[Music] all right before we head in uh we are uh I think about 3 weeks away from the launch of the financial modeling module uh in the applied level we'll be going through both Costco uh and capr a US retailer and a Canadian apartment re uh and we'll be basically starting from a blank Excel worksheet and building up a full model and I'll show you uh shortly what the model looks like so far because well I've got to build the whole thing first before uh we can do anything um so a couple of things I'll make available to you here's uh Costco's last 10 K we're going to use September uh 2023 September 3rd uh their next year end is uh just around the corner so by the time uh we're done building up Costco and projecting out 2024 we will have full year 2024 results and we can look at a variance to see how close were we based on our assumptions and then uh it gives us the opportunity to show how to update a model uh when new data comes out um I'm going to try to make this file available for you I don't know where uh I'll post it for download uh but but it's the 10K and I've highlighted key things that we're going to need to know key information that we're going to need to know uh I'm going to give you the first few uh and then uh hopefully in time you you would be going through the 10ks yourself and determining uh what information uh what information you would highlight uh because if I keep giving it to you uh well you'll never actually get to the point where you can pick out what are the important things yourself let's have a look at um the other supporting documents uh that I'll be providing um there'll be a walkth through much like I did with global ship lease I'll be doing a walkth through of Costco just so that we can understand the nature of the business we're dealing with uh and in understanding the nature of the business we're dealing with we can get into a position where we can start to determine what things we need to forecast so we can see here what our Revenue drivers are once we identify the revenue drivers we're in a position to start forecasting uh revenues Costco has both membership fees and merchandise fees so we got to figure out how we going to model the growth in merchandise fees uh and uh whenever we're forecasting revenues we always think about price and quantity how are we going to forecast price how are we going to forecast quantity and what uh what assumptions uh would we need we don't want to just take a growth rate and say 5-year growth rate is this this let's forecast that into the future because okay great you got a growth rate what's driving that growth rate if there are three or four variables driving that growth rate you want to decompose it into as many of those uh uh variables as possible so you can see the effect of each one so we'll be uh looking at ways of forecasting membership fees uh merchandise revenue and we always start here you want to get a good understanding of the business and a good understanding of the drivers you can understand the assumptions that we're looking for and how we would begin to model this before you even go to a spreadsheet uh you want to have an idea of the data that you would need to determine whether or not uh you can get that data uh so some examples of how things work uh if we're forecasting uh merchandise Revenue executive members get a 2% reward so we have to figure out well how much is that 2% reward going to come to because that's a liability so we have to first understand how the liability is created before before we can then uh begin to model how uh we would uh account for that liability then we go into costs so you'll be getting that as well let's have a look at where I am uh with the model so far and uh keep in mind uh you're not getting this you're going to get a a blank worksheet and we are going to build this up uh on our own uh so here is our income statement we're going to do it all in one all in one sheet I've uh separated them out in separate worksheets to show you what they would look like but it is brutally difficult to to maintain and audit a model across multiple multiple tabs everything really should be in one worksheet and it should be built like this uh notice if I highlight J that's 2021 these are the actuals uh everything should be all the way down from our Revenue schedule uh our our expenses schedule everything all the way down should be the same column and uh our assumption should be on a different page and our year should be here if I change this year 2024 it changes every year everywhere uh to uh the forecast Year all these always stay the same and then it's a cut and paste you hop over four columns and you just have to do this actually you just have to do this and you cut and paste and it hops over four columns uh and you just simply add your new column I'm actually making it sound simpler than what it is but there is a a way to build up these spreadsheets such that updating becomes super super easy to do uh you want to try to avoid as much hard coding as you possibly can uh so there is a way to do it but we will build this whole thing up from scratch what you see here everything whoops every everything you see here will not be there we will uh do everything when we get to the revenue schedule membership revenue for Price we'll have to forecast out uh price and it does take a while to forecast out price a lot of assumptions in here and then we'll forecast out quantity and there we go look at look at all the work you got to do before you get to a forecast of membership revenue and then for merchandise Revenue uh this is our forecast in uh in the uh Solid box here and all the assumptions and all the work you have to do and in getting this out we do have to get the acred members reward we have to figure out what that is because this belongs in our uh balance sheet where is our balance sheet here we have to fill in both uh acred member rewards and deferred uh membership fees because of the way that uh revenue is recognized in case you thought that this was easy to do there is so much work on each line item uh but you are going to build this and same with the assumptions page we're going to build this we're going to build the scenarios page uh so that if we just uh change uh we're got a base case running if we put a best case all of our uh forecasts uh change and everything throughout the whole spreadsheet changes to to those to those drivers uh whichever numbers that we put in uh put in there and then we have our assumptions uh that follow uh below uh this begins in a couple of weeks it will be in sector studies uh in the appropriate folder so we'll find the Costco model in the Staples folder we'll find Cap re uh in the real estate folder if you have uh the sector studies or the applied level uh you you get this this is part of the core of the applied level you don't need any extra fees and there was no deadline for this one anybody who has the applied level or sector studies uh uh will get this if you're just interested in in just the financial modeling I'm not breaking it out into a separate module just pick up sector studies it's only 220 uh and that gives you you the ability to upgrade to the full applied level at any time for full credit if you're level one level two or level three CFA candidate uh this is a musthave uh there is a financial model modeling module a practical skills module that cfai offers uh but it uses manufactured data most places that offer Financial modeling not all some of them do have real live companies but most will use manufactured data um I will never use manufactured data all of the models we'll be doing over the next several years will all be real companies uh and there'll be a model in every single sector and um the goal ultimately is if there's a sub industry there'll be a model in the sub industry as well these things do take time to build a good model um that gets you 80% of the way there 100 hours at least uh and now what we're doing we're not doing any quarterly in this we're just doing annuals the next iteration obviously would be quarterly and of how I modeling things uh you may say in time as you follow this company but I can figure out how to model that a little bit better yeah that's the point is the more you follow this company uh the more you follow the industry uh the better you're going to get your model if you if you if this is you where you're going to be an expert in in 3 or 4 years will make make this look like a joke we we'll make this model here look like like like you know an undergrad did it in as opposed to a grad student so there we are Let's uh let's head in let's begin with the data economic data from last week Monday the conference board uh leading index negative. 