Riding the Volatility Wave: A VIX-Based Approach to Election Investing

Here's the Real Reason Treasury Yields Are Rising (YouTube link)

Yield Curve Mystery: Why Did Yields Rise After the Fed Cut?

The speakers in the video above are discussing the recent rise in the 10-year Treasury yield following the Federal Reserve's 50-basis-point interest rate cut. They propose four potential explanations for this unexpected yield increase:

1. A Head Fake: The yield rise is temporary and will soon reverse.
2. Bond Vigilantes: Investors are concerned about rising deficits and national debt, leading them to demand higher yields on government bonds.
3. Market Repositioning: Investors who had bet on a recession are now selling bonds as the economic outlook improves.
4. A New Market Paradigm: Investors are anticipating higher growth and inflation in 2025, leading to increased demand for higher-yielding bonds.

The speakers from DataTrek Research lean towards the third or fourth explanation, suggesting that the market is shifting towards a new paradigm of stronger economic growth and higher inflation. They also acknowledge the possibility of a Fed policy mistake, given past errors in assessing economic conditions.

Current bond yields are similar to those seen in the 1960s and 2000s

Nick Colas from DataTrek Research  is arguing that despite significantly higher debt-to-GDP ratios compared to the past, current bond yields are similar to those seen in the 1960s and 2000s. This suggests that the market is not yet pricing in the risks associated with increased government debt. The speaker believes that factors like inflation expectations and real interest rates are more significant drivers of bond yields than debt levels. They argue that the current market environment is not indicative of an imminent debt crisis, and that the market is not yet fully pricing in the potential consequences of high debt levels.

How to Ride the Volatility Wave

In the video above (from @29:13 to @30:59), Nick Colas and Josh Brown discuss the VIX chart shown to clients, emphasizing potential volatility from the upcoming election.

CBOE Volatility (VIX) Index (10/2020 - Present)

Despite stable expectations, they acknowledge that surprises can happen. Historically, a VIX at 35 signals a good buying opportunity for the S&P 500, with an average gain of 6.5% over the next month. A VIX at 27 is also a useful indicator. They stress that these levels help in deciding when to buy amid market volatility, drawing on strategies used since the pandemic crisis. They're cautious but wouldn't be shocked to see the VIX hit 30 again.

Key Points

They're warning about potential market volatility ahead of the election. They suggest using these levels to buy stocks when the market is volatile.

• Historically, a VIX at 35 signals a good buying opportunity for the S&P 500, with an average gain of 6.5% over the next month.
• A VIX at 27 is also a useful indicator.

Understanding Options Contracts

How To Choose An Options Contract (YouTube link)

The above video offers a basic overview of options trading, focusing on key factors when choosing an options contract. Consider the various expiration dates available. The choice depends on your trading strategy. For weekly trades, focus on the nearest expiration. For swing trades, opt for a later expiration date based on your expectations.

Key Points:

• Platform: The speaker recommends Interactive Brokers Pro (IBKR Pro) for its fast execution speeds.
• Options Chain: This is the interface where you view available options contracts.
• Key Metrics: The most essential metrics include last price, net change, delta, open interest, volume, theta, bid, and ask.
• Delta: Measures the sensitivity of an option's price to changes in the underlying asset's price.  In other words, delta shows how much an option's price changes for each $1 move in the underlying stock. 
• Relationship between option price sensitivity (delta) and premium: Note that options with higher deltas, indicating greater price sensitivity, generally have higher premiums. Conversely, options with lower deltas, indicating less price sensitivity, typically have lower premiums. This is because options with higher deltas are more likely to be profitable if the underlying asset's price moves in the desired direction.
• Open Interest and Volume: High open interest and volume indicate liquidity, making it easier to buy or sell contracts.
• High open interest indicates that many contracts are available, while sufficient volume ensures there are buyers and sellers to facilitate trades. Without enough volume, even a profitable option may be difficult to sell. This is because options are traded in an open market, and finding buyers or sellers is crucial for successful trading.
• Theta: Theta represents the time decay of an options contract, meaning its value decreases over time. Theta decay gives traders an idea of how much the value will drop overnight or in a single day.
• Spread: The difference between the bid and ask price.  Aim for options with narrower spreads to minimize transaction costs and improve profitability.
• Wide spreads can significantly impact profitability, as the difference between the bid and ask price can result in immediate losses. This can be particularly problematic when using stop-loss orders, as the wide spread can trigger the stop-loss before the desired price movement occurs.

Choosing Contracts Based on Theta:

1. Trading Horizon: If you're a short-term trader, focus on options with lower theta values to minimize the impact of time decay. Conversely, if you're a long-term trader, you may be less concerned about theta.
2. Underlying Asset Volatility: High volatility can offset the effects of theta decay. If you expect the underlying asset to be highly volatile, you may be able to tolerate a higher theta.
3. Risk Tolerance: Consider your risk tolerance. Options with higher theta values tend to have lower premiums, but they also decay faster. If you're risk-averse, you may prefer options with lower theta values.

Example:

• Short-Term Trader: If you're trading weekly options, you'll want to choose contracts with lower theta values to minimize the impact of time decay.
• Long-Term Trader: If you're holding options for several months, you may be able to tolerate higher theta values, as you have more time for the underlying asset's price to move in your favor.

