Q: Tenet has dropped like a rock over the last 2 1/2 months. Buy opportunity? See article link below. John Greenwich
J: I don’t know. I haven’t looked at it. Generally, I want to stay away from healthcare right now because I think the costs debate is only just beginning and sentiment has only just begun to shift from incredibly bullish.
Q: You may have seen this.
I have no clue how good of a predictor CEO’s have been in the past.
But the one question I have is “if they think stock is overvalued, then why are they all buying back stock???”
According to the latest Global Business Outlook survey jointly conducted by Duke University and CFO magazine, 55% of U.S. companies say they think the stock market is overvalued, while only 6% of them think the stock market is undervalued.
More than 1,200 CFOs, including 510 from the U.S., participated in this recent quarterly survey. The survey questions cover five main parts: Business Optimism, CFO top concerns, Employment and wages, stock market valuation, and risk management concerns.
J: Great question!
Q: Do you think there still a lot more selling to come in biotech ?
J: Over the long-term absolutely. Healthcare costs will likely be an election issue so the macro backdrop will be negative for some time. That said, I actually took a stab at the long side briefly last week. They rallied hard!
Q: I’ve been using the SPX as a proxy for broad market sentiment in a global portfolio. Obviously, markets and securities diverge, but market correlation seems to rise in a downdraft as we have now. I’ve been concerned the past year about valuations, earnings, and slowing global growth; shifting into a rather defensive position.
The question that nags me is when to move to a more bullish stance. I saw guys refuse to acknowledge the rally since 2009, sitting out much of the stunning gains. I don’t want to be them in the next cycle. I agree with your analysis that markets need to come off more, but markets seldom do what we want. What’s your take on when and how to edge out of bearishness and toward a more aggressive posture?
J: Great question. See this week’s market comment for details and thanks for the inspiration!
Q: Good morning I’ve been looking for where this is posted I just figured out that you actually need to go into the position to see your little note I’ve been looking in the alerts and have only been seeing –the same archives —it’s something you may just want to pass along to new subscribers.
J: Thanks for the heads up. Will do.
Q: was it the BOJ buying US equities as part or their QE that caused todays reversal? They sure were moving in sync
J: They almost always do move in sync which is one reason I watch USDJPY so closely. I can’t tell you why, though.
Q: Bend area’s economy expanding, panelists say; However, expansion could bring labor shortage
J: It sure looks like a labor shortage from where I’m sitting.
Q: Who knows if we are going to be faked out again in our miners with a false breakout, but once they start up they will be explosive. You have talked about your buying but mainly on dips but what about adding on a breakout? What do you look for and I assume you may use tighter stops? Would you look for a few days of upside and taking out of 200 dma or something along those lines? AEM looks like it will be the only one to break through the 200 dma. GG and ngd and nem aren’t close to the 200 so how would you decide which or when to add? Also, do you ever differentiate on the miners and have a full position for investment but a small trading position that you are more nimble with? Thanks.
J: These are tough to answer. I think it really depends on your personal trading style. I wouldn’t normally be compelled to add on strength. It’s just not in my nature. That does work well for others. I have built up a rather large position right now and am happy just sitting tight with it.
Q: Would you comment on the sky high bullish gold miner sentiment seen in stocktwits.com?
J: I don’t quite know what to make of it. Some of the ST sentiment signals are valuable – usually the most volatile ones. Others not so much.
Q: The question I keep asking myself is why is this not ’98 or ’11 all over again. I personally think it’s much easier to explain why it’s not 2011. 2 years into a recovery, the jury was still out on whether or not fed policies worked. There was much less euphoria in the market – what we saw mid 2013-end of 2014 was simply astonishing. Credit spreads weren’t in a year + upswing. Earnings were actually growing. Etc/etc….
I find it harder to explain why it couldn’t be ’98. I know there are major differences from a fundamental standpoint now as there was then. Rates were at 7%, then dropped to 4%. Euphoria was definitely present in a major way. Earnings were growing then as well.
I guess my question focuses around whether QE4 (potentially) could equate to a rate cut, thus reviving the animal spirits in the marketplace. Or as Hussman writes, we would need to see massive improvement in investor preference toward risk. During QE3, the link between money printing and commodity prices broke. It’s possible, even logical you might say, to think that the link between equity prices rising w/ money printing could break if investors maintain a risk averse preference. It’s tough to say. But I’d be interested in hearing your take on why it may/may not be a repeat of those times.
Also, side note. Been trying to find the chart of QE and asset class prices. Can’t seem to dig it up. Do you happen to have one handy?
Thanks again for your insights. They are certainly very helpful and appreciated.
J: Thanks for bringing this up, I’ll write something more about it this weekend.
Q: It’s been over 2 months I subscribed for your premium report and I must say I am very happy with your service. I like your timely updates and help with your views on market and directions.
Thank you and keep up the good work.
My question is w.r.t to my 401k account (Self Directed Account – SDA).
I like your idea of going inverse ETF way when market is looking bearish. But with my 401k account (SDA), there is a restriction with inverse ETFs to trade.
Do you know a better or alternative way to play inverse/short given the restriction on my 401k for inverse ETFs?
I can think of options trading (put options) , but again, I don’t have much knowledge to play that game.
Would you recommend anyone you know who can help with options trading insight/report just like your premium report? Appreciate your help.
Any other thought is highly appreciated. Thank you once again.
