A Comment -- General Comments From an Expert (A Commentary)

Educational Segment. Credit market risk. There is a gross mispricing of credit market risk. Due to implied fiscal and monetary stimulus, the weaker companies who would not be able to make interest payments are able to get money with a tight credit spread. We see a deterioration in credit spreads before the stock markets turn down. There is a divergence where the stock market makes new highs, but there is less tightness in the credit market. We are starting to see this. It is not signalling a sell yet, but it is cautionary.

Market. He is watching BB-T very carefully which is a large position for him. He sold his entire position today. The only explanation for the climb he can see is a short squeeze. Some insiders sold some stock last week. He thinks there are momentum, computer driven strategies that were at play this week. His approach to the market right now is that it is a stock picker's market right now. He is a value investor and was careful about portfolio construction. He has not made many changes to his portfolio other than trimming and is now sitting on about 12% cash.

The vaccination Gamestop dichotomy: 93% of the workforce is still employed, and are paying down debt with little to spend on--so these people may be doing just fine. Also consider that super low interest rates make house-buying affordable, especially in the suburbs. That's why homebuilding stocks are booming. It's fair to worry about the slowness of the vaccine roll-out, but he doesn't seem more lockdowns, because governments can't afford them. Rates will stay low and consumers have lots of money that they'll spend when things reopen. Groups in reddit are targeting shorted stocks, like they are doing with Gamestop. Same with Bed Bath and Beyond, also squeezed. Some stocks they target are genuinely undervalued like Blackberry. That said, this is a sideshow, but it won't threaten the overall market.

Coronavirus second wave. The cases are up, hospitalizations are up. Despite vaccine delivery delays, the western world will be vaccinated before the end of this year or early next year. In the meantime, governments are supporting the economy with monetary and fiscal policy.

Governments will not need to spend as much money as the vaccine is rolled out. The central banks have maintained the low interest rates but the bond market is reacting differently. US 10 year bond yields are back over 1% today. Long term bond yields are rising. Investment grade bonds are expected to have a negative yield in 2021 and 2022. However, within PE 25x, there are lots of stocks offering great value.

Travel stocks. Airlines and cruise lines have taken on a ton of debt to survive covid. These companies have also issued a lot of shares so the price will not come back to pre-covid levels. He prefer companies that have stronger balance sheets and aren't reliant on reopening to get back to where they were before covid.

Bitcoin and Ethereum. He does not understand it, and if you don't understand it, you shouldn't own it as per Buffet's philosophy. It has seen a wild ride and if you are speculating on it, then keep the position small.

How are you positioning tech holdings now? 94-95% fully invested, with a bit of cash. 63% hedge overlay on top of that. He still sees value, but the hedge tells you that there are warning signals. Valuations are high. Pay attention to monetary stimulus. Another $3T is expected to reach the US markets in 2021. Once vaccines create herd immunity and economies open up, market fundamentals and technicals should be important again. Forward-looking nature of the market means selling the news will happen well in advance of global economies opening up. Going into 2021, he likes GARPy large-cap names such as Ericsson, MSFT, Alibaba and Nvidia. Likes semiconductors. E-commerce plays like Shopify and PayPal. Also likes themes of electrification and 5G.

Strategy for buying puts on the QQQ. He'd recommend laddering some puts. Laddering lowers your risk. Set a strike price one month out around $310, and then do it about $10 down going out each month. Hardest part of doing puts is there are so many moving pieces: strike price, expiration date, volatility. He uses the NASDAQ 100 instead of the PowerShares QQQ.

Market Call pre-empted by inauguration of US President Joe Biden.

Biden's inauguration and 2021 investing themes The Trump era is over, so how to prepare for the Biden era? The markets roared today, partially because nothing crazy (violent) happened at the inauguration. Biden should do a better job than Trump in rolling out the vaccines and this alone will be crucial. The biggest investing theme for 2021 is e-commerce. Many are nervous that e-commerce will fade with the end of the pandemic, but he thinks this is only the start. For example, Choptle is using an app to boost its revenues. Then, there's Amazon, Apple and other big tech names which led today's markets. Salesforce and Adobe, too. Then, there are cybersecurity plays like Crowdstrike. He likes them all. Add to this the 5G roll-out stocks, like Taiwan Semi and Qualcomm. Biden's stimulus plans will benefit Dollar General, Walmart and other retailers. Biden, he expects, will build warmer relations with China, which businesses want; Apple, Boeing and Starbucks will benefit. Work from home will continue this year, so Wayfair, Zoom Video and Amazon are picks here. Biden will encourage the EV trend (Ford is a pick here). For all of them: buy on pullbacks when others are scared.

Does incoming Biden presidency change your investing strategy? Partially. It's a piece of the puzzle, but there are a lot of moving pieces. The Democrat Blue Wave is just part of it. Obama had a clean sweep, but there were splinter groups there that turned out more conservative and held up the agenda. We'll certainly see more fiscal money and infrastructure investment, though. Bond yields could rise and pressure dividend stocks, possibly. This includes consumer staples. We're moving into value and cyclicals and, at long last, move away from pure growth/momentum stocks. Value is now in cyclicals--banks, industrials, metals/minerals. Passive investing will take a back seat to stock-picking, which reverses the last 10 years. In fact, passive investing is a danger trade with too much money concentrated in a few areas.