• LGR Financial Newsletter (Volume I, Issue 13)

LGR Financial Newsletter

Volume I, Issue 13 (Released On June 10, 2014)

Hello all!  I hope everyone has had a good last two weeks.

This Issue contains lots of economic data (from the past two weeks) and analysis on economic data and economic news that has come out recently.  I will focus less on the stock market and more on economics in this issue, given the economic backdrop shaping our investing decisions.

Due to the fact that I am now working full-time, I must choose how to most effectively use the free time that I have allotted to writing about financial markets.Therefore, I am letting you all know now that I won’t be releasing another Issue of newsletter until the week after next (meaning Volume 1 Issue 14 will be released around June 22nd). However, I will probably send out a few short reports in the meantime (hopefully one with an analysis on gold and one with an analysis on the US Dollar). Over the next two weeks, I plan to work more on my website and on writing my “buy pitch” article on Las Vegas Sands Corp. (NYSE: LVS).  I’m not sure if either of them will be completely finished in two weeks, but I hope to get both of them well underway.

I will most likely be sending out bi-weekly Issues of my newsletter until I finish creating my website and writing my “buy pitch”. After those two things are done, I will move back to weekly Issues of my newsletter.

This Issue will contain a Summary of The Market’s Performance (5/27/14 – 6/06/14), a Portfolio Update (5/26/14 – 6/06/14), a Market Update (5/26/14 – 6/06/14), and a Write-Up on global economics.

I appreciate all feedback and recommendations for topics to cover in my future write-ups!


Summary of The Market’s Performance:

(MAY 27 - JUNE 06)

The past two trading weeks were slightly shorter than normal, due to the fact that the stock market was closed on May 26th for Memorial Day. All three major indexes moved higher over the past two weeks (from the market’s close on May 23rd to its close on June 6th). The S&P 500, the DJIA, and the Nasdaq Composite had returns of 2.57%, 1.91%, and 3.24% respectively over that time period. Also, to provide some price data for things I mentioned in the last Issue of my newsletter (and thing I will mention in this Issue) the Russell 2000 Index, TLT, and the spot price of gold had returns of 3.46%, -0.98% and -3.14% over that same time period.

The S&P 500 reached eight new intra-day highs over the past two trading weeks, which means that the S&P 500 was making new highs almost every single day (8 new intra-day highs in only 9 trading days). That isn’t all, the S&P 500 actually managed to close (literally point-for-point) at its all-time high, with an all-time intra-day high of 1,949.44 and a closing value of 1,949.44, on June 6th.

Just to let you all know how impressive it is for the S&P 500 to reach at new 52-week high, and have that high also be extremely close to (or the same as) the S&P 500’s closing value, I decided to create a program that would test for that exact thing. In order to create the program, I needed to use data for SPY, instead of using data for the S&P 500 index, because my trading account does not have access to data for the S&P 500 index.

For those of you who don’t already know, SPY is an Exchange Traded Fund (ETF) that “seeks to provide investment results that, before expenses, generally correspond to the price and yield performance of the S&P 500 Index” (Yahoo Finance, Link #1). SPY is approximately 1/10 the value of the S&P 500 Index, and it tries to stay as close to 1/10 of the value of the S&P 500 Index as possible. SPY does a very good job of this and over the past 5 years the total return for SPY was almost the exactly the same as the total return for the S&P 500, over the same period of time, according to Yahoo Finance’s data (SPY’s total return for past 5 years = 105.49% and the S&P 500’s total return for past 5 years = 106.03%).

I looked for times when the difference between SPY’s intra-day high and closing price was less than 0.01% of the closing price (basically meaning that the intra-day high was less than 0.01% higher than the closing price), and when SPY was making a new 52-week high (new high for past 252 trading days). I found that this phenomenon has only occurred 14 times in the last 15 years (3780 trading days).

In short, the stock market’s performance over the past two weeks, and really over the past five years, was quite amazing. Indeed, the S&P 500 has gone up approximately 157% from its major low after the most recent financial crisis, which was reached on March 09, 2009. How much higher do you think it will go?

