Financial Letter - April 15th, 2018
167th Issue (since 01/24/2015)
Market Risk (Systematic Risk)
The SPY sailed the fifteenth week of 2018 with feeble winds, consolidating prices at the present level and completing a small Head and Shoulder bullish configuration. This means there is a reasonable possibility that the market goes up. The VIX is now lower than 20%. (when VIX goes down the SPY goes-up and vice versa – see chart n. 3). The volatility of VIX (VVIX – chart 4) show the fluctuations of VIX are slowing: a positive sign. The long-term chart is now feeble in its bullishness (see chart 2 - SPY - weekly). SPY attained a new historical high at 286.63 points on January 26, 2018.
It is possible that the political surprises amplified by the media (about the tariff) is finished and the return to normality is near. The U.S. is a population of 326 million and their economy is more based on internal consumption than exportation, at the opposite of countries like Germany, where the exportations are more important than the internal consumption. Even if Walmart prices will increase, people will adapt with relative discontent.
The conclusion about this past week: the hurricane seems furtherly slowing and the rotation of winds seems disappearing. The sky is blue, still distant, but less than a week ago.
The Langford Management
Presently our investments are in ETFs and ETN offering a high return, with a dividend yield between 5 to 10 % per year, at pro rata temporis, monthly. The market has still a strong positive bias. We don’t think for the moment to change the allocation because also the products with higher returns are also bullish.
In the USD accounts, still we have cash, in the form of FLOT, MINT, NEAR. In the CAD accounts, it is PSA or the equivalents. In the average, our portfolios are invested 60% in revenue and 40% in directivity.
In some, more aggressive accounts we have increased the capital synthetically with option strategies to profit of the actual upward strong momentum. In accounts that allow futures markets, we have futures contracts in long position on stock indexes.
Our portfolio management is always ad hoc, for each client. But also, we offer now five standardized mini-portfolios for clients interested:
- Bullish aggressive
- A contrarian as a hedge or profit
- Bullish and dividend oriented
- Against inflation
- Bullish, aggressive on non-traditional assets.
(The portfolio management fees of Charles K. Langford Inc. is 0.9% of assets, per year (equivalent to $900 per $100,000). The capital under management is invested exclusively in ETF, ETN and options)
Among a group of selected stocks and ETFs, the week just ended has given middle- and long-term buy signals for the following stocks and ETFs.
TREND FOLLOWING
|
Middle-term bullish |
Long-term bullish |
|
|---|---|---|
|
Canadian Market |
ALA.TO |
BTE.TO |
Options Strategies
Investors that believe the current Canadian market offers interesting bullish opportunities, they can buy the call on CNQ (it closed Friday at $44.30) May18/40.00 @ $4.70, whose delta is 0.87 and gamma 0.05 (accelerator of delta). This call will offer a profit of 87% of the stock increase at a cost that is about 9 times lower than the present price. If the stock goes down, the maximum loss is the premium.
SPY - Daily - 2018/04/13
SPY - Weekly - 2018/04/13
VIX - Daily - 2018/04/13
VVIX - Daily - 2018/04/13
