bear market could end soon after a major crash. The Federal Reserve will love a crash as that is extremely deflationary and 99% of the people who will suffer will be the top 1% of the richest people in the US. Even now there are some amazing bargains out there and I have already started “nibbling”. As they always say on Wall Street, get your shopping list ready but only buy a little at a time or you will get caught to the famous Wall Street “falling knife”!!

On 9/29/22, Josh Brown (a brilliant guy!) said on CNBC that due to Fed Reserve action, we have lost $10 Trillion in market cap in the stock market already. The loss is more in the bond market. Most of the money lost belonged to the top 1% richest Americans. Josh also reminded that once again, as inflation rose and stocks/bonds fell, price of gold also fell. We see so many TV commercials on how gold is a great buy as a hedge against inflation and bear markets! Not true! Commodities are priced in US dollars (USD)  so as the dollar has being rising to record levels, it is a drag on commodities. Many countries have tried to replace the USD but that will never happen.

The US dollar (USD) surge is raising interest rates in most countries. They have no choice or else capital will flow to the US like a tsunami. For the past 30 years, the Federal Reserve was a buyer of bonds in the open market but now they are going in the opposite direction. They have a balance sheet worth over $8 trillion, and they want to reduce it. Some say that they should just wait till the bonds mature. Instead the Feds are expected to sell $100 billion in treasuries in 2022 Q4. Even now there are signs of liquidity problems in the bond market. It is prudent to expect rates to keep rising. People complain about a 6% mortgage rate. I paid 11% on my mortgage in 1985.

Carter Braxton Worth is an American financial analyst and stock market strategist. Each year since 2008, he has appeared on institutional investor's All America Research Team, ranked as one of the Top 3 technical analysts on Wall Street. On 9/16/22, on CNBC, Carter predicted that the S&P 500 will go down to 2500! On 9/30/22, the S&P500 ended at 3585. Imagine that! I have already made a lot of money on buying and selling put options on the S&P500 (SPY). Imagine the opportunities it will create for us to short sell with put options and make money! When you combine stocks/ETFs and options, there are so many ways to “play” this game. For a moment, let us assume that Carter Worth is correct and the S&P500 will go down to 2500 (SPY to 250). As of 9/30/22, SPY put option expiring 12/16/22, is priced at about at $130 per contract (100 shares). Let us say that on 10/3/22, you write/sell a naked SPY put option that expire on 12/16/22, you will get $130 per contract. Then what happens? Prior to 12/17/22, if the S&P 500 go to or below 2500, the buyer of that naked option could exercise the option and you will have to buy 100 shares of SPY at $250 per contract. After that if S&P500 keeps going down, keep buying more. You can also buy puts as a hedge.

Experts say not to look at the previous high and assume that the stock will get back to that level. That is very true. Many years ago Boeing hit $400 and now it cannot even go over $150. However, it is a yardstick to make an estimate of the future potential. On 4/29/22, I added Netflix to our portfolio, in just 150 days, it is up 23.9% during this severe bear market!! I am not happy as I wanted it to fall further to buy more. What changed? Netflix will offer a free service with ads (like You Tube) and some say that they might generate more ad revenue than Facebook/Meta! I also bought Ford and AMD. 9/29/22 was a good day to buy AMD around $65. I was waiting for it to go to $60 to pull the trigger but $65 is good enough. Decades ago, when a Wall Street legend was asked how he made money he replied, “I never bought at the very bottom and I never sold at the very top”- if you try to do that, you will miss the boat. Even though I bought Ford and AMD (down about 50% from their previous highs) , I expect them to go lower so I also bought PUT options as hedges. With the expected recession of the century, the probability is high that AMD and Ford will fall significantly in the future.

Over the past few months, I have been using PUTS to short sell 20yr old US Treasuries on ETF, TLT. As interest rates go up, bonds fall. It seems like a “no brainer” but the bond market has been resisting interest rate hikes expecting the Feds to reverse it’s policy in 2023 and start lowering rates again but that probability is very low. Fed Chair Powell stated that he is more like Volker who kept on increasing rates (to 20%?)  rather than Arthur Burns who stop tightening prematurely in the 1970s. However, in 1980 Volker stopped tightening for a short period and inflation roared again so Volker kept on increasing rates for a long time till inflation came under control for a long period of time. Federal Reserve cannot openly say that they want to create a recession, but they know that it is needed to tame inflation. I bought PUTS on TLT on 5/11/22 at $575 per contract and sold them on 9/22/22 at $630 per contract!

