🗞️ J. Powell is Itching to Go Brrrrrr

WHILE YOU POUR THE JOE… ☕️
Eating Steak Tonight

Remember our post titled “Canadian Takeout”? A few days ago, we wrote out all the reasons why we thought DoorDash stock would deliver not only an earnings beat but a decent double-digit rally 📈.

Anyway, the quarterly results not only proved us right but also exceeded our expectations by roughly 12-15% to the upside 🔥, which is nice.

This setup justified playing call options on the stock, adding to our winning streak. We are likely to open the trading session with a decent return.

Catching these types of plays can take a little while, and subscribing to our newsletter isn’t enough (it comes out three times a week). Instead, you can follow us on Twitter (X?), where you can get live updates on what we’re buying and trading.

Speaking of what we’re buying and trading, let’s get on with today’s email 📧…

DIGGING DEEPER
Strategize Like a Pro

We have been saying many bad things (which is just reality) about the state of the U.S. economy, driven by the falling readings in the ISM PMI index 📉, which has now been in contraction for as many as 21 consecutive months.

This means that the economy is about to get much worse than it has already been. You see, GDP (adjusted for inflation) has been contracting alongside the PMI for nearly two years.

Unemployment recently broke out above 4%, which is the threshold at which the Fed tends to consider taking action to stop further economic deterioration.

The Fed could consider printing and injecting money into the economy to help cushion the bump and lowering interest rates to stimulate consumer and business activity.

The Bets Are Off

This is precisely what some in the market are starting to bet on since the potential of lower interest rates will also bring a lower and weaker dollar 💵.

For those of you studying economics, a weaker dollar means that American Exports become more attractive for foreign nations to buy with their stronger currencies.

This is why the spread between exports minus imports is starting to make headways into positive territory, just ahead of the potential dollar lowering by September 2024.

A weaker dollar also poses trouble for a select list of domestic consumption stocks, which we wrote about in a previous post.

It may seem completely unrelated, but it’s connected. As the expectation for a weaker dollar sets in, other nations are starting to stockpile gold and sell their dollar reserves.

Gold holdings will eventually be collateralized to finance new construction projects (infrastructure and residential), and a weaker dollar can also help a stock like Caterpillar.

More Options

Not everything is bad news, though. A contracting PMI can only mean it will eventually expand, and the Fed's cutting interest rates might be the catalyst for that.

So, we are investigating the few industries that are managing to expand (or turn around) during this economic contraction.

These sectors are mainly Petroleum and Furniture. When it comes to oil, there is also a double-fundamental factor pushing the space higher, and it's got everything to do with the infamous yield curve.

To save me from repeating everything we wrote about in that post, why don't you just head over and see what's happening for yourself? After all, this only happens once in a business cycle.

As the yield curve returns to normality, you'll see why the oil sector tends to outperform, and one stock is setting up to beat the rest at its own game.

When it comes to furniture, we have yet to mention any names, so that's where the homework we did can help you today.

SharkNinja (NYSE: SN)

When you think about who gets paid first in the real estate value chain after the home is sold, the furniture industry comes to mind.

But stocks like Willaims-Sonoma are already trading near all-time highs, so the furnishing aspect of the market may already be done squeezing the upside to be had in the new PMI run.

Turning to SharkNinja, that stock also trades near an all-time high. However, it only started selling a little over a year ago, so the true valuation the company can command has yet to be recognized by the market.

The company has momentum, but that is only the rearview mirror, which can’t be monetized. What about the road ahead? That’s where you can make your dollar stretch further by aligning it with a better investment.

So, knowing that SharkNinja is already making headway into America’s largest retailers like Wal-Mart, Target, and others, this brand could be the first in line to start seeing the future profits of the real estate boom 🏠️.

Markets noticed this trend in SharkNinja stock, so they felt comfortable sending it into positive outlier status.

SharkNinja stock trades at a premium of 19.3% to the rest of the industry; its 17.7x forward P/E multiple stands significantly above the industry’s 14.8x average valuation today.

This is what management thinks is in store for SharkNinja stock's future, which is enough to justify the way markets are bidding the company higher above all other peers in the space.

Analysts at Canaccord Genuity Group think SharkNinja stock is worth up to $90 a share 🎯, which directly calls for a net upside of 18% 🔥 from its current price.

More than that, up to $1 billion of institutional capital has entered the company, giving markets another vote of confidence to consider.

WEEK(END) STOCK
Bonds Are Exciting?

Bonds are cool if you’re old and have enough money to enjoy tax-free yields. But most of us haven’t reached that level yet, so we need a better—and more exciting—way to play the bond market.

Either through futures, which are too risky in my opinion, or the iShares 20+ Year Treasury Bond ETF, you can access the potential rally that is headed straight for the bond market.

Now that the Fed is almost certain to be cutting interest rates by September 2024, some in the market are starting to notice that investing in this ETF might be one of the best plays out there.

Stanley Druckenmiller is one of them, the guy who traded shoulder to shoulder with George Soros, so he probably knows a thing or two about macro trades.

** Quick Tip 🔎: Bond prices move opposite to yields so that when the Fed cuts rates, sending bond prices up, this ETF could promise an attractive enough upside for you.

This is the graph for the ETF. Notice how, in 2020 (the last time the Fed cut interest rates), the price of bonds in this instrument went bonkers and reached a new all-time high 📈.

Knowing that this bet is over 90% certain, as measured by the CME’s FedWatch tool, you can probably guess where we have been investing a lot of our liquid buying power.

NOW GO AND MAKE IT HAPPEN
Find Your Groove

If you are considering the genius behind this bond ETF trade, it makes sense to study the man's experience and expertise.

Today's book recommendation 📖 brings you the written experience and lessons from the man himself.

To your success,

G. 🥃