🗞 They Lied to You (Again)

WHILE YOU POUR THE JOE… ☕️
America is Healing

Look, there’s still a long way to go when it comes to the social divides present in the United States today, but if the media leaders are making a shift, that’s a huge pivotal factor.

Imagine this, the nation’s youth (especially female youth) on social media will be exposed to traditional masculine energy more and more, meaning the next generation of workers and entrepreneurs will start to create a lot more value. 📈 

Why?

The market has been flooded with liberalism, which typically brings empires down, so there’s a reason to raise the flag and celebrate.

Speaking of doing the right thing, let’s get on with today’s email 📧…

UNPHASED
Resting Poker Face

The market has a faulty memory most of the time, especially when it comes to stuff like this. Back in August 2024, the Bureau of Labor Statistics (BLS) revised the Nonfarm Payrolls number (NFP) down by over 800k jobs. 📈 

This should get you thinking about a couple of things…

Such as: Were they trying to make the economy seem stronger than it actually was, to give the election a different sway? What about the Fed, were they trying to bully the fed into cutting rates early to bail out some of the failing regional banks?

Or: If they are willing to lie that much, are they still doing it?

The answer rhymes with misleading markets, or in other words, fraud. ❌ 

The main reason the BLS had to revise jobs lower was that, well, no real jobs were created in the first place.

When most of the NFP is made up of part-time, retail, seasonal, and government jobs, then it means the real economy is getting no real value out of new hires.

This is the case today as you can see in the chart above. The spread between part-time and full-time jobs has created a growing divergence since roughly March 2023.

That led to the 800k downward revision in August, and my guess is there will be an even worse revision soon enough, considering that full-time jobs have been flat or contracting since the last revision. 📉 

You can also see this in action through the recent PMI data, which we broke down in last week’s posts.

Manufacturing saw net losses in jobs, and this has been the case for the past 28 months now. 😨 

So, we are 100% convinced that this sector is not contributing to the real economy. In fact, manufacturing has been contracting for over 26 consecutive months now.

As the S&P 500 index typically has a 12-18 month lag to this PMI, it is safe to assume that we’re overdue for a pullback. If you read this newsletter post, then you’ll know that the big money is already positioned for this recession theme.

When it comes to the services PMI, jobs were added, though not enough to justify the NFP beating expectations by nearly 100k jobs. 👀 

More than that, we can see that the main additions to employment were in either government, seasonal, or part-time jobs.

We can reach this conclusion by breaking down each industry and its segments, which is part of our systematic process for coming up with trade ideas.

Here’s where services jobs went:

• Wholesale Trade (part-time)

• Finance & Insurance (seasonal due to tax season coming up)

• Transportation & Warehousing (part-time)

• Accommodation (seasonal due to holiday season)

• Construction (seasonal)

• Public Admin., Healthcare, Utilities (government)

This is why we decided to buy even more of the $TLT bond ETF on Friday after it dipped below $85. Judging by the sharp recovery, the market is telling us it doesn’t buy this bluffed-out NFP report either. 🎯 

TRADE OF THE WEEK
Back Online

This is the Chinese manufacturing PMI index, and even though it had a couple of months of lackluster activity, it seems that the economy is finally starting to catch up there.

A whole quarter of expanding manufacturing activity, rising new orders, and the government sending in a bazooka of stimulus measures lately are all factors that will play a massive role in one commodity’s price. 📈 

And that’s oil.

You see, China is the world’s largest importer of oil. They even represented 40% of global oil demand before COVID-19 hit. The rebound in Asia’s powerhouse will definitely cause the price of oil to soar due to the ensuing demand.

But that’s already something you knew, if you read this previous post on our crude oil thesis.

Beautiful, oil is going higher and even hedge funds have been buying, but what can you do about it and guarantee yourself a nice multiplier on your money?

Consider yourself blessed with Transocean stock my friend. This is one we already hold since the $4 mark, but a lot of you are new to the newsletter after our successful YouTube debut, so here we are sharing it again.

In fact, you are getting a much better entry than we are, since we think this one will finally pay off in the coming quarter or two, here’s why:

As of December, the company achieved a new $111 million drilling contract, adding to the already significant $9.3 billion backlog of orders. 💵 

Considering that this company is only $3.5 billion in size, this backlog (which should turn to realized revenue in ~3 years) is going to throw the company’s price-to-sales (P/S) ratio into a very deep and unjustified discount.

More than that, new contracts should signal to you that our oil thesis is, in fact, shooting in the right direction, as far as demand is concerned.

Let’s see what analysts think about this stock right now. By the way, we have valued it between $6-$7 🎯 a share on a base case. In the best case, we think it can even go past $10 if oil goes above $120 a barrel again.

As always, right on track here.

If you acknowledge that Transocean's sales could skyrocket in the coming quarters, then you’d be surprised to see the stock trade at a P/S discount, right? If you’re thinking along these lines, you’ve been following us for a while; congrats. 🎉 

Here’s how Transocean compares to other peers in the drilling industry:

As you can see, there is no P/S discount to be had here, only a P/B, but that’s not that important here.

Transocean is in the top two regarding forward P/E ratios (PE2 column), and rightly so as the market expects its EPS to grow by 61.1% for 2026. 🔥 

You will note that Patterson-UTI Energy is at the top of the list, a holding we also have in our drilling portfolio, so have your pick and enjoy the ride in oil.

I have a feeling we’ll make a lot of money here. 🫰 

NOW GO AND MAKE IT HAPPEN
Encyclopedia

Having the right knowledge to connect the dots between China, oil, and a drilling company takes some reading.

This is why, in today’s book recommendation 📖, you will understand the world and its energy sources/demand trends, so you are not fooled by the mainstream media talks about solar and wind.

If anything, nuclear is the answer, hence why Amazon and Google are investing in it.

To your success,

G. 🥃