Five Hundred Words 12/17/2018

Monday, December 17, 2018

Daily Writing

 

Housekeeping

Over the next few days, we are gearing up for a long-scheduled, much-anticipated trip to China on December 25, 2018.  Throughout this week we will focus on some of our main goals for the China trip.  I am genuinely worried about the state of China, its economy, and its political climate.

 

Things I’m thinking about

  • What does the economic environment currently look like in China?
  • How is the political climate changing?
    • E.g., political propaganda more prevalent, increased patriotic sentiment?
  • How does the average Chinese citizen view the economy vis-à-vis the “average” Chinese political and/or business elite?
  • How have views of the United States changed since this time last year?
  • What are Chinese companies doing to prepare for a global economic slowdown?
  • What is the overall market sentiment China?
  • If folks in China aren’t worried about the economy, then what are they worried about?

 

 

Market Observations

The S&P started the day with a 1.00% spike downward.  US Treasury yields continue their push lower, with the yield on the 10-year Treasury now 2.86% and the yield on the 30-year Treasury now 3.13%.  Keep in mind that just a few weeks prior the yield on the 10-year Treasury Note was higher than 3.25%.  At the time many experts felt that US Treasuries could online continue to move higher, with some speculating that the 10-year yield was more likely to reach 4.00% than 3.25%.

The CBOE put/call ratio also remains elevated, at time of writing sits at 1.16 after opening the day at 1.24.  The average ratio is 0.76, and a rate over 1.00 is elevated.  The CBOE put/call ratio is a measure of overall fear in the market.

At the time of writing, WTI crude has dropped more than 3.50% where it currently sits at $49.40/barrel.  I find it interesting that amid the current market turmoil gold has hardly budged.  For the past few months, gold has traded within a tight range between $1200 – $1250/oz.

 

 

Personal thoughts

I’m not sure if this belongs in my daily writing, but I feel it is essential to grant this sliver of insight into my own thinking.

When I wake up each morning, I tell myself three things that help propel me forward:

  • I will be proud of my actions
  • I will strive to help others
  • I will be kind

It can be quite tricky to balance these things, and the results are not immediate.  However, in general, I’ve found that by following these commands that I give myself I can enhance my own learning and growth.  The focus is not on me, but those around me.  Also, I do not ‘hope’ to accomplish these tasks each day, I give myself the command that I ‘will’ strive to accomplish these things each day.  This allows me to feel a greater sense of control and accountability for my actions.  I must be a pillar of support for others, but I also must be vulnerable at times.  Kindness is highly undervalued.

 

Developing a personal investing style

Last week I met with a trusted advisor for lunch.  We discussed the importance of identifying broad trends in market behavior and even human behavior.  Sometimes patterns cannot be quantified 100%, although that doesn’t deter many from trying.

My biggest takeaways were focusing on using Time to my advantage.  It seems obvious, but the more time you have, the more options and flexibility you must employ different strategies.  The second takeaway was the importance of discovering my own style and utilizing that style to my advantage.  I’ll never be able to obtain an edge if I blindly copy the path of others, even if I emulate Warren Buffett there will be times where I need to make decisions based on my own intuition, experiences, and processes.  I’ll never be the next Warren Buffett because I am focused on being the next Kevin Tellier.

General Notes

Types of Hedge Funds

  • CTA/Managed Futures
  • Equity Hedge
  • Event Driven
  • Fixed Income Directional
  • Fixed Income Relative Value
  • Macro
  • Multi-strategy

Market Data

 

Resource Commodities

 

December 17, 2018

December 14, 2018

December 13, 2018

December 12, 2018

Gold Spot

1238.10

1241.70

1245.00

1242.90

Silver

14.535

14.715

14.720

14.535

Platinum

785.00

794.00

802.00

783.00

Copper

2.7200

2.7590

2.780

2.7854

Crude(WTI)

50.53

51.10

51.41

51.83

 

Global Government Bond Yields

 

December 17, 2018

December 14, 2018

December 13, 2018

December 12, 2018

US 10 year

2.86%

2.89%

2.91%

2.90%

US 30 Year

3.12%

3.14%

3.16%

3.13%

UK

1.27%

1.24%

1.26%

1.24%

Germany

0.26%

0.25%

0.27%

0.26%

Brazil

9.67%

9.61%

9.86%

10.02%

Italy

2.95%

2.93%

2.93%

3.00%

Japan

0.02%

0.02%

0.05%

0.04%

Major U.S. Indices

 

