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TIPs got you down? Here’s an ETF to consider

Apr 06, 2022

Good morning!

I warned yesterday about the possibility of a fade and to be cautious about running whole hog into the teeth of a reflex rally.

The markets are down in the early going as I type but the action still feels stilted. That makes sense given the ongoing situation in Ukraine, the Fed and oil prices.Here’s my playbook:

1 – Powell risks bond massacre

Fed Chair Jerome “JPow” Powell’s message conflicts with the President’s when it comes to inflation. The markets now see six rate hikes, one at each of the six remaining meetings this year. (Read)

While I hope that the Fed is smart enough to maintain a measured pace, there are no guarantees. In fact, I think the Fed is in “inflation panic” a term Guggenheim Partners Chief Investment Officer Scott Minerd used recently. (Read)

I can’t help but have a sense of déjà vu this morning as I think about the Bond Massacre of 1994 under very similar conditions.

Fortunately, the key to surviving all this nonsense isn’t all that challenging even if the prospect of more selling seems that way.

Stay focused and invest ONLY in companies you want to own 10 years from now. And, of course, maintain your hedges. Slow down buying while you’re at it.

If you’re a member of the One Bar Ahead™ Family, stick to the “5 D’s” and remember why we follow ‘em … because they’re all backed by trillions of dollars that will get spent practically no matter what.

I suggest re-reading the January 2021 and January 2022 issues outlining what they are and how they’re changing. (Click here to access)

2 – TIPs got you down? – consider buying this ETF instead

TIPs are supposed to help investors protect their money against inflation, but the nasty little secret is that they can fall as interest rates increase. That’s because TIPs have positive duration, a measurement of how sensitive bond prices are to interest rate movements.

Consider a choice like the Horizon Kinetics Inflation Beneficiaries ETF (INFL) instead. It invests in financial services, energy and commodities, all of which may offer comparably more inflation protection in the real world rather than just being rate driven.

3 – Shegenerates lost $225,000 overnight

Decentralized finance – DeFI to the technoratti – is the future according to many. It’s also a prime target for criminals because the infrastructure needed to protect investors and their money remains super-primitive.

Fortune reports that a crypto investor named Shegenerates lost $225,000 overnight when attackers hit the popular funding platforms Agave and Hundred Finance to the tune of $11 million. (Read)

4 – If you’re a BABA bag holder

Alibaba rose 37% yesterday after Beijing “signaled support.”

No, Beijing didn’t.

At least not like the Western press thinks.

What Vice Premier Liu He actually said was the Chinese government would be introducing market friendly policies and that any policies should be developed in coordination with financial regulators.

That’s CCP code speak for we will crush anybody who gets out of line. (Read)

BABA shares have lost -53.74% over the past year.

If you’re a bag holder, you’re not alone and you’ve got a choice to make.

BABA is probably so low now and under so much scrutiny that it’ll be hard to match the (formerly sky-high) growth everybody thinks they’re buying. Shares could drop further or merely scrape the bottom of the barrel for years.

What you really need to ask yourself is whether there is something else you’d rather own that can help you make up ground faster. To me, the answer is a very firm, “yes” but that’s a story for another time.

If you kept risk small by using appropriate position sizing on the way “in” then you’re probably looking at a long slog ahead. I could make the argument that you may as well just hold on at this point. Just keep in mind that China’s stance on Russia remains a massive unknown. Sanctions could take shares into the basement in a hurry.

5 – MRNA: CEO bags $400 million selling shares

Moderna CEO Stephane Bancel sold more than $400 million in company stock during the pandemic according to CNBC which is reporting that all sales were executed under SEC rule 10b5-1 which exists to prevent insider trading. Critics charge it’s too lax. (Read)

People will undoubtedly try to make a mountain out of a molehill here but my read of the SEC filings is that he’s selling consistently to increase charitable giving (which lowers his taxes), to fund a trust fund for his children, and to potentially free up capital for other investments.