The Bears are Eating Your Tech Stocks

Don’t Jump the Gun [Morning Reckoning] October 31, 2023 [WEBSITE]( | [UNSUBSCRIBE]( The Bears are Eating Your Tech Stocks Baltimore, Maryland October 31, 2023 [Greg Guenthner] GREG GUENTHNER Good Morning Reader, The stock market continues to drag investors into a pit of despair as the major averages post another ugly week of losses. The Nasdaq took the brunt of the damage, tumbling more than 5% in just ten trading days as the once bulletproof mega-cap tech stocks began to unravel. The bears have now come for the biggest and best stocks on the market, with major players like Alphabet Inc. (GOOG) suffering double-digit damage. At first, it looked as if some of the more beaten-down growth names might find some relief while the mega-caps underperformed. But many of these stocks continue to find new lows as distribution dominates the tape. Nowhere to run, nowhere to hide… Naturally, doom and gloom predictions are flooding the airwaves as the market continues its fall slump. It’s spooky season — and slippery stocks are starting to scare the pants off investors. The absence of new highs, poor breadth, and sluggish action is taking its toll on the bulls. It’s gotten so gloomy out there that World War 3 and Black Monday have been trending on social media. Investors are on the verge of panic every weekend, expecting cataclysmic events to rip through the markets, sparking a historic crash. But is the situation for stocks really that grim? Not yet… While we’ve yet to witness a significant breakdown, the averages remain mired in a choppy, sideways trend. Last week’s action was especially difficult. The S&P lost 2.5% to close at its lows on Friday, hitting levels we haven’t seen since late May. The summer melt up has melted down as the large-cap index has dropped more than 10% from its highs. But if you have even a drop of contrarian blood coursing through your veins, you’re probably on the lookout for a bounce this week. We’re entering a seasonally strong period for stocks, sentiment is in the gutter, and the averages are near obvious support levels. Push the news, panic, and upcoming Fed meeting out of your head for a moment. Instead of focusing on the noise, let’s instead plot out a couple of potential scenarios for stocks as November approaches. What Happens Next? First up: the unexpected rally. We could see a quick washout below key support to set up an end-of-year rally. In this scenario, the major averages and some of the more popular stocks undercut support (their respective 200-day moving averages or other obvious, horizontal levels). Sellers then come for the strong names and mega-caps as these are usually the last lines of defense and “safe havens” for the bulls. They successfully scare some weak hands out of their positions, yet fail to crater the market. Stocks find support, bottom out, and begin to attract these same sold-out bulls into a year-end push higher. The next scenario is where it turns ugly. If markets continue to suffer as yields and the dollar push higher, this drawdown could morph into the beginning of a major leg lower. That means we’ll see breakdowns expand and ripple through the market, tearing down leading stocks and everything in between. All the angst and worry built up over the past few weeks will be confirmed by poor earnings reactions – and maybe even a little panic following the Wednesday release of the latest Fed minutes. All major moves lower begin with what appears to be a standard market pullback, so the move will likely catch the remaining bulls off guard as the averages defy seasonality and an end-of-year melt up turns into a full blown meltdown. [Biden Admin Furious Over This New “Alternative” Currency]( Take a close look at this photo: [Click here to learn more]( [What you see here is a new “alternative” currency that’s taking America by storm…]( One which could ruin Biden’s CBDC plans. It’s already popping across the nation… including Utah, New Hampshire and Nevada. [If you’re worried about Biden Bucks then you must watch this short 2-minute video that breaks down how this “alternative” currency works…]( [LEARN MORE]( Don’t Jump the Gun We’ve experienced choppy markets for several weeks. These conditions won’t last forever. With the averages at or near important inflection points, I expect stocks will break one way or the other sooner rather than later. But there are no guarantees — and mistakes are incredibly costly in difficult trading environments. When markets are trending, you can get it wrong and still