Food for thought

Periodically I like to post thoughts and market musings swirling around in my head.  I also like to provide you, the good readership, with bits and pieces of interesting research pieces I have come across. All in, some questions to ponder on, and food for thought to help you out with your analysis.

 

The current rally was predictable. But will it last?

Here’s my latest video. It features the short termed technical timing system that I have talked about many times on this blog. On the video, you will see the indicators that were predicting the probability of a neartermed rally. So far, so good. Note that the rally must hold after the initial thrust. Its vital that 3600 is maintained on the SPX to avoid making a lower low on the charts.

The parabolic rally on the USD may be ending

Do you recall my “Think for yourself” blogs (part 1 & 2) where I cited RBC’s optimistic market predictions for 2022 back in December 2021 (while I noted I was bearish)?  And when I cited the story back in August that the bear market was over (when I noted I didn’t trust that rally)? Recently, I’ve harped on an overbought USD. Here’s another piece of evidence for the decline in the USD. As with the optimistic forecasts for the markets late last year, and the optimistic forecasts for the end of the bear in August – now we have the “runaway train” story for the USD. Learn to think for yourself! Here’s the latest (Oct 1, 2022) Bloomberg magazine:

 

 

High yield spreads are not at bear-market bottom levels

US high yield spreads against investment grade bonds are still not at bear market levels. We are currently at 550 bps vs typically 800 to 1000 bps in bear markets. Does this mean more pain to come for corporate bonds and equity markets?

If you’ve not done so already…

We’ve taken on quite a few new blog subscribers recently. If you know of people who might like this blog – forward it to them and encourage them to subscribe to as well. They’ll get the blog sent to their inboxes immediately after publishing, just like you do. Timely information is vital in this market.

Some of the newer readers may not have read my detailed Market Outlook blog – Market outlook – inflation, recession, and opportunities – ValueTrend

Also for newbies – don’t forget to subscribe to our semi-regularly published newsletter too – which contains analysis that is normally only for ValueTrend clients. The only thing we filter out in that newsletter are the individual positions and rotational (buy/sell) notes. You still get to read all of the macro positioning notes that our clients see  – here.

 

Don’t fight the Fed

It ain’t over until its over….

“Tighter monetary policy has begun to cool demand and reduce inflationary pressures, but our job is not yet done,’ said New York Fed President John Williams

A Fed pivot is coming, but it ain’t quite here yet. Job openings have declined (recession?). Our bet is year-end or early 2023 – possibly mid-November at the earliest. But who really knows? A Fed pivot will likely end the bear. Unless it doesn’t.

Don’t bet on the green targets

In Emerging Markets, billions of human beings were consuming ZERO carbon vs. now – a large carbon demand growth. Poor countries CAN NOT fund/ execute wind, and solar investments fast enough to meet demand / realistic carbon neutral 2080. If Germany made such a spectacular wind, solar, renewables $600B miscalculation, what about India? – BearTraps

What Australia Energy and Climate Minister, Chris Bowen has to build to reach 2030 renewables target:

  • 40X 7MW turbines every month until 2030
  • 22,000 500W solar panels every day for the next eight years, or 60 million by 2030. That´s 22k solar panels PER day for 8 years!

Um, OK.

Oh, also, we can feed the expanding world population by cutting fertilizer usage.

A letter from Keith Richards to the Great Reset gang:

“Dear Australia & gang. I have a perpetual motion machine that I just built–happy to sell it to you. Please ignore the physics. It’ll work – pinky promise!”

As an aside – an interesting article by Edison Investment Research noting that ESG policies are focusing on the wrong things. Specifically, 70% of  global greenhouse emissions are linked to the way material is handled (aka manufacturing, packaging and waste management /recycling). In other words, Reset governments focus on the feel-good but do-little (except wreck havoc) ESG strategies without addressing the elephant in the room.

Airlines – a value play?

Canadian airlines have been under restrictions not seen in most of the developed world – for far too long. My wife recently travelled outside of Canada and was amazed how Canada was the only country imposing these restrictions on passengers. Air Canada recently blasted the Trudeau government, saying restrictions “were not justified by science”.

Following political science (not actual science), Trudeau has finally had to retract his unrealistic authoritarian vaccine and COVID policies after mounting criticism. I guess the opinions of those fringe minority truckers and their unacceptable opinions are now justified…

“Air Canada welcomes the removal of these restrictions, acknowledging that air travel is safe and that the measures were not justified by science. We believe it will greatly facilitate travel, help to continue stabilizing the country’s air transport sector and support Canada’s economy.”

While this is positive for the company (and travelers), the stock needs to break its descending triangle before it’s technically attractive.  The stock is worth watching, as is this video by comedian John Julian Stetch, who’s made a name for his hilarious Trudeau portrayals. “Trudeau urges more Booster Juice

 

 

ValueTrend Performance

Yes, a systematic process can limit your risk and protect your capital. Buy and hold – not so much in bad markets.

*Since June 30, 2009

Disclaimers:
The information contained in this report is for illustration purposes only and was obtained from sources that we believe to be reliable however, we cannot represent that is accurate or complete. The portfolio may invest in leveraged or inverse exchange traded funds and thus there may be exposure to aggressive techniques which may magnify gains and losses and can result in greater volatility and be subject to aggressive investment risk and price volatility risk. All performance data represents past performance and is not necessarily indicative of future performance. The North American Index is comprised of 85% S&P TSX300 and 15% S&P500 USD . ValueTrend Wealth Management’s liability shall only be attached to the accuracy of the information contained in your official statement of account and information in your official statement of account will always take precedence over the information contained in this illustration.

The above performance chart was produced for illustration purposes only based on a hypothetical $10,000 investment amount and should not be used as the basis for making investment decisions.  The ValueTrend Equity Model performance is based on portfolio holdings of Portfolio Manager Keith Richard’s equity portfolio since June 30, 2009 and the chart is based on monthly rate of return calculation gross of any fees and assumes reinvestment of all distributions with no cash outflows or inflows.  From inception to January 2016, the equity platform management fee of ValueTrend was 1.50%.  This fee was increased to 1.75% effective February 2016 to reflect increased trading expenses.  Every effort has been made to compile this material accurately however due to the inherent possibility of human and mechanical error, the accuracy and completeness are not guaranteed.  All performance data represents past performance and is not necessarily indicative of future performance.

ValueTrend Client survey

In August of 2022, clients once again participated in an online client survey conducted by an independent third-party “Absolute Engagement”. Once again, we wanted to hear your feedback on our services, and to identify areas where we might improve through a confidential & independent audit. We were thrilled and humbled by the results.

92% of respondents gave us the TOP ratings for overall satisfaction. The survey went on to ask what the most important factors are when evaluating our services (or any Portfolio Manager).

Here are ValueTrend’s scores on each factor, on a scale of 0 (dissatisfied) to 5 (perfect):

  1. Trustworthiness: 4.8/5
  2. Technical Expertise: 4.9/5
  3. An active, analytical investment approach: 4.7/5
  4. A quick response to questions & needs: 4.8/5

Absolute Engagement noted that we scored amongst the highest levels of satisfaction they have seen in the industry. They were particularly impressed that we chose to conduct the survey in a bear market. Clients of most Portfolio Managers and Advisors are particularly prone to negative responses during such times, apparently. We did note that our investing approach is considerably more risk-protective than most.

 

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