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Where to put your money next

Apr 12, 2022

Good morning!

Futures jumped after the CPI report fostered hope that inflation may be peaking. I doubt very seriously that’s true, but I’ll take it.

Here’s the playbook.

1 – Gaming the big money before it games you

I have a sneaking suspicion that the big money may use any rally today to sell into strength based on pre-market chatter. People hear that and the first thought is often “I’d better sell too” but that’s exactly what they’re hoping you’ll do.

Remember this is not an “on off” nor an “all in/out” decision.

The big money has been buying every drop, including the past few days. They tend to trade around core positions and use down days to build which, if you’ve been reading my work for any length of time, is going to sound familiar.

The constant up/down action that’s so frustrating is a function of leverage. Rates are down in early going and predictably the big money is going to put their foot on the gas pedal as a result.

Big tech is probably going to be first out of the gate if overnight Nasdaq futures are any indication. Nasdaq is down -5.7% month to date versus just -2.6% from the S&P 500 and the big money loves a bargain.

You know the names … and the drill!

2 – Where to put your money next

Let’s assume for a moment that you’ve got big tech covered. Most investors don’t but that’s another story about horses and water.

The next place to put your money last was oil. I recommended Chevron last September and it’s returned 74.6% versus -1.83% from the S&P 500 over the same time frame.

Now it’ll be big pharma and to agree with CNBC’s Jim Cramer, I mean “only” big pharma. The small cap variety will get crushed by rising rates especially if they don’t have a product pipeline.

One of my favs has a new CEO and all indications are that he’s going to go on an M&A run. But the timing remains nuanced.

I’ll have an update and a plan in the May One Bar Ahead™! (Click here if you’re not already on board)

3 – TIPS won’t cut it

I said the “print” would be a doozy, possibly even the highest ever and it appears I was correct in my thinking.

Inflation jumped 8.5% and is now running at the highest levels since 1981. (Read)

Naturally, that excludes food and energy which are running substantially higher and hotter. Energy, for example, is up 32% YoY and 11% month over month.

Many investors are feeling lost because they fear downside, but the more expensive proposition is missing opportunity.

For example, buying 2% bonds sounds great until you realize that the world’s best companies are growing at 35-45% a year.

That’s the stuff to buy if you’re really serious about beating inflation and understand that volatility is a tradeoff, not a limiter.

My take with the fabulous Stuart Varney yesterday morning ahead of the bell on exactly this subject. (Watch)

TIPS (Treasury Protected Inflation Securities) will NOT cut it BTW so don’t fall for those if you’ve got a broker or planner hawking those things.

4 – No more “Blue light special”

It was an American icon that once competed seriously with Walmart, Target and other big retailers via a network of 2,000+ locations. Now, Kmart is down to just 3 stores following closures in Avenel, NJ and other locations. (Read)

No more blue light specials, an expression that will mean something if you’re a certain vintage like I am.

There are only a handful of retail stocks worth your money, and I can count ‘em on one hand with fingers left over.

5 – Oil: everything except what’s needed

The President is now authorizing a waiver for E15 fuel. Naturally he’s spinning this as a way to give consumers more choice when it comes to gasoline and save money for American families. (Read)

Call me crazy but $0.10 per gallon is chump change when opening drilling and re-engaging pipelines could result in savings of $0.50 or more … per gallon!