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Hawkish or dovish doesn’t matter

Sep 18, 2023

Good morning! 👋

Thanks for letting me take some much-needed time off at home in Japan with my family. As is the case with many vacations, it went too fast.

Let’s get after it!

There’s an old saying, and it seems more than fitting as I fire up my screens this morning…

…The more things change, the more they remain the same.

The markets are inching lower in early going while awaiting more clarity regarding the Fed’s next policy decisions. They’re split as I type, actually with the S&P 500 and Nasdaq having flipped “green” while the Dow is still in negative territory.

No surprise.

Investors widely anticipate that the Fed is going to leave rates alone—and it might—but I think it’s far more likely that the Fed wants to prove a point and will raise rates anyway because that’s what they’ve said they’ll do.

My guess is they want to “get ahead” of things and prove a point by raising rates longer than needed to make up for having gotten transitory so wrong. I think Powell’s already caused the next three crises, but that’s neither here nor there.

What you want to do—heck, what WE want to do—is be prepared for both outcomes.

Here’s my playbook.

Hawkish or dovish doesn’t matter

The vast majority of speculators are trying to place their bets on whether the Fed’s pronouncement will be hawkish (meaning tough on inflation) or dovish (meaning that it’ll let rates pause or take a lenient approach). Doesn’t matter.

The key is being ready for either.

If the Fed raises rates, you want a few steady Eddies in your portfolio. Choices include those paying great dividends, making smart “must have” products and services, and with visionary leadership.
If the Fed pauses or drops rates, you want a few king-size growers, especially when it comes to Big Tech. I know I sound like a broken record on this, but where else are you going to get 50% margins, 100% growth, and more??!!

Meanwhile, a few speculative putskies on the indices could be just the ticket if you fancy the possibility of quick gains this week. Otherwise, get your buy list ready and keep reinvesting!

Oil to $100

I said last January when oil was trading at roughly $75 a barrel that $100 would be likely by year-end. WTI just hit $91+ and has tacked on 29.8% this quarter alone. Brent is already at $94.78.

There’s only one oil company I want to own, and I talked about it with the fabulous Stuart Varney this morning ahead of the opening bell. (Watch)

That, and a tech stock that could nearly double but is being priced like it’s going out of existence.

Average American family spends $709 more a month

The much-touted “Inflation Reduction Act” signed into law 13 months ago doesn’t seem to be doing much reducing when it comes to inflation. Case in point, the average American now has to cough up $709 more per month than two years ago to buy the same amount of goods and services, according to Moody’s. (Read)

The real pain point, though, is something called “real earnings,” which are stuck below 2019 levels.

Translation: Paychecks are going up, just not as much as the cost of living.

Inflation-resistant stocks are more important than ever, even if you think inflation is moderating. If you don’t own any, that’s something you’ll want to address straight away.

As always, I’ve got a few ideas, and you can learn more right here if that’s helpful. Upgrade to Paid

If you thought NYC hotels were expensive, wait

Airbnb users are racing to find new accommodations, especially for this Christmas season.

That’s because NYC recently enacted new regs designed to limited new and—in the city’s eyes—illegal short-term rentals in the city. Specifically, the new regulations require hosts to be present for stays of less than 30 days and no more than 2 people staying in each dwelling as guests at a time. Hosts must also get approval from the city.

Airbnb bookings in NYC dropped 77% from June 4 to September 10, according to the travel website Skift, as reported by CNN. (Read)

I don’t own Airbnb stock, but this makes me want to run the other way. I can easily see other shortsighted city governments hatching follow-on regs.

Puts, short, or avoid.

UAW strike = another win for Tesla

The UAW strike is now in its fourth day, and companies are starting to feel it, even if they’re not on strike. That’s because the processes within these companies are so interconnected, parts of the supply chain like stampings and individual facilities in general that are dependent on the other facilities that are on strike are being forced to halt production, even though they’re not on strike. (Read)

This speaks to something called the “butterfly effect.”

If you’re not familiar with the term, the butterfly effect is an idea drawn from the Science of Complexity (aka Chaos Theory). It conveys the thinking that even small things have a correspondingly large impact on other parts of the system. Like, for example, a butterfly flapping its wings in one part of the world and causing a hurricane in another.

It’s an important thought, especially in this instance.

That’s because the butterfly effect is forcing temporary layoffs for people that have nothing to do with the strike as they are unable to work because of what’s happening.

Tesla wins again.

The Big Three are losing money on every EV they sell and are hobbled by shenanigans like the strike when it comes to conventional cars, which is where they made their money. The strike will set them back months vis a vis competitors, perhaps more.

Tesla makes only EVs and continues to change the industry.

Yes, it’s true that Tesla’s workers on average get paid less per hour than the UAW workers who are currently on strike, but Unka Elon keeps his workers happy and has reportedly made many of ‘em millionaires through stock options.

Expect Elon to take full advantage of this misstep by the Big 3.

Tim Higgins, reporter at The Wall Street Journal, comments, “Any wage increase further advances Tesla’s already tremendous cost advantage in EVs over its older US peers, which are contending with generations of legacy expenses while trying to steer a costly transition to electric from gas-powered vehicles.”

I agree!

My target is $300, a target I set some time ago. Then, once that gets taken out, I’m starting to think about another split and/or $500 a share.