BOB LANG: Good morning, Action Alerts Plus subscribers. It's September 14, 2022. Time for the rundown. And as usual, lots to cover today. So let's get to it.
So this morning, we had the release of the producer price index numbers on the heels of the CPI which came out yesterday. It was a bit disappointing, on the core side especially.
This is too hot. This number is a little bit too hot. The Fed will not like this number. And as we see, Fed Funds futures continue to creep up towards that 4%, 4.5% range for the middle of 2023.
We also see just about a lock for a 75 basis point rate hike next week. It's over 100% chance of that happening.
We're actually seeing a bit of a probability, about a 1/3 probability, of a 100 basis point rate hike still coming in for next week too.
So that would bring the Fed Funds rate up to 3.25%. We're currently at 2.25%. So I think banks and the rest of the markets are getting prepared and ready for a big rate hike that's coming in next week. Fed Funds futures, again, are pricing in about a 4.5% rate on the Fed Funds in April of 2023.
On the earnings side-- Well, it's not really earnings, but warning side, Nucor, one of our names in the AAP portfolio, came out and warned about their quarter for this coming year, and said that they're going to be a little bit light, saying that steel mill segment earnings were going to be considerably lower, quarter over quarter.
They do believe, though, that 2022 is going to be their best year ever. However, have we already seen some of the best numbers in the first half of the year? I think that's probably the case.
We do have a small position in the name, currently. The stock is down to about the 200-day moving average right now. So we're going to see how it reacts over there. It's been really good support over the past couple of years.
And if we get some support here, and some buyers are picking up the name, we may consider adding a little bit more to Nucor in the portfolio.
Now, tomorrow, we have retail sales figures which are going to come out for August. We beat on the retail sales in July. So we'll see what happens in August with back to school numbers being thrown out there.
We also are expecting to see industrial production, business inventories, Philly Fed. And also, of course, every Thursday, jobless claims are going to be coming out. So it's going to be a busy day on the economic front.
So I want to talk a little bit about what happened yesterday. Let's stop for a minute and talk about this for a bit. A little worried about it. This was the fifth worst point loss in the history of the S&P 500 yesterday.
The top three, of course, were during March of 2020 when the S&P 500 fell over 35% during that month of when it looked like everything was going to be shut down.
I know you felt it with your portfolios. So did we. But just understand what we've been telling you for months. This is a bear market. And this is what bear markets will do.
It requires us to use the bear playbook. And what is the bear playbook? That means keeping your positions rather light. Holding high levels of cash. And using protection when you can.
And we're using this protection with using the PSQ, which is the inverse QQQ, and the SH, which is the inverse of the SPI.
Now, we're not making lots of money on those things. And that's not the point. What the point is to try and blunt some of the volatility that comes into the markets.
Now, of course, these last few days were real strong leading up to yesterday. Certainly, using that playbook has helped us sidestep a lot of that volatility that has come into the portfolio.
So wiping away four days of gains is a painful experience. But bear markets, as they say, wear you out. They don't scare you out. That's a phrase that a good friend of mine, Rev Shark, who some of you know from Real Money Pro, says this all the time about bear markets.
So don't forget, these bear markets are going to fill you with hope. And all of a sudden, when you're feeling that the bear market is over, and then all of a sudden take a big swipe across your face, that's what bear markets will do.
We just have to accept this all the time, happening right now, and make the necessary adjustments, and wait until that bull market is going to come. Because the good news is, a bear market will eventually end and a bull market will start.
And we all want to be in the game when that time comes. And the best way to do that is to protect your profits and just be patient and wait like we're going to do.
Thanks, everyone, for listening. And we'll see you again tomorrow.