the white house vs. the fedgold mining juniors etf gdxj $34.11 9/20/17 1/17/18 $35.67 5% euro trust...
TRANSCRIPT
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TheWhiteHousevs.
theFed
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TRACK RECORD: RECENTLY CLOSED POSITIONS
Toviewthefulltrackrecordofallclosedpositionsrunningbacktoearly-2015,visit:http://phoenixcapitalresearch.com/privatewealthadvisory/track-record/Toviewourcurrentopenpositions,scrolltothebottomofthisissueofPrivateWealthAdvisory.
POSITION SYMBOL BUYDATE
BUYPRICE
SELLDATE
SELLPRICE
GAIN/ LOSS
BiotechETF IBB 11/15/17 $102.08 1/2/18 $108.87 7% WheatonPreciousMetals WPM 10/5/16 $20.83 1/2/18 $22.42 8% HelixEnergySolutions HLX 10/11/17 $7.75 1/9/18 $8.29 7% ExxonMobil XOM 12/13/17 $83.12 1/9/18 $87.08 5% EnterpriseProductsPartners EPD 8/10/17 $26.08 1/9/18 $28.16 8% DBCommodityETF DBC 9/13/17 $15.26 1/12/18 $16.97 11% GoldMinerETF GDX 9/20/17 $23.50 1/17/18 $24.44 4% GoldMiningJuniorsETF GDXJ 9/20/17 $34.11 1/17/18 $35.67 5% EuroTrust FXE 8/23/17 $114.05 1/29/18 $118.95 5% UltraShortOilETF SCO 1/17/18 $21.72 2/8/18 $23.66 9% UltraShortSilverETF ZSL 1/10/18 $31.27 2/9/18 $34.12 9% UltraShortS&P500 SDS 2/15/18 $38.82 3/22/18 $39.84 3% Facebook FB 5/31/17 $151.63 3/28/18 $152.13 0% Alphabet GOOGL 5/31/17 $987.72 3/28/18 $1,001.09 -1% UltraShortOilETF SCO 2/7/18 $22.71 4/11/18 $18.71 -18% LongTreasuryBondETF TLT 2/8/18 $118.69 4/11/18 $121.33 3% USDollar UUP 1/31/18 $23.25 5/9/18 $24.42 5% EnergyETF XLE 4/11/18 $70.56 5/9/18 $76.86 9% FranceETF(SHORT) EWQ 9/16/16 $23.38 5/30/18 $31.82 -36% ItalyETF(SHORT) EWI 9/16/16 $21.56 5/30/18 $30.05 -39% TechETF XLK 3/28/18 $64.15 6/5/18 $71.78 12% Alphabet GOOGL 4/25/18 $1,022.99 6/5/18 $1,148.34 12% WesdomeGoldMines WDO.TO 9/20/17 $2.05 6/14/18 $2.56 25% MetalsandMinersETF XME 3/22/18 $34.50 6/14/18 $38.24 11% RPXCorp RPXC 8/5/15 $15.48 6/18/18 $10.50 -32% CVS CVS 5/30/18 $65.99 6/20/18 $71.73 9% PublicStorage PSA 3/23/17 $225.92 6/27/18 $227.20 5% DiamondOffshoreDrilling DO 1/3/18 $19.77 6/27/18 $21.22 7% EnergyTransferPartners ETP 8/2/17 $21.00 7/19/18 $19.91 6% UtilitiesETF XLU 2/15/18 $49.68 7/19/18 $52.56 7%
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Themarketsarenowfacedwithanewdynamic,namelythattheUSPresidentisatoddswiththeUSCentralBank,theFederalReserve,or“Fed”whenitcomestomonetarypolicy.Firstalittlebackground…AsIoutlinedinmybestsellingbookTheEverythingBubble:TheEndgameForCentralBankPolicyavailableonAmazonhere),onceformerPresidentRichardNixonseveredtheUSDollarfromtheGoldStandardcompletelyin1971,itopenedthedoortoexponentialdebtgrowth.Thereasonforthiswasthatfromthispointforward,USdebtholderscouldnolongerrequesttobepaidbackinGold.Putanotherway,theUSwouldserviceitsdebtssolelyinUSdollars…dollarsthattheUSFederalReservecouldprintatanytime.Whatfollowedwasdebtgrowththatfaroutpacedeconomicgrowth.Theendresultwasthatbythetimethelate‘90srolledaround,theUSfinancialsystemwassoleveragedthattheFedbeganintentionallycreatingassetbubblestostopthesystemfromdeleveragingduringeconomiccontractions.I’veshownthischartbeforebutitsummatesthesituationnicely.
