ALERT: Take a Double-Digit Gain Amidst the Bogus Inflation Celebration
A word of warning … I’m hopping on my soapbox and revisiting how the Federal Reserve’s approach to curb inflation by jacking up interest rates has been a complete and utter failure.
The nonsense simply needs to stop before it’s too late.
Everywhere I turn, I read how inflation is falling and consumer spending remains strong. I hate to burst anyone’s bubble, but saying that inflation rose at a slower pace in October than September does not mean that inflation is falling. It means prices are rising at a slower pace. And that’s an enormous distinction.
And so is the fact that prices that are either rising slower or literally falling tend to be discretionary in nature and not in consumer staples.
Check out the following chart I found that shows which prices fell, and which ones rose over the past 12 months.
And don’t let the red bars fool you at the top of the list. Those reflect increases, starting with rent, personal care, housing, groceries, new cars, college tuition, etc. Prices fell for electronics, appliances, furniture, airfares, toys, household energy, gas, etc.
If you’re looking to take a vacation, buy a new living room set, try out new gadgets, then it’s all good. Need to pay rent? Feed the family? Brush your teeth? Send a child to college? Then, it’s not good at all. Surely, you don’t need any of the latter ...
Think about it. When was the last time you bought something frivolous? How about seeing a neighbor pull into his or her driveway in a shiny, new car?
Here in South Florida, we frequently see shiny new luxury vehicles like Lamborghinis on the roads. But this is a very, very small portion of the overall population.
In my neck of the woods, where average people like you and I call home, “Keeping up with the Joneses” is no longer a life goal. Today, most of us are happy with “just keeping up. Period.”
I mean, Americans took on record credit card debt in 2022 as the highest year-over-year increase in consumer debt since 2008, and it continues to grow. That doesn’t reflect an extremely healthy overall economy to me.
In one of your recent issues, I mentioned that the supposedly “strong” economy buoyed by “strong” consumer spending is occurring for one of three reasons … or a combination.
One, the stability of the U.S. and high Treasury yields are attracting foreign investments and propping up the economy, not American consumers.
Two, people are spending more because goods and services cost more — they are not buying more.
Three, the rich keep spending as the gap between the wealthy and middle class expands.
In fact, the onslaught of rate hikes has dramatically lowered the odds of achieving the American Dream for the 99%.
Yet, in the surprise of all surprises, a Mortgage Bankers Association Survey revealed that “amid stable rates,” mortgage and refinance applications rose 2.8% and 2% last week, respectively, from the previous week — the biggest move in five weeks.
I find it hard to believe that the current 30-year fixed mortgage rate of 7.61% — just 30 basis points lower than three weeks ago — created that much interest in buying property or refinancing.
Most homeowners I know here in South Florida already took advantage of rock-bottom rates and are staying put. Plus, housing costs are outrageous and becoming more so by the day because of dwindling inventory and high costs of mortgages.
I think the unaffordability of homes is one of the biggest unintended consequences of the rate hikes.
Unfortunately, the combination of cheap credit and affordable homes — two of the biggest drivers of wealth accumulation for the middle class in the 20th century and early 21st century — is landing many people in the poor house.
Prices have soared nearly 150% from their 2012 lows and 40% from 2020 to 2022 alone.
Median U.S. housing prices peaked at $257,000 before the 2008 Financial Crisis. They fell to $208,000 in 2011, rose to $322,000 in 2020, then hit an incredible $454,000 in June 2022.
Whilst rising rates have caused housing prices in some regions to decline between 5% to 15% (those that rose the fastest), prices have not come down enough to make up for the increase in interest rates. It’s estimated that housing needs a 20% to 30% decline from current levels to make buying affordable.
Hiking rates further would have the opposite effect.
If the Fed remains bound and determined to bring the labor market to its knees and send unemployment higher to curtail the “supposed strong economy and strong consumer demand,” I think the floor drops from under the housing industry.
From there, an increase in all kinds of loan defaults — personal, cars, mortgages and more in commercial real estate — will negatively impact banks, maybe even cause a few more to fail.
Something’s got to give. We can’t keep doing the same thing and expecting different results.
