Selling equities, buying bonds and gold

In yesterday’s post I discussed using a ratio of Corporate Bonds to Treasuries as a signal for rotating out of equities. The signal is very strong. My gut feel also tells me that recent retracement of late-2018 losses unconvincing.

Today I made my trades. I decided to do the following.

  • Keep some equities:
    • Hold Berkshire Hathaway (BRK). It is around 21% of my portfolio. It is trading at US$197.10 today, which is CA$262.45.
    • Hold my Global Equities ETF (XMW.TO). It is around 9% of my portfolio. Today it trades at $38.78.
  • Sell my NASDAQ Fund (XQQ.TO) at $52.22
  • Add to Bonds (XBB.TO), buying at $30.61, taking my stake from 14% to 23% of total portfolio
  • Sell my TSX Fund (XIU.TO) at $21.73, and hold cash (18% of my portfolio)
  • Sell my S&P 500 Fund (XSP.TO) at $28.45
  • Buy Gold (CGL.TO)  at $10.98 for a stake of 28% of my portfolio
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Time to sell equities?

I was listening to Adam Robinson on the Farnham Street podcast. He suggested a couple of key ratios that indicate positive or negative sentiment in markets:

More importantly Robinson suggested both are leading indicators, particularly Copper : Gold.

I did some analysis. Corporate Bonds : Treasuries was predictive of downturns in the S&P 500 over the past 16 years or so (see pic 1).

screen shot 2019-01-09 at 11.58.02 pm

I found that Copper : Gold was predictive of downturns in the S&P 500 over the past 7 years or so – I did not have older data (see pic 2).

screen shot 2019-01-10 at 12.01.11 am

Taken together, these ratios told us to:

  • Sell in September 2007 – before the Mortgage Bubble burst in 2008 causing the Great Financial Crisis.
  • Buy in June 2009 – not long after the crisis bottomed out
  • Sell in May 2015 – Greek debt worries return, worries about Spanish debt, weak US jobs report
  • Buy in April 2016 – fears retreat
  • Sell in November 2018 – Unclear what we will call this period but we have certainly seen volatility

Useful predictions!

screen shot 2019-01-09 at 11.46.48 pm

So, given that these indicators issued a sell signal in November 2018, should I sell equities?

What a year!

It’s been terrible year for equities. The S&P500 is down 14.3%, the DOW down 13.0%, the tech heavy NASDAQ down 17.3% and the TSX down 10.9%. Almost bear market territory.

My portfolio is actually up 0.42% primarily due to my Bonds (XBB.TO) and my Berkshire Hathaway (BRK.B) stocks that are denominated in USD, which is up over CAD.

Screen Shot 2019-01-01 at 11.05.41 PM

Portfolio Update – Down 6.80% in Q4 2018

My portfolio balances at close of trading on 31st December were:

Ticker

Price (C$)

Price Change

Percentage

XMW $‎ 39.43 -2.81% 9.5%
XIU $‎ 21.60 -9.77% 17.7%
XSP $‎ 27.97 -15.04% 26.8%
BRK $‎ 277.94 -0.04% 22.7%
XBB $‎ 30.40 0.76% 13.7%
XQQ $‎ 51.12 -17.61% 8.9%
HMMJ $‎ 14.29 n/a 0.2%
HUT $‎ 1.40 n/a 0.2%
GLXY $‎ 0.98 n/a 0.2%
Cash 0.0%
Total 100.0%

My portfolio is down 6.80% since last month. For comparison my TI Index is down 8.66%, the DOW is down 11.83% and the TSX is down 10.89%. My investments are down but performed well against TI Index, the TSX, and the DOW.

Losers this month are – everything.My TSX fund (XIU.TO) is down 9.77%, S&P500 fund (XSP.TO) is down 15.04%, and my NASDAQ fund (XQQ.TO) is down 17,61%.

On the winning side, Berkshire Hathaway (BRK) is down only 0.04%* and Bonds (XBB.TO) up 0.76% are the winners.

*Berkshire Hathaway is denominated in USD but I measure performance in CAD. This means that its value in my portfolio goes up with the USD.

Screen Shot 2019-01-01 at 10.31.15 PM

A little speculation

There are some interesting new industries emerging.

  • Blockchain is a significant new technology which underpins cryptocurrencies such as Bitcoin, and has other uses as a data validation tool across many industries.
  • Marijuana has been legalized in Canada and many US states.

There are many ways to invest in these industries. I have chosen:

  • Horizons Marijuana Life Sciences fund (HMMJ.TO) – an ETF holding a large range of publicly trader Canadian marijuana growers;
  • HUT 8 (HUT.V) – a publicly traded cryptocurrency mining company on the Venture exchange; and
  • Galaxy Digital (GLXY.V) – a merchant bank on the Venture exchange which serves the cryptocurrency industry.

I have made a small investment in each totalling a modest 0.7% of my portfolio.

  • Buy HMMJ.TO @ $14.50
  • Buy GLXY.V @ $1.01
  • Buy HUT.V @ $1.41

Hut 8 and Galaxy are penny stocks with high volatility so I have not set stop losses on them.

UPDATE

Today I am adjusting my portfolio. Time to sell these stocks.

  • Buy HMMJ.TO @ $15.82 (up 9%)
  • Buy GLXY.V @ $1.49 (up 48%)
  • Buy HUT.V @ $1.70 (up 21%)

Not bad for a week’s work!

 

Portfolio Update – Up 5.50% in Q3 2018

My portfolio balances at close of trading on 28th September were:

Ticker

Price (C$)

Price Change

Percentage

XMW $‎ 40.57 3.81% 9.2%
XIU $‎ 23.94 -1.40% 18.1%
XSP $‎ 32.92 7.37% 29.9%
BRK $‎ 278.06 15.58% 19.3%
XBB $‎ 30.17 -1.76% 12.9%
XQQ $‎ 62.05 8.18% 9.9%
Cash 0.7%
Total 100.0%

My portfolio is up 5.50% since last month. For comparison my TI Index is up 1.75%, the DOW is up 9.01% and the TSX is down 1.26%. My investments are up and performed well against TI Index, very well against the TSX, but poorly against the DOW.

My TSX fund (XIU.TI) is down 1.40% and is the loser this quarter. Berkshire Hathaway (BRK) up 25.58% and S&P 500 (XSP.TO) up 7.37% are the winners.

Note: Berkshire Hathaway is denominated in USD but I measure performance in CAD. This means that its value in my portfolio goes up with the USD.

Screen Shot 2018-12-23 at 10.17.31 PM

Portfolio Update – Up 2.08% in Q2 2018

My portfolio balances at close of trading on 29th June were:

Ticker

Price (C$)

Price Change

Percentage

XMW $‎ 39.08

1.45%

9.6%

XIU $‎ 24.28

6.17%

19.7%

XSP $‎ 30.66

2.23%

29.9%

BRK $‎ 240.59

-6.43%

16.1%

XBB $‎ 30.71 n/a

14.1%

XQQ $‎ 57.36

6.68%

9.8%

Cash

0.9%

Total

100.0%

My portfolio is up 2.08% since last month. For comparison my TI Index is up 2.93%, the DOW is up 0.70% and the TSX is up 5.92%. My investments are up and performed reasonably against the TSX, DOW and TI Index.

Berkshire Hathaway (BRK) is down 6.43% and is the loser this quarter. My TSX Fund (XIU.TO) up 6.17% and Nasdaq Fund (XQQ.TO) up 6.68% are winners.

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