make money. A little tailwind from the prevailing trend will help cover up poor decisions. Heck, you might even still book decent gains if you underperform during especially strong periods. Don’t get me wrong — there are techniques and strategies you can use to make money whether the market is moving up, down, or sideways. But trying to “get in early” on breakouts or breakdowns before the market tips its hand is a recipe for disaster. Intraday swings and fake-outs are commonplace these days, while trending days are few and far between. Instead of follow-through, we’re stuck with big gaps higher or lower as traders try to wrap their minds around the endless list of risks attacking their favorite stocks. I know how frustrating it is out there. It’s especially difficult to sit on your hands waiting for more confirmation before pulling the trigger on new trades. But that’s exactly what you have to do in this environment. When false breakouts and choppy conditions are prevalent, successful traders know to pull back. Protecting capital is the top priority! There’s obviously a ton of noise out there right now, which means it’s more important than ever to tune it out and remain focused on your trading goals. 3 Ways to Beat the Chop As the market continues to lurch along, remember the rules that guide us in these conditions: We’ll let price lead the way. Don’t get too caught up in the scary headlines. Price will tell us how this market will behave in the weeks and months ahead — the narratives won’t! Choppy action means fewer trades. Taking a step back from a choppy market will allow you to protect your capital, limit drawdowns due to failed breakouts, and allow you to jump on any new opportunities when they emerge due to your large cash position. Cash is a trade! Breakeven is winning in this market. Passive investors are watching their losses grow as stocks continue to retreat from their summer highs. So-called “growth investors” are down big as many of the prominent names in this group are down as much as 50% from their year-to-date highs. They have a long way to go before they will make those losses back. By limiting your drawdowns, you’ll be miles ahead of the herd when this market finally picks a direction. If a trade’s not working, cut it loose. Small losses won’t kill you (but big ones just might!) Best, [Greg Guenthner] Greg Guenthner Contributing Editor, Morning Reckoning feedback@dailyreckoning.com [James Altucher: THIS is my top AI investment pick]( I’ve been called a “genius investor” by my fans… And an “eccentric millionaire” by some others. I think it’s because I make big predictions that [tend to come true.]( Today, I’m making my boldest prediction ever. Revealing the AI stocks I believe… Could turn as little as $10,000… Into $1 MILLION over the next few years. To show you I’m serious about helping you get in on this opportunity, I’m giving away one of my top 5 AI 2.0 stock picks – free. [See my top 5 pick here now.]( [LEARN MORE]( In Case You Missed It… Let Them Eat… Bugs? Sean Ring, Editor [Sean Ring] SEAN RING Dear Reader, I must disclose this immediately: I utterly loathe the World Economic Forum. To quote Obi-Wan Kenobi, “You’ll never find a more wretched hive of scum and villainy.” From Jacinda Ardern, the Woman Who Would Be Queen (of New Zealand), to Chrystia Freeland, granddaughter of one Nazi and chief cheerleader for another, to Justin Trudeau, the chip off the old block, all who associate with the World Economic Forum have proven themselves to be authoritarian nightmares. But the buck must stop somewhere, and that’s with Klaus Schwab, the co-founder and head of the WEF. A student of Kissinger (of course), Schwab has taken public-private partnerships to a new level. His goal has been to “infiltrate cabinets” to alter government policy. New Zealand and Canada are unrecognizable, thanks to his acolytes. I don’t mind the climate nuts so much. Due to our current economic woes and inevitable banking crisis, idiotic policies like net zero and ESG are being rolled back. Al Gore, John Kerry, and Mark Carney look like used car salesmen who’ve tried to stay relevant by shouting the loudest. But when it comes to my food intake, the “Eat Ze Bugs” crowd goes beyond the pale. And they must be stopped. I don’t usually write about health because, well, I’m a plump, beer- and wine-drinking, meat-eating machine. And while I try to take care of myself better these days, I won’t apologize for going for what Joe Rogan calls “mouth pleasure.” While I can regulate my booze and