 | Something's Gotta Give by: Charles Sizemore | Chief Editor, The Banyan Edge
January 21, 2023 Banyan Nation,
It’s been a wild week of data … and a lot of it looks scary.
But before we get to that, I want to focus on one 100% unambiguously positive little nugget.
The average 30-year mortgage rate, while still roughly double the levels of mid-2021, is continuing to creep downward. In November, the average mortgage topped out at about 7.1%. Today, the average is nearly a full percentage point lower at 6.2%.  (Click here to view larger image.) Home affordability is still a major issue, and just this past week, KB Homes announced that 68% of the homes it had under contract to sell in the fourth quarter of 2022 ended up cancelling. (To put that in perspective, the average from 2017 to 2021 was about 21%.)
That’s reflecting in the existing home sales data too. That data shows a slump of 1.5% from November to December. That’s over a third lower from the year before, and the worst level since 2010.
So, something’s clearly gotta give here. If we’re going to avoid a major setback in the housing market, we need to see mortgage rates continue to ease.
Speaking of that … Amber Lancaster, Adam O’Dell and Mike Carr will be joining me on Monday’s podcast, and housing is going to be one of the macro risks we cover.
We’ll also be picking apart the debt ceiling crisis and some other recent troubling data that points toward recession.
Every crisis brings with it opportunities and risks … so be sure you tune in to see how you’ll be positioning for it. (Incidentally, I touched on the debt ceiling crisis in Friday’s Banyan Edge, just after Adam’s piece, “Not for the Faint of Heart.”) And about that, let’s take a look at what the team has had to say this week. - “TradeSmith CEO Explains the ‘TradeStops’ Easy Investing Tool,” by Ian King.
This isn’t an easy time to invest. Inflation is still wrecking the market, and there is no immediate end in sight. Risk management is always critically important, but it’s all the more so during a bear market like today. So on Tuesday, Ian sat down with TradeSmith CEO Keith Kaplan to talk about taking a more systematic approach to risk management.
There are almost infinite layers to proper risk management, of course, but two of the most important factors are position sizing and knowing when to take a loss. Keith and Ian walk through the data here, illustrating how you should size your positions analytically and when exactly you should throw in the towel.
- “3 Rock-Star CEOs Helped Shareholders Profit Up to 188%,” by Charles Mizrahi.
As Charles likes to remind us, a stock is not just a symbol on a screen. It’s a piece of a real business. And when investing, you need to be able to trust the person running the business, whether it’s a Fortune 500 company or the local donut shop.
Charles breaks down three “rock-star” CEOs that have exactly the character traits he looks for: integrity, energy, intelligence and good old-fashioned grit. Read on to see what makes a rock-star CEO.
- “Trading Options: Avoid the Market Maker Scheme,” by Michael Carr.
The “sell in May and go away” maxim has been repeated to the point of being cliché. And worse, it’s not even very tradable. But there are other seasonal patterns that are tradable. And you don’t have to wait six months to take advantage of them.
That’s why on Thursday, Mike phoned up a confidential source to learn why this weekly pattern exists … and how you can use it to pad your profits this year. Fair warning, this is a bit technical… But it’ll open your eyes to how the market really works.
- “’Wednesday Windfalls’ Help You Trade Options In 3 Easy Steps,” by Adam O'Dell.
Adam is not a man who takes unnecessary risks. I say “unnecessary” because risk — and how you manage it — is part of the investment process. But when Adam takes risks, he makes sure his expected returns more than make up for it.
Adam recalls his time living on Little Torch Key in a “tin can blown halfway to Cuba.” It was scary living in a remote part of the Keys, 30 miles from a grocery store and on his own to face the elements … but it was worth it!
He ties that feeling to one of his favorite trading strategies … one that gets him into a position on Monday and out by Wednesday. It’s just the right kind of strategy for a volatile market like today’s, so it’s the perfect time to start using it.
That’s going to wrap it up. But before I go, let me ask: How do you feel about gold?
With the dollar backing off of its recent strength and the government descending into anarchy over the debt ceiling, does having a little gold make sense? Or is it truly a barbarous relic?
Let us know your thoughts right here. Until next week,
Charles Sizemore
Chief Editor, The Banyan Edge
P.S. Thank you, as always, for reading and giving us your feedback.
Remember that you can do that anytime, including any questions you’d like us to answer on the podcast, by emailing us at BanyanEdge@BanyanHill.com. |  | | Cutting-edge financial innovation signals the best time to buy and sell for maximum gains. Full details here. |
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