The Coast is Clear

The Federal Reserve has indicated that unless the economy shows significant unambiguous strength, rates will remain near zero for a long while.

Equities will move up.

Get long, or very long.

Have a stop in case the market surprises and sells off.

Simple to say, much harder to do, but it can be done.

I am buying stocks today.


Closing Inverse ETFs, Going Long TNA With a Stop

Closing the leveraged inverse ETFs (TZA, SPXS, FAZ) and initiating a leveraged long using TNA.

I may be early, but it is a low risk shot with good risk/reward with a stop at 71 on the TNA

I will sell close to 80 if we get there, adding and scalping along the way.

Why am I inclined to go long here?

I see support at yesterday’s low print on the SPY.  This is just a short term reversal that I am playing.  I have no firm conviction beyond the next day or two.

I also started a position in LABU a 3 x Bull Biotech ETF.  Stop at 35 on that one.

Here goes….



Buy? Not I, not yet.

The S&P 500 put in a nice bounce yesterday.  I was watching from the sidelines.

Today will be important.

Can the bounce be sustained by more buying, or do we slide further below resistance?

Look at the SPX chart below.  There are months of congestion to dig through, resistance to higher prices, overhead.  Despite the seeming strength, the bounce stalled at the line in the sand resistance level.

If the institutional buyers buy that overhead supply, we will clear resistance and I will join the bull stampede.

If not, I will add to my short exposure.

Time will tell.


Reposted from Tatro Capital

Addicted to Stimuli


” As we fast forward to now, it is my guess that we’re going to once again be faced with the prospects of higher rates and just how this will impact our economy. It is clear what the market thinks about any reduction in stimulus and it makes me believe that much more volatility is on the horizon. Does this mean we just cut and run for the hills? No, not yet. So far, the selling, which I believe can easily continue, is well within the context of normal market activity. After the Brexit, the market recouped the entire loss and added a few % points as well. To return to these pre and post Brexit levels makes sense. If however we give up much more it will affirm that a real change in character has taken place and my guess is stops will begin to trigger and cash will be raised.”

Professionally Managed Fund : FIGARO

If managing your own money is not for you, read the below, and consider hiring a pro that can get the job done.  I happen to know the professional who runs the FIGARO fund, and he/they are impressive.

The below is reposted from an email I received:


*** This is an exception, out of the ordinary, update/message! ***

We, at The FIGARO Fund don’t usually care/comment about single days trading patterns/results because of three main reasons:

1.    Although we are only investing in 100% financial, fully traded and very liquid assets that have an ongoing-daily pricing, the fund’s NAV is getting published on a quarterly basis. As such, we find very little value to look at and/or draw conclusion from a single day trading. The quarterly intervals supposed to successfully “absorb” the daily noise, if and when such noise occurs.

2.    The FIGARO Fund is an absolute return fund. As such, it aims at making money under all market conditions. Obviously, this isn’t achievable on each and every (trading) day and, therefore, focusing on a one day loss/gain – as big as it may be – seems irrelevant.

3.    The FIGARO Fund is all about performance, not about words, opinions or excuses. We don’t write about the markets, we don’t share our opinions and we don’t run a long term strategy. The FIGARO Fund has a (very) short-term view/s and, consequently, it’s a trading vehicle that tries to maximise returns subject to pre-defined levels of risk. While the fund is not market neutral, The FIGARO Fund does not care about or adhere to the traditional long-term, buy and hold, fully invested, long only concepts of traditional management!

Nevertheless, the last day of trading (Friday, September 9th), in which the S&P500 dropped by 2.45%, was a unique day from various aspects:

(a)  We witnessed something that hasn’t happened yet during Q3/2016. As a matter of fact, last Friday was the worst single session since the UK’s surprise decision to exit from the European Union.

(b)  Both the S&P500 and the Dow Jones fell below their 50-day moving averages.

(c)  We got few e-mails asking us how well has the fund coped with the worst session since June 24th? Since we thus far (since the fund been launched) haven’t received any inquiry regarding a single trading day we thought it would be useful to address the natural concerns.

We’re pretty sure that by now most of you probably think to themselves, “this sounds like a prologue of an excuse…” so let us conclude by saying loud and clear:

Friday, September 9th, was The FIGARO Fund’s BEST SINGLE DAY TRADING SINCE LAUNCH!!!

