Q: I understand the gold trade. I agree that the Fed will probably be slow to raise rates even as inflation kicks in. But, TLT… in a rising rate enviroment? China selling 10yrT and stock market dropping in the short term are good for TLT but China could do another round of selling any time. I get the impression it will be a very choppy ride short term with expectation of lower long term. I am not sure how to navigate that kind of trade.
J: Folks have been using the phrase “rising rate environement” for a long time without any evidence of such. Ultimately, I agree with Jeff Gundlach and Ray Dalio – way too many are bearish on long bonds right now. We are far more likely to see another round of QE than a true “rising rate environment” any time soon.
Q: Perhaps Buffett’s advice of putting 90% of investment cash in an S&P 500 index fund and 10% in a short-term government bond is the way to go. Which leads me to this question, is your model portfolio designed to mimic the long-term performance of Buffett’s strategy or more about capital preservation, or some other objective(s)?
J: The model ETF portfolio is my best attempt at generating the best risk-adjusted returns via buy and hold. The tactical side of that portfolio is meant to further reduce drawdowns. The trade ideas are my attempt to find the best individual risk/reward opportunities I can find.
As for 90% in stocks, that’s fine so long as it suits your timeframe (very long), goals and risk tolerance. It’s my personal opinion that it just doesn’t suit most people.
Q: Jesse Since I follow your trade ideas and not really tactical how does this effect what you are doing? You have talked about tactical as to what people should look at but not sure if that is what you are doing? Thought trade ideas was what you really do? Are you actually buying gld and tlt? I have positions in ngd aem and gg so would you be adding to those or use gdx and gdxj? I would love to add to gld or I have used dgp in the past and no tlt?
J: The trade ideas are really what I’m doing with my own money. I also manage accounts for some friends and family that’s sort of a combination of both the ETF portfolio and the trade ideas. For less aggressive accounts I like GLD. For more aggressive I like the miners. GDX and GDXJ for those who want to stick to ETFs and NGD and GG for those who want to own individual stocks.
Q: Does this seem like a good time to really add to all our miner longs not just aem and nem?
J: As a group, the miners are my largest position right now. I’m very, very bullish on their long-term prospects. I don’t know where they’ll go in the short run but I like the backdrop and how their acting in response.
Q: Hi Jesse
I notice your recent individual gold trade ideas are in companies that dominate GDX. Why not simplify and gain trading exposure to gold through GDX/GDXJ?
J: I think that’s probably the best option for those who want the ease of an ETF. For me, though, I’d rather hand pick the stocks and be able to weight them as I choose.
Q: Hi Jesse,
Just joined the premium service. What do you think about NBG as a contrarian buy? Do you think the dangers of the bank going under are overblown, making it unreasonably hated?
J: I generally dislike big banks because their financial statements are just a black box (unlike the old thrifts which were much simpler). Not even their own top execs seem to be able to put together a quarterly report they can stand behind. As for a greek bank? I have no idea. Could be a decent lottery ticket sort of speculation, I guess, but there’s certainly no way to come to any sort of true investment thesis there.
Q: Have you thought about PCLN?
J: I haven’t. It’s not one I really follow. And at 30 p/e (20 ev/ebitda) for 7% revenue growth and 10% of net income going to employee option grants, it doesn’t interest me much.
Q: Hi Jesse, hope you are well. Just a quick Q&J on your current thoughts about KMI and whether adding here is something you are considering. Thanks!
J: Yes. You read my mind. I’ve been seriously thinking about adding to it in the trade ideas.