The world’s smartest investors are buying this stock right now

Good morning!

‍It sure is nice to see some green on the screen. It’ll be the 4th consecutive day to the upside if it holds.

This is important because it points out a disconnect.

People are prepared for the worst when they should be planning for the best. The S&P 500 is now on pace for the 2nd positive week in the past three and is just 20% off record highs.

The next rally won’t suddenly start like a switch gets flipped. It’ll build slowly in plain sight despite overwhelming doubt, hesitation, and fear. That catches a lot of people by surprise which is, of course, exactly why it’s worth noting.

Fortunes are being made tomorrow by those buying today. Even if there’s more selling ahead.

Here’s my playbook.

Apple’s new Lockdown Mode

The company is rolling out a new feature called “Lockdown Mode” that’s intended to help protect users against state-sponsored spyware. Ostensibly it’s geared for activists, human rights defenders and journalists but I can see a broad application for consumers.

The new feature will work on iPhones, iPads and Macs by blocking attachments sent to the Messages app as well as disabling certain features that are geared towards convenience right now.

Why this is important: Apple just set the bar higher. Cybersecurity is a growing concern for everybody and Apple’s move ushers in what I hope will be a truly sustained effort to protect individuals worldwide. It’s also a shot across the bow at companies like Norton and Kaspersky.

You know what to do!

Goldman, incidentally, is out with a report saying Apple could drop to $130 a share. Retail investors see something like that and think they should be selling but, in doing so, completely forget the firm’s history of saying one thing and doing another.

New England Asset Management – which runs Warren Buffett’s so-called “secret portfolio” – has 56% of its wealth in Apple stock alone.

The world’s smartest money is buying!

Are chips bottoming?

Samsung just announced earnings, and shares rose after “better than feared” numbers.

Why you should care: ~60% of Samsung’s operating profits come from their components and semiconductors business. The fact that Samsung is doing better than expected bodes well for other chip manufacturers like TSM.

I’m still betting on a longer-term American comeback with one company I like even better.

One Bar Ahead™ Family members, you already know which stock I’m talking about. Shares are trading at a discount but probably not for long!

Amazon takes a “steak” in Grubhub

Amazon just took a 2% stake in Grubhub, one of the mainstream food delivery apps, and will be waiving delivery fees for Amazon Prime members. If the partnership works, Amazon will be increasing their stake to 15%. (Read)

Great!

Amazon has an increasingly challenging battle to justify Prime pricing increases to consumers and putting a little food on the table could be an effective way to do that. Meanwhile, Grubhub wins because it’ll be able to leverage Amazon’s existing logistics network.

Not surprisingly, both Uber and DoorDash dropped 6-7% on this news.

Yet another example of the “Best, not rest” investing approach we talk about frequently in One Bar Ahead™ at work. (Learn More)

What’s an inversion anyway & how to trade one

Bond prices and yields go in opposite directions. If prices are rising, yields are falling and if prices are falling yields are rising.

Treasury yields are higher this morning and look to extend that. Not only that, but the 2- and 10-year varieties are inverted.

Most economists and erstwhile FURUs blather on about this but can’t tell you what inversion actually means.

It’s not that challenging.

An inversion simply means that short-term interest rates are higher than longer-term rates. Normally, it’s the other way around with long-term rates being higher.

The 2 to 10 year is key because this inversion, if sustained, is widely interpreted that a recession is more likely because the economy is weakening.

That sounds absolutely terrible because the news will lead you to believe that stocks will tank immediately after an inversion. That’s not true. In fact, the lead time from an inversion to weakening economic data can vary anywhere from one to two years after an inversion.

This time around, though, I submit the door is already open. Stocks have already sold off hard this year.

A trade idea: Consider shorting the 10-year note future (/ZN) and go long the two-year future (/ZT). Or, if ETFs are more your speed, consider buying the iShares Short Treasury Bond ETF (SHV) while simultaneously going long the iShares 7-10 Year Treasury Bond ETF (IEF). The futures are “cleaner” because there isn’t a 2 year ETF I’m aware of, though.

The best economic indicator ever isn’t stocks

Learning to invest isn’t just about numbers. You’ve got to learn to read the world around you if you want to really hit it big. For example, prices for 2nd hand Rolex and Patek Phillippe watches are falling as the crypto meltdown continues. (Read)

That’s not a coincidence. Both brands are a sign of success coveted by newly flush crypto bros worldwide.

The fact that they’re falling tells me two things: a) demand has dropped and b) the pain associated with crypto’s crash from the heavens is hitting many where it hurts.

What to watch next:

Rémy-Cointreau is linked to luxury travel.

Condo prices in Puerto Rico. They’re linked to the crypto community at large and the uber-wealthy tax avoidance crowd.

Quarterly results for LVMH (which owns Dior, RM Williams and Fendi) and Kering (which owns Balenciaga, Gucci and Yves Saint Laurent)

Ironically, Ferrari, Porsche and Lambo sales are not bellwethers in my experience because they’re largely driven by consumers who are not negatively impacted by what’s happening.

Trade Ideas: Calendar spreads on the likes of LVMH and Remy-Cointreau seem like logical places to start. I think results may come in super low as does ever-important and increasingly fickle guidance.

Bottom Line

Money is made not on the selling like many think.

Buying “right” is the real driver.

So do it!

The sun will come up tomorrow … seriously.

Keith