The Time Has Come for Main Street to Show Big Tech How It’s Done

Hilary Kramer

Hilary Kramer is an investment analyst and portfolio manager with 30 years of experience on Wall Street.

When I saw today’s unemployment number, the first thing I did was to figure out how to short some of the biggest stocks Silicon Valley has produced.

We’re betting against Microsoft Corp. (NASDAQ:MSFT) and Inc. (NASDAQ:AMZN) now in our Turbo Trader and High Octane Trader services, respectively. It isn’t so much that I think either of these trillion-dollar behemoths is on the brink of disaster since the recent earnings cycle has proved that these companies are run by smart people with vast resources. Both companies will thrive.

But with so many people on Wall Street crowding into the top of the technology tree in the pandemic’s wake, these stocks have simply gotten too far ahead of themselves. After all, the NASDAQ is up a stunning 25% year to date in what government economists still consider a recession, while the S&P 500 is barely positive over the same time.

If anything, MSFT and AMZN have kept the broad market out of negative territory. That’s all right when technology is the only thing working in the global economy. However, when U.S. employers outside Silicon Valley start cautiously hiring again, it’s time for smart money to come out of the high-tech bunker and get back in the game.

 Beyond the Digital Screen

Big Tech gets most of the love with people who spend their lives behind a screen, but for the rest of us, the physical world remains where all the real action is.

Pure technology stocks still only account for 25% of the S&P 500 and only employ a small fraction of the U.S. population. Even if you pull Facebook Inc. (NASDAQ:FB) and Alphabet Inc. (NASDAQ:GOOG) back from the communications sector, technology just isn’t the real heart of the economy.

As trite as it sounds to the people in Silicon Valley, the heart of the economy remains small businesses. I am talking about construction, convenience retail and independent restaurants, not to mention local schools, banks, hospitals and professional offices.

When the local economy starts suffering, it doesn’t really matter how much cloud computing capacity Amazon and Microsoft sell. Sooner or later, we’ll all feel the chill.

And when the local economy strikes back, smart money breathes a sigh of relief. I can’t wait to start buying airlines, mall retail and community banks again.

Every step the job market moves forward takes us closer to that moment. Progress is good.

But investors who convinced themselves that Big Tech and vaccines are the only things in the world that are still working now see good news as a bad thing. Suddenly, their stocks need to compete for capital and market leadership.

Today demonstrated that good news for Main Street is now seen as bad news for Silicon Valley stocks. Look at AMZN and MSFT today. They’ve come a long way and now it’s time they step back.

My Turbo Trader subscribers booked a 25% win today on a put option trade in MSFT. All we had to do was acknowledge that this gigantic stock would find it difficult to push much farther beyond $210 in the immediate future.

That’s all it takes to make money in a brittle market environment. Maybe one day far from now, MSFT and its peers will rule the world. Today, they’re still subject to the basic law of gravity.

Where are we rolling our money instead? For me, the strongest investment strategy always starts by locking in enough income to pay the bills.

Value Authority is where we concentrate on solid old-economy stocks that pay bigger yields than what you’d get from MSFT or the U.S. government, for that matter. Until Big Tech takes a big dip, we need to be patient before those stocks are attractive.

When regular dividends are coming in, we can afford to be patient. That’s the approach I recently recommended for TD Ameritrade clients. (Watch the video.)

And as for Main Street, we look at the real business of America every week on my Millionaire Maker radio show. (Click here for recorded episodes and local stations.)

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