Inside Edge Capital Critical Update.
Todd Gordon January 27, 2021
Hello Perspective and Existing Wealth Management Clients.
I hope this finds you and your family well in the new year. I want to update you on the status of our new wealth management company, Inside Edge Capital Management. We’re very close to launch and we have important details in the body of this text.
But first, a bit about the state of the market and our economy.
I know we all hoped with the calendar change we might see the COVID pandemic recede and a return to some degree of normalcy. They say it’s always darkest before dawn, so despite the infection and mortality rates climbing, I believe the sun is just below the horizon. Vaccines are being administered and the country is slowly coming back online. The markets are pricing in a successful vaccination rollout to the general population via a moderate rotation out of large cap tech and the SAH / WAH (stay at home / work at home) names like PTON, DOCU, and MTCH, and into reopening plays like small and mid-cap value and growth names. The markets are also digesting the change in the balance of power in Washington to the Democratic party rather well and trusting that additional stimulus packages are forthcoming. We’re also now in full swing of Q4 ‘20 earnings season as we’re awaiting Apple, FB, and Tesla this evening.
Bennett, Aleks, and Team have been tracking a possible end to a 5-wave motive pattern that could draw the indexes 10%+ lower. We are watching this possibility closely.
In the last 2 days there have been extreme pockets of volatility in smaller beaten down names most impacted by the COVID pandemic, like brick and mortar names AMC and GME. If you’ve been paying attention the volatility is literally off the charts and unlike anything I’ve ever seen in my 20 years of trading stock. It’s more of a technical move from hedge funds extremely leveraged on the short side being raided by locked-at-home keyboard crusaders representing the new age sub-millennial investing group that now has discretionary capital, owns bitcoin, and hangs out on message boards. Many of them are “working at home” and collaborating online to sniff out established hedge funds who are participating in extremely crowded short positions with short interest 40% larger than the actual stock float, such as GME for example, and attacking. I say good for them. If a hedge fund is too dumb to know they are in an extremely crowded trade, or convinced a stock is worthless based on their ‘woke’ fundamental thesis and not willing to budge ignoring the fact that this market is not really trading based on fundamentals anymore, then let ‘em fail. I’ve been arguing against TSLA bears and their dire fundamental forecast for years on CNBC all the while holding the stock. The sooner people realize TSLA does not trade based on this or next quarter’s financials, but rather with an extreme multiple that’s extrapolating Elon’s vision that very well may change the world we live in, the better off they’ll be. I think many are looking back with regret that they didn’t put a higher multiple on Jeff Bezos when he was just selling books and CD’s online.
So anyway, back to Gamestop, AMC, Koss and others, it’s not about the fundamentals of the underlying company, it’s about the newer generations who are challenging the establishment and demanding their voices be heard. I say good for them. But I also remind them that this gamification of trading will not last and usually ends up in tears. The sooner they realize that we are in the midst of the 3rd major technological boom following the industrial revolution and Y2k internet boom, and a majority of their investable assets be directed to large tech, the more quickly they will solidify their future by leveraging the 8th wonder of the world according to Einstein, compounded returns. If you have kids please be sure they are contributing to Roth IRAs every month. I don’t care if it’s $100 bucks. Do it please.
I discussed this on CNBC today: https://tradinganalysis.com/blog/dow-falls-as-reddit-backed-stocks-soar-trading-the-market-divide
Speaking of investing, and the real point of this note is the new wealth management company. I have spent the last 2 months straight building two distinct portfolios that will be the foundation around which we launch this new business. One is a growth-oriented portfolio representing 11 sectors, and the new cannabis industry, with 77 carefully selected securities. The other is a value dividend portfolio representing all 11 sectors with 74 carefully selected names. I’ve gone through every single one of these companies on a technical and fundamental basis and selected the very best to be included in our portfolios. We’ve also done extensive work to carefully weight sector representation based on rotation models with the intent of beating our index benchmarks. For now, I will be sharing these portfolios with clients who I’m already working with, or prospective clients who meet the requirements of becoming a client.
Now that the portfolios are finally done, it’s time to pretend like I’m a college kid trading stock in my dorm room again and cram for this series 65 exam required to launch the RIA. I should be able to knock this out in 2 weeks and we should be open for business in February.
CEO – Inside Edge Capital Management