The 3s Report: Whistling Past The Graveyard To Start 2025

From timely to timeless, the 3 most important points we can make about stocks, bonds, ETFs, markets and investing...updated weekly

ROAR Score weekly update

• Our "Reward Opportunity and Risk" (ROAR) score drops to 20 from 40 today. That returns it to the level it stood at back on 11/26/24, from which it hopped to 35 and then 40.

• This means a 2-ETF portfolio that can only be allocated to SPY and BIL would now be 20% SPY and 80% BIL.

• I would not be the least bit surprised to see ROAR pop back up during January...or go to zero

3 Quick Thoughts on markets

• I could tell you what I think of things here at year-end. Or, I can just outline what the Sungarden YARP Portfolio allocation looks like, following today's trades. That tells the story better.

• I am down to 10 stocks (22% of portfolio), 10 income ETFs (74%) an options "long combination" (puts AND calls on SPY) and a bit of spare cash. That's it.

• I'm not convinced that December's price action can simply be pawned off on "it's low volume/holiday season." Long bond rates may have stopped rising for now, which would likely be a lift for stocks. But few stocks look OK to me beyond a bounce.

3 ETF (or index) charts I’m watching

That is some change in the yield curve from Thanksgiving to now. Long rates are up (way up) and short rates are down (way down). Yet the long end remains iffy, given the "buyers strike" that might be happening from the historically big owners of US Treasuries. Meanwhile, at well above 4%, T-bills still please my risk-managed portfolio quite well.

This is the chart for a very popular dividend ETF, one I think is too popular. I follow many of its stock holdings for my own work, and so if my concerns about the market during Q1 come to pass, SCHD is set up for a very rude start to 2025. I hedge my dividend stock portfolio, it doesn't. It is just an index ETF. It has slid nearly 8% in 4 weeks, taking its 2024 total return from 20% to 11%. Yet I suspect not many among the $65 billion shareholder base notice, or care. More of this, and I think they will.

Remember those old cartoons where a guy was stranded on a desert island, and hallucinated that he thought he'd found food? Maybe that's me here, but in case oil is not a mirage this time around, I'll note that its price is perking up. A 5% move higher would be a "gimmie" but if it looks to move much higher in the new year, I'll get very interested.

3 stock charts I’m watching

Amgen is one of many stocks I see that I'd call "cheap but not yet timely."

If 2025 goes as 2022 did, with stocks falling at the starting line and falling for 9 months before catching a bid, remember this chart. Banks and financials look like this, save for a few mega caps. That bottom part I circled has a message: "I tried to rally but didn't have the strength, so I just gave up." December light volume thing, or something else? We'll find out soon.

In one of my small trading accounts, I'm a proud owner (make that "renter") of this meme stock, but in inverse form. Make that 2X inverse. MSTR is the stock symbol, and the 2X bear ETF is SMST for the curious. The chart looks lower (higher for my SMST position), but these can change rapidly. Still, any stock that goes "from a 1-handle to a 5-handle" inside of 3 months hits my radar to try to profit from a subsequent plunge. Options are too expensive on a stock like Microstrategy, so my strategy is the levered ETF in this case.

Final thoughts for now

Happy New Year to all who are along for the ride with us at Sungarden! Enjoy the celebration, then strap in. January is a very critical month.

Most stocks look like they are "toast" so unless there is yet another jolt of hope-ium early in the year, the buy list will stay slim. There's a long list of market worries, yet it seems all of Wall Street is bullish. I'm happy to join them, but for now the modest "long" positions and those call options are my preferred way to participate.

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