Q: I like that gold could hold and the miners “could” double. What type of correction would you look for on ngd or the others to add more since I am still underweighted? People on flecks site are asking how to add now that the rally may be real. Is this where you use Fibonacci, or back to last breakout, etc?
J: I’ve tried to answer this question a few times in the Q&J. I can’t tell you how you should trade. I can only share how I am trading and I have a full position in the miners. I have no idea what a pullback might look like. I think they are in the process of bottoming and then trading much higher.
Q: Of all the mining/gold stocks in which you hold positions, which are the best buys during this recent retracement? I want to add to my positions in this sector.
J: They’re all different which is why I own them all. Easiest thing would be to just buy GDX or GDXJ. After that I encourage you to do your own research to determine which is best fit for your goals and risk tolerance.
Q: My question is why do you short using 3x levered ETF’s and not a greater value of an unlevered inverse ETF? I would guesstimate the impact of time decay on a 3x ETF would have a meaningful impact over time, or is your ‘short-term’ investment timeframe such that it is not of concern.
J: Yeah. I don’t hold them very long at all and I personally like that I don’t have to commit much capital to them to get broader short exposure.
Q: How long are you going to stay with the short on Soxxs – I must say I found your logic compelling – unfortunately it was one of my worst trades of the year. But I put a stop on it at 47 – it’s 40 today !
J: Yeah. I certainly have now given back my SOXS profits made on the way down. This is why I scale in and out of the short side. Scaled into that one far too quickly.
Q: 2 questions:
1) You are bearish on the stock market and therefore steer clear or broad market exposure. This makes sense – you’re contrarian and we’ve been in a bull for quite a while. Have you ever been very bullish on the whole market when others were bearish? Like, did you buy up the market in 2009? Or are you generally more bearish in bull markets than you are bullish in bear markets? Am I making any sense here 🙂
2) You have VNQ as part of your tactical allocation, but not VNQI. Is there a reason you prefer domestic REITS over international REITS? I’m curious because you do have international equities as part of your allocation, but not international REITS.
J: Absolutely. I was rip-snorting bullish in late 2008/early 2009. See this: Fortitude in the Face of Crisis and this: TD Indicators: Another Tool for the Trader’s Toolbox
As for VNQI, I just haven’t looked at it that closely but I do like the idea of foreign real estate to further diversify the ETF portfolio.
Q: Was I the only one that noticed the drawing of the boat filled with rowers at the beginning of last week’s market letter? Was this meant to honor the rowers in last weekend’s Head of the Charles regatta in Boston?
J: You were the only one who remarked on it. I only intended it as an allusion to the “row, row, row your boat” theme.
Q: The SPY appears to have just completed a Double Bottom since mid-Aug. Shouldn’t this imply a more positive near-term perspective on the overall market?
J: I don’t really use technical patterns like this in a vacuum. The sentiment surrounding a pattern is usually more valuable to me than the pattern itself. Right now I think far too many players believe the bottom is in and are now expecting a 2011-type scenario will play out. That makes the pattern suspect, imho.
Q: I have no idea what % you would be short right now but I can’t take it anymore! I have been at least 50% cash in my IRA’s and all cash in my personal account since 2014. FANG has turned to FAG and its awesome! Going all in with TQQQ right now for all my personal accts on margin! Wish me luck, These big tech stocks look cheap especially AMZN = Amazing! I don’t understand this market at all but S&P 5000 estimates are for 14%+ growth next year to some $135 In operational S&P 500 earnings . With these uber low interest rates you can put a conservative 20x multiple on that and come up with a realistic reasonably valued 2750 target on the S&P 500. This implies major upside. Get out of KMI kind sir. I hope you aren’t stuck in bearish mode when the rest of the world seas reasonable valuations and strong earnings growth rates. I like your format et all but your bearishness has been contagious for nothing but losses thus far. I must stick with my guns and buy and hold from here on!
J: Can’t tell if you’re serious or not.
Q: What if I was?!?!? I am really mixed here as we have seen higher PE ratios in the past especially the early nineties when they busted above 20 for the first time ever with 300% higher interest rates. If we trade over 20x on next year’s earnings your current your portfolio will be nothing but pain. Very frustrated RIA down South!! Shorts look like they are toast until next August. This is a carbon copy of 2006/2007 and we seem to have a ways to go before the next big shoe drops sometime in 2017. Let’s face the facts and say we have been entirely too bearish! Just take next years expected earnings number you have and x by at LEAST 17.5 or maybe 20. Once Goldman and the boys blew out many fickle investors in the 8/24 ETF mini crash I was worried the all time highs would be back in play. What the HFT’s did to poor small investors on 8/24 was criminal but they need to run it back up to sell out and repeat. Jesse what are your best guess earnings estimates for next year? We were supposed to be down 9-10% this earnings season but this was the classic lowered and beat game that has been getting played out since at least 2013. It looks like true EPS will be flat at best. The uber bulls are foaming at the mouth once energy and the like rebound into next year. Realistically we could see much higher annual S&P operational EPS before the cycle ends. Hell there is no cycle anymore only with the Fed!!!! I am truly worried for my family/business as global CB’s could give a rats about what happens to us when their QE train derails and explodes into a fireball. The bigger the bubble the harder the crash. The bubble is in all global Central Bank’s reckless behavior. It needs to be stopped or slowed down considerably before the next big turn in the tracks. Who wins when this explodes? GOLD/Silver?
J: I totally sympathize with your frustration, especially this week. Central Banks step in and markets respond again. Personally, I think this whole thing is very near the end game – as evidenced by broadly increasing risk aversion. When (not if) investors realize the CB’s can’t magically make the markets levitate during a global recession risk assets will do poorly. The more desperate the CB’s get the better gold with perform.
Q: What are your feelings on Laszlo Birinyi predictions of an s and p of 3200 by 2017?
J: See this: https://twitter.com/jessefelder/status/628976339383488512 and this: I’m Hearing A Lot Of Smart People Use “The Four Most Dangerous Words In Investing” These Days