Look Alive, Folks!
Look Alive, Folks!
Rob is not catching much of a break during his travels...
I live on the West Coast, so I was a little surprised when around midnight last night, I saw a fresh email from Rob (~3AM his time) with his thoughts on Wednesday’s market rout. Funnily enough, I was up late myself watching a documentary on Enron, so I was primed to read more content on market happenings. Today I’m relaying some of Rob’s takeaways, but you can bet if this volatility continues he will have a lot more to say.
Wednesday was a day when the axiom “Avoid Big Loss” was put to the test. It is why risk management is so centered in Rob’s process. Headlines were that the market was down big, but the individual stock declines in several cases are breathtaking for an investment generation not used to what the stock market does to money if investors are complacent and don’t prioritize risk management.
Yet some dividend stocks are doing just fine, as if nothing is wrong in the market. In some cases like REITs and utilities, this seems to be a knee jerk reaction to rates slipping lower, favoring those higher yield sectors. But it is very situational so ETFs are not getting the benefits other than falling less than say the SPY.
If you were not already doing something to mix “tail risk” defense with your offense in the portfolio, you had like an hour to figure it out on Wednesday. It’s not too late to start of course. Positive economic data helped temper some of the volatility for Thursday’s trading session. But even if the panic is relatively contained, yesterday was a sense check, an opportunity to ask yourself how much of this you can stomach.
The YARP portfolio was UP on Wednesday. By more than 0.70%. More than 1/2 of the 39 stocks were up. But most of the gains came from the index put options previously owned, and added to last week.
This is one of the things that makes YARP unique. Sure, it does a nice job of identifying and rotating through a set of dividend stocks, which are producing a dividend yield more than 5x that is the S&P 500 and about 50% higher than the popular dividend ETFs. But the ability to neutralize dangerous market drawdowns that might sap confidence and turn inverting into an emotional game for many.
Okay, below we will be taking a look at some performance that matters.
PERFORMANCE THAT MATTERS
Given the week we’ve had, I thought it would be interesting to directly compare last week’s table to this week’s.
7/18
7/25
Look at the difference in returns since May for FNGS. Last week , total returns since May of this year were up 18.7%, and as of today that figure has diminished to 12.5%. Something that Rob emphasizes a lot is that things typically fall a lot faster than they climb, and this was a week where we saw that.
Small caps had a less inspired week compared with last’s, and the same goes for dividend stocks. Recent economic data might help reinvigorate the small cap rally in the coming week or so, but to-be-determined.
Okay folks, thanks for reading. Until next week!