3.1 billion reasons the next market bottom could be closer than people think

Good morning!

The markets are trying to make a stand this morning as I type, despite a jobs report showing nonfarm payrolls rose 223,000, well above the 200,000 expected. Normally, that’d be a bad thing in today’s markets because it’d be interpreted as a sign that the Fed will continue to hike.

In my best late-night TV voice… but, nooooooooo…

What traders have focused on is the fact that wage gains were lighter, which is being interpreted as a sign that the Fed may be having an impact. And they hope that the next meeting may result in a “pause” or at least some sort of reckoning from Team Powell.

Don’t “buy” either storyline.

Instead, stick to companies that can grow practically no matter what the Fed does, how Wall Street tries to spin things, and who is in the White House. A process I call, “buy the best, ignore the rest.”

Team Powell isn’t done by a long shot.

Here’s my playbook.

More evidence we're on the right track

BioNTech says it will start cancer vaccine trials along with other personalized mRNA therapies in the UK starting this September. (Read)

I hope you own at least one of the big vaccine makers because customizable medicine is right around the corner. As is the next pandemic. I’ll be sharing my thinking on my top 3 favs this Friday when we publish the One Bar Ahead® Annual Outlook. Upgrade to Paid

Speakerless

The US government is a slow-motion train wreck on both sides of the aisle. Leaders are so busy trying to sink each other in both parties that they’ve forgotten who they serve. Super-sad state of affairs no matter how you cut it, to my way of thinking. What happened to manners, civility, and working together??!! (Read)

There is a huge body of evidence suggesting that the stock markets do better when there’s “gridlock” because traders don’t have to worry about policy risk. But I don’t think that applies any longer, given the Fed’s follies.

Millions of investors and traders would be wise to stop worrying about who’s right and start focusing on which companies are profitable.

This is rich: Greenspan says recession most likely outcome 🤦♂️

Some of you reading along may remember a speech I delivered at the 2006 World Money Show when I said that Greenspan would ultimately play a pivotal role in creating a crisis most could not yet anticipate. The crowd went bananas when I said he’d go down in history as more like Bob Uecker than Hank Aaron when people eventually put the pieces together. That’s happening now.

Greenspan’s actions played a formative role in today’s crisis, which is why I found his recent commentary to be completely preposterous. (Read)

I believe that the Fed will continue to hike through at least mid-year before the evidence becomes overwhelming that it’s making another “transitory”-style mistake.

Stay frosty!

Retail investors dumped $3.1B last week—urah!

Data shows that retail investors dumped a record $3.1 billion in stock, including record amounts of Tesla. (Read)

That’s an amazingly bullish sign and I am not alone in my thinking. Tech maven Cathie Wood has been buying Tesla shares despite plunging share prices. (Read)

Critics and more than a handful of armchair quarterbacks are screaming “buuuuuuuuttttt…” because Wood’s Ark Funds have gotten clobbered this year.

They’re totally off base.

Think about it.

Tech has gotten shellacked because of the Fed, not because it’s inherently bad; Wood just happens to run an entirely tech-centric fund, so that’s logical.

The fact that retail investors are THAT bearish on a stock like Tesla is a very bullish sign.

I hope I’m smart enough to buy more. Betting against Musk today is a lot like betting against Jobs back in the day.

Why beer might be a bust this time around

People tend to drink and smoke more when the SHTF so companies making booze and cigarettes have historically done well during recessionary times.

Things may be different this time. Case in point, Constellation Brands warned in their third-quarter earnings call that they’ll continue to pass on higher operating costs to the consumer by charging higher beer prices. Not surprisingly, shares dropped faster than the foam on a cheap tap run. Down -9.7% yesterday alone. (Read)

Healthcare and defense stocks are a much better way to play tough times this go round. That’s because beer is a “nice to have,” but medicine and defense are clearly “must haves” at the moment. That’s why the OBA Family has been on board for a while now... because of the comparative stability both offer. Upgrade to Paid

Bottom Line

They say a picture is worth a thousand words, but as an investor, I like to think that’s $1,000. Perhaps more.

Let me show you what I mean.

People waste hours trying to figure out the noise when what they should be doing is concentrating on what it’s gonna take to make ‘em profitable. Especially when it comes to the Fed.

Stick to the very best companies you can buy as long as the Fed’s follies continue.

No excuses.

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

Keith 😊