Week Ending 3/27/2020 - Bear Rally?

3/23/2020 Monday

I already sold down most of DLR and switched to DLR's preferred's last week. Turns out to be a ninja move. That stock got crushed 11% today. 

Sold a little more DLR today. I did not want to reduce overall portfolio exposure though, so I rotated that money into SBUX and GOOGL.

Even though the market is down some 30%+ (I can't even keep track anymore), there are still very few bargains out there. Some of the names are getting close though - a 10-15% leg down and I'm ready to buy them.

3/24/2020 Tuesday

Whoa, S&P 500 up 9.38% today. This must have been a vicious rally for short sellers. 

It caught me off guard too. I'm still under-exposed for some growth names (UBER, TTD, SQ) and hoping for those prices to go lower. I was just doing some work on EW last night trying to figure out growth runaway and TAM.. I was ready to buy it on a decent drop today! But the stock went up 17.6% instead! 

So this rally is kind of a bummer.

The 1929/30's Depression era comparison continue to pile up - but on the upside this time.

At least one fancy footwork I did kind of paid off. I had switched out of DLR equities into preferred's last week, just before the stock had a meltdown. Then Fed announced they will expand QE to buy corporate bonds also (I expected this but not this soon!). This should calm the credit markets and help the preferred's too.

Overall my portfolio exposure still hover around 60% equities. The moves I did the past 2 weeks are very incremental.

3/25/2020 Wednesday

Late last night congress reached a $2 trillion deal, and the market continued to rally today.

This $2 trillion won't mitigate all the damages the economy will sustain, but it buys time and minimizes the catastrophe. So it's reasonable that markets are already looking out to the other side. 

I am also looking beyond the Covid-19 induced recession. Always have. I'm just not so bullish about it.

I'm not doing much. Added a few shares of SQ. Yes it's up like 50% from the lows.. but it's still below my original purchase price before this whole crisis. So technically I'm averaging down. This is still a small position so whatevers. 

More about those preferred's. The DLR preferred's I bought has done really well but I could have done even better. 

AT&T's 4.75% Series Preferred went up 19% today! I did not buy this one. 

My thought process - as I wrote last week - was that low coupon preferred are less likely to get called so you're not going to get those huge yield-to-calls (in some cases 30-40% YTC). But I forgot low coupon securities have higher duration. 

And that's the point of this trade - own high duration stuff in advance of credit market calming (with a big assist from the Fed buying corporate bonds). 

Being a former fixed-income guy I actually thought about that dynamic but dismissed it. Lesson learned.

3/26/2020 Friday

Market seem to calm down a bit - S&P dropped only 3.4% today after a massive run up.

The more I learn about the fiscal stimulus/relief bill (CARES Act), the more impressive it looks. 

Aside from the various small business relieves, what stood out to me the most is the ~$450bn of Exchange Stabilization Fund as buffer against losses, which can be leveraged up to $4-4.5 trillion of lending by the Federal Reserve. 

The Fed balance sheet already exceeded $5 trillion, and they're talking about doing another $4.5 trillion of lending! 

So we not only have massive fiscal stimulus, but also a massive expansion of monetary base in addition to what already occurred this month. 

The scope, size, and speed of government response is truly historic. I was there in 1Q2017 when subprime blew up and can't remember the government doing anything. This time it's all hands on deck. 

Frankly I was almost looking forward to the Great Depression, but looks like that won't happen. Have I missed an once in a life time buying opportunity? Oh wells.