26 January 2024

Markets have been up for 3 months in a row but the increase in January has been snail like. Good economic reports the last five days have encouraged the bulls. The TV Gurus have now removed Tesla from the Super Seven category as its recent report was downbeat. Among the Fancy loved market gain leaders Apple, Google, Fakebook, and Netflix are at 30X earnings. Microsoft is 35x, Amazon is 60X, Adobe and Salesforce are 40X. Among other loved and over owned stocks in other areas Costco is at 40X, Chipotle 50X, Lululemon 50X, Shopify 100X and CrowdStrike 100X. They are expensive.

Expensive stocks eventually see the P/Es move lower either by growing earnings or by the share price retreating. Last year most of the Poohbahs were predicting a recession. And so, money moved to supposedly recession proof AI stocks whose prices had collapsed the year before because we can't remember why. (There's always a reason for price collapses, unless there's not.)

We are bemused that the media keeps showing the market performance from January 2023 and not January 2022. The one-year performance was excellent in the stocks mentioned above; the two-year performance was less than ordinary

Unlike in the Dot Com bubble of 1995-2000 the Fancy stocks leading the markets higher are real companies with great expectations. They are also as overpriced now they were in December 2021.

With 450 of the S&P 500 lagging the % price recovery of the leaders in 2023, the bullish presumption is that at some point this year rotation from the top 50 will move funds to the more price attractive stocks in the 450.

Seldom in 55 years have we seen the leaders retreat and the followers push higher. For that reason, we are 75% cash in our larger accounts and 40% cash in the other except our small associated accounts where we are always more aggressive.

We currently own,

AT&T, Intel (purchased today when it dropped 12% on less than results), Walgreens, Apache Oil, Devon Oil, Hewlett Packard Enterprise, Ford and Under Armour. We sold the rest of our retailers, BMY, PFE, and the Regional Bank ETF this week for scratch profits. We took a loss in Rivian when Tesla reported market disappointing numbers.

The January thaw is upon us, UGH!!!

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Jamie Dimon. The JP Morgan of the 21st century who is also the Chairman and CEO of JP Morgan, the bank, thinks the Trumpster wasn't so Bad. BOO !!!

https://www.theguardian.com/commentisfree/2024/jan/21/jpmorgan-ceo-jamie-dimon-defends-trump

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Macy's rejects buyout offer.

https://www.cnn.com/2024/01/22/business/macys-rejects-arhouse-bid/index.html

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Archer Daniels Midland (dropped from 70 to 50 this week on possible accounting irregularities) has often cut corners.

https://chicagoreader.com/news-politics/crime-in-the-suits/

https://finance.yahoo.com/news/1-accounting-probe-hits-adm-162327289.html

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19 January 2024

The S&P 500 closed at an all time high but up only 7% over 2 years. The DJIA is also close to an all-time high. The Super Seven and their friends are mainly responsible for the move to highs as the big boys and girls continue to crowd into already crowded trades. AI is the future according to the gurus the same as many of the super stocks of the 1995 – 2000 DOT-Comm bubble were thought to be. The new Paradigm Worth the read: (https://www.investopedia.com/terms/n/newparadigm.asp)

We continue to trade our favorite stocks. 10% gains in our group are a lot easier to come by. We moved back into our retail group and Hain, Rivian, and Devon as they dropped more than 10% in the past week. We also re-entered Bristol Myers and IAT (Regional Banks ETF) on a 5% lower pullback. We are maintaining 50% and greater cash in all but our smaller associated accounts.

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OOPS

It's been a cold week in the U.S. with more than 150 million Americans living under a wind chill warning due to dangerously freezing temperatures. While the weather has resulted in infrastructure, public health, and even voting issues, it's also impacting a more surprising demographic: Tesla owners.

Drivers in Chicago have been experiencing long lines at Supercharging stations and, in some cases, completely dead vehicles as their cars struggle to cope with the frigid weather. Tow trucks have also been called in to deal with the Teslas that have occasionally been abandoned by their owners in the street after quickly losing power.

https://www.thedailybeast.com/why-teslas-are-dying-in-chicagos-freezing-cold-weather?ref=home

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Bank That Made $50 Billion Last Year Pays $18 Million For Making Clients It Paid A Few Thousand Dollars Keep Schtum

You would think, given its history with them and a presumably crack legal team, that JPMorgan Chase would know what it can and can't do vis-à-vis whistleblowers, potential or actual. The evidence we have indicates otherwise. There was the case of compliance officer who happened to notice that JPMorgan didn't seem to have an anti-corruption program—the tip-off might have been all of the princelings swanning about the place—and certainly didn't have the one it promised the Justice Department it would set up in the wake of said princelings scandal.