December 17, 2018

December 14, 2018

December 13, 2018

December 12, 2018

VIX

22.36

21.57

21.00

21.91

DOW

239.86

244.08

245.76

245.09

S&P 500

259.39

262.92

266.45

267.45

NASDAQ

6864.23

6961.86

7096.00

7163.89

 

Currency Cross Rates

 

December 17, 2018

December 14, 2018

December 13, 2018

December 12, 2018

USD/JPY

112.9200

113.2900

113.6700

113.210

EUR/USD

1.1344

1.1306

1.1355

1.1366

AUD/USD

0.7181

0.7178

0.7223

0.7230

USD/MXN

20.223

20.2528

20.069

20.0358

USD/CNY

6.905

6.9049

6.878

6.8777

USD Index

97.15

97.42

97.15

97.46

Five Hundred Words 12/10/2018

Monday, December 10, 2018

Daily Writing

9:25 AM

Things I’m thinking about

  • Do option holders receive dividends?
  • How do the best traders structure their days?
  • What are the routines of the top traders?
  • What factors determine bond prices and yields?
  • After the point where the yield curve inverts, how do markets typically behave until recession arrives?
  • What does full conviction feel like?
  • What is the current state of global liquidity?  What are the arguments for global liquidity drying up?
  • What would happen to the UK economy under a ‘hard Brexit’?

Market Overview

Brexit

The major news today revolves around Theresa May’s aborted Brexit vote upon the realization that her Brexit proposal would fail miserably.

 

How are markets reacting?

The GBP/USD currency pair dropped 67 basis points and is sitting on 0.90280 at time of writing.  The EUR/GBP currency pair is trading 92 basis points higher at 0.90261.

Our view is Theresa May is merely delaying the inevitable.

 

The Chinese Yuan has started weakening again

 

USDCNY_12_10_2018

 

Trading Log

Moving forward I will include a trading log as part of my writing.  The purpose of this activity is to gain a better sense of the price action of the market as it relates to my emotions in the market.  My to gain a better understanding of the impact of markets on my emotions.

Why do I have such strong impulses to sell when the correct decision would be to buy and vice versa?  It’s quite easy to lose track of your emotions while trading.

A lesson I learned recently is that I don’t always need to be trading.  I’ve found that 90% of my time is better spent observing the market, researching, and doing pretty much nothing.  I’ve discovered that I make my biggest mistakes when entering trades at the wrong time, mostly early.  For example,  after I conduct my research and open a position, I find I have difficulty maintaining my original reason for entering the trade initially, so when the trade starts to go in the wrong direction I begin to allow new ideas to pop into my head that eventually convinces me I’m wrong, even if I’m still right.  It’s quite confusing.

Market Data

 

Resource Commodities

 

December 10, 2018

December 7, 2018

December 6, 2018

December 5, 2018

Gold Spot

1245.00

1237.20

NA

1238.00

Silver

14.545

14.440

NA

14.505

Platinum

782.00

788.00

NA

802.00

Copper

2.80

2.7530

NA

2.7555

Crude(WTI)

51.58

53.73

NA

52.12

 

Global Government Bond Yields

 

December 10, 2018

December 7, 2018

December 6, 2018

December 5, 2018

US 10 year

2.85%

2.89%

2.87%

2.91%

US 30 Year

3.13%

3.17%

3.13

3.17%

UK

1.21%

1.26%

1.24%

1.31%

Germany

0.25%

0.26%

0.23%

0.27%

Brazil

10.12%

9.99%

10.00%

10.09%

Italy

3.09%

3.14%

3.20%

3.05%

Japan

0.03%

0.05%

0.05%

0.06%

 

 

Major U.S. Indices

 

December 10, 2018

December 7, 2018

December 6, 2018

December 5, 2018

VIX

23.95

22.42

23.53

CLOSED

DOW

243.61

24918.82

247.27

CLOSED

S&P 500

263.37

269.45

265.97

CLOSED

NASDAQ

7041.83

6994.39

7114.10

CLOSED

EM USD

1062.41

1059.54

1060.39

CLOSED

 

Currency Cross Rates

 

December 10, 2018

December 7, 2018

December 6, 2018

December 5, 2018

USD/JPY

113.1800

112.6900

112.4800

113.2100

EUR/USD

1.1358

1.1384

1.1389

1.1344

AUD/USD

0.7188

0.7227

0.7224

0.7268

USD/MXN

6.8730

20.338

20.494

20.5130

USD/CNY

6.9127

6.882

6.8815

6.8545

USD Index

97.18

96.80

97.00

97.08

Five Hundred Words 12/06/2018

Thursday, December 6, 2018

Daily Writing

Questions I would like to answer eventually

  • What is the current bull case for the overall economy, and global equities in particular?
  • What events in the late 1980’s led to the collapse of the Soviet Union?
  • Are there any parallels between USSR in late 1980’s and China today?

