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Financial Letter - April 8th, 2018

Financial Letter

April 8, 2018

166th Issue (since 01/24/2015)

Market Risk (Systematic Risk)

The SPY sailed the fourteenth week of 2018 with strong headwinds and tailwinds of same strength, consolidating prices at the present level. This means there is a reasonable possibility that the market might take the upward direction. The VIX is now slightly higher than 20%. If it will go down further, the chart will show a possible, comforting “M” configuration (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 slowing but the rotation of winds can make damages. The sky is blue 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

AGI.TO
IPL.TO
MEG.TO
PXT.TO
SPE.TO
VET.TO
ZMU.TO
GPH.V
PAC.V
RYU.V

ATH.TO
CCO.TO
CG.TO
OGC.TO
TOG.TO
LDI.V
TUF.V

Options Strategies

Investors that believe the current Canadian market offers interesting bullish opportunities, they can buy the call on IPL (it closed Friday at $22.76) May18/20.00 @ $2.84, whose delta is 0.96 and gamma 0.06 (accelerator of delta). This call will offer a profit of 96% of the stock increase at a cost that is about 8 times lower than the present price. If the stock goes down, the maximum loss is the premium.

SPY - Daily - 2018/04/06

SPY - Weekly - 2018/04/06

VIX - Daily - 2018/04/06

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