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The hidden power of bad investments

Mar 29, 2023

Good morning! 👋

The train is leaving the station as investors bet the regional banking crisis is over.

You and I both know that’s not true, but that’s moot.

It’s better to be long than wrong.

‘Nuff said.

Here’s my playbook.

A rip-your-face-off rally if rates fall

CNBC’s Jim Cramer noted recently (and I’m paraphrasing here) that the SVB banking crisis has done the Fed’s job and that conditions are ripe for a massive rally.

Gee, I thought to myself… where have we heard that before??!!

Silly me.

You and I have been talking about this for months.

My exact words more recently during an appearance on Varney & Co were that it would be a “rip-your-face-off rally” if the Fed pauses or even blinks. (Watch)

I hope you’re ready!

Trades appear to be setting up for that possibility ahead of time.

Now they speak: “Pause AI”

Uncle Elon and 1,000 other tech luminaries including Apple co-founder Steve Wozniak penned an open letter on the Future of Life Institute’s website, urging a six-month “pause” in giant AI experiments saying that unrestrained development poses a profound risk to society and to humanity. (Read)

Ya think?

What I want to know is where these guys were when social media in all its guises was foisted upon us by a bunch of arrogant Technorati before the risks of what they unleashed were understood.

I submit that so-called “social media” has become profoundly anti-social.

It’s dumbing us down, creating division instead of unity, and spawning an entire generation of people who lack even the most basic conversation skills.

What’s your take?

Hit me up via email and let me know.

Oh, and buy the best AI stocks on the planet because this genie is NOT going back in the bottle.

Mammoth meatballs: Where’s Mikey?

There’s a very famous old Life cereal commercial in which several kids are confronted with some cereal that’s supposed to be good for you. “I’m not going to twy it,” says one before pushing in front of another who won’t either. Then, in one of the most famous tag lines of all time they have a flash of inspiration. “Let’s get Mikey to try it. He hates everything.” Of course, Mikey likes it—and the rest, as they say, is history.

Where’s Mikey when you need him?

An Australian cultured meat company named Vow has created a ginormous meatball from flesh cultivated from an extinct woolly mammoth using its DNA. (Read)

“We wanted to create something that was totally different from anything you can get now,” Vow founder Tim Noakesmith told Reuters, adding that an additional reason for choosing mammoth is that scientists believe that the animal’s extinction was caused by climate change.

Maybe so.

But nobody dares eat it because… oh, you know… nobody’s seen this protein in 4,000 years (and it could kill us). 🤦‍♂️

Investing Implication: The investing public still hasn’t moved beyond fake meat, but they’d be wise to do so quickly. They will not have a choice a few years from now. The Earth is simply incapable of producing enough food at the rate our population is growing, which means that synthetic biology in all its guises will be a critical “must have” technology in the very near future.

We’ve been following developments very closely in One Bar Ahead® for a while now, and if you’ve got that covered, cool. If not... Upgrade to Paid

You’re not paying attention if you’re not buying defense stocks

Saudi Arabia’s cabinet approved a memorandum awarding Riyadh the status of dialogue partner in the Shanghai Cooperation Organization. (Read)

If that doesn’t set off some alarm bells in your head, it should.

The SCO is a political, security, and trade alliance that lists China, Russia, India, Pakistan, and four other central Asian nations as members.

I’d rather buy specific stocks, but it seems to me that the iShares US Aerospace & Defense ETF (ITA) could be a good catch-all, too.

The hidden power of bad investments

Many of the best investments you’ll ever make come from lessons you learn by making the worst.

Affirm Holdings (AFRM) certainly qualifies.

I bought in early on around $114 for two reasons: a) the game-changing nature of BNPL (buy now pay later) and b) changing consumer behaviour.

Things went swimmingly for a while.

Then Apple got into the game, saying that it was exploring the concept.

AFRM’s shares tanked, and I said “Enough” after taking a 50% loss.

Funny enough, it wasn’t the loss that mattered.

I had kept my position size small enough that I wasn’t over my skis. Schtuff happens; it was the realization that Apple had changed the rules of the game and that the reasons for owning Affirm had vanished.

So I immediately put more money into Apple.

Here’s the lesson.

Many investors think about stocks like they think about chairs, as something to sit on.

What you want to do instead is constantly be on the lookout for “game changers” and stronger players. Numbers are just for keeping score.

Many people thought at the time that Apple would buy Affirm, but I reasoned that wasn’t very likely because Apple doesn’t tend to purchase weaker players. History doesn’t work that way. Strong companies like Apple tend to buy stronger players or develop real strength from within.

The idea is that you want to constantly adjust your portfolio so that you are playing to strength, even if it means absorbing a few lumps along the way.

Affirm is now just $10 a share.

Apple, on the other hand, is on its way to $200 a share.

My challenge for you is simple.

What investments would you ditch if you broke the rules and played to strength?

Answer honestly.

I think you’ll be surprised.