New BUY Signals!! F*ck Chicken Little…

We’ve reached a new cluster of buy market signals. Of course, indicators aren’t an exact science BUT the more signals that occur together the stronger the confirmation. This market could definitely go down more (market timing is a fool’s errand). We’re just looking for a general trend indication and right now signals are leaning to opportunity, NOT A CHANCE TO FREAK OUT AND SELL.

For those with no background in technical indicators, we’ll give you the shortest explanations possible… If this is way over your head, totally understand. You’re just going to have to trust that we know what we’re talking about.

 

The McClellan Oscillator is an indicator that measures overall market movement. Any reading below -200 means the market is oversold. Meaning the market is close to running out of sellers and almost only buyers will be left soon. Right now, we’re sitting around -240.

8.6.19McClellanOsc_598

 

The Put/Call ratio measures how many bets options traders are making on the market going down vs up. Right now, the ratio is at 1.24. The average usually hovers around .9. That means right now there are 24% more bearish bets than. bullish. You’ll notice that the last 2 times the indicator was this high were late May and late December. Screaming buy opportunities.

8.6.19cpc

 

This next chart has 2 VIX (volatility index) signals. The Bollinger Band signal and the CVR3 cluster. For the Bollinger bands we just want to see that the close comes back into the upper band after it’s spent a few days outside. For CVR3, we want to see: the close lower than the open for the day, the close higher than the 10 day moving average, and the PPO close above 10 (right now it’s at 15)

8.6.19vix.JPG

 

Keep an eye and you might want to review your watch lists. Do NOT get shaken out of your positions unless you hit a trailing stop you had previously set.

 

Read the New York Times, Wall Street Journal, and Other Paid News Sites for Free

At least once in your life I’m sure you’ve gone to read an article linked up from a favorite site only to find a stupid popup asking for a ridiculous amount of money to read the rest of the article. Typically the ad begging for money will block the content or just blur it all out. Pain in the ass. NSFW has a solution you could “hypothetically” use if one were so inclined…

For articles from the WSJ, Forbes, Bloomberg, and most Newspapers

*UPDATE 12/20/19*

Several sites including the WSJ have updated the paywall security. If the Outline method doesn’t work, you will need to use the following updated Github extension link.

Paywall Bypass

*UPDATE 5/20/19*

WSJ will show you the paywall, but if you click X on the ad it will disappear.

 

Go to Outline.com

Copy and paste the URL of the article you want to read into the box and click Create Outline.

outline picture

Every now and then, the Outline program just doesn’t cut it and won’t get past the paywall. Business Insider Prime is a good example,  If by chance, the site is down or you can’t get a result to load. Try this next trick…

Most paywalls are bypassed if you disable JavaScript. For people that aren’t total tech nerds, here are the easiest methods:

PC Users: Open Chrome, click this link and install the Toggle JavaScript plugin. Go to the article you want to read and click the icon in your browser toolbar to disable java.  Reload the page. If you use Mozilla (Firefox), you can just click the reader mode to bypass most walls. If you use internet explorer, you better be a card carrying member of AARP… Use a better browser.

MAC users:  Read the most up to date method at the Apple tutorial page for disabling java in Safari

Voila! You’ve “hypothetically” bypassed the paywall and “hypothetically” saved hundreds of $ in paywall news sources. Just remember to switch Java back on when closing out the article so that the rest of your browsing is unaffected. 

DISCLAIMER: NSFWallstreet.com assumes no liability for the usage of this information.

 

 

**For the more advanced tech guys out there, see below for a chrome extension build to bypass needing to use Outline. You will probably still have cookie popups using this method.

Bypass Paywall 

The New Gold Bull Market Has Begun

This morning, the Fed stated that it was keeping interest rates the same, but was open to cutting rates in the near future “should it be needed” to aid the slightly wounded economy*. We’re not going to go into more detail on what they said exactly because, frankly, it bores the ever-living sh*t out of us. But you can read that stuff if you’re on the toilet here…

Fed Holds Rates Steady, Hints at Future Cuts if Outlook Doesn’t Improve

Here’s what the stock market liked from the Fed

The Fed just defied Trump’s wishes for a rate cut but signaled that one could come soon

