The Enhanced Investor Weekly Macro
March 5, 2017
ENHANCED INVESTOR WEEKLY WRAP & UPDATE Market Wrap Good Evening everyone! Last week was wild and here’s a brief synopsis as to why… As many of you have seen, and have been concerned about a “bubble”, U.S. Equities had their best run of the year. Record highs across the major indexes are indicative of the implications by the infrastructure plan Congress is currently preparing. Label Brainard and Janet Yellen both hinted at a March rate hike on March 15th. What does this mean? As we’ve discussed in the Education Section, the Federal Reserve deals in Monetary Policy to counterbalance Fiscal Policy. With inflation nearing 2% and the US economy looking strong via the Consumer Confidence Indicators, this is the time for the US to raise rates. With China struggling and the EU’s inflation trending up at an anemic pace, this is the time to reduce our Current Account Deficit. Do not worry about this. Rates rising to even 3% (we’re currently between .5 and . 75%) are extremely low. The US crude inventory as reached a record high of 520.2 million barrels. This does not mean that you short oil stocks. The US is preparing to export oil to China, which is deficient and India as well. The Snapchat IPO: Look, no one outside of the investment banks got in at $17. I’m an angel investor for a few companies, so believe me when I tell you - don’t sweat this. Gold took a hit this week. Why? As I explained while at the Lael Brainard speech: Hawkish comments from several Federal Reserve officials, who indicated that tighter monetary policy may be coming soon hurts gold in the short-term. Dovish Long-term stock plays below with long gold. Hawkish - short gold.
Market Update 1.
gold trading strategy.
U.S. Jobs Report - 8:30am 3/10 (Friday)
In the week ahead, global financial markets will focus on the monthly U.S. employment report due Friday, which could seal the deal for a Federal Reserve rate hike later this month. The projection is now an 80% probability of an The Enhanced Investor Weekly Macro
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The Enhanced Investor Weekly Macro
March 5, 2017
interest rate hike on March 15th. Expect gold to go down significantly if the Jobs Report on Friday is as forecast. The only number that could throw off a rate hike is job creation less than 120,000. 2. European Central Bank Policy Meeting Investors will await the outcome of Thursday’s European Central Bank meeting for fresh clues on the future path of the region's massive stimulus program. The ECB is expected to keep interest rates unchanged even despite rapid inflation and immense growth. Mario Draghi speaks 45 minutes after the decision and is expected to remain dovish. 3. China February Trade Data China is to release what will be closely watched trade and inflation data amid ongoing concerns over the health of the world's second biggest economy. The report is expected to show that the country’s current account surplus has narrowed to $25.0 billion last month from $51.4 billion in January. China's economy grew 6.8% in the fourth quarter, boosted by higher government spending and record bank lending. But the economy still faces headwinds from a cooling housing market and possible protectionist measures from the U.S. The housing market in China is in a massive bubble and should be watched closely. Price-to-rent ratios are 33 to 1. 4. U.K. Manufacturing Production for January In the U.K., traders will be awaiting a report on manufacturing production for further indications on the continued effect that the Brexit decision is having on the economy. The Bank of England raised its forecasts for growth and inflation last month, but appeared in no rush to raise interest rates as Any reduction of expectations Prime Minister Theresa May intends to trigger perceived by the markets the formal process for separating from the regarding stimulus results in a European Union by the end of March. market selloff. 5. Reserve Bank of Australia Policy Meeting Interest rate increases are mechanism used by the Federal Reserve to reduce the money Outside the G7, market participants will be supply (something Trump and looking ahead to a monetary policy Wall Street do not want). announcement from the Reserve Bank of Monetary policy can balance Australia on Tuesday. fiscal policy.
When fiscal stimulus hits Main Street, big banks on Wall Street access increased/excess reserves making more loans to consumers while increasing the money multiplier. Markets UP.
The RBA's latest interest rate decision is due on Tuesday at 03:30GMT (10:30PM ET Monday). Most economists expect the central bank to keep rates unchanged at the current record-low of 1.50% and signal that the current policy
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The Enhanced Investor Weekly Macro
March 5, 2017
easing is over, given the economy's convincing rebound last quarter, rising commodity exports and a robust increase in household debt levels. Long-Term Stock Ideas The bullish rally may not have much left in it given the impending moves from the Federal Reserve, so‌ What to do? Here are a few stocks/plays to look at for this week and next: TRVG - Post-IPO base looks bullish. TLND - With the software sector looking relatively healthy, this long-term play in database services is safe. CELG - May finally break out of the 17-week base. With a PE of 21 and growth rate of 36%, I like this one. See Gold on next page*
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The Enhanced Investor Weekly Macro
March 5, 2017
GOLD During Brainard’s speech last Wednesday, I mentioned in the chat that she was Hawkish. I picked up JDST @ $16.65 and rode it to just over $20. I’ll be cautious, but here are the indexes/strategies to watch if you want to LONG: The GDX/NUGT is a Buy IF: 1) The GDX hits within the range of $20 to $21 OR 2) The GDX closes above $25 This is based off of the 400-day moving average and strong supports given the current political environment.
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The Enhanced Investor Weekly Macro
March 5, 2017
Buy on Weakness, Sell on Strength!
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The Enhanced Investor Weekly Macro
March 5, 2017
Education The Fed continues to garner a lot of attention. Questions abound, I’m attaching some slides that I made up for the site.
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The Enhanced Investor Weekly Macro
March 5, 2017
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The Enhanced Investor Weekly Macro
March 5, 2017
Additional Info For any newcomers who don’t know me, I’ve been contributing via the Enhanced Investor Weekly Macro Reports under #WatchList for over a year now. I began the education portion of this newsletter back in November due to the market action at the time. My in-depth knowledge of bubbles relative to political shifts and global economics, emerging markets, and monetary/fiscal policy needed to be shared, so I decided that it was simply not enough for beginners, or even intermediate traders because in order to have the ability to synthesize what’s truly happening - you need to be operating at the MBA/PhD level. As I’ve noted before, unfortunately, some PhD’s forget the basics. Whether that’s due to moral hazard, or plain and simple hubris, I can’t comment on that. Anyway, as I said a few weeks ago, it’s not fair for me to assume that all of you have what those at investment banks call “financial sophistication”, but that’s why we’re working together here at Enhanced Investor. Monitoring Wall Street and Washington helps us gain the upper edge. It’s why we do this. Anyway, I am more than happy to help, so if for some reason I don’t receive a tag in the #mainstockchat, or you don’t direct message me on Discord, please feel free to email here adamwood@fas.harvard.edu or you can tag me on StockTwits @ EILeadMacroAnalyst. Don’t fear a bubble - ever. We do not fear bubbles here at Enhanced Investor. Why? Because we’re armed with the strategic, tactical, and historical knowledge of every major bubble that has ever occurred. From the Tulip Mania of 1637 to the Housing Crisis of 2008 and the current market conditions - we’re prepared.
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