Brook Reef

Shorting XLF @ $23.09 5% position After buying KMI and EPD, I had to offset it with a short. So I'll short financials. Huge numbers of people didn't pay their mortgage last month. Losing jobs isn't good news for banks. Lower interest rates isn't good news for banks. It's a tough environment to be a financial company. I would short XLE, but think that oil has upside and don't want to short the higher beta aspect of my trade. So I decided to short something that's not so much as hedge as it is an outright short idea.

Buying EPD @ $17.64 2% position Enterprise Products Partners is like the OG of MLPs. They have always been ahead of the curve. They bought in their GP before it was cool. And have a long history of providing great distributions to unitholders. EPD is like KMI in a lot of ways - but better. You see, EPD controls the hub of the pipeline system. Where oil and gas comes off of the big, long pipes and is re-routed to other pipes. It's the interchange of the pipeline system. That means, EPD doesn't rely on any one oilfield to keep pumping oil to justify their huge pipe. They are a true proxy for national production. *Obviously, this is a bit of a simplification for illustrative purposes - but it's directionally correct.* EPD pays a 10% distribution yield today. MLPs are different from stocks for tax reporting purposes. They require you to file a K-1 since it's a partnership. So be aware of that complication before buying.

Buying KMI @ $14.88 2% position Kinder Morgan is a pipeline company. They experience growth with more oil being produced - which tends to happen when oil prices go up. Think of them as a toll road for oil flows. They need more traffic to make more money - and justify building out more roads (pipes). While we wait for growth, KMI pays a well covered 7% dividend yield. Not too shabby! I last traded KMI down here below $15/share and sold it just under $16/share. So I think it's a solid buy down here and won't be afraid to add more below $14.

I slept way too long last night and am off to a very late start today. It's month-end, so watch out for some weirdness - remember, the pension funds have to sell a lot after the bull run. Whether they do it during market hours or after-hours is the question. 1) So far, the Fed has not even approached their limits on various lending facilities. Their balance sheet has undoubtedly grown, but the limits are way higher than today. 2) Buying the stock market at the wrong time can result in decades of breaking even, on an inflation-adjusted basis.  3) The coronavirus pandemic has started to hurt red states more than blue states. Good luck today, hopefully you're more awake than me!

I'm moving pretty slow this morning after a hard weekend of physical work, but we'll make it through. Two pieces of news worth mentioning from the weekend: covid cases continuing to spike in the south and west and President Trump tweeting a video of a white supremacist shouting something about white power or whatever those people shout about - while carrying a "Trump" flag and likely wanting to "Make America Great Again". Trump quickly deleted the tweet, but he's still an idiot. _______________________________________________________ 1) Even a blind squirrel finds a nut every once in a while. Well, here's your blind squirrel explanation for the stock market! It's a bit uncanny, if you ask me... 2) Regarding covid cases, let's talk about Sweden. Remember that they didn't shut down - other than recommending old people stay home - but did incorporate social distancing and masks. Well, they continue to see cases on an upward traject

My Dad celebrated his birthday this weekend. We socially distanced for a bit in their back yard. I also worked like a dog on our home remodel this weekend and haven't done my normal amount of "work" looking into the upcoming week. Markets sold off late in the week as covid cases spiked higher across the country. Actually, to new daily highs. Wave 1 continues (it never ended). U.S. Indices Dow  -3.3%  to 25,016. S&P 500  -2.9%  to 3,009. Nasdaq  -1.9%  to 9,757. Russell 2000  -2.4%  to 1,385. CBOE Volatility Index  -1.1%  to 34.73. S&P 500 Sectors Consumer Staples  -1.3% . Utilities  -1.9% . Financials  -1.% . Telecom  -0.8% . Healthcare  -1.6% . Industrials  -2.3% . Information Technology  +1.6% . Materials  -1.1% . Energy  -3.% . Consumer Discretionary  +0.4% . World Indices London  -2.1%  to 6,164. France  -1.4%  to 4,910. Germany  -2.%  to 12,089. Japan  +0.2%  to 22,512. China  +0.4%  to 2,980. Hong Kong  -0.4%  to 24,550. India  +1.3%  to 35,171.