6 previous was negative point2 it's been negative for quite some time however uh for the fourth consecutive month the US Lei has not signaled a recession ahead there are two um points on this chart to pay attention to the black uh black dashed line is a warning signal and the red line is a recession signal this is saying it has not signaled recession which means it hasn't been below the red line but it is at the warning level but it's not signaling a recession it did uh it's it's never been wrong in terms of recession uh it did signal a recession and it didn't happen um so many things after the pandemic indicators that had worked for quite some time no longer seem to work on the next screen we'll get the um non-farm payrolls job revisions uh that's a big one Tuesday retail sales out of Mexico not uh not that good negative uh point 5 month over month very kind of backwards looking we're looking at June here 3.9% year-over-year Canada got inflation numbers on uh Tuesday uh core inflation went from NE .1 to plus3 and the inflation rate month over month went from .1 to plus4 the year-over-year uh are still fairly good core inflation year-over-year 1 n down to 17 and 2 7 down to 25 this is well below the core is well below the 2% Target uh but uh you know you get a couple more months like that maybe the Bank of Canada goes on hold right now we have 50 basis points of cuts from the Bank of Canada I think we have three more meetings um there's a belief that you'll get 25 basis points per meeting earlier in the year I had felt that by the end of the year we would get 100 basis points from Bank Canada we're 50 into that with three more meetings maybe we get 125 basis points Wednesday uh from Canada PPI uh flat uh previous was Nega .1 uh this came in as flat the forecast was for it to be even more negative uh year-over-year unchanged uh raw material prices month over month from negative uh 1.7 the expectation was still negative came in at .7 year over-year is uh is lower though so base effects playing a role here but the month over month certainly don't want to see several months like that in a row the big news uh in uh economic data last week the big big news was of course Powell speech on Friday but in economic data was the uh revisions and uh I was uh on the website clicking refresh refresh refresh and it just wasn't coming up and apparently you find out after that they were late in releasing it and they had been emailing it if you if you sent a a notice in saying I didn't get it they just emailed it to you I guess some banks got it before uh everyone else did 818 it's only 0.5% uh which is uh it seems like a small amount but it's quite large largest uh revision since 2009 uh man manfacturing down 115 retail trade 129 professional and business services 358 Leisure and Hospitality 150 some sectors uh did gain however so if we take the 818 divide by the 12 months this is very backwards looking by the way this is as of March 2024 so it's so rear view mirror that eh other than highlighting that you know maybe maybe some of the data we're seeing isn't real data or isn't isn't as exact as we would like it to be uh it's so far in the rearview mirror I don't think it really matters that much 800 818 divided by 12 68,000 a month so lower jobs uh uh on average per month instead of 242 over the prior 12 months to this report it was 174 174 * 12 you're still greater than 2 million jobs over the year being uh being created uh crude oil big draw Downs on both oil stocks and gasoline stocks uh expectation was for a draw down of 2.7 million it was 4.6 million and for gasoline 1 million it was 1.6 million uh and when these reports came out WTI went down and uh RB went down so CL for uh the oil contract and RB for the gasoline contract both went down so I was watching that thinking well that's that's sort of the wrong Direction you know it's uh we always think that if you have these reports before they come out you could make money on it I would not have shorted if I had this 5 minutes before it was released uh I would have at a very minimum being long both contracts and would have lost so sometimes even if you know what the number is it may not even help you because it's not really what the number says It's the reaction to the number and the reaction on both of these is negative Thursday back to Mexico GDP growth rate year-over year this is the final look at uh at at Q2 neg uh not negative uh 2.1% previous downgraded to 1.5 forecast was for 2.2 came in light economic activity year-over-year for June negative point6 forecast was for 0.9 so that is a fairly big Miss uh mid-mon inflation uh we're in deflation for that month negative 03 the expectation was for .12 uh and year-over-year 5.16 expectation was for 5.31 previous 561 so that's coming down nicely Chicago fed National activity index for the us on Thursday Nega .34 the uh expectation was for a positive 03 the previous was negative 09 so uh more acceleration to the downside continuing jobless claims uh Last Read was 1859 up to 1863 expectation was for 1870 less than expected but still a week over week gain and initial jobless claims the expectation was 230 came in at 232 the previous week was 228 so uh that is lower or a higher initial jobless claims than both last week and the expectation S&P composite um I don't know that these uh get paid attention to the pmis are are the king of the king of the hill when it comes to uh uh to the indexes 543 to 541 uh was a decrease it did beat 535 this is for the composite then it's broken down into a manufacturing and services manufacturing came in lower both than last month and the expectation and uh Services came in higher than both last month and the expectation which has been a trend for a couple of years now Friday in Canada retail sales negative .3 uh right in with expectations it was Nega .8 the month before for the uh for May for June negative .3 manufacturing sales month over month for July this is June we're moving into July here up 1.1% uh from being down 2.1% and retail sales continuing on with the first report X autos because it's interest rate sensitive how is everything else going up3 uh this uh previous month was netive 1.2 that's an upgrade to - 1.2 the expectation was still uh negative came in at um AT3 and then Friday Powell speech I think the big line in there uh was his um uh his words about the labor market we we we won't accept uh any deterioration in the labor market or any further deterioration but he has uh sort of moved away from his inflation uh Focus to the economy Focus the other side of the Dual mandate feels that the risks to inflation uh are lower now than the risks to the economy so is watching the job market and I wonder how much of that had to do with the revisions that the economy had not been as strong as previous previously thought still a good economy I mean creating 2 million jobs over that 12-month period in the face of rising interest rates if you go back to uh end of uh March 2023 uh to end of March 2024 you had uh uh interest rate increases during that period of time and the economy still created over 2 million jobs but certainly not the 3 million jobs or the 2.8 2.9 Million jobs uh that was that was believed so 25 basis point cut for September is pretty much in the books I think that's 100% uh 100% probability uh whether we're going to get 50 basis points or not it doesn't that doesn't feel like it's this fed I think they'll start with 25 starting with 50 out of the gate kind of is a negative signal