OTW #34: Money flows into commodities, Retail in trouble, Car repos rising
Important financial stories to check out over the weekend
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Let’s dive into another issue of Over the Weekend.
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1. Money pours into commodities.
Commodity ETFs posted back-to-back inflows for the first time since early 2022.
Antagonist’s take
If your portfolio only consists of stocks, adding commodities can reduce your risk and losses when the market crashes. And when commodities rally, you can make significant gains.
Prices can move quickly, so getting in at the right time is important. You don’t have to time the bottom perfectly, but you want to get in as momentum builds. The inflows for commodity ETFs suggest that this could be occurring now.
How to invest
Several ETFs provide broad exposure to commodities such as precious metals, livestock, oil, coffee, sugar, etc.
If you follow the Papa Bear strategy, you’re probably familiar with PDBC. Here’s a list of other commodity ETFs as well.
And if you’re interested in investing in individual commodities, we hold several in our Blend Portfolio. You can view them all with a free trial. Cancel any time.
2. Is retail in trouble?
Businesses and consumers are starting to feel the pain of interest rates that have risen at a record pace. Multiple data points suggest that we could be on the cusp of a credit event.
A credit event is when a negative “event” affects a borrower's ability to repay debt, which often leads to default. These events can also trigger payouts on credit default swaps, financial instruments used to hedge against such risks.
provided an excellent analysis of retail credit conditions in his newsletter:Retail in Crisis: credit events usually happen one of two ways — either completely out of the blue e.g. the covid crash, or “slowly at first, then all of a sudden”. I was just looking at CDS pricing (Credit Default Swaps, which are basically insurance against a credit event) across the various sectors, and Retail falls firmly into that second category… a slow and steady uptrend, but now priced as if a credit crisis is in progress…READ MORE
Antagonist’s take
The increasing likelihood of a credit event is yet another reason to ensure you aren’t over-exposed to stocks. I already mentioned commodities as a way to diversify and hedge risk, but can you also profit from a credit event?
Last May, I wrote this article about how to reap big gains by monitoring high yield bond spreads. When a credit event arrives, those spreads will likely widen. That’ll signal it’s time to buy.
Then, when the economy improves and investor confidence returns, the spreads will return to normal. That’s the ideal time to sell and lock in a handsome profit.
3. Car repossessions are rising.
“We’re seeing a pretty big uptick in [car] repos, repossessions.” That’s what Kevin Malik, CEO of RunBuggy, a nationwide vehicle transportation marketplace, said in an interview with CarDealershipGuy.
Cars get repossessed if owners don’t keep up with their monthly payments. Lenders can “repo” the vehicle to recover their money. It’s their way of saying, “If you don't pay, you can’t keep the car.”
Antagonist’s take
Granted, Malik represents just one company. But his business is nationwide, and he’s on the frontlines. This means that he sees events unfolding as they happen, long before the data hits the reports.
While “boots-on-the-ground” stories certainly aren’t foolproof, they can provide you with valuable information before Wall St. hears about it, thus giving you an edge.
Last thing...
To limit the length of Over the Weekend to 5 minutes, I can only highlight a few stories.
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Thank you for reading, and have a great weekend!
Jason Milton
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