Now What - Long Term Good, Mid Term Ok, Short Term - Bad

 How to position yourself right now.    I am preparing to buy into market after a Medium Sized correction.    

PS - commercial real estate should be the source of some liquidity crunches in the future. 

Inflation Accomodating Stock List According to Warren Buffett

Just 2 Criteria really:

 (1) an ability to increase prices rather easily (even when product demand is flat and capacity is not fully utilized) without fear of significant loss of either market share or unit volume

(2) an ability to accommodate large dollar volume increases in business (often produced more by inflation than by real growth) with only minor additional investment of capital.”

 I think of companies in my portfolio (in order)  that will withstand that criteria like: 

AXP    - As spending increases am-ex automatically collects more income.   Possibility of less spending overall.   However like all companies wages will be increasing.   This company worries me least with regards to inflation.

JPM - Banks in general should benefit from the FED interest rate increases; as interest rates on customer accounts will increase much slower than lending rates.  

AAPL - Has pricing power and committed customers who will not switch because of a little more.   Raw materials for chips etc. are accelerating faster than finished products are increasing however.  

GOOG - Advertising will keep being needed.    Web services alternatives better than google will be hard to find.   YouTube is an undervalued asset that doesn't need to advertise.

FHLC, OGN - Healthcare should be somewhat easier to transfer through others like insurance and medicare.

FDX - Still a key to the boom in delivering parcels for the rising internet sales.   Price increase have been made and dont seem to be too difficult thus far.

BABA - Pass through costs should not really be e    

LGIH - Demand for housing not decreasing any time soon.    But expect headwinds from rising interest rates and the FED.

   

 

How Much Longer for the COVID Bull Market?

Currently the market is valued near previous highs without COVID?   The NASDAQ maybe should be valued at more than before given many technology companies are flourishing and many because of what COVID has forced the economy to do.   However, since then unemployment has RAGED, many companies are teetering (24 HR Fitness, Avis, Hertz,United, Banks, Airlines, Travel, Leasure etc.), and Trillions have gone into the market support systems from the FED and the like.    How much stimulus corrects the math of exponential growth of Covid is playing out.   Seems like time for the market to take a breather or corrections perhaps?   What will things look like in 6 months for the market?

The Bulls: Internet Commerce, Software, Information Technology

• Vaccine: Funding for vaccines is pushing many pharmaceuticals towards solving COVID
• I believe a successful vaccine will be winter spring 2021.
• Stimulus: Congress $3T Subsidies
• CARES act additional unemployment of 600 per week runs out July 31,2020
• HEROES could extend it.
• PPP 
• EIDL
• Rent and Mortgage Relief
• Paid Sick Leave
• Student Loan Relief until September 30, 2020
• Penalty Free IRA and ROTH
• Employee Retention Act 
• Federal Reserve Main Street Lending
• Employee Retention Tax Credits
• Short Time Compensation Plans
• Economic Stabilization Plans
• State and Local Government Aid
• Hospitals and Health Assistance
• Food Banks and Other Food Security- 450M
• FED: Don't fight the fed because they are focused like never before to keep the economy moving.
• Fed buying junk bonds and propping up all corporate debtors
• Speculation: Robinhood example speculation from sports betting and from boredom betters

The Bears: Travel and Leisure, Banks, Cyclicals

• Old Flu: H1N1 could be an additional problem we cant coordinate in conjunction with COVID
• Reopening Bungled: Economy reopening was too fast and no amount of fiscal stimulus can fight the math of exponential growth.
• Stimulus: Some stimulus is running out
• Exponential COVID numbers: COVID numbers are climbing and accelerating in West and South
• World wide covid numbers are accelerating
• Xi vs. Trump Trade heating up
• US elections heating up and there will be an exceptionally divisive for democrats and republicans
• Main street restaurants, travel, hospitality, and other businesses in trouble till a vaccine arrives
• Pfizer has had good trials on 24 people already
• Restaurants and bars at best can make 50% of pre-Covid income
• Unemployment spiking
• Loan delinquencies rising and will create stress for banks and card issuers.
• Home Loans
• Car Loans
• Student Loans

When Will Bears Show Up Again.........

Currently the market is valued at more than earlier this year without COVID?   At least with the NASDAQ.     Since then unemployment has RAGED, many companies are teetering (24 HR Fitness, Avis, Hertz,United, Banks, Airlines, Travel, Leasure etc.), and Trillions have gone into the market support systems.    How much stimulus corrects the math of exponential growth of Covid.   Seems like time for the market to take a breather, right?