Buying SRE @ $114.83 Adding 2% 4% position I sold two 1% utility positions to add more to Sempra, a top-pick company. I think, with high confidence, that Sempra is worth $145+/share. Sempra Energy is one of the best capital allocators in the utility and energy infrastructure space. They aren't afraid to be ahead of the curve and take bold bets. For example, they were way ahead of the LNG export game. They diversified into Latin America before values skyrocketed, and then got out. They doubled down into regulated utilities when others were selling. They know what they are supposed to do and do it well. It's no wonder Avangrid (AGR) stole an executive from Sempra! This is an excerpt from an article I wrote a year ago, but is still relevant: SDG&E:  San Diego Gas & Electric is a natural gas & electric utility that provides services to San Diego and the surrounding areas. SoCalGas:  Southern California Gas is a natural gas utility that provides natural gas se

Selling D @ $79.55 Realized loss of $6.90 (7.98%) Same as CMS, D is a great company - but Sempra is cheaper and has tons of upside potential as an energy infrastructure play.

Selling CMS @ $56.25 Realized loss of $3.30 (-5.54%) I think CMS is a great company, but Sempra (SRE) is way cheaper and has more upside potential. So I'm rotating into Sempra.

Buying ACI @ $16.20 2% position ACI, Albertsons, IPO'd today. It priced below the range of $18-20 at $16.00. I like the grocery sector and Albertsons is a pretty cheap, well-positioned way to play. IPOs are usually set up to do well out of the gate - and a grocer coming back public AND pricing below the range all combines to make a solid company, in my estimation.

PAIR TRADE Long GOOGL @ $1,430.85 Short MSFT @ $199.68 2% each Microsoft announced the permanent closure of their retail stores. The strategy never really made sense - Microsoft isn't really a hardware company in the way that Apple is. Sure, they have a few products, but they are pretty niche and premium. Google is one that I continue to like the story and offerings. Everything is increasingly going to the cloud and can be done on a crummy computer inside of a browser - with the heavy computing done elsewhere, not on a local machine. Heck, Google announced expansion of "parallels" which makes running Windows apps on a Chromebook possible. So I'll bet on the cloud and against old tech. And the chart of GOOGL looks great while MSFT's looks over-extended.

Happy birthday weekend to my dad! The bank stress tests were revealed - with limits on buybacks and dividends. Good news, obviously.... Futures are flat to down this morning before the open. Short note, late start today. _____________________________________________________________ 1) Stock correlations are still really high. That means they all move together - a macro trade - instead of moving on company fundamentals. 2) It's a bit hard to see, but the little red line is the % of positive tests. It was 7.7% - the highest since May 10th. Number of tests are up 60% since then. More testing leads to more cases - but a higher positive rate is worrying. 3) Not to keep harping on the coronavirus, but it seems to have been pushed to the backburner by a lot of folks. It's still very much here and very real. This chart is a damning one for our response - specifically on President Trump. Why haven't our case numbers fallen like the rest of the world? Why are we no

Shorting EWI @ $24.03 5% position I was hunting for a single stock to short with a 2% position and figured why not short an ETF at 5%? This brings me from 1%+ long to ~4% short - a much more comfortable positioning. EWI is the Italian equity ETF. Italy is a country that relies on tourism. I would short Brazil, where cases are skyrocketing, but the commodity-centric nature of their economy gives me pause if and when inflation returns, globally. So Italy gets the call today. It's on a short leash and could be covered quickly if a better idea pops up.

Covering SO @ $50.77 Realized gain of $3.44 (6.35%) Shorting SO was a solid call but the chart looks pretty over-sold to me here. I'm now 2% net long, so will be hunting for a short by the end of the day. Stay tuned.

