March Madness, The NFL, TLT Vs. the TBF and when on Tech Stocks?

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March Madness, The NFL, TLT Vs. the TBF and when on Tech Stocks?


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Hey this is Jeffrey with another issue  of Stock Smart, March 19th, 2021 edition. Hope you’re all doing well. So it’s finally here, March Madness. The day everyone’s been waiting for, since we missed it last year, win or go home. It’s the second Super Bowl for gamblers, there’s over 60 plus games they can bet on over the next three weeks with a ton of high-end drama, Illinois, I told you is my pick and president or former president Barack Obama, he has Illinois in the final but he is going with Gonzaga, now remember when you watch this because we love to get into the stats, numbers. I do, that’s my background, expect a 12-5 seed upset. Stats show 30 out of the last 35 years 12-seed has beaten the 5-seed. So who’s it going to be this year? Let’s take a look quickly at the 12-5 matchups because these are fun.

This happens every year. 12-5 Winthrop vs. Villanova, we have Oregon State, Tennessee. Georgetown Colorado and UCSB Creighton, I’m going to tell you I did not watch a ton of college basketball, my team that I follow is DePaul. They were terrible this year. They didn’t even have a game. They missed like almost all their games at the beginning of the year because of Covid. I think the Big Ten is the strongest, you know conference by far and so to me the upset that I would pick in the 12-5 just because I don’t think the Big East is that great is Georgetown Colorado, I’m going to take Colorado in the upset of the 12-5. So we’ll watch that, there’s going to be one there almost always is a 12-5.

Not so much as the 13-4, only happens like 20% of the time, but 35% of the time or so the 12-5 happens, NFL announced a new set of national TV deals on Thursday. So they’re keeping games on ESPN ABC of course Fox CBS, NBC Amazon, NFL Network are going to have games. And the agreement keeps like, Sunday afternoon games will be on CBS and Fox. The big deal is Amazon is going to be an exclusive home now for the Thursday night games, so you can watch it on your Amazon Prime, which is pretty cool and they do a good job covering it. So that’s happening, big announcement for again, sports gambling gaming. We’re following this closely because it’s very tied to the market that’s going to probably grow 5X

in the next 5 years as more states looked at it. So Connecticut, they have online sports betting they have a proof, they made through a major hurdle, they announced a deal that will allow the Foxwood Casino Operator to launch a Statewide mobile iGaming for sports betting in Connecticut. You’re going to see this more and more as more States look to raise revenue and they’re sick of seeing the money go out the door to Las Vegas, Atlantic City, Indian reservations they’re sick of seeing it. So what they’re going to see now is they want to be partners they want to get that revenue.

They need that revenue to continue to build and produce great things in their communities, so you’re going to see more and more and I would guarantee and I’d make a good bet that all 50 states will have some kind of legislation that allows for gambling. People want it, it’s entertainment it’s part of the entertainment profile. Of course there has to be good knowledge about the gambling problems and there’ll be programs that happened because of that. This is a time too if you go into a sort of a high inflationary period. Gambling is going to be kind of recession proof, people don’t get rid of their vices. They continue to drink, have fun, they travel a little bit maybe a little less than normal.

They continue to do the things that they like to do.


I want to look at a stock now, there’s no marketing language on these stocks because there’s no marketing language on bonds and I want to look at two stocks that are perfectly I would say negatively correlated instead of positively correlated like we talked about on the show a couple times, many times actually how the S&P 500 is now positively correlated at least 70% of the time with Bitcoin. Well, this one’s a perfect inverse. We have the TLT which is the 20-year long-term bonds. Against the TBF which is the short or the inverse of the 20-year Bond. So course it’s going to be perfectly inversely correlated. Let’s look what happens. Let’s look what’s happened like in the last 3 months here. So the TLT which attracts the long-term bonds and you know, what’s happening, right? What’s happening with the long-term bonds?

They’re being sold because as interest rates, the yields rise, that means that the older bonds become less valuable and they’re like, why am I holding this bond that has no yield now the new yields are better so let’s get rid of them. And also inflation when you have a fixed income type security like a bond, it doesn’t increase with inflation unless it’s a treasury inflation-protected security otherwise a bond just sits there with its yield that you paid for forever and then you have inflation and the bond becomes less valuable. You have a dwindling value of money. So let’s look at these two – the TLT year-to-date is down 15%, so the TBF which is the inverse right means the opposite. What do you think that’s up?

That’s up 15%. So, one way to maybe hedge if you believe and I’m not going to recommend anyone do anything with the short because it’s essentially a short it’s not a dramatic short because the movement on bonds is so slow, it is like tortoise. It’s not like GameStop which is like rocket ship. So GameStop in a short is like a rocket ship, a bond short is like a tortoise, it moves very slow. But what you can see here is if you believe that inflation and we’re going to continue to get inflation. I am a firm believer that we are going to see more inflation. I don’t think the numbers are accurate. I think the way that they are looking at the CPI right now doing online and phone polling is not as good as if you go in person. It just isn’t, we’ve all done it.

You know that your Zoom meetings, they do not have the same impact as if you go in a meeting in person and create a connection, so when they go and they start doing the CPI numbers again and they go in person and I talked to my friends they have businesses and they have a couple of them have Plumbing companies, are your parts going up that you’re using? Yeah. I’m like, did you pass along increases yet to your consumer? Uh, no, we’re thinking about it. It’s happening too quick and people are still in this hangover of Covid where they haven’t really adjusted to it yet, you know, they’re thinking about hey getting the vaccine they’re thinking with my money coming in I’m getting a stimulus check. They’re not thinking about how these prices have gone up.

