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The markets remind me of a house party

Jan 26, 2022

Good morning!

I spent the morning with the fabulous Maria Bartiromo and the legendary Steve Forbes on Mornings with Maria, which means I am desperately in search of some sleep and some coffee … although to be fair, not necessarily in that order!

So I’ll keep it brief.

Microsoft killed it, while Tesla and Intel report after the bell and the Fed’s on tap.

Here’s my playbook.

1 – Markets remind me of a house party

The cops are on their way and people in the know are going out the kitchen window. I am deeply suspicious of today’s rally action after two down days of vicious selling.

Why?

Because this kind of action is more typically associated with the beginning of new declines than the resumption of a rally.

If I am correct, coupla things come to mind:

Quality matters so owning the right stocks is key because they’ll fall less and rebound fastest longer term.
The Fed needs to take action, not jawbone some more about willingness to take action.
Hunt for bargain/value and limit choices to great companies with big profits.

Like, for example …

2 – With stocks like MSFT, why on earth would you even think about buying PTON?

MSFT notched their first $50 billion quarter. Team Nadella just reported earnings yesterday afternoon, and absolutely knocked the leather off the ball with earnings of $2.48 per share and revenue of $51.7B vs expectations of $2.31/share and $50.88B. Azure is also still growing at ridiculous speeds of 46%, and I don’t think that’ll be slowing anytime soon. (Read)

With stocks like this and performance like that on offer, I am baffled why many investors choose to put their money in stocks like Peloton… but that’s just me.

3 – So much for “clean and green”

Water is a huge deal to conservationists and rightly so. Less than 3% of all the water we have on the planet is fresh water. Just 0.5% is drinkable.

Yet the Beijing Olympics are apparently going to be the first ever to rely on artificial snow.

Some 2 million cubic meters have been repurposed which is roughly the equivalent of 800 Olympic-sized swimming pools. All from an area that is already short on water and can ill-afford the 49 million gallons needed to make all that.

Oh, and the Games are being held in the middle of the Songshan Nature Reserve on an area bigger than 1,000 football pitches. (Read)

4 – Main Street went to war with Wall Street a year ago

One year ago, GameStop stock shot up nearly 150% in one day, marking the beginning of its meme-stock status. AMC, too.

Both moves created a desperately overdue discussion about everything from payment for order flow, market shenanigans and how Wall Street stacks the deck in its favour.

Both stocks are now down 60% and meme stonk-related activity on Reddit has halved with droves of people having had their you know whats handed to ‘em. (Read)

At first it was fun but there is no doubt in my mind that millions of people who got sucked in are rethinking their involvement and wishing they’d never heard of GME or AMC.

5 – Not a reason to abandon Nvidia

The FTC has reportedly sued to block Nvidia’s bid to purchase ARM (another chipmaker) on the grounds that Nvidia could become too powerful if the deal went through… which is probably true. Anybody who knows the difference between a GPU and a CPU knows that this would create an absolutely ‘uuuuge player because ARM already makes chips for almost all of the largest tech companies and other chip designers. (Read)

Not a reason to abandon NVDA though. The company will be a key player in the metaverse. What’s more, GPUs will continue to be super important in the AI space, for data centers and more. No wonder the company is still growing at nosebleed speeds.

Softbank, meanwhile, is reportedly looking for a way to take ARM public now that the acquisition proposal is seemingly DOA. (Read)

I’m not holding my breath … Softbank backed WeWork and that didn’t – ahem – work.