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75% chance of something most investors think is impossible right now

Nov 28, 2022

Good morning! 👋

Let’s start with a quick welcome to 5,236+ savvy, fun, and super smart investors and traders who joined 5 with Fitz over the weekend! ! If you’re reading along and you aren’t part of the Family, please click here to join the Family! Upgrade to Paid

Markets have, not surprisingly, opened to the downside as fears over Chinese unrest roils global markets. It’s a big deal, but not for the reasons most people in the West will think.

Here’s my playbook.

What China's protests mean for your money

Protests rage in China as that nation’s draconian COVID-19 restrictions take hold. Guangzhou is building 250,000 quarantine sites after having become a new hotspot infection site, according to Wion. (Read) Apparently, there are widespread protests underway. Which is totally understandable, considering 400+ million people are under some form of lockdown or quarantine.

I can almost guarantee you that we’re not hearing the half of it.

Key Thought: Beijing will not tolerate a loss of control, even if it means wrecking the economy. Many so-called Chinese experts are going to posture about freedom, protests, and expression, but very few understand how the game is really played. Westerners have called for China’s demise for 50 years, and the only thing they’ve gotten right in all that time is being wrong about its failure.

What China’s protests mean for your money. Protests will 1) cause supply chain concerns to roil global markets. So, the thing to do is focus on those companies where China plays a material role in otherwise sound operations and 2) you can buy at a discount, using other people’s shortsightedness to your advantage. My favourite fruity computer maker and Team Tesla come to mind, for example.

My POV with the fabulous Ashley Webster ahead of the opening bell. (Watch)

Biden/Chevron: A do-over

Chevron received an expanded US license that allows production to resume in Venezuela and for imports into the US. This allows Chevron to continue existing oil projects and will bring new supply to US refineries. The Venezuelan state-run oil firm PDVSA is being prevented from receiving proceeds from Chevron’s Venezuelan petroleum sales. (Read)

My Thoughts. The Biden Administration continues to drain the Strategic Petroleum Reserve which now stands at just 390,000 barrels and the lowest level in 40 years. The move will bring on supply, which, if you passed basic economics class, may lower prices. That’s not a coincidence… the Biden administration stated recently that it will refill the reserve when oil reaches $67–$72 per barrel. WTI crude is trading at $75.97 per barrel as I write.

Three guesses which company will earn bank—and the first two don’t count.

Record Black Friday sales 🥳, but BNPL jumps 78% 💩

Black Friday sales hit a record high of $9.12 billion for online shopping. (Read)

This seems like a home run at first glance, but really isn’t.

Buy now, pay later jumped 78% compared to the previous week. That tells me people are so stretched as inflation rages that they simply can’t pay for what’s on offer. This at a time when, mind you, 63% of Americans couldn’t handle a $500 emergency without going into debt. That and, oh—I dunno—the average credit card rate is 22.40%, which is the highest since Lending Tree started tracking monthly rates in 2019. (Read)

One Bar Ahead Action: Score a double, meaning buy the best banks you can get your hands on, as well as the number one payments network. All that vigorish – aka juice - is gonna add up—you might as well profit from it. 🤦‍♂️ I recommend two in One Bar Ahead®. Upgrade to Paid

75% chance of a Santa Rally

What history says. The S&P has gained an average of 1.6% during December, which is more than double the 0.7% gain of every other month. Simultaneously, stocks have rallied 75% of the time since 1945 during the last five trading days of December and first two days of January (i.e., the “Santa period”). The average rally has been 1.3% since 1969, according to the Stock Trader’s Almanac.

Why you should care even if you don’t believe it. Like anybody else, fund managers are driven by bonuses and don’t like uncomfortable questions from their clients. That’s why many will go out of their way to make sure the names clients want to see are on the year-end statement. This is a nasty little practice called “window-dressing.”

Will this happen again? My take is that the bottom is already forming based on current price action. In fact, it has been for the several weeks we’ve been talking about it. There are obviously no guarantees, but that’s why you “buy the best and ignore the rest.” Anything else is a risk you don’t want in your portfolio.

It’s a stock pickers’ market!

FTX/Moonstone Bank: Move along, nothing to see here

The FTX saga is getting weirder by the minute. Apparently, Alameda, FTX’s fund management arm, invested $11.5 million into a tiny rural Washington State financial institution called Farmington State Bank.

Ummm. The amount was for 10% of the bank, which implied a valuation of $115 million. That was also double the bank’s entire net worth, according to Protos. (Read) Not that I believe in coincidences, but the bank—which was renamed Moonstone, BTW—had 25 employees and just $10 million on deposit. Further, FDIC data suggests that just four accounts were responsible for a 600% increase in deposits during Q3.

The scenario is not unlike the one depicted in the 2017 action comedy, American Made. It’s a true story based on pilot Barry Seal who became a drug-runner for the CIA in the 1980s. Things began to unravel when Seal began buying up rural banks to deal with all the cash he’d been paid and, in doing so, ultimately tipped off the FBI that something was afoot. (Watch)

This investigation is going to be very interesting!

Newsflash: BlockFi just filed for bankruptcy as we’re preparing this morning’s alert. The situation will get a lot worse before it gets better as the contagion spreads. Get out or make peace with the prospect that you may not!