Market Overview

The United States has requested the extradition of the CFO of Huawei, Wanzhou Meng, from Canada.  Meng is also the daughter of Huawei founder Ren Zhengfei.

How did Canadian authorities have the right to arrest Wanzhou Meng?

US law prohibits the exports of specific US-origin technologies in certain countries.  When Huawei pays to license specific US tech, it promises not to export to certain countries like Iran.  So it is not unreasonable for the US to punish Huawei for flouting this US law.

The Dow opened down 400 points amid China trade tensions stemming from the arrest of Meng, and fears of economic slowdown.

I believe there are strong headwinds coming stemming from China, and our view is that a recession is on the horizon.  To be wrong would require a major turnaround in the Chinese economy, and interest rates must remain at historic lows.

We’ve exited all positions to mitigate risk and we now sit solely on cash.  We do not have any equity or bond positions.

From Bloomberg:

“The biggest qualm is the trade war escalating and this is haunting the markets,” said Naeem Aslam, chief market analyst at Think Markets U.K. in London, in an email. “It is arduous to find bulls in the market and it seems to me that this game is about to become uglier.”

US 10-year Treasury yields continue pushing lower, threatening to break through 2.80%

 

Parallels between economies of modern China and late-1980’s USSR

  • Economic statistics unreliable and often outright fudged
  • Steps taken to liberalize economy via centralized policy
    • USSR: Perestroika
    • China: 1980 economic reforms, 2019 opening of Chinese financial sector
  • Increasing influence of regional elite beyond central authorities
    • USSR: Ethnic minority regions
    • China: Xinjiang
      • From Beijing’s perspective, Xinjiang represents an existential threat to the CCP
  • Entrenched industrial, military, and legacy regime interests

“Political paralysis produced by the powerful forces who opposed economic reform was the ultimate cause of the Soviet Union’s collapse.”

Hypothesis:

Xi Jinping is terrified of losing authority over the military and regional elites in China.  If China enters economic downturn, Xi will lose his ability to influence these groups.  Therefore, Xi has no choice but to continually consolidate his power to ensure his total control.

I’m most interested in studying the collapse of the Soviet Union to gain an understanding of how modern superpowers decline.  I want to understand what sorts of events transpire on the ground during a period of economic turmoil.  Who are the victims?  Who are the aggressors?  Who gains, who loses?  Which groups or individuals have the most to lose from collapse?  Which individuals or groups stand the most to gain from collapse?  These are the types of questions I am hoping to answer before I go to China.

 

Market Data

Resource Commodities

  December 6, 2018 December 5, 2018 December 4, 2018 December 3, 2018

Gold Spot

NA
1238.00
1230.30
1228.28

Silver

NA
14.505
14.355
14.385

Gold/silver

NA
85.47
84.84
85.29

Platinum

NA
802.00
806.00
806.00

Copper

NA
2.7555
2.8075
2.8571

Crude(WTI)

NA
52.12
53.25
52.97

 

Global Government Bond Yields

  December 6, 2018 December 5, 2018 December 4, 2018 December 3, 2018

US 10 year

2.87%
2.91%
2.95%
3.02%

US 30 Year

3.13
3.17%
3.38%
3.38

UK

1.24%
1.31%
1.31%
1.33%

Germany

0.23%
0.27%
0.28%
0.31%

Brazil

10.00%
10.09%
9.95%
9.82%

Italy

3.20%
3.05%
3.15%
3.12%

Japan

0.05%

 

0.06%
0.06%
0.07%

 

 

Major U.S. Indices

  December 6, 2018 December 5, 2018 December 4, 2018 December 3, 2018

VIX

23.53
CLOSED
16.84
16.04

DOW

247.27
CLOSED
257.53
257.80

S&P 500

265.97
CLOSED
278.34
280.38

NASDAQ

7114.10
CLOSED
7158.43
7421.77

EM USD

1060.39
CLOSED
1059.93
1054.71

 

 

Currency Cross Rates

  December 6, 2018 December 5, 2018 December 4, 2018 December 3, 2018

USD/JPY

112.4800
113.2100
112.8100
113.590

EUR/USD

1.1389
1.1344
1.1339
1.1334

AUD/USD

0.7224
0.7268
0.7338
0.7369

USD/MXN

20.494
20.5130
20.356
20.0611

USD/CNY

6.8815
6.8545
6.8342
6.8893

USD Index

97.00
97.08
96.97
97.02

Five Hundred Words 12/05/2018

Wednesday, December 5, 2018

Daily Writing

Market Overview

Markets are closed today for a National Day of Mourning in honor of late President George HW Bush.  Markets will reopen on Thursday.

