One stock that my brother recommended to me was Drive Shack. It is a Top Golf competitor that, as most other non-essential businesses, has been closed down due to the COVID-19 pandemic. This week, they opened back up and their stock opened up on Tues as well, closing at $1.43.
On Tues I visited a new beach where I saw some wind surfers. It reminded me of my kite surfing in Morocco.
I also worked a bit on my RV – mainly cleaning it up and testing the fridge which still refuses to operate.
The market will probably have a hard time living up to 2019. The Dow Jones Industrial Average has risen 23% in 2019 after gaining 190.17 points, or 0.7%, to 28,645.26, this past week, while the S&P 500 index has gained 29% after rising 0.6%, to 3240.02, and the Nasdaq Composite has climbed 36% after finishing the week up 0.9%, at 9006.62. The S&P 500 and the Dow both closed the week at all-time highs.
For reference, today – May 11th – the DOW closed at 24,221.99, the S&P 500 index closed at 2930.19, and the Nasdaq closed at 9192.34.
As the market attempts to perform a V recovery as Trump wishes, these final thoughts of this article are worth noting:
All that’s missing is what could go wrong. We have a few things: The trade war between the U.S. and China could heat up again. Europe could become President Donald Trump’s next trade target. Inflation could heat up and cause the Fed to start thinking about raising rates again. And the economic acceleration the market appears to be expecting might simply fail to show up.
Everyone else may be looking at the bright side. We have our doubts.
I am a bit surprised that these long picks so closely matched the SPY. With 500 stocks, the SPY provides better diversification. I prefer to be a bit more conscious of the stocks I am picking and don’t want to blindly invest in an index.
For some reason, I started looking at the current price of the S&P 500 of $2929.80 and looked back to when it was about this price in the past. On Oct 4, 2019, S&P 500 closed at $2951.01. Much more synchronistically, the S&P 500 hit a local top of $2925.51 on Oct 3, 2018. Over the next 3 months from that date, the S&P 500 dropped 17% to $2447.89. The Oct 3, 2018 date is synchronistic to me because I referred back to it in AAPL Stock Prediction for Oct 3, 2019, in which I noted:
On Oct 3, 2018, AAPL hit an all time high of $233.47 and today it is down over 20% from that high, opening at $178.37. Could I surf to a universe where APPL stock is up over 25% from today by Oct 3, 2019? In that universe, AAPL would be above it’s all time high price of $233.47. While I can imagine how I could increase my odds of that universe, I do not feel a calling to do so due to the limited influence I believe I have on that event. So, I’m left with a sense based primarily on wishful thinking that AAPL stock will hit a new all time high before Oct 3, 2019.
The AAPL stock prediction was close. AAPL closed at $220.83 on Oct 3, 2019 and a week later set a new high of $236.21 on Oct 11, 2019. On Mar 20, 2020, AAPL hit a year low of $229.24.
If it’s synchronistic, then there must be some meaning to it. The meaning that I’m feeling is that the world is at an inflection point and something unexpected is about to happen.
Even though gas prices at the pump are cheap, relatively speaking, there are still those for whom the price is not low enough. Propane tanks were stolen recently from a Blue Rhino gas dispenser. This event is closer to a universe where goods are scarce, such as a universe I blogged about yesterday in 20200427M Day 118: Who Is John Galt?, before filling my car up with gas today. It was interesting how I came to notice. I saw the Blue Rhino dispenser and, for some unknown reason, was drawn to go look at it even though there was no damage from the exterior and no real reason for me to go check it out. As I walked towards it, a guy with a mask on started whistling at me from outside the gas station. When I turned to notice him, he told me that the dispenser had been broken into. It was then that I decided to investigate it further and see how the back of the dispenser had been pried off.
A few days ago I was moved to take a picture of a man blowing bubbles along West Cliff (20200423h Day 114: Bubbles in the Air). I wonder now if the US dollar is in a bubble. The value of the US dollar has remained strong, relative to other currencies, and has even held up fairly well against the price of gold. Investigating some ratios involving oil, gas, and the US dollar will help us understand the universes around us.
In Figure 1, the recent drop in the price of oil due to the supply/demand imbalance can be easily seen, even when priced in ounces of gold. Apparently, the demand for gold has not dropped, or at least not dropped more than the supply of gold.
In Figure 2, it’s interesting to see how much of the S&P500 increase in value is over the long term is actually due to the decrease in the value of the measuring stick – the US Dollar. When the S&P500 is measured in the closest thing we have to a gold-backed currency, $50 American Gold Eagles, then a more real evaluation of the value of the S&P500 over time can be seen.
Figure 3 is evidence for why I am currently long Silver. I primarily purchase Silver through the ETF $SLV because I can purchase using my retirement account and quickly move in and out of a position without worrying about loading up a truck.
Figure 4 is interesting because it values the price of gold in inflation-adjusted dollars. This, of course, hides the depreciation of the US dollar. If CPI is to be believed as an accurate measure of this depreciation, then gold appears to be over-valued at this point. I think it is more likely that the CPI is lower than the actually inflation rate. The way CPI was calculated was changed in 1980. If CPI were still calculated in the same way, it would be higher (see Figure 5).
