Q: What do you think of Meb Faber’s ETF’s? Particularly, I find GMOM interesting. Do you see any big inherent risks to this set up?
J: I really like Meb and appreciate the research he does. That said this fund looks fairly expensive and is also very lightly traded. I’d probably wait to see a bit more history here before I even dipped a toe.
Q: In your latest chart book you provided lots of charts on market risk appetites. Did you consider including the performance of the Smalls vs Bigs? That seems to be another worthy indicator to counter the Bull theme of “no recession likely as USA is immune to increasing global malaise” given smaller stocks generally have greater domestic exposure than larger.
J: The equal weight SPY to cap weighted SPY gets at this sort of relative performance but I hear you. After all the data out today it’s getting very hard to argue the US is insulated from the global economic slowdown.
Q: Any thought on moving into VIX (Via VXX or UVXY) in the near future given the crazy complacency in the market and poor internals (lows/highs, etc)?
J: Personally, I don’t really like to use VIX products. Really tough to trade a derivative of a derivative of a derivative. Just my 2c.
Q: Are you concerned about the potential impact of environmental legislation on KMI and gold miners? I’ve read articles that claim that KMI’s recent drop is due to fears over the new Canadian government’s nixing of the Keystone pipeline. I imagine that mining companies, many of which have really bad environmental impacts, could also be negatively affected by environmental legislation. Focusing so much of your current portfolios on miners and oil transfer, are you concerned about the impact of environmental legislation on these holdings?
J: This is a good question but it’s always been a question for these companies. I see no reason why policies are likely to change right now.
Q: Tuesday…what do you make of the action of the market today versus the vix? Just seemed there were waves of selling/recovery without much fear… for that matter….what does the market look like/behave like, if the big guys are selling into strength to raise cash? Multiple times during the day selling and letting the market recover or do they sell just once and let the market recover overnight? Just trying to put together hints to recognize it in the future.
J: I honestly don’t know what to make of it. Options market is affected by so many things short-term it’s hard to make much sense of a single day’s action.
Q: Has a stock like DDD caught your attention at all? About a buck off all time lows, sentiment still very negative?
J: It has. Technically, it looks like it should bounce here but I’m not at all confident with my understanding of the business (moat) or the stock’s valuation to make an investment decision.
Q: Looks like AEM and NEM had good earnings. Maybe that will get them to break out of the consolidation pattern. Can’t believe Gold was slammed when fomc came out. what a bunch of losers they are. You getting nervous about the shorts? It is getting painful but your charts show no breadth, etc.
J: Very pleased with AEM and NEM results. They both want to break out soon looks like. I’m not nervous though disappointed I scaled in too quickly into the shorts. Most, if not all, of the profits I made on the downside originally have now been given back. That said, topping is a process and I’m still confident that’s the situation we’re facing now.
Q: Why do you have short term government bonds in the model portfolio, and in particular why are you heavy on them for the tactical portfolio? Aren’t short term government bonds the most susceptible to rising rates – falling price relationship? Is this a bet against the fed raising rates when they say they will? Or is your rationale that with a bear market more people will go into safe short term bonds pushing prices higher regardless of fed actions?
J: Good question. Actually short-term government bonds are the least susceptible to rising interest rates. Because the mature so quickly they move very little in relation to changes in interest rates anywhere along the curve.
I use this fund mainly as a cash alternative. I like short-term government securities better than other money market fund options because they have very little risk in general. Not only is there is very little risk from interest rate moves there is also no default risk. The latter can’t be said of all MMF assets.