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How to play the Fed (and win)

Sep 20, 2023

Good morning! 👋

Decided I needed a little Rock & Roll from Led Zeppelin this morning ahead of the open.

My neighbors, perhaps not so much. [face palm]

But that’s another story for another time.

The important thing this morning is that it’s Fed day, and once again, traders are taking prices up in the pre-market hours after having taken ‘em down yesterday.

This would be laughable if it weren’t so predictable.

Today’s markets are very different than the markets we grew up with, and it’s important that you take that into consideration if you want different results.

Big, leveraged traders are using every trick in the book—massive leverage, Dark Pools, 0DTE, high-speed trading, and more—to create volatility they can exploit at your expense.

Repeat after me… DO… NOT… PLAY… THAT… GAME!

When in doubt, zoom out!

Here’s my playbook.

How to play the Fed (and win)

The one and only Charles Payne asked me yesterday, “How should investors play current market conditions?”

My answer is decidedly simple.

Buying great companies never goes out of style.

(Watch)

Key Point: The reason most investors fail isn’t for lack of trying. They simply lack a comprehensive, disciplined framework for seeing past the short-term noise.

INTC vs. NVDA

Intel is a great company with a long, storied history and a fabulous CEO who I’ve been fortunate to meet several times, Pat Gelsinger.

Still, the company can’t get out of its own way.

Yesterday should have been a home run as Gelsinger began speaking about generative AI at the company’s annual developer forum. Instead, shares began to slide and by the end of the day finished down -4.3% to become the worst-performing stock in the DJIA.

I’d rather own NVDA (along with a handful of other super-specialized chip makers). Upgrade to Paid

Dan Ives and Sarge Guilfoyle both like Palantir—so do I

I was a lone wolf for a long time, professionally speaking, and endured no end of guff for having been in the water early on this one.

Now I couldn’t ask for better company.

My colleagues Dan Ives and Stephen “Sarge” Guilfoyle are on board too. (Read)

With good reason.

Palantir is THE big data play of the century, perhaps of all time.

The company’s client range and breadth of involvement at every level in global markets is second to none. What’s more, it’s growing very, very rapidly.

Naysayers, of course, can’t see this coming. They can’t easily tick boxes in their analytical reports, which means that it doesn’t fit neatly into their world.

Good!

Innovators always break the mold.

Besides, the naysayers’ inability to see what happens simply means more shares are available at lower prices for longer.

CART: Buy or eye?

The company is already fading after a much-ballyhooed $660 Million IPO. (Read)

No surprise to me.

IPOs are as rigged as it gets.

Back in the day, individuals had a real shot at wealth buying freshly minted IPO shares.

These days, however, buying IPO shares is a lot like going to a casino where the tables are not only stacked against you but you get mugged on your way to play.

Any 12-year-old with a bike can compete.

Give CART a quarter or, better yet, 2–3 to prove itself—then think about buying shares.

If your greed glands are working overtime—and I get that they may be—remember what happened to PTON.

PTON’s shares are down -97.1% from an all-time high of $167.42 on January 13, 2021 to just $4.85 as I type and, dare I say it, all but dead money.

The better choice in a situation like this is to wait for a company you want to own to drop below its IPO price, a pattern we have seen before (i.e., Palantir).

Worried about more debt? Buy assets

The doom-and-gloom crowd has been busy lately now that total US debt has surpassed $33T.

The implication, in their eyes, is that the markets will inevitably crash.

Take that with a grain of salt, for two reasons.

First, they’ve been making that argument for decades. One day, sure, the roosters will come home to crow, but meanwhile there’s a ton of money on the move, which means that there’s tremendous profit potential up for grabs. Buffett hasn’t cut and run, for example.

And second, what this really says is very simple and in the words of our newest ace analyst, Andre “Dre” Appleton, “Buy assets.”

He’s right.

What Dre is pointing out is deceptively simple.

You’ve heard me say time and again that money is like water in that it will flow to where it’s treated best.

Right now, that’s the world’s best stocks in the world’s best stock market. Many people instinctively default to gold or metals, but that’s not everything it’s cracked up to be—for reasons we’ll talk about another time.

I know it’s scary—I get that, but history is very clear about this.

If debt continues to pile up (as it probably will) and the dollar continues to be devalued (as is likely the case), one of the best places to park that money IS the stock market. Especially if you help control risk by confining your investments to the world’s best companies.

Including, of course, many of the great names we talk about frequently.

There is always a way into the fight and a path to profits!

Always.

Oh, and if you’re interested, fine wine—yes, you read that correctly—has outperformed the S&P 500 4-to-1 since 1952, according to Forbes, which is why I’ve started to collect it in addition to enjoying a glass now and then. The team at Oeno (where I’m a happy client) has recently started the Saturday Cork & Cask to help anybody who wants to learn more. You can sign up for free here if that’s of interest. (Learn More)