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The real risk to what Powell says next is one nobody’s talking about

Aug 26, 2022

Good morning!

‍It’s Fed Day, or something like that.

Here’s my playbook.

The biggest risk is 50

People are going to quibble whether Fed Chair Jerome Powell will hike 75 or 100 basis points, if he’ll continue to prattle on about being aggressive, raising rates etc.

The real risk is 50. That’s because a “low” hike would panic the market because traders would immediately put 2 and 2 together and assume that conditions are worse than they seem.

What to do today. Nothing stupid.

Random thought bubble. The spin doctors will be in high gear today, starting with Powell himself who seems to be going out of his way to be a western dude complete with plat shirts, denim and quilted vests. Guess his handlers are watching Yellowstone.

Why we buy

Microsoft just published THE roadmap to consumer trends in several industries.

It matches up almost perfectly to what we’ve been saying all along.

Here’s the summary:

  • Travel: Searches for “cheap” and “discount” have risen by 56% since the start of the year. People are still travelling… and they’re looking for deals.
  • Automotive: With gas prices soaring, electric vehicles are getting traction. Microsoft’s Audience Hybrid & Alternative Vehicles has increased 3x since the first half of 2022.
  • Retail: Shoppers are waiting for good deals to buy non-essential items. The most popular deals being buy-one-get-one (BOGO), percentages, and free shipping.
  • Technology and telecommunications: Cheaper and even older models of smartphones are the new rage. Microsoft recommends promoting both new and old models below $500.
  • Health and wellness: Yes, customers are looking for cheaper options here, too. Companies can stand out by lowering prices just the tiniest bit.
  • Financial services: Saving accounts, cash-back, and reward-based credit cards are growing in popularity.

Why you should care: The common denominator among all these industry trends matches people’s feelings about the economy. No one wants to break the bank, but they also don’t want to stop spending.

Invest accordingly.

BofA upgrades First Solar

BofA upgraded First Solar in a note saying – get this – that the cash uplift from the Inflation Reduction act is “underappreciated.” (Read)

That’s rich.

What to do. If you’re gonna own it, do so with the expectation that you and your money will get hosed. That’s what usually happens to gummint’ darlings.

Could this stock be worth a nibble?

People think about tech in terms of linear upgrades but they’re missing the point.

Every great breakthrough happens once. That’s why you want to hunt for stocks making products and services that go from “0 to 1”, notes billionaire Peter Thiel.

That’s why I’m intrigued by the prospect of SpaceX working with T-Mobile to use Starlink to provide fast internet in rural areas via phone. ( a 0 to 1 move) NOT the usual path of satellite internet -> cell towers -> new cell phones which is “n+1”. (Read) The move could instantly unlock millions of customers with little friction to purchase.

Might be worth nibbling into T-Mobile a bit.

Should you buy BBBY this morning?

Depends on how badly you want to get burned. The company will release its turnaround plan next week, according to reports circulating this morning. (Read)

Quick buck artists are circling. BBBY is +5.45% in the premarket. Get over it. This is a $10 stock so you’re talking about $.60. BFD. Besides and for what it’s worth, the scuttlebutt I’m hearing is that the big money has it in play and a downside target of $2, which means the memers are in for a rude awakening.

Instead, buy a real retailer that’s not fighting for its life. If the $10 thing is your kryptonite, buy fractional shares. Many brokers offer ‘em now. The math IS the same.

My favorite is up 58.10% over the past 5 years versus 18.04% from the S&P 500 over the same time period – and there’s plenty of performance still to come (Get the stock)

Bottom Line

People grouse about how much money they’re losing.

I get it - that’s never fun. In fact, it can be downright de-motivating and frustrating.

Yet success, by its very definition, includes failure.

You’ve gotta learn to love the downside just as much as you love the highs.

Let’s get after it and finish the week strong!



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