Author: Beau Wolinsky, KC Capital Management
Covestor model: Quantitative ETF
Disclosures: None
Coming out of July, I wanted to position myself long rather than short because I felt like we had an excellent earnings season, and in early August we saw the market tumble due to silence by the rating agencies who refused to say whether or not they were going to maintain a triple A credit rating on US sovereign debt. It is our opinion that we will maintain our credit ratings at each US agency.
We had a very bad recent GDP report and even saw Q1 numbers revised dramatically lower. Since liquidity ratios are so high, I feel that the market may be re-assessing its expectations of growth in light of the GDP revisions, and while this doesn’t factor into our technical entries, it is a theme we pay attention to whenever we go long.
We believe that the market could experience a few more days of turmoil, and eventually rally to new highs for both the NASDAQ and S&P 500.
The headline risk to our strategies depends on the extent to which investors choose to take action. We know that we are in a hyperinflationary environment, so revenues should increase and accrete to earnings and top line growth. I am personally concerned with the rise in gold, but see silver increasing at a decreasing rate versus the parabolic rise we’ve seen in the gold futures. We feel any rise in metals or commodities in general merely reinforces our belief that stocks should rise with the pricing pressures. Unfortunately, if we do see another leg down in the dollar, this will be only beneficial for commodities, and only if the weakness is short lived and the dollar strengthens – despite commodity inflation pressures – we should see a rise in the stock market, particularly technology stocks.
We are positioned long as of 8/2, and in the technology sector we’re utilizing triple leveraged instruments long and short, with approximately 10 trades per month.
