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Yes, this stock is still dirt cheap

Aug 18, 2022

Good morning!

‍Retail rolls on and the split I spoke about yesterday on Mornings with Maria is accelerating. (Watch)

Yet, the markets are trying to put on a rally anyway!

Here’s my playbook.

Fed Follies

Driving the news. The Fed’s July minutes were as expected with Team Powell indicating that the Fed could adjust its pace of tightening based on market conditions. And, of course, that the Fed remains “committed to fighting inflation” … whatever that means, considering they missed the crisis in the first place!

I expect another 75 basis point hike in September with more by the end of the year. That’ll put a dent in the markets short term but not take the wind out of the sails.

The big picture. The markets have figured out Powell isn’t Volker and has no aspirations of filling his shoes. And that means the big money thinks he’s predictable which is why, of course, they can stay on the gas. Volatility will increase, but that’s an opportunity for smart investors.

Meme stock maven Ryan Cohen turns on his peeps

Activist investor and Ape demigod Ryan Cohen made headlines when people learned his firm (RC Ventures) purchased a boatload of $60-$80 BBBY calls last April.

Meme investors assumed that he’d bet on a massive rise in prices because – ya know – it’s calls (a bet on higher prices).

The intrigue. There’s another side and it’s one I brought to your attention yesterday.

This situation is potentially “as ugly as it gets. I’ll bet dimes to dollars that Cohen bought those call options … as part of a hedging strategy … or to create a run higher that would allow him to use Ape FOMO as an exit.”

News broke last night that Cohen intends to sell his stake. (Read)

Predictably, social media went nuts where BBBY stock is a favourite discussion item. Will he or won’t he but the question people should be asking is “did he already?”

If you’re gonna play social media stocks, be smart about it. The big money uses tactics and strategies that should never be taken at face value. Calls, for instance, can be used to assemble synthetic positions that emulate actual positions or that can be used to adjust existing positions. Even to place bearish bets by otherwise seemingly bullish buyers.

Get those Christmas gifts early

It’s not too early to start thinking about Christmas or the holiday season in general.

What we’re watching. According to Sea-Intelligence, more than 9.3% of all containers worldwide remain stuck on ships or in terminals. That’s 5X the global average over the past ten years and works out to roughly 5.8 million containers rotting on board or in dingy warehouses. (Read)

Trade idea: Many retailers are skipping the boat entirely and opting for air transport. That’s going to be more reliable but also more expensive. UPS, AAWW, and EXPD could be worth a look.

SPACs (finally) put to pasture

SPACs – so called blank check companies – are officially a flash in the proverbial pan.

According to the WSJ, SPAC activity is at a 5 year low with not a single company raising money in July of this year. Compare that to March 2021 when investors and get rich quick artists were falling all over themselves to raise a staggering $36b. (Read)

The whole idea of a SPAC is patently ridiculous. The founders would go to the market – clueless investors – with a simple premise that goes loosely along the following … give us gobs of money and we’ll do some sweet deals. If the deal works, we’ll give you SPAC shares for an IPO. If we find a deal, we’ll come back and ask you to vote for it. If we can’t, you cover our fat fees for a year or two. If we find a deal, we get 20% of the newly formed entity and you get … bupkis, or a least a few penny shares.

Good riddance!

Tesla charging stations crush the competition

Catch up quick. The government has never, ever managed to do anything better than private industry. The notion that it’s going to plough billions into EV charging stations plays well to the media.

Customers have already voted. JD Power reports that Tesla charging stations crush the competition. (Read)

Like that’s a surprise.

Great for Tesla stock. The move, I noted several years ago, will add billions to the top line when it opens its charging stations to other brands. A move that is apparently in the works. And yes, Tesla stock is still dirt cheap if you’re wondering.