Fed strikes again—US Treasuries cross 5%

Fed up with the Fed

This is a bad joke. Powell says he’s “resolute” when it comes to reaching the Fed’s inflation target of 2%.

Would somebody please tell him that’s a fool’s errand.

Seriously.

Many people are totally flabbergasted to learn that the Fed’s 2% target was created out of thin air in 1990 by the Reserve Bank of New Zealand and has no basis in any sort of academic study whatsoever. In fact, it came from an off-the-cuff remark made during a TV interview with Roger Douglas, New Zealand’s finance minister at the time, who said that he’d “ideally” want an inflation rate between 0% and 1%.

The 2% you hear today as a target was originally intended as a “boundary”—nothing more—for inflationary bias that was estimated to be just 0.75% at the time.

And the rest, as they say, is history.

Canada and England followed, as did other central banks. The Fed officially adopted the policy in January 2012 under then-Chairman Ben “Helicopter” Bernanke.

Kinda puts the Fed in a new light, eh??!!

Yeeesh.

BTW: Most investors will default to commodities, metals, and the like, in an effort to defend themselves, but history shows that’s not a great idea. The best investments right now are actually companies expanding at rates dramatically higher than inflation, starting with tech.

But don’t take my word for it.

The legendary Dr. Mark Mobius, a mentor and friend, and I are in complete agreement.

BTW, I encourage you to read his book, The Inflation Myth and the Wonderful World of Deflation, or, if you’re a member of the One Bar Ahead® Family, to check out his exclusive interview in the March 2021 issue.

Two no-brainer buys right now

President Biden said last night that he plans to send Congress a budget request for “America’s national security needs to support our critical partners, including Israel and Ukraine.” (Read)

Security/defense stocks are a no-brainer under the circumstances. And not just bombs, bullets, and missiles either… cyber defense is a biggie.

1. I hope you’ve been paying attention; and,

2. I wish I was wrong.

One of my faves is up 5% this month alone; the other has yet to run but seems to be powering up. Buying now could be a super-smart move. I’ll have more in today’s AMAs. Upgrade to Paid

I’ll be surprised if Nokia is still with us in 5 years

Nokia is cutting 14,000 jobs amidst what it calls “market uncertainty.” (Read)

CEO Pekka Lundmark says that “resetting the cost-base” is a necessary step to adjust to market uncertainty and secure long-term profitability and competitiveness.

The situation is so bad that he has to use a euphemism to explain what’s happened.

“Resetting the cost-base” is like calling a drug dealer an unlicensed pharmacist.

Profits are down -69%.

I will be surprised if Nokia is still kickin’ in 5 years.

Gives me an idea.

NOK is trading at $3 and change.

Normally, I’d suggest selling some deep OTM Cash-Secured Puts at $1 to collect premium while doing a little shopping. Only there’s no premium, which tells me I’m not alone in my thinking that Nokia may not survive.

Entering a LowBall Order at $0.50 or lower could be interesting because that may be where a suitor surfaces to buy the place out. I’m not sure the risks are worth it, though.

I’m just spitballin’ here.

Remember: Not all tech is the same. Buy the best, ignore the rest isn’t just a cute mantra, and situations like Nokia prove it (again).

The next wave of M&A starts now

Tech companies have a lot of cash and will start spending it to acquire next-gen tech and new-gen customers who are then packaged into an Apple-like ecosphere.

“Microsoft/Activision is just the start,” I told you when the deal first hit the headlines.

Publicly listed gaming companies including Activision Blizzard, Electronic Arts, Sea, Nintendo, Bandai Namco, and China’s NetEase, just to name a few, are sitting on a whopping $45B in cash and cash equivalents, VC firm Konvoy reports. (Read)

The global video game market is expected to grow at a compound annual growth rate (CAGR) of 13.4% from 2023 to 2030 to reach $583.69 billion by 2030, according to Grand View Research, a figure I think is low, incidentally.

And this from CNBC: “The VanEck Video Gaming and eSports ETF (ESPO), which seeks to track MVIS Global Video Gaming & eSports Index, has climbed 20% in the year to date, according to Konvoy. The S&P 500 index, by contrast, has climbed close to 12% year to date.”

Makes sense.

Inflation continues to rage, and people simply want to do more with less… at home.

Gaming is logical.

The next time you hear somebody complaining about wages, mention Digit

Amazon recently launched a bipedal robot called Digit that’s capable of lifting boxes weighing up to 35 pounds. (Read)

So?

There are already 750,000 of ‘em working next to their human counterparts worldwide.

That catches a lot of folks by surprise but probably shouldn’t.

Robots don’t take vacations, need 3pm yoga breaks, or complain about wages. Heck, they don’t need heat, AC, or light either—three of the biggest, most expensive creature comforts.

It’s logical that EVERY company in the world will move towards robotics as cost-cutting pressures continue to mount and worker discontent increases. AI, which a lot of people still don’t understand, will accelerate adoption.

Every protest or strike, no matter how well intentioned, justified, or founded, will only speed up the process and deepen corporate resolve.

Machine learning, vision, propulsion, logic… they’re all go-to trends over the next decade.

Invest accordingly.

Bottom Line

Opportunity knocks when you least expect it.

Especially in the financial markets.

Let’s finish the week strong you got this!

Keith 😊