and I don't think they want to do that they may go 50 at some future meetings but I think this first one for September I think it's a 25 which means some of the reaction that we've seen in the market off the Powell speech I think is uh premature and uh is going to more than likely retrace looking at uh money market rates we can start to see the 3month begin to price in at 25 basis point uh 25 basis point cut in September down eight basis points to 5.25 that is below the effective federal funds rate in fact the 2mon is nearing the effective federal funds rate of 5.33 uh the 2-year 3.9% rates down uh rates and yields down across all the teners the only tener that is higher today than the beginning of the year is the 30-year started the year at 403 sitting at 4.1 uh curve inversion almost gone nine basis points in the Capital Market that's the only curve that's inverted is the 2 to the 10 nine basis points 781 days now I wonder if we'll uh break 800 days 19 more days can can it hold a an inversion for three more weeks uh I I think it will because I think the market this week weekend uh or the participants will reflect on what they did Friday and think Eh this is a 25 basis point fed not a 50 uh for September and they'll start to back out some of these uh some of these cuts into the end of the year so I think we'll be inverted for uh a little while longer the money market the Capital Market inversion still very deep 1.44 that's not going to change until you actually start getting Cuts uh the 3 month will be anchored very closely to the effect of federal funds rate but it is coming down uh Canada still uh is uh inverted uh balance sheet down 37.760761 4.89 billion up to 6.24 trillion uh retail up 21.2 Billion institutions up 3.5 billion both up on uh government and just a sort of a flip in Prime retail up 12.72-ounce 5% it's now 36.5% 63 on the 25 still favoring the Market's still favoring the 25 but uh less so than last week I think uh this is what we're going to get when I say that's what we're going to get it's not what I believe uh should happen it's just given this fed this is not a 50 basis point fed this is a very careful fed they've signaled that it's time uh to start uh rate cut uh I think they'll start with a 25 when they uh signaled when inflation was really high that it was time to start raising rates uh they raised 25 basis points you know just a little bit I think they're going to do the same thing I think they're going to cut just a little bit and I think it's 25 so a lot of the euphoria that was priced in on Friday I think is going to back out what are my risk events for the week durable goods in one day uh not till later in the week do we get interesting stuff US GDP second look at second quarter uh GDP and first look at gross national income in four days followed by Canada same thing second quarter GDP and the preliminary look at July's GDP in 5 days alongside uspc fed speak this week uh from the time that I did this the calendar was rather light usually fills up uh Wednesday wall in bosic Thursday in case you didn't hear him bosic will repeat himself December going out to the end of the year uh more than three rate Cuts uh from 60.5% up to 66.2% and um there's pricing in uh three there's so the market is saying the idea of one or two that's gone there's going to be at least three 40% uh last week 23.8 so the bets are uh increasing to being more than three for the year Vectra federal funds rat still sitting at 5.33 that's not going to come down until uh the fomc moves reverse repo down 17.4 bilon 312 uh billion TGA down 54 billion reserves up 20 billion uh so uh at runoff of 40 billion looking at 29.3 months what we should pay attention attention to here is there's 25 billion in Us treasuries in there uh and 15 billion of mortgage back Securities although the cap on mortgage back Securities is higher you could have a faster runoff uh but why prepay your mortgage if you had a low rate only only to take out another mortgage at a higher rate but once uh rates start coming down especially uh mortgage rates once they start coming down you could have this 40 uh move upwards uh closer to the cap of 60 um being the cap being 20 more on the cap of MBS you could move up to 60 uh which would accelerate this to about 20 months real rates uh all from the 5 to the 30 uh all under 2% and you have a upward sloping uh upward sloping curve across real rates inflation expectations or break evens between nominal and real bonds up that seems rather surprising but I think this as I said before I think this is an outcome uh not an input I don't know that the market positions between nominal and real based on where the break evens are I think it's just a mathematical result looking at fed funds Futures uh really pricing in some aggressiveness 195 basis points of cuts in the next four quarters Q3 34.5 basis points Q4 71 and a half basis points so a little more than four I'll call it four rate cuts by the end of the year uh in three meetings so there's a 25 of 50 and a 25 or two 50s in there q1 another uh 55 basis points uh Q2 another 34 for 89 in the first 6 months of 2025 so you get to basically eight uh if we think a rate Cuts 25 basis points eight uh 825 basis point rate Cuts in the next 12 quarters um that's uh that's aggressive without without significant deterioration in the labor market I think that's aggressive I think 106 is for this fed if if this is a bet on the FED I think it's wrong if this is a bet on the FED will have no choice because the economy will force their hand H yeah I can I can get on board there but if this is just based on the psychology of the fed the FED says they're going to cut here's 100 this is not 100 basis point fed um this is this is maybe a 50 to 75 into the end of the year on the FED I seem to think the data will force their hand uh but uh we got to take this 100 and say well what are we betting on when we bet on 100 for TLT uh what's going on here uh up97 for the week SPX up 1.45 implied volatility drifting away uh I think it's overdone I I I think uh I'm still uh over the next few years I still think TLT probably Finds Its way well above 100 130 140 because I I don't I don't think this fed uh or any fed will have any choice given uh the fiscal situation they'll have no choice but to head to the zero line uh or crush the economy simply because the level of debt will just be unaffordable at these level at these rate levels so I'm still long-term bullish on TLT it's just you know if I'm looking at October all the way to October uh I think the FED meeting in September is going to be 25 is going to be rather disappointing which does not justify at this point I think a TLT over 100 so I may sell the 102 to 103 calls for October uh they're paying 97 for the 102s and 77 for the 103s if we have any more strength these premiums improve since I'm long TLT I probably will sell some covered calls on this at 102 103 for October expiration not because I I I'm looking to lighten my position by that period of time just it uh just seems a little premature given given the psychology of the FED if if I don't sell the calls and I uh go with the idea that the FED will have no choice I have one jobs report between now and September I got to hope that that jobs report sucks but if that job report comes in at 190 uh even anywhere 180 190 200 no I don't think the FED is going to go uh 50 basis points if it comes in under 100,000 because you need about just because of population growth I think you need 100 I forget the number it was like 120 130 per month just to keep the unemployment rate constant um if you come in with a bad number then yeah you could see you could see uh 50 basis points uh for September but uh this this it doesn't feel like it's going to be a bad report and this doesn't feel like a 50 basis point Fed so selling the 102 103s I think is just it's just money sitting there waiting for me to take 30-year fixed rate mortgage 6.46% only three basis points but uh this is just a Thursday it doesn't have the benefit of uh Powell on Friday over that same period time 10e pullback six so the spread