What you do need to know, is that interest rate cuts means gold goes up. Why? Well, in a nutshell, for interest rates to go down the Federal Reserve has to “print money” to buy up treasuries and cause the yield to go down. Prices of bonds/treasuries work in a seesaw motion against the yields they have. (Lesson for another time) Printing money means more money in circulation, which means “theoretically” more inflation, and gold is supposed to be an inflation hedge.  It’s all very boring. Gold went up nearly 3% on the Fed news, but here’s what’s important about gold’s recent price action. Gold spiked up in MULTIPLE currencies, not just the US dollar and has been on a steady move up in all of the big 5 currencies for the last month. The big 5 currencies are the US Dollar, Great Britain Pound, Swiss Franc, Canadian Dollar, and the Japanese Yen. Gold is officially having a bull moment when it moves up in ALL 5 currencies. This metric is used so that it can be established that gold is not just being used as a hedge for one currency while not affecting anybody else in the globe.

Gold prices6.19.19

 

Notice how the Japanese Yen price of gold has gone up the least amount in the last month and it’s still up over 2.5%. When we add up the last month’s price action, 1, along with the 3% spike today in all currencies, 2, then note that the high of today for spot gold in the US dollar is $1,394 and that is the highest level gold has reached in over 5 years (in the US of course) …we’ve got a pretty damn good case that the bull market in gold we’ve been waiting for is here.

There IS a major caveat to this article. We may be a bit premature. We need to see gold break the $1,400 level and stay there to really know that the new bull is here, but our money is on exactly that happening in the next week or 2. Our preferred place to look at the spot price of gold is Kitco.

 

 

 

 

*The main thing hurting the economy at the moment is the trade war. Trump wants the rates cut to theoretically unf*ck problems he caused in the first place.

Using Metal Prices To Predict Interest Rates (Master-Level Nerdy Sh*t)

This article is going to fall under the “a quick take our word for it and go do your own research” category. Not just our word, Jeff Gundlach (one of our favorite market geniuses) is a big proponent of this indicator.

How many of you have heard the phrase “the Fed is lowering rates”. Well, in a nutshell it means the government is stepping in to control the interest rate that works as the baseline for the economy. Around this baseline, real estate mortgage loans, bank loans, car loans, etc are going to be be tacked on based on a certain percent spread. It’s all very nerdy and boring. For those of you who already DO understand this concept, a rather esoteric trick to predict where interest rates are going (as controlled by the Fed) is to compare the ratio of copper prices to gold prices.

Copper is often called “Dr. Copper”. Because it’s such a staple in construction, the prices going up typically indicate that the economy is humming along. Buildings are being built, cars are being manufactured, you know the drill.  Gold on the other hand is more of a fear/pessimism metal. It has no way near as much use as a base metal like copper. Gold is usually going to go up when investors are worried the economy is NOT going to do all that well. It’s a safe haven metal that people hold on to in case of emergencies.

So long story short: the price of copper going up typically = economic optimism, gold going up = economic pessimism. When you divide gold price by copper price and the ratio is high you can assume an optimistic outlook on the economy as determined by the pricing. Vice versa, a low ratio means pessimism. How does the Fed react to pessimism? It lowers rates, making it easier for the man on the street to borrow money to use for things that will get the economy back in shape (buying bullsh*t, taking out loans on homes, creating jobs, etc)

This may be a bit more succinct explanation from longtermtrends.net :
Gold is the most widely recognized safe-haven asset among investors. Therefore, during times of economic and geopolitical distress it generally tends to perform well, making it a leading indicator of fear.
Copper is the exact opposite. Because it is a key industrial metal that is used globally in a wide range of industrial applications it performs strongly when the global economy is firing on all cylinders. This makes it a leading indicator of global economic health and has led to it being commonly called Dr Copper.
The ratio prices copper in gold and it represents the number of ounces of gold it takes to buy an ounce of copper.

 

This is where it gets pretty cool to look at… If you overlay the copper to gold ratio with the Fed controlled interest rate IT’S A PRETTY F*CKING CLOSE CORRELATION. Not exact, but pretty damn close. See below for somebody else’s fancy example of the correlation in action…

copper to gold ratio april 2015 to june 2017

See what we mean? Pretty damn close. Granted that’s an older time line and we’re too lazy to make our own graphic at the moment. But you can use the following two links to find updated graphs.

