THE NEW NORMAL PREMIUM
For the past 10 years, we’ve seen a major disparity between the performance of growth stocks and value stocks. Traditional, fundamental analysts attributed the phenomenon to passive investors steering money into high-growth, large-cap tech companies.
But... what if the reality is that those companies were always best positioned to thrive in the future? Even as they were growing their top lines by double-digits, into the billions, year after year.
And then COVID-19 happened. And the future became NOW!
Everywhere we look, we see those “expensive” growth companies actually flourishing, while traditional brick and mortar players can’t even do any business.
The premium for the future was right all along. And now, of course, the rest of the world is chasing that viability. And they’re being rewarded with massive returns in the process.
If you view what’s happening in global economies and markets through the prism of war, things become more clear.
After WW2, the U.S. saw an unparalleled period of growth. By having a viable nation, and by escaping as the least scathed of the global superpowers.
The economies and companies that survive will experience the same thing now.
And the world will be theirs…
Key Market Movers
These are assets that are moving the broader markets and affecting everything. It’s always changing, but part of the art of trading is reading the texture of the market. Though I don’t necessarily have a trade or position in these assets, I’m always watching them as indicators.
The Nasdaq is breaking out to all time highs in August 2020.
This isn’t exactly an overnight success story in the works. This move has been happening for some time now. And the late money is, of course, propelling growth tech mega-caps to the upside.
The last time we saw the Nasdaq this far stretched to the upside, with quarterly bar charts, was in late 1999. And we all know what happened next… from 5,000 back down to 1,000 in a little over a year.
So we need to be ready for all scenarios. And that's the beauty of Money Links. We’ll be ready to capitalize should such a move happen again.
Core Portfolio Long/Shorts
These are longer-term holdings that I recommend you have positions in. I’m not a long-term investor, so by long-term I’m not talking years per se but weeks to a few months. There is, of course, still a healthy positive skew and risk-reward embedded in all of the trades. I’ll be providing stops, upside guidance and updates, and these trades will typically be single stock names.
Current Link Trades:
AMZN/BABA , AMD/INTC, PYPL/V, MS/HSBC, NFLX/CMCSA
AMZN/BABA
The Amazon/Alibaba Money Link looks to be on the precipice of breaking out.
Recent news out of the Trump administration rocked Chinese listed companies in the U.S. on Friday, and it could be just the beginning.
If the U.S. vs. China trade war gets any hotter, we could see a real panic out of BABA’s stock.
AMD/INTC
I talk a lot about this world being split very starkly right now, between winners and losers. Last week we saw two American chip-making companies having drastically different 2020 experiences.
The legendary company, Intel, had what one famous Wall Street analyst called the worst quarterly call they’d ever heard. On the other hand, you have AMD, Intel’s processor-making rival, blowing out earnings... and even raising its full-year forecasts.
To buy one stock at its yearly high, and short another at its low seems counter-intuitive, as most are rushing to do the opposite. And that's precisely why this is the perfect time to place this Money Link.
This Money Link has the potential to be one of the staggering returns you see on our webinars. The chart above tells the whole story, and I want to be there as this link continues to explode.
PYPL/V
The PayPal leg of this Money Link has been out and out blistering.
Another clear cut winner of the stay home movement, PayPal has become ubiquitous in the new normal. Paying cash and writing checks is now a thing of the past, thanks to Paypal.
Next up, plastic Visa credit cards will go away. This Money Link is a relative baby, and has many years to grow. And I will play this in and out many times over the years.
MS/HSBC
This is another Money Link where one leg is creating all of our profits, as the bearish position in HSBC is doing very well.
They reported terrible earrings, and are rudderless. I honed in on this bank months ago, and now everything is playing out as planned as HSBC continues to collapse.
If we get a moderate rally in MS, this Money Link will pay handsomely.
NFLX/CMCSA
This past month offered us an opportunity to enter a Money Link that’s been working for a while. Netflix got hit after earnings, and Comcast has been unreasonably strong considering their challenges.
I wait patiently on many Money Links to offer an attractive entry point. And often, the single most important factor in if you will make money is how and when you enter the trade.
Current Swing Trades
This is the bread and butter of my strategy. They are weekly swing trades (sometimes intra-week) long/short spreads. They will mostly be International ETF’s, and I’ll also have sector ETF’s from time to time as the action warrants it. These trades are meant to be done together, and I’ll be tracking the performance of each long/short pair for the return. I’ll send a weekly trading summary dealing with the swing trading pairs, and I’ll give updates as events to take advantage of arise.
Current Swing Trades:
TLT/XOP, GLD/USO
TLT/XOP
This Money Link paid very nicely in June, and I got back into it in late July.
While XOP, the oil drillers ETF, has been resilient with the strong market, TLT has been a very nice long, as yields still look to go lower.
I expect a full breakdown in 10 year yields later this summer or early fall, which will create chaos in the S&P. And I expect it to create a real knock-on effect in the oil drillers.
GLD/USO
What can I say about this trade, other than we timed it great, and it worked right away!
As you all know, I’m not a goldbug. I’m a trader first! And I need to see the potential for big moves on the immediate horizon.
When Gold broke out in July on huge volume, as the market was still in risk-on mode, I pulled the trigger. And this trade has been an absolute homerun. And though we’re likely to exit soon, this is a Money Link I’ll go back to over and over.
In Conclusion
August is typically a junior trader month, when the big bosses go on vacation and volume tends to be anemic.
This is no typical August though. I expect turbulence and huge moves, which we’ll look to pounce on. And these huge moves will set the stage for an unbelievable Autumn trading season, with an election looming on the horizon.
Don’t worry though... I have strategies for how to trade elections too.
LFG!