AMEX:SPY Hey, friends! As you know, I'm not a swing-trader or a long-term trader. Especially, I am not an investor, because no one has ever cancelled the speed of capital turnover, and with positive deals of 70% the situation in this matter takes a completely different turn. However, this is not what I am talking about now. If anyone is interested to learn it, welcome to my students.
So, on Sunday I got this message from my subscriber: "...I like your message about Cgen, also I am also trying to build for the family in the future. I currently have YRCW, DKNG, PTE, CLRB, NET and INPX. Can you tell me anything. Anything would help..."
After that it became more obvious to me that I am read not only by day traders, but also by people who do not trade actively, but also want to invest and earn on it. I must note that I do not understand the panic among people who "hurry to jump into the last carriage of the leaving train". First, in my opinion, the "train" is not leaving yet. Secondly, even if it does, jumping into it is a dangerous thing. RobinHood Investment has registered a sharp increase in the number of accounts opened during the crisis, which confirms the idea: people are afraid of not having time to get to the market.
However, I thought about it and decided to give these investors a real gift: analyze the market from my point of view and then write something worth looking at to invest money. Please note that this will not be an individual advice, because, as a minimum, you need to know your client, his preferences, readiness for risks, his planning horizon, as well as the goals of reinvestment of profits or withdrawal of profits. I am not your advisor, and before you make a trade, conduct your personal analysis.
Ok, here we go.
About the market. If you look carefully at the SPY chart, you can see that the market is now trading at the level of November-December last year. Please note: at the level when there was no COVID outbreak in the USA, when the economy was fine, when the elasticity of supply and demand was balanced. The market is almost ( once again: almost) at its maximum level. So why did the market grow now if the economy was in decline, when the number of unemployed rose sharply, when consumption fell? Are these expectations inflated? It is not correct to assume that everyone will go to work now and the economy will grow. The question is: Will there be demand? How can demand be at the same level as before the pandemic if there is such unemployment? People have lost their jobs. It is obvious to me that there will still be a correction in the market. We saw an example of such correction on June 11-12. So, my personal opinion is that the correction is inevitable. The question is different: when can it happen?
Prerequisites for further market decline: 1. The second wave of COVID-19. Not all restrictions have been removed yet, however, it is obvious that another wave is possible by September-October. See the official materials of the World Health Organization. You'll understand everything. who.int/emergencies/diseases/novel-coronavirus-2019. You can watch a fresh press conference right away. I'm sure you'll be curious. 2. Political instability in The United States. There is nothing to comment on, except that such unrest may partially affect the market and give local corrections. 2. The trade war with China. If Mr. Trump takes the job, a wave of decline awaits us, as in September 2018. 3. The results of the 2nd Q of 2020. I notice that COVID has been hit hardest in March, April and May. The worst was in April, i.e. the main wave of restrictions occurred at the beginning of the second quarter. Consequently, the second quarter reporting may be worse than the first quarter reporting. 4. US elections .. November 2020. In my opinion, it's impossible to predict Trump.
Prerequisites for further market growth: 1. The Federal Reserve System does not plan to increase the rate until 2022. Cheap money is an incentive for the economy. 2. Countries are gradually coming out of quarantine. 3. OPEC+ has agreed to reduce oil production, which will push up oil prices.
As a consequence, we have two ways: to be in the cache, but we must understand that because of the money flood, inflation is possible OR the second way: to buy stocks now, but to be afraid of possible market correction.
Personally, I choose to buy shares. The question is different: what to buy? And now, friends, the interesting thing is. Here are my thoughts on this: 1. Investing in the IT . Communication, cloud storage and information processing and graphics processors. With high-tech manufacturing, this part of the industry will be in demand. I wouldn't invest in the gaming industry, because it's not known what will happen to them after everyone goes to work and stops sitting at home. It's risky. Personally, I would look at T and NVDA and other companies with large capitalization. Moreover, I would add that AT&T, in my opinion, is greatly underestimated.
2. Aviation Strange as it may seem, I would still personally look at the aviation industry and production, especially at very large companies that have been promised government support or that have recently issued bonds: Delta, American Airlines, Boeing. Read more here: investing.com/equities/delta-air-lines-new Of course, I understand that the recovery in this industry will be long, but if you are ready to sit in it for a long time and are ready to buy them on corrections, these assets could be positive on the horizon of 1-2 years. But it is very important: only those companies for which the state support has been agreed and only the largest of them. Domestic flights will be restored, life will take its course.
3. Oil companies. You have to be very careful. I categorically do not recommend buying fallen oil shale companies like Chesapeake Energy. The oil shale companies aren't doing very well right now. If you buy, it's just classic companies that are too big to fall. I also strictly recommend against buying futures on oil.
4. Pharmaceuticals. There are two options: classic and venture business. Classic, like Johnson and Johnson, which have sagged but are recovering. There will be normal growth potential here, but this industry should be considered as a defense of its portfolio, because the demand for such products is stable. If you want to take a risk and bet on a vaccine developer, which I think is very risky, look at Gilead Sciences Inc. However, I must say that it is very risky to bet on this company, because you don't know who will invent this vaccine first, and it is more than unreasonable to make up the entire portfolio of all vaccine companies. Trying to guess is a risk.
