Market Update: 06-17-19

The Issachar Fund is fully invested in Muni Bonds with a small allocation to Preferreds.  My conviction level in munis remains high with a moderate level of conviction in Preferred Stock ETFs.  Preferred stocks entitle the shareholder to a fixed dividend, whose payment takes priority over that of common-stock dividends.  Preferred stocks have a historical tendency to do well when bonds and stocks trend higher.  If the preferreds perform as expected, I plan to increase our exposure.  If things do not go as planned, I will not hesitate to do what is necessary to minimize our losses.  Munis and preferreds have, what I feel are, good historical day-to-day serial price correlations and they seem to be working well at this time.  (Portfolio holdings are subject to change at any time and should not be considered investment advice.) The market appears to be in a holding pattern, likely in anticipation of this Wednesday’s Fed policy announcement.  Fed CME Futures expect the Federal Reserve to reduce rates 3 times over the next 5 meetings, but they are expecting the Fed to keep rates steady after their 2-day meeting this Wednesday.  There are some expectations of a possible rate cut, and it is not clear what the market will do in response. It could be seen as an admission that the economy is weakening.  If the economy is weakening, then I would expect further rate cuts because I believe the Fed wants to see Trump reelected.  Any hint […]

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Market Update: 06/11/19

The Issachar Fund is 195% invested with 70% in Muni Bond Mutual Funds, 123% in Muni ETFs and 2% in stocks.  My conviction level in muni bonds increased so I added to our muni exposure via Total Return Swaps.  We have a Total Return Swap agreement with a bank that charges us interest to buy the ETF in their account and we make or lose what the ETF returns.  I like to use leverage on muni and junk bonds whenever they are trending and when I perceive the risk/reward relationship is skewed in our favor.  Muni and junk bonds historically have good day-to-day serial price correlations which basically means the price yesterday tends to be close to the price today and that typically makes for a nice trend.  I also like what I am seeing in my stock Watch List as stocks are breaking out on strong volume which indicates to me that “big money” is coming back in the market.  (Portfolio holdings are subject to change at any time and should not be considered investment advice.  Allocations exceeding 100% result from the use of leverage.) Trump cuts a deal with Mexico and the market rallies.  Mexico agreed to stem the tide of immigrants crossing our southern border and President Trump agreed to not impose 5% tariffs.  The uncertainty of Mexican tariffs had the market worried about the potential negative impact on corporate earnings, but that concern appears to have  been lifted and the market […]

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Market Update: 06-03-19

The Issachar Fund holds 165% in Muni Bond Mutual Funds (70%) and ETFs (95%).  I purchased more municipal (muni) bond ETFs last week due to the accelerated price slope I am seeing in the muni space and the continued price deterioration exhibited in the stock market.  We are using leverage because I feel the potential gain from a continued uptrend in muni bonds outweighs the cost of leverage.  Muni bonds have historically produced good day-to-day serial price correlations and I find that very attractive in this market environment.  Muni bonds are historically issued with lower interest rates when compared to government bonds because muni bond interest is tax-free on the federal and state level.  Muni bonds are often considered a safe-haven low default-risk type of investment.  Since muni bonds appear to be under accumulation, what is the market trying to tell us about the future of the stock market?  (Portfolio holdings are subject to change at any time and should not be considered investment advice.) The 10-year Treasury Bond Yield (2.21%) dipped below the targeted Fed Fund Rate (2.25%).  I believe the market is trying to tell us that we are headed for a global economic slow-down.  The market historically discounts the future by taking what is known today and forecasting what it sees in the future.  Normally, the market does not like uncertainty and the ramifications of an escalated trade war may be too hard to predict so there seems to be a flight […]

