Target—what to do now

Good morning! 👋

My exact words on Monday were that the market was setting up for a “violent rally.” Then, yesterday, I told you that what was happening with the 10YR Treasury meant, “Get on the gas.”

I hope you did!

Stock futures are substantially higher again this morning as Noriko types while traders try to extend this week’s rally. The S&P 500 tacked on 1.9% yesterday while the tech-heavy Nazzy (NASDAQ) jumped 2.4%—with both logging their best day since April.

I’ve been telling you for months that the Fed is going to have a day of reckoning when the data begins to show that it has overplayed its hand. And that’s happening now.

Obviously, the markets will not charge higher in a straight line. In fact, there is a lot of money on the table now, so it would be logical to expect a day or two of selling and short-term profit taking. Perhaps even by the time you read this.

Don’t let that bother you.

Remember—buying AND selling are absolutely necessary for the markets to move higher, and history is very clear about that.

Which is why, of course, we buy the best and ignore the rest!

Here’s my playbook.

Mortgage demand is on the rise

Believe or not, the Mortgage Bankers Association reports that mortgage demand jumped 2.8% last week, making it the second straight week of gains. (Read)

Applications to refinance home loans increased 2% for the week and were 7% higher YoY.

Wall Street will undoubtedly jump on this story very quickly, and there will probably be a corresponding jump in home builders and construction company stocks over the next few days.

Don’t fall for it!

The average 30-year fixed-rate mortgage is 7.61%, and the jump in refinancing tells me that borrowers are still strapped. And the Home Depot data that I mentioned yesterday—declining sales and empty carts—supports that.

For now, I’ll continue to steer clear.

Wholesale prices tank

This is another story that Wall Street will be all over later today.

The PPI dropped 0.5% for the month vs. expectations of 0.1%, according to the Labor Department. This is the biggest monthly decline since April 2020. (Read)

Wall Street’s take will be that this is proof positive that the worst of the inflationary hell we’ve all been living through may have passed.

I’m not so sure.

The PPI does not include food, energy, and lots of other things that we feel in our wallet.

Still, as investors, we need to put our personal feelings aside and look at the data for what it is... fuel for the fire.

I have been encouraging you for weeks to scoop up shares, particularly when it comes to Big Tech, energy, medicine—all of which will return to the head of the class far more quickly than most investors expect.

Ford: This could backfire spectacularly

Ford is apparently introducing a new feature that will allow customers to give real-time feedback on its vehicles, including the Mustang Mach-E, the F-150 Lightning, and others. Plans are that the feature will be included in additional vehicles coming off factory lines in 2024 and beyond. (Read)

If your experience with “customer service” these days is anything like mine, I think Ford may unleash a digital can of whoop-ass that it is not counting on.

The latest data I’ve seen suggests that 92% or more of corporate executives think they’re doing a great job when it comes to customer service, but just 2–5% of customers think so.

I believe this will go one of two ways:

  1. Ford execs will listen and respond immediately, in which case Ford customers may build loyalty, and that would be good for the stock.

  2. The public will perceive that Ford doesn’t give a rip, in which case feedback given to Ford that goes unanswered will get magnified in social media. That would absolutely put Ford in a world of hurt.

Either way, my hat is off to Ford… this is a super-gutsy move.

My POV: I still think Ford has an EV problem and the actual cost associated with the UAW strike is going to bite into earnings, so I won’t be buying the stock anytime soon. At $10.40, it’s not worth the trouble of shorting or buying puts either.

Target reports double beat—what to do now

Target reported a “double beat,” meaning the retailer exceeded fiscal Q3 earnings and revenue expectations. (Read)

The news outlets are already gaga over this, and the stock is up as a result. What catches my attention, though, is that management says it’s still seeing deal-starved shopping and lower/weaker discretionary spending. That, too, matches up with Home Depot data I shared with you earlier this week and mortgage data that I shared with you this morning.

Many investors are going to jump to the conclusion that holiday sales will accelerate this year, but I think they’re putting the cart before the horse. Target’s management expects this year’s holiday quarter to be a mid-single-digit decline YoY.

Keith’s Investing tip: It’s very important to keep the big picture in mind when you are investing. Headlines like this from Target will make you think that buying retail stocks is a great idea, but every bit of data we have at our disposal suggests that’s a risky proposition because consumers are still strapped. On the other hand, AI spending is accelerating at a triple-digit pace, and the companies that are doing the spending have hundreds of billions of dollars already in the bank ready to go. Catch my drift?!?!

If you fancy a biotech punt...

I don’t normally write about speculative biotech stocks because the risks just aren’t worth it in most cases. But every once in a while, I come across a stock that could be interesting and worth a speculative shot. (Read)

CRSP is one of ‘em.

The company is developing a way of editing your genome to fix bad genes. If what they’re working on actually works, it’s a big step towards customizable medicine.

I happen to like another medical innovator even better than CRSP because it’s got the size, scope, and scale to be much farther along on the road to human health. Plus, as OBAers know, it’s got a great dividend. Upgrade to Paid

Bottom Line

Motivation gets you to the starting line.

Discipline keeps you in the race.

As always, let’s MAKE it a great day.

また明日!

Keith and Noriko 😊