Today, I will be summarizing my thinking in the most general of terms. Think of it as a snapshot in time for where I believe we want to be invested today, and more importantly, where we do NOT want to be invested today.
Unlike the masterpiece cheat sheets that I used to craft for my engineering courses, today’s will be more straightforward.
Reminder: I am here to discuss the market as I see it, in general. I am not here to provide financial advice or make specific recommendations. Whether you agree with me or not, I would love to hear your feedback!
Have you ever really wondered how secure you are online? With such a large number of passwords to remember (i.e. for your bank, cell phone, doctor, insurance, email, and any service you use) most people reuse passwords across multiple platforms. This leaves you vulnerable.
Next, you have the ask yourself how strong are your passwords? Are any one them password123?
Next, you have to ask what are your privacy settings and your security questions for each of these platforms.
Next, you have to ask if you have a way to recover a lost password or a two-factor authentication.
Then………the list is limitless. There are entire websites and companies dedicated to the topic of personal cybersecurity practices. While that is not my focus, here are some general tips (a quick digression):
1 - Use a VPN
2 - Strengthen your passwords for your critical info (i.e. bank account, crypto platforms)
3 - Dive deeper into your security options for each service you use (choose the most stringent)
The cybersecurity sector has much larger players to consider than just personal security. Governments, militaries and entire defense (or offense, depending on your worldviews) industries are placing cybersecurity as their priority numero uno.
It has become a political topic that candidates all agree on (woah, that’s when you know you’re onto something BIG). It involves high-tech innovation, patents, competition and everything else that comes with the world of tech. With the proliferation of cryptocurrencies, cybersecurity will only see even more demand as more retail investors flood into the space.
This sector simply has too many reasons to fail, and that is why I recommend you consider it for the long-term.
What is meant by a hedge? A hedge is a way to offset losses. It’s insurance.
Think of it like this: your total investment portfolio is your house. Your fire insurance protection policy is your hedge to your home burning down.
While you pursue your investment strategy in stocks, options, bonds, etc. I recommend that you always consider an allocation towards a hedge.
My favorites include gold stocks (or physical gold/silver coins) and cryptocurrencies. They both behave in the same manner. When people lose confidence in their economy, in their fiat currency, in their governments, etc. they look to alternative assets. These alternative assets are what you ought to consider as your hedging options.
Hedging vehicles also insulate you to losses from black swan events, or general turmoil.
I encourage you to treat this portion of your portfolio differently than the rest, as it is higher in risk and more exposed to volatility. But it’s insurance, so you should not lose sight of why you are investing in this area.
That said, I believe a long-term bull market for gold is in place as is an emergence of regulated, legal cryptocurrencies. More on these topics in the future, as this is an area where I receive a large majority of questions.
Another simpler way to hedge is to……
This is the time (although, it really should always be the time) to cut back your expenses and save up your cash. Precisely when everyone around us starts to spend more and more (i.e. new car, new gadgets, vacations) this is a contrarian indicator that tells us a correction is due.
Many have been living beyond their means for several years. Just take a look at outstanding student loan debt, credit card debt, and auto financing debt. Americans have been overextending themselves in order to attend college, racking up credit card debt to survive, and then putting icing on the cake by buying a flashy new car as soon as they have enough saved up for the down payment. The rest of the developed world sits in a similar situation. Debt overload.
Ironically, these same people are probably the ones investing all of their savings into passive funds. Things may be going well for them now, but how long will this continue?
Nobody knows. Save your allowance in the meantime.
For those of you inclined to pursue the Melt Up strategy you are likely already pursuing this strategy, even if you are unaware of it. As I have said before, a general way to play this is to gain exposure to biotech ($BIB) and technology ($ROM), as these stocks soar the highest at height of "bullish mania".
For those looking to diversify your bullish portfolio, the best way is to diversify outside of the US Dollar or US assets.
To give you an idea, some places I would begin doing research now are with Euro Stoxx 50 and KWEB China funds. Japanese banking too, perhaps. China, Japan and select European assets appear severely undervalued when compared to their US counterparts.
If you are going to invest in today’s environment, I highly recommend you study up on options. The beauty of options is that you can risk less capital for higher returns, but the beast is that more often than not your options contracts expire worthless.
I am employing a strategy of put options against struggling businesses (scroll down for examples) and call options for companies or funds that have experienced recent panics (i.e. Brazil in late May, below).
Options are not suitable for everyone, but the message remains: work to understand options and nibble on some when you’re comfortable and they’re extremely cheap.
Auto financiers, auto makers, and auto rentals are screwed. There is no polite way to say it.
Make sure you aren’t investing here for the long term. Especially Tesla, get out while you still can.
Here is a quality rundown on why auto is not a healthy place to invest.
Nearly everyone and their mother is aware of this one. You already know Amazon is killing everyone’s business, so avoid any brick and mortar.
Victims include the likes of Macy’s, Sears, JCPenney, and just about any name you see at a mall. Also on the short list are mall operators, REITs dedicated to shopping malls, and lenders who are heavily exposed to this sector.
Mainstream has covered this extensively, so study up as you please.
Side note: if you must have exposure to this trend, I recommend you research REITs that focus on warehouses. Warehouses will be in high demand as this "death of retail" trend and the trend of online shopping continue.
Our friends to the north may be approaching an event like 07/08 in the US housing market.
In short, property values have reached an inflection point. Look out below!
Steer clear of passively investing in the Canadian stock market as you are well aware of what happened to the US stock market once our housing mortgage bubble burst.
Canada, eh? Same thing is happening in Australia.
In fact, just recently the credit ratings for some of the largest Aussie banks were downgraded.
I hope that you will sit back and develop a comprehensive investment strategy for yourself and become an engaged student of the markets. Believe me, we are all students, even the so-called “experts” are still learning as they go.
My cheat sheet is not exhaustive, as each of us have our custom, extensive portfolios that are beyond the scope of this article. The purpose of the cheat sheet is to highlight my areas of interest at the moment, and to stimulate your thinking in terms of investment.
Now, I must say that unique opportunities always exist in the investment world. You may retort that you have a particular Canadian biotech company that will skyrocket upon Phase II results of Drug XYZ in September. I am not discouraging you from pursuing what you see fit, I am only pointing out the market as I see it and larger, structural trends that I find fascinating.
“There are many ways to catch a fish, but the best one is the one that works for you.” — Karl Mikael Syding
DISCLAIMER : This content is for informational, educational and research purposes only. This post is not to be taken as personalized investment advice.
If you found this interesting, please up-vote and chime in via the comments. If not, feel free to forward this to your frenemies.
