July Investment Strategy: We are about to enter a Vicious Battlefield. Adopt the right mindset required.
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Note: The next 6-12 months will be provide the Big Opportunities for people who have cash and have been preparing for this moment will be able to get astounding prices of the best companies for the years to come. The Bear Market will come back in full force soon and those who have been patient will be rewarded in an outsized way.
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Dear YT Friends & Public Investment Community,
You may find the above image to be quite captivating (or at least intriguing). I will make this directly relevant to your investment strategy, but first, out of my commitment to your education, I want to share some history.
On April 17th, 1895, the Qing Dynasty in China reached an agreement with the Meiji Empire of Japan on a treaty called “The Treaty of Shimonoseki”. By signing this agreement, China relinquished all claims to influence over Korea, which then would become a protectorate of Japan over the next several decades. On top of adding Korea to their sphere of influence, Japan also gained Formosa (modern-day Taiwan), the Penghu Island, and the Liaodong Peninsula.
In this bitter defeat, China had lost to Japan in the first Sino-Japanese war of 1894-1895 despite having a larger army size and greater resources.
In the decades leading up to the first Sino-Japanese war, the Qing Dynasty in China had been slow to upgrade their own military and bureaucracy and lost two Opium wars in the process.
In the meantime, Japan went through a revitalization of national pride through the 1868 Meiji Restoration. Japan spent the coming decades modernizing their military, and found the exact moment to capitalize on a moment of weakness.
As we fast forward to today, we have clearly witnessed China having learned from this dark moment in history - a situation that they promised themselves to never be in again.
What this tells us as investors is an incredibly important message:
There is a price to grow.
There is a price to stay stagnant.
In any case, a price will be paid.
I do a lot of reading across literature and history- it is a very relevant part of my work as I help our Community navigate what comes next.
Becoming more well-read is something I encourage to do for the 2H of 2022. Inside my Community, not only do I offer investment research, I also suggest best books on personal growth, perspective, and long-term investing.
Whether we like it or not, the market is a battlefield. When we have done our homework and preparation, we increase our odds of survival. When we engage in transactions that haven’t been well though out, any gains that were made should not be thought of as earned from skill.
Readers of my public email newsletter here know that I wish to offer you as much as I can to help you succeed in the markets while ensuring that I respect a clean separation between what I offer publicly and privately.
This is why I’ve publicly shared my previous exclusive Bi-Weekly reports here so that you can see my process and my research style.
And my exclusive monthly slide decks here, which give you a sense of how I present conclusions.
I believe our next test is likely to start sooner rather than later.
And I want you to be battle-ready.
Psychologically. Emotionally. Financially.
What comes next in Markets
I’ve fully read the June Fed Minutes. The same day the Minutes came out, I read the 10+ page document and I shared my observations and analysis.
I wish to share with you some high-level conclusions, and for deeper Research, my Community may be the place for you if you are a patient long-term investor.
Look, from the Fed Minutes, I don’t find any reason to believe that there is going to be an immediate Fed Pivot. Perhaps in several months, but not at this very moment. I see quite a few notable people calling for an end to raising rates as the economy softens.
The problem is, the economy hasn’t softened enough.
We must not fight the Fed.
And if you think you can’t handle further losses in the market, I’m going to tell you right now that you must absolutely prepared and braced for further volatility.
Now is your time to plan your next move.
Here is what we know:
The Jobs Report offers the Fed very little reason to think the economy is very weak.
The VIX is below 25, indicating that most investors are actually quite complacent (I know, hard to believe).
With Oil having stayed north of 100+ per barrel for most of the last 45 days, it might be hard to imagine CPI falling below 8% this coming report? A stubborn 8%+ CPI is no good for markets, I tell you.
We are seeing ARKK related stocks trying to front-run a Fed Pivot.
But here’s the problem - do we trust the ARKK stocks as a leading indicator into a Fed Pivot markets, or do we trust the bond market (2Y and 10Y as main indicators)?
ARKK has soared an impressive 25%+ from its lows from 38 to 48.
Meanwhile, the 2Y and 10Y are BOTH above 3.1%. The TLT ETF can’t seem to get any momentum. And the Dollar is at 106+ (near its recent highs)
As you can see, pockets of the stock market and the bond market are telling different stories. The question is, which one do you believe?
So then this brings me to my next point.
You might be asking well Larry, it sounds like you’re bearish, so do we hide out in cash.
While hiding out in cash is a strong strategy in bear markets, an even better strategy is to start planning your next move.
Setup your watchlist. Start hypothesizing what themes may bottom ahead of the S&P 500 and Nasdaq. We are doing this every single day in our Community. We are actively trying to figure out where there is opportunity in this environment.
We are planning out the next several months because as human beings and creatures of emotions, we are unable to make proper on-the-spot decisions when emotions truly run hot. That is why we must have a plan far, far ahead of time.
Know the valuation ratios of the companies you’re interested in. Know whether the Macro setup is on their side or not.
And also understand their technical setup so that you can put the edge in your favor.
I respect the famous adage that time in the market beats timing the market. That is absolutely true.
But doing your homework, preparing for the next cyclical move, and owning your own plan to act with a careful strategy ALONG WITH having a long timeframe in the market is something that I believe will distinguish the winners from those who wish they did more planning.
And I wish to help you do just that.
Pain is temporary. Regret is forever.
There is an ancient adage that says “make those close to you happy, and people from afar will come.”
It’s my pleasure to be able to help my friends from all over the world. Here is a quick chat with me and one of my member friends. His name is Aristotelis from Cyprus, but he says we can call him Aristotle.
Thank you 🌹
Much love to the Community as always.
Before we wrap up, I want to take a moment to thank Interactive Brokers for being one of our Channel’s trusted Partners. They have world-class international trading features such as being able to buy HK-listed shares or on-shore China stocks.
If you are concerned about China’s ADR delisting issue, know that IB allows investors to buy HK-listed shares to avoid any hassles if that event occurs.
Interactive brokers allows investors to buy HK-listed shares of Alibaba, JD, Tencent, and other brand name Chinese Internet companies on the HK market. Click the links to check out their features.
If you are concerned about Chinese ADR stocks getting delisted, owning HK-listed shares removes the hassle.
That’ll do for this update.
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❤️ this email if you enjoyed the read. And see you in my next Youtube Video.
Your Investment Strategist,
Larry
Important note: My public letters are not financial advice. You must do your own research. They are designed for educational purposes only.