☕ Stocks that get hit the hardest tend to bounce biggest

Good morning! 👋 

News outlets are reporting that the markets are in a foul mood after El Zucko’s comments fell flat but we – you and I - know better. 

The US10YR treasury yield is now the highest it’s been in more than 5 months. 

If you’re just joining us, this is THE relationship you want to watch. 

Here’s why. 

Big traders borrow gobs of money to ply their trade.  

• When yields drop, that means the cost of debt is down, so they borrow more to magnify their returns and start buying stocks. 
• When yields rise, the opposite is true. They start selling to deleverage (which is what's happening today) before they get one whopper of a margin call. Tech stocks, which are super liquid and easy to unload, go first. 

If you’re an investor, this is the financial version of a dinner bell. 

The business case for owning great companies is a much longer time horizon than the day-to-day trading that hits the headlines. 

Invest accordingly! 

What will you buy today? 

Remember... Stocks that get hit the hardest tend to bounce biggest. 

Just sayin’. 

Here’s my playbook. 

1 – The real problem with Meta isn’t Meta 

META reported quarterly results that didn't even remotely come close to what the street expected. (Read) 

Once again, the problem isn’t META – which actually reported pretty darn good Q1 results, btw. 

It’s the guidance. 

Why? 

Because that raises concerns about the broader tech complex in general including specifically both Microsoft and Alphabet which report shortly. 

Get your shopping list ready.  

Some of the tactics that could work superbly include selling cash secured puts, LowBall Orders. Heck even buy a share or two to stay focused if you can. 

Keith’s Investing Tip: To a point I’ve raised many times... you make your money on down days but that doesn’t often become apparent until you get up days. 

2 – GDP plus +1.6%: WWJPOWD? 

The Q1 reading for US gross domestic product came out earlier this morning at 1.6% versus the 2.4% economists expected. 

Two takeaways: 

1. Rising prices (that whole pesky inflation thing) and falling numbers isn’t good; but, 
2. Could it be good enough that the Fed stands pat? 

Traders don’t seem to think so yet but, odds are they will. 

Watch how fast they get back on the gas – meaning flip back to buying – if JPow gets in front of a mic and even hints at holding steady or the prospect of a cut. 

3 – Merck clobbers earnings 

Merck, a pharmaceutical giant, came in with adjusted EPS of $2.07 per share on $15.78 billion in revenue. Analysts expected $1.88 per year on $15.2 billion. (Read) 

This reinforces my contention that pharma is going to be one of the stronger plays this year and into early next, a comment I made as part of my January outlook. 

Not surprisingly – again, given my outlook – sales reflect stronger growth in 2 key areas: vaccines and oncology. Worldwide growth was +9%, but +12% excluding foreign exchange. 

Should you buy Merck? 

Before you do or even if you already have a few shares, there’s another so-called big pharma name “on my radar” with a higher shareholder yield, stronger annualized growth, and bigger upside potential.  

Every $1,000 invested in Nvidia when it first got “on my radar” more than a decade ago – on April 25, 2012 - would be worth $259,441.24 as of last night – 25,844.12% return even after all the selling according to finmasters. The SPY returned 357.60% by comparison. 

If you’ve got this covered – excellent. Most investors lurch from one stock to the next when the real magic is finding world class companies and sticking to ‘em if you can. 

I’ll be here if you need me. Upgrade to Paid 

4 – Nashville's off the list 🤦‍♂️ 

Like many people, my bride and I have been considering a move to less expensive, quieter and more business-friendly places around the world, including Nashville, Tennessee.  

So much for that idea! 

Oracle let it slip earlier this week that it’s moving the company’s HQ there.  

The new campus will reportedly include office buildings, a health clinic, restaurants, hotels, and even a concert venue.  

MyPOV: Big corporate moves – mega projects, really – typically result in a massive uptake of everything from housing to construction equipment and more. Multi-family housing could be particularly profitable, as would anything in the equipment leasing space. Real estate agents, title companies and insurance players, too. 

5 – Venice tourist fee 

Venice (Italy) is making waves this morning, having enacted what is being billed as the world’s first day-tripper tourist entry fee. It's intended to help cut down on “over tourism” - aka the more than 5.5M+ people who visit annually and who overwhelm the 50,000 or so residents. (Read) 

Love it or hate it, this is the future of tourism. 

We’ve had similar fees in Japan for years, particularly for culturally significant temples and shrines where selfie-stick wielding tourists have regularly trampled 1,000-year-old gardens and otherwise torn up delicate buildings that are centuries old. Many are also downright rude which only makes it worse. 

Tourism “taxes” aren’t new in and of themselves. You'll need to pay up if you want to visit Amsterdam, Spain’s Balearic Islands, and Manchester, England just to name a few. And don’t even get me started on Las Vegas “resort” fees – arrrgg. 

I can easily envision players like Live Nation Entertainment wanting to get in on the action if this takes off. Or a new app being developed to take up the slack by a company we don’t know about. Shoot, even Apple or something in the EU could jump in if the ecosystem is big enough. 

You'll know we’re on to something if the scalpers go to work. 

BTW, if any of you beat me back to Venice, please take a moment to let me know if you see ‘em on the way in and how the city reacts. 

Bottom Line 

Many people feel the compulsion to “do something” on big down days when fear runs strong and emotions run high, especially if they’re new to investing or trading. 

Not true.  

In fact, some of the best decisions are to do nothing.  

Owning the right stocks can give you the confidence needed to do so.  

Let that sink in. 

As always, let’s MAKE it a great day! 

You got this – I promise. 

Keith 😊