Today I made significant changes to 20% of the model portfolio. Paired trades (winners & losers) were sold in an effort to mitigate further risk and harvest some long term capital gains.
The liquidation was spurred by this week’s unexpected resignation of Intel’s CEO and also the revelation that Starbucks’ sales are decelerating in China.
I’ve been using the hefty Intel profits as a paired trade to counter major losses in GE. The sudden loss of a high profile CEO presents too much uncertainty and I’d rather be safe than sorry.
I’ve also been patient with Starbucks because of potential for large scale productivity improvements in the US (replacing baristas with robots…the new CEO is a tech guy, not a coffee hipster) and massive expansion in China (they’ve been opening more than one store per day). However, recent events have led me to speculate that former CEO Schultz has left the company in worse shape today than his initial departure back in 2000.
Consequently, I’ve sold the following paired positions to preserve a moderate profit:
- Winners: CSCO, EIRL, EIS & INTC
- Losers: ALK, FXB, GE & SBUX
And have initiated the following new positions:
- KRE Regional Banks ETF
- IAK Insurance ETF
- IBB Biotech ETF
- ITA Aero & Def ETF
- KCE Capital Markets ETF
- LIT Lithium ETF
Emerging Markets have not done well over the past few weeks; however, I’ve chosen not to liquidate them because I believe the tough talk on tariffs is simply a negotiating tool and won’t lead to a long term trade war. I suspect most trade deals will be smoothed over in time for the mid-term elections in November. You can listen to my most recent commentary about Trump’s October Surprise at: https://www.wealthsteading.com/266
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