The White House vs. the Fed July 26 2018
SHORT-TERM ISSUES
• TheTrumpWHhasturnedonthePowellFed
• Aweak$USDisnowallbutguaranteed
• Goldtofinallybottom?INTERMEDIATE-TERM
ISSUES • Inflationtradestooutperformstocksforthenext12months.
• $USDtodropintothemidtolow‘80s.LONG-TERM ISSUES
• ACrisisworsethan2008.• Eventualmarketcollapseof50%+inrealterms.
• Ascrambleforhigh-endcollateraltobringaboutderivativescollapse/implosionofbigbanks.
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TotalDebtSecuritiesvs.GDPinTrillions$USD
Insimpleterms,theFedbeganacampaignofpurposelyproppingupthefinancialmarkets,particularlystocks.Thishasleadinvestorstocointheterm,“the[insertFedChairlastname]Put.”Ifyou’reunfamiliarwith“puts,”theyareoptionsthatpayyouifthemarketfalls.Inthissense,thethinkingbehindthephrase“theFedPut”isthatbecausetheFedstepintopropupthemarketswheneverstocksbegintobreakdowninabigway,investorswouldbe“paid”bytheFedtoinvestduringmarketdeclines.Thus,overthelast20years,we’vehadthe“GreenspanPut”the“BernankePut”andthe“YellenPut,”aseachsuccessiveFedChairsteppedintosupportstockswhentheywereclosetobreakingdownwhetheritbebycuttinginterestrates(Greenspan,Bernanke),announcingaQEprogram(Bernanke),orengaginginverbalinterventione.g.“theFedstandsreadytoact”(Greenspan,Bernanke,andYellen).Asaresultofthis,whenPresidentTrumpannouncedhisnominationofJeromePowellasFedChairinJanuary2018,theprimaryquestionforinvestorswaswhethertherewouldbea“PowellPut.”AsIoutlinedinmyinitialanalysisofJeromePowell(seetheissuetitledNewBossDifferentFromtheOldBossdated2/21/18)IdidNOTthinkthiswouldbethecase.
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FedChairPowellhassinceconfirmeditbyembarkingonanaggressivetighteningofmonetarypolicywithSEVENplannedratehikesoverthecourseof2018-2019aswellasaQuantitativeTightening(QT)programthroughwhichtheFedwouldshrinkitsbalancesheetby$30billionpermonth(April’18-July’18)then$40billionpermonth(July’18-September’18)andfinally$50billionpermonth(October’18untiltheplaniscompletedwhentheFedbalancesheethits$3trillion).LookingatFedChairPowell’stestimonyaswellashisanswersduringFedQ&Asessions,ithasbecomeclearthatPowellisfocusedprimarilyontheUSeconomyratherthanthefinancialmarkets.WithUSGDPgrowthclockinginthe3%-5%range,PowellhasdecidedthattheeconomycanwithstandaggressiveFedtightening.ThisishighlyUSDollarPOSITIVEandhighlystockmarketNEGATIVE.Therearetwolargeproblemswiththis,however:
1) TheTrumpadministrationwantsaweak$USDforitstrade/manufacturingpolicies.
2) PresidentTrumphas“branded”thestockmarketaspartofhissuccessasUSPresident.
