Tickers | Billionaire's Portfolio

November 26, 5:00 pm EST

After a down 7% October, the S&P 500 was down another 3% for November as we started the week.

But stocks had a nice day, continuing to bounce from this big trendline we’ve been watching over the past week.

And the better news: We have potential positive catalysts on the docket for this week that could put a final stamp on this correction.

Powell (Fed Chair) gives a prepared speech on Wednesday at the Economic Club of New York. Remember, we were looking for some signal a couple of weeks ago that the Fed might take a pause normalizing rates. We got it, but from the Atlanta Fed President. This week, any indication from the Fed Chair that rate hikes are nearing an end would be a greenlight for stocks.

And then we get new information on U.S./China trade relations by the week’s end as Trump and Xi are scheduled for a sit down at the G20 meetings. Among all of the concerns that might be curbing risk appetite (both in markets and the economy) this one is among the biggest. Progress on that front should also trigger relief in stocks.

The combination of a more dovish Fed and some clarity on trade would set up for what could be a very aggressive bounce for stocks into the year end.

What stocks do you buy? Join me here to get my curated portfolio of 20 stocks that I think can do multiples of what broader stocks do, coming out of this market correction environment.

Trump Is Settled On Saudi Sanctions — Good For Stocks

November 21, 5:00 pm EST

We looked at the below chart yesterday. We’re continuing to get a bounce off of this big trend line that incorporates the lows of the oil price crash of 2016, and the election later that year.

Importantly, as I said yesterday, the stock declines of this year appear to have everything to do with Saudi capital flows — and less to do with all of the hand-wringing issues you hear and read in the financial media.

As we discussed last month, the top for stocks in January and the top in October, both align perfectly with the timing of events in Saudi Arabia.

Let’s revisit that timeline from my October note: “Remember, last November the Saudi Crown Prince Salam, successor to the King, ordered the arrest of many of the most powerful Saudi Princes, country ministers and business people in Saudi Arabia on corruption charges. More than $100 billion in assets were claimed to be under investigation (a third frozen) in what was called the “Saudi purge.”

These subjects were detained for nearly three months. The timing of their release and the market correction of early this year is where it all begins to align.

They were released on Saturday, January 27. S&P futures open for trading on Sunday night. Stocks topped that night and proceeded to drop 12% in six days. And rallies in stocks were sold aggressively for the better part of the next seven months.

Fast forward to this month and we have the murder of the journalist who was a public critic of the Crown Prince Salam. As the details of story pointed back to Salam, on October 3, U.S. bond markets got hit (to the hour of news hitting the wires) and stocks topped that day, and have proceeded to drop by more than 8%.

Clearly, the destabilization in Saudi Arabia has put considerable assets in jeopardy. With that, those in control of those assets have likely been scrambling to protect them, as U.S. Congress pushes for sanctions, which could include freezing Saudi assets.”

Now, over the past few weeks, we’ve seen some back and forth onwhether or not the Saudi Crown Prince would be implicated in the Khashoggi murder and/or, most importantly, sanctioned. And the moves in stocks have been reflecting that whipsaw. Remember, the Saudi sovereign wealth fund is worth more than half a trillion dollars. They’ve been heavily invested in the tech giants. And those (the tech giants) have led the way down. Any uptick in the probability that we see more U.S.-based Saudi assets frozen or threatened, has created selling in stocks.

But as we said yesterday, Trump seems to be settled on the sanctions that have already been levied (excluding the Crown Prince and broader government). That’s a positive for stocks.

And he’s leveraging the Saudi crisis to get oil prices lower. Remember, we talked about the oil bargaining chip earlier this month. Here’s an excerpt from my November 9 note: “It’s probably no coincidence that the slide in oil prices started the day that the Saudi Crown Prince was implicated in journalist Jamal Khashoggi’s disappearance. Remember, the bond market got hit, to the hour, of this headline hitting …

Stocks topped a few hours later, and that was the top for oil prices too.

When Trump spoke with the Saudi Crown Prince on the phone on October 16, oil was trading above $71. We haven’t seen that level since.

Trump‘s position on high oil prices is no secret. He doesn’t like it. And Saudi Arabia is well aware. Is it possible that Trump has leverage and is using it? Likely. Is it possible that the Crown Prince is willing play ball with U.S. demands (on oil production) in order to avoid sanctions (or worse).“

Interestingly, Trump is now confirming the above with his statements over the past couple of days.

Bottom line: When stocks decline for non-fundamental reasons, it’s a huge buying opportunity. This is one of those moments.