DoubleLine Capital CEO Jeffrey Gundlach said the Federal Reserve should ease the pace of rate hikes as the economy is on the brink of a recession. The Fed on Wednesday raised benchmark interest rates by another three-quarters of a percentage point to a range of 3%-3.25%, the highest since early 2008. The central bank also signaled that will raise rates as high as 4.6% in 2023 before the central bank stops its fight against soaring inflation. “I don’t think they are going to be able to pull that off,” Gundlach said on the Fed’s forecast to hike rates to 4.4% by the end of 2022. “I think the economy is going to be showing signs of weakening.” “I do think the unemployment rate is going to go up and I do think we’re headed to a recession, and I think the Fed should have pasted this differently,” Gundlach said. “But now they’re so committed to this 2% that I think the odds of a recession in 2023 are very high. I mean, I would put them at 75%.” (Gundlach “Bond King”, CNBC, 9/21/22)

‘Get out of these distorted markets’: Mohamed El-Erian (Bond King) just issued a dire warning to stock and bond investors — but also offered 1 shockproof asset for safety. Due to rampant inflation, holding cash may not be a wise move. (Higher and higher price levels erode the purchasing power of cash savings.). That’s one of the reasons many investors have been holding stocks and bonds instead. But according to Mohamed El-Erian — president of Queens’ College, Cambridge University, and chief economic advisor at Allianz SE — it might be time to switch gears. “We need to get out of these distorted markets that have created a lot of damage,” the famed economist tells CNBC. “What we have again learned since the middle of August, is that [stocks and bonds] can both go down at the same time,” he says. “In a world like that, you have to look at short-dated fixed income, and you have to look at cash as an alternative.” (Jin Pang, Yahoo Finance, 9/12/22)

 

China (PRC)  is the 2nd biggest economy and they are in big trouble. I always believed that the hype was greater than reality when it came to the PRC.  Modern PRC was built on stolen intellectual property from the west. 25.7% of their economy comes from the construction industry. Some of the biggest companies in that industry are close to bankruptcy. Their banks are having a problem staying afloat. As Steve Weiss said on CNBC on 9/29/22, this industry in China is collapsing now. We still do not hear about the “Chinese debt traps”; these are billions of dollars given by the PRC to third world countries that are run by corrupt politicians who steal most of the money and these poor countries cannot afford basic necessities as all foreign exchange has to be spent on loan repayments to China (PRC). Recently the PRC was reluctant to write off a part of the money owed (as done by Europe) by Sri Lanka stating that it would lead to a precedence and about 20 other countries will ask for the same benefit. About 10% of Sri Lanka’s external debt is owed to China (PRC) but there are many African countries where it is 40% to 50%! I firmly believe that this too will drag down the Chinese economy. It will also have a detrimental impact on countries like Malaysia and Indonesia that export to support the construction industry in China. How can we benefit from this? During the past few years some Wall Street firms were leaving the US for Asia due to our problems, and I believe that was very foolish. I started short selling the EEM ETF (mainly China -Emerging Markets) with put options. The put options I bought on 9/23/22, is up by 8% already while the put options I bought on 1/18/22 is up by 15% and these options expire in 2024.

Recently the Fed Chair Powell stated that raising rates will hurt people now, but it will end up with most Americans being able to afford housing in the future. It seems counterintuitive but it is 100% true. As I have been saying for a long time, with the trillions of dollars “printed” by the Federal Reserve (nothing at all due to stimulus money given out), many billionaires and Wall Street funds bought houses all over the country and kept raising rents at an astronomical level. They also used margin to buy more. Fed action will kill those activities.

When the Federal Reserve lower rates some complain and when they raise rates to curb inflation, people complain but they do it for the benefit of our long-term economic health. This inflation that is quickly turning to hyperinflation should be crushed at any cost soon or everyone will end up in big trouble. Powell stated that he is more like Volker than Arthur Burns and that is good for the US-little pain now followed by a long period of prosperity (30 years?) with a rate of inflation below 2%.

I have been saying that cutting taxes (mainly for the rich) is inflationary and increasing taxes for the rich is deflationary- and some of the taxes collected could be used to help the middle class and the poor. Last week what happened in the UK was amazing! This is something that Democrats can use against the Republicans!  The new right-wing government in the UK reduced taxes which brought their bond market to a near collapse. Even though it is rare, the IMF warned the UK government that this move  is not only inflationary, but it will benefit the rich at the expense of the poor. Soon after the tax cut was announced, the UK currency (pound) crashed! Bank of England (BOE) had to reverse its actions and start buying bonds as they were afraid that pension funds would go bankrupt! The UK pound is 12% of the dollar index and soon after the BOE bond purchase, the US dollar dropped slightly after rising sharply for months.