Regarding#1,throughoutthecampaigntrailaswellashisfirst18monthsinoffice,twoofPresidentTrump’sprimaryeconomicgoalshavebeen“fairtrade”andto“bringbackmanufacturingtotheUS.”Bothoftheserequirethe$USDtobeweak.Regarding#2(thestockmarket),PresidentTrumphasrepeatedlytakecreditforthebullmarketinstocksthathasoccurredsincehiselection.Indeed,weknowfromTreasurySecretaryStevenMnuchinthattheTrumpWhiteHouseviewsthestockmarketasa“reportcard.”Withover46%ofcorporaterevenuescomingfromoverseas,thestockmarketwillNOTperformwellwithastrong$USDoverthelong-term.SohereagainFedpolicyrunscountertotheTrumpWhiteHouse’sgoals.Putsimply,theTrumpWhiteHouseandthePowellFedhavebeenonacollisioncourseasfarasmonetarypolicygoes.FromJanuary2018-July2018,thistensionwaslargelyleftunspoken.Then,lastweek,PresidentTrumptooktohistwitteraccounttostatethefollowing:
China,theEuropeanUnionandothershavebeenmanipulatingtheircurrenciesandinterestrateslower,whiletheU.S.israisingrateswhilethedollarsgetsstronger
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andstrongerwitheachpassingday-takingawayourbigcompetitiveedge.Asusual,notalevelplayingfield..
https://twitter.com/realDonaldTrump/status/1020287981020729344
....TheUnitedStatesshouldnotbepenalizedbecausewearedoingsowell.Tighteningnowhurtsallthatwehavedone.TheU.S.shouldbeallowedtorecapturewhatwaslostduetoillegalcurrencymanipulationandBADTradeDeals.Debtcomingdue&weareraisingrates-Really?
https://twitter.com/realDonaldTrump/status/1020290163933630464
Theseimplicationsofthesetweetsareasfollows:
1) PresidentTrumpiswarningthePowellFedtoslowthepaceofitstighteningprogram.
2) PresidentTrumpwillnowbetargetingbothChinaANDtheEUregardingtheirmonetarypolicies.
ThePowellFedmeetsnextTuesdayandWednesday.Soasoftoday,wehaveyettoseewhetherJeromePowell“gotthemessage.”ButiftheFedannouncesitwill“pumpthebrakes”onitsmonetarypolicynextweek,wewillknowthatPresidentTrump’smessagewasheardloudandclear.
If,however,thePowellFedchoosetoignorePresidentTrumpandcontinueswithitsproposedpolicies,thingscouldgetveryugly.
ThereislittleprecedentforasittingPresidenttoopenlyattacktheFed.Thelastsuchinstancewasintheearly‘70swhenthen-PresidentNixonurgedthen-FedChairArthurBurnstostartcuttingratestoaidtheformer’sPresidentialre-electioncampaign.
Burns,likePowelltoday,thoughttheeconomywasgoingstrong,andsoinitiallyignoredthepressurefromtheNixonWhiteHousetohalthisintendedratehikes.SoNixonthenhadproxiesstartpressuringBurns“behindthescenes”includingathreattohavetheFedabsorbedbytheUSTreasury.
THATgotthemessageacross.TheBurnsFedstartedcuttingratesinmid-1971However,Burnsfailedtoactquicklyenough,soNixonendedtheGoldStandardinAugusttounleashinflation.
Thistimearound,thingsarequitedifferent.
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Firstly,thereisnomajormonetarypolicy,suchasendingtheGoldStandard,whichPresidentTrumpcouldemploy.Secondly,PresidentTrumphasmadehisattacksonthePowellFedbothEXPLICITandPUBLICviahisTwitteraccountwithits53+millionfollowers.
IbelievethatifthePowellFedcomesoutnextweekandpushestocontinueitsaggressivetighteningschedulePresidentTrumpwillendupfiringPowellbeforetheendoftheyear.
Regardlessofone’sfeelingsonthissubject,let’sfaceit:theTrumpWhiteHousehasZEROissueswithfiringseniorlevelofficials.Todate,PresidentTrumphasalreadyfiredhisSecretaryofState,hisChiefofStaff,twoNationalSecurityAdvisors,theheadoftheFBI,anactingAttorneyGeneral,andmore.
Withthatinmind,IsincerelydoubtPresidentTrumpwouldhaveissuesfiringaFedChair.Yes,itwouldresultintheusualwailingandgnashingofteethfromthemedia.ButthefactisthatPresidentcanfireaFedChairifhechooses.AndifsaidFedChair’sstrategyisseentobeendingthefamed“Fedput”thathasbeenadefactopolicyforthelast20+years,it’sunlikelythatinvestorswouldbetooupsetabouthimgettingfired.