What stocks do you buy? Join me here to get my curated portfolio of 20 stocks that I think can do multiples of what broader stocks do, coming out of this market correction environment.

Have a great Thanksgiving!

Trump’s Handling Of Saudi Arabia Is A Big Deal For Markets

November 20, 5:00 pm EST

Stocks hit this big trendline today and bounced.

This line comes in from the oil price crash-induced lows of 2016. And, as you can see, we have the bottom of the fallout in the futures market on election night, and the lows of last month. This area also puts the S&P 500 right at a 10% decline from the October highs.

Is it the bottom of this sharp two-day slide? Maybe.

Let’s talk about why stocks have gotten hit, again, this week.

Last week, it looked like the fog had lifted. We were looking for the Fed to signal a pause on rates. We got it, to a degree, with the message that the ‘normalization phase’ for rates was in the “final days.” We had the U.S. Treasury name those Saudis to be sanctioned in the Khashoggi murder. The Crown Prince wasn’t one of them – which means the Kingdom was not being sanctioned. And we had news that progress was being made on U.S. China trade. That was all good news for stocks.

But the latter two of these hurdles for stocks was reversed over the weekend.

We had some confrontational talk from Pence and Xi. And we had news that the CIA investigation would implicate the Crown Prince in the murder of Khashoggi.

Everyone is well aware of the U.S./China trade implications. As for the Saudi, implications, it’s more complicated. First, Trump has been trying to make the case for Saudi Arabia’s critical alliance in the fight to defeat ISIS and check of Iran. Maybe more importantly, pushing Saudi Arabia toward an alignment with China and Russia in the long-game would be a grave danger for the U.S.

Taking action against the Crown Prince would jeopardize both.

So, as I suggested earlier in the month, Trump seems to be leveraging the Saudi crisis to get oil prices lower. He said as much today. And to this point, it appears that he’s settled on the sanctions that have already been levied.

If that holds, that’s good for stocks. The risk, given the amount of wealth Saudi Arabia has in U.S. capital markets, is any change in that stance that might mean broad sanctions on the Kingdom of Saudi Arabia. That’s where Saudi liquidations, in effort to secure assets, is dangerous for the stock market.

Join me here to get all of my in-depth analysis on the big picture, and to get access to my carefully curated list of “stocks to buy” now.

Monopoly Is Being Priced-Out Of The Tech Giants

November 19, 5:00 pm EST

The tech giants continued to get hammered today. We’ve talked about the prospects for an unraveling of the tech giants for much of the past year.

Despite the clear warning shots that were fired by regulators/lawmakers (and the President) along the way, these stocks kept going up — until they didn’t.

As I said back on September 4th, when Amazon crossed the trillion-dollar valuation threshold, “at 161 times earnings, the market seems to be betting on the Amazon monopoly being left to corner all of the world’s industries. That’s a bad bet. Much like China undercut the compeition on price and cornered the world’s export market, Amazon has undercut the retail industry on price, and cornered the world’s retail business. That tipping point (on retail) has well passed. And as sales growth accelerates for Amazon, so does the speed at which competition is being destroyed. But Amazon is now moving aggressively into almost every industry. This company has to be/will be broken up.”

A day later, Facebook and Twitter executives visited Capitol Hill for a Congressional grilling. Here’s an excerpt from my note that day: “If you listened to Zuckerberg‘s Congressional testimony in April, and today’s grilling of Jack Dorsey (Twitter) and Sheryl Sandberg (Facebook), it’s clear that they have created monsters that they can’t manage. These tech giants have gotten too big, too powerful and too dangerous to the economy (and society).”

Here we are, a little more than two months later, and the sentiment on tech has dramatically changed. Amazon topped the day it reached the trillion-dollar valuation and has lost a quarter of a trillion dollars in value since (down 26%). Facebook is down 39% since the record highs in July.

So it appears that we are finally seeing the “monopoly scenario” priced out of the tech giants. And with that, we should see money moving back into those stocks that have been left for dead in industries like media, retail, shipping (to name a few). This is the Dow/Nasdaq convergence we’ve been looking for for much of this year — and we’re getting it. At one point this summer the Nasdaq was up close to 15% on the year, while the Dow was flat. Now both are up just over 1% year-to-date. I suspect that Dow outperformance will continue.

We have G20 tomorrow, where the world will be watching for some movement on the U.S./China trade negotiations. Any hint at a deal should get this Dow trade moving aggressively higher.

Join me here to get all of my in-depth analysis on the big picture, and to get access to my carefully curated list of “stocks to buy” now.

Stocks Trading On Fear, Not Reality

November 16, 5:00 pm EST

Stocks end the week on a strong note.

