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More shenanigans = more profit potential

Dec 20, 2022

Good morning!

Futures are flat as I type in early going while the US 10-year yield is up 0.08%. That could make for a choppy day, but admittedly, it’s too early to know which way the wind’s blowing.

It’s tempting to run for the hills—and many people are—but the fact of the matter remains that buying great companies when they’re put “on sale” is how you play the game if you want to build real, sustainable wealth.

You may not like it, but that’s a different topic.

SPOILER ALERT: Buy low, sell high is STILL how you play the game and always will be.

Here’s my playbook.

Cisco sends 5% of workers packing

Cisco handed walking papers to 5% of its workforce, according to reports this morning. This is part of a pre-planned action but still stinks because it’s more proof the Fed still doesn’t have a handle on things. (Watch)

MyPOV: Fed hikes will not fix what’s wrong with our economy. There are still more jobs than workers, with 3+ million people having left the workforce. To a point I have made repeatedly, unemployment will not go up meaningfully, no matter what the Fed does.

This isn’t rocket science.

JGB bond yield shift: Did the SHTF in Tokyo?

What’s happening. Bank of Japan just changed its yield curve policy to allow the 10-year Japanese Government Bond to move 50 basis points to either side of the 0% target it has in place. (Read)

Why this is a big deal. The move highlights something lurking under the surface the way a shark fin highlights a great white. Global central banks are almost uniformly hawkish and still hell bent for leather on raising rates. So, this means Japan has effectively stepped out on its own. My guess is that Japan’s having trouble issuing debt and, by implication, that its corporate bond market is in the proverbial toilet.

What to do. Time to short JGB paper—I think yields will rise quickly.

Why I hope I’m wrong. I can’t shake the nagging feeling that this reminds me of the lead-up to the Global Financial Crisis. Longtime readers will recall that I correctly identified it as a multi-trillion problem in advance during an appearance on Varney & Co... when nearly everybody else thought it was just a few-hundred-million problem limited to Greek banks.

Auto Execs: EVs not “all that”

KPMG surveyed more than 900 automobile industry experts, and the media expectation for US EV sales in 2030 has dropped to just 35% of the market... from 65% last year. Nearly half!

Time to get real—and not a moment too soon, IMHO. Even Toyota’s president, Akio Toyoda, says the company “cannot speak loudly” when it comes to EVs, which is a remarkably direct observation in a country where nobody speaks their mind. (Read)

Long Ford, short Toyota?

Why I think FDX could break $125

I made Wall Street’s blood boil when I called Meta a bug in search of a windshield as it crested $350 a share. Then drove the Technorati positively batsh!t when I said it would ultimately fall under $100.

FedEx (FDX) isn’t far behind. I said “Avoid it” late last year because the shipping market was at risk from a post-pandemic retreat to reality. Shares dropped from roughly $250 to a 52-week low of $141.92 before fighting their way back to $171, where they trade as I write today.

FDX could break $125 in the next six months because, like Meta, it’s lost the mojo needed to keep prices where they are. The company reports after the bell today.

Bearish spreads, puts, and hedges could all work nicely here.

GIS reports a double, shares slide anyway

I sure am getting tired of Wall Street’s shenanigans.

General Mills (GIS) reported better-than-expected profit and revenue while also raising its full-year forecast. Yet, shares slid in the pre-market.

I warned One Bar Ahead® readers to hedge their bets against exactly this scenario in yesterday’s alert. Take profits as noted if you’re following along as directed.

This trade has probably run its course, but if you’d like to get ahead of the next move or similar moves Upgrade to Paid