ThisisonekeydynamicI’mwatchingtoday.
TheotherkeydynamicconcernsthesecondimplicationofPresidentTrump’stweetsfromlastweek,namelythatPresidentTrumpwillnowbetargetingbothChinaANDtheEUregardingtheirmonetarypolicies.
Here’sthattweetagain:
China,theEuropeanUnionandothershavebeenmanipulatingtheircurrenciesandinterestrateslower,whiletheU.S.israisingrateswhilethedollarsgetsstrongerandstrongerwitheachpassingday-takingawayourbigcompetitiveedge.Asusual,notalevelplayingfield..
https://twitter.com/realDonaldTrump/status/1020287981020729344
Now,criticswillwonderwhyPresidentTrumpleftoutJapaninhislistofcurrencymanipulators.AsIoutlinedinlastweek’sWeeklyMarketUpdate,IbelievetheTrumpAdministrationhasmadeadealwithJapanthataslongastheBankofJapanhelpstosupporttheUSstockmarket,PresidentTrumpwillrefrainfromtargetingJapanfortradeimbalances/currencymanipulation(seelastweek’swriteupforamoredetailedoutlineofthisscheme)
I’mnowevenmoreconvincedthatPresidentTrumphasmadesuchanarrangementwithJapan
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astheBankofJapanleakedthatitwouldconsidertighteningmonetarypolicythedayafterTrumpmadehistweetsaccusingChinaandtheEUofbeingcurrencymanipulators.
Again,lookattheorderofthings1)PresidentTrumptweetsthattheEUandChinaandmanipulatingtheircurrenciesunfairly,leavingJapanoutofthemix,2)theBankofJapanleaksthatitisconsideringtighteningmonetarypolicytheverynextday.
AdramaticdayforJapan’sdebtmarketsawyieldssurgeonmediareportsofpossiblechangestothenation’sultra-loosemonetarypolicy,spurringthecentralbanktooffertobuyanunlimitedamountofbonds.
Theyieldon10-yeargovernmentsecuritiessoaredasmuchassixbasispointsto0.09percent,itsbiggestincreaseinalmosttwoyears,pullingtheyenhigherandweighingonstocks.WhiletheyieldcamedownafterthepurchaseofferbytheBankofJapan,itthenbouncedbacktojustonebasispointbelowtheday’shigh.
Thenewsreportsmaybea“atrialballoon,aimedpartlyatsignalingpolicywon’tbeonautopilotforever,”BloombergEconomics’YukiMasujimawrote.“WeexpecttheBOJtoraiseitstargetforthe10-yearyieldbyasmallincrementfromaround0percentnowaroundOctober,assumingkeyconditionsaremet:coreinflationisabove1percent,theyenisstable,andPrimeMinisterShinzoAbemakesasymbolicdeclarationthatdeflationisover.”
https://www.bloomberg.com/news/articles/2018-07-23/japan-s-bond-yields-jump-on-reports-boj-to-discuss-policy-change
Astheabovestoryattests,theBoJconsideredraisingthetargetedyieldofitsbond-buyingprogramfrom0%to0.1%.Grantedthatseemslikeasmallchange,butforaCentralBankwhosebalancesheetisequaltoover95%ofJapan’sGDPandwhichhasmaintainedZIRP/NIRPforthebetterpartoftwodecades,eventhissmalltighteningofmonetarypolicyisalmostunheardof.
IbelievePresidentTrumpcoordinatedthiswithJapaninadvancesothatcriticscouldn’tattackthefactheisnotincludingJapaninhislabelingoftheEUandChinaascurrencymanipulators.
Putanotherway,bymakingthisarrangement,ANDbycriticizingthePowellFedforraisingrates,PresidentTrumphasinsuredthathewillgetaweak$USDonewayoranother.
OnewaywouldbetheFedbacktracksonitsaggressivetighteningschedule.
TheotherwaywouldbethatPresidentTrumppunishestheEUforitsmonetarypolicy,
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resultingintheEurorisingandthe$USDfalling.