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Market Update: 05-28-19

The Issachar Fund holds 115% in Muni Bond Mutual Funds (70%) and ETFs (45%).  The stock market peaked on October 3rd and High Yield Muni Bonds bottomed on October 10th and they have been trending higher (double-digit annualized rates) ever since.  Maybe the bond market was predicting that if the Fed raised rates like they indicated, the economy would slow and low and behold, I think the bond market was right. The Fed raised rates in Q-4 and the stock market dropped about 19% while the munis continued to attract money and trend higher.  Munis have historically been a low-volatility asset class and I like that because their trends tend to persist.  Low volatility trends that persist like junk bonds (not currently doing well) and munis has allowed us through the years to generate return relative to the risk we are taking.  I have conviction in this muni trade, and I plan to stay as long as we are being rewarded.  (Portfolio holdings are subject to change at any time and should not be considered investment advice.  Allocations exceeding 100% result from the use of leverage.) All major stock market indexes are now trading below their 50-day moving averages (dma) which could mean trouble for the stock market.  The major market indexes remain in a three-week downtrend (lower lows and lower highs) “correction” from their early May highs. This is the deepest correction since the market rally began in late December, so we need to […]

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Market Update: 05-20-19

The Fund holds 15% in Muni Bond ETFs and 85% in Cash.  I like what I am seeing in the muni bond space, especially high yield muni bond ETFs and mutual funds.  I added two muni ETFs as a starter position with plans to possibly add more if things work out the way I anticipate.  I typically “test the waters” with small positions and if they “work” then I try to add bigger positions as I get more conviction in the trade.  On a risk-adjusted basis, the muni bond sector looks attractive at this juncture in anticipation of a slower economic environment.  According to fund tracker EPFR Global, investors pulled $19.5 billion out of global mutual funds and ETFs in the week ended May 15, while bonds added $5.1 billion for their 19th week of inflows.  There is the potential for the stock market to make lower lows.  However, I believe that we are one tweet away from a rally or one tweet away from a sell-off, so stay alert. Chinese trade tensions have not eased and may have gotten worse.  Trump feels that he is in the driver’s seat when it comes to trade negotiations with China and sometimes, he pushes the envelope …because he can.  However, China sold the most Treasuries in almost 2.5 years in March, offloading over $20 Billion taking China’s Treasury holdings to $1.12 Trillion.  I believe the Fed will buy whatever China sells so I am not too concerned […]

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Market Update: 05-13-19

The Fund holds 100% in short maturity cash equivalents.  Cash is a position!  I sold all stock positions last week as the market declined following a Trump Tweet promising to raise tariffs on Chinese imports by Friday if the Chinese did not give into his demands.  The market lost about 2% last week.  When the market is not rewarding me for taking risk, I prefer to reduce exposure or simply step aside and let the market do what it needs to do.  Imagine doing a planned retreat to hilltop on a battlefield to get a better view of what you are up against.  Once we clear our minds and get a vision of where we are headed, then we can plan our attack.  In a sense, going to an all cash position allows me to clear my head and refocus on my objective.  Once I am convinced the market may reward us for taking risk, I will carefully reenter the market.  However, most of the previous stock leaders are not acting like leaders so I will patently wait for the leaders to show me they are ready to “act right”. The S&P 500 Index futures are pointing to about a 2% decline on Monday morning.  Tensions with Iran and potentially more Chinese tariffs seem to be spooking the market at this time.  The market traded lower last week on a sell-the-rumor; buy-the-news bounce-off-support reversal-rally on Friday.  We could see the Chinese retaliate; however, they import […]

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Market Update: 05-06-19

The Fund holds about 85% in short-term bonds and about 15% in stocks.  I sold stocks that were not performing as expected last week and purchased new ones which appear to have strong fundamentals and sound technical chart patterns.  It has been a frustrating year for risk managers, but I am confident that my strategies can keep us out of major declines and keep us in during major advances.  If my current positions start to work (make money) then I plan to increase exposure if we are rewarded for taking on more risk.  However, if these positions start to roll over (lose money) then I plan to do what is necessary to minimize losses.  I am cautiously optimistic but that can quickly change depending on market conditions. The US stock futures were pointing to a sharp decline at the open!  President Trump tweeted that he intends to impose additional tariffs on Chinese imports as trade talks progress “too slowly” and the market does not appear to be happy about that.  The S&P 500 Index was trading near all-time highs so I would not be surprised to see the indexes use these “trade fears” as an excuse to retreat a bit.  However, this could be the start of a major market decline and we should never ignore the warning signs.  Just because the market has always “come back” and has made new highs does not mean that it will “come back” when you are ready to […]

