2020 Report Card Part II

Wednesday, 23 December 2020
Wollongong, Australia
By Greg Canavan

[8 min read]

Today’s Insider will be your final one for the year.

Woody and I will be back talking markets and how we can help you handle them in the week starting 11 January.

From all of us here, thanks for your support during the year and all the very best for the Christmas and New Year break. We hope you’re spending it with loved ones and haven’t had your Christmas ruined by the ridiculous border closures we’ve seen this week.

Speaking of idiot politicians, did you see the stimulus bill in the US just passed by the House and Senate? $600 cheques for the chumps and billions for the crony capitalists. A lazy $3.3 billion for Israel, $453 million for Ukraine, and $10 million for gender programs in Pakistan.

In other words, a lot of it will line the pockets of the corrupt and connected. So it’s not much of a stimulus bill at all. It will, however, leave the US economy to carry an even greater debt burden, so it will have negative long-term consequences.

But that’s a worry for another day.

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Let’s finish the year with part two of our score card. If you missed part one, you can check it out here.

Before I get into the trading services, I’ll finish the review of our entry level services. These remaining few have a more bearish big-picture viewpoint, and their performance suffered because of it.

It raises an interesting question. In an era where there are no longer any fiscal conservatives, and politicians will spend your kids’ money at will, what is the low-risk play? Is it sitting in cash and waiting the insanity out? Or is it playing the game knowing that the table is rigged?

I’m not sure, but it’s a question we all need to think about as we head into 2021 and beyond.

The Bonner-Denning Letter

We added a new service this year, The Bonner-Denning Letter. It’s a big picture, libertarian take on the world with the concept of sound money at its core. It’s helmed by two of the giants of the newsletter industry, Bill Bonner and Dan Denning.

They don’t recommend specific stocks, so there is no performance to report. But if you want a thought-provoking read on what ails the world, this is one of the best.

Jim Rickards’ Strategic Intelligence Australia

It’s closely followed by Jim Rickards’ Strategic Intelligence Australia service. Jim’s political and macroeconomic analysis is brilliant, and we are delighted to exclusively publish his work here in Australia. But, as I often point out, the link between macroeconomics and the stock market is often a tenuous one.

For this reason, Strategic Intelligence Australia underperformed in the 12 months to 3 December, with the portfolio of stocks generating a return of just 2%.

That’s the price you pay for not taking on risk in a ‘risk-on’ environment. But that’s OK though. Jim, and his Aussie investment strategist, Nick Hubble, play the long game. Strategic Intelligence Australia is about positioning for long-term moves, not tactically adjusting to the short-term mood of the market.

And on that front they’ve done a great job.

The Gowdie Letter

To use a well-worn cliché, it was a game of two halves for our resident bear Vern Gowdie, editor of The Gowdie Letter. Vern is well known for his bearish views and down to earth, common sense advice.

Vern’s world view appeared to be vindicated in March and April, when the virus and lockdowns effectively brought on a GFC II. But after that it was a different story. Markets rallied strongly thanks to the kitchen sink hitting the economy both here in Australia and just about everywhere else in the world.

As a result, Vern’s ‘portfolio’ suffered. I use the term loosely though. Vern doesn’t really recommend stocks. He advocates holding cash. Up until this year, his only past recommendations were gold and the UK pound after it crashed on news of Brexit.

But this year he recommended shorting the Aussie market after it bounced. And that has hurt the ‘portfolio’ performance. Not including the cash weighting (theoretically around 80% after allowing for a 10% short position and 5% each in gold and the pound) the portfolio declined 25% this year.

But assuming the 25% decline was on 20% of the portfolio, the loss was a more manageable 5% for the year (assuming zero return for the cash component).

Still, Vern prides himself on capital stability. I’ve no doubt he’s not happy with the performance. But life as a rational bear in a world of irrational policy making is not easy. The trick is trying to manage this dichotomy.  

My conclusion is the same as I offered for my service: Can do better.

Cycles, Trends & Forecasts

Before moving onto the trading services, a quick comment on Cycles, Trends & Forecasts. Catherine Cashmore helms the service and has done a brilliant job this year. I believe it is one of the most unique real estate/cycles services in the world.