Read story at: https://dealbreaker.com/2024/01/bank-that-made-50-billion-last-year-pays-18-million-for-making-clients-it-paid-a-few-thousand-dollars-keep-schtum

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12 January 2024

Markets were mixed this and our down and out over year end bounce stocks that we bought in December failed to bounce. With the extraordinary gains of last year, we were quicker to move to the sidelines and await a better setup.

We ended the week with minimal amounts of Apache Oil, AT&T, Pfizer, Hewlett Packard Enterprises, Ford, Macy's and Under Armour and a lot of cash in accounts.

We repurchased Apache Oil $4 lower than we sold last month when APA announced an all-cash deal to buy Callon Petroleum. The deal will increase Apache's Permian production by 50%. Until the deal closes the share price of Apache may remain under selling pressure as there is a potential 10%+ arb profit available by selling Apache and buying Callon if the deal closes in 6 months. Apache has a 3% yield priced at 7X (times earnings).

We have been trading AT&T (and Verizon) without much luck for the last few years and we are back in AT&T for now (Sold Verizon today for scratch if the dividend is included). AT&T 6.7% yield, 7X.

We also are back in Pfizer at $28 having sold at $30+ last week. 5.8% yield, 17X

We've traded Hewlett Packard Enterprises profitably over the years and reentered this week when the shares dropped 10% on news HPE was acquiring Juniper Networks in an all-cash deal (no arb possible).

From JP Morgan by way of Yahoo:

The Juniper acquisition will shift HPE's AI-related portfolio toward higher margin networking business, with higher growth potential. The move is part of HPE's continuing strategy to capitalize on trends in the AI world, particularly in the increased demand for secure and unified IT solutions for connecting, protecting, and analyzing edge-to-cloud data.

https://finance.yahoo.com/news/likely-windfall-moment-jpmorgan-says-103528914.html

We keep trying with Ford. The value is there but it seems like only we recognize it. 5.2% yield, 7X

We sold Nordstrom, The Gap and VF Corp and now hold a small amount of Macy's (to see if anything comes from the rumored takeover talks) and Under Armour. Retail stocks were good to us last year but we're letting that sector alone for now.

We eliminated our bank stock positions to see how they react to earnings. Today the banks reporting earnings -even the better than -are nominally lower.

We are at the farmhouse in a blizzard with the woodpile full and sheltered and the woodstove blazing. Doesn't get any batter. Blessings.

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5 January 2024

We ended the year on a high with accounts up 25% to 35%. We've managed- with a lot of luck- to outperform the S&P 500 and DJIA for the last 3 years buy a substantial amount and the NASDAQ 100 a less than but significant amount. We luckily avoided the large drops of 2022 (most accounts flat to up/or down single digits) and outperforming our usual 10% gains in 2023.

We last did this 20 years ago so we won't get our hopes up for the types of gains we had this year anytime soon.

We decided to raise cash in the first few days of trading and our large accounts are now 25% stocks and 75% USFR (7 day Treasury ETF) yielding over 5%. The euphoria in the markets gives us pause and with the budget crisis occurring in a few weeks we would rather be on the outside looking in- for the time being. We will trade earnings misses in quality stocks but that's the extent of our willingness to assume market risk.

We have reduced positions in our retailers – The Gap, Macy's, Nordstrom, VF Corp (Timberland, North Face, Vans) and Under Armour. We are currently bank issues IAT (regional bank ETF), Key Corp and Huntington Bank. We are trading Whirlpool and Zoom; reentered Verizon and AT&T -analysts are more positive. We repurchased Ford at year end and think Walgreens has room to move higher with new management. Organon is a women's health drug company spun off from Merck at $30 per share now trading at $14. Finally, we own a new ETF- RAYS (Global X Solar) which owns a group of solar stocks. The shares move with the solar stocks which seem to pop at least once a year.

And that's that, for now. We are back on our weekly Friday Schedule.

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