And they’ve gone up dramatically, not just energy but in everyday consumer goods. We talked about this Commodities. Commodities being a great hedge right now against inflation because the raw goods and materials that you pay for things that are produced. Right? So you have like the corn and wheat and whatever that goes into breads and goes to cows and feed and grain and cattle and it all goes down the line, your milk goes up, your beef goes up, steak goes up, all the products that are made, they go up, we talked about how the metals have increased, lumbers increase, that increases in your house, talked about the shortages in semiconductors, that impacts your car prices, and you have interest rates on top of that, cars are going to get triple expensive, cost of goods that make the car, plus the interest rate to buy the car going up.

So anyway, if you want to look at a possible hedge against inflation, you can play this TBF which again is up 15.27% this year in a very short period of time like 7 weeks. That’s not 7 weeks. It’s about 9 weeks, so up in about 9 weeks. This is up and it is kind of an inflation hedge. So take a look at it, at TBF.


Now, we’re going to take a question. Here’s the question from John, so this again follows what we’ve been talking about. John wants to know when it’s going to be safe to get into tech stocks. Well this is a tough question, right? Because it doesn’t seem safe yet. It seems like the NASDAQ continues to get pounded and it does because of the fear of inflation. So when you look at growth companies companies that don’t really make a profit, profit right now or bottom line profit.

You’re paying way out in advance, five years sometimes for the profits, you know down the road and those profits get way more expensive because these companies have to borrow money to keep going and the cost of borrowing money increases. Thereby making their profits decrease in the future, let’s look at a couple things that really impact this though. So banks are getting hit a little bit today, and they’re getting crushed because the Fed said the SLR supplemental leverage ratio, which they relaxed during Covid, is not going to be extended, kind of a surprise, going to end on March 31st, but it impacts banks greatly because what it does is they were able to withhold certain things as their leverage notes. Meaning they have to have certain deposit requirements on hand to be able to loan more money and banks make money loaning money. Let’s look at really quickly.

How do banks make money. It’s really simple. It’s just like a store that buys a pencil for $0.10 and then they charge you $0.20 when you buy it the bank does the same thing, they borrow money at X a lot of times from the Fed and they want to make a spread, the spread is the difference between what they borrowed it for and what they can sell it for or what they loan you the money for, you know spreads and the interest rates are going up, but the move in banks has been insane, the XLF, which is the financial sector ETF, has moved about 16% in two and a half months.

That is an insane move, many of these banks, JP Morgan, Goldman Sachs they’re up 30, 40% already and they’re anticipating yeah, interest rates moving higher, but the move is too great and what you’re going to see so the timing of this, this is what I’m seeing. This is what I’m feeling you’re already seeing some pushback in the banks you’re going to see more by the way. And also I want to tell you what’s going to happen. Banks hold a lot of 5-year notes. And so you’re going to see more selling in notes and treasuries now because the banks now can’t use this, you know they have to count their bonds now in that leverage ratio, so they’re going to get rid of them because they’re going to want to be more liquid.

So watch for more selling of bonds, that already happened this morning when this note came out about the SLR being lifted. We started selling you know, bond prices in the 5-year notes went up as selling, net selling went up as well. So when interest rates are higher banks make more money, but this move was too much too soon. So what I would think, here we’re going to get into bank earnings April 15th, some of the big boys JP Morgan Goldman Sachs start that week, bank earnings usually have the first of the earnings season. And what happens is you’re going to get a rotation probably right before that out of these banks because they’re not going to want to sit in there and have disappointing earnings. And I think the banks are going to disappoint based on what they’ve done.

You saw this in tech stocks, all the tech stocks, that even had great numbers, and the banks will not have the great numbers that tech stocks had, growth of 30-40%, you’re not going to see that in these banks. No way. They’re going to disappoint in earnings when they hit in April, so people are going to get out of them before and when they disappoint there’s going to be a rotation to the tech stocks. Now one thing you need to remember, you know, the financials, things like energy financials are not a big part of the S&P 500 anymore. I mean they are in general meaning they are a big part of it but not like the tech stocks.

Which are like 25-30% of the S&P 500 and so the incremental moves that you’ve seen in the stock prices in like a tech stock, you need big movements to really make a stock price move by a dollar because the market caps are jumbos, you know, we’re talking about trillion dollar companies like Apple and Tesla so the market caps, they need a lot of money in them to move them, when you see some stocks that have smaller market caps a lot of these banks, especially regional banks, it doesn’t take a lot to move them, move the stock price. So keep that in mind. That’s why these have moved so much and so it seems like it’s way overdone, takes a lot more money to move the big heavy tech stocks, so timing-wise

I think if people are going to move into these, you see it right into earnings, like early April, that’s probably when you want to start taking little positions again or adding to your positions in tech stocks, and that’s probably when you’re going to see money move out of these financials. So hey, thanks for the questions, another great show. We did get great news. I was checking last night’s stats of the show. We tripled our daily download rate in like the last week and it’s incredible. Thanks to all the listeners, appreciate it, will see you again next time on Stock Smart.

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