🗞️ Lockdown PTSD

WHILE YOU POUR THE JOE… ☕️
Drastic Measures

You know what the wealthiest people in countries like France, England, United States, and Canada have in common?

They’re leaving.

That’s right, there has been a net emigration pattern in these countries as more and more people realize that they are paying five-star ratings in exchange for two-star service 👎️.

Countries like Malaysia, Singapore, Italy, Dubai, and even China now offer a better tax deal and a lower cost of living. So, like true capitalists, they are leaving for better treatment.

To stop this, Donald Trump is now considering wiping out the income tax in exchange for higher import tariffs. This accomplishes two things:

1. Gets people to stay as they can save a sh*t ton of money on taxes and saves the US from having to resort to open-border policies to avoid a population collapse.

2. It incentivizes companies to start producing and manufacturing in the US to avoid price increases through tariffs. This is also good since we are not making anything anymore but rather going into debt to consume.

Speaking of economic impacts that may get people leaving, let’s get on with today’s email 📧…

MONKEYPOX COMING TO A TOWN NEAR YOU
Ah Sh*t, Here We Go Again (Like the Meme)

Remember the turn of events during 2018 through 2020?

Venezuelan elections, where Trump tried to intervene in the fraud by threatening to send the Marines, then China and Russia said “Nope.” 🙅 

Right after, Trump retaliated by increasing tariffs against China and causing the Fed to cut rates to help our faltering economy. Still, bond traders had been compressing yields as if they knew something bigger was in the works.

Then COVID-19 came out of nowhere. Oh, and don’t be fooled—it helped trigger the remote elections that enabled China and Russia to remove their only opponent from the picture.

Now, they’ve bought pretty much all of America’s trading partners, and Trump is back for a second round to try and undo what these world leaders have built.

Which is precisely why they’re proud to introduce:

So apparently, there is a new deadly virus that is just as bad - if not worse - than COVID, which is a suspicious conclusion considering that the virus is just getting started.

What is interesting is that the Federal Reserve has held onto the timing of rate cuts as if waiting for better timing or “Data.”

Current economic data is not supportive of rate cuts, especially as inflation in many areas is still running high, and consumer activity shows no signs of slowing down, no matter how broke people are.

Every day activities from citizens are the last thing to follow the economic cycle, so that might offset the other effects. Still, I do think rate cuts are a bit premature right now, unless an emergency calls for them.

For the first time over a semester, the Fed has been buying bonds and expanding its balance sheet. This is 2019 behavior where the economy was doing just fine, but there were lower yields and asset expansions anyway.

More than that, the commitment of traders report shows increasing dumping of S&P 500 futures from commercials (which are banks and other issuers).

** Quick Tip 🔎: We show precisely how this report works in another post; I highly suggest reading it so you get the gist of the following chart.

That’s the futures chart for the S&P 500, and below, you will notice two things:

1. The red line shows commercials dumping more and more inventory each week, likely selling to all the breakout buyers chasing momentum.

2. Every time this happens, as you would now understand the report by re-reading our previous post, it signals a selloff might be overdue for the S&P 500.

We can confirm that this might be the case by looking at the recent price action and volume on the $SPY ETF.

Notice the $SPY price action after the carry-trade selloff. It has been making higher highs on decreasing volume 📉 and trading at a low-volume node.

This, to me at least, means that the market makers are, in fact, raising the price to dump their inventory onto breakout buyers.

If this weren’t the case, we’d see much more volume as the price breaks out higher, but it’s just not there right now.

Add to this the way that our hedge, the $TLT bond ETF, which has been recommended for net gains for at least three weeks now, is behaving.

This one has been making higher highs on relatively normal volume. It doesn’t signal to us that there is going to be a breakout yet, but it does tell us that someone is looking to get into bonds 👀 at each low-volume node.

Notice the reaction and quick pivot higher each time $TLT goes into a gray-shaded area? Those are the low-volume nodes where big players like to get in or out.

Most of you know by now that we’ve been bearish on the market since July 2023 📅 but also remained bullish in buying every dip since, as we understand that markets can stay disconnected from economic realities for years at a time.

However, the time is nearing for a correction, and the way the economy is playing and the breakouts in Monkeypox might bring this correction to a stock market near you. 📉 

I’ve been getting ready by making sure my portfolio is hedged by buying some insurance puts on the $SPY and being very long on $TLT, among other discounted value stocks I like.

WEEKSTARTER STOCK
Tails I Win, Heads I Don’t Lose Much

That guy above is Michael Burry, he predicted the 2008 financial crisis as early as 2005 🎯.

But he’s not only famous for that. He is also a great value investor with a simple philosophy. When he makes a bet, he likes to win by a lot, but if he’s wrong, he’s only set up to lose a little.

That's why I like to pay attention to what he’s buying and selling lately. You, too, can keep up with his strategy and thinking by checking 13-F filings regularly.

His latest - and biggest - move was made into Alibaba stock, our largest holding and a theme we covered in our last post on Friday.

He also made a few other moves that caught our attention, and we felt it would be fair to share them here.

Michael Burry’s Latest 13-F

After selling out of his gold position for a profit, Burry looked to buy one controversial name in the world of commercial real estate property.

By the way, there is still more upside in gold left, considering that the US dollar could soon see a devaluation based on changing fiscal policy and other nations like China and India stockpiling the precious metal.

Anyway, his buy into Hudson Pacific Properties 🏢 was a surprise, especially considering all of the risks and drama going on around the commercial property niche.

Remote work and other trends have negatively affected these types of properties, and their valuations have plummeted as a result. His interest in this stock, though, could be a sign of a bottom. 📈 

Hudson Pacific Properties (NYSE: HPP)

So look, hybrid work - at least for me - is here to stay, especially as long as most of the US economy is focused on the services sector rather than physical trades and manufacturing.

Businesses centered on technology, particularly the largest companies out there, which are only poised to go higher thanks to the boom in artificial intelligence 🤖, will become the best tenants to bet on.

According to Hudson Properties' latest quarterly results, these are the largest tenants renting office space from this real estate portfolio company.

Notice something? Google, Amazon, Netflix, and other key players in today’s economy are some of Hudson’s largest tenants.

Despite these businesses being the first ones to advocate remote and hybrid work schedules, this landlord did its homework to figure out future demand trends for in-office space coming from these companies:

It looks like, according to LinkedIn data, more and more managers are looking for in-person 😭 (or at least hybrid) work rather than 100% remote, and this is good for Hudson’s tenants it seems.

Then again, Burry wasn’t the only one who found a certain amount of upside in this stock; here’s what Wall Street analysts had to say:

• 55.4% earnings per share growth for the next 12 months

• $7.29 price target, calling for up to 45.7% upside 🔥 from today’s price

• 4.0% dividend 💵 to show enough financial robustness

These are some of the trends pushing the potential for this stock higher in the coming quarters. However, Burry’s thesis is probably focused on the fact that these tenants will be around for a long time.

NOW GO AND MAKE IT HAPPEN
Popcorn Time

Get to know the personality behind the bet on this commercial property portfolio; Michael Burry was made famous by the movie “The Big Short,” which is today’s recommendation 🎥, not a book since we wanted to entertain you for a change.

Bonus points if you manage to watch it with a date and successfully explain how the financial system collapsed.

To your success,

G. 🥃