Hey Subscriber,

Humblebrag: Yes our 70% allocation to Ultra Income/25% to Ultra Growth/5% NDAU Cryptocurrency (and not including our All-Access Option Income & Trading in our Discord Trading room) continues to outperform the S&P 500 in 2021 by our normal 6X including dividends--no big deal--we have averaged that 6X market outperformance since 2013.

PS- Shauna is updating the Ultra Growth and Ultra Income 2021 performance spreadsheets tonight--they will be ready to go with updated buy-under prices with Part II of the Q2 Wrap-Up Newsletter later this week

There is a LOT of macroeconomic information and strategy to digest in order to make Q3-Q4 2021 investing as profitable as Q1-Q2--so let's first unpack the big picture macroeconomic known knowns.

First known--with the economic rebound peaking in the second half of 2021, it is hard to make the case that we should expect Q3-Q4 stock performance to match 60%+ Q1-Q2. 

Action to take: Let's A) Lower our second-half performance expectations just a wee bit and B) Take our portfolio allocation to 50%/45%/5% Ultra Income/Ultra Growth/5% Crypto.  

The Transformity MacroMarket Timing Index: 18.1 is an all-time high score going into the Q2 GDP report out July 30. The risk of an economic recession in the next 4-6 months with 60% of the population vaccinated/post-infection antibodies is less than 1%.

In other words, the risk of a recession anticipating bear market for stocks (i.e., 20%+ downdraft) in the next 4-6 months is virtually nil.  

The Atlanta Fed's GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2021 is 8.3 percent on June 25, down from 9.7 percent on June 24. After this morning’s releases from the Bureau of Economic Analysis, the nowcast of second-quarter real gross private domestic investment growth decreased from 13.1 percent to 6.8 percent.

Yet the New York Fed Staff GDP Nowcast stands at just 3.4% for 2021:Q2 and 4.1% for 2021:​Q3.

Why the massive confusion?

Because no macroeconomic model has ever modeled a post-pandemic economic recovery in the modern era before--that's why.

There has been no established playbook on how to trade the 2020 Covid-19 pandemic--so everyone found a narrative that was working (Work from Home/Enterprise Digital Transformation/Energy Demand Recovery/Pimp My House/Prison Covid Lockdown Beneficiaries and of course SPACMania etc.) and just throwing darts made money IF you stepped into the teeth of the pandemic lockdowns. 

We all had to make it up as we saw the data and the investable narratives and I am proud to say we got a lot more right than wrong. 

The Known Knowns Second Half 2021 And Our Strategy to Profit From Them

1) We probably will now hit PEAK PENT UP GDP rebound in late Q3-early Q4 according to our model and others we trust and follow. September means paying better to stay home ends and school begins (I can hear the screams of exstacy now in families with many small children!)

But what peak GDP growth means to stocks is the re-opening surge in GDP and cyclical stocks is peaking--which in stock land means the "cyclical/value trade" as in buying the business cycle sensitive companies with the most operating leverage (where higher sales revenues from the upturning business cycle go right to the bottom line with little incremental additional costs to produce another widget or sale) should be peaking in value this summer. 

It also means our move BACK INTO the dominant secular growth technology names in mid-May was almost the bottom of the QQQ to the day (better to be lucky sometimes than good!).  The reason is simple: a slower-growing economy makes the highly reliable/high margin and largely subscription-based or global recovery juiced ad-based revenues of digital tech platform companies MORE attractive than the cyclical plays that have had a very nice 9-month run. 

Facebook winning their monopoly case does not hurt our mega-cap dominators, either (although a part of our thesis for owning these global digital dominators is that they are worth 30% to 50% MORE broken up into 2-3 $500 billion stand-alone pure plays). 

In addition, our higher Ultra Growth portfolio weighing recognizes that about $800 BILLION in stock buybacks have already been approved--with more on the way. This tailwind for stocks is up 40% from 2020.

And...capital spending (non-aircraft/non-defense) is ramping up 25% from 2020 levels and are near levels not seen since the early 1990s. We and Morgan Stanley have U.S. capital spending rising to 116% of prerecession levels. By comparison, it took capital investment took 10 years to reach the levels of the 2007-2008 recession. 

Let's face it: between 7 million more retirements than normal, 9 million jobs to fill, 80 million white collar workers now in "hybrid" work environments and 20-30% higher blue-collar/service salaries in 2021 than 2020, owners and managers have NO OTHER OPTION than to add automation and reduce headcounts when possible.   

Key point: All of the above makes THIS the most important chart in the stock market today: the QQQ. It shows the divergence in secular growth and "value" stocks that started in mid-May and has the Value Index $MUV poised to break support while the QQQ breaks out! 

