Apple just did it to naysayers again – time to buy more!

Good Morning!
Traders are still on the gas this morning as I type and that’s great because it puts the market on track for the best month of the year. And to think how many people jumped my you know what this past June for saying that the markets could have a strong summer.

No matter.

You’re only as good as your last investment or trade. Things could have easily gone the other way, and I could have been entirely wrong.

Here’s my playbook.

The only thing that matters now is what happens next

Abject bearishness is a very bullish contrarian signal.

I think there’s a good case to be made that traders stay on the gas a little while longer for three reasons most investors and retail traders will miss: FOMO, window dressing and a low cost of carry.

The first – FOMO - is what they’re feeling and will try to make you feel so they can separate you from your money.

The second – window dressing - is a nasty little practice that involves establishing positions in key stocks they know clients will want to see in their quarterly reports come September 30 when the quarter ends.

The third – cost of carry - is the cost of the money they’re using to lever up. Right or wrong, the possibility of a Fed pause as alluded to this week is too good to pass up.

Oh … and the world’s best companies including Apple, Microsoft and Chevron are raking in the buck. So, there is that!

You know what to do.

Apple: the only 2 things that matter

The doom and gloomers just got their asteroids handed to ‘em again.

Apple knocked it out of the park. (Listen to the call)

Two things stand out.

First, Cook himself said, “we expect revenue to accelerate in the September quarter despite seeing some pockets of softness”.

Second, Apple services are growing considerably as I have repeatedly pointed out much to the chagrin of iPhone-focused analysts who don’t understand the bigger game being played out.

Apple now has 860 million paid subscriptions globally. Repeat after me … that’s roughly 1 in every 10 people using an Apple device or otherwise tapping into an Apple service somewhere on the planet.

Anybody checked on Dan Niles today?

He was making the rounds earlier this week bashing big tech but especially Apple and Microsoft which are leading the charge yet again.

Note to self … buy more of both.

Jack’s out; Beijing won

Reports are flying that Alibaba founder Jack Ma will relinquish control of Ant Group, the company that controls all of Alipay, a payment network with more than a billion users. (Read)

If you recall, the company was slated to go public in 2020 but was abruptly halted by Chinese authorities because they didn’t align with the party’s goals and it was subsequently put up for “reorganization”.

That’s CCP speak for “you’re going to get a long walk in the Gobi desert if you don’t roll over” and not something to be taken lightly.

To be brutally honest, I am surprised Jack Ma is still alive.

That tells me Beijing needs him alive and kicking behind the scenes because Chinese regulators don’t understand the infrastructure he assembled and need him to help them navigate.

Oh, the irony.

Millions of western investors are going to be tempted but I’d steer clear. Like everything else, whatever the Chinese government touches, the “payback” will come when you least expect it.

The Inflation Reduction Act will do anything but

Before you castigate me for being political, understand that I don’t do politics. I do money, which means that I must talk about this stuff. Whether we agree or not, whether you like it or not … those things are moot.

The Inflation Reduction Act of 2022 is almost sure to cause more inflation, not less. That’s because the Act includes $433 billion in new spending at a time when there’s already too much money in the system.

That’s how “demand pull” inflation (which is what we have now) works. Prices increase whenever there is too much money in the system. They go down when there’s less.

Choice investments under the circumstances include more big energy companies, defense, and medicine … all of which can protect margins.

Chevron just slayed it

Long a favourite of mine, Chevron just posted phenomenal earnings and record numbers. That’s $11.62 billion for the quarter, up from $3.08 billion during Q2 2021. (Read)

Makes sense.

Chevron has spent billions to ensure that it can meet demand and expects to spend more. Pierre Breber, Chevron’s CFO said the company’s “guidance through 2026 is $15bn to $17bn per year, So that gives us $2bn of room to increase . . . you should see higher capital from us in 2023.”

Unfortunately, this will provoke more political posturing and backlash from feckless leaders who don’t understand basic economics.

Still a great buy IMHO.

Bottom Line

Having "what the fruit loops was I thinking" moments is a part of the game if you're in the markets long enough.

The key is learning from the experience and not having 'em very often. Or at least less frequently over time.

Let’s finish the week strong!

And as always, MAKE it a great day!

Keith