has increased by 3 to 260 going into Friday this is surprising to me uh analy and ab this is the right direction here this is uh a little wild and crazy look at hav Nani and up 18% told Brothers 15 but they did have a decent earning py up 10% these are big numbers and these I must remind you are ETFs and this is a one this is one week the these are not stocks you say 8.21% did xhb have good earnings no it's a it's an ETF of a whole bunch of companies same with ITB those are uh big numbers and honestly I think overdone uh I think overdone at this point uh I I just I don't believe the data between now and September will give the FED permission to do 50 but again exogenous events happen all the time something could happen on a Tuesday night in some Far part of the corner of the world that causes uh repercussions all over the globe and we might have you know a 100 basis point cut before the next meeting if it's bad enough so I'm saying ex exogenous events no exogenous events I don't know that there's anything in the data that tells me that the September jobs report is going to be bad there's evidence it seems that the last jobs report was weak because of weather related effects that will simply reverse with this one so this one could be um uncharacteristically strong given the last 6 months of jobs reports it could stand out as one of the better ones so and the psychology of this fed is not is not there I think this is a little overdone uh it's hard to to say that I want to be an investor in the home builders at this point in time uh given given how much is being priced in on the interest rate front iyr up 3.66 looking like it wants to get to $100 xlu up 1.32 uh still performing well I might lighten up my synthetic you'll recall I have a $ synthetic for March 2025 it's had a beautiful run I set up this synthetic when xlu was low 68s where are we now in the 75s it's had a great run speaking of great run what about capr anybody uh still in in that beautiful thing uh I was loading up in the uh $43 range we're sitting at 52 in 2 months you got a roughly about a 20% % increase in that stock in over a two-month period plus a dividend increase from a144 a year to a150 a year uh not bad mortgage apps down 10.1% ending August 16th or for the weekending August 16th existing uh home sales for July up 1.3% month over month and this is big new home sales for July up 10.6% and I must point out that is month over month month these are some big numbers uh Tuesday we'll get the housing price index for June along with case Cas Schiller and Thursday pending home sales overall these aren't big risk events for the housing market uh we haven't done this for a while let's look at realtor.com July 2024 uh Trends report the July 2024 monthly housing market trends report you've seen this before this is active listing count here's July 2024 just moving straight up well above 2021 the yellow line is 2022 pink line is 2023 there's 2024 but still below pre pandemic uh but uh up 36.6% year-over-year um over 2023 the pink line down here total listing count uh again above the last 3 years uh but still below pre pandemic pending listings uh newly listed homes uh this is the seasonal Trend it peaks in the spring March April May and then slowly falls into the uh into the end of the year so it is just sitting just above 2023 uh inventory change uh year-over-year versus pre- pandemic so the black is year-over-year and the um kind of reddish pink is uh year-over-year for the us as a whole um year-over-year up 36.6% but uh for pre pandemic - 287 then you could see what regions South uh looks like the uh area with the most Supply up 47.6% year over-year down only 14.9 uh pre pandemic and same with the west down 19.4 inventory up 35.4 the uh Northeast looks like the less active area still down well over 50% versus pre- pandemic and up only 14.7% year-over-year uh days on Market 5 days longer uh year-over-year than last year just a little under 50 days uh but uh this is all pre pandemic over here it was taken anywhere from 55 to 60 days we're sitting looks like 49 days here so still are moving faster than pre pandemic but certainly uh nowhere near what we had uh for the last 3 years at this point in time going down July had just a little over 30 days for 2021 2022 the houses were moving lots of news in Robo taxi uh industry land last week Cruz will now join the Uber platform uh starting in 2025 Cruz will dispatch some of its trouble ridden robot Hax East to join Uber's ride hailing service from the Independent Uber will offer driverless rides to users as soon as next year uh with Cruz GM on the news did very well uh up 4.41% on Friday the news came out Thursday after the close up 4.41% on Friday 4851 you'll recall as it was dropping from earnings I was selling puts at 48 47 46 45 for all all the way down including uh in the uh peak of the volatility uh doing strips all the way down to 32 uh and when volatility disappeared and it started recovering I closed those strips and as uh premium disappeared in the puts the 40s the 41s the 42s for September no point keeping them open I've closed them I have now closed all the puts uh thank you very much GM that was a beautiful 3 weeks uh I uh made enough off of GM to probably buy one of their more lower priced Vehicles so thank you very much without ever uh having to own any of those shares uh I am still long GM though I still have uh some shares of GM because as it was dropping I was not only just selling puts but I thought well I may as well buy at the same time so uh very happy with GM this year uh I also bought 40 uh for t Tesla 40 December 220 puts average price of 255 it's about $100,000 bet um 220 puts it um it uh it just doesn't look good for Tesla they're reminding me more and more of blackberry in 2008 uh let's just have a look at what's going on in this uh in this industry here wo is now up to 100,000 paid rides per week and they are also on Uber if there's going to be a robo taxi platform it's going to be Uber they're in 140 countries uh worldwide uh I got a whole bunch of other um headlines that are up here uh from Auto blog uh wh's new purpose built Robo taxi that's made by a Chinese Tesla rival uh wh Mo's new sixth generation Robo taxi features fewer sensors in a bid to reduce production costs alphabets wh Robo taxi unit doubles its paid rides in 3 months that's the 100,000 in 3 months doubled it uh Google's weo now obviously the leader in self-driving cars uh and a couple that were on the same page here regarding Tesla Tesla drivers say new self-driving update is repeatedly running red lights and distracted Elon Musk is letting other EV makers take Tesla's Crown uh Europe July EV sales number one B MW up 35% year-over-year 14,869 units Tesla down 16% year-over-year 14561 units uh BMW is now the number one seller uh in in Europe um back to Robo taxis by du monthly average of 287,000 rides at 100,000 a week uh Google oro's at 400,000 they're sitting at 287 there is uh across the world some 40 50 Robo taxi businesses that are out there uh Tesla is really really late to the party and what doesn't help Tesla is I guess earlier this week they've been deleting uh anything on their site relating to the promises they made to um car buyers from 2016 that every car was equipped uh with the hardware necessary for full self- driving uh that is no longer true with where um the FSD version is uh from Tesla now so they're they're trying to get rid of all that stuff the um what motivates me to do this is all the characteristics of Tesla in 2024 feel like Blackberry in 2008 which is why I shorted Blackberry at 130 bucks at the height uh of their popularity of which I was uh you know laughed at and called names for that but that's okay uh quality control issues uh you're hearing this more with Tesla and JD power ranks out of 50 Vehicles JD power ranks Tesla in the 40 to 50 range almost consistently quality control issues if you remember the BlackBerry Torch how awful that thing was uh rushed to Market much like the Cyber truck was rushed to Market rushed to Market because they had to have some kind of uh comp of