Q1 2017 Performance: Equity/Commodity Trading

In the previous two articles, I wrote about my forex trading and equity investments performance for the first quarter of this year. In this article, I will talk about my 1st quarter performance for equity/commodity trading.


For the first quarter of 2017, my active trading performance for equities and commodities (commodity ETFs) was up 3.51%.

Equity/Commodity Trading Portfolio (Robinhood) P/L
The white line represents the start of the year.

For years, I could not trade equities and commodity ETFs due to commissions. Thanks to Robinhood, I’m not able to trade for free.

My first loss came from the first trade of the year. I thought energy, especially oil would go up over the next few hours, but I was wrong. So I closed my long position on Direxion Daily Energy Bull and Bear 3X Shares (ERX) at 2.13% loss (everything was tweeted out)

A month later, I made another call on oil. This time, short oil. I went long inverse oil ETF. Here’s why I thought oil would drop;

I closed the SCO position a month later at 22.55% gain, the biggest gainer of all positions closed during the first quarter of this year.

My biggest loss came from VelocityShares Daily 2x VIX Short-Term ETN (TVIX). I thought volatility would pick up in the coming month (and it did a little bit). However, after they underwent 1:10 reverse split on March 16th, I did not want to risk having the ETN go to single digits once again, so I indeed closed the position at 17.27% loss.

In nominal terms, the 22.55% gain on SCO is 3 times larger than the 17.27 loss on TVIX.

There are other positions that made and lost money. But overall, my portfolio was up 3.51% in the 1st quarter.

Current Positions:

I can only go long securities on Robinhood. My current positions are SPXS, WFC, LULU, DIS, EXPE, VRX.

I went long on Direxion Daily S&P 500 Bill and Bear 3x Shares (SPXS), which is inverse of S&P 500, because I believe investors are underestimating the negatives of Trump’s policies. Once investors realize the negatives of Trump’s fiscal policies and/or his actual policies are less stimulative as he proposed, the market will take a dump.

A lot of people think tax rate will be reduced to 15%. I have been watching some of Trump’s TV interviews, especially on Fox News, and it seems Trump himself does not believe tax cut will be 15% or lower. He basically said it might have to be little higher, say around 20%.

I also watched Trump’s body language and I believe Trump is not confident in what he’s saying about his fiscal stimulus plan as he was during the campaign.

So when the actual plan is released, investors will be disappointed.

SPXS is also a small hedge for my portfolio as I’m long individual U.S. stocks.

I’m also long on Wells Fargo (WFC), Lulelemon Athletica (LULU). I believe the plunge on LULU is overdone and could fill half of the gap. WFC fell after the earnings report last week. General bank earnings are trending higher and Well Fargo is no different. I went long on WFC also due to technical purposes.

I’m also long on Disney (DIS). I bought just at the start of rumors that Apple (AAPL) would buy Disney.

I’m also long on Expedia (EXPE). See this awesome tweet thread.

And finally, I’m long Valeant (VRX). I went long on the pharmaceutical company the day after Bill Ackman revealed he cut his $4 billion loss.

Valeant recently extended the maturity of their debt until the early 2020s, which gives them about 5 years to restructure their capital and the company. Plus, they have over $5 in cash for each share.

Just because Ackman lost big on VRX does not mean he’s not a great investor. He is a great investor (that’s why he’s rich?). If you watch his presentations and talks, he knows about he’s talking about. He does his research and deeply cares about other people. At least that’s what I think.

The current positions I mentioned above can change at any time or reverse. Thank you.

Equity/Commodity Portfolio Performance: Inception & 2016

In the previous article, I laid out my performance for Forex portfolio since inception and for the year 2016. This one will briefly lay out the equity/commodity portfolio performance. Briefly, because I don’t have much statistics on it than for FX……for now.

Before going further, I should note: “Average price” includes Dividend Reinvestment Plan (DRIP) – the dividends I received were used to buy additional shares in the company.


Since inception (summer of 2014), I’m down 31%. I’m currently holding 9 companies, including the ones I wrote article(s) about; GoPro (NASDAQ:GPRO), General Electric (NYSE:GE), and Cisco (NASDAQ:CSCO). I don’t have Eli Lilly (NYSE:LLY) since my broker doesn’t allow me to short.

All shares of 9 different companies belong to 1 class: domestic equity. 59.4% is in large cap. 18.89% in mid cap. 3.66% in small cap. And 18.05% in “other domestic equity.” Will change the allocation this year; international equity, fixed income, etc.

On February 16, 2015, I wrote about Microsoft (NASDAQ:MSFT) when the share-price was $43.95. Today, it’s trading at $62.14. I missed the opportunity to go long on it.

On April 12, 2015, I wrote about GE and believed GE was a strong by (it still is). Since then, GE is up 12.30%, from $28.06 to $31.51 (dividends not calculated). Dividends are automatically invested in new shares. Average price I paid for the shares is $25.99. I’m currently up 21.24%.