Remember: Theta is just one factor to consider when choosing options contracts. Other factors, such as delta, implied volatility, and strike price, should also be taken into account.

Additional Tips:

• Focus on essentials: Start with the most important metrics and gradually add more complexity as you gain experience.
• Avoid noise: Avoid overwhelming yourself with too much information. Focus on what's relevant to your trading strategy.
• Consider liquidity: Ensure there's sufficient open interest and volume to avoid difficulty in buying or selling contracts.
• Be mindful of spreads: Wide spreads can impact your profitability.

By understanding these key concepts, you can make more informed decisions when trading options.

Using Open Interest to Identify Support and Resistance

Option trading basics: How to analyze Open interest (YouTube link)

Summary of Open Interest

Open interest is the total number of outstanding contracts for a specific strike price on an options contract. It represents the number of buyers and sellers who have not yet closed their positions.

How Open Interest is Used:

• Determining Support and Resistance: The strike price with the highest open interest on the put side is generally considered a support level, while the strike price with the highest open interest on the call side is considered a resistance level.

• Reasoning Behind Support and Resistance:

  When a strike price has a high open interest, it signifies a significant number of both buyers and sellers are actively trading at that level. This concentration of interest can create a strong support or resistance level.

  • Support: If the underlying asset's price drops below a put strike price with high open interest, option sellers may face potential losses. To avoid these losses, they might buy more of the underlying asset to hedge their positions. This buying pressure can help support the price and prevent it from falling further.
  • Resistance: Conversely, if the underlying asset's price rises above a call strike price with high open interest, option sellers may be incentivized to sell their positions to avoid potential losses. This selling pressure can act as a resistance, limiting further price increases.

Key Points:

• Open interest is a useful tool for analyzing options markets.
• It helps identify potential support and resistance levels.
• The concept of open interest is based on the assumption that option sellers have more financial power (see Option Seller Margin Requirements below) and are more likely to defend their positions.

Note: Although open interest can be a valuable tool, it's essential to consider it in conjunction with other technical and fundamental analysis methods for a comprehensive understanding of the market.

Additionally, please refer to the final section of the article, 'The Decline of Open Interest as a Trading Tool,' to gain insights into the limitations of using open interest as a sole trading strategy

Option Contract Matrix

Option Premium Matrix

Call Option Margin: Buyer vs. Seller

When buying a call option, there is typically no margin requirement, meaning you only need to pay the premium to enter the position; however, when selling a call option (being the "call option seller"), a margin deposit is required to cover potential losses if the underlying stock price rises significantly. 

Key points: 

• Call option buyer: Only needs to pay the premium for the option, no additional margin needed. 
• Call option seller: Requires a margin deposit to cover potential losses as they are obligated to sell the underlying stock if the option is exercised. 

Reasoning: 

• Limited risk for buyers: When buying a call option, your maximum loss is limited to the premium you paid.
• Unlimited risk for sellers: When selling a call option, your potential losses are unlimited if the underlying stock price rises significantly.

Option margins are complex: They vary based on option type (call/put), position (in/out-of-money), and whether they're naked or covered. For example, naked calls require 100% of proceeds + 20% of underlying value. Read [1] for more details.

Put Option Margin: Buyer vs. Seller

When buying a put option, there is typically no margin requirement, meaning you only need to pay the premium to enter the position; however, when selling (writing) a put option, a margin requirement is usually necessary, as you could be obligated to buy the underlying security at the strike price if the option is exercised, requiring sufficient funds in your account to cover that potential purchase. 

Key points: 

• Put option buyer: Only needs to pay the premium for the option, no additional margin required. 
• Put option seller: Needs to meet a margin requirement based on the underlying security's price to cover potential assignment if the option is exercised.

Reasoning

• Limited risk for buyers: When buying a put option, your maximum loss is limited to the premium you paid, so no extra margin is needed. 
• Unlimited risk for sellers: When selling a put option, you could be obligated to buy the underlying security at the strike price if the option is exercised, potentially leading to significant losses if the stock price drops significantly

The Decline of Open Interest as a Trading Tool

Aditya Trivedi in the above video argues that open interest is no longer a reliable indicator for determining support and resistance levels in the latest options market.

Key Points:

• Historical Effectiveness: Open interest was once a useful tool for identifying support and resistance. However, its effectiveness has diminished in recent years.
• Shift in Focus: Traders have shifted their focus from total open interest to changes in open interest, which has also become less reliable.
• Market Manipulation: Market participants may manipulate open interest data, making it less trustworthy.
• Rapid Changes: Open interest can change rapidly, making it difficult to use as a reliable indicator.
• Alternative Indicators: The author suggests focusing on price action and other technical indicators rather than relying solely on open interest.

Overall, Aditya believes that open interest has become outdated and unreliable as a trading tool.

References

1. Options margin requirements

Unrealized Losses Loom Large Over U.S. Banks

The FDIC data shows a significant increase in unrealized losses at banks, primarily due to the Fed's interest rate hikes. These losses have reached a peak of $655 billion but have since declined slightly to $512 billion. While interest rate cuts could help mitigate these losses, they may also negatively impact bank profitability. There are concerns about potential risks beyond unrealized losses, such as a recession or financial crisis, which may be influencing the Fed's decision to cut rates.