response their product Cycles were really slow um and the torch quickly got the name the Blackberry torture I had a torch oh what a piece of this thing was awful I had it for a couple of days I brought it back I don't want this every when I was bringing it back everyone was bringing theirs back it was it was just a lineup of people returning the torture uh product delays uh Rim was uh at the time it was called Rim arm R IM IMM was their ticker uh they had 24mon lead time on any new product Apple was turning over the iPhone about every eight months Apple was introducing a new a new model uh and uh Rim didn't speed up still took uh that much time to do it you also had a distracted CEO at the time uh who was very concerned about buying an NHL team for Hamilton uh and uh distracted him he was spending money and looking at other things things distracted him from the business you sort of have that going on uh clearly with musk and X right now and uh his Fascination uh with uh Trump and I guess wanting to be you know something in Trump's cabinet or uh do something in the administration so it feels too much uh like what we had in uh 2008 and in 2008 you couldn't tell somebody uh that the Blackberry was dead uh it was called the crackberry Obama had one he just uh uh you know had uh uh you know risen to a lot of Fame late in that year and it was talk about him not wanting to give up his BlackBerry even though for security reasons he had to it was hitting on all cylinders at that time but um the the uh iPhone was out and there were other uh companies releasing releasing it at the time just the their quality control their product delays uh the CEO this was enough to say look it's uh they're not going to make it plus they didn't really have the cash to go up against to fight uh with apple uh or even Nokia Nokia had six times more cash on their balance sheet than Rim RM was only sitting on a billion dollars you're not going to win a fight against Apple which had you know multiples of that so I think that's where we are with Tesla uh so let's make uh let's make a significant bet on it at this time still on the theme of a little overdone let's have a look at the US dollar uh the DX the US dollar Index uh in June 26th 105.7 uh August 23rd .56 that's a huge drop uh over a two-month period uh this last low was at 100 we're sitting at 100565 this is zoomed in for week there is Powell uh speaking there uh I think this is a little overdone uh I don't think we're going to get the rapid uh cuts that uh that the market seems to think we're going to get from this fed if it were up to this fed uh which means you'd have to be betting on a significant deterioration of the economy for the FED to move faster than what I think they will so I think this is overdone uh and I was watching it on on Friday especially the Canadian dollar Peak below 135 for a bit and I thought this this this is uh this is a little overdone here what's going to happen like you know we got to start thinking well what if what if you have a continual deterioration of the US dollar uh what do you want to do first thing we have to think about is well what what will happen in the US market because what you're going to get with the yen is you're going to get an increase in the value of the Yen so the Yen will go up the US dollar will go down I have two arguments for what could possibly happen uh and I don't know which one is going to win out uh you simply just have to watch watch The Fallout the um the if the carry trade is between the Yen and other currencies probably nothing is going to happen because while the yen is strengthening every other currency is strengthening as as well uh which would mean that the carry trade is still intact between the Yen and other currencies cuz they'd be strengthening along with uh along with the Yen which means that the Yen other currency exchange rate might be fairly stable but if the carry trade uh is from the Yen to the US if any of it is in the US this is this is going to hurt twice as hard because you have a deteriorating US dollar with a rising Yen so maybe maybe there's some carry trade unwinding coming you would have thought it would have been Friday with the big move you had Friday if there was anything there you would have thought there would have been some unwinding on Friday but markets were strong very strong uh yields were actually lower uh in the capital markets rates were lower in the money market so it didn't feel like money was leaving there so I don't know big question mark on uh what to expect going forward here if we continue to get uh weakness especially if you break a 100 the other argument is the S&P 500 is becoming cheaper in other currencies so we have a market in the US Dollars that's pushing what 22 times forward earnings uh but if the US dollar is decreasing for a US investor the market is still 22 times forward earnings it still costs $5,600 uh on the index but in other currencies as the US dollar weakens and other currencies strengthen the relative cost meaning the Canadian dollar cost uh of the S&P 500 is actually decreasing sorry about that but uh my uh all my Apple devices want to go off at the same time when it tells me how much screen time I've used last week so just to give you an example here let's uh let's just just take the changing currency one week ago the the Canadian dollar was sitting at 13682 or I should say the US dollar in Canadian dollar terms was 13682 uh now it's 13510 so if we take the closing price of the S&P 500 on Friday uh and if there was no currency change it would have cost 7709 Canadian uh for the index but because of the currency change it now costs 7612 so in Canadian dollars the S&P 500 is actually 1.26% cheaper so even though it went up 1 Point some odd perc um week over week for a Canadian there was no change in price for the S&P 500 Index because it went up in price but the Canadian dollar increased in value which decreased the Canadian cost of it basically unchanged so if you have a weakening uh US dollar you could have a rising S&P 500 because in other currencies it's becoming a cheaper and cheaper market so you get a US dollar that weakens week after week after week uh you could see the same thing you had in Japan where you had a Yen that was weakening but its stock market was going uh was going up significantly why uh because in other country's currencies it was a really cheap Market to buy because you could buy so much yen uh with with uh uh your currency so it ended up being a a cheap place a cheap Market to buy you could get the S&P 500 uh on a continual weakness of the US dollar uh being supported on the way up which means end of year price of uh 6,000 on the index might be low you might get 62 63 64 if you get prolonged US dollar weakness that's the other argument which argument is it going to be is it going to be the argument that a weakening US dollar is going to unwind some carry trade that happens to be sitting in the US big question mark there because we don't know how much of the carry trade is in the us but we do know this a weakening uh US dollar will make the S&P 500 cheaper in other country's currencies the counter to that is but hang on on a second my friend uh let's say you do buy the S&P 500 and the US dollar continues to weaken uh by the time you sell uh that S&P whatever gain you got in the market could have been taken away by the currency you would have to hedge the currency but it's expensive to hedge currencies right now I'm going to show you on the next screen how to negate uh that problem how to benefit twice from a weakening US dollar if you're taking your foreign currency and buying the US uh which just bolsters the positions I have even more so a weaker US dollar is going to make um commodity prices higher CU commodity prices are denominated in US dollars so to keep the price of oil constant or the price of gold constant in Canadian dollars as the US dollar weakens the price of gold would have to increase uh therefore when you exchange it into Canadian dollars it basically hasn't moved so it's going to support commodity prices so if you have