Below is a chart of SPY for the past 20 years with monthly time intervals:


***The graph was automatically scaled on my Tradestation platform, and I did not alter the price increments or graph in any way***

After looking at the chart above, I would be interested to hear what you all think about how much higher the S&P 500 will go in the near future.


Portfolio Update (5/27/14 – 6/06/14):

(MAY 27 - JUNE 06)

Over the past few weeks I’ve been adjusting my portfolio’s holdings to reflect my bearish outlook on the overall stock market, moving money out of stocks that I believe would drop the most if the market were to experience a correction and moving it into stocks that can go outperform the market if it corrects. Unfortunately this strategy hurt my portfolio’s performance over the last two weeks, and my portfolio significantly underperformed the S&P 500 over the past two weeks. Despite that fact, I believe I will be rewarded if I turn out to be right about the market being about to correct.

I maintain an Excel spreadsheet, which tracks my portfolio’s positions in every way imaginable, and I update this spreadsheet every weekend.  I’M WILLING TO SEND THE ENTIRE EXCEL DOCUMENT VIA EMAIL TO ANYONE WHO ASKS FOR IT, and it will help people know exactly what companies and sectors I have invested in.  It also provides the “guidelines” that I structure my portfolio upon.

Below is some information about my simulated portfolio, and a list of my five best performers, and five worst performers, for the past two weeks:

  • My portfolio’s starting balance (on 1/1/2014): $1,000,000.00
  • My portfolio’s current balance (on 5/16/2014): $1,067,667.88
  • My portfolio’s return to date: 6.77%
  • The S&P 500’s return to date: 5.47%

More measures of risk-adjusted performance will be added shortly!

My Five Best Performers For Past Two Weeks:

  1. Air Lease Corp (AL): +9.64%
  2. Smith & Wesson Holding Corporation (SWHC): +8.52%
  3. Whole Foods Market (WFM): +8.34%
  4. Iamgold Corp. (IAG): +7.60%
  5. First Solar Inc. (FSLR): +3.64%

My Five Worst Performers For Past Two Weeks:

  1. Life Time Fitness, Inc. (LTM): -14.43%
  2. Znga Inc. (ZNGA): -9.45%
  3. Franco-Nevada Corp. (FNV): -4.45%
  4. First Majestic Silver Corp. (AG): -3.86%
  5. Questcor Pharmaceuticals, Inc. (QCOR): -3.33%

There has been lots of volatility in the performance of stocks in my portfolio over the past two months, as seen by the best and worst performers in this Issue of my newsletter compared to the last Issue of my newsletter. A few stocks that were my worst performers for the past two weeks were on last Issue’s list as top performers (LTM and QCOR), and a few stocks that were my best performers for the past two weeks were on last Issue’s list as worst performers (WFM and IAG).

Also it is important to note that SWHC was on my top performer list for two the past two Issues of my newsletter (meaning it was one of my top performers for the past seven weeks), and it had a total return of 16.76% for the past seven weeks.

LTM performed terribly over the past two weeks, dropping approximately 15% in only two trading days this past week (June 4th and June 5th). There does not appear to be a discernable reason why LTM was hit so hard this past week, since there was absolutely no negative news reports to speak of, so one can only guess at the reason why the stock declined so severely. It was very unfortunate that the stock experienced such a decline, because prior to the decline it was one the best performing stocks in my, but my position is still up 12.35% as of this past Friday (June 6th).


Market Update (major events, news stories, economic data reports):

(MAY 27 - JUNE 06)

Given the fact that many important economics news reports that have come out in the past two weeks, I have decided to summarize the most important economic data reports and then get into some more in-depth analysis on global economic reports/data in my write-up (in the next section of this Issue).

Below is summary of the most important global economic data that has come out in the past two weeks. The data comes from Forexfactory.com and I will present two data points; Actual (the reported data that was released on the day indicated) and Forecast (the average analyst forecast, before the data was released, on Forex Factory). The list also includes days on which representatives of major central banks spoke.