Have a great month! In the month of Halloween, do not be scared!! Let us hope we will have 60% to 90% crash (from the previous highs)!!

Nathan Rothschild, a 19th-century British financier and member of the Rothschild banking family, is credited with saying that "the time to buy is when there's blood in the streets." Whether or not Rothschild actually uttered the famous line, it reveals an important truth about betting against market psychology.

Have a Great Month!

September 8 Post

Hi Again,

What is the best way to make money in a market that is going nowhere? Select a

stock that has upside potential and buy the stock in 100 share increments and for

each 100 shares, write/sell call options (covered calls). Right now, natural gas

stocks are red hot (till recently)due to the Russian invasion of Ukraine and Europe

trying to get enough natural gas for the winter. I hold many stocks in this industry.

One of them is Range Resource Corp (RRC). On 8/26/22, I wrote (sold) call options

on the shares I hold at a price of $169 per contract. On 8/26/22, RRC was at $34.

The covered call I sold had an expiry date of 9/2/22 (7 days) and a strike price of

$37. On 9/1/22, RRC was at $32 but I bought back the option at $5 per contract,

making a profit of $164 per contract! I still hold the stocks and one day, I will sell it

when it is prudent. All experts agree that natural gas stocks will continue to go

higher and higher; and I disagree. I am a contrarian. If we get to know that Europe

and the US are expected to have mild winters (or something of that nature), natural

gas prices will come tumbling down (as they have been doing for the past few days)

. On 9/1/22, after selling my covered calls (expiring 9/2/22) on RRC, I sold covered

calls on RRC (strike price $35, expiring 10/21/22-in another 51 days) to repeat the

same process. On 9/7/22, the covered call options I sold for $213 has gone down to

$115! If I decide to buy it back that will get me a 46% profit in just 7 days! I also

have some long term puts on RRC as a hedge against a big fall in RRC price.

Pardon the pun but there are so many “options” with “options”!!

When the “fear gauge” (VIX) goes down to 20 or below, it is time to short sell the

market and when VIX goes to about 30, it is time to buy the market-this is all for

the short term. On 8/17/22, VIX was around 20 so to short sell the market I bought

put options on the NASDAQ on QQQs. On 8/17/22, I bought QQQ put option with

a strike price of 200 and expiry date 1/20/23 for $119 per contract. On 9/1/22, VIX

was at 27 so I sold my put options at $214 per contract with a 79% profit in 15

days!!

In investments and trading what is important is to have valid strategies and then it is

all about your discipline!

What is happening in the market right now? There is a tug of war between 2 camps.

The camp that is having a major impact on the market is under the impression that

the Federal Reserve will not be able to keep their word and keep raising rates for a

long time without lowering rates in 2023. They say as the Feds pivoted within the

past 12 months, and they will pivot again and start lowering rates in 2023 as

inflation is already on the decline. However Fed Chair Powell stated that he is

more like former Fed Chair Volker (who raised rates to 15% in the 1980s to kill

inflation for 30+ years) than former Fed Chair Arthur Burns who stopped raising

rates prematurely in the 1970s which led to stagflation and hyperinflation.

Feds will not buy bonds in the open market for the first time in 20 years and they

will start unloading some of their bonds to decrease their balance sheet. In 2018

when they tried to do it, they had to come back and buy bonds to keep the bond

market liquid. This too will raise rates. (Josh Brown, CNBC, 8/10/22)

Monetary policies are more effective than fiscal policies. Mathematical economics

can prove that. When the Feds lower rates and the economy benefits Presidents try

to take the credit and when the Feds tighten monetary policy to lower inflation,

Presidents get wrongly blamed. Even though some inflation was caused by stimulus

payments, 95% of inflation was caused by too lenient monetary policy for an

extended period of time coupled with huge tax cuts for the wealthy and companies

that used tax cuts for stock buybacks (even Trump agreed that this is what

happened) . As Fed Chair Powell stated 1/3 of inflation is due to housing prices and

rent. Many Wall Street firms were buying cash down (leaving out the people able to

buy with mortgages) and then renting those houses and increasing rents over 100%

every few months. Monetary tightening is already paying off. California governor

wants to enact laws to protect people from these Wall Street firms-most probably

those announcements will come when we get closer to the election day. Same kind

of policy changes were made in Canada and New Zealand. Per Tom Lee on CNBC

(8/26/22), housing inventories and used car inventories are at the highest level since

2007. After the Feds tighten or lower rates, it takes 6 months to see the impact on

“main street”(economy).