commodity us-based commodity producers they should do fairly well let's test that here's the dollar Index here's oxy here's Freeport here's the price of copper and let's all line it up to Friday at 10 when the US dollar just tanked and look what it did it dropped it then rallied and then dropped again and went sideways have a look at oxy as the US dollar was dropping oxy was Rising as the US dollar rallied oxy drop you can line them right up it's almost perfect uh so if I were going to take Canadian dollars and buy US Dollars and buy the market I wouldn't buy the market I would buy sectors I would buy materials and and um uh energy because the prices of the companies uh will be tightly correlated to the price of their output which is Commodities will be tightly correlated negatively correlated I should say to the US dollar have a look at Freeport you see the same you see the same pattern in here have a look at Copper again same pattern in here it's going to be the opposite of whatever the US dollar does so if we expect more US dollar weakness look for copper and oil prices uh to go up look for Freeport and oxy to go up this will only work with us-based companies because their functional currency must be the US dollar such that there are no translation gains or losses on the income statement the functional currency must be the US dollar you will get higher commodity prices from a lower US dollar which means you'll get higher us-based commodity producer prices so I am uh I have puts on oxy but no position I have puts on oxy I am long free port and I have puts on free port and I did have puts on copper but I did close those uh so a us a a lowering of the US dollar has helped all all of those positions and is helping Freeport nicely uh if there's continued decline in the US dollar I'm in the right places already not only that I do have lots of exposure to Canadian apartment reach so I am long the Canadian uh by definition and since I need US Dollars now more than I need Canadian dollars I am inherently short u short US Dollars just the uh cap re position alone uh again I've said has gone from mid 43s to 52 has raised its dividend and when I uh entered at 43 the Canadian dollar was sitting around 1.37 to 1.38 we're sitting at 1.35 right now so I can buy a hell of a lot more US dollars so this position has won in three ways it won on the move up remember I had sold a whole bunch of puts on this one so I won on all the puts the dividend increased I won there and winning on the currency uh winning on Long FCX winning on the currency there it's going to help utilities as well uh the lower uh lower rates in the US is is helping utilities I don't know I uh I seem to be doing quite well on all of these it's been a good week but I think it's overdone I think my good week is probably going to give back next week I think in reflection we're going to look at the move in the US dollar and say the expectation of the moves if we think logically about what the FED will do with only one jobs report in between now and a ray cut it's going to be 25 it it just doesn't justify this big move in the US dollar we we're pricing in 200 that 200 basis points are guaranteed going to happen I think it's a little overdone I think yields on the long end of the curve are gotten a little ahead of themselves uh and I think the US dollar has gotten a little ahead of itself so I think a natural thing like I said TLT I'd be looking to sell calls on TLT um I think I'm going to get some retracement here so yeah it was a nice Friday I didn't take any money on this and I didn't do anything else on this but it was a nice Friday it was nice I think by end of Monday end of Tuesday I'll have given back uh some part of that I would look for a retracement of the US dollar upwards and a move uh on TLT down okay new positions this is the last week for new positions and uh many of my positions I think are getting near the end of their cycle uh these were great positions to have given the cycle that we were in but if we're moving into a rate cutting uh regime uh while the economy holds up then you got to start shifting into other sectors so uh I might be near the end of the watch lists that I currently have I might have to cycle some new names in here from some different sectors going forward uh as I said I closed my GM puts all worked out uh most of them had very minimal value uh so for the uh amount of capital that was being tied up with the minimum amount of Premium it didn't make sense I'll see where GM finds a home and I think it might be worth selling puts at higher strike prices uh Good Year Tire I uh sold the $9 put and the $8 call I got a 75 175 uh for this one this is octo these are all Octobers and I also did the $10 put $9 call I got a184 I did 30 contracts well 60 basically cuz it's 30 30 30 30 so 60 on each one um if they're put to me my average price if these are put to me my average price will be 175 if they're called uh my average call price is 975 which still puts me at a loss uh but certainly uh a better loss than uh when it was $7.70 $760 that's certainly a better loss than then I don't know that we that it get to 975 on its own it seems to have trouble uh uh it's in the $8 range looks like it's wants wants to you know kind of stay under $9 for a while this one here gets put to me at $816 I'd pick up another 3,000 shares at $86 or called away at 1084 there is uh getting closer to the break even Point uh so I've added that on Goodyear I've uh uh like I said a couple of weeks ago when they were under eight bucks I said I don't really know what what I want to do with them I reviewed their quarterly report and their plan for cost reduction and debt reduction uh and it's well underway uh their off-road tire division has been sold uh that's a done deal there's a billion dollars there and the cost savings that they want to achieve are well underway I didn't see anything that would make me think they're not going to make it so that's why I have no problem staying in this one lamb Weston I closed my $60 put rolled it up to October 65 put it had uh two upgrades last week to overweight uh my average price on my long position is now 6592 uh and lamb Wesson Clos at 6269 so I'm about $3.30 below my break even contrast that with a couple of days after earnings when lamb Weston was sitting about 55 and my 7250 puts were put to me at an average price of 71 I was sitting on a $16 a share loss now looking at $3.30 that's not counting the premium I got from the 65 puts We rise above 65 and it's called away from me I actually end up walking away with a small not big but small little profit on that but uh when you think about $1,600 per board lot uh loss uh on lamb Weston that is not bad this is uh you know for some critics uh of the strategy that I have that says why not just move on like just you take your loss move on uh but I've gone from $16 a share loss to $3.30 a share right now based on where the prices are um so that's an improvement of $12.70 per share could I have uh left it what has it been four weeks 5 weeks now could I have left it 5 weeks ago and found something else that increased by $12.70 a share over that period of time that's questionable uh not without you know making a wild bet on something so going from you know NE $60,000 uh to $10,000 in in a loss is the same as going from Zer to positive 50,000 somewhere else it's the same thing right and I believed it was overdone uh so by October I think uh I probably uh you know will be out of lamb Weston uh at at a profit and and and you know by that time I may not even want to get out I may say you know Now's the Time to stay in xlu uh it's been very very good to me uh I have the March 2025 $70 synthetic and I set that up when uh uh xlu was 68 and change so I did get a credit uh on this one I may lighten up on some of that synthetic this week um 76 seems to be a point of resistance on xlu I don't know if we're ready right now for xlu to really break out to new highs uh everything seems to just move so fast these days that you get to undervalued to fairly valued to overvalued so fast um not that I think