Tonight I hosted the 4th official call. We had 8 students on the line and I jumped right into a market update.
In addition to our usual indices update, I covered some important news from the week. The Bureau of Labor Statistics reported an underwhelming 20,000 new jobs for the February non-farm payroll report. The market had been expecting 180,000 new jobs. This was a huge miss. As expected, stock prices and bond yields dropped after the report. I explained that this report might actually be what the stock market needs to qualm the fears of the Federal Reserve raising rates anytime soon. The “P” (policy), in the GIP Model, will now be a support for the stock market as the federal reserve is turning dovish.
Next, we went over our stock picks from the previous weeks. Since Target stock reported excellent earnings since our last call, the stock moved in the wrong direction for our short position. We were $332 negative on the trade. We passed on Amazon stock and the stock has moved up again. It does appear that Aurora Cannabis might be a winner for us. The students replaced ACB with Green Thumb as we have already made $568 on the trade.
Last week I asked them to recommend a favorite stock to benefit from The Internet of things (IoT). The internet of things is the network of devices such as vehicles, and home appliances that contain electronics, software, sensors, actuators, and connectivity which allows these things to connect, interact and exchange data. Based on the consensus, we bought Google stock. The share price is around $1,200 per share. Therefore, we must be past our phobia of buying high priced stocks.
Based on last week’s call, the consensus was we were moving into QUAD 3 in the second quarter. Based on historical returns, utilities, REITS (real estate investment trusts) and energy stocks do the best in QUAD 3. For our next call I asked them to research what stock they think we should buy in anticipation of QUAD 3 coming in the next quarter. Tonight, we covered another important economic trigger: yield spreads.
So far we have covered the yield curve, job creation and unemployment claims. In finance, the yield spread or credit spread is the difference between the quoted rates of return on two different investments, usually of different credit qualities but similar maturities. It is often an indication of the risk premium for one investment product over another. For our economic trigger, I explained that we look at the risk spread between junk bonds and treasury bonds. Junk bonds are bonds that have a credit rating of below BBB and carry a higher risk of default. I explained that it is important to measure and map the difference between these spreads as rising yields warrant caution for stock investors.
Monthly Conference Call Replays
April 2019 – 3 in 3 Market Update