Markets shrug off tariffs and focus on rates. Some profits taken in oil. Contrarian trades on semiconductors on news flows. Back on the short interest rates play on a day rates fall. Back to Brazil - oil this time. Averaging down in marijuana
Portfolio News
Market Jitters - Tariff Tantrum The tariff story has gone beyond tantrum to reality. CNBC calls it Tariff Turmoil.
The markets seem to have priced in a lot. While the talking heads are talking about the looming deadline - midnight - the markets chose to move up and were led by the sector likely to be affected the most by China tariffs, semiconductors. The talking heads are back on the old hobby horse of a looming recession. The Federal Reserve minutes were released - they are not talking that way. The opposite in fact. Markets do look forward and they do make assumptions - so far they are more relaxed than the talking heads.
Read this - there is some data - and make your own conclusions. The speaker may be right. The big question is when will the 10 years start?
Our expectation at the moment is that you won’t have any real return from U.S. equities over the next 10 years
Dan Kemp, chief investment officer for Europe, the Middle East and Africa, Morningstar Investment Management Europe
I see something else in the key chart which shows implied returns for various markets after adjusting for current valuations. Yes it is correct that US markets are looking fully valued - that is why the black line is near zero for the US. My thought is if all the other markets are looking better it does not make sense for the US to be the only one that is not. Something has to give more widely than just one market. If they are right, it will help having a global view.
Europe headlines highlight the flip flop feel. Relief as the rumours flow about auto tariffs.
On the tariffs front, the new tariffs will go in place at midnight.
In a Make America Great rally, I watched as Donald Trump was consistent about that and was promising more. He was in classic Trump mode - pushing hard on his hobby horses but also not giving an inch in a negotiation. Who will flinch?
I am guessing the Chinese might. The currency reversed some of the interventions in overnight trade. Some good news in my portfolios, I discovered that I am still holding a 6.30 call expiring in May 2019 - looking pretty. The challenging part is knowing when to exit as this market is not really a free market driven by data alone.
There is a point to take note of - iron ore prices are sagging. If steel tariffs flow through to reduced steel demand, iron ore prices will sag more. I am going to reduce my holding in BHP (BHP.AX) by one third.
World Cup Russia headlines shifted away from football with 2 more people succumbing to the nerve agent in England. Apparently they handled the stuff. Maybe the penalty shootout was too much for them
What the headlines did not cover is news that Russian inflation is projected to rise strongly to pass the target set by the monetary authorities after a subdued spell. That could be good for my Russia investments as inflation offers pricing power.
Bought
Applied Materials, Inc (AMAT): Semiconductors. Micron Technology (MU) price moved up in early US trade. This surprised me given the news about the Chinese court blocking sales of their chips in China. This price move suggested to me that all semiconductor stocks could move positively as the sector may have over reacted to the China tariffs implications. I averaged down entry price on two of my semiconductor holdings. Good to see that the sector was the best performer in the overnight trading.
Cypress Semiconductor Corp (CY): Semiconductors. Averaged down entry price.
NYSE Pickens Oil Response ETF (BOON): US Energy. I wrote up the rationale for using this ETF to reduce company specific risk in midstream oil in TIB234. With the sale of a parcel of Chesapeake Energy (CHK), I added to my position in BOON.
Petróleo Brasileiro S.A (PBR): Brazil Oil Producer. Petrobras price has struggled on the back of the Brazil problems (truck strike, diesel price mechanism, presidential election). The price chart showed a reversal off the lows.
With a rising oil price and supply complications in Venezuela, Petrobras could stand to benefit. I averaged down my entry price.
Aphria Inc (APH.TO): Canadian Medicinal Marijuana. Each time there is a wrinkle in US news relating to marijuana, price of Canadian marijuana stocks slide. My Canadian investments are predicated on the Canadian market and not the US market. Every slide like this feels like a discount opportunity. I averaged down my entry price.
This article did catch my eye.
In order for FDA to take enforcement action against illegal marketing of unapproved new OTC drugs containing marijuana or THC, it is not necessary for FDA to establish a negative monograph for marijuana or THC
This may seem a bit confusing. Basically it says that the FDA believes it has enough mechanisms in place to manage the claims made about the medicinal benefits of marijuana and it is not going on the publicity warpath. This is a bit of a step back from the position taken by Attorney General, Jeff Sessions in January when he rescinded protections for state marijuana laws.
https://www.forbes.com/sites/tomangell/2018/07/05/fda-rejects-petition-to-further-restrict-marijuana
Sold
Alpiq Holding AG (ALPH.SW): Swiss Utility/Construction. I ran out of patience on this stock bought on meeting all three of my pricing screens. The key belief was that economic growth would fix the revenue line. The trade war is raising questions for me on economic growth. Bank the 2.9% profit since February 2018 was my thought and grab the Swiss Francs while they are still strong against the US Dollar. (See TIB182 for the original rationale)
Royal Dutch Shell (RDSA.AS): Sold an odd lot of shares to round down to nearest 100 shares. I bought Shell originally in January 2016 and again in March 2016 on the basis that its was relatively undervalued compared to the major US integrated oil producers. These odd lot shares have since been added as part of a dividend reinvestment process. Profit compared to original purchase level was 62% - a little less for the actual reinvestment dates.
