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Where do stocks go from here?

Aug 22, 2022

Good morning!

‍The Jackson Black Hole gets underway this week and traders are understandably skittish.

Here’s my playbook.

Where do stocks go next?

Driving headlines. This morning it’s down on fears related to what Powell might or might not say from the Jackson Black Hole on Friday.

MyPOV. The emperor has no clothes. Sadly, everybody knows it but everybody pretends to pay attention anyway. I expect some volatility this week; if there's some buying today then that'll moderate but if not, it could get nasty.

It's critically important to keep an eye on the bigger picture. 95% of the S&P 500 has reported and 75% have beaten expectations ... which means the short-term noise is just that ... noise.

The stocks to own. Reliable names we talk about frequently, all of which are low-beta, high-quality companies capable of plenty of growth.

Meanwhile, keep your hedges on. As noted in last Wednesday's Master Class, the S&P 500 was telling us that there was a downturn in the cards. I showed members of the One Bar Ahead™ Family in attendance the chart and we talked through the specific investments needed. (Learn more)

Meta will fall under $100 a share

The incomparable Stuart Varney and brilliant Susan Li were incredulous when I said so … but here’s my case from earlier this morning ahead of the opening bell. (Watch)

Dozens of ways to trade the situation. Buy puts, bearish spreads, shorting, avoiding and buying something else instead. I’ll have a few thoughts in TWK later this morning.

AMC shares tank on Regal’s BQ notice

AMC got shellacked last week to the tune of a -26% loss. Shares were down more than 30% in today’s pre-market on news that Cineworld, a rival, said it was considering filing for bankruptcy. (Read)

Not a surprise.

The company issued a new preferred stock being called “APE” units that is negatively impacting trading. Valuation concerns tend to have that effect.

Meme mania continues.

A legal way to discriminate against low-income borrowers?

I thought this was a joke, but it’s not.

What’s happening. Bank of Australia announced over the weekend that it will stop providing loans for gas and diesel vehicles starting in 2025 to encourage the purchase of electric vehicles.

Something stinks. Teslas accounted for more than 50% of all EVs sold there which means EV customers are a higher tier – read less likely to default – than conventional car borrowers. Research is hard to come by, but financing is problematic because of a lack of comparative data, safety information and the generally limited breadth of specialized financing.

Begs the question: Is the bank really that “woke” or is this going to be a new way to discriminate against lower-income borrowers? And, while we’re at it, will the bank’s default risk go up or down as a result of this move? Chances are good we know the answer, but nobody is apparently asking the question because it’s a hot potato.

Expect similar moves. US banks are going to be watching this closely. Expect similar moves here if there are no legal challenges. And backlash from political hacks who will suddenly be aware of the issue a year from now.

Yuan, Euro, and Pound down for the count

Globalists are getting a real education in how the dollar actually works. Rising rates are making the dollar more expensive than ever and, much to their chagrin, tanking other major currencies. (Read)

Of note. China’s hopes for an independent block were dashed as it hemorrhages foreign capital at rates making Beijing’s head spin. Russian dreams of an alternative currency system are a great big nyet. India looks foolish for having gone along with the plot and playing in the so-called Dim Sum market where credit issuers from around the world issue yuan-denominated debt.

Why this matters. Currency impact will be the subject of next quarter’s earnings reports. As will more “pre-emptive” earnings warnings.