Ad-hoc feature returns this week.
LINK1 LINK2 BarronsLINKTRADER. Wall Street exhaled as the control of White House and Senate had clarity, but that for House is still in limbo (Republicans need to pick up only 7 more, but Democrats need 19 more). Stocks rose sharply, while the volatility index VIX fell sharply. Investors are reviewing Trumponomics 1.0 to figure out Trumponomics 2.0 and are betting on value/cyclicals (
IVE), financials (
XLF, KRE), energy (
XLE), industrials, defense and small caps. In healthcare, Medicare Advantage (Part C) may get a boost, and ACA/Obamacare the boot.
But the economic and market conditions now are different. It’s unclear how much of the tax cuts, tariffs (on friends and foes) and deregulations will go through. Watch tech and retail for first adverse impacts of new tariffs-counter-tariffs. Inflation may remain above the Fed’s +2% average target and that target may be in question (e.g. why not +3%?). The budget deficit is already double that in 2016, and the bond market may not like a big growth in deficits. That has been the message of the bond market already, but 5%+ 10-yr may pose real problems for both stocks and bonds. Earnings growth estimate remain strong in double-digits.
The elections are over and Trumponomics 2.0 will be here soon. Consider financials (
XLF, KBE, KRE; play on lower rates and deregulation), value/cyclicals (
IVE; catchup play), small caps (
IJR, SPSM; play on domestic companies), bonds (
SHY, LQD, HYG; play on lower rates, even if rates may move up later due to inflation, deficits, debt). All these had strong post-election bounces, but there is more to come.
INTERVIEW/Q&A/FUNDS. Meb FABER, Cambria (Cofounder, CEO, CIO;
SYLD, etc). Value manager Faber has an active eTF SYLD that focuses on SHAREHOLDER YIELD (dividend yield + buyback yield); the eTF also takes into account valuation, quality, momentum, and has caps on sectors and countries. Since 2009, the SP500 has been a 10-bagger, beating most other things – unprecedented, comparable to the Roaring 1920s, the Nifty Fifty of early-1970s, the Dot. com bubble of late-1990s, or whatever. Both earnings growth and P/E expansion contributed to this fantastic move. But where to now? If you put value and trend (momentum) in 4 boxes, the best box has low valuation and uptrend, but the 2nd best box is expensive valuation and uptrend (meaning trend trumps valuation). The ways to diversify away from market-cap indexes include dividend stocks (obviously, Faber prefers shareholder yield), foreign markets, EMs, etc. The firm also has an active global asset allocation eTF
GAA, an eTF of eTFs.
FUNDS. Indexing has benefited large caps. Many startups and early-stage companies remain private longer, and there are several unicorns among the private companies. The M&A and bankruptcy have eliminated many weak public small caps. So, the universe of public small caps has shrunk. The total market Wilshire 5000 index now has only 3,370 stocks. Small cap R2000 has many unprofitable companies (a better small-cap index is SP SC 600). People are thinking that the old Fama-French studies about outperformance of small caps don’t apply anymore. Mentioned are OEFs AVALX, NEAGX; eTFs
DFAS, IJR, IWM, SPSM. (By
@lewisbraham at MFO)
FUNDS. Post-election, Tesla/TSLA has run up sharply, but the new CEF
DXYZ (3/26/24- ) has done twice better; its premium is an astounding +329%. It has high exposure to TSLA and SpaceX. The fund buys private unicorns through their venture-capital financing and pre-IPO stages. But its recent rise may be as fleeting as its moonshot in April. (Retail investors don’t have easy access to the private-equity market, so the premium is so high. The private-equity market is quite illiquid and volatile.)
INCOME. Small caps with good dividends include
CWH (retail),
CRGY (energy),
KGS (energy); eTFs
DES, OUSM. Small caps are seen among the beneficiaries of Trumponomics 2.0.
OTHER VOICES. Allan SLOAN. There aren’t many companies that now offer traditional/DB PENSION plans. Those that still offer them to current employees or retirees are offloading the DB pension plans for ANNUITIES from insurers. The characterization and evaluation of liabilities are different for pension plans and insurers. So, companies typically have large one-time gains on these conversions. An obvious loss for beneficiaries is the loss of PBGC guarantee for the pension plans (and they don’t have a say on what insurer was chosen for conversion).
RETIREMENT. Just when investors thought that bond yields were head lower, they rose instead. The bond market is getting nervous about annual deficits and total debt. Bond volatility index MOVE is high (it has eased some post-election). But the bond market is more than the rate-sensitive Treasuries. Consider shorter maturities with more credit risks –
VMBS, IGSB, USHY, FRA (CEF).
Comments
TNTY) TRTY. It’s 15% of my diversified portfolio. I wouldn't overdo it, but I think the trend following approach has a small role to play in a broadly diversified portfolio. For TRTY the trend following approach comprises around 30% of the fund as I recall.More broadly, Cambria has as many losers as it does winners. Certainly not the best shop in town. M* rates the firm “below average” in its stewardship section. (Reasons are a bit complex. Read it before investing with them.) And both funds I reference above receive only “neutral” medalist ratings - part of the reason being over-reliance on a single person (Faber).
One positive re the funds I mentioned is that they invest in a fairly large number of other etfs - some from other fund families. And fees are low.
Can not pull up TNTY. Pl share full name and if possible link to the fund site.
Link to this fund
This is a unique fund from what M* would call a small ”niche” etf provider. Not for everyone or for growth oriented investors. At a bit over
$1 Mil$100 Mil AUM, it is one of Cambrea’s larger funds. And please read my earlier cautionary notes.Since I raised the stewardship issue prior, it seems fitting here to quote the essence of Morningstar’s primary criticism in that regard directly from Morningstar:
”Cambria added Toroso Investments as a subadvisor to its suite of ETFs in September 2023. Toroso quickly morphed into Tidal Investments, a subsidiary of Tidal Financial Group, following a private equity deal in November 2023. Toroso and Tidal's co-founder and CIO Michael Venuto had been an independent trustee on Cambria's three-person ETF board since 2019. Venuto abstained from voting on the Toroso hire and resigned from the board. Although Cambria's choice of subadvisor is reasonable, the decision nonetheless raises questions.”
"A vital element in keeping the peace is our military establishment. Our arms must be mighty, ready for instant action, so that no potential aggressor may be tempted to risk his own destruction."
"Our military organization today bears little relation to that known by any of my predecessors in peacetime, or indeed by the fighting men of World War II or Korea."
"Until the latest of our world conflicts, the United States had no armaments industry. American makers of plowshares could, with time and as required, make swords as well. But now we can no longer risk emergency improvisation of national defense; we have been compelled to create a permanent armaments industry of vast proportions. Added to this, three and a half million men and women are directly engaged in the defense establishment. We annually spend on military security more than the net income of all United States corporations."
"This conjunction of an immense military establishment and a large arms industry is new in the American experience. The total influence -- economic, political, even spiritual -- is felt in every city, every State house, every office of the Federal government. We recognize the imperative need for this development. Yet we must not fail to comprehend its grave implications. Our toil, resources and livelihood are all involved; so is the very structure of our society."
"In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist."
Thanks @Derf! What was I thinking? Yes, TRTY has over $100 Mil AUM - still relatively small. And the publicity from the Barron’s interview should help. Some of Cambrea’s etfs are nearer $50 Mil. From what I’ve read, they have never closed one, but did merge 2 smaller etfs together.