Brink’s is a Buy, and How to Avoid a Fed Fueled Crash

Brink's Company Buy

On Friday, the headline naturally centered on inflation expectations. We have minutes coming from the Federal Open Market Committee (FOMC) next week. The FOMC will discuss the timeline of its tapering goals and maybe discuss when we can see interest rates get off the floor. (Read on for Brink’s buy details!)

Given the breakneck pace of inflation over the last few months, we’ll likely see two hikes for interest rates next year. That’s probably enough to bring outlandish speculation in worthless zombie stocks to an end. This could certainly impact the top end of the technology sector. 

Some financial institutions like Bank of America anticipate aggressive rate hikes in 2023 and 2024 as well (as many as three each year). However, I don’t know how and what the Fed is going to do if an aggressive approach pushes the U.S. economy into slower economic growth. This has been a wild experiment from the Federal Reserve over the last decade, and especially over the last 18 months with interest rates. 

Looking to the Future

The problem with economists (and I’m one of them) is that we tend to look to the past for examples of how to address the financial crisis. Most of the leaders in the Fed look for guidance on how to handle today’s problems based on what happened in 1930, 1948, 1973, 1979, 1987, 2000, and on and on.

They don’t recognize that today’s problems are unique and that sample sizes should be larger when harvesting responses. They also fail to understand that most of the problems caused started with the central bank’s policies. 

Don’t worry though, they’ll pull the levers in front of them and start tossing random potions into the elixir that they hope will cure the economy. Then, they’ll retire – having only kicked the can down the road – and write a book about how “brave” they were and how they had the “courage to act.” Maybe someone will put them on the cover of Newsweek with their arms crossed so that we know that they still “mean business.”

Momentum Swings

Listen, the Fed isn’t going to save us. Washington isn’t going to save us. They cooked this goose way too long, and now they’re effectively dismissing and excusing rampant inflation. All the while, politicians are meeting secretly with mainstream media outlets like CNN to change the economic narrative. 

Right now, the value of the QQQ (the Nasdaq 100) compared to the Dow Jones Industrial Average is at the highest level since the height of the Dot-Com Bubble. We’ll look back and likely call this rampant era of speculation and reckless capital allocation as the COVID Bubble.

What goes up will inevitably come back down. And we’ll have the Fed and a wealth of economically ignorant elites to thank. The best that we can do in this case together is to use momentum to manage individual sectors and expectations. Every day I’m telling you where market momentum sits and when you need to build cash. 

Ahead of next week’s busy options expiration date, we must buckle up and prepare for a potentially wild ride. The good news is that there are buying opportunities in special situations.

What’s On Tap Next Week

The most important thing that investors can eye as momentum remains sideways is the energy sector. I’m expecting a significant bull market for oil prices moving forward. 

Politicians are straining their necks to scream about price gouging in the oil and gas sector. The reality is that market disincentives have distorted the markets. Oil production companies simply aren’t responding to the most important incentive to increase the output: Price.

The ESG market has fueled an incredibly sideways effort by oil producers to bring crude to the market. This is true even though market prices are higher than production prices. Oil companies with solid balance sheets appear comfortable in simply waiting for higher prices. They can use their available cash to buy back stock. 

As I’ve said, there will be about a $500 billion lack of capital expenditures to bring supply to the market at a time that demand rises over the next few years. I remain very bullish on oil, with my primary risk centering around weakness in global economic growth.  

Buying Brink’s Company

I also want to keep a very close eye on The Brink’s Company (NYSE:BCO) next week. The company was recently a popular trade of mine after it experienced a dramatic selloff and crashed into a 30-day period of oversold conditions. Shares bounced after reporting earnings. 

But there is significant upside left in this company, and it’s worthy of speculation next week. The company will host a virtual investor event on Wednesday. Senior management will outline its strategic plans for 2022 through 2024 and discuss its financial targets. After last year’s event BCO stock ripped 4% as optimism spread. 

Remember, the world is awash in cash. Brink’s is in the business of securing that capital as the global economy reopens from COVID. It’s a great stock, and likely has a better string of opportunities in the supply chain.

Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.
Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.

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