Investors are still reeling from the sudden 3.00% drop in U.S. equities on Tuesday.  There are indications that China is actively looking to cooperate more with the United States, but there is no telling what that means for the markets when we resume trading at 9:30 AM on Thursday.

Little questions I’d like to answer eventually

  • What does an inverted yield curve mean for the broader economy?
  • The price of palladium has exceeded the price of gold for the first time in 16 years. What does this mean?  Why is this important?  Who does this impact most?  What is the use case for palladium?

China and Trump and America and trade wars, etc.

Following President Donald Trump’s open questioning of China’s commitment to reduce tariffs on US imports, China’s ministry of commerce stated publicly that it is committed to a 90-day timeline to address specific items.

Global markets cheered the weekend accord on Monday, only to reverse course Tuesday as doubts emerged over precisely what the world’s two largest economies had agreed on.

There is no good indication of how markets will respond to news that China’s ministry of commerce confirmed their 90-day commitment to purchase US imports and move to reduce or entirely remove tariffs within 90 days of December 1.

Government Bonds (German ones specifically)

The yield on the German 10-year government bond (also known as “the Bund” has fallen to 0.27%.

Why is this important?

When it comes to bonds, price and yield move inversely.  When the price of a bond moves higher, the yield moves lower.  Declining bond yields in the German Bund (or other comparably safe assets such as U.S. Treasuries) indicate that global investors are seeking safer assets to park their money.  For example, if European investors are starting to feel uncertain about European equities, they may choose to rotate their assets into bonds where they know they can find a guaranteed “risk-free” rate of return.

Here’s what we’re thinking: a 0.27% yield in nominal terms is negative in real terms.  Negative real yield means that once the bond matures, the investor will end of losing money.

If global investors can’t buy their domestic bonds and they can’t buy German bunds, then where do they go?

The clear answer is US Treasury Bonds.  At the time of writing, the yield on the US 10-year Treasury Note is 2.91%.  An important thing to note is that the real yield of U.S. Treasuries after taking long-term inflation into account is just 0.97%.  Compared to the negative-yielding German or Japanese Government Bonds (or even gold) a 2.91% yield is pretty darn attractive.

Miscellaneous items

Brexit

There’s still no Brexit deal.   I’m not entirely in tune with the happenings of Brexit (which from what I understand is likely for the better), but it feels like the indecision surrounding Brexit negotiations between the May government and the EU is fueling more anxiety and fear in the market than a hard Brexit would.  I understand that the issue is far more complicated than that, but that’s just how it feels to me.

We will consider a deeper dive into the Brexit narrative at some point, but for now, we’ll leave it here.

Personal Thoughts

Overall this blog is intended to be an exploration of my thinking and analysis of the world over time.  I hope whatever I write here can be informative for others as well.  My approach is to continually ask questions about things I don’t understand clearly, because of this my writing contains unanswered questions.  I hope moving forward I can develop a community of people who possess a learner’s mindset.  Ideally, those who follow my blog are skilled in areas where I am weak so that I can learn as well.  My sincere wish is to contribute to the thinking of others.

Market Data

Resource Commodities

 

December 5, 2018

December 4, 2018

December 3, 2018

November 30, 2018

Gold Spot

1238.00

1230.30

1228.28

1223.90

Silver

14.505

14.355

14.385

14.285

Gold/silver

85.47

84.84

85.29

85.76

Platinum

802.00

806.00

806.00

818.00

Copper

2.7555

2.8075

2.8571

2.824

Crude(WTI)

52.12

53.25

52.97

50.52

Global Government Bond Yields

 

December 5, 2018

December 4, 2018

December 3, 2018

November 30, 2018

US 10 year

2.91%

2.95%

3.02%

3.02%

US 30 Year

3.17%

3.38%

3.38

3.38%

UK

1.31%

1.31%

1.33%

1.36%

Germany

0.27%

0.28%

0.31%

0.31%

Brazil

10.09%

9.95%

9.82%

9.89%

Italy

3.05%

3.15%

3.12%

3.21%

Japan

0.06%

0.06%

0.07%

0.08%

Major U.S. Indexes

 