Bulls:
Robinhood speculation
Fed buying junk bonds
Congress $3T Subsidies
Don't fight the fed this time

Bears:
H1N1 could be an additional problem
Economy reopening was too fast
Covid numbers are climbing and new accelerating in West and South
World wide covid numbers are accelerating
Xi vs. Trump Trade heating up
US elections heating up
Main street businesses in trouble
Restaurants and bars at best can make 50% of pre-Covid income
Unemployment spiking
Loan delinquencies rising

Finally A Buying Opportunity But When

Is Coronavirus going to slow the oil market to the point that oil companies will start defaulting on bond issues?   This would create a new step down and possibly a capitulation where smaller more speculative companies start to get swallowed by the large integrated oils.

As usual the question is when and how low?

When Is The Bear Going to Be Back

After a sizeable rise in 2019 where valuations start getting high coupled with slower growth ahead there will be a reconning with PEG's in the market. 

Technicals Are Starting to Look Really Negative

Brexit Pending
China / US Trade Not Looking GOOD now or in the future.   Hegemony is at stake not $.
Congo Ebola
Worldwide slowdown except in the US

Approaching Septembers Highs of Last Year

I feel like I am getting lulled into sleep by the new highs and positive news.    What could go wrong with this market:

1. Fed suggests raising rates?
2. Ebola spread
3. Spring starts new offensive in Afghanistan, Syria, Libya....
4. North Korea's missiles start flying again....
5. Trump Impeachment Proceedings
6. Trump starts War

When will the BEAR show up again?

1. Chinese Trade Talks
2. N. Korea Launches more missiles
3. Emerging Markets slow down further.
4. Ebola Scare
5. Europe Slows
6. Brexit proceeds in a disorganized way

Sold ITOT and UPS

Geopolitical Risks

High
*North Korea sells missiles to ISIS, Iran etc.

Medium
*Brexit
*Venezuela Anarchy
*India / Pakistan Skirmish
*North Korea Starts Testing Missiles

Low
*Ebola

Test

Test

Test

Trump Pics Are Getting Expensive: Biotechnology, Money Center Banking, Energy, and Defense

What Sectors to Invest for the Next Year - Banking, Healthcare, Technology, Defense, and Infrastructure

Waiting Patiently for the Next Wall Street SALE - 3%, 5%, or 10%?

I think Healthcare, Banks, and Oil will be good places to hide out in the future.   Also, keep a watch on the foreign markets for opportunities as well.    This commodity bust is bound to hit bottom one of these days. 

There is a ton of cash out there with no where to go?

What is a more compelling investment than stocks?

Buying small companies--- probably most compelling given the lack of new issues on Wall Street but this has complexity and therefore risks of credibility in buying shell companies etc

Bonds ----  the only bond investments that seem at all worthwhile are emerging market bonds which carry an extra helping of risk.  

Stocks ---  are at a record high and record high price to earnings ratio.  So how much further can the market go given earnings are not advancing as fast as the stock prices.   

Real estate --- like stocks expensive and fully valued.   

Gold ---  only really moves as a fiat currency up when international risks are accelerating.   Never a dividend.   

Enticipating a Sideways Market and We are Near A High

Sold Some BP and UPS

 

Buy and Sell

General Market seems highish, but there is a record amount of $$ sitting on the sidelines.    Be careful to the upside.    Generally, I am waiting for lower prices to start buying again.  

I think sells for me are:
BABA (cheap compared with AMZN but has significant accounting hair)

NUE (good run, but commercial construction may have more to go)

I think buys for me are:
JCI (controls are springing up everywhere)
HIINX (Brexit will pass and international markets will get rid of uncertainty)

CAT (great company shitty environment - coming back from a bottom)
IBB (a bargain, but can we get it for less)
IYH (Healthcare is pretty recession proof and generally pretty low right now)
TRN (oil cars have new regulations and wind energy is strong and getting more compelling)

Time to Start Selling Again?

Even though the Technicals still point in the up direction, there are still plenty of bearishness indicators which have really not changed much in two months.       

I am thinking I will consider selling some in the following order:
GE
NUE
ITOT
LEN
MOAT
CAT
BA
AAPL
DIS

Let me know your thoughts....