Chesapeake Energy Corp (CHK): US Midstream Oil. Price has been moving ahead solidly since my purchase in May 2018. I sold a portion of my holding for 59% profit and applied the proceeds to the NYSE Pickens Oil Response ETF (BOON). I retain a holding in the stock as I do have a January 2020 4/7 bull call spread for which I have to hold stock to cover the sold leg. Trade price was $5.35 = some way to go to the sold call price of $7.
Shorts
Direxion Daily MSCI Real Est Bear 3X ETF (DRV): US Real Estate. This trade is all about rising interest rates and relative risk between real estate and US treasuries. (See TIB235). It is an inverse ETF which will rise as real estate investment trust returns fall. Thus far price has not moved as I expected as I was sort of hoping that the long period of lows in 2017 would provide support. I bought another small parcel to average down my entry price in early trade. Imagine my surprise when I see price collapse even further after the Federal Reserve minutes came out.
That was the investing mistake - wait up into the small hours and review the statement before making the trade OR wait a day.
Utilities Select Sector SPDR ETF (XLU): Electric Utilities. I started to short electricity utilities in June 2018 with a dual play of rising interest rates and changing industry dynamics (see TIB245). Again, price has not moved the way I expected. I have updated the chart I presented in TIB245 which compared XLU (black bars) to 20 Year Treasury Bond ETF (TLT - orange line). The levels then are the blue ray for TLT and the pink ray for XLU.
The market has taken the view that Treasury yields are too low and they are prepared to take the utility yield risk. The spread between the two curves was 13 points and it is now 22 points - that is half a rate hike less built into expectations in one month. I think the magical level for longer dated Treasury yields is 3% - above that and this trade will work as expected
BlackRock MuniYield Quality Fund III, Inc (MYI): US Municipal Bonds. The short in XLU has carrying costs. These are funded by buying a Municipal Bond fund which does not move as strongly with rates because returns are tax free to US investors. The chart for MYI shows that price has not moved as much as XLU since my first purchase in early June
Cryptocurency
Bitcoin (BTCUSD): Price range for the day was $255 (3.8% of the high). The good news is price closed above the resistance line which could now form a support level. The bad news is price did not make a higher high (i..e, it was an inside bar) and it is Friday. Too often have we seen a dump happen on Fridays and the weekend.
In my Bitmex account, we have passed the June futures expiry. I started another spread trade buying a September future long at $6609 and selling a December future short at $6629
Ethereum (ETHUSD): Price range for the day was $21 (4.3% of the high). While the charts look similar, the support lines are in a different place and ETH's inside bar formed below the resistance line. We will need to see buyers to push this through. If not do not be surprised to see a wander back to the pink support level
CryptoBots
Outsourced Bot One closed trade on SNT (1.94%) replaced with a new trade on SNT. (213 closed trades). Problem children was reduced by one with SNT closing (>10% down) - (17 coins) - ETH, ZEC (-50%), DASH (-50%), LTC, BTS, ICX (-45%), ADA (-43%), PPT (-53%), DGD (-52%), GAS (-57%), STRAT (-54%), NEO (-54%), ETC, QTUM (-47%), BTG (-62%), XMR, OMG.
Only one coin left in the 60s club = BTG at -62%. Next possible close could be XMR.
On this account, trading on Binance robot is disabled as the API reset process was not working for a particular email service I use for my account. Ticket has gone to support to fix it.
Profit Trailer Bot I did the work to change the trading model to a whitelist after updating Binance API's. The changes required were to set closing orders for all the coins on the DCA list - set at breakeven. Then I set up the whitelist and disabled all coins that are on the pending list (old DCA list). The whitelist coins are ones with solid volume and/or solid reputation.
No new trades and no closed trades - API change may not have worked right. I have reset the bot. Dollar Cost Average (DCA) list now called Pending list) was unchanged at 12 coins with 1 coin improving (KNC) and 11 worse. Biggest move was VEN which dropped 9 percentage points
New Trading Bot Positions improved 1 point to -51.8% (was -52.8%)
3 coins improved and BTC was flat. NEO did 3 percentage points = about time but still a long way to go. The good news is I do earn GAS from the NEO holdings on Binance.
Currency Trades
Forex Robot did not close any trades and is trading at a negative equity level of 3.8% (higher than prior day's 3.6%).
Outsourced MAM account Actions to Wealth closed out 2 trades for 0.46% profits for the day (July 4).
Cautions: This is not financial advice. You need to consider your own financial position and take your own advice before you follow any of my ideas
Images: I own the rights to use and edit the Buy Sell image. News headlines come from Google Search. Relative Market Value chart comes from Morningstar. All other images are created using my various trading and charting platforms. They are all my own work
Tickers: I monitor my portfolios using Yahoo Finance. The ticker symbols used are Yahoo Finance tickers
Charts: http://mymark.mx/TradingView - this is a free charting package. I have a Pro subscription to get access to real time forex prices
Crypto Trading: get 6 months free trades with Bitmex for leveraged crypto trading. http://mymark.mx/Bitmex
Bitcoin: Get started with mining Bitcoin for as little as $25 http://mymark.mx/Galaxy
July 5, 2018