December 5, 2018

December 4, 2018

December 3, 2018

November 30, 2018

VIX

CLOSED

16.84

16.04

19.18

DOW

CLOSED

257.53

257.80

253.39

S&P 500

CLOSED

278.34

280.38

273.98

NASDAQ

CLOSED

7158.43

7421.77

7296.39

EM USD

CLOSED

1059.93

1054.71

1053.73

Currency Cross Rates

 

December 5, 2018

December 4, 2018

December 3, 2018

November 30, 2018

USD/JPY

113.2100

112.8100

113.590

113.5300

EUR/USD

1.1344

1.1339

1.1334

1.1316

AUD/USD

0.7268

0.7338

0.7369

0.7306

USD/MXN

20.5130

20.356

20.0611

20.226

USD/CNY

6.8545

6.8342

6.8893

6.95557

USD Index

97.08

96.97

97.02

97.20

Tellier Holdings Apprentice Fund

Wednesday, December 5, 2018

Equities

 

Close

P&L (%)

Shares

Average price

Entry date

BRK B

closed

closed

30

209.505

11/30/2018

KO

closed

closed

83

49.65

11/30/2018

MCD

closed

closed

19

187.43

11/30/2018

SNY

closed

closed

60

45.15

11/30/2018

SBUX

closed

closed

38

66.61

11/30/2018

LMT

closed

closed

6

302.45

11/30/2018

MSFT

closed

closed

15

110.28

11/30/2018

TCEHY

closed

closed

23

39.87

11/30/2018

ETFs

 

Close

P&L (%)

Shares

Average price

Entry date

Franklin FTSE China

FLCH

Closed

Closed

50

22.14

11/30/2018

SPDR S&P 500 ETF

SPY

Closed

Closed

15

274.38

11/30/2018

Cash

 

Close

P&L (%)

Position

Average Price

Entry date

EUR/GBP

EUR/GBP

(-0.04%)

10000

0.89177

11/30/2018

 

Five Hundred Words 12/04/2018

Tuesday, December 4, 2018

Daily Writing

9:10 AM

Initial impressions of the day

Yesterday we touched on commodities moving higher.[1]  Intuitively you’d think that the spike in demand for copper and other base metals would be due to the tentative truce between the US and China.  However, we can’t confirm this, and the dramatic downturn we witnessed today could dispel this theory.

What is the real cause of the spike in demand for copper?

Rather than increased optimism over Chinese demand, the bullishness in copper is a direct result of the prospect that a shift to cleaner forms of energy creates new demand for the base metal,[2] which is used in electric car batteries and wind turbines.

2:40 PM

OK so maybe no trade deal

At its lows the Dow Jones Industrial average fell by as much as 800 points, or more than 3.00% on Trump’s sudden wavering views on China.  Now, after a brief period of relative clarity regarding US-China trade tensions, that all went out the window after President Donald Trump tweeted that his team would be “seeing wither or not a REAL deal with China is actually possible” by early March, the next deadline in the talks.  This uncertainty exacerbated fears that the global economy could be slowing.

Many of the events that the market believed would help improve certainty moving into the new year haven’t panned out.  Firstly, there was a widely held belief that mid-term elections on November 6, 2018 would allow the market to price in potential higher budget deficits and adjusted fiscal policy that typically accompanies democratic electoral victory

4:11 PM

OK so maybe the sky is falling

Today was an absolute slaughter in the markets.  The SPY fell 3.20%, the DOW fell more than 800 points at its peak, U.S. 10-year Treasuries dipped below 3.00% before settling at 2.91%.  Tellier Holdings Apprentice Fund fell 4.28% primarily on weakness in financials and banks.  The BLK dividend capture strategy turned out to be a complete disaster.  We’ll end up making $70 from the dividend pay out at the end of the month, but on the day BLK dropped by more than 6.00%, something our risk models placed a 0.10% probability on BLK dropping more than 6.00%.  Over the past five years BLK has only dropped more than 6.00% on two other occasions, once in late January of this year and once previously in 2014.

Reflections on a -4.00% day

Today was supposed to be a calm day. I had my strategy in place for when things went right. However, I had no contingency plan for when things went wrong. I will shrug off today’s poor result, and I will continue to focus on the basics. I will continue to seek permanence. I must remember to move with the overall trend. Only after I determine, the secular trends should I make trade decisions.