FDIC Quarterly 2024 Vol 18 No 2

Notes

1. HTM: Stands for Held to Maturity. These securities are purchased with the intent to hold them until maturity. Unrealized gains or losses on HTM securities are not recognized in the income statement.
2. AFS: Stands for Available for Sale. These securities can be sold at any time. Unrealized gains or losses on AFS securities are recognized in other comprehensive income, which is a part of equity.

Proactively Assess Your Bank’s Financial Health with FAU’s Free Tool

If you wish to be proactive and examine your bank's unrealized loss ratio, you can utilize this free tool provided by Florida Atlantic University. Although this screener is not flawless and does not reveal all aspects of a bank's financial well-being, it serves as a valuable starting point.

In the article, the (HTM+AFS) Loss to CET1 Capital column is likely the most important in the context of understanding the impact of unrealized losses on U.S. banks.

Here's why:

• CET1 Capital: This is a key measure of a bank's financial strength and resilience. A higher CET1 ratio indicates a stronger bank.
• (HTM+AFS) Loss to CET1 Capital: This column shows the percentage impact of unrealized losses on the CET1 capital ratio. A higher percentage means that unrealized losses are having a more significant negative impact on the bank's financial health.

By analyzing this column, investors and regulators can assess how vulnerable banks are to potential losses from changes in interest rates. A high percentage suggests that the bank's financial stability could be compromised if interest rates continue to rise or if the bank is forced to sell its securities at a loss.

100 Largest Banks Face Potential Unrealized Losses: Only 20 Riskiest Listed

Market Mayhem: Surviving and Thriving in a Downtrend

Video1.  Markets Are Too Complacent, Creating "A Recipe For Pain (YouTube link)

During his interview with Adam Taggart, Ted Oakley emphasized the potential pitfalls of a bear market.

One thing I find about bear markets that people seem to forget is that they can come on quickly. They don't always have to crash, but they can descend rapidly. You might look up a few months later and realize how much the market has fallen. It's often when people lose their complacency and start to worry that the real pain begins. The biggest problem is that people become complacent when prices are high, and that's a recipe for trouble in the future.

Historical Bear Markets and Corrections

What does history teach us about corrections within bull markets (those that don't escalate into something more severe)? Goldman Sachs provides some insights:[1]

Table 1 presents a historical overview of bear markets and corrections in the S&P 500 since the end of World War II. We identified 14 bear markets and 22 corrections exceeding 10%. On average, bear markets decline by 30% over 13 months and take 22 months to recover to previous levels (in nominal terms). In contrast, the average 'correction' is 13% over 4 months and recovers in just 4 months.

Table 1.  Historical Bear Markets and Corrections in the S&P 500 

Clearly, this is a helpful table. While its findings may seem intuitive to some, I suspect many readers were surprised by the significant difference in recovery times between market corrections and full-blown bear markets. For those worried about near-term market weakness but not convinced of an impending prolonged downturn, this information might offer some reassurance.

Navigating Bear Markets: Strategies and Considerations

It's challenging to maintain short positions, whether you're shorting stocks, ETFs, or bear ETFs. Broker lending rates, dividend payments, and the daily price calculations of bear ETFs can all contribute to difficulties.

A conservative investor can outperform the market simply by holding cash or government bonds. For a more aggressive individual investor, the most cost-effective way to capitalize on a market downturn is to employ a strategy of buying puts and selling calls on SPY, QQQ, IWM, or similar ETFs. Alternatively, they can strategically short large, liquid, and easily borrowable stocks or ETFs after market rebounds.

Mitigating Market Downturns: Strategies from Ted Oakley

Ted Oakley of @Oxbow_Advisors  proposed a 30/30/30/10 portfolio as an alternative to the traditional 60/40 portfolio (Video 1).

• 30% should be in short-term fixed income, not long-term. You'll need to actively trade this portion.
• 30% should be in real assets like commodities and real estate. These won't be the primary growth drivers due to market instability.
• 30% should be in a mix of growth and value stocks.
• 10% should be in cash.

For the categories outside of real assets, you'll need to trade them periodically. You can't simply invest and forget about them like in a 60/40 portfolio.

Their current portfolio reflects this strategy. They have three main accounts:

• Conservative fixed income: This is a very short-term account that rarely requires adjustments.
• High-income account: This account has significant exposure to commodities like gold, miners, fertilizer, and real estate.
• Stock account: They've shifted their stock holdings to include more energy, gold miners, consumer staples, and healthcare. Healthcare is a particularly attractive sector due to demographics and recent price declines.

Overall, they aim to maintain around 50% in treasuries for liquidity. This strategy should help you weather any market storm, though they might experience some declines in a severe bear market.

References

1. Goldman's Latest Warning: 'Some Kind Of Correction Seems A High Probability'
2. Short-Interest: Being Bear Is Back In Vogue

The Crystal Ball of Housing: Demographics and Demand

Housing Demographics with John Burns’ Eric Finnigan (YouTube link)

Eric Finnigan leads demographics research at John Burns Research and Consulting, helping clients in the housing and real estate industries understand demand based on demographic trends. He views demographics as a predictive tool, likening it to a crystal ball for future trends. His interest in demographics began around 2013-2014 while working for a capital allocator firm. He analyzed demographic data to predict shifts in housing preferences, such as Millennials moving from urban areas to more affordable regions. Finnigan has been in the housing market research field since 2007, gaining significant experience during the subprime mortgage crisis. His career has been shaped by a deep dive into demographics and housing economics.