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Market Update: 04-29-19

The Fund holds about 85% in short-term bonds and about 15% in stocks.  I added to our stock positions last week and I expect to increase stock exposure this week if earnings come in better than expected.  A few leading growth stocks were crushed after releasing negative earnings and guidance last week, but I am finding many more leading stocks rallying after positive earnings surprises.  This is very encouraging to me because I believe the “leaders” (best stocks in the best groups) often pave the way for the indexes to follow.  I am more optimistic than last week as I “follow the leaders” and trust they will tell us when there is trouble ahead. Real GPD for the 1st Quarter grew at an annualized rate of 3.2%!  This is far above expectations and the market seems to like this kind of positive economic growth.  Inflation is very low, and bonds are also doing very well.  Junk bonds are confirming the euphoria and trending higher indicating to me that investors still have a hungry appetite for risk.  Two-year German, French and Japanese bond yields have negative yields while the 2-Year US Treasury bonds yields a positive 2.3%. Imagine loaning money to Germany, France and Japan and having to pay them interest to loan them money.  It makes no sense to me but that is what is happening across the pond.  I pray that will never happen to us but that is what can happen when government […]

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Market Update: 04-23-19

The Fund is about 95% invested in short-term bonds.  I sold stocks as sell limits were triggered as money appears to be flowing out of growth.  It has been a difficult environment for growth investors as leading stocks after the 12/23/18 low get hit with waves of selling due to profit-taking and short-selling which tend to suppress prices even further.  I am cautiously optimistic. The trend is still up but stiff resistance is just ahead.  The S&P 500 Index (large-caps) is less than 1% away from an all-time high.  However, the Russell 2000 (small-caps) is about 10% from its all-time high and I consider that a yellow caution flag.  The small-caps can under perform the large-caps for a short period, but I prefer to see the small-caps lead on a relative basis.  A small-cap dominance indicates to me that investors are okay with taking on more risk.  However, that does not appear to be the case currently.  It could be that the market is predicting a favorable trade deal with China and that could benefit the large-cap exporters more than domestic small-cap companies.  Bottom line, the trend is still up but I would not be surprised to see a “pause” before the market truly breaks out of this V-shaped pattern.                    Defensive sectors like consumer staples, healthcare and utilities are not leading.  This tells me that the market is not concerned with economic growth slipping into a recession as it was in Q4.  Healthcare […]

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Market Update: 04-15-19

The Fund is about 93% invested.  We have about 78% in short-term bonds, 15% in growth stocks and 7% in Cash and I am hoping to increase stock exposure shortly.  I believe all eight growth stocks have excellent fundamental and technical characteristics and appear to have sound chart patterns.  I am seeking the “best of breed” stocks in the industries that seem to be under accumulation.  The cloud, software and cyber-security industries look very attractive to me at this time. The major indexes are at or approaching significant resistance and I would not be surprised to see a pull-back or consolidation.  The trend has been up since the Christmas Eve low and I am expecting the trend to continue with earnings coming in better than expected.  I do not like to play “earnings roulette” so I will likely not hold any position into its earnings release date.  The risk of an earnings or revenue miss, and a stock dropping is a risk I am not willing to take.  However, if I have a “cushion” or a substantial profit in the position, I may consider holding it through its earning release.  Either way, I would rather miss an opportunity than lose money.        Stocks seem to be buoyed by the expectation that the current economic slowdown will be just a slowdown and not a recession.  The economic outlook on March 19 as represented by a steep drop in the bank stocks was for a severe economic […]

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