We’ve talked all week about the catalysts to fuel the continuation of recovery in the stock market. The Fed’s signalling that their rate normalization program is in the final steps was a big one. We’ve also possibly cleared the overhang of the potential for broad sanctions on the Saudi government. And now we’re getting movement on the China/U.S. trade negotiations.

Again, just in the past few days we’ve cleared a lot of the fog that has been hanging over stocks.

With that, as we head into the weekend, let’s take a look at a few charts …

On Wednesday, we looked at this chart above. This big retracement level was setting up nice, technically, for another leg higher in the post correction recovery for stocks. It looks like we’re getting it.

And I continue to think this may all end in a sharp V-shaped recovery. In the chart below, you can see what the slope of that move may look like.

The stock market fears are driven by “what-ifs.” Meanwhile the reality (the “what is”) is clearly supportive of much higher stock prices: strong economic growth, subdued inflation, strong corporate earnings and cheap valuations.

Have a great weekend!

Join me here to get all of my in-depth analysis on the big picture, and to get access to my carefully curated list of “stocks to buy” now.

Fed Signals End Of Rate ‘Normalization’

November 15, 5:00 pm EST

One of the spots weighing on the market has been the Fed’s persistent increase in interest rates. With that, and with some soft spots showing in the global economy and a more challenging policymaking environment ahead in Washington, we were watching Fed Chair Powell’s remarks very closely late yesterday (after the market close) for some signalling that a pause on rate hikes might be coming.

Unlike past Fed heads, Powell is a plain spoken guy. And he tends to be very clear in his messaging. With that, he didn’t seem to have an agenda for sending a clear signal to markets yesterday. But he did have some dovish takeaways. He said they are at the point where they have to take seriously the risk of moving too far and stifling the recovery and not moving far enough to manage inflation. On that note, he acknowledged that the level of interest rates are weighing on the house market. And he said signs of a global slowdown are concerning. So, he tells us they’re watching the data closely for next moves, and then he tells us some data is suggesting slowing.

Now, it’s common for other Fed governors to be out talking, between meetings, in an effort to set market expectations. With that said, the bigger signalling came today. The Atlanta Fed President and a voting Fed governor on monetary policy (Bostic), had a prepared speech in Madrid today. He said the Fed is in the final steps of getting to the neutral rate (which means neither accommodative nor restrictive). He said that’s where they “want to be” and then said he thinks the neutral rate is between 2.5% and 3.5%. Rates are currently 2%-2.25% (almost the low end of his neutral range). And he said they should proceed cautiously with rate increases. Bottom line: These statements suggest the Fed could be done with the ‘normalization’ process of rates after one or two more hikes.

So, we were looking for the Fed to use the weakening global growth data this week (from Japan and Europe), some softer global inflation data, and the changes in Congress, as an excuse to dial down the market’s expectations for the path of rates. It was subtle, but I think we’ve seen it.

Indeed, stocks ripped higher on Bostic’s comments this afternoon. The Dow jumped about 1.5% today as the comments hit the news wires.

Moreover, we’ve had some more uncertainty removed from marketsin the past 24-hours. We now have trade discussions re-opened between China and the U.S. And today, the U.S. Treasury has named the individuals that will be sanctioned in Saudi Arabia, regarding the murder of Khashoggi. To this point, the Saudi Crown Price isn’t one of them, which means the Saudi government is not being sanctioned.

It’s been a violent six weeks for stocks, but the lows from late October remain well intact. And we may now be clear for another recovery leg of this recent broad market correction.

Join me here to get all of my in-depth analysis on the big picture, and to get access to my carefully curated list of “stocks to buy” now.

Gridlock In Washington Should Give The Fed An Excuse To Pause

November 14, 5:00 pm EST

Later today Fed Chair Powell will be speaking at a Dallas Fed event. We’ve talked over the past two days about the potential for Powell to use this opportunity to dial down expectations of a December rate hike.

Overnight, Japan reported a contraction in their economy for the third quarter. And this morning Germany’s GDP report showed the first contraction in more than three years. Meanwhile, U.S. core CPI came in softer than expected this morning. And the headline number will be hit, in the next reading, by a 28% plunge in oil prices.

Add this to the outlook for gridlock in Washington on any further pro-growth policy-making, and Powell has the perfect excuse to start telegraphing a pause on rate hikes.

If he does, expect stocks to respond very favorably. We will see. He speaks at 6:05pm EST.

Here’s a look at stocks and the decline of the past month, as we head into this Fed discussion on the economy …

Technically, today the S&P and the Dow both hit a big retracement level and bounced aggressively. This sets up nicely for the Fed discussion.