In the summer of 2015, I wrote about CSCO (part 1, part 2 AND 4Q FY’15 earnings report). Since the first article, CSCO is up 7.97%, from $27.99 to $30.22 (dividends not calculated). Average price I paid for the shares is $24.85. I’m currently up 21.61%.

On November 21, 2015, I wrote my first article on LLY and believed it was overvalued (it still is). Since then, LLY is down 13.98%, from $85.50 to $73.55. Second article on LLY was posted very recently.

On December 26, 2015, I wrote about GPRO and believed it was a buy. Since then, GPRO (and I) are down whopping 52.62%, from $18.34 to $8.69.

For the last year, my equity portfolio is down 12.61%. Because of $9.99 trade fee and low capital, I have refused to buy some stocks I wanted at times.

I recently opened Robinhood, broker with $0 commission. I’m planning to use it to actively trade equities and commodities.

As to commodities, I’m up 8.25% since inception (fall of 2016). I’m currently holding 50 shares of Direxion Daily Gold Miners Bull 3X Shares (NUGT), which is up 24.03%.

I might change my broker to Interactive Brokers (IB) from TD Ameritrade, as IB offers more tools for portfolio analysis.

If you didn’t like this performance/article, read the “Forex Portfolio Performance: Inception & 2016.” Maybe you’ll like that performance/article enough to like me again.

If you do, follow me on Twitter (@Khojinur30). I tweet out my trades live. If you don’t, peace.

No Clear Direction Signs For US Economy…….Yet

Last Friday (May 8, 2015), non-farm payrolls report was released and it was in-line with expectations. 223,000 new jobs were added in April, and the unemployment rate fell by 0.1% to 5.4%, the lowest level since May 2008. While, this is a good news. March gains was revised down to 85,000 from the prior estimate of 126,000 (-41,000), lowest since 2012. I believe the April number (223,000) will also be revised lower.

Wage growth remained modest. Over the past 12 months, average hourly earnings have increased by 2.2%. As unemployment rate falls, wages should start to pick up speed, which also will push up inflation.

Fed officials are closely watching the labor market and other key economic reports, as they are in a tough spot on raising short-term rates, which have been held near zero since December 2008.

There is a very little chance of rate hike in June. I believe the Fed won’t hike the interest rates, unless over 350,000 jobs are added in May and unemployment rate goes down by 0.2% to 5.2% (which certainly will not happen).

First quarter was very weak due to; strong U.S. dollar, low energy prices, West Coast port strike, and the bad weather. When these four are combined together, it creates a heavy roof to push down economic growth.

Hiring has been strong in many industries, except energy. About 15,000 energy jobs were lost in April, worst month since May 2009. Lower oil prices increased the pressure on the energy sector. Low energy prices has caused energy companies to lose profits. As a result, they had to cut jobs. Recently, crude oil inventories supply were declining, which caused oil prices to rise above $60.

Last Tuesday (May 5, 2015), trade balance report was released and it exploded. The US trade deficit widened by 43.1% to a seasonally adjusted $51.4 billion in March, largest monthly expansion in the trade gap since December 1996 and the largest deficit reading since October 2008. Trade balance is when you subtract imports from exports. In other words, it’s the difference between imports and exports.

Trade Balance for the past two years
Trade Balance for the past two years

A biggest reason for the weakness was the 9-month slowdown at West Coast port due to a labor contract dispute. West Coast ports is back in business. Imports arriving though the West Coast port surged. Imports increased 7.7% in March, the largest increase on record. While exports only increased 0.9% in March, reflecting strong dollar impact. In the past 12 months, the dollar has jumped almost 10%. Strong dollar had made Americans goods and services less competitive in global markets. Bigger imports and smaller exports mean a bigger deficit.

I believe it’s not to worry about in a long term. Once the backlog is cleared, imports will drop and the trade deficit will also drop.

Recently, the dollar has fallen sharply because of weak US economic reports, including Gross Domestic Product (GDP).

On April 29, 2015 (Wednesday), GDP Advance estimate increased at an annual rate of 0.2% in the first quarter of 2015, down from 2.2% in the fourth quarter of 2014 (-2.0%). This is a huge difference. Economists were anticipating growth of 1% in the first quarter.

Real GDP for the past three years
Real GDP for the past three years

Again, the weakness was due to U.S. dollar, low energy prices, West Coast port strike, and the bad weather. West Coast port strike disrupted the flow of trade, increasing imports which negatively impact GDP. In the past 12 months, the dollar has jumped almost 10%.

According to the report, Real exports of goods and services decreased 7.2% in the first quarter, from an increase of 4.5% in the fourth quarter. Real Imports of goods and services increased 1.8%, from an increase of 10.4% in the fourth quarter.

I’m afraid that Q1 GDP will be revised to negative number. Second estimate (Preliminary) of Q1 GDP will be released on Friday, May 29, 2015.

First quarter GDP was disappointing. I believe the economy should bounce back in the 3 quarters of 2015.