J: Options are really tough. 90% of traders lose money on them. For most people I think it’s best to just reduce exposure to stocks to whatever degree they feel comfortable with.
Q: A number of things, including various chart analysts like Andrew Kassen, seem to think that the downward trend is intact and that the current bounce will quickly reside to continue to a lower low.
Do you think the case is strong enough to re-short after the bounce?
J: I think this is just the beginning of another major bear market so I believe it’s prudent to keep some hedge or short on at all times. From a trading perspective there is a chance for a continued bounce after today but as of right now I’m inclined to use it to scale back into shorts (as I started to do today) rather than try to play the potential upside.
Q: I toy around a bit with the market some and run a real estate based investing company. I have my RIA license and have begun managing money for family and friends. I think KMI is a house of cards and would encourage you to reread their fundamental cash flows etc… since you espouse what Buffett preaches. Valuentum is the leader in regards to copying Buffett. I have found their research almost humanly perfect for this cash flow based valuation methodology. You need to investigate their findings about what a house of cards KMI is. I would play the MLPL ETF for the “trade” instead. Also what is your take on Natural Gas? The FCG ETF looks like a DEEP contrarian winner soon going forward much like gold/silver miners do. MU in the semi space will be the first to turn, this one is CHEAP!
Like your web site, just wish the Alerts were more organized and I have no idea what ¼, ½ position sizes mean as far as percentages go. Most financial subscription web sites resort to using a “model” portfolio based off of 50k or 100k so you can truly express what your position size is!
Thanks for the good work. It’s been tough being somewhat bearish this last year or so.
J: I did read this piece today: http://valuentumbrian.tumblr.com/post/130073604290/warning-the-mlp-business-model-may-not-survive
I think it’s way off base. Kinder Morgan isn’t doing anything different than Buffett is doing with Berkshire’s energy assets. He’s pouring a ton of money into the sector right now.
I used to provide position sizes but I found that too many people just copied it and that’s not the point. I’d rather have folks determine for themselves what a full position is to them. I’m much more aggressive with my own money than anyone else really should be 😉 I’ve discussed this in the Q&J many times over the past couple months.
Q: Appreciate all your thoughtful commentary. Everyone knows that the biotechs got slammed last week. Forget Hilary, they were over owned and over loved and a bear will get to them all. More curious is the damage to all of healthcare. HMOs, drugs, device etc. Certainly a bit over owned but I do believe they are telling us a good deal about this market but quite possibly the exorbitant cost of healthcare. Many of the wkly charts are awful.
Any thoughts, would love to hear them
J: I agree. I think people are generally becoming worried about the soaring cost of healthcare, not just drugs. Incomes have been stagnating and they approved a 30-40% increase in health insurance premiums here in Oregon for next year. It’s astounding. Sounds like it’s going to be an election issue.
Q: Planning on an S&P bounce @ 1867?
J: Actually looks like we should bounce right about now (1875).
Q: Thanks for your timely Updates & Alerts. These indeed help a lot to understand the market situation, especially to someone like me who is relative new and amateur to finance.
I hold a portion of BHP in my portfolio with 20% loss from my average purchase prices. I hesitated to sell it a while ago as its dividends become attractive as price going down (over 8% now).
But the price have been tanking a whole and technical trends looks horrible…
I just don’t know how to deal with it now. Do you think I should take a stop loss here as miner has not bottomed yet?
J: I can’t tell you what to do with the stock. It’s not one I own or would consider right now. As for stopping out, I think that if you determine you were wrong in your original thesis or the stock just fell further than you’re comfortable with selling is probably a good idea. You can always reevaluate and buy it back if you decide it’s an attractive opportunity after all.
Q: Have you considered shorting some of the no-revenue biotechs, as now the IBB bubble has been pricked any new equity far more expensive to obtain? I think PBYI for example will be out of cash by end CY17…and is still +$2b market cap. Also CLVS, GBT, SAGE, TSRO.
J: I’m not comfortable shorting any of the individual names as analyzing their drug pipelines is totally outside my circle of competence. I just wouldn’t feel comfortable at all. This is the main reason I like to use the ETF.
Q: Have you looked at any MLP etfs considering the beating they’ve taken?
Also, given silver’s price relative to gold, which I believe is at or near the lowest levels seen in quite some time, have you considered putting money to work there?
J: I’m buying a bunch more KMI this morning, Brent. In fact, I just sent out an alert in that regard. As for silver, I’m more comfortable with gold right now and already heavily exposed via the miners.
Q: Does the chart of GG bother you in that it looks like it has broken the double bottom? What would motivate you to sell GG and just stay with the others? AEM looks like the strongest stock. How can sentiment on GG be almost 100% bullish?
J: Not at all. It hasn’t made a lower low yet. I would have to see gold fall much further to abandon any of the stocks right now. As for the StockTwits sentiment, there is very little message volume in the GG stream so I don’t put much stock in it.
Q: AAPL data today arguably supports the thesis:
iPhone 6S announced sales were a ‘record’, however included 2 weeks of pre-order availability + China, whereas iPhone 6 announced sales (from Sep 2014) had only 1 week of pre-order availability and no China. Seems sales have likely been brought forward from 4Q15/1Q16?
J: I like all of the Apple suppliers as shorts. I also like Intel as a short which is why I’ve just been using the semi ETF. I’ve got my eye on it for a reentry.