Pull-Back Opportunities

The market can remain irrational longer than you can remain solvent

- John Maynard Keynes

​​The Portfolio Performance

The portfolio is UP +9.32%

Our benchmark, the S&P 500 closed UP +3.61%

Buying on Pull-Back Today's broad pull-back in stocks has presented some opportunities. By the time you read this I will be adding shares to the portfolio in Advanced Micro Devices (AMD) and the iShares Clean Energy ETF (ICLN). Both of these stocks are still in a down trend so I'll be taking a bite out of the remaining shares that we need to buy and leaving the rest for better opportunities.

Investors are reacting, maybe over-reacting to a jobs report that was worse than expected. That was the headline, but digging deeper into the actual report I find that the report is better than expected when viewed in terms of where we were same period last year. From my perspective, something else is at play here and I'm sure its valuations.

In plain language, the condition of our jobs market is bad, really bad, but what I'm looking at is the reaction of investors to a headline. Specifically, investors sold off stocks today because "the initial jobless claims were worse than expected". Expected by who? Compared to what? Over what time-period? Were there any other metrics that contradict the jobs report?

Initial Jobless Claims came in at 861,000 for the week ending February 13, 2021, which is significantly higher than where we were in February 2020, but as the chart shows, this was a small uptick from last month and a dramatic decline from where we were last Spring.

Included in the report are the numbers for Continuing Jobless Claims and the benefits paid for claims. Continuing Claims has continued to decline as have the total amount paid out in benefits. I would say that the unemployment situation as awful, but certainly much better than where we were a few months ago. Considering all that investors have looked past in recent months, this one jobs report can't be the sole trigger of this weeks sell-off.

Just yesterday the Retail Sales report delivered a huge surprise, to the upside. That's kind of a contradiction, jobless claims are up, retail sales are way up, therefore we should sell our stocks. Excluding autos, retail sales in January surged 5.9% vs an expected increase of just 1.2%. The jump in retail sales was fueled by $600 stimulus checks that came out of the $900 billion package. Keep in mind Congress is still noodling on $1 to $1.9 trillion more. While retail sales broadly were way up, Walmart just delivered an earnings call with mixed results that did not meet analysts expectations in every respect. Most important was the forward guidance is a bit gloomy.

I think investors have been looking for a reason to sell because valuations have become stretched so high, that even the Reddit crowd wanted to take some profits. Looking at the S&P 500 Oscillator, the overbought condition becomes apparent.

There's an old saying,

Valuations don't matter, until they do

From where I'm standing, it looks like we reached a point where valuations matter...at least for a little while.

Today's Actions

BUY AMD 100 shares @ $87.80

BUY ICLN 1,000 shares @ $27.75

"Markets don't go to zero, Portfolio's do.

Buy quality, be patient...and look twice for motorcycles."

- Clay Baker

Stay Inves