Passed Pawn Advisors November 2019
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Passed Pawn Advisors

A next generation digital investment advice firm utilizing the latest methodology and technology to create sensible and affordable financial solutions for our clients

Quote Of The Month

This market is grinding higher — yes, it’s overbought, but markets that get overbought can stay overbought for an extended period.”

-- Craig Johnson, technical market strategist for Piper Jaffray

Economic Highlights

  • The Fed interest rates are steady

  • The elusive China trade deal is getting ever closer to the breakthrough

  • Q3 corporate earnings were largely good, with about 80% S&P 500 companies beating the previously reduced earnings expectations, essentially ending conversations about “earnings recession”

  • The November US purchasing managers’ index (PMI) pointed to a pickup in activity across both manufacturing and services

  • The latest estimate of Q3 US GDP rose, so the pace of growth actually picked up slightly, despite expectations for a continued slowdown

Market Highlights

  • US Equities bull market keeps going, with S&P 500 Index closing up 3.6%, ahead of all other major asset classes

  • Foreign Developed Markets Equities were also up 1.1%, with Europe taking the lead

  • Domestic bonds were little changed, but foreign developed bonds retreated a bit

  • Commodities also gained -2.6%, with oil up 2.3%, and gold down -3.3%, in a risk-on month

  • US REITs took a rare breather, down -1.5%

Observations and Expectations

By the time of Thanksgiving, US Markets delivered plenty for investors to be thankful for. As corporate earnings, unemployment, inflation, and economy growth continue to defy the chorus of lower expectations, those who stayed the course with what’s been working all year – growth equities – got rewarded again in November.

Among the earnings reports, energy and materials sectors continued their meaningful downward trend, which keeps us away from these areas for the most part. The rest of the economy seems healthy, with technology recovering after a correction in several high-flying industries. The recent lead by the financials, despite lower interest rate, is a very positive sign for the overall market, as well as good performance by industrials, trade issues notwithstanding.

Looking forward to the rest of the year, with no surprises from the Fed or UK vote, and with China incremental deal inching closer, you can just feel the Santa Claus rally in the air. 2020 may be a totally different animal, though, with one keyword to keep in mind: Election. The retail sales results for the 2019 Holiday Season will be the first test.

Sector Update

Materials sector is typically the definition of cyclical. As economies expand, the manufacturers require more raw materials, driving up the prices and improving earnings of those companies that provide them. The story has been different this time, though. (How many times have you heard THAT from market commentators?) You can blame uncertainty due to the trade issues or the tariffs directly. Or you can point to the (relatively) strong dollar. In any case, the entire sector continues to bleed red.

Healthcare, on the other hand, have been doing the best sector in November. The group is one of the most diverse among all 11 sectors, with some parts are very demand inelastic (think hospitals) and some are super growth (think biotech). The latter reeled earlier in the Fall, as the rise of Sen. Warren in the polls scared biotech investors. With the drug pricing bill likely dead on arrival in the Senate, and boosted by recent M&A activity, the sector seems to be back in the growth mode, but remains volatile as always.

Market Data

Want to see a market snapshot and all your favorite stocks in one place? Try our market data pages.

Question of the Month

This is where we answer the best investment question we’ve heard all month. If you’d like your question to be considered, please send it to us.


Should the traditional retail industry and related REITs be avoided at all costs? [A reprint from May 2018]


The onslaught of Amazon is undeniably impressive. A newcomer to the e-commerce focusing only on books a little over 20 years ago, the company today is one of the largest corporations in the world and is the online retail king. Many retailers have been “Amazon-ed” and many others are rumored to be on the “hitlist”.

Every time Amazon expands into a new category, the companies in that category and their shareholders understandably fret. When Amazon bought Whole Foods last year, for example, all grocery store stocks took steep losses with no exceptions. Many traditional retailers – from books to electronics to toys and even department stores – who haven’t figured out how to compete have gone belly up or remain on life support in secular decline.

But that doesn’t mean it’s impossible to compete with Amazon. To survive, retailers have to figure out how to use their physical stores to their advantage, while doing one of the following 3 things: compete on price, provide a better service, or offer unique products.

If the first option sounds dubious, think back some 5 years ago. Best Buy, the last remaining major electronics retailer, was then seemingly losing its last stand. The company offered a price match and used their stores as essentially showrooms. Adding Geek Squad service also helped keep customers coming into the door. Wal-Mart figured out that customers can order online, but get a free delivery to their local store instead of their home, and that’s without paying for Prime membership. Costco and other price clubs compete with their differentiated business model, while many specialty stores offer hard-to-shop-for or hard-to-ship products, from home appliances to jewelry to vehicles. Among the retail REITs, those that primarily lease spaces in malls may be getting in trouble, but those renting smaller spaces and especially those in the outlet malls are doing just fine.

Over the past several months the retail sector, as well as retail REITs, have mounted a furious comeback. The bottom line is that the retail space and retail REITs have become more heterogeneous, and investors should pick their spots carefully. But the reports of death of traditional retail have been greatly exaggerated.

ETF Education

We have recently added a new section to our website designed to provide educational, reference, and news resources to investors in the growing world of ETFs. Product knowledge, understanding cost and tax structure and how ETF trade works can help investors of all stripes find better opportunities for their portfolios and improve its risk management. Knowing the mechanics of volatility ETFs, for example, could have helped $XIV ETF holders avoid huge losses last week.

Featured Motifs

Motif Investing is an innovative broker that allows you to treat a portfolio of equities as a single unit.  We utilize their platform to offer our clients affordable solutions in thematic investing.

Each month we highlight 3 of our motifs that play on current market themes.

Motif Pure eCommerce
Risk Profile Moderately Aggressive
Time Horizon Short/Mid-Term

Pure eCommerce is a group of rapidly growing companies that sell 100% of their products online. The only service included is online travel, a traditional e-commerce category, and services to the segment.

Motif Oncology - Development
Risk Profile Aggressive
Time Horizon Short/Mid-Term

As the fight to find cure for cancer continues, many companies are developing promising new drugs that are just starting clinical trials. The risk of setback or rejection by FDA is the highest, but so is the potential reward.

Motif A Walk In The Clouds
Risk Profile Moderately Aggressive
Time Horizon Mid/Long-Term

Cloud services are the next generation in software services for the world on the go. These companies are leading the change.

Investing Hot Reads

Model Portfolio

See how our proprietary algorithm creates a customized portfolio just for you

Our Papers

These thematic investing papers provide insights into specific investment topics.  If you follow the subject, you can easily subscribe to them and receive a daily email update.  It's absolutely FREE.

In The News

  EquityMag: Case Study
  BuzzFeed: Impact Investing
  ABNewsWire: Press Release
The materials presented above serve informational purpose only and do not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. The author, Passed Pawn Advisors, LLC, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment assets mentioned above. Motif Investing portfolios that may be presented are created by Passed Pawn Advisors, LLC, and are available for purchase through their site.
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