January 2019 Newsletter: It's like Springtime in January (minus the polar vortex)

Man what a difference a Market Flash Crash and "Jerry Powell" Make!


Dear Subscriber,

So Far So Good--We Got ALL The Big Stuff Right--All That's Left Is China/Trump Detente!

Condolences to our many subscribers suffering from the polar vortex--damn Canadians! I hope the nearly 16% one-month performance of our Transformity Investor PRO portfolio is at least partically warming your portfolio!

In last month's newsletter(s) I asked  "Are we at the beginning of an oncoming 2019 US recession and a REAL 30%+ face ripping bear market after a historic 10-year bull market like the panicked sellers and hedge funds are pricing stocks at?" 

Our conclusion was NO-- our trusty 45-piece Transformity MacroMarket Index which forecasts US recession or expansion 4-6 months out was still POSITIVE 15.2 (now up to 15.6). This means there is less than 4% risk of the end of the business cycle and GDP recession. 

Why did we trust our forecasting index while the "smart money" hedge funds were selling everything they could after in December and money was pouring out of S&P Index funds like water out of a collapsed dam?

Because since 1988 our index (components of which we licensed from Londo School of Economics which created and backtested this amazing forecasting tool) has been dead right on call REAL recession led bear markets and identifying market corrections that are (of course) part of bull market cycles and HEALTHY blood-lettings and cash building events (cash is the oxygen that is the feedstock of bull markets.)

While big time and small time investors priced stocks as if we were rapidly heading into:
1) 1st half recession
2) Inverted yield curve (Fed tightening of short term rates would exceed the 10-year rate
3)  And buying bear market stocks like utilities and consumer packaged goods (which in turn got way overpriced)

We held firm--and BAM--look at how our wealth grew in January 2019!

First, we cashed in 48% annualized profits in 2018 BEFORE the October 3rd beginning of the Fed-led market meltdown tantrum (which I am now calling the "Attack of the Equity Vigilantes).

We held on to our 2X high-income plays that got crushed in panic selling during the correction and we doubled down on MORL MRRL BDCL MI NRZ at panic lows. We held onto our 2X position in AMD assuming positive 2019 forecast (as they steal market share from Intel and some from Nvidia--WOO HOO the exceeded our expectations) and held onto our solo positions in Nvidia (NVDA) and Newtek Capital (NEWT) (with Nvidia seriously disappointing on many fronts and Newtek bouncing back and buying back stock.

Then we added 25% yielding 2X Small Cap Dividend ETN SMHB and the 20% yielding AMZA after they cut their dividend to 8 cents per month.

Action to Take: HOLD Nvidia and AMD for the moment. Nvidia is SO oversold and shorted it's on it's way back to short term support above it's 50-day moving average. We will have more on Nvidia in the second part of the January Newsletter later next week when we get our calls returned from the folks we trust in the GPU and semiconductor space.

The chart of AMD is a LOT more fun--$25 target reached but $30 looks like the new target IF we can get comfortable with the ramp of the new GPU chips in Q2-Q4. 

YES Our 2019 Scorecard Is Already Pretty Astonishing

YES it was great to have a lot of cash to put to work into our double down of our lowest risk/high dividend plays and keep our 2X weight AMD and single Nvidia positions (that is what CASH is all about in a portfolio--to use opportunistically when Mr. Market has a nervous breakdown and indiscriminately sells what they HAVE TO and not what they want to!).

I'll take this start to January every year!

January 2019 Transformity Investing PRO Performance

Position Return + Div

AMD 29.80%

AMD 29.80%

Nvdia 2.80%

Chegg 23.79%

MORL 13.68%

MORL 13.68%

MRRL 10.79%

MRRL 10.79%

BDCL 15.21%

BDCL 15.21%

NEWT 10.25%

NRZ 18.24%

NRZ 18.24%

MIC 20.27%

MIC 20.27%

SMHB 8.89%

AMZA 2.20%

Total  15.52%

Even better--with the income positions alone if we get ZERO more appreciation from here we add on another 22% in dividend yieldfor doing nothing but collecting dividends(and as always--IF YOU DO NOT NEED THE INCOME--reinvest the dividends in your $10K a Month Ultra Income investments.) Subscribers who started with us in 2013-2014 have some ridiculous cash-on-cash returns every month--some as high as 60% per year (NEWT) based on their cost basis.

OK--next week we get into the REST of 2019 plan--but the good news is
1) with the Fed on hold as expected (the "Powell Put")
2) Investor sentiment still WAY bearish (that is agreatbullish sign)
3) Hedge funds WAY under-invested in stocks (God I love those guys)
4) And the Trump Administration wounded by the government shutdown which means they HAVE TO GET a suitable China/US trade deal done (no more tariffs, a framework for US agriculture/tech and services exports tobeginimmediately and a US/EU/Japan bi-lateral agreement to end technology transfer conditions for global tech companies by 2H 2010)

Our new S&P 500 target is 2950-3050 foryear-end.

We will be adding what I call "Idiosyncratic" secular growth companies in Software-as-a-Service as well as more no-brainer transformative companies with stocks destroyed by panic/forced selling (as well as some leveraged TQQQ and January 2020 options IF trade jitters reverse this HUGE move off the panic Dec 24 low (which we SHOULD EXPECT at some point in February). 

Can we beat 48% performance of last year?

We are 1/3 of the way there already--stay with us all year!


PRO NewslettersTobin Smith