Last week we sent our interim update (one month ahead of the end of quarter) that related to the fund’s performance till the end of August. We estimated that the fund gained 2% during those two months and we actually admitted that we trailed the S&P500 performance. Since September has been extremely generous to us thus far, we find it important to emphasise that things have changed completely since the end of August. Not only that the FIGARO Fundis, once again, outperforming the S&P500, if things won’t change much from here we now expect the fund to deliver a double-digit return this quarter, just as we did during the previous two quarters.

Those of you who consider investing into the fund while waiting for a pullback, allow us to highlight few things for you:

1.    Things change at The FIGARO Fund very quickly, as you can see. In more simple words, this is not a fund/vehicle that follow old myths. If you tell yourself “after such a run up I’ll wait for a pullback” you may never get in… While The FIGARO Fund is not immune from losing – and we’re sure that we would see losses along the road – the fund may elect to sit on the side-lines with no positions whatsoever (!!!), just as we did during Q4/2015.

2.    Each day, each month and each quarter is a new ball game for us. We may change our stance and holdings within a blink of an eye. We are 100% liquid and we have the ability to adjust very quickly for the ever-changing circumstances. While traditional investment managers “make or break” alongside the market – we may (as just shown) profit when others lose.

3.    We view the US Elections as a major event. We believe that the identity of the next US president is far from being certain. This is exactly why we already adopted a very cautious approach (that allow us to make money on a day like last Friday) and we intend to keep running a cautious strategy and possibly get out of most positions ahead of the US Elections. While traditional money managers may change the asset allocation within your portfolio, they would most probably maintain the “long only, buy and hold, long term, fully invested” concepts that run along the vast majority of investment managed accounts/portfolios. This might put your money at great risk should the outcomes of the US elections be viewed as negative!

Although The FIGARO Fund is neither market neutral nor bullet proof, it does offer something that traditional managers/funds don’t offer. It’s not only the creativity, flexibility, wisdom, risk management and short-term strategy but mostly the disengagement from old perceptions/myths that we strongly believe don’t necessarily work anymore (generally speaking) or serve your money (and specific needs) in the best way.

The FIGARO Fund (fact sheet attached at the bottom of this message) can be purchased through your bank/brokerage account. Since the fund is a licensed-registered security it has a unique International Securities Identification Number (“ISIN”), just like any normal security (share, bond, fund, etc.) has; all you need to do is to ask your banker/broker to buy ISIN BMG3033P1932.

Please also note that Mr. Aharonovich will be visiting Israel during October. Should you wish to arrange a meeting with him – please contact us by writing to the e-mail address from which this message is being sent. We look forward to hearing from you!

Kind Regards,

The FIGARO Fund team


Interesting Analysis From Tatro Capital

Bulls Vs. Bears


Throughout the summer, markets have meandered without much fanfare. In fact, the S&P 500 broke to new highs in early July; and, as of mid-September, we are within 10 points of this area having moved no more than 2% in either direction. It is healthy to digest gains such as we’ve done for the last 8 weeks, allowing buyers and sellers to position accordingly. With that being said, I thought it helpful to review two varying opinions regarding stocks and how we can shape up going into the fall and year end.


Bear Case


Bears will argue valuation as being the primary reason the market is due for a fall. They’re not incorrect with this argument.  A majority of the value metrics used show that compared to historical averages, the market is trading at levels which seem quite rich in price. Specifically, the S&P 500 is currently trading at an earnings multiple of 25. What this means is that, for every dollar in company earnings (stocks in the S&P), the market price is 25 times this amount. Unless you know history, this means very little.  However, the moment I tell you that the S&P 500 historical P/E median is 14.64 or that the historical P/E mean is 15.61, it infers that the current level is quite high.


Consider for a moment how this multiple or P/E could come back in-line with the historical average. To understand this we need to do a little math. Since we know the current S&P market price of $2,180 and the current P/E of approximately 25, we can calculate the total earnings of the S&P 500.


$2,180/ 25 = 87.20


To check this math we simply run the calculation in a different way to ensure we get the same multiple.


P/E or Price / Earnings

$2,180 / $87.20 = 25


Now, to see this multiple revert down to a more historical level, one of two things needs to happen. Either we need to see earnings increase and price remain constant or price fall and earnings remain constant. Let’s do some reverse math and see what earnings would have to increase to in order to see a P/E of $15. We will be solving for E.


