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Take profits + a new trade idea most will miss

Aug 03, 2022

Good morning!

‍The markets are trying to mount a comeback in the early pre-market now that Speaker Pelosi has left the building … err, the island.

I think it’s time for some quick profit taking then, of course, hunting down some new opportunities.

Profits don’t just happen.

We – you and I – create ‘em so let’s get busy!

Here’s my playbook.

Take profits if you followed along

I recommended the Direxion Daily 10yr Treasury Bear 3X (TYO) yesterday for a quick speculative one-day play on Speaker Pelosi’s provocative trip to Taiwan.

By the numbers: Shares jumped 4% yesterday to close at $10.67. That’s a quick $400 for every $10,000 invested for anyone who bought at the open and sold at the close. The last after-hours trade I see reflects $10.71 at 19:56:45; so slightly higher still. Not bad for a day’s work.

Update: I expect a quick reversal a) now that she’s left and b) if China refrains from doing anything super stupid like unleashing a missile or “accidentally” shooting down something across the strait or even over Taiwanese airspace where tensions remain high.

It’s tempting to hold if you’re not used to leveraged instruments like TYO but doing so is a mistake because the risks will mount considerably. TYO is a 3X leveraged fund and, as such, is not something you’d want to hold for anything longer than a day, perhaps 2-3 at the very most and under exceptional circumstances.

Headlines are creating this opening and most investors will miss it

Question: Would you buy stocks today, in this environment?

That’s the question Maria Bartiromo asked of me this morning. If you’ve been reading my work for any length of time, you probably know the answer.

House Speaker Pelosi’s trip to Taiwan: Headlines are creating a unique opportunity and it’s one that most investors will miss because they’re downplaying China’s reaction. It’s not the tanks on the beach grabbing headlines that matter but what Bejing does next that could really throw a spanner in things. (Watch)

A Special Bonus Recommendation: I will have a special bonus recommendation related to the very opening I’m alluding to tonight for everyone in the One Bar Ahead™ Family when we kick off the first ever One Bar Ahead™ Master Classes.

The live link was included in Monday’s update.

Robinhood will be the biggest self-pump & dump in history

What I said: I called Robinhood the biggest “self-pump and dump in history” the day it filed for its IPO during an appearance on Mornings with Maria on Fox Business Network. (Watch)

The company reported terrible numbers, layoffs and a fine related to lack of compliance for crypto-related activities. Shares are down 90% from 52-week highs. (Read)

The impact: I’ve got to believe regulators will slam down because the so-called “democratization” Vlad promised has been more like a gigantic mugging for retail investors who fell for the company’s schtick.

What happens next: Today, I told her that the company will be lucky to survive. (Watch)

Jamie Dimon saw this coming (and we did too)

People castigated JPMorgan CEO Jamie Dimon when he put up the corporate blast shields, refused to boost the company’s dividend and increased loss reserves recently.

A prudent move: I told you Dimon’s actions were prudent because inflation would hit consumers hard and force many to get in over their heads. Credit card debt would be a “canary in the coal mine,” I said on more than one occasion.

Dimon remains the single most intelligent and forward-thinking banking CEO on the planet IMHO.

No surprise then that the Federal Reserve said Tuesday that household debt has now hit $16+ trillion for the first time ever during Q2. Credit card debt, specifically, jumped by 13% or $100 billion which is the biggest most expensive form of debt there is. (Read)

Said the Fed, “the impacts of inflation are apparent in high volumes of borrowing.”

Ya think??!!

What I’m watching: Total debt is a proxy for inflation related spending because more people push debt as the cost of goods rises. As such, it’s a better barometer than official government CPI data which is a) late to the party and b) more cooked than a Christmas goose.

Yes but: I’ll own JPM specifically because Dimon is ahead of the game and it’s got the reserves needed.

This stock became a little more interesting

PayPal just reported earnings yesterday along with announcing that they’re getting a new CFO and a $2b investment from Elliott.

Meh, but: The earnings themselves were pretty “meh”, but the statements regarding internal investment were what caught my eye.

CEO Schulman said “We were doing 100 things. We’re now doing three or four things extremely well.”

There’s a powerful lesson. Schulman recognizes something unique to the very best CEOs, especially in this environment. It’s better to deliver well on the core business, not dump money into the pursuit of hot trends like – oh, I dunno - crypto.

Worth a nibble: PayPal is one of three fast checkout services that exist, and the fact that they’re focusing exclusively on that for the foreseeable future is attractive to me. The stock is up 13% in the after hours and could be worth a small nibble.