Hey Nusbaum, You're An Idiot

A round up of the week's posts and client trades.

In my last two posts that I cross posted to Seeking Alpha there were a lot of comments taking me to the woodshed. Either I am the idiot or I wrote the articles poorly such that I did not effectively convey my points or there was some collective group think stupidity that flourished on these posts. It could be any of these or a combination of all three.

With regard to (WRT) Financial Independence/Retire Early, or FIRE; 50 comes very quickly and you may want the optionality of an almost paid for house, almost a complete Social Security earnings record and a 401k balance. I'm 52 and having that optionality after all these years (and counting) of doing work that I love is very empowering. That's all I was talking about, giving your future self more options.

WRT Apple (AAPL), there is history for big milestones in individual names and the market more broadly to coincide with market tops, as the late Joe Battipaglia said, "6000 is a chipshot." This is a behavioral phenomenon that may or may not happen this time, No need to tell me why this time is different as a few people literally did; behavioral. Some of the comments assumed I must be selling something; blog posts are often a series of observations, that all the post was. I don't tout stocks like so many Seeking Alpha posts do, I am not selling a newsletter, I write because it is usually pretty fun. I have 85,000 followers at Seeking Alpha and more through other outlets. I couldn't accommodate even 1% of that number.

One part of my blogging going back to 2004 when I started, is sharing trades I make for clients albeit after the fact. Today I replaced the Square (SQ) position by adding to an existing position is Pacer Trend Pilot Large Cap ETF (PTLC). The fund will take defensive action based on the S&P 500 Index' relationship to its 200 day moving average. I use it because it will take defensive action for clients without needing to place a trade which means not generating capital gains for taxable accounts and the fund will re-equitize for clients, again without needing to place a trade. Adding PTLC keeps equity exposure about the same but does reduce volatility in the portfolio which might be a good idea if we are indeed late in the cycle which I believe we are. I am still plenty long for clients but have made a couple of small tweaks to slightly reduce correlation and volatility including buying AGFiQ US Market Neutral Anti-Beta (BTAL) back on May 7th.

BTAL tends to have a low to negative correlation to the S&P 500. It shorts high beta names and goes long low beta. Interestingly it is up from where I bought it which might support the idea of the market rolling over. If BTAL is going up then low beta must be outperforming high beta so BTAL might be capturing a turn in the market as a leading indicator of sorts. As I said when I disclosed buying BTAL the consequence for being wrong is small so I will continue to maintain the position for now until I turn out to be more wrong than I am at this point.

​Another thing I regularly write about is how ETFs can be used to build or enhance a portfolio. This means looking at new funds and existing funds. I did this for eight years at theStreet.com, I did before then and still do it now. It is part of my process for figuring out what I decide to do and not do in client accounts. It was this process that led me to BTAL. I learned about it, studied it and made the decision to use it. There have been plenty of funds that I have learned about, studied, written about and then decided not to use; still not trying to sell anything.

Speaking of which, Innovator Funds caused a little buzz on Friday announcing that it will launch three ETFs that appear to be in the realm of structured products whereby the will own options that track the S&P 500, will cap the upside and limit the downside. Back in 2002, I worked at Morgan Stanley for about ten minutes and it offered products that were very similar but were not exchange traded. I imagine this sort of product is widely available at brokerage firms still and I imagine they are quite expensive but I am now 16 years removed from that world. The Innovator funds are also similar to insurance products that no doubt are expensive (I have never sold an insurance product so I cannot be certain).

There will be more information available once they list next week but there is some strategic opportunity here to explore. The prospectuses say the funds will charge 0.79% so in a world of three basis points and now even zero, is the protection offered worth the fee? We'll try to dive in to see if we can draw a conclusion.

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