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How to find the “good stuff” in bad markets

Jun 14, 2022

Good Tuesday morning!

‍Futures are up ever so slightly and the hope is that the markets may try for a higher bounce after yet another vicious day of selling.
Here’s my playbook.

PPI is “only” 10.8%

The rally is pretty simple.

The May producer price index was expected to be worse so a reading of “only” 10.8% this morning is enough to bring in buyers … or at least that will be the official story.

In my best Dr. Evil voice, rrriiiiiiiiiiiiggght.

Inflation continues to rage, and a 10.8% reading is still at near-record levels. That’s suddenly not going to go away.

The real key is that 10-year Treasury yields backed off to 3.3% so the big money is a) taking on leverage/margin and b) getting on the gas.

Don’t let it fool you.

What to buy: Simple. Companies that can produce profits, boost revenues and generate gobs of cash during a downturn.

You know why: The best companies will fall less, stabilize first, and recover fastest. More in a moment.

Crypto: so bad it’s good?!?!

You know things are bad when industry insiders have to use euphemisms to describe what’s happening.

MyPOV: the situation makes “winter” look like a weekend in Palm Beach.

Crypto companies including Coinbase, Crypto.com, and even Peter Thiel-backed BlockFi are laying off employees en masse. Reports indicated all three companies are letting go of 18%, 5%, and 20% of their staff respectively.

Bitcoin has plunged to a new low of $20,834.70. (Read)

Ultimately, this is good for investors: There’s no question digital currency is the future but that’s different.

Meanwhile, weaker firms are going to get bled out. That’s the way markets work. Tread lightly.

Smile the next time you hear a tech bear talking smack

Digitalization is the single largest investing theme in human history.

Period.

Oracle smashed earnings and revenue estimates and, not surprisingly, shares jumped 11% in pre-market trading. Most of this is coming from the company’s cloud infrastructure business which, ta da, competes with both Microsoft’s Azure and Amazon’s Web Services. (Read)

At the risk of sounding like a broken record: The very best companies will boost sales, generate gobs of cash and get stronger during down markets.

Go farther up the food chain: I like Oracle fine enough but there’s a few players I like even better that are “farther up” the food chain, including a specialized defence contractor I recommended yesterday. (Get the stock)

Disney+ has a Hotstar problem

Wall Street’s swallowed the bait hook, line, and sinker when it comes to Disney+ which has been gaining subscribers consistently for the past few years.

Look deeper.

More than 1/3rd of Disney’s subs are coming from Hotstar, an Indian counterpart serving Premier League Cricket. Exclusive rights expire in 2023. (Read)

What’s coming: If the subscriber counts drop like I think they will, what happens next will make Netflix’s drop look pale by comparison.

Read this if you’ve had enough doom & gloom

Lots of people have, including me.

Perhaps that’s why I find myself thinking about our next motorcycle ride. Or the dog walk we’ll take later today by the bay. Laughing when I can’t find my flip-flops (again)!

There’s a reason: Some scientists now think that natural selection favours characteristics that foster the survival of groups, not just individuals.

Makes sense.

Laughter is not just the “best medicine” but quite literally the glue that holds us together. Smiles, too.

Pass along a kind word, a smile, and a hug.

We WILL get through this!