I must be honest with myself if I’m going to improve. I will be accountable. Today’s performance was weak because my risk management philosophy was deeply flawed. As soon as BLK began to drop from 434 down to 424, I felt it was highly unlikely to continue moving further. I added to the BLK position 424.80 because I wanted to capture the additional dividend.

By that point, BLK was already trading down roughly. BLK had only fallen more than 3.00% in a day less than 5% of the time over the past five years.

Unfortunately, I failed to take into account the risks posed to the banking sector Given BLK’s historical volatility and past performance, and I felt the downside would be limited as we crossed the ex-dividend date on Thursday, December 6. I did not anticipate a 5.00% drop in the banking sector with minimal warning, especially given the subdued volatility on Monday.

I felt rushed to decide on BLK quicker than I liked because I knew the market would be closed on Wednesday to honor the late President George HW Bush. I felt encouraged to make this move because I used the same strategy to profit on MCD and TLT.  According to my Blackstone, INC. (NYSE: BLK), over the last five years BLK had only experience three drawdowns greater than 5.00%.  Today happened to be the second largest draw down, only after the October 10, 2018 decline from which the broader market has yet to fully recover.

Although my mistake cost me roughly 2.00% of my portfolio today, my risk management in the other areas of my portfolio was quite strong. Defensive stocks such as MCD, KO, and SBUX all did their jobs and held steady, all finishing roughly even on the day perhaps even slightly up.

I still do not have a great understanding of the impact of bond prices on overall rates and the profitability of banks.  From a macro perspective I am working how the market will behave now that the fear of an inverted yield curve is looking to bubble up.

There are still many things to learn, I feel I can take this experience as a learning opportunity.  I am still in the game, and I will strive to improve on my risk management and trading strategy.

 

Citations

https://www.ft.com/content/dc1421ea-f6ea-11e8-af46-2022a0b02a6c

https://www.bloomberg.com/news/articles/2018-12-04/china-s-currency-strengthens-extends-biggest-gain-in-two-years-jp93up4y

 

 

Market Data

Resource Commodities

 

December 4, 2018

December 3, 2018

November 30, 2018

November 29, 2018

Gold Spot

1230.30

1228.28

1223.90

1220.70

Silver

14.355

14.385

14.285

14.285

Gold/silver

84.84

85.29

85.76

85.39

Platinum

806.00

806.00

818.00

822.00

Copper

2.8075

2.8571

2.824

2.7955

Crude (WTI)

53.25

52.97

50.52

51.07

 

Global Government Bond Yields

 

December 4, 2018

December 3, 2018

November 30, 2018

November 29, 2018

US 10 year

2.95%

3.02%

3.02%

3.02%

US 30 Year

3.38%

3.38

3.38%

3.33%

UK

1.31%

1.33%

1.36%

1.34%

Germany

0.28%

0.31%

0.31%

0.32%

Brazil

9.95%

9.82%

9.89%

10.05%

Italy

3.15%

3.12%

3.21%

3.22%

Japan

0.06%

0.07%

0.08%

0.08%

 

 

Major U.S. Indexes

 

December 4, 2018

December 3, 2018

November 30, 2018

November 29, 2018

VIX

16.84

16.04

19.18

NA

DOW

257.53

257.80

253.39

NA

S&P 500

278.34

280.38

273.98

NA

NASDAQ

7158.43

7421.77

7296.39

NA

EM USD

1059.93

1054.71

1053.73

NA

 

Currency Cross Rates

 

December 4, 2018

December 3, 2018

November 30, 2018

November 29, 2018

USD/JPY

112.8100

113.590

113.5300

NA

EUR/USD

1.1339

1.1334

1.1316

NA

AUD/USD

0.7338

0.7369

0.7306

NA

USD/MXN

20.356

20.0611

20.226

NA

USD/CNY

6.8342

6.8893

6.95557

NA

USD Index

96.97

97.02

97.20

NA

 

 

Tellier Holdings Apprentice Fund

Tuesday, December 4, 2018

Equities

 

Close

P&L (%)

Shares

Average price

Entry date

BRK B

210.12

(-1.22%)

30

209.505

11/30/2018

KO

49.58

(-0.18%)

83

49.65

11/30/2018

MCD

185.04

(-0.03%)

19

187.43

11/30/2018

SNY

44.14

(-0.10%)

60

45.15

11/30/2018

SBUX

66.65

(-0.13%)

38

66.61

11/30/2018

LMT

286.73

(-0.24%)