desserts, regarding meat, I simply won’t compromise. In Piedmont, the land of “Slow Food,” the meat is delectable. It’s so good; steak tartare is on every restaurant menu. Yup, we all eat raw meat here. No one gets sick. In fact, everyone is much healthier here than you’d find in other parts of the world. In this edition of the Morning Reckoning, I’ll explain why it’s a matter of life and death that we must eviscerate Schwab’s buggy plan. Meat and Health I’ve always associated meat with strength. As a high school football player, I needed to eat meat to keep up. Even when my mother made linguine, it’d be with a heaping portion of rock lobster and clams. When I moved to London and met vegetarians for the first time, they, to a person, were physically weak. Guys and girls, I never saw a strong vegetarian. I still never have. I’m not even sure I’ve ever met a vegan. Chalk that up to good networking skills. It was self-evident that meat was not only healthy, but also the best way to get protein into my muscles. I may have assumed this because none of the vegetarians I knew had any muscles. Even when claims came out about how vegetables had the same protein as meat, and that you could be healthy — no, healthier — if you cut out meat entirely, I never bought the arguments. But protein was protein, right? My logic circuit agreed, but my gut instinct didn’t. So, you can imagine my joy as I sat on the couch watching[a YouTube video]( that explained exactly why meat is so important for protein intake. Please note that the video wasn’t a rant against the WEF. It was an informative video about how the body can or can’t ingest protein. Protein is Not Protein Look, protein isn't just protein. Not all sources are created equal. Your body needs a variety of amino acids—both essential and non-essential—to function optimally. The so-called "essential" amino acids are those your body can't synthesize on its own. You have to get them from your diet. Now, certain sources of protein, like those found in animal products, offer a more balanced and bioavailable set of amino acids compared to plant-based sources. But how do you quantitatively measure this difference? That's where DIAAS comes in. DIAAS: They Kept This Quiet, Didn’t They? Let’s dig into something you probably haven't heard of but should absolutely know about: The Digestible Indispensable Amino Acid Score (DIAAS). In a world where junk science often trumps logic, and Big Pharma is ready to prescribe you the next “miracle cure” for all your ailments, understanding something as basic yet critical as the quality of protein you ingest can be a revolutionary act. Before DIAAS, the Protein Digestibility-Corrected Amino Acid Score (PDCAAS) was the darling of nutritionists. However, the PDCAAS has a glaring flaw: it truncates the scores at 1.0, meaning it fails to distinguish between high-quality protein sources that exceed the reference pattern for human needs. The DIAAS is a more accurate measure because it doesn't cap the score and considers the actual digestibility of amino acids in the small intestine. In layman's terms, DIAAS tells you not just what's entering your system, but also what your body is actually able to use. It's the free-market approach to assessing protein quality; it tells it like it is, with no governmental or Big Pharma interference. Here's a table of some of the highest-scoring DIAAS food sources. This is raw data without the cloak of governmental bias or corporate interest. It’s nutrition in numbers, plain and simple: [MR] [MR] And here are some of the lowest: [MR] Some Key Takeaways - Animal Kingdom Rules: It’s hard to ignore the facts. Animal-based proteins overwhelmingly score higher on the DIAAS metric. They offer a more balanced array of essential amino acids and are more readily digestible. For anyone still clinging to the outdated food pyramid model, it’s time to wake up. - Plant-Based Can't Keep Up: Although plant-based proteins like soy protein isolate and quinoa offer a valuable source of nutrients, especially for vegetarians or those who prefer a plant-based diet, they generally score lower. This isn’t a judgment; it’s a quantitative observation. - Versatility Matters: Foods like milk and eggs are not just high scorers on the DIAAS but also incredibly versatile in a culinary sense. Freedom of choice in how we prepare our food is another form of self-expression; these foods offer that in spades. - Whole Grains Aren't Whole Nutrition: Let's get real. Just because something is hailed as a "whole grain" doesn't mean it's a