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As of Oct. 14 , 2022, the market has been crashing and the S&P index has lost about 23% year-to-date . Will it continue? What actions should we take to respond to the current market? This book tries to answer these questions in my personal view.
If you followed my simple market timing (Death Cross and described in Chapter 3) that requires no charting, you should have left the market in March, 2022; I am guilty as charged by leaving the market too early. When you have more time, a more detailed section (Book 2 that is included in this book) is available.
Most retail investors do not return the market when it recovers. I did well in the last two (2000 and 2008). The simple market timing also tells us when to return (Golden Cross) in Chapter 3. Most of my profits were due to returning to the market in recovery of the last two market crashes (Chapter 15).
Unlike the other two market crashes, this market fluctuates a lot and the market timing could give us false signals; in most cases we do not lose money except tax consequences for non-retirement accounts by reversing our actions.
Today conservative investors should accumulate cash. CDs (Common Tools, Chapter 11) is a good vehicle to park your money.
Aggressive investors can buy contra ETFs and even shorting stocks (Common Tools, Chapter 7 and Appendix 4 for ETFs). The momentum of a stock can be determined by technical analysis (Book 3) and Sector Rotation (the bonus Book 4).
My earlier books described how expensive FAANG stocks were (Chapter 8) and how to rip the profits by using trailing stops. When the market recovers, they could be candidates.
There are also good stocks in any market. There are few in the current market. They usually make good profits year after year. At least, put them in a buying list and buy them when the market recovers.
When the market recovers (indicated by Golden Cross), buy beaten down stocks (low RSI(14)) that have potentials and/or are fundamentally sound (low debt and profitable). It is described in Common Tools, Chapter 8).
Inflation hedge is described in Common Tools, Chapter 10. I believe oil (USO) and energy stocks should surge after the midterm election if not already if OPEC continues cutting production.
Sector rotation (Common Tools, Chapter 9) should include contra ETFs.
The Ukraine war (Chapter 11) seems not to be over soon. The EU, especially Germany, will suffer most economically. Hence, we may want to buy a contra ETF on EU. Besides citizens in Ukraine, many folks in poor countries will starve to death. If you made money by buying defense stocks, please donate some of your ‘loots’ to these folks.
We do not sell China chips and similar products. I expect this sector will recover soon, but it will face tough competition from China in the 2027 time frame.
Will Vietnam and India replace China in global manufacturing? My ETF on Vietnam has not performed well for many years. I have serious doubt about bringing some manufacturing back home. Our wages, education, regulations, environment… prevent us from doing so.
From my estimate, the market has always been profitable on a year before the election since WW2 (the included Book 2, Section IV). Will 2023 be the exception? Only time can tell.
Initial date: 10/2022.
Size: 250 pages (6*9).
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