Closing Double Pair Trade Sell DLR @ $141.99 Sell IRM @ $24.67 Cover VNQ @ $76.66 DLR: Realized loss of $0.50 (-0.35%) IRM: Realized loss of $2.40 (-8.87%) VNQ: Realized gain of $4.81 (5.90%) Total realized gain of 1.23% I still believe in this trade idea, but am covering at a modest gain (for the second time) to reduce gross exposure. The market fall yesterday combined with today's chop shows me that being less bloated and more nimble is the right positioning. So I'll take off this solid pair trade and move on with my life. IRM is a great-looking long idea, if you are too short and need a high yielding transformation story.

Today is Thursday and that means we get Initial Jobless Claims data. It will undoubtedly be another week of humongous job losses, no matter how the media tries to paint it as "slowing". The market seems to succumb to reality a bit yesterday on renewed covid fears. Trump announced that the Federal support to testing facilities will be ended. And has continued to push the notion that more testing leads to more cases and therefore more fear. While there's a nugget of truth in that, there's also the idea that knowing how widespread it is, who has it, and then acting appropriately to contain the spread requires data. But that doesn't help his narrative that the virus is defeated. _______________________________________________________ 1) GM could be worth 2.5x it's current value on the EV business alone. Analysis was done by Morgan Stanley comparing GM's EV business to Tesla. The answer is that it's worth $100bn. GM is worth $40bn today. Ergo, it cou

Buying STX @ $47.65 2% position The last time I traded Seagate, I wound up dumping it because they cut jobs and showed that it's not #antifragile. Shares are down and have drastically underperformed the technology group. I still like the story and metrics, so I'll give it another shot here down ~10% from where I sold it. The red day in the market shows that reality still glimmers, even if it's transient. Reality will win. Don't get too long just yet.

Buying AWK @ $124.34 *Adding 0.25%* *Total Position 1.50%* This is a pretty reasonable price - and better than last week for the 2nd week in a row. I think AWK is worth $110-120, but want to keep adding a bit every week...so getting it for today's price isn't too far off. This is a stock you gift to your grandkids. Seriously. A question was posed on Twitter on 5/9/20 asking if you could only make 1 investment from here on out, what would it be? Many of the answers were various index funds, Amazon, or gold. After thinking about it for a long time, the answer became clear: U.S. regulated water utilities. And there is really only one of them that is worth considering: American Water (AWK). Before getting into AWK, this is a different kind of purchase. It's not a "cheap" stock. As such, we aren't buying it in a "normal" 2% position size. It's going to be one we add to each week in small amounts until a real position is reached. Most weeks wil

Yesterday was another session where we opened into weakness and shares slowly rallied throughout the day. However, the rally began to fade in the final hour and we finished just about at the lows of the day. It's still strange to see any selloff get quickly bought - but I guess down prices and days are no longer allowed. It might hurt somebody's feelings... Don't forget that quarter-end rebalancing is coming as we approach month end. And given the strong run in stocks this quarter, it could be a big one. Futures are down ~1% as of the time of writing. I expect news of a vaccine or more stimulus from the White House to ensure the red doesn't hurt the President's feelings... _________________________________________________ 1) Covid hospitalizations continue to spike in Florida - they don't report state-wide data, but this is Miami-Dade county. Probably one of the worst-hit places in the state, to be sure. 2) If you're looking for a "V" r

Buying TAP @ $38.04 2% position I last sold TAP over $40/share, so buying it back right around $38 is a pretty good deal. Remember, TAP is Molson Coors Brewing. Beer. And it's much more North American than InBev/Budweiser. We Americans drink at home much more than the rest of the world where 75% of beer is consumed outside of the home. So TAP is a good way to play the consumer drinking - whether that be out and about or back home if we shut down again.

I am selling a small portion of my GLD to keep it just below 5%. This isn't a full-fledged trade I'll document here; rather, it's a friendly piece of advice to you. Gold still has a role to play in a portfolio given our macro backdrop, but ensuring nothing gets out of balance - and we take advantage of price movements is important.