5. Tourist business. Not risky SSL, but hotel chains clearly will not die completely and in 1-2 years will feel good again.
6. Financial companies Such as Wells Fargo or JP Morgan Chase, for which classic dividend rates or rates are planned above average, only if the margin from sales is positive. For example, JPM +3.68% dividends with margin + 28.32B, WFC +7.39% dividends with income 12.47B.
7. Money. Those who are very afraid to invest can look at cross-pairs, for example, USD_AED. It's not a chart at all - it's a solid line. If something can happen to the dollar, it is unlikely to happen to the dirham. Look at the chart of this currency pair for decades, you will understand everything.
So, what do we have in the portfolio in this case:
IT - is for growth with company and with good dividends. Aviation and tourism for recovery and slow conservative growth. Classic Oil - to gain with dividends. The financial sector is exceptionally long term to receive dividends in order to outpace inflation. Thus, we have a balanced portfolio.
And remember, you don't have to buy the whole deposit right now. If there is a second wave or poor reporting for the second quarter, you will be able to buy more.
Well, friends, I hope I've given you the details. If you have any more questions, you can ask. Once again, I note that this article reflects only my vision and in no way is advice or inducement to action. Before you make a decision to buy or sell shares or derivatives, do your own analysis.
thank you for explaining on a very simply level for new investors
just one question (im not arguing jut asking)
your number 7. Money. do not you think that USD_AED depend on each other?
and this is why their ratio always look like a straight line?
the value of USD went up and down historically but the ratio always stayed the same.
the value of USD to CAD went down in 2010-2011.
the value of USD to AED stayed the same
this is because usd and AED went down together 2010-2011
Saudi Riyal is the same flat line to the dollar. maybe because it is a petro dollar?(1944 Bretton Woods agreement)
As you know, a currency pair consists of a base one and a quote parts, the quote is written like this: base\quote.
In other words, there are some units of currency of the Arab Emirates for a unit of the American currency.
So, there is logic in the council to look at this currency pair:
Yes, the quote of the currency pair usually depends on each other. But the idea to buy USD\AED in the broach is that this currency pair is extremely stable.
The AED currency unit exchange rate was set back in 1997 and was equal to 3.67.
And of course, since the currencies depend on each other so that the exchange rate does not change, the Arab Emirates "tied" this rate to 3.67.
And that's what they did it for:
1. The economy of the Emirates is very stable.
2. Banks sell Dollars and Dirhams in any quantities, so currency speculators in the Emirates have not taken root.
3. The citizens of the country have lost interest in the Dollar because the rate is stable, and if so, they do not transfer their assets into dollars, leaving cash (liquidity) in the state currency.
4. The Dirham became freely accepted in the Middle East, unlike, the Yemeni currency (YER).
5. The main attitude for the UAE was that people should love the national money, keep their savings only in it and have no doubts about stability: no matter what happens, the Dirham will not "collapse".
6. Of course the course is supported by oil.
7. There are other important nuances: a feature of the UAE economy is that it is based on the labor of foreign nationals who benefit from the high exchange rate of the Dirham, as they regularly send part of their earnings home. In addition, the UAE market has a very high proportion of imported goods, including daily demand and foodstuffs, which means that removing the attachment to the dollar, which would most likely lead to a devaluation of the Dirham, would hit the pockets of the population, raising the inflation rate.
8. Now about USD_AED ratio. It remains unchanged even when the value of the dollar falls, only because it is supported by the government of Emirates. The exchange rate was slightly declining in 2011 (by 2 cents), but the next day it rose again. The coefficient remains stable because this rate is artificially supported. Well, the reasons why it is supported - I mentioned earlier.
Where am I going with all this?
Provided that all other currencies in the world are not as stable and their rates are not supported as they are by the AED, we can use this pair as a protective tool to save some money. This means that if for some reason you decide to buy, for example, USD\JPY , just for "rescue", then waking up one morning, you can be very unpleasant surprise.
But if you buy USD\AED, then your dream will be deep and calm, because the course has been the same for decades.
Alexey_Malorodov
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@akatsiya, I see why you don't understand).
You don't need two different currencies and they dont devalue each other.
To protect your capital, you just need to buy the Dirhamas for Dollars. Not for Rubles, not for the Euro, not for the JPY, but for dollars. That's why the Dollar/Dirham pair is used. I live in Russia, I can't use the Ruble to buy Dirhams save capital. Because the Emirates supports the rate only on the dollar, it does not support the rate on the ruble. The rate of RUB\AED may change. If you buy dirhams for rubles, you won't save capital because the rate may fall. I have to use the dollar. That's what the pair is used for.
You just buy the Dirham for the Dollar and you know that no matter what happens, you can get 1 Dollar back for 3.67 Dirhams.
just one question (im not arguing jut asking)
your number 7. Money. do not you think that USD_AED depend on each other?
and this is why their ratio always look like a straight line?
the value of USD went up and down historically but the ratio always stayed the same.
the value of USD to CAD went down in 2010-2011.
the value of USD to AED stayed the same
this is because usd and AED went down together 2010-2011
Saudi Riyal is the same flat line to the dollar. maybe because it is a petro dollar?(1944 Bretton Woods agreement)
thank you