Skip to content

The baby, the bath and the drain. Amazing sell-off.

I thought it had ended. I was wrong. I have been wrong before. (Ask my kids.)

Inflation is rampant. If you measure it one way, it ebbed in April. If you measure it another way — called “core inflation” — it picked up.

The bad publicity inflation is getting is putting pressure on the Fed to clobber the economy even harder.

The clobbering so far — higher interest rates — have already cut the demand and pricing of housing and clobbered stock prices.

The plummet in share prices will have a major effect on spending of all things from housing to cruises, from fixing up your house (horrid drop in HD) to buying yourself a pricey large new TV.

Read more about inflation’s affect on the Fed in today’s New York Times’s cover story. Click here.

Here’s the Times’ chart:

What to do about our stocks?

Love your stocks and keep them all. Await the upcoming uptown. It will come. It always does. That’s sort of the Buffett approach.

My approach has been the 15% Rule. When your stock has dropped 15% off its high sell it. Don’t keep falling stocks because you love them — for whatever reason. This has worked in spades in this downturn where you have seen great stocks like Amazon and Home Depot plummet. Here are six month charts of the two:

One other rule during this downturn has been NOT to own stocks that have no earnings.

And keep away from bitcoin, crypto currencies and gold.

Bitcoin is not dong well. Six months ago it was over $60,000. Now it’s dropped by more than half.

My few friends (and me) are hiding out in oil. I especially like DVN (which has a 7.8% dividend yield), PXD, ENB (which has a dividend yield of 6.2%) and OXY:

Cramer had neat chart last night:

Cramer once pounded the table for Carvana. It’s been doing great in sales growth, but has also been losing more and more money. That’s not a good formula in today’s market.

There are companies making money who are also losing ground, like Google, Apple, Home Depot … in fact most everyone.

Most of us shouldn’t be in this market — except maybe oils and some PUTs. You could try looking at Cramer’s list. Basically, any tech stock — from Google to Palo Networks is ripe for a PUT. Frankly, I haven’t developed a theory on when and how to buy PUTS, though I did make a little money on my few Apple PUTs.

This downdraft is going to last longer. There is talk of a recession in the Fall. For now, there are too many uncertainties — from the Fed to Ukraine, from supply constraints to a shortage of grain (as a result of the Ukraine war), to consumers generally pulling their buying in — something Amazon execs talked about in their latest depressing earnings conference call. And of course inflation. Oil is high and going higher.

The great news today

There are opportunities around galore to start your own business. Try this with the next person you meet: Ask them, “What product or service would make your life and your customers’ lives easier? I asked this of a nice man I just met. He runs a hospital and would love if his patients could do more of their health monitoring and their blood work at home.

I’d like to start a business auditing web sites. Most are so awful that a few easy fixes would make a huge difference. Want a list? Start with the airlines.

Have you read about the Turkish drones that are winning the Ukraine war?  They’re the product of a talented Turkish entrepreneur:

Read more. click here.

The good news about starting your own business is that there’s plenty of money around to fund it.

Ask yourself, “What the world really needs….”

Which is not this:

I will have my portfolio updated in a few minutes.  (It’s on the web site.) I wouldn’t pay it much attention. Very little of it is making any money. Even my oil stocks are losing money today. It could be a good time to few a more.

This is a horrible time to own stocks. I’m now 80% in cash — a function of selling more in recent days and the drop in value of what I still own in recent days. If the denominator goes down, your percentage in cash goes up. Ain’t arithmetic fun?

There’s a new Airbnb business which involves renting out a place you rent (but not own). It’s hugely profitable. Airbnb is good to work with, apparently. Sadly, its stock, like many others, is plummeting. It loses money.

The Hong Kong Chinese arrested a 90-year catholic cardinal and charged him with violating their new security laws. Yet another reason not to visit China. President Xi is certifiable.

Art has been holding its value and then some:

It sold for around $195 million. It’s a good investment. I bet it will double its value within five years.

But, for mere mortals, it’s time to play tennis. Time for a bike ride. Time for a nap.

Send me your thoughts. Am I unduly pessimistic today?

See you soon. — Harry Newton