Volatility is back! And it’s back in a big way. Indeed, since the revelation late Thanksgiving night that a new COVID-19 variant, dubbed “Omicron,” had been identified in South Africa, markets have been extremely nervous.
That was evidenced by Friday’s huge holiday-shortened session selloff, where the S&P 500 and NASDAQ Composite both got smacked down by 2.2%, respectively, while the Dow took an even bigger hit of 2.5%. The small-cap Russell 2000 really hit the skids, diving 3.7% last Friday.
Then, after a weekend to digest the data (and the Thanksgiving turkey), markets came back with a strong session on Monday. Yet that strength was short-lived, as stocks gave back those Monday gains, and then some, on Tuesday and again on Wednesday.
Since the Federal Reserve stepped in to help rescue the markets in March 2020, I’ve been telling my newsletter advisory subscribers that there were “Four Horsemen” that would keep the bull market galloping. And, once one or more of those horsemen stumbled, the bull market run could falter and/or take a nasty fall.
Now, over the past several days, two of the horsemen have stepped in the mire, and as such, these two horsemen have the potential of bring this bull market to a halt.
For those who aren’t subscribers to my newsletter advisory services, the “Four Horsemen” of the bull market are 1) Accommodative Federal Reserve policy, 2) Accommodative fiscal policy, 3) COVID-19/vaccine optimism and 4) Earnings strength.
While two of the Four Horsemen remain intact, i.e., accommodative fiscal policy and earnings strength, the other two — COVID-19/vaccine optimism and Fed policy — might soon be turning bearish.
As for the COVID-19/vaccine optimism, the new Omicron variant has everyone at least a little bit worried that we could see more worldwide lockdowns of the sort we saw last year. And while this is a possibility, we are very far from this being a probability. In fact, I am of the opinion that Friday’s selling was a huge overreaction to the threat of a new variant causing a material shutdown of the economy, either internationally or here at home.
Is Omicron a cause for concern? Yes. Is it a cause for panic selling? No way. Think of it like the Delta variant, which caused a hiccup in markets this summer that led to a “buy-the-dip” opportunity that saw your money soar to new all-time highs by early winter.
Of course, we are going to monitor the Omicron situation to see if it gets worse (in fact, as I wrote this, I got news of the first confirmed case of Omicron just a few hundred miles north of me in San Francisco, Calif.). Yet at this point, I am not even close to pushing the panic button — and you shouldn’t be either.
As for the other “Horseman of the Apocalypse,” Federal Reserve policy, well, it is here that I think we need to be a bit more concerned.
On Tuesday, Federal Reserve Chairman Jerome Powell essentially announced the Fed will accelerate the tapering of quantitative easing (QE) at the December Federal Open Market Committee meeting — despite the Omicron threat to the recovery. And while that doesn’t automatically mean that interest rate hikes will come sooner than later, it does certainly increase the chances.
If the Fed tapers QE and raises rates to control inflation into a COVID-related loss of economic momentum, that could well be the policy mistake that ends the rally.
Now, Powell speaking hawkishly during his Congressional testimony on Tuesday doesn’t mean the Fed will make a policy mistake. Moreover, I think the Fed will “blink” on tightening policy if Omicron becomes a threat to the economy, regardless of what’s happening with inflation.
However, the most likely endgame for this bull market is a Fed policy mistake. The reason why is that this bull market will eventually end, and it will do so for the same reason that most bull markets end, i.e., the Fed will get too aggressive and eventually kill the market rally by raising rates too high and choking off economic growth.
Now, prior to Omicron and Powell’s testimony on Tuesday, I thought such a policy mistake was likely quarters, if not years, away. However, based on the past couple of days, that endgame might be getting closer than I thought.
So, given the current situation in markets, how does one stay nimble and get the most profit out of your trading while limiting your overall dollar exposure?
The answer is by using options — and the best way I know how to use options is by embracing “High Velocity Options” of the sort I use in my trading services.
These High Velocity Options are typically “slightly out of the money” call or put options with an expiration date of 30 to 90 days. They are fast trades that generate double- and triple-digit-percentage profits.
And the timing for these High Velocity Options couldn’t be any better, as we are less than two weeks away from the Dec. 14 launch of my new advisory trading service, aptly called “High Velocity Options.”