StockCharts Copper-to-Gold Ratio

Longtermtrends Copper-to-Gold Ratio

 

The current graphs indicate rates going down a bit.coppergold2

Low and behold, the jobs report that came out this morning led to the Fed saying that they may be cutting rates back down.

 

It’s no longer a question of if the Fed will cut interest rates, but when

Fed Begins Debate on Whether to Cut Rate as Soon as June

So that is where we leave you today. Go out and do your own research and know that now you can make an educated guess about where rates are going when people want to sound smart mentioning the economy at “cocktail parties”. But in all seriousness… who the hell still has cocktail parties.

 

 

 

 

Further Reading and Resources:

The Power of Copper-Gold – Jeff Gundlach’s Double Line Fund Report PDF

Validating Gundlach’s 10-yr Treasury relation to the Copper:Gold Ratio

How the Gold-to-Copper Ratio Can Make You a Smarter Investor

Copper-Gold Ratio Signals Treasury Yields May Be Set to Drop (July 2018 Article)

The Copper-Gold Ratio

The NSFW 401(k) Cheat Guide

For the sake of not dying of boredom, NSFW officially recommends just skipping to the questions you actually care about first. This stuff is not fun. The financial industry has ensured that it sounds as boring and complicated as possible. It’s a lot easier to take advantage of people when they’re asleep. **Edited: NSFW has removed a comment referencing Bill Cosby here as it is already a dated reference and not that funny. **

 

The Basics

What is a 401(k) and why is it called that?
It’s a retirement plan set up by employers that lets workers save and invest a piece of their paycheck before taxes are taken out. Taxes aren’t paid until the money is withdrawn later (ideally in retirement). The name 401K comes from the part of the tax code that created these plans.  The account your plan uses is made specifically to invest for your retirement and nothing else. Another company, called a plan administrator, takes care of and manages the account for both you and your employer.

My company says they will “match contributions”? What the hell are they talking about?
A contribution is the money you put into your retirement plan. The match means your employer will put in the same amount of money that you put in. You put in $100 a month, they will also put in $100. That means you now have $200 to invest with. Generally, an employer will have a maximum amount they will match (around 3-5% a month or per check on average).

What’s the catch? Why would they do that?
The catch is called “vesting”. It means that even though they put that money in there for you, you don’t usually get to keep it for quite some time. Nearly all retirement plans have a vesting schedule. Vesting schedules tell you how long you have to stay with the company to keep the money they “gave” you.  Companies love to talk about the employer match because it sounds like a great benefit (and it can be), but most will never even say the word vesting. It’s quite common for companies nowadays to require people to stay with the company for 5 or more years before they can keep 100% of their employer matches. Any gains that you made from investing the employer’s contribution will ALSO be taken away from you if you leave early. Sneaky Bastards.

How much can you put in to the plan/account per year?
2018 limit = up to $18,500
2019 limit= up to $19,000
Note that these maximums are set by the IRS, not your employer.

Can I invest in anything I want or do I have to choose from the funds specified in the plan?
Just the stuff in the plan. There will generally be a list of 20 or less mutual funds.

 

 

How to Willingly Give Wall Street Your Money While Bitching About Wall Street Taking Your Money

(aka Hidden Fees you are probably already paying)

 

“96% of people know how much they pay each month for streaming media services like Netflix. Just 27% know how much they’re paying in fees on their 401(k) accounts.”

Most people, if they invest at work at all, don’t bother looking at the cost of their retirement plan. Unfortunately, this can really suck away the returns that you make on your money over the long run. When people see a fee like .25% (for clarity that is just a quarter of one percent) they don’t give a second thought, because they’re still not completely comfortable with the idea of compound interest. The chart below can show you how much even a quarter of a percent can affect an investment return over time.

effect of fees on return 30 yearsSource: Investor.gov

Notice that the difference between the blue line and the green line is only .75% in fees. Not even 1%. In 30 years it shaved off around $30,000 from your retirement. So pay attention…

 

Types of Fees:

Plan Administration Fee = Money you pay the 401k plan administrator for managing your retirement plan. Generally there is no way around this fee while you’re with your employer, but it’s something to be aware of. This is also one of the many reasons why you don’t want to leave your 401k with an employer custodian after you’ve left.

Expense Ratio = The management and operations fees of the fund are generally grouped together into this number. It will be given as a percentage that you will pay each year you have your money in the fund.

