3 easy ways to stay in the game, even if it’s scary

Keith Fitz-Gerald | Editorial
October 3, 2023

This article appears courtesy of RiskHedge, LLC.

Howdy!

The markets are down in early going yet again, which shouldn’t come as a surprise. Rates jumped 11 bips yesterday and are up another 5 bips this morning.

(A “bip” is Wall Street-speak for a basis point, which is equal to 1/100th of 1 percentage point.)

As I noted on Varney & Co yesterday, it’s a time for caution AND changing up your playbook. (Watch)

Here’s my playbook.

10-YR Treasuries at highest yield in 16 years

People are flipping out, but there’s simply no need for that.

Remember how the game is played.

Big, leveraged-up-to-their-eyeballs traders often hit the sell button when rates rise because it means the “vigorish (vig)” just went up. They cannot afford a margin call, so they typically sell to get under the VAR (value at risk) that would cause them to get one.

At the same time, other traders flip—meaning they shift from upside to downside—and, in doing so, create the selling that’s happening now. Hedgers complicate matters, particularly the 0DTE crowd, which we’ll get into another time.

I know stock prices are supposed to reflect the economy—and they still do—but we live at a time when the short-term noise is simply louder than the concept of value.

Stay in the game if you can!

  1. Quality names only, particularly those making “must have” products and services the world cannot live without.

  2. Change your tactics to reduce overall risk.

  3. Hedge to make your money safer.

There is always a way into the fight!

Dimon confirms what I’ve been railing on all year

Many investors are drooling when it comes to AI because they think it’s going to make their lives easier and more profitable.

Not so fast.

At the risk of sounding like a broken record… the big money will figure out a way to use AI in their own interest at your expense. Further, AI and highly computerized order flow will introduce unprecedented levels of volatility, fear and head-spinning, seemingly directionless change in the markets.

Well, imagine my surprise.

JPM CEO Jamie Dimon just said exactly what I’ve alleged is happening… AI is already doing all the bank’s equity hedging. Moreover, he sees it being used for “every single process” of JPM’s operations. (Read)

Other banks and financial institutions will follow; it’s only a matter of time.

What does this mean for investors?

Volatility will continue to get worse, which is scary… right up to the moment you realize that it’s a king-size opportunity.

Building codes aren’t strong enough for EV chargers

Here’s one for you.

There’s no doubt that EVs are coming fast, but, as usual, there’s an unanticipated problem.

Many parking garages (where green cities are keen to install charging stations and have gobs of EVs rest so they can turn a buck) are built to codes that date back to the 1970s. They’re not strong enough to carry the weight of the EVs and their batteries and lack the appropriate fire equipment needed to fight super-hot battery fires. (Read)

Call me crazy, but I can easily envision companies like ChargePoint, Blink, and Tesla striking deals with private companies/various city/county governments, etc. for the rights to build and power what’s needed.

The situation strikes me as very similar to private toll roads like the San Diego South Bay expressway between Spring Valley and Otay Mesa, or Orchard Pond Parkway in Tallahassee, Florida.

Big money for the right players!

Listen up if you own NEE

NextEra Energy is a popular stock amongst retirees because it’s a) a utility, and b) pays a healthy dividend.

I think there’s a great speculative trade brewing.

The company recently went into slash-and-burn mode saying that 5–8% may be more in line through 2026 than the 10% previously targeted. Share prices tumbled from the low $60s to the low $50s.

Bottom fishers are baiting their hooks, but I think that’s risky.

I think there’s a good chance NEE cuts dividends next.

Putskies!

Then, when the selling has reached a crescendo, Selling Cash-Secured Puts.

Remember: Investing is NOT a one and done. It used to be that you were “in” or “out” of stocks you liked, but these days it’s more like an ebb and flow. Knowing what to buy is only ½ the battle; knowing “how” is far more important, at least if you’re after long-term success.

AMD is teaming up with… Intel??!!

One of the strongest laws of the jungle is that weaker players team up to take on the top dog. Imagine my surprise when I read that AMD is teaming up with Intel to take on NVDA, at least according to Motley Fool. (Read)

Lisa Su, CEO of AMD, has stated, “I’m not a believer in moats when the market is moving as fast as this.”

Neither am I.

I own two of the three—and happily, I might add.

Might be time to think about more.

Hmmm.

Bottom Line

Money isn’t just about keeping score. It’s an opportunity to inspire, uplift, and encourage those around you.

As always, MAKE it a great day!

You got this.

Keith

This article appears courtesy of RiskHedge, LLC. RiskHedge publishes investment research and is independent of Mauldin Economics. Mauldin Economics may earn an affiliate commission from purchases you make at RiskHedge.com

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