Here we go again.
It’s been about a month since the media was out there forcing narratives — remember the Suez Ship? — but it’s starting to happen again.
Tesla’s earnings last night kicked off a flurry of media activity. And I get it. When Elon Musk sells Bitcoin, games credit sales and uses lower taxes to generate an earnings beat because they sort of forgot to sell cars, it’s probably newsworthy.
But Tesla isn’t even the same kind of business as the rest of the Tech sector.
In fact, I’d argue at this point, they’re more of a manufacturer than they are a service provider.
And while the data point we use to measure the sector — the ISM Manufacturing PMI — is near all-time highs…
The ISM Services PMI, which is a better proxy for mega-cap tech companies like Alphabet Inc. (NYSE: GOOGL), and who reports after the close, is at all-time highs.
But no discussion on this point — just the fact that tech is down, and that’s concerning.
Even the things that are up today — commodities, industrials, retail and financials – are deeply concerning because all of them now mean one thing.
Seriously, I heard the word inflation — specifically associated with the word “copper” — no fewer than 20 times today, and I maybe watched the news for 20 minutes.
Bloomberg has not one, but FIVE articles on their front page dedicated to either the Tesla rout or various inflationary factors.
Oh, and while they were at it, they threw in one on the Archegos hedge fund implosion — just in case you’re still actually interested in that meaningless garbage.
Over at CNBC, they touched on all those issues too, of course.
But they added one in for good measure — the “back-to-work” trade.
Apparently when Jamie Dimon says JP Morgan Chase employees are going back to work, it means that it’s super important for the markets to take notice.
My response to all this hype?
File under: DUHHHHHHHHH.
The truth is these issues aren’t even news. They’re just stories meant to trigger you into paying attention so they can sell you stuff during the commercials.
All those headlines — or “tape bombs” — are things we have known about all these things for months… In some cases, a year or more.
For instance, if you had been reading this website instead of Bloomberg, you’d have been long copper in February when all they cared about was the GameStop short squeeze.
And we didn’t just do it once — we did it twice.
We sold it three weeks later after it ripped for a 29.4% gain.
And then we bought it back when it tanked the following week.
While we didn’t nick the absolute top and bottom there, we did manage to call it pretty darn close.
How did we know that?
Well, for one, we have eyes. And using those eyes, I observed that lumber was soaring to uncomfortably high levels all the way back in August.
Link is above there, but here’s a screenshot for the skeptical:
Source: Venture Society
In fact, one of my very first articles for this website was about food insecurity and the resulting inflation… and that was more than a year ago!
The “back-to-work” trade isn’t new either.
While the mainstream media was focusing you in on GameStop back in January, I wrote the following — screenshot for proof.
Source: Venture Society
That’s right — heading back to work was a “known known” an entire quarter ago.
A completely simple, straightforward idea that eventually this pandemic will end, and we will have to trade in the slippers for dress shoes.
Again, I didn’t exactly nick the top and the bottom, but that’s a decent result.
And finally, I also showed you how to think about the big tech stocks just a few weeks ago as The Masters golf tournament kicked off… screenshot for proof.
Source: Venture Society
That’s all you need — price versus volatility.
Just judging by the graph below, the current price trend for the Nasdaq 100 is clear… It’s going up.
And although Nasdaq volatility bounced these last few sessions, the bounce is much smaller than previous periods, and the downward trend is intact.
When these are the market conditions, you don’t sell at the bottom… You buy every dip. Plain and simple.
The fact that the news is concerned with these narratives is itself an indicator that some of these rallies and dips are overdone.
And if we are to be contrarians, we must have the courage to buy when everyone is selling, and we must have the conviction to sell when everyone is buying.
So today, we’re going to sell one-half of our positions in our copper plays — Ivanhoe Mines (OTC: IVPAF), Freeport McMoRan Inc. (NYSE: FCX) and the United States Copper Index Fund (NYSEArca: CPER) – which are up 19%, 13% and 18%, respectively.
We’re also going to sell one-half of our position in Designer Brands Inc. (NYSE: DBI), which is currently up 26% relative to our entry.
And we’re going to use the proceeds to buy another quarter tranche of the Invesco QQQ Trust Series 1 (NYSEArca: QQQ).
After that, we’ll just wait until tomorrow, listen to what the financial media is saying…
And do the opposite all over again.
All the best,