Positive Housing Outlook: Rising Headship Rates

The headship rate, which is the percentage of adults who are heads of households, is a key indicator for understanding demographics and housing demand. A lower headship rate means that fewer adult individuals are living in primary residences.

The rising headship rate suggests a positive outlook for the housing market. It indicates that more adults are forming households, which can lead to increased demand for housing and support economic growth. This trend is likely driven by factors such as a strong job market, rising incomes, and changing demographics.

While the data for the second half of 2024 is still being analyzed, the current trend points towards continued growth in household formation and housing demand. This could have significant implications for the housing market, including increased home prices and rental rates.

Headship Rates in Oregon

In [1], it analyzes household formation trends in Oregon and identifies key factors driving the increase. The aging demographics of Millennials, along with rising headship rates across all age groups, have contributed to the formation of more households. This has led to increased demand for housing in Oregon.

References

1. Household Formation in Oregon

The Global Economic Outlook: Lacy Hunt's Perspective

What The Huge Downward Revision In The Jobs Data Means For The Economy | Dr. Lacy Hunt (YouTube link)

In this interview, Lacy Hunt, a renowned economist, discusses the state of the US economy with Julia La Roche. Hunt begins by highlighting the significant flaws in the Bureau of Labor Statistics (BLS) payroll data. The conversation then delves into broader economic issues, including the economic lifecycle and global economic factors.

Key Takeaways from Lacy Hunt's Economic Analysis

These are the main takeaways from Lacy Hunt’s interview

• The Bureau of Labor Statistics (BLS) payroll data is significantly flawed, with a five standard error miss in 2023. This has led to a misperception of the economy's health.
• There is a net negative national saving in the US, meaning the government's spending exceeds its income. This is a serious problem because it reduces resources available for investment and economic growth.  
• Government policies, such as deficit spending, have not been effective in addressing the negative national saving. In fact, they may have worsened the problem.
• The Federal Reserve's quantitative easing in 2020 and 2021 contributed to inflation and did not solve the underlying problem of negative national saving.
• The Federal Reserve is behind the curve on inflation and will likely need to cut interest rates more than currently expected.
• The economic lifecycle is difficult to determine due to flawed data.
• The global economy is facing headwinds, including negative money supply growth in major economies and rising government debt levels.
• Rising government debt levels are associated with slower economic growth.
• Technology alone cannot solve the economic problems.
• The US economy is relatively better off than other major economies but faces challenges from international trade.

Hunt concludes that the US economy needs to address negative net national saving and other structural issues to achieve sustainable growth. Overall, his analysis paints a concerning picture of the economy, highlighting the negative impact of national saving, the unreliability of economic data, and the ineffective policy responses. Hunt's assessment offers a sobering perspective on the current economic landscape.

Dr. Lacy Hunt: A Macroeconomic Mastermind for Long-Term Investors

Dr. Lacy Hunt is known for his long-term investment outlook and his use of macroeconomic indicators to predict market trends. His analysis often focuses on factors such as:

• Monetary policy: The actions of central banks, particularly the Federal Reserve, and their impact on interest rates and the money supply.
• Fiscal policy: Government spending and taxation, and their effects on the economy.
• Demographics: Population trends, including birth rates and aging populations, which can influence economic growth and consumption patterns.
• Global economic trends: The performance of the global economy, including trade, currency exchange rates, and geopolitical events.

By analyzing these macroeconomic factors, Dr. Hunt identifies potential opportunities and risks in the market and makes investment decisions accordingly. His long-term focus means that he is not swayed by short-term market fluctuations and is willing to hold investments for extended periods, even if they experience temporary declines.

Short Selling vs. Put Options: Betting on a Decline

How to Trade Options for Beginners: Covered Calls on thinkorswim® (YouTube link)

If you believe a stock price will decline, you can either:

• Short sell the stock, hoping to buy it back at a lower price.
• Buy a put option on the stock, giving you the right to sell the stock at a specific price if it declines. 

Key Differences:

• Ownership: With short selling, you borrow the asset.  With put options, you buy a contract.  
• Leverage: Options often provide leverage, allowing investors to control a larger position with a smaller capital outlay compared to short selling.  
• Time Decay: Option prices are influenced by time decay, meaning the option's value decreases as it approaches expiration.   

Both strategies aim to profit from a declining stock price, but they carry different risk and reward profiles.

Short Selling: Betting on a Price Decline

Short selling is a trading strategy where an investor borrows a security (like a stock) and immediately sells it, hoping to buy it back later at a lower price. The difference between the selling and buying price is the profit if the price does indeed decline.

How Short Selling Works:

• Borrowing the Security: An investor borrows shares of a stock from a broker. Short sellers pay interest on the borrowed shares and are liable for any dividends paid during the short position.
• Selling the Shares: The borrowed shares are sold on the open market immediately.
• Covering the Position: If the stock price falls, the investor buys back the same number of shares to return to the lender. The difference in price is the profit.