that xlu is overvalued it is the sum of all of its components but it's been a good run I'm sitting on uh on some good money uh I may lighten up I don't know I don't know uh I'm going to see how how rates uh and yields play this week uh but if if we have even uh uh more upward movement in xlu because rates are going lower on more and more expectations of more and more cuts by the end of the year I know that that is wrong I probably will lighten up going uh into Canada MTO and interrent I sold about 5% each of Mento and interent um they're just not performing as well as uh as well as I would have liked CPR was my number one bet in Canada by far uh it it it just had the best value proposition but you want to be Diversified eh not that great I'm not that impressed with the price action on either MTO or interent I sold 5% I'll probably continue to sell more uh they they pay a dividend but the dividend yield is low they are uh below their net asset value but it is Canada IFRS so they're listed at fair value you have to believe fair value if you don't believe fair value you think it's something lower than the discount from net asset value is not as great as what you thought it was and I don't know their price action hasn't uh hasn't been that impressive uh from you know from my from my point of view and there's no options on these guys so I probably will continue to lighten up only because it's there better there's a better place to be cap R I am now down to 56,800 shares from 64,000 shares as it's going up I I'm hoping to reduce uh my exposure um I I have a position that's way too large to begin with but it was hanging around 43 for too long and I kept buying more shares just almost out of anger it's like fine I'll take it uh dividend was raised 144 to 150 I sold 36 $52 calls average price of 77 we're sitting just a little under $52 now net asset value of 5640 we're 7.8% below the net asset value and again that's net asset value based on fair value of the assets uh which is model derived you have to believe the fair value uh I think at fair value uh at nav you're you're buying a fairly valued uh um business I don't I don't want to own I don't want to buy fair value right I want to steal it uh my target is to have 25,000 shares by the time we get to the $ 5455 range if you're wondering why I sold 36 it's cuz that's all I got you put a bid out I was trying to get 100 uh selling cap re uh if I tried to sell 56,000 shares at a certain price I'd never get it you can't print uh very big numbers uh you know th000 2,000 at a time that's about it uh the most efficient way to sell shares of this company is to sell calls so if it uh continues to increase we get to 54 55 range I'll probably start selling 52 uh $52 calls like in the money calls to sell my position as opposed to selling it in the market but I want to get down to 25,000 shares I got 56 so 31,000 shares I will decrease by the time we get to 5 4 to 55 cuz I want to as the price is going up the value of your position goes up the proportion that it represents of your portfolio goes up and I'm want again under 2% so I have to I have to lighten up that does not mean that I'm changing my view on uh on the prospects of Canadian apartment reads uh it just this doesn't offer me this is not moving the way I'd like it to move low dividend and no options uh cap re does have options I will stay in this 25 for a long period of time because of the options uh one of the more successful Canadian trades I've made was North View apartment reats way back before it got taken out owned it at 16 and I owned it all the way through uh the amount of money I made off off the options uh I was able to more than double that dividend triple uh that dividend even and and and get the price increase on the way up I think I could do the same thing with Capri is I can easily double that dividend the dividend now is like 2 2.8% something like that uh not much but I can easily double even triple that dividend uh while still holding it because it does have options they're not the most liquid options they're what I'd say liquid is um uh kind of like Hotel California options these These are uh uh options I refer to that yeah you can get in it's probably easy to get in but you know you're not getting out if you have to so you can check in any time but you can never leave um I don't plan to leave them if I sell puts it's because I plan to have them put to me and if I sell calls it's because I'm okay with the Shar is being called away so it ends up being a beautiful uh basis on which to uh do short strangles on uh once you get closer to net asset value so I will hold the 25,000 shares for a long period period of time it's just 56 is a little too much it's you know as we approach its net asset value it's time to right siize that position uh short I'm short Tesla long puts December 2024 at 220 average price 255 iwm um short shares at 21787 um because again I think I think Friday was a little overdone I think Friday was uh some Euphoria combined with the shorts saying okay game's over let's get out and I think a lot of Friday uh um let's say half of of Friday's gain not a lot half of Friday's gain was probably uh demand uh for uh short covering uh es I'm still short my es position I have uh traded options in around the es position such that uh I'm in a gain position even if I take the loss on yes I'm in a gain but why uh when you have the underlying the options become less risky to use the options actually lower your risk and I'm making money on the options I'm going to roll the es September to December I don't know when but I'm going to roll them you get a pick up of 51 points and those 51 points isn't this point in time um it's it's constant right because uh the it's the difference between a September expiration and a December expiration so being that this this is constant those 51 points belong to this period of time um I'll roll it probably closer to the expiration date but I am going to roll them to December I'm not going to close them I'm going to keep them and roll them I get a pick pickup of 51 points so if you can get a pickup of 51 points it's it's 51 points for free if you're short you have positive carry on that so I'll take it uh things that I'm watching TD uh earnings were um if you just look at earnings because of the onetime events pretty bad uh but if you remove the onetime events it's still a good franchise Al cell puts 78 or lower on weakness uh it did drop down last week um but it's an event it's not a recurring thing it's an event so uh let's see where it finds a home it's in low 80s right now 80.2 80.3 uh if I see any weakness any concern this week on TD uh I I don't mind owning that for the long term I'll sell 78 puts or lower on any weakness CAD us I may hedge the cad positions against the us if I see uh the contract 7450 to 75 I think we're 74 74 to 7410 we're in this region somewhere uh this means that one Canadian dollar gets 7 4 cents us once you get to 745 or 75 that's about this is 1.33 if you think better the other way we're sitting at 13510 right now get down to 1.33 that's the upper range here at the 75 again I think it's just a little too much Canada is in a far weaker position uh than the US uh at 139 I would have gone long the Canadian I said that before but at 133 I think I'd want to go short the Canadian so I'm looking at that one US Yen uh 14438 right now I think there is cause for some concern below 141 that's a 52 we low on the pair 52- we low when I say low that means the US dollar against the yen is at a 52- we low or said the other way that's a 52 we high for the yen against the US dollar get below 141 uh any carry trade over the last year is now uh in terms of currency is now underwater uh as soon as you break 141 that's the last 12 months of carry trades are are underwater uh at that price I don't know what kind of effect it's going to have and I don't know if it'll have a US effect or if it'll primarily have a um a peso effect it has had a peso effect uh we know that because that seemed to be the most logical carry trade is uh from is from the Yen uh to the peso