This is my first ALL-OPTIONS trading service designed for investors who are serious about making big profits, fast.
For more details on how you can become a charter member of High Velocity Options, and how you can be on the inaugural launch call via Zoom, simply go to my special offer now.
In this market, the best way to wrangle those Two Horsemen of the Apocalypse is to outsmart them with High Velocity Options.
ETF Talk: Investing in Industrial Real Estate Aimed at E-Commerce
Investing in industrial real estate aimed at e-commerce can be much more than a pedestrian walk along a warehouse district for investors.
Contrary to popular belief, real estate is not exclusively limited to buying, selling, renting or renovating homes and other types of properties. In fact, real estate can run the gamut, as conveyed last week in my article about real estate related to data and infrastructure and this week’s article that delves into a real estate investment trust (REIT) exchange-traded fund (ETF) that focuses on investing in industrial real estate aimed at e-commerce.
Developed by Benchmark Investments, LLC., Pacer Benchmark Industrial Real Estate SCTR ETF (NYSE: INDS) is not the typical real estate investment fund. While most real estate investment funds focus on all U.S.-listed real estate companies, INDS invests in only industrial real estate REITs that are part of the e-commerce distribution and logistics networks that accumulate most of their revenue from real estate activities.
Specifically, INDS invests in industrial services such as warehouses, distribution centers and self-storage facilities, among others. Qualified companies are screened by property type, tenant type and revenue type. Moreover, each company must meet specific market cap and liquidity thresholds.
INDS caps its exposure to non-self-storage REITs at a maximum of 80% and it caps inclusion of individual securities at 15%. Further, companies with a market cap weighting of 4.5% or higher cannot comprise more than 45% of the fund. Ideally, this non-diversified fund will invest at least 80% of its value in net assets, plus any borrowed funds for investment purposes, in the industrial real estate sector.
INDS has an expense ratio of 0.60% and a dividend yield of 1.58%. The fund has $355.74 million in assets under management. Though this fund is fairly new, since it just was created in 2018, it appears to have found its footing over the past year.
In February 2021, the fund saw a spike, and then a small dip into March. It then climbed steadily before hitting another sharp dip in October. Currently, the fund is seeing a spike higher than it has all year and is at the high end of its 52-week range. INDS opened on Dec. 1 at $51.19, and its all-time high is $52.18, which bodes well for investing in industrial real estate aimed at e-commerce.
Chart courtesy of StockCharts.com
The fund’s top five holdings include Duke Realty Corp. (DRE), 14.95%; Prologis Inc. (PLD), 14.88%; Americold Realty Trust (COLD), 10.80%; Life Storage Inc. (LSI), 4.75%; and Innovative Industrial Properties Inc. Registered Shares (IIPR), 4.61%.
Though this is a fledgling fund, its approach to investing in the real estate sector appears to be a savvy one. With its particular interest in industrial REITs, its company scrutiny and its market-cap and liquidity criteria, Pacer Benchmark Industrial Real Estate SCTR ETF (NYSE: INDS) facilitates investing in industrial real estate aimed at e-commerce.
However, this type of ETF may not be appropriate for all portfolios. Thus, interested investors always should conduct their due diligence and decide whether the fund is suitable for their investing goals.
As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.
In case you missed it…
Eating Well This Thanksgiving Feast
When it comes to the art of celebrating through feasting, there is perhaps no expression better than that belonging to fashion designer Elsa Schiaparelli, who once wrote, “Eating is not merely a material pleasure. Eating well gives a spectacular joy to life and contributes immensely to goodwill and happy companionship. It is of great importance to the morale.”
In this publication, and in all my investment advisory publications, we are all about celebrating the spectacular joy in life that comes from making rational, profitable decisions with our money. Remember, money isn’t just money. Think of money as “units of choice.” The more units of choice you have, the more freedom you have. And the more freedom you have, the better able you are to live the life you really want.
Thanksgiving is the day Americans give thanks for all of our tremendous blessings, including our country and its rational foundation, a foundation unlike any other in history: a foundation of individual rights, and a country founded on the principles of freedom from coercion, where the individual citizen is the primary agent of importance, not God, the king, the president or the state.