The Risks of Short Selling

Short selling comes with four main risks:

• Limitless losses: Unlike buying shares (which has a capped loss equal to your investment), shorting a stock has no upper limit on potential losses. If the stock price rises unexpectedly, you may have to pay significantly more to replace the borrowed shares.
• Fluctuating borrowing costs: The interest rate to borrow a stock can change rapidly based on supply and demand. Sudden fee increases can make it impractical to maintain a short position. Keep these factors in mind when considering short selling!
• Dividends: Short sellers owe dividends on borrowed shares. To avoid this, they often close positions before the ex-dividend date.
• Margin calls: Short selling often requires a margin account, meaning the investor needs to deposit a certain amount of money as collateral.  If collateral falls below a certain level, brokers demand additional funds or securities.

Option Contract Matrix

Option Premium Matrix

Put Options: The Options Equivalent to Short Selling

Put options are financial contracts that give the holder the right, but not the obligation, to sell an underlying asset at a specified price (strike price) on or before a specific date (expiration date).  

How Put Options Mimic Short Selling:

• Profit from Price Decline: Similar to short selling, put options profit when the underlying asset's price decreases.
• Limited Risk: Unlike short selling, where potential losses are theoretically unlimited, the maximum loss on a put option is the premium paid for the contract.

Steps to Buy a Put Option:

• Open a Brokerage Account: Ensure it allows options trading.
• Understand Put Options: Learn about strike price, expiration date, and premium.
• Choose an Underlying Asset: Select the stock or index for the put option.
• Select Strike Price and Expiration Date: Decide on these details for your option.
• Place the Order: Submit a market or limit order to purchase the desired number of put contracts. 
• Monitor the Option: Track the option's price and the underlying asset's price.
• Exercise or Sell the Option: Decide whether to exercise the option if it becomes profitable or sell it before expiration.

Steps to Exercise a Put Option:

• Contact Your Broker: Inform your broker of your decision to exercise the put option.
• Pay the Strike Price: You'll need to pay the strike price for the shares you're obligated to buy under the option contract.
• Receive the Shares: Your broker will deliver the shares to you.  Note that the settlement date for the option contract is typically two business days after the exercise date. This means that the shares will be delivered to your account two business days after you pay the strike price.
• Sell the Shares: Since the market price is lower than the strike price, you can sell the shares at the current market price, realizing a profit.

Important Note: Exercising a put option is generally not the most efficient way to profit from it. Often, it's more beneficial to sell the option itself before expiration, especially if the option's time value is significant.

Other Strategies for Profiting from a Decline

While short selling and put options are the most direct ways to profit from a declining market, there are other strategies that can achieve similar outcomes:

Inverse ETFs

• Inverse ETFs aim to deliver the opposite returns of an underlying index. If the market declines, an inverse ETF will typically rise.  
• Example: A 2x inverse S&P 500 ETF would aim to double the inverse performance of the S&P 500.

Bearish Spread Options

• Bearish spread options involve creating a position that profits from a decline in the underlying asset's price while limiting potential losses.  
• Examples: Put spreads, call spreads, and straddles can be structured to benefit from a downward market.

Pairs Trading

• Pairs trading involves identifying two correlated stocks and betting on their price relationship to revert to the mean. If one stock outperforms the other, a trader might short the outperforming stock and long the underperforming one.

It's important to note that each of these strategies has its own risk profile and requires careful consideration.

References

1. Short Selling: The Risks and Rewards
2. Intro to options: A different way to participate in the stock market
3. The Short Option: A Primer on Selling Options
4. Updated Investor Bulletin: Leveraged and Inverse ETFs

New York Aster: A Fall Favorite for Your Garden

Nectar-Rich New York Aster Attracts Pollinators

The New York Aster (Aster novi-belgii) is a true old-time garden favorite, bringing a burst of color and charm to your landscape from summer all the way through fall.

Bring color and life to your late summer garden (YouTube link)

Bring color and life to your late summer garden with Aster novi-belgii!

This charming perennial boasts a multitude of benefits for your garden, making it a fantastic choice for both novice and experienced gardeners alike.

A Haven for Pollinators:

One of New York Aster greatest assets is its ability to attract a variety of pollinators. The flowers are rich in nectar, providing a valuable food source for bees, butterflies, and other beneficial insects. By planting Aster, you'll be supporting these vital creatures and contributing to a healthy ecosystem in your own backyard!

Extends Your Garden's Beauty:

Aster blooms later in the season, when many other plants begin to fade. Its vibrant light purple-red flowers add a burst of color to your garden from mid September onwards, extending the feeling of summer well into fall. And while the foliage change is subtle, the leaves turning a soft yellow in autumn provide another layer of visual interest as the season progresses.

Plant New York Aster today and enjoy a vibrant display of late-blooming flowers that benefit both your garden and the environment!