6

302.45

11/30/2018

MSFT

108.52

(-0.20%)

15

110.28

11/30/2018

TCEHY

NA

(-0.08%)

23

39.87

11/30/2018

 

ETFs

 

Close

P&L (%)

Shares

Average price

Entry date

Franklin FTSE CHINA

FLCH

22.25

(-0.09%)

50

22.14

11/30/2018

SPDR S&P 500 ETF

SPY

270.25

(-0.53%)

15

274.38

11/30/2018

 

Cash

 

Close

P&L (%)

Market value

Average price

Entry date

EUR/GBP

0.89196

(-0.04%)

8920

0.89177

11/30/2018

 

 

 

Five Hundred Words 12/03/2018

Monday, December 3, 2018

Daily Writing

7:04 AM

Today is the first trading day of December.  We are looking forward to implementing our new risk management strategy which emphasizes performance against the SPX benchmark.

Over the weekend the United States and China agreed to a trade war ceasefire.

Certain commodities are trading much higher, notably WTI Crude and copper.  Is this due to a perceived increase in Chinese demand?

We are exploring a short-term dividend capture strategy[1] targeting Blackrock (NYSE: BLK).  BLK’s ex-dividend date is this coming Thursday December 6.  Our strategy will be to find an appropriate time to purchase shares of Blackrock before the ex-dividend date and unload the shares at an appropriate price any time after Thursday.  Blackrock’s current share price is 428.01 sitting on 31.32% volatility.  The dividend yield is 2.42% and the quarterly dividend is $3.13 per share.

Sanofi S.A.[2] (NYSE: SNY) is lower close to 2.00% pre-market while most other equities are riding higher pre-market on news of US-China trade war ceasefire.  Sanofi is a French pharmaceutical company headquartered in Paris.  Are concerns over Sanofi somehow related to the Gilets Jaunes (yellow-vest) riots?[3]

Mexico’s peso currency gained 1.30% on news of US-China trade truce.  Separately, local media cited a two-page report detailing agreements made by the group building the airport, which noted than an offer to purchase up to $1.8 billion in bonds will be offered in New York on Monday[4]; this means construction of the controversial airport will continue even after the project was cancelled by incoming President AMLO.

2:06 PM

On November 30 we opted to pivot to several defensive names, namely KO, MCD, and SNY.  Defensive stocks are underperforming today, despite a 1.00% on the day for the S&P.  KO, MCD, and SNY are down 2.00%, 1.75%, and 2.29% respectively at time of writing.  I still want to hold on to defensive stocks in case we are at risk of entering a bear market heading into the end of the year.  I’m having difficulty generating alpha, I will analyze the data at the end of the day to see if there are any changes I can make to my portfolio.

[1] https://www.investopedia.com/articles/stocks/11/dividend-capture-strategy.asp

[2] https://en.wikipedia.org/wiki/Sanofi

[3] https://www.ft.com/content/7d0e1318-f09b-11e8-ae55-df4bf40f9d0d

[4] https://www.reuters.com/article/uk-mexico-peso/mexican-peso-up-after-airport-bond-holder-report-us-china-trade-truce-idUSKBN1O10VP

 

Market Data

Resource Commodities

 

December 3, 2018

November 30, 2018

November 29, 2018

November 28, 2018

Gold Spot

1228.28

1223.90

1220.70

1214.60

Silver

14.385

14.285

14.285

14.120

Gold/silver

85.29

85.76

85.39

86.13

Platinum

806.00

818.00

822.00

831.00

Copper

2.8571

2.824

2.7955

2.75

Crude (WTI)

52.97

50.52

51.07

51.23

 

Global Government Bond Yields

 

December 3, 2018

November 30, 2018

November 29, 2018

November 28, 2018

US 10 year

3.02%

3.02%

3.02%

3.06%

US 30 Year

3.38%

3.38%

3.33%

3.33%

UK

1.33%

1.36%

1.34%

1.37%

Germany

0.31%

0.31%

0.32%

0.35%

Brazil

9.82%

9.89%

10.05%

10.08%

Italy

3.12%

3.21%

3.22%

3.26%

Japan

0.07%

0.08%

0.08%

0.09%

 

Major U.S. Indexes

 

December 3, 2018

November 30, 2018

November 29, 2018

November 28, 2018

VIX

16.04

19.18

NA

18.87

DOW

257.80

253.39

NA

248.33

S&P 500

280.38

273.98

NA

269.61

NASDAQ

7421.77

7296.39

NA

7120.56

EM USD

1054.71

1053.73

NA

1048.40

 

