Call #4: 3/5/19
Today was the 3rd official call of our series of 10 calls. We had 7 students on the call tonight and I reviewed the typical data points:
- S&P 500 Index
- Oil
- Interest Rates
- Dollar Index
- VIX
Tonight we had an important GDP number to review for the 4th quarter of 2018:
The US economy grew @ 2.6%, which beat the consensus estimate of 2.4%. Most importantly and contrary to many, the US economy was still in Quad 1 in the 4th quarter of this year. We had expected the data to confirm our QUAD 4 call. None of the students questioned the headline number. In my opinion, since the GDP number is subject to revisions, I expected the next report to show a number closer to 2.4%.
I also explained that our GDP NOWCast is calling for a Q1 2019 GDP number of 1.3%. So, Q1 of 2019 has the US economy in QUAD 4.
Next, we reviewed QUAD 4 allocations:
- High grade fixed income
- Low beta
- High dividend stocks
But, since the Federal Reserve has pivoted in their policy, we are moving beyond this quarter into Q2.
I asked the students:
What Quad do you think we will be in Q2?
7 out of 8 believed we will be in QUAD 3 in Q2. QUAD 3 typically favors high grade bonds, growth and quality stocks. And on a sector basis: utilities, REITS and energy. We will have more to come on this. I have to say I am impressed that so many of them are getting this concept so quickly.
Next, we reviewed our stocks:
Based on consensus, Target stock was shorted @ $72.87. The current price is $72.67. We were slightly ahead in the stock and the students agreed to maintain their short position.
Based on consensus, we passed on AMZN stock $1638 (the current price was $1696). I asked the students to text my personal line if they changed their opinion and we did have one change their mind. However, it wasn’t enough to buy the stock. I have a feeling that the share price is still the main reason they are passing on the stock.
I gave a general history of Green Thumb Industries and the potential market of cannabis stocks. The students were asked to text my personal line to BUY, SHORT or PASS.
We are early in their growing knowledge and two of the students collaborated before our call to change the stock from Green Thumb to Aurora Cannabis. I am familiar with the stock but asked why? The answer I got was, “Aurora Cannabis is likely to be a leader in annual production.” The consensus of students agreed to go with the change, so I bought symbol ACB.
I have to say this is one of the proudest moments for me so far. I hope this turns out to be rewarding for them since they are taking a risk.
Tonight’s ECONOMIC TRIGGER: UNEMPLOYMENT CLAIMS
Initial Jobless Claims is a report issued by the U.S. Department of Labor on a weekly basis. The employment situation is extremely important for a macroeconomic analysis. The financial markets track employment indicators, although this is a low impact indicator compared with the monthly BLS’s “Employment Report.” This report tracks how many new people have filed for unemployment benefits in the previous week. It is a good gauge of the U.S. job market. For instance, when more people file for unemployment benefits, fewer people have jobs, and vice versa. Investors can use this report to gather pertinent information about the economy, but it’s a very volatile data, so the four-week average of jobless claims is monitored.
We did not have any final questions this week, so I gave them their homework for next week. They were asked to recommend a favorite stock to benefit from The Internet of Things (IoT). This includes the network of devices such as vehicles, and home appliances that contain electronics, software, sensors and actuators. All of which allow these devices to connect, interact and exchange data.