Clipchamp Eating Up Space? Here's How to Free Up Storage

What's Clipchamp

Clipchamp is a user-friendly online video editor offered by Microsoft with powerful features that doesn't require software downloads.  It packs a punch for video editing, letting you:

• Trim & crop videos
• Add animated text
• Record voiceovers & subtitles
• Apply transitions & effects
• Use green screens
• Enhance audio
• Access stock media

Low disk space culprit: Clipchamp's data usage

Warning: Mind Your Hard Drive Space

 Clipchamp can gobble up storage space on your computer for a couple of reasons:

• Cache: Clipchamp caches previews, project files, and other temporary data to speed things up when you're editing. This cache can grow large, especially if you've imported a lot of media files.
• IndexedDB: Clipchamp uses a browser technology called IndexedDB to store project data. In some cases, this data can become bloated or corrupted, leading to unnecessary storage use.

Unlike the cache, messing with IndexedDB can potentially lead to losing project data, so it's a last resort.

Find Clipchamp, click the three dots (…) next to it, and select “Advanced options”.

Click “Reset” (this clears cache and preferences without losing projects)

How to Reclaim Storage from Clipchamp

If Clipchamp is taking up too much storage space on your computer, here are some steps you can take to address the issue:

1. Clear ClipChamp Cache:
1. Open Windows Settings (press [Windows Key] + I).
2. Go to Apps > Installed apps.
3. Find Clipchamp, click the three dots (…) next to it, and select “Advanced options”.
4. Click “Reset” (this clears cache and preferences without losing projects).
2. Advanced Approach (Data Loss Possible):
1. Close Clipchamp.
2. Search for %appdata%\Local\Packages\Clipchamp.Clipchamp_* (replace * with random characters).  For example, it should be in the following folder:
• C:\Users\yourUserName\AppData\Local\Packages\Clipchamp.Clipchamp_yxz26nhyzhsrt\LocalState\EBWebView\Default\IndexedDB
3. Inside LocalState\EBWebView\Default\IndexedDB, you’ll find folders with project data. Delete them carefully.
4. Note: Only proceed if you’re comfortable and have backups of your projects.  Instead of messing with technical data (IndexedDB), you can also free up space by deleting old projects within Clipchamp.

Instead of messing with technical data (IndexedDB), you can free up space by deleting old projects within Clipchamp

Deleting app data resulted in a mere 8.0 KB of disk usage

"Not what you look at, but what you see." — Ralph Waldo Emerson

"Not what you look at, but what you see." — Ralph Waldo Emerson

𓆝 𓆟 𓆞 𓆝 𓆟 𓆞 𓆝 𓆟 𓆞 𓆝 𓆟 𓆞 𓆝𓆝 𓆟 𓆞 𓆝 𓆟 𓆞 𓆝 𓆟 𓆞 𓆝 𓆟 𓆞 𓆝

"Not what you look at, but what you see." - Ralph Waldo Emerson 

This quote emphasizes that reality is subjective and what matters most is how we interpret what we experience.

"The only thing you sometimes have control over is your perspective. You don't have control over your situation. But you can choose to see things in a different way." - Buddha

This quote highlights the power of perspective in shaping our experience of life. Even if we can't change a situation, we can choose how we view it.

𓆝 𓆟 𓆞 𓆝 𓆟 𓆞 𓆝 𓆟 𓆞 𓆝 𓆟 𓆞 𓆝𓆝 𓆟 𓆞 𓆝 𓆟 𓆞 𓆝 𓆟 𓆞 𓆝 𓆟 𓆞 𓆝

The Big Dream of the Tiny Boy

Have you heard of Järnpojken? It’s a tiny statue in Stockholm that perfectly illustrates the idea of perspective. Järnpojken, which means ‘Iron Boy’ in Swedish, is located in the courtyard of Stockholm Cathedral in the old town, Gamla Stan. This beloved artwork, originally named ‘Boy Looking at the Moon’ (‘Pojke som tittar på månen’), stands at just 15 centimeters (5.9 inches) high, making it Sweden’s smallest public monument. Despite its diminutive size, Järnpojken captures the imagination as it gazes skyward.

Iron Boy - Boy watching the moon (the smallest statue in Stockholm)

Keeping Track of Your Roth Conversion: Key Tax Forms

How to Complete IRS Form 8606 (for a Backdoor Roth IRA; YouTube link)

There are two key tax reports you'll want to receive for a Roth conversion:

1. Form 1099-R from your custodian (the financial institution holding your traditional IRA):

   • This form reports the total distribution amount from your traditional IRA.
   • In the case of a Roth conversion, the distribution amount will represent the fair market value of your entire traditional IRA account (including contributions and earnings) on the conversion date.
   • Box 7 of the 1099-R will likely have a code indicating a rollover or conversion (typically code "R").

2. Form 8606 (titled "Nondeductible IRAs"):

   • This form, filed with your tax return, tells the IRS how much of your Roth conversion was from non-deductible contributions you previously made to your traditional IRA.
   • It's important to report this correctly, as only the portion converted from earnings in your traditional IRA is taxable. This form helps determine the taxable amount of the conversion.

Here's a breakdown of their roles:

• Form 1099-R: Provides the total distribution from your traditional IRA, which is the basis for the conversion.
• Form 8606: Clarifies how much of the conversion represents non-deductible contributions (not taxable) vs earnings (taxable).

It's important to note:

• You will typically receive these forms from your custodian by mail in January or February of the following year.
• You can usually also access them electronically through your custodian's online portal.

If you have a complex situation or questions about how to fill out Form 8606, consulting with a tax professional is recommended.

Acknowledgement

• The above content was generated by Gemini.