12B-1 Fee Money you pay the fund to use for trading commisions at the brokerage and for advertising to other investors. This way you get to pay for marketing, not them. Not even kidding. You probably wouldn’t give them money if they called it Advertising Fee though. 12B-1 sounds fancy and people don’t ask alot of questions. This fee should be already included in the expense ratio.

Load = A sales charge. A load is a fee you pay when putting money into or taking out of a mutual fund. For example, a front-load fee of 1% on the fund means that before they even invest your money, you pay them 1% of all the money you’re giving them to invest. Pretty sweet deal, huh? If you pay the fee when taking the money back out of the fund, that’s called a back-load.

Redemption Fee = Money you pay for taking your money out of a fund too quickly. For example let’s say a mutual fund has a redemption fee for withdrawals before 30 days. You put your money into it. 3 weeks later, you decide you think another fund would be a better investment.  So you sell out of that mutual fund. You get to pay them for selling out before 30 days have passed.

What is a reasonable amount I can expect to pay in fees?
If you work for a large company, expect to pay about 1-2% a year with all fees included. Aim for 1% or Less (expense ratio + plan administration). Smaller companies with retirement plans generally run higher in fees (2-3%+). Aim for not paying more than 2% tops. Generally, when people are even made aware of the fees they are paying, they will make better decisions for fund choices. If a fund commands a higher fee, you may want to make damn sure that it has a long history of outperforming all other choices available.

Funds with higher fees are generally actively managed vs just indexed. The ironic thing is, the cheaper indexed funds usually outperform the stock picking managers (about 90% of the time). So just remember, 90% of the time, you’re best off just picking the index fund(s).

If you want a short cut in finding out how much money you’re giving away FINRA (financial regulator) has a free tool for you.

Fund Fee Analyzer
*Can be used for Mutual Funds, CEF’s, ETF’s, etc.

 

WHAT THE F*CK?

(A translation guide for that stupid packet they gave you at work)

 

Allocation
How your money is split up and used to buy stocks, bonds, or funds.

Equity (equities)
Stocks.

Fixed-Income
Bonds.

Balanced
Your money is put into a mix of different types of stocks and bonds.

Aggressive
Your account value is going to swing up and down more, but you have the potential to make more money in the long run.

Conservative
Your account value will be relatively stable, but you probably won’t make as much money in the long run.

Moderate
In-between conservative and aggressive. You won’t make the huge gains when the market goes up, but you also won’t lose as much if the market goes down.

Index (indexed)
The fund doesn’t have somebody making decisions on what to buy and sell. The value of the fund tries to match the growth/value of a specific market or theme.  Example, a fund that is indexed to the Dow Jones means you won’t have to buy every company in the Dow Jones. The fund owns all those companies and you will get the cumulative gains and losses of everybody. These funds are (as a rule of thumb) cheaper, better options than actively managed funds.

Global
At least some of your money will buy stocks or bonds from countries other than the US.

Developed
The big European countries. Think Germany, France, Switzerland, etc.

Emerging
Money is at least partially invested in the up and coming countries that aren’t typically considered as well off economically as the US or Europe. Think China, India, Brazil, Russia, etc.

Target Fund (aka TR  2050 or whatever number)
The 4 digit number is the year you expect to retire. A target fund means you pay a manager to allocate your money between stocks and bonds and reallocate regularly in the hopes that by the time you retire they will have invested your money way better than you could have. Hot tip: these funds are garbage and work superbly for Wall Street to bleed money from people who are too lazy to make a few simple, informed decisions.

 

Quote Source: TD Ameritrade 2018 Survey of 1000 active investors. The percentage of the general population who know about 401(k) fees is far less than 27%.

Backdoor Investing: A Safer Way to Speculate

Unless you’ve been hiding under a rock, you’ve likely heard about the rapidly expanding cannabis industry. It seems nearly every major website has been posting about either cannabis regulation, a new IPO, or some new product. Well, we’ve been getting a lot of questions about which cannabis stocks to invest in and our answer may surprise you.

While there are cannabis stocks we recommend investing in directly, we’re going to show you a quick and easy way to buy these companies in a much safer way. Simply put, you don’t buy the cannabis stocks… you buy the stocks of the companies that buy the risky stocks. You’ve probably seen at least one or two articles about companies investing in the cannabis industry. Cigarette companies, liquor companies, even a few financial companies (if you’ve got a good eye). Here’s the thing… Those big bastards have WAY more investment savvy than you do. They’ve got analysts who do the real work. There’s no reason for you to have to dig as much when a multi-billion dollar company has already done it.

