Summertime Rally - It Ain't Broke So Don't Fix It

Here it is the groove slightly transformed
Just a bit of a break from the norm
Just a little somethin' to break the monotony
Of all that hardcore dance that has gotten to be
A little bit out of control it's cool to dance
But what about the groove that soothes that moves romance
Give me a soft subtle mix
And if it ain't broke then don't try to fix it


~ Will Smith + DJ Jazzy Jeff ---Summertime

I often use my blog as my personal sticky notes. It becomes a treasure trove of how I traded the markets --- say during a previous recession. When I look back during those times, I laugh at the days I was recommending stocks (in a recession) --- but it serves as a healthy reminder that there will be plenty of good days as the economy heals and eventually rebounds. Are we already there? Well that's why I put on the track Summertime. While some may say its still technically Spring, the markets are roaring back and it feels like Summertime in the air. Good data is in the news for a change to break the monotony. It's cool to go outside and goof around in your backyard. It is so nice outside, many states are even trying to re-open BUT with the shelter-in place strategy working --- I often hear 'if it ain't broke then don't try to fix it'. I want to highlight the difference between MACRO AND MICRO.  While I may believe there is a long difficult road ahead (MACRO), I can't deny that weeks of 4/20 and 4/27 have been really good so far (MICRO).  Here are some of the headlines:

Fear of Missing Out -- FOMO RALLY 

The S&P 500, aka the S&P, is one of the more commonly followed stock indices. It is a good reflection of the U.S. stock market as it tracks the performance of the largest companies listed on stock exchanges in the United States. The all-time high of the S&P is roughly around 3380s in February 2020 --- well I'll be the first to say I'm very impressed, while also very shocked at the massive rally off the bottom. This is why I allocate funds in different buckets. My investment account has been fully funded in stocks and I have bought a few new stocks but mainly I've monitored the stocks that were down and glad to see many of them moving up off their lows.

COVID-19 Treatment / Vaccine News

Gilead Sciences (GILD)  This morning as I was watching the markets, a ray of hope sent the stocks shooting up. GILD released preliminary results of a coronavirus drug trial which appears to indicate that at least 50% of patients treated with a 5-day dosage of antiviral drug remdesivir got better and more than half were released from the hospital within a two week period. My understanding of the data appears to show similar results with a 10-day dosage (so positive news for a lower dosage period). Remember, this is NOT a vaccine only a treatment to save lives! But I think the market is looking for rays of hope and people will begin to see a path forward if they know there is an opportunity to survive this deadly virus.


Real Estate   

Developer DR Horton (DHI) said it has observed an upturn in weekly sales for the most recent two weeks.  March was been a rough month for real estate sales. I assume the industry needed some time to adjust and adopt technology to allow for more remote video based tours. A green chute in the housing sector can be seen as mortgage applications to purchase a home pivoted directions and moved higher a week ago --- up 12% week over week, says the MBA. This uptick was seen across the 10 biggest states and may kick-off a snapback spring of homebuying.

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URB Lesson:

Macro - I like to tell people to plan long-term 3-5 years and have opinion/view/perspective on how you expect things to play out. I watched the movie 'CREED' and based on your opponent you have to develop a game plan...even when you're the world champ.  Example: Towards the end of 2017, I had a view that the market was no longer cheap. So I changed my approach, I trained for 6 months and found ways to make income on quick trades. Normally I like to buy and hold for many years but it life we must adjust to the data (or your opponent).

Micro - This article is to keep it real. The last few weeks have been positive. That is great for me, my family, the city and state, country and world. Be flexible to take advantage of these micro moments. I am long in my stock portfolio but I can still be conservative in my retirement account.

What I am Trading - I have been actively trading UBER (UBER) over the last 3-4 weeks. I get in and get out. For example, I think its all time low is 18 --- I bought at $23 in my retirement account and just sold today. I was pleasantly surprised with how it performed. In my stock account, I was early on UBER and bought at $27ish. I traded around the position using options and took some nice income wins and then I sold off the position this week. But I need to research my opponent UBER further. A good friend of mine...billionaire Jim Chanos thinks UBER is a bad investment --- so I can be stubborn OR I can be balanced. He wisdom has prompted me to sell my position even though I was up over 33% in one account and had small gains in another. I must remain humble and see life and trades through the eyes of others. If not, you don't see the hidden risks around the corner.  Why do I respect Jim so much he makes money typically off of betting when stocks go down...very difficult thing to do. 

