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Q1 closers and the allure of deep OTM puts

Mar 31, 2023

Good morning! 👋

It’s the last day of Q1, and the markets will undoubtedly make it interesting all the way to the closing bell.

Here’s my playbook.

Trump indicted; markets nonplussed

Let’s get this off the table straight away.

I don’t have the luxury of taking sides in my capacity as an investment strategist. My job is to find the very best investment opportunities I can and share ‘em with you.

In this case, I think the situation could result in the previously unimaginable combination of an indicted former US president campaigning as the front-runner for the 2024 Republican nomination.

I expect the markets to remain cautious with regard to this issue but see two specific trades on the horizon as the situation develops:

A. The markets may rally sharply if it looks like Trump could win, then sell off hard if he does; and,

B. Firearms and ammo makers could jump if there is a corresponding fear that he won’t or gun-control legislation looks likely. POWW comes to mind, for example. I own a few speculative “Vegas Money” shares and am upside-down so far, but that could easily change given that it’s trading at just ~$2 a share.

Admittedly, this is one of the most challenging investment scenarios I’ve ever had to contend with.

Keeping emotions at bay will be key and, I suspect, tested like none of us have ever imagined.

Ford Lightning prices jacked again

Ford is raising prices for its flagship EV, the F-150 Lightning pickup. It’s supposedly the center piece for Ford’s EV ambitions, but I have a hard time imagining that—given that the price range is $60,000 on the low end for fleet models and $98,000+ for a top trim model. (Read)

MyPOV: There is simply NO way that the average consumer can handle that kind of pricing, so this is going to be all about payments. That’s why sales will depend on touting payments of “only” $___ a month rather than sticker. Management probably hopes that this will boost Ford’s margins and erase the $3B the company expects to lose on EVs this year (that I told you about recently), but I doubt it.

The banks will be the real winners here, as will the credit agencies, which have made billions by harvesting the most intimate details of our lives without our permission. My favourite has held up despite the SVB Crisis.

The first central bank to fail won’t be... the Fed?

Author Robert Kiyosaki of Rich Dad, Poor Dad fame argued during an appearance on Neil Cavuto’s show that the Fed won’t be the first central bank to fail. That honour will go to the Bank of Japan, he said, which has kept rates low and facilitated financing the quadrillion-dollar derivatives market.

Is he right?

Having spent more than 35 years at this point closely involved with Japan (as a consultant, investment strategist, husband, and father), I can easily imagine that happening.

However, I also think Kiyosaki is underestimating Japanese resolve. That won’t change the global contagion if it happens, but still worth noting.

Buying a few deep OTM puts, then shelving ‘em could be one avenue if the SHTF.

Hmmm.

Good for SpaceX and Rocket Lab

Sir Richard is a really cool guy, which is why I’m super sad to see this happening. I’ve got to imagine it’s devastating, to be sure. Understandable, but devastating nonetheless.

I think it’ll be good for SpaceX and Rocket Lab.

The LEO (Low Earth Orbit) market was something on the order of $5–$10 billion and growing at 22.6% a year, but the Russia-Ukraine situation derailed that. At least for now.

It’ll be back as a function of digitalization, which may just be the single-largest investing theme in recorded human history. Do NOT miss it!

Kraft sells Russian baby food biz to Chernogolovka

Kraft Heinz (KHC) is selling its Russian baby food business to Chernogolovka for an estimated $32.4–$38.9 million; it’s just the latest Western company to depart from Russia. (Read)

Situations like this—a forced exit—often lead to otherwise viable business units being sold at a deep discount. And that, in turn, typically results in large write-downs that can negatively impact share prices... which is exactly what I think will happen in this situation.

Anybody owning Kraft would be wise to put up the blast shields, at least temporarily.

Meanwhile, deglobalization continues.

The temptation is to consider that a negative, but the real upside is to view things positively.

There are still plenty of great stocks out there.

Speaking of which, I’ll be sharing the April issue of One Bar Ahead® later today with the OBA Family, and there’s still time to get on board if you’d like. This month, I’m going to take an in-depth look at what I think may be one of the most powerful technical indicators on the planet. Plus, I’ll introduce a new feature I call the “Dividend Fortune Builder.” Cheesy name, I know, but it’s the only one I’ve got! Upgrade to Paid

Invest in the best, ignore the rest!