BLACK PACIFIC CAPITAL
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|Posted on 13 December, 2015 at 21:21|
Weekly Market Assessment
It's all bad, no wait...its all good! This week was another example of how difficult it has been this year to trade in the equity markets. On Tuesday, we had a nice rally across the markets but come Wednesday and Thursday, we lose over 475 points on some negative ISM (Institute of Supply Management) numbers that showed a contraction in the manufacturing sector of the economy. However, come Friday and we rally 370 points on a positive employment report where some 211,000 jobs were created and the unemployment rate stood at 5%. Of course this further gives the Federal Reserve the greenlight on the maximum employment side to raise rates, however we all know what we are lacking...inflation. So we are back in the black for the year and it looks like December is going to be another tough month in trying to decide the future direction of this market. We have the last monetary policy meeting for the year in two weeks, which will put to rest the talk of interest rates for this year and will open up a world of conversation after they have made their decision to raise rates or not. I don't see any major moves in the market and think we will remain flat for the rest of the year, making it a +/-1% gain for the year. Has the market moved away from having these double digits gains for the year? Or are we just taking a break trying to assess the situation in the markets before we continue on the path of least resistance?
Where will we go from here? Is it time to step to the sidelines and wait out the rest of the year and avoid any additional risk from the Federal Reserve? Usually two weeks into December, large investment firms and hedge funds will begin to liquidate positions and begin the process of looking into what next year has to bring and to make funds available for taxes. This brings added volatility to the market and individual stocks as these large positions are winded down. The VIX (volatility Index) remains at depressed levels which expresses stability in the market for the time being. The 10 Year Treasury Bond currently trades at 2.25%, which also expresses calm in the markets as no one is running for cover and safely in the all mighty Treasury Bonds. Could this all change in one week, scratch that even in one day, absolutely. We have seen this happen many times just in this past year. Is the market fooling us to move into riskier assets before it pulls the rug out from beneath us with an end of year rate hike? Or is it safe to jump in feeling warm and cozy that the market is on strong footing? This is of course the foundation to every investment decision, do I wait it out or do I take on the risk? One thing we know for sure is that over the past six years the decision to take on the risk has so far been the best decision. The secular bull market I believe will remain intact in the face and aftermath of an interest rate hike. So on that note, here is to the bull that continues to run!
Making the Watchlist: Below are the stocks that I will be looking at over the coming months. I will provide the the current stock price and why I am watching them. I will comment on them as I continue to keep an eye on them. You will be able to see and follow their growth and/or decline. Chart links may be attached.
See What I'm Trading:You can now view all my real-time trades by following this link, BlackPacific Capital1. This new site shows my trades, in real time the minute they are bought and sold. Below you can also click on the stock symbols, trade strategy or prices which will lead you to this new site. The site offers a full risk/return profile and video detailing the strategy of the trade. Note: When looking at the option positions every contract equals 100 shares.
BlackPacific Capital has created three funds. The first is the Total Return Fund and the other is the Growth Fund. Both of these funds will be compared against the S&P 500. Both will hold a total of no more than five companies each. The Total Return Fund is a low turnover fund where every holding must have a dividend and be undervalued to its peers. The growth fund is made up of momentum high growth stocks where the turnover rate is much higher. Below are their Weekly and Year to Date returns. For more information and to see the holdings in each fund click here.
New holdings and liquidated positions: I have finally been able to add Exxon Mobil (XOM) to the Total Return Fund at $79 and locked in a yield of 3.6%. I have also sold out of the position in Netflix (NFLX) at $129.75 for a total return on the position of 30.73%. I have also added Square(SQ) at $11.90 to the Growth Fund and have given up on opening a position in Tesla (TSLA).
S&P 500 Return
Year to Date: 1.81%
Total Return Fund Return
Year to Date: 2.45%
Year to Date: 8.02%
Categories: Weekly Market Assessment