Tounderstandhowhecoulddothis,youneedtoremembertwothings:
1) TheEurocomprises56%ofthebasketofcurrenciesagainstwhich$USDtrades
…and…
2)WhenaCentralBankbeginstotightenmonetarypolicy,particularlyifdoingsomeansendingaQEprogram,itscurrencyusuallyralliesaggressively.
Withthatinmind,considerthattheEU’sGDPgrewatannualpaceof2.4%in1Q18.AndEUinflationiscurrentlyat2%.Meanwhile,theECBcontinuestorunCRISIS-likemonetarypolicywithratesatNEGATIVE0.4%andQEat€30billionpermonth.
Again,theEU’seconomyANDinflationareat2%orhigher…andtheECBismaintainingNEGATIVEinterestrateswhileALSOemployingaQEprogram.Incontrast,theFedisengagedinQTandhasraisedratesSEVENtimes.
How’sthatforanimbalance?
Thisispureinsanity.ItisnowonderPresidentTrumpisattackingtheEUandtheECB.AndIhavelittledoubtthattheECBwillbeforcedtoacceleratethepaceofitsQEtaper/normalizationinthecomingweeks.
Putanotherway,itisnowclearthatthePresidentoftheUnitedStateswantsaweaker$USD.Andhe’sgoingtogetiteitherviatheFedortheECB.
Andthemarketsknowit.
Firstandforemost,the$USDhasjustslammedintoMAJORoverheadresistance.Anditisdoingthisrightas“goinglong”the$USDhasbecomeanEXTREMLYcrowdedtrade.Sentimenthereisinsanelybullish.
Putsimply,allthetrendfollowershavepiledintothistraderightasmomentumisending…andthePresidentoftheUnitedStateshasmadeitclearhewantsthe$USDlower.
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Acloseupofthemostrecentportionofthischartrevealsthemomentumisfadingrapidlyhere.The$USDisjustoneoftwodowndaysawayfromlosingitsbullmarket.
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Thebondmarketisalreadyactingasthoughthisisthecase.
Firstandforemost,theTIP:TLTratiohasbegunmovingintoaninflationarydirection.Bythelookofthings,we’reabouttobreakouttotheupsideofaMASSIVEtriangleformation.
ThisisHIGHLYinflationary/weak$USD.Remember,bondsalways“getit”beforestocksdo.AndrightnowbondsareSCREAMINGthataweak$USDiscoming.
WegetadditionalevidenceofthisfromtheEmergingMarketBondFund(EMB)whichisalsoHIGHLYsensitivetothe$USD(EMsarecurrentlysittingonover$4trillionin$USDdenominateddebtsoany$USDstrengthisaBIGriskforthem).
Asthebelowchartshows,EMBhasbrokenoutofitsdescendingchannel.ThisisVERYbullishindeed,andisanotherBIG“tell”thatthe$USDisabouttorolloverinabigway.
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Elsewhereinthemarkets,$USDhedges/reflationplaysarereactingasthoughwe’reabouttoseepronounced$USDweakness.Copperlookslikeithasbottomed.
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ThenextlegupwillseeCoppermovingto$3.30.
Bytheway,CoppersuggeststhatGoldshouldalreadybenorthof$1,250.
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Speakingofwhich,IknowmanyofyouarefrustratedwithGold’srecentperformance.I’mrighttherewithyou.ItseemsasthoughGoldistakingFOREVERtobottom.ButitISbottoming.
Thepreciousmetalisnowrightatsupportagainandonthevergeofbreakingitsbullishfallingwedgepattern.
Uranium,(URA),anotherreflationplay,looksreadytoerupthigheraswell.
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Elsewhereinthe“weak$USD”themeIseeEmergingMarkets(EEM)lookingtobottom.
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EEMgotrejectedatmajorresistanceat$45.Thisisverycommonforabullrunthatisearlyinitsinfancy.Iexpectwe’lltakeout$45onthenexttryandbeonoutwayto$48shortly.
Thesamegoesforthecommodity-centricBrazil(EWZ).
Allofthesechartstellusthatthefinancialsystemisshiftingbacktowardsaweak$USDtheme.BetweenthisandthefactthatPresidentTrumphasbroadcastthathewantsaweak$USD,thestageissetforthistobecomethedominanttrendfortheremainderof2018.
