☕️ I didn’t see this one coming, but now that I have

Howdy! 👋 

The markets are flattish with all three indices marginally green in the early going as I type. I don’t know if that’ll hold as traders adopt a wait-and-see attitude ahead of “the Fed.” 

Then again and to be honest, I don’t care much either. 

Why? 

Simple. 

Rates are for traders and profits are for investors. 

The world’s best companies are not Fed-dependent including many of the great names we talk about frequently. So – Fed or not – that’s where I tend to focus my time and encourage you to focus yours. 

Buy the best, ignore the rest!® 

Here’s my playbook. 

1 – The markets are flat, but SpaceX continues to rally as I type 

What to do? 

My $0.02 is get ready. 

I say that because most investors continue to think in terms of specific stocks, but what they don’t realize is that the world’s best traders think in terms of probabilities. 

Let me explain. 

Today’s markets are increasingly run by algorithms and quantitative models that can – and do – pile into single stocks like SpaceX regardless of what the broader markets are doing. Then, get dumped just as fast. 

That’s why – I submit – you want to remain intently focused on the world’s best companies – which in my world means those making “must have” products and services – because every now and then one of ‘em goes on sale for reasons that have nothing to do with the business itself or the profit potential at hand. 

Get your buy list ready. 

YOU do have one… right!?!?! 

Trade Idea: I think it’s only a matter of time before we get a short-term whip downward as traders continue to suck in the FOMO crowd. Putskies and inverse ETFs could work nicely if volatility rises. 🤔 

2 – Warsh serves up his first nothing burger 

That was fast.  

Kevin Warsh’s first big move is… drum roll please… removing a line from a statement. (Read) 

Doh! 

And as much as everybody hoped for swift decisive action, that means no rate change and no clarity on when the markets might expect one.  

Survey says rates stay parked right around current levels through 2027 which, by the way, is exactly what I've been saying since he first got the nod. 

I continue to believe that there’s an outside chance he actually raises rates, but that’s just me. 

Meanwhile, and to a point that I made yesterday, I hope to heck he “takes away the mic” from anybody at the Fed who wants to blather on about rates, the dot plot or whatever nonsense strikes ‘em. (See #5) 

Keith’s Investing Tip: People obsess over the Fed but what they really should be doing is figuring out which companies to own that don’t need the Fed to succeed. It’s a short list. 

3 – I didn’t see this one coming but now that I have… 

Yum Brands just sold Pizza Hut to private equity firm LongRange Capital for $2.7 billion. (Read) 

Smart move. 

The Pizza Hut name still means something with 15,500 restaurants in 100+ countries and $10B in annual sales system-wide. Going private removes the quarterly earning pressure that caused most of the damage to the once venerated brand in the first place imho. 

LongRange has a big row to hoe, though. 

The Hut has logged 10 consecutive quarters of declining US comparable sales because it’s been managed for MBA-style efficiency, not brand loyalty for years.  

Reminds me of Reese's Peanut Butter cups. 

Seems to me that Domino’s won the delivery wars while Papa John’s owns the premium tier and Little Caesars owns the value lane. 

Nostalgia won’t pay the rent. 

Keith’s Investing Tip: Storied brands can fail so the question is what makes ‘em succeed from an investing perspective. While I love the Hut, this move tells me the restaurant sector in general remains a dicey proposition. 

4 – What Nvidia gets that most investors don’t 

Team Jensen announced that it’s raising $20 billion in bonds — its first trip to the debt markets since 2021, when it raised $5 billion. (Read) 

Four times bigger this time around… seven tranches, maturities stretching all the way out to 2056. 

Predictably, shares are down as I type. 

MyPOV?  

This isn't a company scrambling for cash. Nvidia is sitting on $80+ billion in cash with $49 billion in free cash flow last quarter. In other words, they don't need this money.  

So why borrow? 

Two words… capital efficiency. 

Good CFOs – and Nvidia’s CFO Colette Kress certainly qualifies – understand that borrowing cheaply in the bond market means the company’s own cash stays free for bigger things. 

Like oh, I dunno… an additional $80 billion in share buybacks — no expiration date — and raising the quarterly dividend 2,400% from $0.01 to $0.25. New chips, new partnerships, new investments. 

Some people are griping about the 2056 maturity date. 

What the pundits and pontificators don’t understand is that you don't borrow money for 30 years if you're nervous about the future. You do it when you're confident enough in your long-term position to lock in today's terms for the next three decades.  

I think it speaks volumes that orders came in at $85 billion on a $20 billion deal because that means the markets get the message. 

Smart investors undoubtedly will too. 

Keith's Investing Tip: The world’s best companies don’t use debt the way you and I do so it’s a mistake to think about what’s happening that way. Instead, think about the trade-offs between cost and profit potential. When a company finances efficiently, it drives earnings expansion — and earnings expansion, in turn, drives share prices higher over time. 

Investors constantly misunderstand the dynamic and that works against ‘em. 

Remember… 

5 – Brent oil dips below $80 per barrel for first time since March 

Oil-related stocks are down on the news as you’d expect. (Read) 

I’m drooling. 

The top big-energy players have amazing cash flow, great yield and super high TSY – True Shareholder Yield. My research shows that’s a powerful mix. 

Hopefully, you’ve got this covered in your own portfolio.  

Not all oil companies are equal, and some are very definitely better than others, imho. 

You know what to do and – if not or you’d like some help – you know where to find me. 

Bottom Line 

There are undoubtedly going to be loads of investors who give up when the markets fall next. That’s too bad because my view is that no investor should ever fear a selloff, a downturn, a correction… whatever you want to call it. 

Reminds me of something Thomas Edison once said. 

“Many of life’s failures are people who did not realize how close they were to success when they gave up.” 

Don’t give up… the markets are filled with opportunity for those who care to look and those who stay in the game. 

Now and as always, let's MAKE it a great day. 

You got this — I promise! 

Keith 😀