Alpha Report Issue #90

• Current read is 75 on the fear greed index vs 75 last week.

• Market Fearful = Potential Opportunity/Deals. (buy calls/sell puts/buy shares)

• Market Greedy = Potential Over Valuation. (buy puts/sell calls/sell shares)

• So the market is now in the extreme greed category after a massive bounce off of the April lows.

• Remember, I like to be bullish when there is extreme fear & bearish when extreme greed.

• So right now, I am being VERY careful!

• Opportunity will come. BE PATIENT!

• 30 year fixed mortgage rate climbs to 6.84% Today vs 6.83% last Sunday.

• 10 year treasury bond yield climbs to 4.42% Today, vs 4.41% last Sunday.

• 2 year treasury bond yield falls to 3.87% Today, vs 3.89% last Sunday.

• Interest rates were flat this week, so not really a needle mover either way.

• As interest rates/bond yields INCREASE, stocks become LESS attractive because bonds become MORE attractive.

• This also works in reverse!

• As interest rates/bond yields DECREASE, stocks become MORE attractive because bonds become LESS attractive.

• REMEMBER, MONEY ALWAYS WANTS TO FIND THE BEST RISK ADJUSTED RETURN.

Let’s keep this simple and break down what actually matters right now for the stock market and to make some money!

What’s up everyone!
Hope you’re having a great weekend!

Let’s cover what matters!

• Q2 earnings have started and they are decent so far.

• Banks reported good but the key thing to look out for is net interest margin compression.

• Let me explain what this means very simply.

• Banks borrow money, then lend it out for more.

• As/if rates comes down more, the spread between what they borrow at and what they lend at becomes tighter.

• Example A: Bank borrows money at 3% and lends at 5%. They make that 2% spread.

• Example B: Bank borrows at 2.5% and lends at 4%. They make that 1.5% spread.

• So example B is what is becoming more of a reality, especially if Trump somehow gets rid of Jerome Powell (Head of the Federal Reserve)

• But overall, the signals from banks point to a strong ish economy and a strong is consumer.

• The US economy is very consumer driven, which means ppl spend money to keep it going.

• People are still spending money, so it’s fine as of now.

• We did get CPI inflation data this week and it came in a tiny bit hot, but nothing to worry about IMO.

• Jerome Powell told us at the last fed meeting that we might see some inflationary pressure for the June and July CPI readings cause of tariffs bumping the price level a little.

• But overall, this is just a little bump in the road and we will be fine IMO.

• Little bumpy for the next few months, but it will trend back down is my thesis.

• We also got some data regarding the labor market.

• We got jobless claims data.

• Both initial claims and continuing claims were better than expected (less ppl jobless)

• Initial jobless claims come in low (good, this is the blue line)

• Continuing jobless claims come in a little lower also (good, orange line)

• So this signals the labor market is doin ok and it’s relatively stable

To Summarize🤝

• The market is a little expensive now fundamentally.

• If earnings hold up and interest rates trend down, we will most likely be ok.

• If something cracks, whether that be inflation to the upside, earnings to the downside, labor market, economy, ect… Expect downside correction.

• I have said it a million time but I will do it again.

• I am prepared to capitalize on upside and downside.

• My portfolio is 100% long/bullish the market.

• But when it comes to leveraged options exposure, I have that low ish now.

• ALWAYS KEEP YOUR RATIOS IN CHECK

• ESPECIALLY IN THE LOFTY ENVIRONMENT WE ARE IN NOW.

I bet you lose money with Stocks & Options or you have in the past...

Most ppl do...
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