What seems likely to happen in the short-term is:
Demand for oil will increase as the world economy comes back online. This will cause the value of oil to return to it’s pre-pandemic value;
The Fed will continue to prop up the bond market, including mortgages and corporate bonds, thereby preventing a deflationary implosion that would result otherwise;
The “free money” that businesses and people receive through unemployment and stimulus checks will also prevent deflation from spiraling out of control;
The supply/demand ratios for goods and services will both decrease and, once the economy is back, this will cause an increase in prices; and
The Fed will hesitate to raise interest rates too fast and this will result in cheap money flooding the financial system, which will encourage what will look like speculation in the financial and housing markets.
In the longer term, there is a measurable probability that real inflation will finally get above 2% and possibly even get out of control. This definitely happens in some nearby universes – just not sure now how prevalent these universes are.
I’d like to end with some quotes from fellow wordpress.com bloggers:
Regular readers will be aware that a feature of my work is to look at the impact of inflation on the ordinary worker and consumer as opposed to central bankers who love to torture the numbers to get the answer they wanted all along
I had thought that given the neighborhood the house, despite its small size, would sell for about $400,000. That would be a sizable increase from the price it sold for 60 years ago. I was wrong though. Asking price is $599,900, 50 times what my parents paid for it. No wonder my mother and I were a bit discombobulated.
A grand inflation in front of a depression is pretty much the end of an economy. If the government prints money in serious quantities and issues debt in more or less unlimited quantities the game is over. The gold bugs will have won.
A rather smart investor named Rick Rule once said, “We don’t want to live in a world with $10,000 an ounce gold.”
Right now there is a greater than zero chance that this will be exactly the world we live in.
The stock market is still quite volatile, as evidenced by the daily movement in my top 6 stock picks: AAPL, IBM, WETF, SLV, AMD, and SFM. This is definitely not as diversified a list as I would like, with 3 technology companies in the mix. However, it is much better than it was 6 months ago when it was all in AAPL and AMD at about a 75%/25% mix. In December and January, I sold some AAPL and AMD and waited for the coronavirus crash before buying or adding to positions in IBM, WETF, SLV, and SFM. My mix is now 44%/20%/14%/11%/6%/5%. From a diversification point of view, I feel much better. My average price for these stocks are $1.23, $109.20, $3.50, $14.25, $10.00, and $16.48.
I would like to be in a universe in which there is an app, program, or website that will give me a summary financial report of my stock holdings. As a website, I would send up some JSON such as:
Santa Cruz, CA: Last week the stock market had a good week – one of the best in quite a while. A few days ago I spoke to a friend from the future who is betting against the market. She is not alone. I just googled “hedge fund bets on sell off” and found the following – interesting from Nov. 22, 2019!
Ray Dalio replied to the WSJ by posting that it is misleading to report that he had a bearish view of the stock market and that his hedge fund, Bridgewater Associates, had no “net bet” that the stock market would fall. What seems clear is that he was hedging his stock portfolio to protect it from a drop in the overall market.
So, Ray was apparently feeling the recent market plunge back in October of last year and started buying “insurance” against a total market correction. It would require delving into conspiracy theories to ponder the reasons why he felt the need for such insurance. Perhaps he took notice of the Event 201 Pandemic Simulation Exercise. From the website:
Event 201, hosted by the Johns Hopkins Center for Health Security, envisions a fast-spreading coronavirus with a devastating impact
The world’s biggest hedge fund manager’s short positions amount to more than $5.3 billion in France and $4.7 billion in Germany, while in Spain its shorts add up to almost $1.4 billion and $821 million in three Italian companies.
Data was not available to show whether Bridgewater, which has $160 billion in assets under management, holds more European stocks than it shorts.
Another hedge fund manager, Bill Ackman, posted about a 100x return on his company’s website:
On 23 March, we completed the exit of our hedges generating proceeds of $2.6bn for the Pershing Square funds, compared with premiums paid and commissions totaling $27m.
I’m sure if I searched I could find other examples of huge bets against the market. Given the fear caused by the pandemic, and the obvious negative effect it is going to cause on the world economies, a bet on the market failing seems like a safe one. However, my thought is that any bet on a failing market should be truly a hedge in this time of uncertainty and act to cushion the loss in value of a net long position. By being long on solid companies and adding a hedge against the entire market dropping, hedge fund managers should be able to sleep better at night.
My thoughts on where the stock market is going is all of the above. It will drop due to the increasing costs of the pandemic, it will rise due to the monetary and governmental stimulus, and it will stay the same due to the balance of these two. There are a set of universes for each of these three scenarios and I would like to plan so that my portfolio stays roughly the same in each of these cases. For bonds, I like floating over fixed, shorter over longer, and treasuries over non-treasuries. For real estate, I like residential over commercial. For equities, I like American over non-American – although the stronger dollar is going to be a weight on American companies. For currencies, I like the Dollar over the Euro and Yuan and the Yen over the Dollar. For precious metals, I like Silver over Gold. There is a high likelihood that one or more fiat currencies experiences hyper inflation and the Dollar is not immune.