I am including all of these economic data reports because they can have a significant impact on currencies (the currency of the country that the economic data pertains to), and I will be talking about currencies later on in this Issue. I only included economic data reports that received the highest level of significance on Forex Factory, which means they have historically had the greatest impact on currency markets. The results are shown in RED if they were significantly below the average analyst forecast, and they are shown in GREEN if they were significantly above the average analyst forecast.Forex Factory automatically does this, so I just made the readings red or green (or black for no surprise reading) based on its existing labels.

The United States of America:

(Currency: US Dollar: USD)

Tuesday, May 27th:

  • Core Durable Goods orders (m/m): 0.1% (Actual) vs. 0.2% (Forecast)
  • CB Consumer Confidence: 83.0 (Actual) vs. 83.2 (Forecast)

Thursday, May 29th:

  • Prelim GDP (q/q): -1.0% (Actual) vs. -0.6% (Forecast)
  • Unemployment Claims (released weekly): 300k (Actual) vs. 321k (Forecast)
  • Pending Home Sales (m/m): 0.4% (Actual) vs. 1.1% (Forecast)

Monday, June 2nd:

  • SM Manufacturing PMI: 55.4 (Actual) vs. 55.7 (Forecast)

Wednesday, June 4th:

  • ADP Non-Farm Employment Change: 179k (Actual) vs. 217k (Forecast)
  • Trade Balance: -47.2B (Actual) vs. -40.8B (Forecast)
  • ISM Non-Manufacturing PMI: 56.3 (Actual) vs. 55.6 (Forecast)

Thursday, June 5th:

  • Unemployment Claims (released weekly): 312k (Actual) vs. 309k (Forecast)

Friday, June 6th:

  • Non-Farm Employment Change: 217k (Actual) vs. 214k (Forecast)
  • Unemployment Rate: 6.3% (Actual) vs. 6.4% (Forecast)


(Currency: British Pound Sterling: GBP)

Tuesday, May 27th:

  • Bank Of England (BOE) Governor Carney Speaks

Monday, June 2nd:

  • Manufacturing PMI: 57.0 (Actual) vs. 57.1 (Forecast)

Tuesday, June 3rd:

  • Construction PMI: 60.0 (Actual) vs. 61.2 (Forecast)

Wednesday, June 4th:

  • Services PMI: 58.6 (Actual) vs. 58.3 (Forecast)

Thursday, June 5th:

  • Asset Purchase Facility: 375B (Actual) vs. 375B (Forecast)
  • Official Bank Rate: 0.50% (Actual) vs. 0.50% (Forecast)

The Eurozone:

(Currency: Euro: EUR)

Monday, May 26th:

  • European Central Bank (ECB) President Draghi Speaks

Tuesday, May 27th:

  • European Central Bank (ECB) President Draghi Speaks

Monday, June 2nd:

  • German Prelim CPI (m/m): -0.1% (Actual) vs. 0.1% (Forecast)***

Tuesday, June 3rd:

  • CPI Flash Estimate (y/y): 0.5% (Actual) vs. 0.7% (Forecast)***

Thursday, June 5th:

  • Minimum Bid Rate: 0.15% (Actual) vs. 0.10% (Forecast)***
  • ECB Press Conference***


(Currency: Chinese Yuan: CNY)

Saturday, May 31st:

  • Manufacturing PMI: 50.8 (Actual) vs. 50.7 (Forecast)

Monday, June 2nd:

  • Non-Manufacturing PMI: 55.5 (Actual) vs. N/A (Forecast)
  • HSBC Final Manufacturing PMI: 49.4 (Actual) vs. 49.7 (Forecast)

Saturday, June 7th:

  • Trade Balance: 35.9B (Actual) vs. 22.6B (Forecast)


(Currency: Canadian Dollar: CAD)

Friday, May 30th:

  • GDP (m/m): 0.1% (Actual) vs. 0.1% (Forecast)

Wednesday, June 4th:

  • Trade Balance: -0.6B (Actual) vs. -0.2B (Forecast)
  • Bank of Canada (BOC) Rate Statement
  • Overnight Rate: 1.00% (Actual) vs. 1.00% (Forecast)

Thursday, June 5th:

  • Building Permits (m/m): 1.1% (Actual) vs. 4.1% (Forecast)
  • Ivey PMI: 48.2 (Actual) vs. 56.3 (Forecast)

Friday, June 6th:

  • Employment Change: 25.8k (Actual) vs. 24.5k (Forecast)
  • Unemployment Rate: 7.0% (Actual) vs. 6.9% (Forecast)


(Currency: Australian Dollar: AUD)

Wednesday, May 28th:

  • Private Capital Expenditure (q/q): -4.2% (Actual) vs. -1.6% (Forecast)

Sunday, June 1st:

  • Building Approvals (m/m): -5.6% (Actual) vs. 2.1% (Forecast)

Monday, June 2nd:

  • Retail Sales (m/m): 0.2% (Actual) vs. 0.3% (Forecast)

Tuesday, June 3rd:

  • Cash Rate: 2.50% (Actual) vs. 2.50% (Forecast)
  • Reserve Bank of Australia (RBA) Rate Statement
  • GDP (q/q): 1.1% (Actual) vs. 0.9% (Forecast)

Wednesday, June 4th:

  • Trade Balance: -0.12B (Actual) vs. 0.40B (Forecast)

Day 1 of G7 Meetings was on Wednesday, June 4th, and Day 2 of G7 Meetings was on Thursday, June 5th. “G7 meetings are attended by finance ministers and central bankers from 7 industrialized nations - Canada, Italy, France, Germany, Japan, the UK, and the US” (Forexfactory.com).

DISCLAIMER: Reports with *** next to them are ones that I will talk about later in my Global Economics Write-Up

DISCLAIMER: Definitions of all the economic terms that I used about can be found in the Issue 13 Appendix Page

DISCLAIMER: The dates are based on EST, so reports from countries in difference time zones (China, etc.) may have been released on a different day than indicated below. For example: China’s Manufacturing PMI was reported at 9:00pm (EST) on Saturday, May 31st, but that would have been 9:00am (CST) on Sunday, June 1st, in China

DISCLAIMER: All of this information can be found by following by following THIS LINK


Write-Up On Global Economics:

The write-up is a 244 word excerpt from a "premium" article that I wrote for Seeking Alpha. The full write-up can be found here: http://seekingalpha.com/article/2454525-the-ecbs-new-stimulus-package-is-too-little-and-too-late


Excerpt From Seeking Alpha Article:

The biggest, and most highly anticipated, economics news story of the past two weeks was definitely the European Central Bank's press conference, which took place on Thursday, June 05, 2014. Officials at the European Central Bank (ECB), mainly Mario Draghi (the ECB's President), have been hinting for quite a while that the ECB was ready and willing to enact further accommodative monetary policy measures if the inflation rate in the Eurozone continued to decline. Further stimulus measures seemed almost guaranteed when, on June 2nd, the Federal Statistical Office of Germany (Destatis) released a preliminary CPI (m/m) reading of -0.1% for the month of May. The preliminary CPI report, which indicated that "annual inflation in Europe's largest economy likely slowed in May," was just the latest indication that inflation in the Eurozone is getting perilously low and Germany's preliminary CPI reading "probably pushing down the broader euro zone rate" while "raising pressure on the European Central Bank to act" during its next meeting.

Just how much pressure did it put on the ECB? Well, due to the fact that it is Europe's largest economy, Germany's economic results are extremely important, and are looked at quite closely by ECB officials. In fact, Germany's economic results are so important that they saved the entire Eurozone from contracting in the most recent quarter. As you all probably know, "the European Union's Statistics Office estimated that the economy of the 18 countries sharing the euro expanded only 0.2 percent…

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If you have any questions about this Issue of my Financial Newsletter please fill out the form below. I also appreciate receiving any comments you might have about what you just read, and I encourage you to send me ideas for topics that you would like to see me write about in the future. Thank you for reading! 

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