• Current read is 34 on the fear greed index vs 42 last week.

• The Fear & Greed Index fell from 42 to 34 this week which is a reminder that opportunities tend to appear when investors become more fearful than the facts warrant.

• Market Fearful = Potential Opportunity/Deals. (consider buy calls/sell puts/buy shares)

• Market Greedy = Potential Over Valuation. (consider buy puts/sell shares/take on less risk)

• I like to be bullish when there is extreme fear

• I like to be bearish when extreme greed.

• Opportunity is out there, just gotta find it!

• 30 year fixed mortgage rate decrease to 6.46% Today, vs 6.48% last week.

• 10 year treasury bond yield decreased to 4.48% Today, vs 4.54% last week

• 2 year treasury bond yield decreased to 4.08% Today, vs 4.15% last week.

• Interest rates fell a little this week as investors sit patient to see if an Iran deal materializes. If we get that, expect rates to fall which is usually good for stocks & the economy. Given stocks just made a HUGE move recently, I do not expect a huge gap up. Lower rates will help justify the higher valuation level we sit at now.

• As I always say, interest rates are gravity!

• As interest rates/bond yields INCREASE, stocks become LESS attractive because bond yields go UP which makes the risk free bond look MORE attractive.

Hope everyone had a great week!
Here is this week’s newsletter.

The market has pulled back a tiny bit, volatility has picked up, and people are nervous about basically everything. Oil, inflation, interest rates, Iran, the Fed, AI, jobs, tariffs, valuations, and probably 700 other things at the same time. Mr. Market is on overload right now, and when Mr. Market gets overloaded, prices start moving around pretty aggressively.

But volatility is not always a bad thing. I know it feels bad in the moment. Nobody likes logging into their account and seeing red. Nobody likes watching stocks fall 5%, 10%, or 15%+ But if the business is still doing well, earnings are still growing, the valuation is good, and the long term thesis is still intact, lower prices are opportunity.

The way I am thinking about the market right now is pretty simple. A few weeks ago, I thought the market was a little too hot. Not insane. Not 1999 bubble level. But a little expensive. Now, after some volatility and with earnings still growing, the market is getting closer to fair value. I would still say the overall market is probably 5 to 10% overvalued. That is not some crazy number where I think everyone needs to run for the hills.

It just means you need to be smart. You do not want to be max aggressive when things are a little stretched, but you also do not want to get scared right when prices start getting better. That is what most people do backwards. They feel amazing when stocks are expensive and going to the moon, and then they feel terrible when stocks are finally getting cheaper as they fall/go sideways. Stop acting like the herd…

One of the biggest things I am watching right now is earnings per share growth. Q2 earnings estimates are still looking really strong. Q2 EPS growth is expected to be around 22% YoY for the S&P 500. That is VERY strong! The long term average is closer to 8 to 10%, so when earnings are growing more than double the average, you have to factor that in. It helps justify the market rally we just got, but not all of it.

The forward PE ratio for the SP500 is about 20, which is pretty similar to the 10 year average of about 19. We are a little above the average on PE because we are more than average for EPS growth. It helps to justify it.

We did also get news that Iran & the USA are potentially close to striking a deal. This will likely drop oil prices, drop inflation expectations, drop interest rates, drop bond yields, drop interest rate hike expectations, & help support the markets slightly elevated valuation we are at now. Good!

Selling calls on USO has been doing great as oil prices are high and the top for oil is likely in. I see a world where the USA and Venezuela are ramping oil production & when the straight of Hormuz opens up, it will flood the world economy with even more oil potentially drop oil even lower than pre Iran. No guarantees, but possible. Will take time to play out. So in addition to capitalizing on great companies at good prices and using options to magnify ultra compelling trades, selling calls on oil has been doing great for the last few months. We simply do what makes sense! (I show all my trades in real time in Discord!)

Overall, the game I play is simple. Own great companies. Sell 1+ year portfolio secured puts on great companies when the price makes sense. Buy leap calls when it makes sense. Keep ratios in check. Do not get overleveraged. Do not get emotional. Let time and earnings do the heavy lifting.

Right now, I think the market is going to stay volatile. There are too many moving pieces for it not to be. We have oil, inflation, the Fed, AI, earnings season coming up, jobs data, consumer data, geopolitics, and all kinds of headlines that can move the market day to day. So keep your pants on. Volatility is part of the game. But as I always say! Volatility = opportunity. Not risk. It’s only risky if you are over leveraged/ don’t know what you own and why you own it.

If the market falls more, good. More things get cheaper. If the market goes sideways, good. Earnings can keep catching up. If the market goes higher, good. We already have exposure to great companies. That is the beauty of having a plan. You do not have to sit there and guess every single candle. You just need to understand what you own, why you own it, what price makes sense, and how much risk you are taking.

That is the message this week. Do not panic because the market is volatile. Do not force trades because you are bored. Do not get bearish/panic because stock prices are taking a breather after a euphoric rally. Zoom out. The long game is where the money is made.

That’s my thoughts for this week!
See you next week!

-Brandon

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Economic/Earnings Calendar For June 15 - 19
(all times in pst)

Monday June 15:
5:15a Industrial Production
5:15a Capacity Utilization
6a NAHB Housing Market Index

Tuesday June 16:
5:30a Import & Export Prices
5:30a Empire State Manufacturing Index
5:30a Housing Starts & Building Permits

Wednesday June 17:
5:30a Retail Sales
11a Interest Rate Decision
11:30a Fed Chair Kevin Warsh's First Press Conference

Thursday June 18:
5:30a Weekly jobless claims
6a Leading Economic Indicators

Friday June 19:
Juneteenth Market Closed

Everything will be broken down in real time in Discord!