Lately I’ve been posting the odd blog with musings and thoughts of my own, and some drawn from various outside sources. This blog follows that pattern. Note that its less narrative, and more “clipped”–I’m trying to feed you with lots of interesting points where real opportunities might reside, without too much of my own noise (well, not too much…).
Year-to-Date stock performance Indexed, market-cap weighted…
FB, AMZN, AAPL, MSFT, GOOGL: +23%
Other 495 companies: -8%……!!!!!
AMZN, FB, AAP charts below…..these three have the sharpest ascents. We are underweight the group, but do hold GOOGL and MSFT–not quite so parabolic, not quite so expensive. Still, we are not interested in chasing this group with too much of our capital.
Larry McDonald, Beartraps:
Whether a vaccine is coming in 6-9 months or 9-12 months but most of us believe that one is coming. When that happens, the valuation of all of these crowded COVID stocks may unwind.
Also from Larry: Stimulus Bill in the Works:
Next approximately $1 Trillion COVID19 econ stimulus package taking shape. Individual industries may see some form of relief (ie entertainment and leisure hard hit by pandemic); liability protection and individual stimulus checks losing steam more now
My two cents worth: Watch stocks like Disney, and other established / well run entertainment stocks. We don’t own any yet. But we are keeping an eye on them. DIS is testing the neckline of its post- COVID rally.
FITCH SAYS CANADA’S RATING DOWNGRADE REFLECTS DETERIORATION OF PUBLIC FINANCES IN 2020 RESULTING FROM CORONAVIRUS PANDEMIC
Keep an eye on Canada”s debt ratings, and the subsequent consequences to the Canadian dollar. Should a second agency (Moody’s, DBRS?) confirm a deteriorating credit for Canada…wait to see a major outflow from other countries….
This development continues to emphasize why investors need to hold assets outside of Canada.
“Told ya so” : For the past 4 years, I have blogged, and blogged, (and blogged ….) about Canada’s Liberal Government’s irresponsible spending and ignorance of basic financial concepts–I was doing this prior to this downgrade. This wasn’t stimulative spending to benefit Canadians. It was non-GDP spending in a vain effort to buy votes. Corporate bribes, special interest groups favoritism, and the final nail in the coffin of the very expensive & vain attempt at a doomed UN seat. Economist Philip Cross spent 36 years at Statistics Canada, the last few years as its Chief Economic Analyst. He knows Canada! And early this year (pre-COVID), he warned that the Liberal government had spent too much taxpayer money unproductively and irresponsibly. Chart below says it all.
He warned this lack of fiscal responsibility would leave Canada ill equipped, should a long lasting crises evolve. Well, here we are, 6 months later. Watch the credit ratings for further developments.
Highly recommended viewing: Cross’s hauntingly accurate interview where he gave this warning can be viewed here. Everyone should watch this.
Democrats may take both Presidency and Senate…what sectors will do best if that happens?
Recall this blog where I showed evidence of a potential market selloff into the election if the Dem’s are winning. By Larry’s research, technology, which has been the key driver of this market (FAANG’s) may suffer the most.
Again, to quote Larry McDonald of Beartraps…
“What are the top 5 Biden Clean Sweep Trades?
Consumer Stapes long
“What’s interesting about cannabis? A large U.S. equity market drawdown in 2H 2020 nearly assures investors a House, Senate, and White in the hands of Cannabis loving Dems. One can make the argument, for the next 180 days, this sector offers a compelling risk-reward. The U.S. legalization upside is upwards of 300-500% for U.S. companies and 100-200% for Canadian companies.”
My thoughts on pot
The Horizons ETF shows signs of failing at the $8-$9 neckline of the current consolidation pattern. The most widely traded marijuana stock, WEED-T, is also floundering. We had a small position in that stock and sold it on the rally. So far, we don’t see enough evidence for another entry. But, it is worth watching. A break of these necklines would imply significant upside, per Larry’s comments above. I’ll wait and see rather than play it ahead of time.
Own some equity in countries with declining COVID cases
I’ve noted in past blogs that we are inching into various emerging markets and into Europe for a longer termed play. Below is a chart showing recent COVID case developments. Note that EM-Asia and European cases are flat/declining, vs. Latin America and America. Canada is doing well in its COVID numbers–although we prefer to remain underweight our index due to debt and political reasons noted above (and, of course, the ever-perpetual flat stock chart…).
Europe could play catch-up to its old highs, similar to the SPX. That might be worth a 15% pop from here
Here’s the chart for the Asia index, ex-japan. Its been strong. Still a bit of upside in it before the old highs are tested.
Well, that’s all I have for today. Off to the cottage! Back next week, and I’m sure there will be lots to talk about.