#Coronacrash Market Update

Summary

  • The stock market hasn’t gotten to support yet, so hold your clickers, but we can look to sell puts soon or buy some QQQ if we want to later.
  • I am still constructive on gold, but it’s tough to buy on spikey up days.
  • I am closing my Coeur Mining position, the margin of safety isn’t high enough on Silvertip review.
  • Super Tuesday thoughts.
  • Focus on favorites and great, not could be’s and goods.

The #Coronacrash is pretty rough today, but we are still not down to the support levels I talked about in today’s “Is Coronavirus Creating 2020’s First Correction?”

SPY weekly

Levels between about $297 and $309 are the main supports for the S&P 500 (SPY) (VOO). We aren’t there yet. We’ll see what happens end of day. We could very well see a reversal that erases a lot of the losses. Who knows? 

We can look to sell puts when we get to the support level if it looks likely to hold. If your risk tolerance isn’t that high, you should be looking to trim into any rallies, intraday or a day or a week. 

Remember, your risk tolerance and asset allocation determine your actions. If you want to keep raising cash, then sell the rips. If you want to trade rebounds to try to make some gains, then sell puts or buy the Invesco QQQ (QQQ) at support levels. 

I still think this stock market sees 2018 lows again this year and possibly 10-20% lower than that – essentially wiping out the Trump debt and “not QE,” tax-cut sugar high, no earnings growth, no revenue growth, fake stock market rally. Am I clear about how I feel about this last leg of the bull market? 

Gold Is King

The arguments just keep lining up for gold in the 2020s. Review the big reasons here:

Massive 2020s Gold And Gold Stock Bull Market Is Just Beginning

Today, the Federal Reserve’s President Mary Daly added on by stating: “We need to embrace the mindset that inflation a bit above target is far better than inflation a bit below target in today’s economic environment…”

She went on to cite, get this, that fundamental changes including an aging population is impacting the economy. Hmmmph, who woulda thought that?

Further into her presentation, she said: “fiscal policy will need to play a larger role in smoothing through economic shocks,” prompting Congress to act on “…expanding the array of automatic stabilizers that form part of the social safety net can help mitigate the depth and duration of economic downturns…” specifically citing unemployment insurance.

Does that sound similar to what I’ve said about needing to insure that people hurt by a changing economy don’t lose their homes and their kids stay fed (I’ve mainly said it in relation to the coal industry, but it applies to all the disrupted industries). 

In other words, the Fed is going be in either easy money or very easy money for a long time. And, since when does a Fed President tell Congress what to do? Answer: since they know monetary policy is not enough anymore.  

More monetary and fiscal stimulus to get through the Baby Boom bust is what we should expect. That will come with currency and debt devaluation. The best places to be will be in disruptive stocks and gold related holdings. 

That said, I’m not ready to buy more Van Eck Gold Miners ETF (GDX) just yet. And, I’m not completely pumped up on the SPDR Gold Trust ETF (GLD) yet. But, I think buying both sometime this year will make sense. 

I still like Newmont Goldcorp (NEM) but it’s overextended: 

NEM daily

Look at the RSI, we need that to fall to the 50s or so to be interested. I think that about $46 is pretty strong support, so if you don’t own Newmont and want to, that’s a good spot to set a limit buy order.

If you want to pair Barrick Gold (GOLD), I understand the impulse, but I don’t want to do that. I’d rather own Barrick in the GDX ETF. Why? Because Barrick is not a member of the S&P 500, but Newmont is. That means that SPY and VOO deposits don’t help Barrick, but do help Newmont. 

I am also selling my Coeur Mining (CDE) stake on relative stability here due to the pause in mining at Silvertip. I originally thought they’d be up and running in a quarter or two, but it won’t be until late 2021 or 2022 if ever. The wrote down nearly the entire purchase price of the mine. That tells me they either made a mistake or there’s a whole lot more expensive work to be done there. So, I’m moving on with a small profit while I can.

Super Tuesday

I talked about Bernie in the post earlier today. Super Tuesday is only 2 weeks away. If Bernie gets half or more of those delegates, the nomination party is over, Bernie will be the nominee.

And, if he gets half or more of the delegates, the stock market is going to trip all over itself for a hot minute with a juicy sell-off is my guess. It’ll come back then when smarter heads prevail because Bernie is a Modern Monetary Theory guy, i.e. print money. 

So, combined with Coronavirus, I’m not real constructive on stocks in general short-term. But, wow, we could be setting up for a heckuva a long trade into the latter part of the year. 

Focus On Great, Not Good

A lot of folks want to own good stocks. Not me. I only want to own stocks that might make the leap to great. That’s less than 10% of the stock market. For everything else, I can pick a few “smart everything world,” clean energy ETFs and resource ETFs for an asset allocation that beats the S&P 500. 

Remember Peter Lynch: 

All you need for a lifetime of successful investing is a few big winners, and the pluses from those will overwhelm the minuses from the stocks that don’t work out.

So, in a nutshell, we want a good asset allocation that avoids the disrupted (fossil fuels and banks) and focuses on the disruptors (smart everything world & clean energy). We want some resources too, metals for a world moving to electrify and water related investments as climate change has its impact. 

In my perfect growth portfolio, I own 4 or 5 ETFs for asset allocation and about 20 stocks for potential big market crushers. In my perfect growth and income portfolio, I own about 4 or 5 ETFs for asset allocation and about 30 stocks for risk managed risk market beaters that mostly pay a dividend income. 

Disclosure: I am/we are long NEM, GDX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I own Bluemound Asset Management, LLC, which is a fiduciary, fee-only Registered Investment Advisor. I publish separately from that entity for self-directed investors. See relevant terms and disclaimers at the website of Bluemound Asset Management, LLC. Any information, opinions, research or thoughts presented are not specific advice as I do not have full knowledge of your circumstances. All investors ought to take special care to consider risk, as all investments carry the potential for loss. Consulting an investment advisor might be in your best interest before proceeding on any trade or investment.

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