Free eLetters

November 2019

If they can shut down this man’s bank account, yours could be next…

November 20, 2019TradeSmith Research Team

Imagine getting the following notice from your bank, out of the blue, with no explanation: Your PERSONAL CHECKING / SAVINGS account ending in XXX will be restricted from use in 21 days, and permanently closed 30 days from the date of this notice. After a careful review of your banking relationship, we’ve made the decision to close your account above. As a reminder, your Deposit Account Agreement, which you received when you opened your account, allows either you or

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Cannabis Stocks are a Gateway Drug to Losses (For Now Anyway)

November 19, 2019TradeSmith Research Team

Cannabis investors have a message for Joe Biden: The 1990s called, they want their worldview back. Biden, a U.S. presidential candidate and front runner among Democrats, hurt pot stocks this week by expressing the view that marijuana is a “gateway drug” and shouldn’t be legalized for that reason. The irritated response from cannabis investors and marijuana enthusiasts — and even from a handful of politicians on both sides of the aisle — was to point out that the “gateway drug”

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Hong Kong’s Rage is the Harbinger of a Multi-Decade U.S.-China Cold War

November 18, 2019TradeSmith Research Team

On June 4, 1989, the Tiananmen Square Massacre occurred. On that dark day, the Chinese government declared martial law and sent in tanks and troops to put down student-led demonstrations. Westerners recall the iconic image of “tank man,” the lone protester standing in front of a line of tanks. What is less well-known is that, in the massacre that occurred less than 24 hours earlier, somewhere between several hundred and several thousand protesters were killed (and thousands more wounded). Three

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Conventional Investment Advice is Like Dieting Advice (All Over the Map and Terrible)

November 13, 2019TradeSmith Research Team

There are few things more obnoxious than dieting and nutrition advice. The more you dig for answers, the more confusing things get. The findings conflict with each other. The recommendations are all over the map. For example, one guy, a doctor or a Ph.D., tells you whole wheat grains are a bedrock staple. Another Ph.D. says grains are toxic for some impressive-sounding reason — because the casing of the wheat kernel was designed to be hard to digest and pass

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Buffett’s Silence Speaks Volumes as He Sits on a Mountain of Cash

November 8, 2019TradeSmith Research Team

When it comes to sky-high market valuations, Warren Buffett doesn’t have to speak. His mountain of cash does all the talking. “Sky-high” was the exact phrase Buffett used to describe market prices earlier this year. In spite of hoping to make an “elephant-sized acquisition” — another Buffett phrase — Berkshire’s Hathaway’s cash pile has swelled to a record-busting $128 billion. In its most recent quarter, Berkshire also booked its highest ever operating profit, at $7.86 billion. That means more cash

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How Cycles and Position Sizing are Connected

November 6, 2019TradeSmith Research Team

We’ve been talking about cycles for the past few weeks. You can get a refresher here: What Investors and Farmers Have in Common: The Enduring Power of Cycles The Lotka-Volterra Equations: Nature’s Ode to Boom and Bust The WeWork Implosion is a Spectacular Example of a Cycle Top (and Era’s End) Today, we’ll explain how cycles and position sizing are connected. And we’ll do so with the help of a legendary billionaire, Howard Marks. Howard Marks is a distressed-debt investor

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Big Tech is a Hot Mess, But Microsoft Floats Above the Fray

November 1, 2019TradeSmith Research Team

The world of big tech looks like a chaotic, bruising, conflicted hot mess right now. And then there is Microsoft, floating above the fray. The Redmond, Wash.-based giant not only vies closely with Apple for the title of “most valuable company in the world” — both of them have a trillion-plus in market cap — it seemingly skates through a hostile political environment with no drama. All the other tech giants have headaches or something worse. Amazon, for example, is

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October 2019

The WeWork Implosion is a Spectacular Example of a Cycle Top (and Era’s End)

October 30, 2019TradeSmith Research Team

WeWork was, at one time, a Silicon Valley “unicorn” of legendary status. Now it is unicorn roadkill. In August, we argued that “The WeWork IPO Sums Up Everything Bad About the Unicorn Bubble.” That was more or less on point apart from one thing: The IPO never actually happened. Instead, WeWork self-destructed in one of the most bizarre and spectacular implosions of any company in Silicon Valley history. It wasn’t just that the WeWork IPO got called off. It was

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Buying Puts on Transport Stocks as a Protective Hedge

October 25, 2019TradeSmith Research Team

The U.S. stock market is in an uncertain place right now. The Dow and S&P 500 are not far from their all-time highs, but technology stocks are a mixed bag and small caps are well off their highs. Then, too, economic indicators are also a mixed bag. Some point toward optimism, but others are more gloomy, or even ominous. And there is no shortage of political and geopolitical drama: Brexit, trade war, Middle East saber rattling, impeachment fights, on and

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The Lotka-Volterra Equations: Nature’s Ode to Boom and Bust

October 23, 2019TradeSmith Research Team

Why should investors pay attention to cycles? For the same reason farmers pay attention to seasons. To maximize the harvest, a farmer has to know the given season — and the seasons are a four-part cycle that repeats year after year. It would make no sense for the farmer to try and harvest crops in the spring (or plant them in the fall). Investors, too, have actions that apply to given cycle points. But investment cycles are shaped by human

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How Many Stocks Should You Own?

October 21, 2019TradeSmith Research Team

We told you about the second most-asked question we get at investment conferences – how does an investor more effectively manage all the stocks he or she has bought? This is not new. Investors, especially newer ones, get excited about all the stock recommendations they read about and in just a few months, they can own well over 100 stocks. We’ve spoken with investors recently who own more than 200 positions. And just like that, they have a problem managing

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Negative Interest Rates Could Be Coming to the USA

October 18, 2019TradeSmith Research Team

Ever since the financial crisis of 2008, monetary policy has had an “Alice in Wonderland” feel. The whole thing has been a crazy experiment — and the experiment is still ongoing. The next bizarre chapter could be negative U.S. rates. Negative interest rates have already shown up in bond markets all around the world. If negative rates come to America too — and if NIRP (negative interest rate policy) is implemented by the Federal Reserve — the central bank that

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