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Inflation Rotation

Mother's Little Helper portfolio was UP today +$1,701.14 (+1.67%).

Overall GAIN YTD: +$1,700.01 (+1.70%).

Our benchmark index, the S&P 500 is DOWN +0.94%

"The universe is based on 'fair exchange'. What you give you will get"

-Guruji Sri Sri Poonamji

I made my buys for the year on December 28, 2018, see the new portfolio here (Click Here).

Prepping for Inflation

If your stocks are like most everybody else you've been on a roller-coaster ride. Unlike the E-Ticket rides at Disneyland that seem to end too quickly, I'm guessing you'd like to get off this one sooner rather than later. While I think there is more selling to come, I think we're closer to the bottom than the top. My only reference point for this is historical in terms of how the stock market has behaved in the past, current environment thinking about how fast the market is making moves now by comparison. The volume has been changing too which suggests that investors are not aggressively buying or selling. On those big down days I suspect that most of it is machine trading, computers programmed to sell and re-balance whole portfolios. Stay out of that fear trade and look for bargains instead.

The latest rotation is looking more and more like a rotation into stocks that should do well in a market with higher inflation. That means those high paying REITs, Real Estate Investment Trusts, growth stocks and utility stocks will continue to decline. As interest rates go up, investors will likely continue to pull out of these stocks and look for stocks with greater potential. In general Financials, Industrials, Airlines and maybe energy. These are sectors where you can find fortress balance sheets, a good dividend and share price appreciation.

Remember, an out of favor, declining sector may be a setup for a buying opportunity, nothing stays down forever, except gravity.

Watching for the Back-To-School-Sale

After seeing the MLH portfolio go into negative territory for the first time, we have bounced back and are now nearly three-quarters of a point ahead of the S&P 500. While our S&P 500 index fund is delivering nice gains, most of our gains are coming from overseas marketing through our Developed Markets Fund and Emerging Markets fund. But the biggest percentage gainer to date is the TBT ProShares UltraShort, our hedge against the US long term bond market. The TBT was up 2.12% for us today and is now 5.49% of the portfolio. Volume in the TBT was up today with 4,731,488 shares trading, average volume is only 3,619,354. I suspect that inflows into the TBT will accelerate as rates rise. I don't want to stay in this fund too long as the benefits of owning it are eroded over longer periods of time; but we can use this fund to continue to protect the portfolio and maybe raise some cash that can be invested elsewhere.

I'll be looking to move on this by summer if my 'Back To School Sale' materializes.

As Always

Stay Invested

Clay Baker

Disclosure: I am personally invested long in some or all of these funds that appear in the Mother's Little Helper portfolio or manage these investments for my Mother's portfolio and may purchase or sell shares within the next 72 hours. I am also invested in other stocks and funds that do not appear in the MLH portfolio. Since I may on occasion discuss Bitcoin and other cryto currencies I disclose here that I personally own investments in the cryto-currencies listed here: VTI, VWO, VEA, VIG, XLE, MUB, TBT, GLD, Bitcoin, LiteCoin

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. This article is not intended to offer investing advice, guarantee 100% accurate predictions, or to be interpreted as providing a personal recommendation.

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