We enhanced the service this year by adding a stock picking element to it. Catherine’s beat is real estate and cycles, not the stock market. So, Callum Newman (who formerly helmed the Grand Cycle Investor service) chips in with a stock pick relevant to the cycle each month.

Because we folded Callum’s service into CT&F, the performance figures for the year are not entirely relevant to CT&F members. Still, all up, the recommended stocks returned a modest 6.3% over the 12 months to 3 December.

Not big gains, but it did outperform the ASX 200, which as I pointed out on Monday, was more or less flat on the year.

Right, let’s move onto our trading services.

As a general comment, I’m very pleased with the way the editors of these services managed things this year. Traders can’t have too much of an opinion. They just need to ‘trade what’s in front of them’ and if you think too much, the market can punish you.

The mental game is very important when trading, and I’m proud of the way the guys managed the emotional turmoil of some very wild markets to generate good returns for you.

Hard Money Trader

Shae Russell’s Hard Money Trader delivered a 22.6% return in the 12 months to 3 December. Here’s Shae’s assessment of the year…

What a year that was. Here at Hard Money Trader we watch two markets: gold and stocks.

2020 nearly broke the futures market and their 48 hour “good for delivery” supply chain, but it also saw the yellow metal reach a history making high of US$2,069. The impact on gold stocks from this has been intoxicating. 

There were companies that absolutely deserved to rally because of their great work. Then there were a couple that posted triple digit gains on nothing more than hype. How our stocks performed during March–November is a preview of the mania that hits gold stocks when the physical gold price goes ballistic.

We ditched two stocks that no matter how good the news was their share price wouldn’t budge. I believe I took too long to make this decision. I’m reviewing my strategy on what should be the triggers to get rid of a losing trade quicker in the future. With explorers it’s more than just a price fall or a percentage loss that are reasons to move on.

Many of the Hard Money Trader stocks have seen their paper gains take a hit recently, as the gold price correction kicks in. Some have moved back into losses.

While I’d hoped to end the year with some of our companies holding higher gains, I’m confident we’re positioning ourselves to enjoy the benefits of a long-term gold bull market.

It’s certainly been a wild ride for gold stocks this year. But Shae’s 22.6% return versus the 15.81% return from the S&P/ASX Gold Index suggests her strategy is a sound one.

Small-Cap Momentum Alert

Ryan Dinse’s Small-Cap Momentum Alert enjoyed a solid year too, delivering a return of 15.4% and strongly outperforming the Small Ordinaries Index. If the cut-off date for returns had been just a few days later, that return would have been even better, as one of Ryan’s stock picks turned into a 10-bagger at one point in December.

Here’s Ryan’s take on the year:

It has been a great year performance wise for my Small-Cap Momentum Alert service.

What has been most pleasing is the fact that it has proven the system works in all types of market. It got us out of a bunch of trades in early March while the world was going into a COVID panic.

But it also allowed us to start getting back into trades well before anyone thought that was a wise idea from an economic point of view.

And regardless of the news we kept piling on the trades even as the economic news seemed glum. Most — tough not all — of these early trades turned into great results for us and we made multiple triple digit returns.

I hope it goes to show the power of following momentum — and ignoring almost everything else — as a trading tool.

However, we can’t get complacent.

The strong market tailwinds and easy money definitely helped our strike rate this year. And there’s no guarantee that will continue to have the same effect going forward.

It’s important to realise the strike rate may go down, but over time and over trades the system should still work.

One thing I’m trying to get better at is in working out when to take secondary profits off the table. We’ve had a few moves that have hit our take half profit levels quickly and then jumped up really high, only to come down after.

Maybe there’s an indicator I can work out to try and get more profits out at short term tops? It’s something I’m always working on.

On that note, I’m thinking of improving our trade delivery too. It’s a bit of a mad scramble to get an alert out in time and I know a recent service has employed an SMS based delivery process. Perhaps this is something we can look into?

Anyway, a great year but as with trading, there are always things to work on. Which is what I’ll keep doing…

Crypto Flip Trader

Ryan’s crypto trading service also had a bonkers year. Unfortunately, our portfolio tracking software doesn’t have a crypto tracking capability, so we can’t verify the performance. Having said that, Ryan has delivered some massive gains this year. What else would you expect from the crypto market in 2020?

I let Ryan tell the story of the year that was…

I’m very pleased that 2020 has rewarded those who managed to tough out the bad times in crypto.

