Buying is a no-brainer for anybody paying attention

Good morning!

Futures were up in early going after another report that suggested inflation could be peaking.

I don’t think so, but that’s moot.

The market doesn’t really care about whether we—you and I—are right. The bigger concern is being profitable… so let’s get to it!

Here’s my playbook.

US 10YR drop, markets pop (again)

People desperately try to predict the markets using the VIX, Put/Call Ratios, and other hopelessly complicated technical indicators. They may as well use some form of economic voodoo.

There’s only one data point that matters—the US 10YR. That’s because the big money traders are leveraged up to the eyeballs in debt. When the rate goes up, they sell to avoid paying more or getting a margin call. When the rate drops, as it has this morning, they borrow more money and buy stocks knowing that the returns they make can be bigger than the cost of the debt they use to do it.

Bonus Points: If you’re a day trader, try watching rates on a 15-minute bar starting about midway through the overnight session. Then, keep an eye on the VIX and the S&P ahead of the US open. There’s very definitely a leading relationship, which means there’s a lot of profit potential, too. 😊

What “heroes and zeros” mean for your money

My good friend Kenny Polcari sat in for another good friend, the fabulous Scott “the Cow Guy” Shellady, yesterday. We had a wonderful chat about all things market related, with a focus on what I call the “heroes and zeros.” (Watch)

Most investors underestimate the significance and, predictably, pay a terrible price when they get trapped offsides—meaning on the wrong side of markets and in the wrong companies.

This isn’t rocket science. Companies that can put up numbers will do great, but those that don’t—Goldman, are you paying attention—will get shellacked. Struggling retailers like Party City, which just filed for bankruptcy, come to mind.

Options, puts, pairs trades could all work nicely.

Me?

I’d rather buy the “best” any day of the week because the “rest” simply won’t cut it. Upgrade to paid

Normally, I don’t agree with billionaire Ken Fisher

I don’t agree with billionaire Ken Fisher’s recent observation that “inflation is deader than a doornail—it just doesn’t know it yet.”

But I do think he’s spot on when it comes to the possibility of a roaring bull market à la 1967. (Watch)

The parallels are striking, and that’s something I pay attention to whenever someone like him arrives in the same neighborhood.

MyPOV: There’s a lot of money on the sidelines, especially from people who are “waiting for an all-clear” buzzer. That’ll come running in at warp speed when the psychology shifts or the Fed simply taps on the brakes. Either way, getting in now is super critical.

People waiting, by the way, may think they’re “saving” their money, but the daunting reality of the situation is that they’ve already missed the 15.5% run that started last October. I’ve encouraged you to buy the entire time—and hope to heck you have!

OBA Application: Missing opportunity is always more expensive than trying to avoid risks you cannot control. Not sometimes, not part of the time… always!

Pat Gelsinger is the Jamie Dimon of chips

Every industry has a few people who truly “get it”—which is why you want to pay attention when they say something significant. Intel CEO Pat Gelsinger said yesterday in Davos that “everything digital runs on semiconductors. So, this is critical to every aspect of human existence.” (Read)

I agree (and, for that matter, felt like I was reading my own words).

Buying beaten-down chip makers is a no-brainer while everybody else is looking the other way and they’ve been kicked to the curb. Not all players are equal, though. Upgrade to paid

Netflix ripe for shenanigans

Once a Wall Street darling that could do no wrong, Netflix is expected to report the slowest quarterly revenue growth in a long time, perhaps ever, when it puts up the numbers. Analysts expect Netflix to report a gain of 4.5 million subscribers in the fourth quarter, which would be the lowest addition during the holiday period since 2014. And a mere—get this—45.8% below the 8.3 million subscribers added a year ago. Worse, the advertising platform so many cheered is likely to be jeered if the company cannot show that it’s attracting customers. (Read)

I have a sneaking suspicion that traders will try to push higher and wipe out the weak money—meaning “everybody who knows” that the stock will go down. I’ve got better things to do with my money than risk getting separated from it to prove a point. Chances are you do, too!

One bright spot. Apparently, the company is hiring a flight attendant and is willing to pay up to $385,000 for candidates demonstrating “discretion.” (Read) That kind of salary range certainly begs the question what a flight attendant would have to be THAT discreet about given the often-dubious history of private jet travel. 🤦

Bottom Line

“The way that you live, every little thing that you do, those actions that you take on a daily basis, that’s who you ARE. And if you don’t train correctly, if you don’t live correctly, when the moment of truth comes, you won’t be able to execute correctly.”

—Jocko Willink, USN-retired

And on a related note, a special thanks to Mr. Tadashi Mizusima in Tokyo who kindly sent me a note regarding yesterday’s Japanese proverb: Vision without action is a daydream. Action without vision is a nightmare. Mizusima-san notes that the saying is attributed to Honda Soichiro who founded Honda Motor from the ashes of WWII. どうもありがとうございます！

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

Keith 😊