Alpha Report Issue #95

• Current read is 61 on the fear greed index vs 64 last week.

• I think this should be closer to 70, so still greedy IMO.

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

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

• I like to be bullish when there is extreme fear

• I like to be bearish when extreme greed.

• So right now, I am being VERY careful!

• Opportunity will come. BE PATIENT!

• 30 year fixed mortgage rate flat at 6.46% Today, vs 6.46% last Sunday.

• 10 year treasury bond yield falls to 4.25% Today, vs 4.32% last Sunday.

• 2 year treasury bond yield falls to 3.69% Today, vs 3.75% last Sunday.

• Interest rates came down a little this week.

• Largely because of what Jerome Powell said at Jackson hole. (I will cover this more below)

• Remember, as interest rates/bond yields DECREASE, stocks become MORE attractive because bond yields go DOWN which makes the risk free bond look LESS attractive.

What’s up everyone!
Hope you’re having a great weekend!
Let’s break down what’s going on right now!

• The marker was a little volatile this week as investors processed some economic data + the Jackson hole fed meeting that was on Friday.

• So whenever there is a “very important” event like Jackson hole, the market is usually volatile leading up to that.

• Overall, the market sold down a little leading in to Friday as investors were nervous Jerome Powell will say something bearish.

• I will say this, I have been watching Jerome Powell every single press conference he has done since he became fed chair.

• You get to learn how he talks, what his tone is, and you pick up more on what he “doesn’t say”

• A few meeting ago he guided that June & July CPI inflation data will likely be a little hot.

• It was, but not as bad as feared.

• At Jackson hole Jerome Powell elaborated a little more on that and essentially said look, yes we had a few warmer inflation reports, but it does NOT look like this will be sustained and we expect inflation to cool back off.

• This is good because it crushed the “higher for longer” on interest rates thesis.

• Also, another HUGE thing is flexible average inflation targeting.

• I can argue this is the most important part of the meeting.

• So what does flexible average inflation targeting (FAIT) mean?

• FAIT means the fed looks at the average of inflation over time.

• If inflation was below 2% for a while, they may let it run above 2% for some time to balance it out.

• Another way to say that is Instead of reacting immediately to higher or lower inflation, they give themselves flexibility to let inflation "make up for past misses."

• This is meant to keep long term inflation expectations steady at 2%.

• But this gives the fed the green light to cut next meeting IMO.

• This is an “excuse” to cut.

• So what does lower interest rates mean for the market?

• Well, just think about it.

• Bonds become less attractive.

• Stock become more attractive.

• More ppl will buy cars, houses, vacations, home renovations, things on credit, ect…

• More money will likely be spent cause cost of capital is cheaper.

• Corporate bonds are often callable. Which means if Apple issues a bond at 5% & yields fall to 4%, they will likely call in the 5% bond and re issue at 4%.

• This will save money and put more to the bottom line. (EPS)

• Ok, I don’t wanna ramble too long cause I can talk about this stuff forever!

To Summarize:

• Market is a little pricy now.

• Rate cuts help support the valuation.

• Be careful with leverage even more now cause of downside risks.

• This does NOT mean a dip MUST happen, but the risks are building the more expensive the market gets.

• I am allocating my portfolios appropriately to capitalize on upside, downside, and generate cash flow while things are a little lofty.

Key mindset: Market will hit new all time highs again over time, but you’ve got to be mentally and financially prepared for the dips. Buy great companies at good prices. Keep your ratios in check. Don’t YOLO into hype. Be patient!

I’ll send this out a few more times than it should be filled up🤝

I have about 15 spots left (I opened 100 total) to become a client at my financial advisory firm.

• Investing.

• Asset Management.

• Insurance (life, disability, etc)

• Estate Planning.

• Taxes Strategy.

• Private Equity

• Private Credit

• Plus some super interesting things that really could made sense given current state of the market.

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