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Bad news is good news for the market (again)

Dec 10, 2021

Good morning!

Inflation surged 6.8%, the highest rate since 1982 and that’s clearly bad.

So why are the markets headed higher?

Stay tuned.

Here’s my playbook.

1 – Why markets are heading higher after the worst inflation since 1982

Inflation is bad and there’s no doubting that given that millions of Americans are hurting. Millions of people around the world, for that matter. Anybody with a link to the US Dollar is getting pinched.

So why are the markets poised for a big run?

To a point I made with the fabulous Charles Payne yesterday, the data itself doesn’t matter. It’s what traders think about the data that matters. (Watch)

Buy energy companies, buy tech companies, buy defence companies … the common thread is that all have growing sales, built-in margin protection and are using technology to grow their businesses in ways most investors do not yet understand.

**I will be talking more about this later today at the Q4 One Bar Ahead™ Zoom Happy Hour. So please make sure you’re signed up if you’re part of the OBA Family. I’m also going to be talking about my 2022 Playbook, taking questions and more. It’s not too late to sign up, but you do need to be an OBAer to attend. (Click here to join us).

2 – What to buy if you fear more selling

I get this question a lot lately and have three thoughts.

First, keep it simple. The game isn’t about selling everything like most people think but rather about selling “enough” to shed risk and stay in the game.

Second, inverse funds like SH or RYURX can hedge your core holdings. They’re easy to buy and rally if the S&P 500 goes into decline. Studies show that having 1-3% of overall assets can dampen portfolio volatility (which is exactly what you’ll want – a smoother ride).

Third, take a hard look at cloud stocks and big tech. Many have single-digit valuations but double or triple-digit growth potential over the next few years.

As much as I like VMWare for example, I’ve got an even better choice lined up for 2022. I’ll be spilling the beans in the January issue. (Join us to get access first).

3 – Evergrande is another Enron moment for ratings agencies

Evergrande has defaulted, exactly as I said it would when the crisis broke this summer. Yet, there hasn’t been so much as a peep from most ratings agencies. Those few that have spoken up have caveated the daylights out of things. (Read)

What a load of it.

Ratings are bought and paid for in the US and it’s one of the dirtiest games on Wall Street.

Ratings agencies can’t admit Evergrande is in default because doing so is tantamount to admitting that a) they missed the entire thing in formation or b) that they were paid off not to. Labelling Evergrande a “default” means that the company has fewer restructuring opportunities and that ratings agencies can’t charge millions more for rating – you guessed it – newly restructured debt packages.

In China, the game’s a bit more serious.

China isn’t pushing the default narrative because there are lots of connected insiders who want to “save face.” Many are going to be quietly removed from key posts. Some are going to get a long walk in the Gobi Desert. Others will go to prison if they live that long; Chinese traffic is notoriously dangerous as is alcohol overconsumption. Look up Neil Heyood, Gu Kailai and Bo Xilai if you think this is all too James Bond-like. (Read)

Evergrande is another Enron moment and yet more reason to toss ratings agencies IMHO.

4 – The biggest opportunity in eCommerce is still the least recognized

Most people know that mCommerce – the branch of eCommerce that allows you to buy and sell stuff anywhere you have a mobile connection - is growing rapidly. But very few people understand that America ranks dead last in global adoption.

Talk about an opportunity!

The fact that I’ve been pounding the table on Apple, Microsoft and all things mobile is not a coincidence. Neither is the “ecosphere.” The key (and something I'm watching closely) is something called "conversational commerce" - which is a topic for another day.

5 – Go where the Buck is going!

I sat down with the fabulous Kenny Polcari recently to talk money, markets and a whole lot more recently on his podcast. He’s as sharp as they come, and it was a real honour to be invited.

I thought you might enjoy our conversation. (Listen now using Spotify) Or, right here if you’d prefer.