This is what we all should be thankful for on Thanksgiving, because despite her flaws, this nation remains the greatest example of how to protect individual rights the world has ever seen.
When it comes to celebrating Thanksgiving, many of us will sit down to a big feast of Turkey, stuffing, potatoes, biscuits, butter, cranberry sauce, pumpkin pie, sparkling wine… I’m getting really hungry just contemplating it. Yet, while some of us will enjoy the turkey, there are others of us who prefer a plant-based alternative to the main course.
In fact, over the past several years, there has been a plant-based protein revolution around the world, as many celebrate the joy that comes from of a meatless feast devoid of any animal products, and one that puts us in more direct contact with the solar energy trapped in plant cells.
It is the latter, plant-based joy that I want to tell you more about today, and more specifically, a company whose raison d’être is to provide plant-based food to the public that is of the utmost quality, nutritional value and flavor.
That company is plant-based foods maker Eat Well Investment Group (EWG:CN/EWGFF:US).
Eat Well is one of the leaders in the burgeoning plant-based food movement, and one aspect of the company that I like is its clear mission. In fact, the mission is the master for Eat Well, and it can be seen via the company’s own words. Allow me to quote here from the company’s website:
We believe food plays a central role in all human societies and is a key determinant of our overall well-being. Food and agricultural infrastructure are the cornerstones of all cultures, and we want to celebrate and grow Canada’s rich heritage and capabilities to feed people on a global scale. Eat Well Group is building a unique ecosystem that can supply these essential cornerstone needs for society. We’re plant-based food & nutrition experts specializing in the latest science and original thinking for what consumers want most: quality, highly affordable, sensory experience, health and nutrition, and clean and simple products.
Our companies have track records of success and leverage the best in new food tech for the future. We believe that if we build a successful company that provides brands, product portfolios and unique and valuable offerings that the general public consumes for the benefit of their health and wellness all while doing good for the planet, then all stakeholders can benefit including shareholders not wanting to miss out on this global investment trend.
I love it when a company knows its role, and as you can see by the above mission statement, there is no ambiguity about what Eat Well wants to achieve.
Of course, I am not telling you about Eat Well just because of its positive mission. I mean, after all, one of my clear missions with this publication, and all my publications, is to help you make money. And that mission is why I am introducing you to Eat Well.
You see, Eat Well is a small-cap company that I think can deliver outstanding upside for investors. This upside takes advantage of the burgeoning plant-based protein wave. In fact, that’s already been the case for Eat Well shareholders, as the stock is up a whopping 890.4% over the past 12 months.
That kind of profit potential is what any investor can gorge on!
So, this Thanksgiving, in addition to giving thanks for all of your tremendous good fortune, and in addition to preparing and consuming your well-deserved feast, why not take a little time to look further into a company that could give you a whole lot of additional, profitable reasons to enjoy a celebratory feast in the year to come?
During this holiday respite, I invite you to read my special report, “Better Living, and Better Profits, Through Eating Well.” This special report is FREE to The Deep Woods readers, as it is a company that I definitely want you to know more about. So, take some time this Thanksgiving weekend and give it a read.
Finally, to all of my family, friends, colleagues, business partners, intellectual influences, and yes, to even my adversaries and philosophic opponents, I want to say that I am eminently thankful to you for the support and the ideas that have shaped my existence.
For that I shall be forever grateful.
On Wisdom and Understanding
“He that is void of wisdom despiseth his neighbour: but a man of understanding holdeth his peace.”
— Proverbs 11:12
In our exceedingly polarized, tribalized social and political climate, it’s easy to “despiseth” your neighbor if they hold different views from yours. Yet rather than cultivate your hatred to the point where it explodes, why not try to become a man of understanding? And you start by holding your peace, thinking through the opposing side’s ideas, and trying your best to avoid the pull of your own “in group.” Doing this might not be easy, but you’ll be surprised at how much wisdom you gain in the process.
Wisdom about money, investing and life can be found anywhere. If you have a good quote that you’d like me to share with your fellow readers, send it to me, along with any comments, questions and suggestions you have about my newsletters, seminars or anything else. Click here to ask Jim.