$2,180 / E = 15  or

$2,180 / 15 = 145


This would mean that earnings would have to increase from 87.20 to 145, while the price remains the same, in order to see the overall multiple decline. This is a 66% increase.


87.20 → 145 = 66% Increase


Of course another way for us to see a historical multiple is for the overall price to decline while earnings remain constant as well. Let’s solve for this.


P / $87.20 = 15 or

$87.20(15) = 1,308


In order for us to return to a historic P/E, while earnings remained constant, we would need to see the S&P move down to 1308 or face a 40% decline.


$2,180 → $1,308 = -40%



Bears will state that valuation alone is enough to be cautious and, while an isolated event of earnings growth or price decline is not guaranteed, some combination is highly probable.


In addition to the mathematical case, bears will cite such things as the ending of monetary policy and the possibility of a change in policy due to the election cycle. They will cite uncertainty in Europe and China as well as future unfunded liabilities in the US. Even a brief understanding of these possibilities will have investors scurrying for the sidelines.


So, why then is the market remaining resilient and continuing to push forward? It helps to take a look at the bull case.


Bull Case


Primarily, the bull case is rooted in global interest rates and their impact on supply and demand for yield. You see the same interest rate environment facing domestic savers, when they head to the bank and buy a CD, is also facing the entire global investment community. While many individual folks could become disgruntled in their search for yield, accepting such low levels or even negative rates in certain areas is not an option for large institutions, pensions, insurance companies or ultra-high net worth.


Take for example the Kentucky Teachers Retirement System which just recently published its 7.5% required rate of return. Traditionally, this is money that must be invested in predictable, safe investments. Years earlier, when interest rates were higher, more than likely administrators allocated a tremendous amount of capital into bonds. Now, however, this is not an option and this institution faces a very tough decision. The system managers can reduce their expectations, which means they will be altering the requirements for benefits considerably, or they can stretch for this rate of return, thus accepting far greater risk than is prudent. Odds do not favor one extreme over the other but rather a balanced approach whereby the plan not only adjusts its payout requirements but also reduces its expected returns. Unfortunately, even with reduced expectations, we find ourselves in an environment with a 10-year treasury bond yielding 1.5%. What’s a manager to do? Well, when these same managers scan the landscape they  come to an investment such as Intel, Cisco, JP Morgan, AT&T, Verizon or countless others and see that the dividend yield is over 3% and the company has the financial ability to keep paying this dividend for years and years to come. They make a decision and take a calculated risk to buy these assets rather than make such extreme adjustments to their projections. Bulls will argue that, as long as we remain in such an interest rate environment across the globe, risk will be favored and multiples will expand.


See reports on CSCO INTC


So far, the market is siding with the bulls. Each time a sell-off starts to ensue, money rushes into the market to scoop up stocks, back stopping any further slide. Dividend paying investments seem to be acting very well and not only remaining firm in price, but advancing at a steady, even pace. It is for this reason we remain invested with a primary focus on these dividend producing areas we feel will garner the most support.


I’m not going to lie. It is hard to dismiss the bearish valuation argument. When I ponder the head wind risks, my natural desire is to crawl into a deep hole and fear for my children’s future. I take refuge in our strategy whereby we possess levels within each investment that, should it be hit, we would look to sell the investment and raise cash. We would take a hit but we would adjust accordingly and look to protect against further declines. In addition, we’re confident that our clients are adhering to a designated risk profile and maximum equity exposure that is right for them and their place in life. It is by following these two primary disciplines that helps me to sleep soundly at night.


While I do not have a crystal ball, I know for sure that the market has been quiet for a bit too long now and some fireworks are definitely on the horizon. My guess is that before September is over we shall have some fairly violent moves. There is no question that as we roll into the election, markets will be walking on eggshells and should we see a surprise Republican victory, a Trump Dump may be the initial response. Nonetheless, you can rest assured I’m watching closely, following a disciplined plan and ready to take action when and where necessary.


Until next time










Tatro Capital is a fee only investment advisor serving individuals and families for the last 15 years. If you are looking for a second opinion and would like us to evaluate your current financial plan or investment portfolio, visit us HERE to set up a no fee, no obligation meeting via the web, phone or in person.