Financial Letter - October 21st, 2018
194th Issue (since 01/24/2015)
The book “L’alchimie qui crée l’or – Le chasseur de tendances boursières II” is now online (Amazon.ca and the title) on Kindle. It is in French. The book is a “bestseller” in the category of business and finance. It's also available on all other reader platforms (Kobo, iBook, etc.).
A second book is now available on Kindle, Kobo, iBook, etc. Its title is “The Trend Hunter” and it is in English.
The average return of the portfolios managed by Charles K. Langford Inc. was 10.90% with a standard deviation of 3.75 in 2016 and 13.50% with a standard deviation of 4.65 in 2017, after trading commissions and ¾ of management fees.
Market Risk (Systematic Risk)
The SPY sailed the forty-third week of 2018 with sustained headwinds and tailwinds that ended with a slight gain. The bearish gap made between October 17 and 18 is partially covered. VIX is at 20%, a level considered unsuitable for technical analysis’ signals. The VVIX (see charts 3 and 4) shows how the VIX itself is volatile: a discouraging signal for short term trading.
The long-term chart is showing deteriorating cautious bullishness (see chart 2 - SPY - weekly).
A private indicator (CKL21) shows the market is presently less negative than last week. The bearish mood of the market show signs of fatigue.
The conclusion of this past week : technically speaking, the market is still in a somewhat negative bias without much optimism, but less negative than the previous week.
The Langford Management
Presently our investments are in ETFs and ETN offering high returns, with a dividend yield between 5 to 10 % per year, at pro rata temporis, monthly. The market still has a strong positive bias. We don’t believe that there is a need for change in this allocation because the products with higher returns are also bullish.
In the USD accounts, we still have cash, in the form of FLOT, MINT, NEAR. In the CAD accounts, it is PSA or the equivalents. On average, our portfolios are invested 60% in revenue products and 40% in directional products.
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
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Middle-term bullish |
Long-term bullish |
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Canadian Market |
EQX.V |
BTU.V |
About Options
Investors that believe the current Canadian market offers interesting bullish opportunities, can buy a call on PPL (it closed Friday at $44.83) January 18/40.00 @ $5.00 whose delta is 0.88 and gamma 0.05 (accelerator of delta). This call will offer a profit of 88% 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 - 2018/10/19
SPY - Weekly - 2018/10/19
VIX - Daily - 2018/10/19
VVIX - Daily - 2018/10/19
