Buy bank stocks; More Hedge Funds Are Betting Against Tether as Crypto Melts Down; How to Stand Up to a Bear Market; Ban TikTok now; Days two and three of my Backroads trip
1) When I called the market bottom on May 12 (slightly prematurely – the S&P 500 is down 3% since then), I wrote:
I'm starting to buy things I can value – the beaten-down stocks of real businesses that generate real cash flows.
Unfortunately, to prevent conflicts of interest, we at Empire Financial Research aren't able to own in our personal accounts anything we've recommended in our newsletters, so I can't buy my absolute favorite ideas, which include Berkshire Hathaway (BRK-B), Alphabet (GOOGL), Meta Platforms (META), Amazon (AMZN), and Netflix (NFLX).
Yesterday and this morning, however, I did buy an exchange-traded fund ("ETF") that holds many big-cap Internet stocks, an online payments giant, a leading retailer, and a basket of four large bank stocks.
I want to pound the table again on large bank stocks.
The four I bought are still cheap – down a collective 2% since May 12, despite Warren Buffett buying $2.5 billion of Citigroup's (C) stock and this good news last week: U.S. banks send cash to investors after stress-test successes. Excerpt:
Morgan Stanley (MS) and Goldman Sachs (GS) led the way as US banks boosted dividends and share buybacks in response to their success in clearing this year's stress tests. JPMorgan Chase (JPM) held its dividend steady at $1 a share.
Goldman Sachs said its quarterly dividend would jump 25% to $2.50 a share from $2. Morgan Stanley boosted its payout to 77.5 cents a share from 70 cents, according to a statement Monday...
The biggest U.S. banks began outlining their plans for distributing capital after passing the Federal Reserve tests, effectively giving them the green light to return billions of dollars to investors in dividends and share buybacks. All lenders cleared the examination last week, showing that they had enough capital to handle a severe economic meltdown with surging unemployment, collapsing real-estate prices and a plunge in stocks.
Volatile markets and rising interest rates are tailwinds for large banks' profits so, barring a major recession, their beaten-down stocks should significantly outperform.
Two of our favorite bank stocks are open recommendations in Empire Stock Investor. You can immediately gain access to our archive to read about them – and receive the next 12 issues with our latest, favorite big-cap ideas – for only $49 by clicking here.
2) It's good to see that I'm not the only one who thinks that the largest "stablecoin," Tether, is one of the best shorts of all time: More Hedge Funds Are Betting Against Tether as Crypto Melts Down. Excerpt:
Short sellers have been ramping up their bets against tether, the world's largest stablecoin, amid a broad market selloff that has called into doubt the financial health of some crypto companies.
In the past month, more traditional hedge funds have executed trades to short tether through Genesis Global Trading, one of the largest crypto brokerages for professional investors. These trades are worth "hundreds of millions" of dollars in notional value, said Leon Marshall, Genesis's head of institutional sales. He declined to be more specific.
"There has been a real spike in the interest from traditional hedge funds who are taking a look at tether and looking to short it," Mr. Marshall said in an interview.
3) Here's the Wall Street Journal's Jason Zweig with some good advice: How to Stand Up to a Bear Market. Excerpt:
Sticking to a plan is especially important for young investors, whose horizons are long. A plan can help them perceive falling markets not as calamity but opportunity.
Warren Buffett has famously said that investors should think of stocks like hamburgers.
If you like burgers, you should root for their price to go down, not up – and the younger you are, the more meals your future holds.
Likewise, "only those who will be sellers of equities in the near future should be happy at seeing stocks rise," Mr. Buffett wrote in 1997. "Prospective purchasers should much prefer sinking prices."
I like to say that the problem with stocks is that they contain the letter T. If they were called socks instead, people would treat a 20% decline in price not as a sell-off but as a sale.
When socks get 20% cheaper, you don't rush to get rid of the ones you already own; you check your sock drawer to see if you need a few more pairs. Young investors should treat stocks the same way.
To be sure, stocks still aren't cheap by historical standards.
But young people seeking to build wealth over long periods should be much happier to buy stocks after this year's 20% decline than they were during the 114% rise that preceded it.
One bit of good news, for younger and older investors alike, is that the yields on income-producing assets are rising.
4) In last Wednesday's e-mail, I said that "TikTok should immediately be shut down in the U.S. until its ownership can be fully transferred to a trustworthy U.S. owner." Here's a spot-on video by podcaster Saagar Enjeti echoing my call: TikTok CAUGHT In China Lies, Ban It NOW.
5) On Monday we took Zodiac boats for half an hour to the archipelago of La Maddalena, a collection of beautiful islands (here's a Condé Nast Traveller article about them: La Maddalena: Sardinia's secret islands). We did a lovely, not-too-difficult 18-mile bike ride, had lunch at the beach, and then took the boats to a nearby island for some fun snorkeling.
Yesterday, we drove an hour to the northern tip of Sardinia (which is part of Italy) and took a one-hour ferry to the French island of Corsica. We took a tour of the historic, charming town of Bonifacio (here's a CNN Travel article about it: Bonifacio: City of Cliffs is France's best-kept secret), had lunch, and hiked an hour along the coast.
Below are some pictures and I've posted 15 more on Facebook here:
Best regards,
Whitney
P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com.