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This will move first if the economy stabilizes

Jan 04, 2023

Good morning!

Rates are down slightly this morning, according to the bellwether 10-year US treasury, which has dropped -0.12% to “just” 3.673% as I type. That’s obviously nothing more than a drop in the proverbial bucket, so I wouldn’t get too excited.

Instead, stay focused.

The stock markets have now fallen to the point where history shows very clearly that buyers have the upper hand if they’ve got any kind of time horizon at all.

Here’s my playbook.

China fears weigh on Apple and Tesla, but only if you’re scared of the headlines 🤦‍♂️

The official story is that China risks loom over US tech giants Tesla and Apple. Things are so bad that even my colleague Dan Ives of Wedbush, a notoriously bullish tech expert, says “there’s a major overhang [...] because both rely on the Chinese consumer.” And he’s right.

MyPOV: Both of these companies have a lot more going for ‘em than just iPhones and cars. Consumers may pull back for 6–9 months, but ultimately, they will be back. You can tell if you look at company guidance, which is prepared by executives who actually know their businesses intimately—as opposed to sell-side analysts who think they know the most intimate details about businesses they don’t run.

Both are bargains, especially if you know which tactics can help you keep the ball in your court. Upgrade to paid

Bankman-Fried: Not me

What’s happening: FTX founder and former CEO SBF plead not guilty in NY to federal charges including money laundering, conspiracy to commit wire fraud, and securities fraud. Judge Kaplan set the trial for October while also deeming secrecy essential to protect the individuals who posted Sam’s $250 million bond. (Read)

Why you should care: The FTX situation will prove “linked” to some surprising elements (and players) in the world’s financial system. There is a role for cryptocurrency; it’s just not the one you’d think.

This may be the last chance to get out if you haven’t already.

Why you'd be wise to reimagine Deere as a disruptor

John Deere is now seeking a satellite partner with the goal of building a geospatial map farmers can use to better track crop performance, weather, and productivity. (Read)

I’m not certain it will move Deere’s needle immediately, but I can think of half a dozen space-related stocks that will benefit, including two already in the One Bar Ahead® Model Portfolio where we’ve been tracking this trend for the past two years. Upgrade to paid

Tokyo Gas is buying; should you?

Tokyo Gas is apparently in talks to buy Rockcliff Energy for $4.6B.

Makes sense. Japan is notoriously resource challenged, and the Ukraine situation has completely upended normal supplies for the island nation. Japan imports roughly 10% of its LNG from the United States.

Cheniere Energy is down -22.9% from 52-week highs at $140.53.

Hmmm.

This will move first if the economy stabilizes

Most investors are hopelessly concerned with short-term interest rates and, in doing so, are totally missing the boat when it comes to predicting what happens next. That’s logical because the Fed is lifting short-term rates in an attempt to crush inflation by reducing demand for goods and services. They can’t, for reasons we’ve discussed many times, but that’s the theory.

Watch long-dated treasury bonds instead. Yields will rise relative to short-term debt if the economy is going to gain some footing.

Insurance companies hold gobs of debt to back the policies they write, so they’ll be a logical beneficiary. I’ve got a few ideas for later this year.