Q: Another one for your Q&J: you are bullish on gold miners however have not yet moved to Full positions for any of your holdings. What would be the trigger for you to do so?
J: This is confusing, I know. I apologize for that. To be clear, I have a massive miner position right now, super-sized.
Q: Jesse – just sharing this with you:
A perspective (via Schwab) – margins have only dropped in energy sector so it may not be an issue.
J: Then again, it’s usually not wise to rationalize an indicator like this.
Q: Are you seeing a bearish engulfing pattern on the miners and does that bother you? what would you be looking for? A decent sell off could be a good entry point for adding more?
J: I don’t see anything bearish in regards to the miners except the fact that they’re a bit overbought in the short-term. However, overbought can stay that way for quite some time.
Q: As we go through earnings reporting, is there any convenient report or statistic that would give a running scorecard of the earnings reports and future expectations?…besides the market…
J: Good question. I subscribe to FactSet’s free reports. They do a great job.
Q: Yeah, I know an anecdote isn’t data….
My father-in-law is 67 and has been retired since 50 (sold an IT company during the tech boom). One of his three brokerage accounts is with Edward Jones and I asked him to check his weighting of equities to fixed interest: came back at ~50:50. And this is for a retiree!
Being rather horrified I told him to get it down to 30:70 ASAP (at the very least until we can meet up and discuss), and his adviser gave him a spiel about not trying to guess the timing of the market. My F-I-L said the adviser is a young guy and likely working off a script from head office.
J: Yeah. It’s really tough to get people to disregard the WS line of BS. Deeply seeded.
Q: Once again, great write up on this weeks market action.
I also wanted to say thanks for not using the portfolio percentages on your trade ideas. I was finding myself just following your trades without checking much for myself. Not having the percentages was little frustrating at first but I do think it is better for us followers in the long run.
I’d love to keep hearing your thoughts on oil as time goes. I think were getting close to the point where debt starts catching up to a lot of oil players.
What service do you use to track insider buying?
J: Thanks. My friend, Asif, runs this site: http://www.insidertrade.net I don’t think he’s accepting any new subscribers but he does have a free weekly newsletter.
Q: Hi Jesse, HLF stock chart doesn’t look good today and is in a downtrend. It looks like some negative divergences. Does any of this bother you?
J: Downtrend? It’s well above its 200-dma. I still have a sizable position and feel comfortable with it.
Q: Just a quick question on money management. You have stated in the past that the trade ideas are how you allocate your liquid net worth. Do you handle retirement assets differently (broad indices, bond funds, etc., maybe similar to your ETF portfolio), or are you truly investing all money as you’re showing on the web site? Just wondering if you maybe have some exposure to stocks elsewhere that you’re not representing on the site.
J: Nope. I want nothing to do with any broad market exposure at all right now.
Q: Just curious how you are thinking of handling KMI earnings release tomorrow? Hold tight, sell half… ? I’m sure I’m not the first to ask…
J: I’m just holding. I have a long-term timeframe with this one. What the stock does after one earnings report doesn’t matter much to me (though I’ll read it with interest to see how the underlying businesses are doing).
Q: Just read you latest alert. By “UPDATE (10/13/15 – 10:16am): I’m taking this to a full position now. For me, this means I’m now fully invested in the short side and net short against my long positions.” does that mean (hypothetically) if the current market value of your trade portfolio is $100k that more than $50k is in the short positions?
J: No, it just means I have more short exposure than long (mainly because the short ETFs are 3x levered). A portfolio manager can hypothetically be 100% long and 100% short or even more extreme than that using leverage.
Q: Thanks for the post today. I understand your point on not relying on quantitative analysis too much. However, it seems the main point of your article was that the primary trend should drive your decisions. I was very surprised by this comment, as most of what you do is quite contrarian and often ignores the trend. Most of your current long trades were purchased in downtrends and under the 200dma (miners, HLF, KMI, NLY, etc.). Can you shed some additional light on what you’re trying to say about ignoring the trend?
J: Hahaha! I was waiting for someone to bring the up. Yes, I am by nature a “swing trader.” This means I look for trend changes but it doesn’t mean I don’t respect the trend. My larger point in the post is that if you are looking at a certain study it makes sense to look at it in the context of the larger trend. The signals are very, very different when you look at them that way.
Q: Is the rally today likely because of expectations for more stimulus from China? If so are there any indicators (besides the market) that might give an early warning when that counter trend is done? Or… what about waiting until they announce an action and wait for the bounce then short it at the top of the bounce? At least you know they will be sitting on their hands and not interferring with the market until they see the effect.
J: My best guess is that it’s just an options expiration thing.
Q: I had bought gdx on your recommendation. Seeing the miners pop over the last 2 weeks, I got a case of coulda-woulda-shouldas, wishing I had gone in more (I know this is not good). Seeing how much gold miners has risen recently, should I hold off from putting more in? Would I just be chasing gains, or do you think they have more to go (I have a long term horizon)?
J: I think they have much farther to go over the next few years. Short-term is anyone’s guess.
Q: You are a very smart fellow and I truly do enjoy your research. What are we missing here? I have been cautious since the end of 2013 with nothing but pain to show for it. The hardest trade is the best one to make for SURE but being a contrarian has been super difficult to say the least! (energy, miners, commodities, emerging markets etc…) Who in the heck is buying at this point?? It seems like the magic invisible hand that has been driving this market upwards is at work AGAIN since yesterday’s stunning mid-day turnaround. I use a conservative Div Discount Model and using my realistic assumptions I get the market to be worth 1500-1550 at BEST on the S&P 500. I am using a true 5%+ ERPremium on top of the 2.1% 10 year treasury yield for a total of 7.25-7.5% RRoReturn. Are the Wall St. banks using much lower ERP total numbers?? If you drop these RRoReturn numbers to 5-5.5% the S&P 500 can easily be worth 2750 or more!! I follow your informative tweets like a hawk but the daily 4-10 bearish pieces show me that you may have some kind of directional bias against U.S. corporations that are seemingly thriving in today’s shady WStreet. It’s all well known that they are using balance sheet tricks and stock by backs by issuing debt at a record pace. By the time a crash MAYBE comes around in 2017-2018 will we have missed another 25-40% price run?? Look at the early 90’s where PE’s finally cracked through the 20x barrier during a profit recession just looking at 10-30 year rates back, this market is cheaper by a large amount using the low rates today. We could easily see all-time highs if rates stay low like you and so many others think they will, heck a future 30 PE may be in the cards!!. If the various indexes blow through their 200dma soon, it will be the green light for all the idiots on the train to jump in big again forcing everyone who sees this for what is to COVER in mass. I just no longer have any faith in this market and am very confused as to how insiders and respected advisors all seem to be on the TINA train and buying FANG. I am one confused RIA down south!!
J: Anything is possible but I believe for new highs to be captured the credit market has to heal some and I just don’t see any sign of that happening right now. Without credit, buybacks and m&a become much more difficult and these are really the main drivers of the stock market right now. All in all, I still believe this is only the beginning of a brand new bear market. I agree with you that fair value is far below current levels. On top of that, fair value could easily be undercut in a prolonged bear market. In fact, it’s happened every other time stocks have fallen from extremely overvalued levels in the past. It just doesn’t happen on my time frame or yours. It happens in its own time and so requires patience most investors just don’t have.
Q: Loved your post tonight. My biggest mistake, too, is not letting my winners run.
This is in part why, for my long term hold, I directly register the stock in my name with a holding company. Much harder to mess with. With online brokers, that TRADE button is too easy to hit.
J: Great idea!