On advice from another famed short-seller Carson Block of Muddy Waters --- they bet that Luckin Coffee would tank. China's next Starbucks was a high flyer UNTIL this month: Luckin Coffee fell over 70% after the company disclosed its chief operating officer fabricated 2019 sales to the tune of over $310 Million dollars. How in the hell do you hide $310M when the whole world is watching you. That's my MACRO concern with this Summertime rally - we are still scared, jobs lost, many lives lost --- BUT the market looks as if that's all in the rearview. For now, I'll enjoy cutting the grass and chasing the kids but I do wonder what will be the damage from the coronavirus recession. 

Notes from the Matix - April Download Pt II

Pharma
Pharma is short for pharmaceuticals and this has traditionally been an industry that I have shied away from as I’ve tried my best to incorporate a rule that I have learned from Warren Buffett and Peter Lynch awhile ago: Invest In Things That You Know

This is at odds at times with the strategy that I’ve been harnessing over time and that’s being a MACROVALUEQUANT. Often, my screens lead me select a stock that I believe has positive momentum (QUANT) and I further weed out these stocks if they are not trading at a low valuation (VALUE) and support my general view on what industries and sectors should do well in the current global economic environment (MACRO). My screens recently led me to 2 pharma stocks (See Pharma Premium Alerts Post) and I was very reluctant to nibble at the bait.

March Matrix Notes

I could do a follow up on why I'm a MACROVALUEQUANT, but who has time, its time to unload my thoughts and unplug from the matrix. I do a lot of reading on the train and listening to the radio and have started taking notes. In the past few weeks, I've tuned into the following discussions and readings:

Ray Dalio (find his discussion on CNBC)
Mr Dalio is the hedge fund titan who runs Bridgewater Associates and rarely makes tv appearances (I heard). After a few moments of defending his unusual methods running his firm, the man behind the world's largest hedge fund was very open about the cycle of leveraging and deleveraging and where the US is at in its cycle after the crisis. He talked about the following subjects:

He noted US Equities are cheap and will benefit from currency devaluations
The money flows will benefit equities
Portfolios are not properly weighted, too much in dollar denominated currencies
Gold is a currency that many are underweight
Stimulus will last through the 4th quarter, and private credit growth will be needed

MacroValueQuant

Why I am a MacroValueQuant
I can tell that I take trading too seriously because I have named my strategy. I couldn’t really describe it many years ago when I first started but I know that it has changed over time. The reason why I describe it as a MACROVALUEQUANT is because it represents a combination of what I slowly have morphed into. The first part of my anagram is MACRO, which describes my growing focus on truly understanding macroeconomics or the working of national economies. So I spend a large part of my reading and listening to stats about the US economy and even global economies. I truly believe that this is a strong approach when evaluating stocks because it gives you a lay of the land. So if you flashback over the past few years, I believe my investing alerts are more likely to be successful if I have better sense of the possible economic scenarios stocks face in the US. A few timely examples of MACRO events that were helpful to be aware of were the housing crisis and the financial crunch. The goal can be either to direct investments to areas that may benefit the most or to simply identify times where it is best to preserve capital.

QUANT represents my love affair with all things quantitative. Purdue University gets a little (okay a lot of) credit for the great mathematical emphasis on quant and statistical analysis. I’ve come to appreciate analytical models and scenarios that may produce highly probable events over time. I remember when I first learned about the January effect and the inefficiencies that exist at times in the efficient market theory. Some of these inefficiencies are due to human nature, things like fear and greed, and a quant approach can help alert when opportunities are available to benefit or stay away from.

VALUE helps to determine whether or not a stock is cheap. I truly have personally experienced not much good can come from buying something overvalued…stocks included. I don’t even really like buying many things at their normal value and prefer discounts and ‘margins of safety’.

So to summarize MACRO helps me find the most likely sectors and industries to benefit from. QUANT screens alert me of opportunities. And VALUE helps me verify that when I buy an alert, I am buying most of my stocks at a discount.