It’s been a fantastic year for us and hopefully shows our FLIP trading methodology can work really well in the right market conditions.

Of course, it’s not perfect and I need to do a little bit more work in working out when to take profits off the table in certain FLIPS.

We were too early on BAND but too late on some others!

I’m looking at a few ideas on this and back-testing to see which could work in these market conditions.

Crypto is such a complex and all-encompassing beast at times though, that my focus for next year will be on trying to simplify things as much as possible. I’ve a few ideas I’m working on here and hope to share them with you early next year.

The end result is to provide you with as much value as we can.

Things certainly look very positive right now and hopefully you’re enjoying this ride as much as I am.

Pivot Trader

Murray Dawes’ Pivot Trader service has had an outstanding year too. Unfortunately, due to the unique way Murray’s trading system manages risk by taking one-third profits on reaching the initial price target, our external portfolio services manager was unable to provide us with the ‘portfolio performance’ in time.

However, as members would attest, Murray’s performance has been outstanding, with stringent risk management ensuring downside risk is carefully managed. Here’s Murray’s take on the year:

The design of the trading system is all about managing risk and I think it came through the crash with flying colours. We were stopped out of a few positions right at the low of the crash (for either breakeven or a win) which was annoying because those positions came roaring back after the crash.

The rally back to the upside was more problematic due to my skepticism that the rally would make it all the way back to the highs without having another leg lower. I was quick to hedge positions on the rally and had a few losses on the index trading side, but the stock trading has been going extremely well and has more than made up for hedging losses. We are left long in nearly every key sector that is currently rallying. We have exposure at good levels to nickel, uranium, lithium, pot stocks, gas and rare earths plus a few great biotechs amongst others.

All up it’s been an incredibly tricky year but I feel satisfied that the strategy ensured our survival in the difficult period and capitalised on the bounce despite my own fears that the rally wouldn’t last.

My only criticism of the service is that Murray should trade more!

His strike rate is phenomenal. In my view, that means he should have more swings, even if it means the strike rate drops a bit. But Murray is the most risk management focused trader I know, and it’s hard to fault that.

So, I’m looking forward to more of the same from Muzza next year (with an emphasis on more!).

Revolutionary Tech Investor

Sam Volkering’s Revolutionary Tech Investor was the standout performer this year, with a portfolio return in the 12 months to 3 December of 55%. Obviously tech was the place to be in 2020, as the NASDAQ returned 45% during the same period.

Despite the strong outperformance overall, as members would know, this is an all or nothing service. Some of Sam’s picks bombed big time, while others soared. It’s a good reminder that the best way to get the value from this type of service is to put a bit of cash down on each pick, rather than try to pick the winners.

By their nature some of the stocks are very early-stage investments. They are prone to binary outcomes. If anything, my one criticism is that we probably don’t do a good enough job of telling people this. Rev Tech investor isn’t about managing a ‘portfolio’. It’s about selecting stocks that have a chance of appreciating thousands of percent. And if it goes pear-shaped, the stocks will go to zero.

Still, Sammy was on the right side of the ledger this year and outperformed the NASDAQ, which is no mean feat.

New Energy Investor and Catalyst Trader

Finally, we launched two new trading services in the back half of the year. I’m not going to comment on them too much, as it’s very early days. And the market has been a tailwind during that time too.

New Energy Investor’s portfolio is up a strong 35% while Catalyst Trader is up 19%.

Both are executing their strategy nicely, but we’ll get a better idea of their strength next year when they’ve had more time to prove themselves (or otherwise!).

Well, that’s a wrap for this issue and for the year.

I hope you can see the results of all the hard work the team have put in this year. While you might have had a different experience, the above results largely point to our services outperforming the market.

I’m very proud of these results and hope we can continue to build on this in 2021. As Editorial Director, I’m very focused on building a team of free-thinking analysts that are committed to beating the market and helping you on your journey towards financial independence.

We happily do that while sitting outside of the mainstream. If you think the same as everyone else, you’re going to get the same results. We strive to be different not just for the sake of it, but to deliver you wealth-generating ideas that can make a real difference to you and your family.

From all of us at Port Phillip Publishing and Fat Tail Media, have a very merry Christmas and happy New Year.

Cheers,

Greg Canavan Signature

Greg Canavan,
Editor, The Insider