Nasdaq rockets out of the gate: I hope you’re on board

Good morning!

Futures roared higher when the October CPI came in less than expected. Or at least that’s what the headlines suggest.

The real story, as we know, is something very, very different.

The US10-YR has dropped to 3.951% in the premarket, which means the “cost” of money they’ll use to leverage up has decreased.

I smell a bullish day if that holds.

Here’s my playbook.

CPI might be in retreat, but your grocery bill won't be

Don’t make the mistake of believing that inflation is “over” just because there’s been a single data point suggesting that it’s cooling. The government continues to spend gobs of money and there are still plenty of supply side problems to contend with.

Retailers report next week. I’m betting they’ll have some not-too-nice things to say about how that’s crimped operations. Guidance, of course, will be key. For example, Coach owner Tapestry Ralph Lauren is already warning about slowing holiday season demand. (Read)

MyPOV. Putskies on major retail names that’ll get pinched could be attractive. Oh, and anybody who didn’t use the recent sell-off to snap up shares of big tech names we talk about frequently in One Bar Ahead® could instantly regret it. Even if there’s more selling ahead.

FTX makes Madoff look like a boy scout

Binance has backed out of the FTX rescue I wrote to you about yesterday, noting that the “issues are beyond our control or ability to help.” That’s buzzword bingo for FTX is a risk they don’t want. (Read)

Things are so bad that Sequoia capital has reportedly also marked its investment in FTX to $0. And chose to tweet about it, a highly unusual move!

Four things stick out…

1. Sequoia said “the fund (Sequoia itself) remains in good shape” as part of the release. (Read) Call me crazy, but that’s what people said about Lehman, too. I think the fund tweeted about the markdown to put as much distance as it can between FTX and Sequoia itself before the really nasty news becomes public.
2. Some big names like BlackRock, Tiger Global, Paradigm, and Insight who are not exactly known as pillars of innocence are gonna have some ‘splaining to do. That’s because FTX CEO Bankman-Fried also owned Alameda Research, a digital trading house holding at least one-third of all assets in FTX’s FTT token.
3. This raises the very ugly specter of unprecedented manipulation, especially if said big dogs knew about it the entire time. Sequoia’s LP letter stressed that the fund does, “extensive research and thorough diligence on every investment” [the fund] makes implying that any screwups were on FTX after Sequoia’s checks were cashed. Riiiiiiiight….
4. I’ll be very curious to see how many YouTube “influencers” hop a plane for parts unknown after shilling FTT. I can’t help but wonder how many mansions will “inexplicably” come on the market in Miami and Puerto Rico.

What to do if you own crypto tokens. Pray. There is always spillover whenever a widely held token gets clobbered. And that’s happening now. Meanwhile, confine your money to the two largest coins by value, Bitcoin and Ethereum. Or, simply buy a stock like JPMorgan (JPM), which has been working on digital clearing with real money since 2017.

EVs are great ... if I don't have to pay for 'em

You can’t make this stuff up. California’s been pushing EVs on… well, dang near everyone whether they wanted ’em or not and no matter whether they could afford ’em or not. Never mind the fact that the electric grid is totally unprepared for the load.

Reality is setting in. EVs are great, “as long as I don’t have to pay for ’em.” Californians rejected a 1.75% tax increase that would have funded electric vehicles on residents making more than $2 million per year. (Read)

I wish there were a way to invest in all the moving vans headed out of the state. Oh, wait… oil.

You know what to do.

Small cap today, blue chip tomorrow

People laughed at Toyota in the late 1960s when it hit the global stage. Chuckled in the early 1970s when it took on Detroit.

Now they just cry in their beer. Toyota is the world’s #1 car maker, selling nearly 10.5 million vehicles in 2021. To put that in context, that’s 1.7 million more than the 8.8 million vehicles that the #2 player, VW Group sold… and VW owns Volkswagon, Audi, Porsche, SEAT, Škoda, Bentley, Bugatti, Ducati, and Lamborghini.

NIO is one of two Chinese automakers using Toyota’s playbook. It just announced strong Q3 revenue and a big end-of-year production push. (Read)

You’ve got two choices when it comes to China. The Dragon is coming to dinner. You can be at the table or on the menu. I get you may not like China or Chinese stocks, but I don’t have the luxury of taking sides in my capacity as an investment strategist. So, let’s get that off the table. It’s your money and your responsibility.

MyPOV: I believe the company is a blue chip in the making. Odds are good that investors will claim “nobody” saw it coming. Especially those ensconced in Detroit and Wolfsburg.

You’ve heard me say it 1,000 times, big tech will skyrocket if inflation pauses

You’ve heard me say it on national TV and right here in the 5 with Fitz dozens of times in recent weeks… “tech will go right back to the head of the class” if there’s even a hint that inflation moderates, or the Fed pauses.

Nasdaq opened +4.8% on the heels of a lower inflation reading and a drop in the 10-year yield.

5 stocks doing even better as I type. Key tech stocks in the One Bar Ahead® Model Portfolio are up 11.5%, 10%, 7.2%, and counting. Why? They’re liquid, widely held, and putting up great numbers despite conditions guttering lesser choices. Oh, and they’ve got high capture ratios, too! Upgrade to Paid

Bottom Line

Action beats reaction every time in the markets but especially now.

You know they're rigged.

You know the computers drive.

You know the big dogs protect their own.

Figure out what makes ’em move, then get ahead of that!

Now as always, let’s MAKE it a GREAT day!

Keith