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Fed’s Bostic hurting markets

Jan 31, 2022

Good morning!

A mixed bag this morning in early going but a tentative climb into the green as I type. Makes sense with all the tech earnings on tap. Stay frosty!

Here’s my playbook.

**1 – Which stock could stop the selling this week, but probably won’t**

Stuart put the question to me this morning … there are over 100 companies reporting including 3 of the big 5 tech names that together account for 25% of the S&P 500: Amazon, Meta, and Alphabet. Here’s my take. (Watch)

2 – Take away the mic

Atlanta Fed President Raphael Bostic told the Financial Times that the fed could hike rates by half a percentage point instead of the quarter-point widely expected if needed. That’s hurting markets because it’s telegraphing more uncertainty. Nobody at the Fed should be allowed to speak to the press save the Chair. Effective immediately.
(Read)

3 – Handicapping AMZN, FB, GOOG

AMZN - Make or break for Amazon ... down 15% YTD with increasingly hostile legislators on the horizon. Slowing revenue growth; down about 25% last 12 months. People who believe in Prime say it's got value, but I don't see it, save AWS. More questions than answers for me ... pass. I think it falls further.
FB - Also down YTD. This is going to be like watching Fantasy Island ... all about the company's plans for the Metaverse, and a split between Apps like Facebook, Messenger etc and Reality Labs. The company is no longer bulletproof like people thought. I simply won't touch it with Zuckerberg at the helm because I believe the leadership is ethically challenged.
Alphabet ... the strongest of the 3 IMHO. If I buy back into any of 'em, this will be the one. Cloud computing here plus all sorts of work in medical, AI etc. Down just 8% YTD so that strength is reflected in the numbers. Google for advertising is key. But strong strides in Google Cloud and Google Workspace. 45% growth year over year.

4 – China names blockchain trial zones while West plays tiddly-winks

The West viewed blockchain as a joke when it surfaced; arguably still does. China, though, latched on to it almost immediately. Now Beijing and Shanghai are officially designated – read anointed by CCP leadership – to trial blockchain applications. This means local governments, universities, banks, power firms and even hospitals – some 164 institutions in all so far - are going to trial applications in the real world and, in doing so, gain real experience at a time when the West hasn’t even gotten to the starting blocks. (Read)

5 – Buy now before it hits another all-time high

People want to throw the baby out with the proverbial bathwater but that’s a huge mistake. Especially when it comes to Costco. Contrary to what the stock price would seem to imply, the company’s fundamentals have improved during the pandemic and sales are growing by double-digit rates. What’s more, the company is super likely to increase membership fees and pay a special dividend this year on top of the recently announced quarterly dividend. (Read)

I believe COST could hit new highs shortly if there’s any kind of pause in broader market pressure. And, not coincidentally, lower prices are a gift for savvy investors with the right perspective.