Example:

Recently, Constellation Brands (STZ, the booze company behind Corona and Modelo beer, Svedka vodka, etc ) made a multi-billion dollar bet on the cannabis company Canopy Growth (CGC). Who do you think has a better idea on a good bet for a weed stock? You or a $42 billion company booze company. So what do you do with that? You can buy STZ if you want to buy CGC. You are getting a huge name brand company as well as a stake in a cannabis company trying to find its footing. If Canopy growth goes bust, you’ve only lost a small amount. If you buy Constellation, you’re getting world-class liquor and beer brands that already pay a dividend as WELL as a portion of Canopy growth. When you’re buying in a retirement account and don’t have to many years until retirement, it may not be a good bet to buy something without a track record (ie cannabis industry stocks). But the big guys who are speculating probably aren’t going to get even close to busting out like some new stock of the day.

So how do you know where to find backdoor stocks? Simple.

  1. Go to Whalewisdom.com. This site shows you 13-F filings (ie who owns what of the big boys on Wall Street)
  2. Enter in the symbol of the stock you want to buy that may be a bit risky or new.
  3. In this case, we’ll just use Canopy Growth (CGC)
  4. Sort the list by % of portfolio.
  5. Big company investments will be at the top of the list. You see here that the 2 biggest holders (whose portfolios are 100% invested in Canopy)cgc investors
  6. Now we Google who the hell those companies are. A simple search shows that  BOTH holding companies are owned by Constellation brands. The first search of CBG Holdings LLC has the first result showing this ownership.constellation investment
  7. The only thing left to do now is decide if you like Constellation Brands, which is  about 4x as big as CGC and already has cemented brands and a helluva distribution network

THAT’S IT! Try it with some new companies and see if you can find some bigger, safer ways to use to backdoor invest in new ideas. Weed stocks, Chinese stocks, new tech stocks.

PEAD: About As Close To A Free Lunch As The Market Will Give You

PEAD is post-earnings announcement drift. It’s a “phenomenon” discovered by in the 1960’s when some guys noticed that after earnings releases the stock nearly always tends to continue drifting in the direction that the earnings tilted. A stock has surprisingly good earnings and jumps on the news, it will probably keep going up for the next few weeks. Same with posting a loss, it will likely continue to drop in price not just the day after earnings, but for the next few weeks.

For example, Kraft Heinz is being slaughtered this morning. As we write, the stock is down 27.5%. Long story short, it because of a trifecta of bad news. Quarterly earnings were massively disappointing, they cut their dividend by 25% (one of the main reasons people buy huge, old companies like this is for the dividend), and they also disclosed that they are being investigated by the SEC for some possible funny business. Whether it’s true or not doesn’t matter. What matters is that the market didn’t like it. So now we have a stock down a massive amount and while this is a VERY overstated example, we can expect with nearly 100% certainty that the stock will continue to fall for a while. It will drift in the direction that it moved initially. Buying right after a huge drop like this is 100% a terrible idea. It may bounce up a bit because of the severity of today’s drop, but that’s only a band-aid on a bullet wound. It’s a pretty damn safe bet to assume you can short the stock or buy puts and probably turn a profit (assuming you don’t overpay for your option).

Conversely, you have a stock like ROKU which posted earnings and revenue higher than Wall Street expected. The stock is up over 20%, a massive over-reaction to an earnings beat. It doesn’t matter though, the street is excited. We can expect Roku to continue in the upward direction for a while. OR at the very least it will likely outperform the broad market.

So that’s all that nerdy acronym means… PEAD = if the earnings announcement was good, the stock will continue moving up for a while. If earnings sucked, it won’t just move down the day after the announcement, it will continue down for the short-term.

 

 

Further reading for the financial nerd types:

Post-Earnings Announcement Effect (Quantpedia)

Surprising Facts on Post-Earnings Announcement Drift (AlphaArchitect)
note: read anything Alpha puts out. Their work is golden.

Drift or Jump: What Drives Post-Earnings Announcement Stock Returns? (SSRN)

Post-earnings-announcement-drift and 52-week high: Evidence from Korea (ScienceDirect)