It’sbeenalongtimecoming,butit’sfinallyhere.EithertheFedwill“pumpthebrakes”onitstighteningscheduleortheECBwillacceleratetheendofitsQEprogram.Eitherway,the$USDisgoinglower.Andourportfolioisperfectlysetupforthis.
Thisconcludesthismonth’sissueofPrivateWealthAdvisory.Barringanynewdevelopmentsyou’llnexthearfrommenextWednesdayinourusualweeklymarketupdate.Untilthen…
GrahamSummersChiefMarketStrategistPhoenixCapitalResearch
BestRegards,
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OPEN POSITIONS
STOCKS PORTFOLIO
Pricesasofmarket’sclose7/26/18
POSITION SYMBOL BUY DATE
BUY PRICE
CURRENT PRICE
GAIN/ LOSS
AgriculturalCommoditiesETF RJA 1/12/17 $6.46 $6.00
-7%
USSteel X 3/15/18 $38.34 $37.24 -3% FreeportMcMoRan FCX 3/22/18 $18.30 $15.97 -12% ChinaETF ASHR 4/4/18 $30.94 $26.31 -15% EmergingMarketsETF EEM 4/4/18 $47.90 $44.53 -6% JapanETF EWJ 4/25/18 $60.58 $59.25 -1% AltriaGroup MO 5/30/18 $56.59 $56.10 0% FinancialsETF XLF 6/6/18 $27.95 $28.07 1% Walmart WMT 7/18/18 $87.86 $88.23 0% BrazilETF EWZ 7/18/18 $33.67 $36.11 7% RioTinto RIO 7/18/18 $53.90 $55.09 2%
BONDS PORTFOLIO
POSITION SYMBOL BUY DATE
BUY PRICE
CURRENT PRICE
GAIN/ LOSS
HighYieldCreditETF HYG 3/28/18 $85.35 $85.94 2% EmergingMarketBondETF
EMB 5/16/18 $108.49 $109.38 2%
LongTreasuryETF TLT 6/27/18 $122.11 $119.26 -2%
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PRECIOUS METALS/ MINERS PORTFOLIO
POSITION SYMBOL BUY DATE
BUY PRICE
CURRENT
PRICE
GAIN/ LOSS
Gold 3/17/10 $1,120 $1,222.00 9% Silver* 3/17/10 $16.23 $15.43 -5% FirstMajesticSilver*** AG 5/12/17 $7.91 $6.49 -13% KlondexMines KLDX 9/20/17 $3.61 $2.20 -39% Iamgold IAG 9/28/17 $6.40 $5.51 -14% SilverMiningETF SIL 10/4/17 $33.96 $27.70 -15% SilverMiningJuniorsETF SILJ 10/4/17 $12.22 $10.32 -13% GoldMiningETF GDX 6/6/18 $22.58 $21.39 -5% GoldMiningJuniorsETF GDXJ 6/6/18 $32.99 $31.91 -3%
SPECIAL SITUATIONS/HEDGES/SHORTS PORTFOLIO These are speculative positions and should be kept small
POSITION SYMBOL BUY DATE
BUY PRICE
CURRENT PRICE
GAIN/ LOSS
Apple(SHORT) AAPL 3/23/17 $140.92 $194.21 -38% Russell200ETF(SHORT) IWM 6/26/18 $163.38 $168.36 -3%
CASH POSITION
POSITION SYMBOL BUY DATE
BUY PRICE
CURRENT
PRICE
GAIN/ LOSS
AustralianDollarETF FXA 5/10/18 $75.13 $73.85 -2%
Pricesasofmarket’sclose7/26/18
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POSITION SYMBOL BUY DATE
BUY PRICE
CURRENT
PRICE
GAIN/ LOSS
CopperMinersETF COPX 12/21/17 $26.55 $23.90 -10%
ArcelorMittal MT 12/21/17 $32.77 $31.26 -4% CorsaCoal CRSXF 12/21/17 $1.20 $0.96 -20% UraniumETF URA 1/17/18 $14.93 $13.37 -9%
Pricesasofmarket’sclose7/26/18
INFLATION PORTFOLIO