Bullseye Brief presents three thematic, actionable investment ideas every other week. My goal is to help identify only those opportunities most worthy of your time… by analyzing data, distilling complexity and sharing insights from a deep network of experts. I love what I do and invite you to join me.
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Adam Johnson

Adam Johnson anchored several business programs at Bloomberg Television over five years, interviewing CEOs, heads of state, and Nobel laureates. His daily video investment blog, Insight and Action was sponsored by a major U.S. lender. Previously he managed global risk assets for ING Furman Selz and Louis Dreyfus, trading oil futures, listed equities and equity options. Adam began his career at Merrill Lynch with a degree in economics at Princeton.


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Special Report

Yield Curve Inversion
  • The US Yield Curve inverts for the first time since 2007 and only the fifth time since 1980
  • 10-year yields fall below 3-month rates as investors react to the Fed’s pivot away from tightening policy
  • Yield curve inversion typically precedes recession though equity markets can rally powerfully for months

The US yield curve has inverted for the first time since 2007. This is a BIG DEAL for markets, and I am writing this SPECIAL EDITION report to address why it matters and what I’m doing. On the surface, a flat or inverted yield curve suggests near-term concern over long-term growth. Investors desperately worried by the threat of recession grab as many 10-year bonds as they can, squeezing prices higher and cramming yields lower in the process. Their panic is so frenzied that yield falls below the rate on 3-month T-Bills. Imagine being so afraid of the unknown that you would rather lock-up your money for 10-years at 2.50%, than face the possibility of lower rates on cash you reinvest every three months. This degree of angst is so unusual we’ve only seen it only four other times since 1985. It’s also why I’m postponing my intended bullish write-up on MKS Instruments (MKSI) until your next Bullseye on April 8… I like it in the low $80s fyi. Right now we need to understand the implications of the inverted curve and how to deal with it.

March 23, 2019

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Clouds Have Parted

I’m Buying an Airline
  • The pendulum of negativity swung too far in Q1 and is not supported by macroeconomic data in Q2
  • Airlines have still not recovered from 20-30% price swoons suffered last fall despite strong fundamentals
  • The nation’s most profitable carrier has just raised revenue guidance to the upper end of its 5-6% range

I am stunned by the reversal in market sentiment since Christmas Eve, when the S&P 500 had fallen 20% from its October high and everyone was so certain things were about to get much worse. Economists were handicapping recession odds on BloombergTV, and CEOs were outlining contingency plans on earnings calls. I even had several loyal readers contemplating whether to cancel their Bullseye subscriptions… an interesting contrary indicator. Fortunately, employment and spending remained strong through Q4’s mini-panic, and stocks have once again resumed their upward trajectory. Resilience is also playing out in the monthly traffic metrics of an airline I profiled during January. It’s the best operator in the business, and while I desperately wanted to buy shares, the CEO was such a Debbie Downer at Analyst Day in December I had to sit on my hands. Not anymore. He just appeared at the J.P. Morgan Transportation Conference presenting a VERY different narrative. His operating metrics are even stronger, and the stock is still reasonably cheap. The company also got profiled in Barron’s, and #1 shareholder Warren Buffet has bought more. Storm clouds have apparently parted. I’m buying an airline.

March 23, 2019

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3 Big Ideas

What I Learned at SXSW
  • 250k attendees descend on Austin, TX for SXSW 2019 and generate nearly $400M in revenue
  • Artificial Intelligence and 5G secure sponsorships but out-of-the-box thinking steals the show
  • Augmented reality blows open entirely new approaches to health care and human interaction

Austin’s 32nd annual South by Southwest conference proved quite an education. It is like Brooklyn hipster meets San Francisco entrepreneur, and Wall Street guys-in-ties need not apply… except it’s Texas, so everyone is welcome. Over ten days of meet-ups, town halls and blowout presentations, tech and media types with something important to say get on stage and let it rip. What a privilege to attend and I too got my moment, sharing stories about American Ingenuity and favorite Bullseye picks with nearly half a million Charles Schwab customers who participated via SchwabLive.com. That’s more than double the number of people who watch CNBC every day, not to mention the quarter million attendees who take over downtown. Over three days I zig-zagged among them on one of 16,000 Uber scooters, diving into dozens conversations which made 5G and EVs seem rudimentary. I think this is why so many people return year after year. Live music and movie screenings are great… as are Austin’s funky vibe and cool restaurants… but the real gift of SXSW is opening our eyes and ears to what’s possible. Thanks Schwab for asking me to participate. Here’s what I learned.

March 23, 2019

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4.8

As in global central bank balance sheet assets have declined 4.8% YTD, the first contraction since 2010.
#NowComesTheFreakOut

59

As in China imports 59% of the semiconductors it inserts into the products in manufactures, many of which are then exported.
#EveryoneNeedsTheTradeDeal

1,000,000

As in an estimated 1,000,000 Brits marched in London over the weekend to protest Brexit and demand a second referendum.
#DoOver?

 

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“My ideal investing is stuff that looks a little crazy now and in 3-5 years is obvious.”
Reed Hoffman, Co-Founder LinkedIn
#AmericanIngenuity

“Given Wells Fargo’s history of unlawful activity, I strongly urge the OCC and CFPB to take action.”
— Sen. Elizabeth Warren’s recent letter to regulators, even though WFC has already paid multiple fines.
#ElectionHeadwinds

“Technology and illiquid alternatives are two pillars of BlackRock’s growth, and this transaction accelerates both.”
–BLK Chairman Larry Fink commenting on a recent acquisition.
#IlliquidAlternatives?