Lower Tax Now or Tax-Free Forever? Weighing Roth Conversion vs. Traditional Contribution

2023 tax rates for a single taxpayer (federal income tax rates in the United States are the same for 2023 and 2024)

Scenario: Your taxable income is $12,000, placing you in the 12% tax bracket.

Options:

• You could contribute more to a retirement account, thereby reducing your taxable income to below $11,001.
• Alternatively, you could perform a Roth conversion, pushing your taxable income up to the upper limit of $44,725.

Weighing Roth Conversion vs. Traditional Contribution

Here's a breakdown of the pros and cons for each option considering the potential sunset of favorable tax rates in 2025 and the benefits of Roth IRAs:

Option 1: Traditional Retirement Account Contribution

Pros:

• Lower your tax bill for 2024: This will put more money in your pocket now.
• Tax-deferred growth: Your contributions and earnings grow tax-deferred within the account.

Cons:

• Tax on withdrawal: When you withdraw the money in retirement, you'll pay income tax at your then-current tax rate.
• RMDs: After reaching age 72, you'll be required to take minimum withdrawals (RMDs) from your traditional IRA, which can push you into a higher tax bracket.
• Future tax rates: If tax rates increase in the future, you might end up paying more in taxes than you would now.

Option 2: Roth Conversion
Pros:

• Lock in today's potentially lower tax rate: By converting to a Roth IRA, you pay taxes on the converted amount now at the current (potentially lower) rate. This guarantees tax-free withdrawals in retirement regardless of future tax rates.
• Tax-free withdrawals: Qualified withdrawals from a Roth IRA, including both contributions and earnings, are tax-free in retirement.
• No RMDs: Unlike traditional IRAs, Roth IRAs don't have required minimum distributions (RMDs). You can leave the money growing tax-free and withdraw it as needed in retirement.
• No limits: While there are income limits on Roth contributions, there have been no such limits for Roth conversions, making this a popular strategy for high-income investors.

Cons:

• Higher tax bill for 2024: Converting to a Roth IRA will increase your taxable income for 2024 and potentially put you in a higher tax bracket this year.
• Reduced access to funds in the short term: The converted amount becomes locked in the Roth IRA and subject to contribution withdrawal rules (penalty-free access to contributions only) until you reach retirement age (59 ½ with a 5-year holding period).

Choosing Between the Options

The best option depends on your individual circumstances and risk tolerance. Here are some factors to consider:

• Your age: If you're young and have a long time horizon until retirement, the tax benefits of a Roth IRA can be more significant due to the potential for tax-free growth over a longer period.
• Your expected future tax bracket: If you believe tax rates will be higher in retirement, a Roth IRA conversion can be advantageous by locking in the potentially lower current rate.
• Your current and future financial needs: Consider if you need immediate access to the funds. Traditional IRAs offer more flexibility in this regard.
• Considering a Roth conversion before moving? If your new state taxes retirement income more (e.g., moving from Texas to California), converting now can save on future taxes.

Conclusion

While knowing the tax rate range is a good starting point, tax planning can get complex. Consider consulting a tax professional for personalized advice based on your specific financial situation.

References

1. Is a Roth IRA conversion right for you?

Can Goldman Sachs' Conviction List Help You Make Money?

Newsquawk reported on March 1st, 2024 that Goldman Sachs removed AAPL from its Conviction List.

Conviction Buy List of Goldman Sachs 

Goldman Sachs offers a curated list of 20-25 stocks they believe hold strong buying potential, known as the Conviction Buy List. These stocks are updated monthly, reflecting changes in the market. Analysts continuously evaluate companies and add or remove them from the list based on their outlook.

Beyond Just Buys: A Balanced Approach

Goldman Sachs also creates a Conviction Sell List to highlight stocks they believe may underperform the market. This balanced approach allows investors to consider both buying opportunities and potential risks.

Diversification Across Industries

The Conviction Buy List spans various sectors, giving investors exposure to a range of industries. From technology and healthcare to finance, consumer goods, and more, the list offers a diverse selection of potential investments.

Conviction List as of 02/01/2024

This is the updated Conviction List as of February 01, 2024, with their upside percentage projection:^[2]

• Constellation Brands Inc. A (STZ) - % upside: 18
• Target Corp. (TGT) - % upside: 27
• Ally Financial Inc. (ALLY) - % upside: 39
• Jefferies Financial Group Inc. (JEF) - % upside: 18
• Blue Owl Capital Inc. (OWL) - % upside: 14
• Simon Property Group (SPG) - % upside: 20
• Merck & Co. Inc. (MRK) - % upside: 6
• Quanterix Corp. (QTRX) - % upside: 58
• Vertex Pharmaceuticals Inc. (VRTX) - % upside: 29
• Installed Building Products (IBP) - % upside: 11
• JB Hunt Transport Services (JBHT) - % upside: 13
• PPG Industries Inc. (PPG) - % upside: 22
• Parker Hannifin Corp. (PH) - % upside: 19
• Textron Inc. (TXT) - % upside: 22
• Chevron Corp. (CVX) - % upside: 22
• First Solar Inc. (FSLR) - % upside: 88
• The Southern Company (SO) - % upside: 18
• Apple (AAPL) - % upside: 21
• Amazon.com Inc. (AMZN) - % upside: 29
• Cintas Corp. (CTAS) - % upside: 11
• Nvidia Corp. (NVDA) - % upside: 2
• TE Connectivity (TEL) - % upside: 23