Currency Cross Rates

 

December 3, 2018

November 30, 2018

November 29, 2018

November 28, 2018

USD/JPY

113.590

113.5300

NA

113.6300

EUR/USD

1.1334

1.1316

NA

1.1367

AUD/USD

0.7369

0.7306

NA

0.7304

USD/MXN

20.0611

20.226

NA

20.2442

USD/CNY

6.8893

6.95557

NA

6.9538

USD Index

97.02

97.20

NA

96.84

 

 

Tellier Holdings Apprentice Fund

Monday, December 3, 2018

Equities

 

Close

P&L (%)

Shares

Average price

Entry date

BRK B

220.81

0.29%

30

209.505

11/30/2018

KO

49.69

(0.23%)

83

49.65

11/30/2018

MCD

185.37

(0.24%)

19

187.43

11/30/2018

SNY

44.55

(0.19%)

60

45.15

11/30/2018

SBUX

67.50

0.11%

38

66.61

11/30/2018

LMT

296.79

(0.09%)

6

302.45

11/30/2018

MSFT

112.09

0.07%

15

110.28

11/30/2018

TCEHY

41.46

0.12%

23

39.87

11/30/2018

 

ETFs

 

Close

P&L (%)

Shares

Average price

Entry date

Franklin FTSE CHINA

FLCH

22.70

0.09%

50

22.14

11/30/2018

SPDR S&P 500 ETF

SPY

279.30

0.21%

15

274.38

11/30/2018

 

Cash

 

Close

P&L (%)

Market value

Average price

Entry date

EUR/GBP

0.89151

0.18%

10,651

0.89043

11/30/2018

Five Hundred Words 11/30/2018

Friday, November 30, 2018

Daily Writing

10:14 AM

Today is the final trading day of November.  Yesterday we exited our short US 10-year Treasury position as it is becoming clear that yields are struggling to keep their head over the 3.00% support level.  Although the historical volatility of the PST exchange-traded instrument was within a tolerable range of 7.00% to 9.00%, the underlying narrative was struggling to hold up after Jerome Powell’s announcement on Wednesday that interest rates are inching closer to a range considered to be “neutral”.

We are focusing on outperforming the SPX benchmark.  Our primary goal into the next year is focusing on exceeding this benchmark.  Our methodology will focus on large-cap, high dividend U.S. equities. We expect portfolio allocation of U.S. equities to fall within 50 – 75%.  At least 60% of portfolio allocation will consist of low beta assets, aiming for below average correlation to the S&P 500 benchmark.

Market Data

 

Resource Commodities

November 30, 2018

November 29, 2018

November 28, 2018

November 27, 2018

Gold Spot

1223.90

1220.70

1214.60

1221.60

Silver

14.285

14.285

14.120

14.190

Gold/silver

85.76

85.39

86.13

85.81

Platinum

818.00

822.00

831.00

842.00

Copper

2.824

2.7955

2.75

2.73

Crude(WTI)

50.52

51.07

51.23

51.58

 

Global Government Bond Yields

November 30, 2018

November 29, 2018

November 28, 2018

November 27, 2018

US 10 year

3.02%

3.02%

3.06%

3.07%

US 30 Year

3.38%

3.33%

3.33%

3.32%

UK

1.36%

1.34%

1.37%

1.39%

Germany

0.31%

0.32%

0.35%

0.35%

Brazil

9.89%

10.05%

10.08%

10.10%

Italy

3.21%

3.22%

3.26%

3.25%

Japan

0.08%

0.08%

0.09%

0.08%

 

Major U.S. Indexes

November 30, 2018

November 29, 2018

November 28, 2018

November 27, 2018

VIX

19.18

NA

18.87

19.41

DOW

253.39

NA

248.33

246.40

S&P 500

273.98

NA

269.61

265.76

NASDAQ

7296.39

NA

7120.56

7081.85

EM USD

1053.73

NA

1048.40

NA

 

Currency Cross Rates

November 30, 2018

November 29, 2018

November 28, 2018

November 27, 2018

USD/JPY

113.5300

NA

113.6300

113.6300

EUR/USD

1.1316

NA

1.1367

1.1326

AUD/USD

0.7306

NA

0.7304

0.7242

USD/MXN

20.226

NA

20.2442

20.623

USD/CNY

6.95557

NA

6.9538

6.9486

USD Index

97.20

NA

96.84

97.15