My brother asked me for stock picks for Monday and this is the list I gave him, with prices as of the end of the day last Friday, April 3rd. Once the U.S. makes it past June 8th, the following stocks should, as a group, be a diversified portfolio that will beat the performance of the SP500 (SPY=248.19, S&P=2488.65). I plan to track them from here until June 8th, and until the end of the year.
I noticed the post yesterday has the wrong day of the week (0402F). It should have been “0402h”. I’m sure the fact that I wrote it on Friday contributed to this mistake. But, it could also be explained by universes colliding. I hope to get back to posting every day, at least until day 160 of this year, June 8th, by which time I hope to be back in a universe in which I’m rarely thinking about or posting about coronaviruses or pandemics.
Today I experienced merging back into a universe I was in a week or so ago. Before the California shelter-in-place order for Santa Cruz County, I had planned to rent a room in a community house. Then, when the initial order was until April 7th, I delayed my move in until that date. Later, when the initial order was extended until May 3rd, I decided to stay where I am until the end of April. However, after feeling into the different universes, I feeling a stronger alignment with the universe where I move in April 7th. I spoke with the owner of the house this morning, and now plan to move in on that date. I wonder if this will pull closer to me universes where the Santa Cruz County shelter-in-place order ends earlier than May 3rd, or at least doesn’t get extended longer.
Some other sets of universes merging this weekend are:
This week a record 3.28 million Americans applied for unemployment benefits. Yesterday, the Dow had it’s best 3-day gain since 1931 and today it finished the week up 12.8%, it’s best weekly advance since 1938. The S&P 500 rose 10.3% – best week since 2008. The Nasdaq rose 9.1% – best week since 2009. U.S. COVID-19 cases topped 100,000. U.S. Influenza A cases topped 128,000 and Influenza B cases topped 113,000. Also, the largest relief package ever, at $2 trillion for coronavirus relief, was signed into law.
Today, the DOW had a gain of 11.37%, the best one day gain since Mar 15, 1933, which happened to be the best one day gain ever at 15.34%. Today’s gain narrowly beat out the gain of 11.36% on Sept. 21, 1932. Just last week, the DOW had the second largest one-day percentage drop ever of 12.93%. This was only a few days after the then 4th largest one-day drop of 9.99% (and don’t you wonder who kept it from being 10%). And this was only a few days after the then 11th largest one-day drop of 7.79%.
For the last four days, I’ve been sensing a change in my universe surfing. I am no longer interested in this universe where a pandemic sweeps the globe. In this universe, I consume more twitter than I have in a lifetime prior. My intention to create instead of consume has been challenged by my weak free will in the face of the universe. I have a choice now. I can continue to be pummeled by the huge waves of the universe sending me into this pandemic. Or I can strengthen my free will and surf to a new set of universes in which COVID-19 is not dominating the daily thoughts of myself or the world.
From what I know about universe surfing, I can’t do this alone. So, if you find yourself reading this, please join me in surfing to a universe in which SARS_CoV_2 and COVID-19 are not dominating the world’s psyche and are only a distance memory. Oh, and your retirement savings will also be higher in the universe I’m surfing to. I’m putting myself on an 80-day surfing plan from 4 days ago. Target date of June 8, 2020, the 160th day of this year.
China announced that it had no new cases (excluding imported cases) of COVID-19 yesterday and the 13-week US Treasury Bill index (IRX) interest rate fell to 98.18% to 0.003%, within rounding of zero percent interest. The 5-year and longer treasure yields all rose as the US dollar and liquidity are now precious assets. March 18th was another volatile day for stocks. AAPL hit a low of $237.12, only a few dollars above the then all-time high of $233.47 that I blogged about in 2018: AAPL Stock Prediction for Oct 3, 2019. More interesting, the NASDAQ closed at 6989.84, below the 7560 prediction I felt “more than 50%” confident about in Aug 2018: NASDAQ Composite Index prediction for March 9, 2019. It’s interesting that I made that prediction for 2019 and it is now true in 2020. The NASDAQ actually fell below 7560 almost a week ago on March 12, 2020. Oh wow, I’m going back to look at 2019 and the NASDAQ on March 12, 2020 closed at 7591.03 and was 7505.92 the week before. So, very close to 7560 on March 9, 2019. Interesting! What I wrote back in August 2018 seems quite synchronistic to me now:
I’m feeling a universe where it is possible for me to sense large changes in the financial markets before they happen. In this universe, I’m sensing a large change in the negative direction occurring either between October 5th and October 19th, on November 9th, or between December 26th and January 19th, 2019. Based on this, I sense that there is a greater than 50% chance that on March 9, 2019, the NASDAQ Comp will be lower than 7,560, the value it was on March 9, 2018.
I’m more curious about why I feel compelled to make this prediction. Only the future knows.
“Feeling” the direction of the market is risky business. If you were to ask me to feel the market now, I would likely stay with safe bets all based around the belief that a year from now, the US dollar will be of relatively lower value compared to other fiat currencies and precious metals. Partly because of this, and partly because the stock market has taken a beating due to the coronavirus pandemic, the NASDAQ, SP500, and most publicly traded stocks will be of higher value, priced in dollars, than they are now.