Fortunately, here in the Weiss Intelligence Portfolio, we have numbers and highly developed strategies to help with our decisions that filter out the fluff and noise. On that note, let’s get to this week's new moves.
Grab Double-Digit Gains, Cut Slight Underperformers
First, we’re grabbing around a 14% gain on Consolidated Water (CWCO), which is great. A large reason for this stock’s price increase was due to a very impressive earnings report released last week on Nov. 9 where it saw total revenue up 99% … and EPS up to $8.8 million from $0.8 million in the year-ago period. Sell.
Right now, in Neutral Mode, we want our inverse exchange-traded funds to be our buffer, while collecting nice gains on our stock positions — which as I previously explained, we are going to be rotating in and out of frequently.
Remember, this is almost entirely based on our modeling and AI performance booster technology. When you have those, you can expect big gains, and it’s why I am so passionate about this.
Our next sell is Vista Energy, S.A.B. de C.V. (VIST), a name we got into on Oct. 30. Recent downward momentum stems from a continued sell-off from its earnings that slightly disappointed before we got in … and from a broader energy sell-off. Fortunately, shares have rebounded in recent days, and the stock is up around 5% on the day as of writing. This gives you a more favorable exit point. Sell.
Our last sell is Sterling Infrastructure (STRL).The company reported Q3 earnings last week on Nov. 7. The results were lackluster at best.
Shares sold off around 15% on the news, and the stock was downgraded in our ratings database from a “B” to a “B-” due to a decline in EBIT, EPS and a very slight decline in net income. Shares have since rebounded some, but we need to get out before things possibly get worse. Sell.
Our 3 New Rankings Risers
When you have the power of the Weiss Ratings algorithms behind your sails, you’re going to win in the long run, and I am loving our three new picks.
First, we’re adding Banco Latinoamericano de Comercio Exterior, S. A. (BLX), a multinational bank headquartered in Panama.
Shares are up around 15% over the past month, and 59% year to date. The relative strength index, one of my favorite momentum indicators, has recently risen. I feel confident in its short-term horizon. Buy.
Our second new portfolio addition is a company you are probably more familiar with — Deck Outdoor (DECK). It is a footwear designer and distributor based in Goleta, California. Its portfolio of brands includes UGG, Teva and Sanuk, to name a few. We’ve been rating this stock as a “Buy” for the majority of the year. Since its jump to this range, shares are up a very nice 48%. Let’s join the DECK party. Buy.
Our final portfolio add of the week is a name that All-Weather Portfolio Members are familiar with, as we sold it around a month ago — United Rentals (URI). Our modeling likes the name again, and shares are up around 20% over the past three weeks. It appears there is more room for it to run. Buy.
Below is what our portfolio holdings will look like after today’s trades:
Below is a list of what our stock portfolio will look like after today’s trades …
- TORM plc (TRMD)
- Banco Latinoamericano de Comercio Exterior, S. A. (BLX)
- Nvidia Corp. (NVDA)
- Kinsale Capital Group Inc. (KNSL)
- Sunoco (SUN)
- Comfort Systems (FIX)
- Novo Nordisk (NVO)
- Frontline plc (FRO)
- PACCAR Inc. (PCAR)
- Dorian LPG (LPG)
- Arista Networks Inc. (ANET)
- The TJX Companies (TJX)
- BellRing Brands Inc. (BRBR)
- Broadcom Inc. (AVGO)
- United Rentals (URI)
- CONSOL Energy (CEIX)
- Medpace Holdings (MEDP)
- nVent electric plc (NVT)
- DECK Outdoor Corp. (DECK)
- Arch Capital Group Ltd. (ACGL)
And remember, we’re still in Neutral Mode for the time being, so no changes to our two ETFs at around a 15% allocation to each.
Given the extremely low volume during the Thanksgiving holiday week, I do not expect any trades next week. Therefore, I don’t anticipate sending an issue next Friday.
I hope you have a lovely holiday with your loved ones, enjoy some delicious turkey and possibly get to watch some football.
We’re only getting started here in what will be an incredible journey utilizing cutting-edge technology in conjunction with our robust ratings system.