Shorting SO @ $54.21 2% position After buying Sempra, I need a short to keep net exposure unchanged. So I'll short Southern Company. Southern is a traditional, vertically-integrated utility that operates mostly in the US south. They have huge power plant projects that carry tons of regulatory risk. They operate in tough jurisdictions. And tend to be a fairly acquisitive company. So it's a pretty clean short, in my opinion.

Buying SRE @ $120.31 2% position Sempra Energy is one of the best capital allocators in the utility and energy infrastructure space. They aren't afraid to be ahead of the curve and take bold bets. For example, they were way ahead of the LNG export game. They diversified into Latin America before values skyrocketed, and then got out. They doubled down into regulated utilities when others were selling. They know what they are supposed to do and do it well. It's no wonder Avangrid (AGR) stole an executive from Sempra! This is an excerpt from an article I wrote a year ago, but is still relevant: SDG&E:  San Diego Gas & Electric is a natural gas & electric utility that provides services to San Diego and the surrounding areas. SoCalGas:  Southern California Gas is a natural gas utility that provides natural gas service to most of Southern California. Texas:  Includes Oncor, a large electric utility in Texas, and InfraREIT, a quickly growing electric t

Before moving into the markets, I just want to give an update on my Lenovo Chromebook Duet. I've been talking about it here for almost a week and finally got it delivered yesterday. Like all Chromebooks, it was easy to get signed in an running - since everything is in the cloud. The screen is sharp and bright. The keyboard/trackpad works great. Some of the keys are a little small, but after a little practice, you get used to it. For $249 at Walmart, it's a steal of a device. It can be disconnected to be just a tablet for when you're surfing home listings on the couch or whatever it is that you do at night ;) I've been using an iPad with a keyboard for notes and typing (as my secondary device) for years. I brought it to meetings all across the world - but the limitations of an iPad is that it's a tablet. This Lenovo Chromebook Duet has a full, desktop internet browser (Chrome), and is therefore way more useful and natural to use. Seriously, if you need a second devi

Shorting AAPL @ $355.25 2% position Apple shares are above where they were last week when they announced some store closings for COVID. They're hosting their WWDC today with the expectation that they'll be switching from Intel chips to ARM chips. Unless they decide to shut down more stores, I don't see the stock going higher. And it looks over-extended on the charts. This might be a quick flipper, but we'll see what develops.

Covering KRE @ $39.21 Realized gain of $2.16 (5.22%) I've sold 7% of long equity exposure today, so it's time to cover some of my short exposure. I don't want to get too aggressively short quite yet. Slap on the back for shorting regional banks and making money!

Selling KR @ $32.55 Realized gain of $1.62 (5.24%) I told you this was a good idea. Whenever a company reports good numbers and gets harshly punished, you should buy. After making a little money on the trade, let's gather up our gains and run.

Selling GDX @ $35.13 Realized loss of $0.52 (-1.46%) I'm throwing out my GDX position today. It was a push of a trade that was somewhat ill-timed - but gave me equity exposure at a time when I couldn't find anything worth buying. With gold up almost 1% today, GDX is up ~5%. I'll take the gift and bail. I want to reduce gross exposure, and this is a way to get out of a low conviction trade at a slight loss - after holding it through a sharp decline.

This is the first official week of summer 2020! It's been warm-ish here in Northern Illinois, but lots of overcast days too. Hopefully, this is the end of the overcast and the start of real sunshine summer, but I digress. I'm excited to get my new Chromebook today and will report back on how it does. I think it's the right form factor and price that just about anybody could benefit from having one of these Lenovo Chromebook Duets for $249. Markets were up ~1% when futures opened before going red around bedtime last night. They got their usual Mnuchin/Powell pump in the wee hours of the morning to be up ~1% when I woke up. And are now about flat. It'll be an interesting day. ____________________________________________________ 1) The coronavirus continues to spread. 6 of Trump's staffers tested positive ahead of his Tulsa rally. Texas and Florida continue to see new record daily highs for new cases. The chart below is one I've been updating every day sinc