US markets were very happy with the jobs report, but not with other economic reports. The Dow soared more than 250 points, or 1.5% on Friday. While USD bracket currencies were mixed.

Check out the charts below; Dow Jones and US Dollar. US Dollar has fallen signification after hitting of $100.27 on mid-April. Dow Jones has been in a range. Dow Jones chart includes something “extra”, that’s not included in the post here.

US Dollar Index - Four Hourly Chart
US Dollar Index – Four Hourly Chart

 

Dow Jones ($DJI) - Hourly Chart
Dow Jones ($DJI) – Hourly Chart

 

If you have any questions, feel free to contact me anytime by going to “Contact Me” and/or leave comments below. Thank you.

Fed removes “patient”, and adds twists

Last Wednesday (March 18, 2015), the Federal Reserve released its statement on the monetary policy and its economic projections. The The Fed dropped from its guidance “patient” in reference to its approach to raising the federal funds rate. It was largely to be expected to be removed, which would have send U.S Dollar higher and U.S market lower. However, the opposite happened because of two twists; they lowered their economic projections, and Chair of the Board of Governors of the Federal Reserve System, Janet Yellen’s words during the press conference.

According to the “dot plot”, the Fed lowered median “dot” for 2015 to 0.625% from 1.125% (December). What is “dot plot”? The Dot Plot is part of the Federal Open Market Committee (FOMC)’s economics projections and it shows what each member thinks the federal funds rate should be in the future. It is released quarterly. Sometimes, it might be released more than that, depending on economic circumstances. It gives you a perspective of what each member of FOMC thinks about economic and monetary conditions in the future.

Again, the Fed lowered median “dot” for the end of 2015 to 0.625% from 1.125% in December (-0.50%). The Fed also lowered the “dot” for end of 2016 and 2017. For the end of 2016, it is at 1.875% from 2.5% in December (-0.625%). For the end of 2017, it is at 3.125% from 3.625% in December (-0.50%). Besides, the “dot”, Yellen said one thing that took a toll on the U.S Dollar.

Even though the Fed removed “patient” from the statement, Yellen had “patient” tone during the press conference. Yellen said ““Just because we removed the word “patient” from the statement does not mean we are going to be impatient,”. This sentence alone halted US Dollar from rebounding after it dropped on the statement. There are other things that complicates the timing of the rate-hike.

It’s now more complicated to predict the Fed’s next move because of three reasons; very strong US Dollar, low inflation, and economic crisis in Europe and Japan, if not United Kingdom too. US Dollar is too strong, hurting U.S exports. Inflation has declined due to falling energy prices. The struggling foreign countries economically can also hurt U.S economy. I believe two majors factor of the Fed’s next move are the strong US Dollar, and the low inflation. When both of them are combined together, it makes imports cheaper and keeps inflation lower. I believe Europe will start to get better–as Quantitative Easing (QE) fully kicks in–money starts flowing in Europe. European stocks will probably hit new highs in the coming years because of QE program. Once, the Fed raises the rates, the money will probably flow into Europe from the U.S because of negative interest rates. Low rates have been a key driver of the bull markets in the U.S stock market the past six years. Lower rates makes stocks more attractive to the investors.

Since, the “dot” has dropped harshly, I believe this could be a sign of late delivery of rate hike. They might hike the interest rate in September, not June. However, if non-farm payrolls number continue to be strong, average wage (indicator for inflation) lifts and oil prices rebound, then the door for rate-hike for June might still be open. For now, there is no sign of oil rebounding since it has dropped sharply this week. We will get the next non-farm payroll, which also includes average wage, on April 3.

In the statement, FOMC stated “The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term. This change in the forward guidance does not indicate that the Committee has decided on the timing of the initial increase in the target range.”

The Fed want to be cautions before raising the interest rates. They want more time to be sure; “further improvement in the labor market” and “reasonably confident that inflation will move back to its 2 percent…” Although, non-farm payrolls have been strong lately, inflation is too low. The inflation is low because of the stronger dollar and the plunge in oil prices.

The Fed is in no hurry to increase the interest rate. The Fed said it would definitely not act on rates at “…April FOMC meeting.” and might wait until later in the year. I believe September has higher chance than June, from the rate-hike.

It looks to me that the Fed planned to send US Dollar lower. They probably wanted the US Dollar to be weaker before raising the rates, which could send the US Dollar a lot higher. Their plan worked. The US Dollar dropped so much that it sent EUR/USD (Euro against US Dollar) up 400 pips (above 1.10). U.S market rose after they were down ever since the release of non-farm payrolls for February. Dow gained over 200 points, as well as other indices.

 

Dow Jones (DJI) - 30 Mins
Dow Jones (DJI) – 30 Mins
US Dollar - 30 Mins
US Dollar – 30 Mins
EUR/USD - 30 Mins
EUR/USD – 30 Mins

 

Feel to contact me and/or to leave comments. Don’t forget to follow my twitter account @Khojinur30. At any moment, I might post my view on certain things. Thank you.