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Anybody not playing both sides is missing 50% of the profit potential

Jan 21, 2022

Good morning!

‍The markets are up in early going ahead of what I believe will be the single largest, singularly most important week of earnings and data of the summer.

There are 175+ companies reporting, plus the Fed, consumer sentiment and a slew of other important stuff that’ll hit the news.

Most people are laser-focused on the Fed, but that’s a sideshow for reasons I noted during a conversation with the fantastic Stuart Varney just ahead of the opening bell. (Watch)

Here’s my playbook.

Normally action beats reaction but …

It doesn’t matter whether you’re talking martial arts, special warfare tactics or the stock markets, normally action beats reaction every time.

Not this week, though.

There is so much data that’ll hit the wires that I’d rather sit back and see what the markets want to give me. Then bust a move, especially when it comes to big tech.

Take Microsoft, for example.

Critically, the company is growing revenue and earnings at 12% a year and price targets reflect a 25%-30% upside. I expect MSFT to generate $295 billion a year by 2025.

MSFT lines up with Digitalization, the largest of the 5 “Ds” we follow in One Bar Ahead™, my premium journal for individual investors. (Learn More)

My inclination is to sell cash secured puts if prices drop because doing so allows me to pick the “discount” at which I want to buy. Plus, I get paid to go shopping via the credit received as a part of the put selling process.

LowBall Orders are another tactic that would work well in this instance, especially if you’re not options savvy or simply don’t like ‘em. Anything under $240 a share would be appealing, for instance.

I suggest you get your buy list ready and apply similar logic to harness any short-term volatility that could hit the stocks you’re keen to buy. Apple, Amazon, Tesla, Chevron … all come to mind at the moment.

The Fed: See ya 75 and raise ya 100

Watching the Fed is like watching a bug in search of a windshield.

Fed futures are pricing in an 80% probability of a 75 basis point hike, but I think it’s just foolish enough to put 100 on the table.

Neither matters much.

The Fed missed this crisis in formation and the markets don’t care on anything other than a short-term basis. The credit card rates, mortgage costs and more that’ll make headlines are moot.

The only number that matters is the one associated with the cost of short-term capital. That’s because hedge funds and other financial institutions carry a jaw-dropping amount of leverage.

Rising rates make ‘em less inclined to “lever up” so the markets will struggle. If the Fed tippy toes to higher rates as I think will be the case, the big money is more likely to stay “on the gas.”

That means we could have a nice rally into Fall.

Rise of decentral digital healthcare

The Amazon/One Medical deal caught a lot of folks by surprise, but not us. In fact, we’ve been talking about it here in 5 with Fitz for over a year. The only question was “when” the move would happen.

Privacy advocates argue that the company would “know” a huge amount about us and use that information in ways that goes way beyond medical sales. (Read)

No doubt, but here’s the thing and why I’m not in the least bit concerned. That’s how the game is already played.

Insurance companies, credit ratings agencies and the like have been in cahoots for years to put “you” together and sell that information.

Disgusting, but potentially a super lucrative move. Apple and Microsoft, BTW, are already edging into this space from other directions.

China’s latest smoke and mirrors

China is apparently floating plans to avoid delisting securities in the United States by 2024 as part of compliance with the 2020 Holding Foreign Companies Accountable Act which requires ‘em to hop up their audit files.

No way in you-know-what this’ll happen.

China will throw everything at this including the kitchen sink in an attempt to make it look like they’re complying and that they “want” to be responsible global market participants.

Riiiiight.

I learned a long time ago in mainland China that the appearance of proprietary is far more important than actual proprietary itself.

There are only two Chinese companies I recommend right now and, even then, under super specific conditions. Both have global aspirations that make them a super different proposition.