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Watching this market is like watching Jaws

Sep 07, 2022

Good morning!

And boom, just like that here we go again.

Watching this market is like watching the 1975 smash American thriller Jaws. The entire audience can see the fin and knows what’s going to happen next.

Keep your guard up!

Here’s my playbook.

Forget 75bp, the real risk is 50

What they’re saying. The markets are bracing for a 75-basis point hike from the Fed this month. The real risk is 50.

Why you should care. People understand 3/4trs of a percent or even 1%. But 50 basis points or ½ a percent would cause massive panic because the entire world would instantly wonder what Team Powell knows that it’s not telling us.

Do yourself a favour. Buy hedges or at least a few putskies. Then go shopping. Tech isn’t going away anytime soon. Neither is medicine, defense, energy or a dozen other proven inflation fighters.

Target’s move

Making headlines: Target CEO Brian Cornell is going to stay on for another 3 years according to the company which just scrapped its retirement policy. (Read)

What this tells you: Forget the Fed’s data; more people are having to work longer as retirement dreams vanish. In fact, 1 in 4 Americans have reportedly delayed or had to cancel long-held retirement plans according to the BMP Real Financial Progress Index. Worse, just 22% of Americans believe they have enough saved for a comfortable retirement according to Schroders.

The big drop: AAPL META GOOG

The iOS privacy changes didn’t just take $10 billion from Meta, they cost Google billions too. Now a new report shows Apple gaining on both companies. (Read)

Both Google and Meta are planning “events” to compete, but the incomparable Steve Jobs set that bar. Naturally the media will fawn all over but the numbers don’t lie.

The bottom line. Most investors could double the amount of Apple stock they own and still not have enough.

Watch Apple’s big day right here.

Unpopular thought: bonds could rally

What’s being said. David Rosenburg of Rosenberg Research said the bond markets are “radically oversold” while also noting inflation fears are temporary and that the 10-year note will return to 1%, all back in 2021. (Read)

I agreed on the oversold part but think 1% is stretching it. In fact, I doubted then that rates would decline just as much as I doubt now that there’s a retracement in the wings. Powell is just as wrong about rates as he was about transitory.

Wall Street’s fears are overwhelmingly inflation related, not demand-driven. That’s why the selling is so vicious.

If you want a smoother ride … keep duration short. Duration, in case you’re not familiar with the term, is a technical measure of interest rate risk. The higher the duration, the more sensitivity to interest rate changes.

My favorite closed-end bond fund has an ultra-low leveraged adjusted effective duration of just 1.82 years. Yet it still trades at a 13.83% premium to NAV and has an 11.40% yield which tells me the smart money is on the same page.

Are you?

(Learn more)

Value + growth = safety & momentum

Stop chasing the “hot money.” I hear from investors in search of “hot stocks constantly. Good luck with that as the Fed continues its tirade.

Think about this instead. Which companies are going to a) survive and b) will be there when you need your money.

For example …

Coterra Energy (CTRA) has had a great run. The company has run up 53.47% YTD and prices reflect a 5.52% forward annual dividend yield according to Yahoo! Finance. However, insiders have been selling recently which would explain the recent slide.

I like another energy company better. The stock is up 29.62% YTD versus a -18.52% drop from the S&P 500. The forward annual dividend yield is a lower 3.62% but the growth is a whole lot higher and not yet factored into prices.

One Bar Ahead™ readers following along as directed are enjoying nearly 60% returns so far with plenty more potential on the horizon.

Buffett’s been buying like crazy. (Get the stock and a whole lot more)

Bottom Line

If you want something bad enough, you'll make it happen no matter what the markets do next.

If not, get used to excuses.

You got this – I promise!


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