$MUV Value Index topped out near to the DAY May 12 that the QQQ bottomed--gee I guess markets really DO look 4-6 months ahead and discount that value back! 

Here is the 3rd most important chart: The Dow Software Index IGV--which is overbought as we type (and needs a healthy pullback AFTER the money managers who are piling in for window dressing for first half close tomorrow.) 

Ultra Income Portfolio

Our amazing proxy on Energy Midstream Transportation AMZA is correcting after a mind-blowing move off the $4.50 March 2020 lows to $31.50 a few weeks ago. We should look for support at the 100-day moving average (but bear in mind the near 10% yield today for those who scooped up AMZA under $5 in March 2020 is nearly a 50% annual yield--you would be INSANE to sell it EVER). 

PS--if you are a holder of our Ultra Income stocks, feel free to join us in All-Access Trading Room and learn how we are now SELLING AMZA $30 call options and USAC and DCP and now OMP to earn extra yield!

If you have a large stake in Ultra Income, it's time for you to manage your Ultra Income investments like a pro--get your one-year All-Access privileges here and scroll down to the All-Access membership. 

Action to Take: BUY Chesapeake Granite Wash Trust (CHKR) under .75 for near 30% annual yield + 50% Upside. 

One of the ways we are going to keep crushing the SP 500 index is to constantly find and take advantage of high yield securities that got insanely crushed by the energy price meltdown of May-November 2020.  This is how we found Oasis Midstream (OMP) at such a screwed-up valuation (more on OMP in a bit). 

Chesapeake Granite Wash Trust, like any natural gas or oil trust, simply collects royalty checks from energy wells it owns in the Granite Wash region of Oklahoma that they lease to energy drillers and operators who produce oil/nat gas/NGLs. Those royalty checks are 100% correlated to the "wellhead" price the operator gets in the free market. 

When CHKR cut its dividend to almost nothing ($0.0063) because many of their wells were stopped from production by their operators as uneconomic, the shares got priced as if they were out of business. To add injury to insult, the NYSE notified the trust of potential delisting in February 2021. 

WE have been waiting patiently on CHKR to raise its quarterly dividend and buy it while the world ignores the stock (it's a $26M market cap) and sure enough, its Q2 dividend went from the $0.0063 nothing burger to a 641% increase to $0.0467 quarterly distribution. 

With third-quarter oil/gas/NGL prices 10-20%+ higher than Q2, our back-of-the-envelope math says 5-6 cents a share Q3 dividend, and forward, is a virtual lock. 

Those of you from my ChangeWave Research days know we LOVE these forgotten energy trusts that are too small to have ANY Wall Street coverage. We made a fortune in energy trusts in the 2000s. And yes, with Transformity Research initiating coverage, the hedge funds that subscribe to us and the coverage we get on social media will amp this miss-priced trust to $1 or more easily. 

SO--you want to be into CHKR early before the sleepy heads and office-bound subscribers get into this 30%+ yielder with 30% upside too. 

OMP--You Get Another Chance to Buy It UNDER $26! 

Oasis Midstream (OMP now owned 71% by Oasis Petroleum, Inc. OAS) sold about 4 million limited partnership units at $24 last Thursday and used that cash to redeem the same number of common interests owned by OAS before the transaction.

The $24 price from the underwriter Morgan Stanley was essentially the 70-day moving average price (which is common in MLP secondaries)--especially since OMP, which we have owned from November 2020, skyrocketed from $9.56 to $35.70 early last week (and congrats to those who sold into the melt-up--I noted a number of All-Access members talking about sell stops around $32-$33--I hope you love your new Porche SUVs--it's the SUV of choice in Scottsdale AZ!.   

Has anything changed with OMP?

Nothing except OAS owns less common units and some else owns more. There is no equity dilution and OMP the business is hitting on all cylinders with new natural gas and oil pipelines coming on stream later this year. OPM generates about 140% of the cash flow they need to keep their dividend near 10% and has PLENTY of cash flow to raise the dividend. 

The deals management has made in 2021 have just been very smart financial moves utilizing their strong financial position to deliver meaningful and tangible benefits to their unitholders.

I love it when we get a second shot at a superb operating company--do NOT miss this opportunity!

OK...we are just getting started. If you need to trim some Ultra Income positions to build some in Ultra Growth, that's fine. We have been trimming DCP, USAC, AMZA, and OMP for the last month simply because they become WAY overweight in our portfolio--that is simply called prudent portfolio management. 

Part II and Part III are ALL about secular growth Ultra Growth sectors and stocks. We will be taking advantage of the up to 50% shake-outs in Green Energy sectors, semiconductors/equipment (finally on track again), and other 3-5 year locked in secular growth segments and sectors.

Don't leave your laptop at home if you are making a July 4th getaway somewhere--our new picks will definitely pay for quite a few vacations! 

Toby