Fear Building Up | 2023-10-29

Hey, welcome back. My portfolio is flat this week, despite a very strong performance from Bitcoin. So I've lost the most from IBM, Shopify and Enphase Energy.

So I've cut GDX gold miner ETF. Despite a fairly strong gold price in this week, I think the miner has been lagging behind. So I've just took profit from this position.

And I've also cut a bunch of short positions like IBM Ford Motor and

CCL

but for Ford Motor, I've cut this position too early. Basically, one day after I cut this position, it had a big drop following the poor earning results.

And I've cut my long position on Lockheed Martin as well, just on the portfolio level risk management. I don't like being too long the markets at the moment.

And finally, I've added a long PLTR, AXON / RCL. And finally, short Tesla.

So overall my portfolio is long delta at the moment,

but the positive Delta is really coming from Bitcoin and bond position.

And I'm also long SPX Delta as well.

And the biggest risks from Bitcoin and Meta. And we have got a bit of sell off after the meta earning results, but I'm still bullish in AI and cloud in general.

And this is my actual option position. So the biggest risk by market value is still Bitcoin.

And I have a fairly high excess liquidity as well. So enough for like three to four new positions, but the, but the excess liquidity also means that I'm not really confident in predicting the market right now.

So this is the chart of the broader market, so obviously a lot of fear right now. But I don't think we should add more shorts at the moment. I think there's a risk that we could see some rebounds.

And this is why I'm having a bit of a cash reserve to try to add some more long positions going forward.

So that's for the portfolio review. As for the market review, I think there is a bit of mixed signal in the market right now. But I think ultimately I do see more upside risk for the market for the rest of this year.

So let's start with some economic data. So this week we have a bunch of positive surprise for the U. S. macro data, for example, PMI. So we have, so we have both the U.

S. manufacturing and service PMI better than expectation.

So we have the chart of the PMIs that are basically going up since the start of this year. And also we have a positive GDP surprise.

So it's basically a 4. 9 percent of rise. It's better than the expectation of 4. 5%.

However, despite all of the data, the market is still selling off this week.

I think it's due to the stronger economic performance means higher inflation means high interest rate.

So the market is crashing and is the fixed volatility index of the S& P 500. And it's also rising, meaning there is a bit of fear building up in the markets. And this gold, I think it's not just related to the market crash. It's also related to the Middle East conflict. And this KRE, Regional Banking ETF

it's not really crashing in this week, but I think the risk is due to the downside. And finally, it's the US Treasury bond ETF.

I think technically it looks like it's bottoming, so there is less risk to the downside and more risk to the upside, meaning falling yield.

And this is the US dollar index. We have also seen that it seems like it's not really that strong anymore. So there is a risk that the dollar may go to the downside.

And this, the dollar Yen chart, we can see that the Japanese Yen fail to fall below 150. So I think the intervention is kind of working right now.

So in summary, I feel that we are at a inflection point in the markets right now.

In the past few months, we have been trading a theme of higher inflation, higher yield, stronger U. S. dollar, and weaker stock markets. But but I think for the rest of this year, we may actually see the opposite happening. Meaning that we could see a weaker yield, weaker U. S. dollar, and higher stock markets.

And especially right now, we are seeing fear in the equity markets. So if the market crash rapidly, like in the next months, we could see some more expectation for easing monetary policy.

So this is why I really think the risk is to the upside for big technology stocks, defense stocks, and some risk off hedges(Bond/Gold/BTC),

but it is just my opinion and I could be wrong so in case we have the broader market keeps selling off, I want to have a stock that is going to fall much further than the broader market. So Tesla, for example,

so that's the summary of my market view. So I will just go for some random stuff right now and starting with Tesla.

So I basically see Tesla as a hedge for a broader market crash. I don't really expect it to happen. I would love to see the market just go up for the rest of this year and just lose off my money on Tesla and make much more money for my other long positions.

But in case of a market sell off, my target is 100 for Tesla.

And this is the structure of my portfolio. So I just shot a strike 150 put option. So the cost is 4.44 and the target is $50. So it's 150 minus 100. So it's 50. So it's a 10 x risk to reward.

And , I've cut my CCL position. So CCL is the worst cruise line operator in my opinion because of a very high debt level. But I think overall the cruise line travelers are doing pretty well. Because firstly, the pandemic is no longer a concern for them.

And secondly, I think cruise line travelers are really the retiree, and they are not really affected by this recession, so they still have a lot of money to spend on the cruise line traveling. So that's why I've added a long position on RCL, so Royal Caribbean Corporation.

It has a fairly low debt level compared to other competitors and it has the strongest revenue growth right now. And this week we have also seen a very strong earning reports from them. So they are basically lifting their full year profit forecast.

Have a very strong booking for the coming seasons.

So this, the chart of RCL, it's been going down in the past three months. So I think it's a good entry here to buy the dip.

And I'm basically expecting a new high for this stock, which is around 115. So if that happened, the risk to reward is three x for this stock. So my structure right now is a diagonal call spread with a cost of around 14. So my target is 30 on this one.

And just want to talk about ExxonMobil as well. I think the earning result is pretty good this week, but the stock actually sell off afterwards. But I think it's just some profit taking and some concern about the coming recession.

But I think the supply risk for the oil market is far more important than the demand risk in this scenario.

So I'm still very bullish on XOM. I think if this stock falls to around 100 level, it would be a good opportunity to buy the dip.

So just some coverage for the U. S. commercial banking deposits in the U. S. It's basically falling.

And currently I'm still keeping my MSTR long position because I do see a few of bull cases for Bitcoin. So first is the ETF. .

And secondly, the strong China stimulus policies and capital fight situation. And we also have the crash happening in the stock market right now. And finally, we are still waiting for the regional banking crashes, which is very bullish for Bitcoin if that, if that happens.

And just want to expand a bit on China. So we have a very poor sentiment of the Chinese stock markets in the past few months. However, we are actually seeing very strong stimulus policies coming out of China. So this week we have the China government raising the deficit ratio from 3% to 3.5%.

, and we are also seeing very poor youth unemployment level, which I think is going to cause Chinese government to do more policy.

So I think there's going to be a bunch of hot money coming off China going forward. And that hot money has to go somewhere.

So I'm checking out JD. com right now, the e commerce company in China.

So the fundamental analysis of this company is actually not very well, the revenue growth is just barely above inflation level. , and we have a very poor valuation as well. , so the PE ratio is just around eight to nine.

And the stock has been doing very poorly this year, and it's partly hurt by the price war with PDD, and also a general very weak consumer spending in China.

And this is a chart of a competitor, PDD, it's actually doing pretty well in this year to my surprise. And this Alibaba is not doing pretty well. I think it's due to the very bad overall Chinese stock market sentiments.

So I'm just thinking about what if the fundamental of JD is improving, I think it could just hit 40 in three to six months. So if JD can hit 40 by March in next year, the risk to reward is going to be 6 to 8 times, which is very good.

So in this week we have JD. com starting a sales campaign to prepare for the double 11 in November. So it seems that the initial results is doing pretty well so far.

And from this news, we can see that the mainland China retail sales is growing by 5. 5 percent in September compared to 4. 6 percent in August. So it's actually improving for the Chinese consumers. So I think a lot of the very bad sentiment is surrounding on the real estate markets, but not for the Chinese consumer.

So I'm thinking about this diagonal call spread structure. So long March 30 call and short December 30 call with a 2 to 1 ratio. , so I'm very likely to put on this trade in next week.

So that's the update for this week. Thank you for watching. See you in the next week. Bye.