Juggling With Knives: Profits, protection and planning for volatility in stocks, bonds, real estate, and real life.
This website is based on my book, Juggling with Knives. Both the book and website are about volatility in everything from stocks and bonds to real estate, and real life topics such as jobs and education.
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I’m starting up my videos again–this time using YouTube as a platform. The fourth YouTube video on why this very stretched market will hang in for another six months went up today.
2020 was a great year for Dividend investing: my Dividend Portfolio showed a total return of 15.71% for 2020
It’s unusual, to say the least, to have a dividend portfolio match the returns on the Standard & Poor’s 500–especially in a year when the S&P 500 was setting an all time high–but that’s what happened in 2020. My Dividend Portfolio showed a price gain of 12.28% for 2020. Add in the 3.43% dividend yield and the total return for the portfolio for the year was 15.71.% For the year the S&P 500 returned 16% and the Dow Jones Industrial Average returned 7%.
I’m starting up my videos on–this time using YouTube as a platform. The third YouTube video on What Apple and Microsoft’s moves on Intel mean for technology stocks went up today.
Closing all of my Options hedges in the Volatility Portfolio; holding off until January or February to add new downside protection
Stock have moved up so strongly that the Put Options I own in my Volatility Portfolio are no longer providing any significant downside protection against a market downturn. Especially since two of the three–the Puts on MGM Resorts International, and Vale l expire on December 18. The last Put, the one on American Airlines, expires on January 15, 2021, but I’m closing that position as well. I’m also selling my two Call Options on Barrick Gold, and the VanEck Vectors Gold Miners ETF since they also expire on December 18 and they are also so far out of the money the holding is pointless. Those Calls on gold were also added as protection against an outbreak in market volatility that never arrived.
Can’t swim against the cash flood anymore–selling my ProShares Short Russell 2000 ETF out of the Volatility Portfolio tomorrow
I bought the ProShares Short Russell 2000 ETF (RWM) back on October 30 because I felt then that the market wasn’t pricing in any of the potential problems likely to hurt the U.S. economy over the next couple of months. I picked the small cap Russell 2000 index for my downside bet because it was showing the most sensitivity to news–good and bad about the economy. Well, I got the sensitivity part right. But I missed the effect of huge cash inflows on stocks in general and the Russell in particular. Right now potential bad news and even actual bad news doesn’t matter much. Stocks keep going up. At the close on December 9, Wednesday, I had a 19.89% loss in this position after today’s slight 0.69% drop in the Russell 2000 (and 0.72% gain in this short ETF.) I’m not willing to let this loss get any bigger so I’m selling this position.
Shares of what was once Kensington Capital Acquisition (KCAC) and is now QuantumScape (QS) are up 203.3.7% since I bought Kensington back on October 13, 2020 in my Volatility Portfolio. But Quantumscape isn’t planning to have its solid state lithium ion battery in production until 2024. And most investors don’t understand the wave of dilution that’s about to hit the now public shares of QuantumScape. So I’ll be taking my profits tomorrow.
If you bought shares of Kensington Capital Acquisition (KCAC) along with me on October 13, you’re received a solicitation for a proxy vote to approve the reverse merger of Kensington with privately held QuantumScape, a startup solid state lithium battery company. The merger is a way for QuantumScape to go public. (Kensington was the 14th and last pick in my Special Report: 10 Stocks for the Post-Coronavirus economy on my JubakAM.com subscription site. I added it to the Volatility Portfolio on October 13. Kensington has called a special meeting for shareholders for November 25 to approve the merger. You can vote online until 11:59 p.m. tonight. I plan to vote in favor of the merger, since that’s the whole reason for owning shares of Kensington. Kensington is a SPAC.
Watch your Puts as a source of cash in any dip: My Puts on Vale and American Airlines move into black
Intended as insurance against a big market drop, my Puts on American Airlines (AAL) and Vale (VALE) have moved into the black in the last two days. My Puts on MGM Resorts International (MGM) could follow–the stock dropped 5.55% in after-hours trading yesterday on a big revenue miss for the third quarter.
Buying ETF to short Russell 2000 (and U.S. economic growth) tomorrow to add more downside protection
Yesterday, October 28, I posted that I would put off buying more downside protection against volatility in this nervous market for one more day. The plunge in stocks on Wednesday made downside protection more expensive–fear increases the demand for downside hedges–and the uncertainty introduced by the release on Thursday of third quarter GDP growth figures (with the possibility that the market would rebound strongly from Wednesday’s drop) both argued for waiting until Friday, October 30 to buy my next hedge. Well, the GDP news is behind us and the market climbed relatively modestly today, which made hedges cheaper, so tomorrow I’ll be adding shares of the ProShares Short Russell 2000 ETF (RWM) to my Volatility Portfolio.
Autoliv beats on prospects for global auto recovery–but I think you’ve got better stocks to play this trend
Autoliv (ALV) reported third quarter earnings per share of either $1.48 (non-GAAP) or $1.12 (GAAP). (GAAP is generally accepted accounting principles.) That consensus was $1.09 a share on Wall Street. Revenue of $2.04 billion was in line with expectations and up 0.5% year over year. For the full 2020 year the company said it expects a 14.5% drop in revenue–versus Wall Street projections for a 15.05% decline. While those results may seem lackluster, they represent a huge improvement for the maker of auto safety systems.