Conviction List as of 03/01/2024

This is the updated Conviction List as of March 01, 2024:^[3]

• Amgen Inc (AMGN) - New price target: $350
• Monday.com (MNDY) - New price target: $270
• Vulcan Materials Company (VMC) - New price target: $292
• Constellation Brands Inc. A (STZ) 
• Target Corp. (TGT)
• Ally Financial Inc. (ALLY)
• Jefferies Financial Group Inc. (JEF) 
• Blue Owl Capital Inc. (OWL)
• Simon Property Group (SPG) 
• Merck & Co. Inc. (MRK) 
• Quanterix Corp. (QTRX) 
• Vertex Pharmaceuticals Inc. (VRTX) 
• Installed Building Products (IBP) 
• JB Hunt Transport Services (JBHT) 
• PPG Industries Inc. (PPG) 
• Parker Hannifin Corp. (PH) 
• Textron Inc. (TXT) 
• Chevron Corp. (CVX) 
• First Solar Inc. (FSLR) 
• The Southern Company (SO) 
• Apple (AAPL)
• Amazon.com Inc. (AMZN) 
• Cintas Corp. (CTAS) 
• Nvidia Corp. (NVDA)
• TE Connectivity (TEL)

References

1. The Goldman Sachs Conviction Buy List Seeks to Guide Investors Toward Profitability
2. Target in, JPMorgan out of Goldman’s conviction list
3. Apple Sinks After Wall Street Titan Pulls Magnificent 7 Stock From Conviction List

Unlocking Price Insights: A Guide to Anchored VWAP in TradingView

Standard VWAP vs Anchored VWAP

Anchored VWAP in TradingView Explained

Anchored VWAP (Volume Weighted Average Price) is a technical analysis tool available in TradingView for stocks and other financial instruments. It's a variation of the standard VWAP that offers more flexibility for analysis.

The formula for Anchored VWAP is:

Anchored VWAP Formula = Σ(Price x Volume) / ΣVolume 

Understanding Supply and Demand with the AVWAP:

The AVWAP helps traders understand supply and demand, key factors influencing market prices. It considers volume, price, and time to create a line that moves up with high demand and down with high supply.

This is especially useful for swing traders and long-term traders (not day traders) who focus on these broader trends.  Read [1] for more details. 

Anchored VWAP full walkthrough – what is AVWAP? (YouTube link)

Key Facts

Benefits of Anchored VWAP:

• Targeted Analysis: You can analyze the VWAP based on a specific event or period, like a breakout point or earnings announcement.
• Flexibility: Compares the current price to the average price since your chosen anchor point, potentially indicating buying and selling pressure.

How to Use Anchored VWAP:

• Find the Anchored VWAP tool: Look for it in the "Drawing Tools" section of TradingView.
• Set the Anchor Point: Click on the chart where you want the calculation to begin.
• Analyze the VWAP Line: The line will show the average price weighted by volume since your chosen anchor point.

When to Use Anchored VWAP

• Identifying potential breakouts from established price ranges.
• Analyzing post-earnings performance compared to the pre-earnings VWAP.
• Evaluating price movements relative to significant events.

Limitations:

• Not a perfect predictor of future prices.
• Use it alongside other technical and fundamental analysis for a comprehensive understanding.

Example

The chart above displays an Anchored VWAP for FXI alongside an OBV indicator in the lower panel. To set an anchor point in Anchored VWAP (Volume-Weighted Average Price) and conduct targeted analysis, follow these steps:

1. Identify a specific price level or event that you want to use as your anchor point. 
• This could be a significant high, low, gap, earnings announcement, or any other relevant point in time.
2. Select the Anchored VWAP Tool:
• On TradingView platform, find the Anchored VWAP tool (see the diagram below).
• Click on it to activate the drawing tool.
3. Click on the Chart:
• Click on the specific candlestick or price level that corresponds to your chosen anchor point.
• This will set the starting point for your Anchored VWAP calculation.
4. View the Anchored VWAP Line:
• The VWAP line will instantly calculate and appear on your chart, anchored to the selected reference point.
• The line will dynamically adjust based on volume and price movements from the anchor point.
5. Analyze the Anchored VWAP:

• Use the anchored VWAP line as a dynamic support/resistance level.
• Observe how price reacts around these levels.
• Look for potential trend changes or reversals when the price crosses above or below the anchored VWAP line.

Remember that:

• The anchor point is crucial for effective analysis. Choose it carefully based on your trading strategy and the context of the market. 
• You can often customize its appearance (color, line style, etc.).

More Resources:

🔵 TradingView 30 Day Trial
🔵 #1 Trading Journal (TradeZella)
🔵 LuxAlgo Indicators (30 Days Risk Free)
🔵 Bookmap (See Beyond The Candlesticks)
✅ 3 Trading Signals (Free Webinar)

Launch the Anchored VWAP tool in TradingView

Anchored VWAP: How To Use This POWERFUL Indicator (YouTube link)

References

1. The Complete Guide to Anchored VWAP Indicator