uh peso had strength for quite some time with 11% money market yields and the Yen had weakness for some time with no money market yield that you couldn't get a better a better spread than that bank of Mexico uh Central Bank has been cutting interest rates uh Japan's moving in the other direction you know so I don't know this one here is a big question mark for me because I don't know what the Fallout from this one will be but once we get to 141 or lower 14438 you continue with us weakness you continue with uh the this below 141 I think it's caused for concern I think it's caused for heightened uh awareness of what's going on uh but I I I couldn't tell you what the result will be so that's an interesting game um this is the last week uh in uh for YouTube all four new positions they now move uh starting next week they will move uh purely to the uh applied level so any subscriber as of July 31st uh will get this it will be in portfolio uh portfolio construction module there'll be a new module in there called uh new positions and and it'll be in there and when I describe the new positions I'll describe them uh in in some extra in some extra detail uh as well spy the all-time high 56440 that was July 16th we're just a smidgen below that 38% below an all-time high 56223 versus 564 uh 40 that's basically 20 points up on the S&P index 20 points you have a 30 40 Point date and uh you have new alltime highs if you have a weakening US dollar I think you can get there forward four quarter operating earnings 25961 LSG 2579 SP Global take the average of the two SP uh closing price SPX closing price 5634 gives us 21.8 times a forward multiple 21 1.8 um interesting thought I had over the weekend is what if I adjusted for cash like what if I took all the cash on all the balance sheets uh off because when you're buying a stock part of the market capitalization is the cash that you're buying right what what is the franchise value of the company so if you looked at Apple you'd say well how much would I pay for Apple not how much would I pay for apple plus a whole p pile a cash but what would I pay for Apple I don't know if that's been done if anyone knows of a forward multiple on a cash adjusted basis where cash is removed from the market capitalization of the S&P 500 what would be the forward multiple for the franchise um it could be that we have a 21.8 times forward multiple because maybe there's three multiples in there that are just cash uh and that we're actually sitting at .8 it could be and and so you look at that and you say well that starts to make a little bit more sense if that is if that is the case the other thing that would be interesting is uh if we look at the S&P 500 and we look at asset value uh we know that companies are sitting on real estate right they're sitting on land and they're sitting on buildings uh and these are listed at historical value well is the fair value of those higher today because we know that property prices are are higher over time so if you adjust for the fair value of the land and the buildings and you adjust for cash we might be sitting at a 17 time forward multiple for the franchise could you have said that at any other time when you look at money market funds with $6.24 trillion doar in there I have to believe that a lot of the uh a lot of the money sitting on uh corporate balance sheets in cash and cashy equivalence some of that might be in that 6.24 trillion I don't know um so at previous points in time did you have these record highs on on money market funds probably not uh and if we look at property values uh you know '90s 2000 we've basically done this so we haven't had these massive increases in Fair Value there could be something there I don't know just uh putting that out there as uh if anyone has any research on the index being adjusted for the excess in a in asset value that is not being captured you'd obviously strip out cash and reassess the value of any land you're sitting on uh surprise Factor 4.6% uh just going back to this 21.8 you still have to live with 21.8 last week was 2154 it is it is a rich a rich forward multiple uh implied volum ility not completely disappearing but uh easing uh somewhat um 50-day moving average 54729 that's 2.66% down from where we are the 200 day moving average is now at 508 that is 9.56% down from where we are um look at this recovery uh I thought the v's were over right you have v-shaped recovery on that one um so technical analysts might be saying well what have we got here uh you know is there a potential here uh for resistance because it is the last it it's the last top uh in which case if it fails maybe you do have that uh that correction uh or do we just continue to break out and get back to the trend that was uh that was in place uh each Trend that uh that is broken seems seems to continue on and off we go big question marks right but that's the name of the game uh we play is is we make bets in the face of uncertainty earnings this week uh lscg 16 SP Global 14 sector spider 15 with so few I mean you'd think that a couple of them would be would have overlap right forever anybody out there listening that is paying these people big money for subscriptions uh I just want to keep reminding you they can't even get this right so you know you might want to rethink uh how much you're paying them uh notables this week I think there's only one I mean really what's the market going to be this coming week a reflection on uh you know what we did on Friday and ask ourselves did that make a lot of sense and everyone this is this is all it's going to be uh is NVIDIA all right uh uh and this is Wednesday after the close um I think so much of of this rally uh of the last year and a half really comes down to ai ai ai uh and is the build out still going at the pace uh that it has been so I think the focus will be here and I don't know that the focus will be so much on the earnings as the forecast because I believe uh there is some uh new platform that they're releasing that may affect current period sales because everyone's waiting for the next for the uh newest releases I I I think there's something there I don't follow Nvidia that closely um and to add to the tech space you also have salesforce.com you have Crow strike and you have HP and in the consumer staples uh JM smucker going into Thursday Dollar General uh Lululemon uh Best Buy you have uh C oh Campbell Soup cpb look at what's that again Campbell Soup and auto desk going in a Thursday um I don't know that any of those will matter uh I think I think this sets the tone until the jobs report on on uh on the following Friday if that comes in uh uh you know where where it's been Landing for the last little while 185 to 200 I think you're looking at a 25 basis point September cut and that is uh that is the week that was and the week that will be uh so next week uh new positions you'll have to look in the applied level for that I'm going to try to get new position up on Fridays uh sometime Friday afternoon so that you have the weekend to think about new positions as opposed to putting them up Sunday um because for some of you it's the middle of the night by the time you see this video the week is already started you haven't had time to do your own research and your own homework to determine whether or not those fit in with what you want to do so I'll try to put them up Friday so you have the whole weekend uh in the applied level uh if you are a applied level subscriber full level applied level subscriber as of July 31st you just get these they'll be in portfolio construction if you are a subscriber after uh July 31st uh you do not uh you do not get new positions but there will be uh there will be an option to add it uh if you want I just don't know I don't know what kind of demand uh there will be uh for it so I don't want to you know invest a lot in the it coding of it uh if if there is no demand so let me know in the comments section if this is something that you'd be interested in if not then then you know I could save everybody uh on this side a lot of time by not coding anything that's it [Music]