Buy the best, ignore the rest

Good morning!

The markets are still digesting yesterday’s elections. They’re down in the early going, which, interestingly enough, has NOTHING to do with who won, lost, or even who’s still complaining about either outcome.

It’s all about liquidity.

The 10-year is up to 4.149% as I type, which means all the margin cowboys are running for cover lest they get a margin call.

Here’s my playbook.

Elections: forget who won this time, concentrate on "will win no matter what"

People are wasting an inordinate amount of time trying to figure out who holds the balance of power—left or right—and what that means for their money.

Focus on this instead. The markets have historically performed better in the six months following midterm elections than they did in the six months leading up to it.

Then find companies that win no matter what or who is in power or who thinks they should be.

Spoiler alert: Defense, energy, and strong dividend players are top drawer, but ONLY if their CEOs are visionary doers, not “dog ate my homework” whiners.

If you like this kind of thinking, you might enjoy my research journal, One Bar Ahead®. Monthly with 2X weekly updates, strategies, tactics and more. Join savvy investors, traders, hedge fundies and professional money managers from around the world who read it. Upgrade to Paid

FTX: Crypto's Lehman moment

The digerati have resisted regulation for years, saying that part of the allure of crypto money was the distributed nature of it and that regulators would “screw it up.” People like me have argued for years that the only way digital money will come into its own is through significant regulation by the CFTC, SEC, and FINRA.

Yesterday’s FTX implosion just ended the argument. FTX exchange blew up spectacularly when it didn’t have the $1 billion+ in excess cash “safeguarding client assets.” CEO Bankman-Fried has evidently been deleting damning tweets about security, cash, etc. as fast as he can. (Read)

Clean and neat

  • FTX balance got leaked last week showing $1B in borrowed money against their own crypto token. Effectively shares.

  • Binance saw this, then publicly announced that it would dump all said token because it was backed by absolutely nothing except vaporware.

  • People had an oh-___ moment and started to withdraw FTX accounts, which, of course, turned into a bank run almost immediately.

  • Now, Binance is going to absorb FTX in what looks to be the ultimate power play.

The situation reminds me of Japan in the early 1990s when Japanese banks enamored with the rapid rise in real estate prices began making loans against appraised assets that really didn’t exist. Then, of course, somebody woke up. 🤦

Why you should care even if you aren’t into crypto. The current generation of crypto has been nothing but smoke and mirrors for years. Hype, shenanigans, and more were the rule, not the exception. The regulators are going to come down like a ton of bricks, as they should. Millions of crypto speculators… ahem, investors (cough, cough)… have just gotten smoked for the umpteenth time.

What happens next, though, may be the actual breakthrough. I call it Crypto 2.0 and just laid out the path forward in the November issue. And, of course, how to invest accordingly … no sh_tcoins, altcoins, or dodgy exchanges down a dark alley somewhere. Just big companies you know and love. Get the Issue

75% of all pandemic-era housing buyers regret buying

Textbook! Homeowners who purchased during the pandemic driven urban exodus as property values skyrocketed now regret it. No kidding… they’ve lost something on the order of $1.5 trillion already. More to follow. (Read)

My 2 cents. Stay the heck away from housing stocks unless you’ve got a Vegas-like appetite for risk. Or buy puts and profit from what could be considerable downside.

Keith’s Corner: FOMO is not an investment strategy, and it doesn’t matter what asset class you’re talking about. If you are chasing performance, don’t. What you want to do is get ahead of it. Put another way, action beats reaction every time.

We're the Fed and we're here to help

Let’s review.

The Fed…

  • Printed money till the cows came home and the markets skyrocketed as the system became addicted to cheap money. Or, in many cases, free money.

  • Denied inflation is real and called it transitory even after it hit 6% and took off like a freight train.

  • Is “determined” to fight inflation by raising rates and forcing you to spend money on your credit cards to make ends meet after you’ve eviscerated your savings.

  • Wants to tighten until companies fire you, leaving you on the curb unemployed.

You can’t make this stuff up.

Investment implications: Buy the very best companies, preferably those making goods and services the world cannot live without no matter who pays for it. Top of the list… energy, medicine, and tech. And keep your hedges in place because the best offense still means having a great defense!

If the Metaverse is so good, why did El Zucko not use it to fire everyone?

Begs the question. Reports this morning say that 11,000 people have just paid a terrible price for El Zucko’s arrogance. As much as I dislike that stock (since $350+ a share), I feel bad for ’em. Not for nothing, but if the Metaverse is so blasted fantastic, why did CEO Mark Zuckerberg resort to an email to bin 11,000 people?!?! (Read)

Answer. Because it’s been “distract and deflect” the entire time. Zuckerberg has ruthlessly eliminated anybody in the C-suite who challenges him. He’s callously told worried consumers, regulatory authorities, and our leaders to pound sand repeatedly. And now… 11,000 people have just paid a price for his hubris.

META is still going to $50. And, frankly, the stock will be lucky to stop there. (Watch)

Bottom Line

This is no time to take a wait-and-see approach.

Just ask anybody who purchased PTON, META, or Carvana… all of which I encouraged you to avoid despite the fact that Wall Street held them out as “darlings” one and all.

My point…

The markets will 💩 all over people who don't change their thinking.

Buy the best, ignore the rest!

Now as always, let’s get out there and MAKE it a great day!

Keith 😊