comprehensive source of essential amino acids. Wheat and corn protein are glaring examples of this. - The Plant-Based Paradox: Some plant-based sources like spirulina and hemp seeds are often touted as "superfoods," but when it comes to delivering all essential amino acids in a digestible form, they fall short. Again, it’s not a judgment, just facts. OK, What About Ze Bugs? Various insects, such as crickets, mealworms, and silkworms, have been proposed as sustainable protein sources. While the idea of eating bugs may churn some stomachs, particularly in Western societies, let's set cultural taboos aside for a moment and talk numbers. The DIAAS scores for insect proteins like cricket flour or mealworm powder can range from 0.77 to 0.89. To put it in context, these scores are higher than most plant-based protein sources like rice, peanuts, and even certain legumes, but still lower than top-tier animal proteins like eggs or milk. Here's the Rundown: - Good but Not Great: Insects as a protein source can't compete with the top-tier DIAAS champions like whey protein or whole eggs. But they do outperform many plant-based options. - Eco-Friendly but Not Wallet-Friendly: While the sustainability angle is a selling point, the cost of insect-based proteins is significantly higher than traditional sources. The free market, left to its own devices, may eventually bring this down, but we're not there yet. - Nutrient-Dense but Context Matters: Insects contain micronutrients like B vitamins and minerals. However, your overall diet and how these insect proteins fit into it should be part of the equation. Protein and Amino Acids Protein quality is not just about the quantity of protein consumed, but also about the presence of all nine essential amino acids, which play important roles in muscle growth and hormone production. Eating a variety of proteins on the same day is important because different foods have different amino acid profiles, and combining them can improve the overall protein quality of the diet. In the video I linked above, the creator used this example. He compared a meal of a peanut butter and jelly sandwich with lentils and edamame beans to a meal of a 4.5-ounce skirt steak and three eggs. While each meal consisted of 54g of protein, the PB&J meal had 875 calories, compared to only 570 calories for the steak and eggs meal. Also of note was the low leucine content of the PB&J meal. Leucine is one of the nine essential amino acids, meaning your body can’t make it; you must get it from your diet. It’s great for muscle building and repair, insulin sensitivity, optimal brain function, and longevity. The PB&J meal had only 3.7 grams of leucine. The steak and eggs meal had 5.3 grams. You'd have to eat much larger portions to get the same amount of leucine from the PB&J meal, which would come to 1,175 calories. If a light went off in your head, remembering that time “fat vegetarian” was no longer an oxymoron, this is why. Wrap Up I hope this will help you when some purple-haired vegan literature major tries to tell you how healthy they are and how they’re helping the planet, and you’re not. Ask them about amino acids. Ask them about protein intake. Ask them what leucine is. They won’t have a clue. They would have been fed garbage science all their lives and will start attacking you with ad hominems and strawmen. But no, they aren’t better than you are. And if they’re forcing their kids onto a vegetarian diet, they’re flat-out abusive. It’s about time Klaus Schwab and his bug-eaters retire. The science says so. And our lives depend on it. Enjoy that well-marbled ribeye with some bone marrow on the side and a glass of vino rosso. Buon appetito! Before I sign off, I have a special announcement for you! We’ve just debuted our brand new Paradigm Press YouTube channel… Every week, I'll be sitting down for exclusive interviews with some of the brightest minds in finance. Trust me, you don’t want to miss this. You can view the existing videos we have on our channel now by[clicking here](. Also,[don’t forget to subscribe]( so you can be notified each week when a new video goes live! Expect our newest video this coming Tuesday afternoon. All the best, [Sean Ring] Sean Ring Contributing Editor, The Morning Reckoning feedback@dailyreckoning.com X (formerly Twitter): [@seaniechaos]( Thank you for reading The Morning Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Greg Guenthner] [Greg Guenthner, CMT,]( is chief strategist at Forge Research Group. 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