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Don’t do anything stupid no matter what Powell says!

Feb 01, 2023

Good morning!

The markets are down in early going ahead of the Fed.

Don’t do anything stupid.

Let Wall Street traders duke it out… then swoop in and clean up the wreckage, especially if there are big names you want to own that get put on sale or caught up in the fracas.

Speaking of which: OBAers, keep an eye on your email. The February issue publishes this Friday, and I believe the timing couldn’t be better for our newest recommendations! Upgrade to Paid

Meanwhile…

Here’s my playbook.

More Fed follies or just Fed frosties?

It won’t be long now. The Fed is widely expected to raise rates 25 bps (98.9% probability), but as I noted several times in recent media appearances (Watch), I continue to believe there’s still an outside chance that Team Powell will push a 50-bps hike through the gate just because it can. (Read)

MyPOV: I expect Powell to do a lot of jawboning about how vigilant the Fed is when it comes to fighting inflation (it missed in the first place) and how attentive they’ll be to the ongoing fight (which is totally ignoring the trillions of dollars in damage being caused). Powell cannot possibly let the markets think, “This is the end,” so he won’t.

I’m planning to take a walk the moment Powell takes the mic.

Sigh.

What China’s really up to in Taiwan

What’s happening. 20+ Chinese military aircraft crossed the central line in the Taiwan Strait forcing Taiwan to scramble fighter jets, activate missile systems, and more. (Read)

The West is reporting this as if it’s a “development” in a long-standing diplomatic dispute.

That’s a mistake.

What’s really happening. China is probing Taiwanese defenses while also using the opportunity to gather electronic intel and simultaneously desensitize defense crews. This makes ‘em less effective and slower to react when the real deal starts. We did the same thing in Gulf War I for weeks.

MyPOV: Both are acts of war, or at least the lead-up to it. I believe China will turn this into a shooting match in 2024/2025 when the US is distracted by yet another contentious presidential election and the situation in Ukraine. Hopefully, cooler heads will prevail.

Meanwhile, key defense contractors are “must-haves” when it comes to your portfolio. My favs are both poised for a run. Upgrade to Paid

BTW, I’m starting to hunt for extremely steep and deep putskies as insurance, too.

Michael Burry tweeted “sell”—should you?

Michael Burry (who made billions betting against subprime mortgages in the global financial crisis) lit up social media with a one-word Tweet, “sell” [ahead of the Fed]. (Read)

Should you?

Depends.

If you’re a trader concerned about a moment in time, fine. Knock yourself out.
If you’re an investor who wants to build serious wealth over time, no way.

This is a perfect example of the kind of sensationalist claptrap I rail on all the time.

Burry is an exceptionally bright guy, to be sure, but stuff like this needs to be taken with a grain of salt and a really big one at that. The “end of the world” crowd has successfully predicted 10 of the last 2 corrections.

Case in point, Yahoo!Finance reported in 2021 that Burry’s “obsession with market crashes has led him down a rabbit hole from which he cannot emerge.” Then noted that Burry has […] “made multiple predictions around market crashes, cryptocurrencies, retail investors, and meme stocks that have all proved to be false, damaging his credibility irreparably.” (Read)

I don’t know that I’ll take things that far, but there’s no denying that this is a tough business.

Fortunately, history is VERY clear—and that’s what you want to focus on, especially on days like today.

The markets have a pronounced upside bias over time, which means your portfolio will reflect that if you are a) invested in the very best stocks, and b) continually harness the volatility others fear.

If you’re really worried—and I get that you might be—pick up a few shares in some of the specialized inverse funds I recommend as ongoing hedges. Put options could work nicely, too.

REMEMBER: Optimists make their money by separating pessimists from theirs. Get your buy list ready, especially if you’re focused on winning. I am. 😊

Intel in slash and burn mode

This is a headline I hoped that I’d never see but am glad that I do.

Intel execs will take a pay cut alongside CEO Pat Gelsinger’s base pay cut of 25%. Reports suggest that pay cuts go all the way into the food chain, including midlevel managers. This after a reporting a weak 2023 outlook and a 40% decline in year-over-year sales. (Read)

AMD, on the other hand, beat both top and bottom-line numbers, but guided lower.

Hmmm...

Match gets swiped left

It turns out there is a price for love. Match Group reported disappointing earnings today and is now down -7.80% in pre-market hours as I write. EPS for the quarter came in at $0.30, well below Refinitiv estimates of $0.46. (Read)

Understandable. “Must have” companies like Chevron are almost always far better investments than “nice to have” choices like Match. The former is up 38.05% over the past 12 months while the latter is down -50.45%.

Just sayin’...