What could change the situation and drive the market lower? Unexpected

geopolitical events could do that. If China (PRC) invades Taiwan, that could topple

markets all over the world. If Putin wins the war in Ukraine, he is not going to stop

there; and if Putin invades Poland and other countries, that could create more

problems for the world. There is a huge financial crisis brewing in China (PRC)

which will have a domino effect on all other countries. Our 2007 housing/banking

crisis is nothing compared to what is going on in China. PRC homes worth $60

Trillion USD (more than all US stocks) have gone down 40% in 2022. Countries

like Malaysia providing resources to the PRC will see their economies going down

with the PRC.

Lately the media has been very pessimistic about the natural gas situation in

Europe; however natural gas stocks in the US have been going down recently.

For example, RRC was $35 on 8/22/22 and on 9/6/22, it is down to $31. EQT was

at $50 on 8/29/22 and on 9/6/22, it is down to $46. Cheniere Energy was at $171 on

8/24/22 and on 9/1/22 it was down to $156. As I stated before I have been making

money on writing covered calls on RRC. Fortunately, as a hedge, I also bought

some puts on RRC as a hedge and that is up 18.56 in 11 days! So I am making

money on the covered calls and on the puts. On covered calls, when the underlying

stock price go down, you can buy back to calls you sold previously for a profit. On

9/1/22, I sold covered calls on RRC (strike price $35, expiry 10/21/22) at $213 per

contract and in just mere 6 days, those are priced at $175 but I will hold this longer

to obtain more of a gain.

Per CNBC as of 9/6/22, not only UK but all of Europe face a big banking crisis due

to the natural gas crisis. Most utilities in UK and Europe have been buying natural

gas on the spot market and buying with margin (over $1.5 Trillion at risk) and this

is heading towards a calamity. This could be good for the US in the long run.

Citibank announced on 9/6/22 that the European energy crisis will impact the whole

world. Politically, if European voters follow Fox News and elect politicians who

will support Putin, then Putin will easily win the Ukraine war and then take over all

of Europe. If we lose our status in the world, that will hurt US companies as 70%

revenue of most big US companies come from overseas. If Russia and China (PRC)

rule the world, they will get all countries to stop imports from the US. That is

according to economic history. Due to covid shutdowns etc., the demand for natural

gas in China (PRC) has gone down. Per a report on CNBC on 9/6/22, when a

shipment of natural gas or oil is loaded in to a tanker at a US port for a purchase

made by China (PRC), that shipment belongs to China even before the tanker leaves

the US port! Observing satellite tracking devices, they have found that China (PRC)

is taking liquid gas directly from the US to Europe and for what they paid less than

$20 in the US, they are selling it over $50 in UK and Europe!

Some more interesting information per CNC 9/6/22-9/7/22:

 Atlanta Fed President stated that “we created inflation and we have been

reducing the rate of inflation”. All prudent economists knew that anyway.

Monetary policy is the best way to bring down inflation but fiscal policies can

help too. Increasing tax rates for the richest Americans and corporations who

pay next to nothing in taxes and spend trillions of dollars on stock buybacks

too will be deflationary.

 When Obama wanted to extend tax concessions to the solar industry, the

Republicans got Obama to agree to let US export natural gas. Trump would

have done it anyway. The reason we did not allow the export of natural gas is

that we did not want US natural gas consumers to freeze to death in the

winter. Now that is a real possibility. US Dept of Energy warned US energy

companies to keep enough natural gas to support the domestic market. Most

countries to protect domestic consumers ban export of certain items. Example

1- China (PRC) has banned export of chemical fertilizer. Example 2- India

recently banned the export of wheat.

 In 2022, the US exported more energy resources to Europe up to August 31,

2022, than we did in all of 2021.

 20% of US energy comes from Nuclear (clean energy). Several CEOs in the

energy sector were on CNBC and they all stated that the recently passed

inflation reduction act will help the US immensely. Germany and UK too will

rely more on nuclear energy now.

 Within the past 12 months, the US budget deficit declined by $1.7 Trillion.

We are sure to have a volatile market over the next few months as September is

the worst month for the stock market; and all the major crashes happened during

the month of October.

Have a great month!

Fernando