Join me here to get all of my in-depth analysis on the big picture, and to get access to my carefully curated list of “stocks to buy” now.

Oil Decline Will Change The Inflation Picture

November 13, 5:00 pm EST

In the past two notes, I’ve focused on oil. And that does indeed seem to be the tail that is wagging the global markets dog.

Oil lost another 8% today. Over the past 31 days, crude prices have dropped 27%.

If we look back over the past five years, the magnitude of that move is only matched (or exceeded) in cases where there was significant manipulation in the oil market and/or a systemically threatening oil price crash.

You can see in the chart above, we’ve dropped 27% over the past 31 days. The other big drops in crude were in February of 2016 (the crash) and in November of 2014 (OPEC’s refusal to cut oil production).

Interestingly, these historic crude price declines were occurring as the Fed was preparing markets for the beginning of its normalization campaign (i.e. moving rates away from the emergency zero interest rate level). And it was these price declines that threw a wrench in those plans.

Despite what the central bankers say, oil prices have a big influence on their read on inflation. Lower oil prices put downward pressure on inflation. And as oil prices were plunging from 2014 through 2016, the Fed clearly and dramatically held back on their rate hiking plans.

On that note, remember yesterday we talked about the prospects that Powell (Fed Chair) may use the opportunity to dial down expectations of a December rate hike, if we see some soft data this week (growth data from Japan and Europe and inflation data from U.S., Europe and UK). We now have a big haircut on oil prices to factor into the inflation data. That too, may give him the excuse to pause on rates. We’ll hear from him tomorrow at a Dallas Fed meeting.

Join me here to get all of my in-depth analysis on the big picture, and to get access to my carefully curated list of “stocks to buy” now.

Watch Fed To Signal Pause In Rate Hikes

November 12, 5:00 pm EST

Stocks continue to swing around following last weeks midterm elections. Perhaps it has something to do with the uncertain outcome that remains in Florida, given the role Florida will play in the 2020 Presidential election. Perhaps it has something to do with the continuation of the unraveling of the tech giants.

Maybe more importantly, we head into a week with key inflation data hitting for the U.S., Europe and the UK. And we have Q3 GDP numbers coming from Japan and Europe. The Japanese economy is expected to have contracted last quarter.

Slowing numbers in Japan and Europe, along with some tame inflation data might give the Fed Chair (Powell) an excuse to dial down expectations of a December Fed hike. He is scheduled to speak Wednesday afternoon at a Dallas Fed event.

With the idea that the new divided Congress will put the brakes on any new pro-growth economic policies, Powell may be looking for the excuse to slow the pace that rates are rising. That would be a huge catalyst for stocks.

Join me here to get all of my in-depth analysis on the big picture, and to get access to my carefully curated list of “stocks to buy” now.

Split Congress Is Greenlight For Stocks

November 8, 5:00 pm EST

The midterm elections are behind us, and I’ve suspected that the lift of that cloud of uncertainty would be the greenlight for stocks to make a run into the end of the year.

We’re seeing it start today.

Remember, the big work on economic stimulus has been done, and that will continue to drive the best growth we’ve had since 2006.

Add to that, there is the potential that Trump can get infrastructure done with a split Congress. With that, it would be a matter of how hot the economy will get.

But as I said, there’s probably a better chance that the Democrats will block any more progress on the economic front, to best position themselves for a run at the 2020 Presidential election.

Interestingly, this gridlock scenario could actually be the optimal scenario for stocks here.

The notion that the economy might be on the verge of accelerating too fast/ running too hot, has dialed UP the inflation-risk-premium for the stock and bond markets. The hot trajectory for the economy has kept pressure on the Fed to continue the path higher in interest rates.

Thus far, the seven quarter-point hikes the Fed has made to the benchmark overnight lending bank rate has NOT choked off economic momentum. But it has, finally, started to get market rates moving. The ten-year government bond yield is near 3.25%, the highest in seven years. And stocks haven’t liked this 3%+ level on rates. And that has a lot to do with what it does to consumer rates, specifically mortgages.

As you can see in the chart below, we now have 30-year mortgages running north of 5% for the first time since 2010.

This move in rates has slowed down the housing market. And this is an example of how this path of hotter growth and an aggressively normalizing Fed has been tracking toward growth killing interest rate levels.

Perhaps some gridlock in Washington will slow the speed at which both are adjusting and allow for some time for the economy to sustain at this 3% growth level.

Join me here to get all of my in-depth analysis on the big picture, and to get access to my carefully curated list of “stocks to buy” now.