ChristopherCarrollSmith

ChristopherCarrollSmith Updated 

Historically, a rebound of this magnitude has almost always indicated that the bear market is over and that we've entered a new bull market. And there's plenty of reason to be optimistic right now. With the US dollar down, US manufacturing numbers have been coming in above expectations (PMI of 49 in July, vs. 46.7 estimate). Consumer confidence and home prices...

ChristopherCarrollSmith Updated 

I recently published an idea where I laid out the bear case . But as I said in that post, although there are reasons for caution, I'm not really bearish on this market. In this post, I'll lay out why I do not believe now is the time to go full short. The bear case in review First, let's briefly review the bear case. First, the yield curve is deeply inverted....

ChristopherCarrollSmith

Last year, continuing claims for unemployment insurance hit the lowest level since 1970. After a sharp uptick this year due to layoffs that mostly affected white collar tech workers, the absolute number remains strong relative to history, but is now above the lows of 1972–73, 1987–88, 2000, and 2018–2019. An upward move this sharp usually accelerates and becomes...

ChristopherCarrollSmith Updated 

Why We Rallied It's been a strong few months for the S&P 500, which is up about 13% from the October lows. There were five reasons for the rally: 1) P/E ratios got attractive, especially for small-to-mid caps. 2) Inflation peaked, which historically has sometimes marked the bottom for stocks. 3) Global liquidity turned upward. Every major bond market was...

ChristopherCarrollSmith Updated 

The S&P 500 sold off until June, when expectations of monetary tightening peaked. Since then, the index has powered off the June lows as the growing likelihood of recession makes it less tenable for the Fed to keep raising rates. I suspect that interest rate expectations will continue to "drive the ship," and that stock prices will peak or consolidate whenever...

ChristopherCarrollSmith Updated 

NTSX is an ETF that holds 60% S&P 500, 40% leveraged bonds. This is a highly efficient portfolio composition known as "return stacking" (recently popularized on Twitter by Corey M. Hoffstein). You get the best of several worlds: the lower volatility of the 60-40 portfolio, and the higher returns offered by leverage. Since leverage is used on the relatively safer...

ChristopherCarrollSmith Updated 

For various reasons, the Chinese tech giant Alibaba has been in a downtrend since October 2020. The company has had many headwinds, most of them related to the regulatory environment in China. Most of those issues now seem to be resolving, and I think BABA will be one of the better performers in the coming year. The China Credit Impulse A major leading...

ChristopherCarrollSmith Updated 

Emerging markets have dramatically underperformed the S&P 500 since the launch of the first EM ETF in 1987. However, during that period, there have been stretches of outperformance. In fact, there appears to be a cycle. EM outperformed from 1987 to 1994, underperformed from 1994 to 2000, outperformed from 2000 to 2010, and underperformed from 2010 until the...

ChristopherCarrollSmith Updated 

Just tossing this one out there: Cathie Wood's ARKK Innovation ETF is within 1% of completing a round-trip to its pre-pandemic highs. It's also at the bottom of a fairly major parallel channel that it's been forming since February last year. In purely technical terms, it looks poised for a bounce. This is not a long-term hold, especially with Tesla as the top...

ChristopherCarrollSmith Updated 

Markets Have Been Celebrating No Corporate Tax Hike Stocks have been marching higher as the risk of a near-term corporate tax hike evaporated due to hard bargaining by centrist Democrats Joe Manchin and Kristen Sinema. Prediction markets are now putting the odds of no corporate tax hike at about 88%: www.predictit.org In fact, the single largest line item in...

ChristopherCarrollSmith Updated 

Headline Potential Merck has three drugs currently under priority FDA review, one of them a Covid-19 drug: Molnupiravir, an antiviral for Covid-19 which has received a positive opinion from the advisory board and which Merck's CEO says should work against any variant Vaxneuvance, a pneumococcal vaccine Lynparza, a breast cancer drug Merck also...

ChristopherCarrollSmith Updated 

A Mean-Reversion Play Power generators like NRG and PNW have been quite beaten down lately, mostly because of surging oil and natural gas prices as we head into winter. NRG is .8 standard deviations below its mean, with 82% upside to its median price multiple of the last 3 years. PNW is currently trading about 3 standard deviations below where it usually trades...

ChristopherCarrollSmith Updated 

This one is almost pure intuition. We're in pharmaceuticals earnings season now. Seagen reports after market today. A bunch of other large holdings of XBI report on November 3-4, and a bunch more on November 8. Bonds and tech stocks have made a breakout move upward, and small caps look primed. (XBI is full of small and micro caps.) XBI has had a long consolidation...

ChristopherCarrollSmith

The holy grail of diversification is to find several uncorrelated asset classes all with positive returns. One problem, though, is that diversified passive investing has caused all asset classes to become more and more correlated over time. Increasingly, you see stocks, bonds, commodities, and cryptocurrencies all move together. One approach to diversification...

ChristopherCarrollSmith Updated 

With today's weak inflation data, treasury yields are falling, which should be at least short-term bullish for tech. Qualcomm has an additional news catalyst from yesterday's announcement that they authorized a $10 B buyback plan. Qualcomm looks to be exiting oversold territory on the daily RSI. It's just under 15 forward P/E right now, with PEG under 0.5 and...

ChristopherCarrollSmith Updated 

After the IPCC's recent report showing that the North Atlantic Current may be on its last legs, I decided that I needed to diversify away from the US and Europe a bit. (If the North Atlantic Current fails, it would cause massive, disruptive climate change for Europe and North America.) So I committed to look for opportunities in some country ETFs. The one I've...

ChristopherCarrollSmith

The South Korean show Squid Game dramatizes, in part, the extremely high household debt levels in that country. With household debt-to-GDP highest in the world, South Korean 30-somethings owe an average of 270% of their annual income. Those are the kinds of household debt levels that could either plunge the country into recession as credit tightens or cause...

ChristopherCarrollSmith Updated 

Fridays and Mondays are the most important trading days of the week. A lot of traders will rebalance their portfolios at the beginning or end of the week, and then simply hold through the week. These days also signal something about the news environment. A down Friday typically signals that traders fear bad news over the weekend, and a down Monday signals that bad...