☕️ Don’t let the “Buffett Indicator Fool Ya”

Howdy! 👋 

There’s a very simple question on a lot of folks’ minds right now, judging by the “split” I see on my screens in the early going – meaning the Dow is red but the S&P 500 and the Nasdaq are green. 

In fact, it’s the very same question I posed in last night’s Sunday Short. 

Buckle up or buckle down? (Watch) 

Either way… 

Be in to win or you won’t...win.  

Here’s my playbook. 

1 – Don’t let the Buffett Indicator fool ya 

I was delighted to sit down for a wonderful conversation with Stuart Varney this morning ahead of today’s opening bell. He wanted to know my take on the so-called Buffett Indicator – a macro-level stock indicator that compares total US market capitalization with US GDP. 

At the risk of committing financial heresy, I think it is outdated and anybody using it these days will be left wishing they hadn’t for three reasons. (Watch) 

2 – How high can Tesla go? 

People are convinced that the company is done for.  

I’m not one of ‘em. (Watch) 

In fact, I think that $600 is just the start. 

I am not alone in my thinking, BTW. 

Musk himself weighed in on a comment I made recently about reaching a $20 trillion valuation. 

He also took a moment to say that he thinks 5X revenue is absolutely possible with “extremely good execution.” 

You know what to do. 😀 

3 – AI eats more jobs – Lufthansa next in line 

On Friday we talked about how Accenture is showing staff the door if they can’t be retrained on AI. The number making the rounds now is staggering—11,000 jobs cut. (Read) 

Like it or not, technology – and AI specifically – will rewrite the playbook faster than corporate HR can print a new one.  

Now Lufthansa is joining the club.  

The airline just announced it will cut 4,000 roles by 2030 as part of a restructuring plan that leans hard on digitization and artificial intelligence. (Read) 

Lufthansa says it expects adjusted operating margins to climb to 8–10% by 2028, along with €2.5 billion+ in annual free cash flow.  

Here’s the tough part. 

It’s scary and unsettling but…  

MyPOV: People’s fears are misplaced. Odds are good you won’t lose your job to AI itself but to people who know how to use it… ergo, learn to use AI!!! And invest in companies helping their people do that. 

What’s happening is unprecedented in human history. 

4 - Gold roars past $3,800: Safe haven or profit haven? 

The shiny stuff is smashing records as the dollar dips and uncertainty looms. (Read) 

Let's call it what it is. 

A smart hedge turning into a momentum monster. 

I thought gold was set up for a fall into fall, but it appears the markets have other ideas. 🤷🏻‍ 

So, we reversed course with a simple, no-options required choice for the One Bar Ahead® Family that’s running as expected. I’m happy to see that, of course, for the simple reason that gold’s on the hunt.  

If you’re not part of the OBA Family and you’re into gold and gold-related options, here’s an idea. 

Trade Idea: Go long GLD shares or a deep in the money November 21 $210 call if you're bullish on sustained flight-to-safety. Target 5% upside by quarter-end and keep an eye on the exits based on your risk tolerance, objectives and circumstances (none of which I know). 

Now for a quick education because we’ve got a great teaching moment on our hands. 

Why the $210 call when GLD is already at $352? 

This is what’s called a “deep in the money” call because the $210 strike is far below the $352 price. The reason DTM calls can be attractive is that options like the one I’m suggesting behave almost identically to the underlying ETF, which in this case is GLD. 

Effectively, each call controls the right to buy 100 shares, so you get the right to buy GLD at $210 no matter how high it goes.  

That’s important because, in a situation like this, the bulk of the call’s value is intrinsic – meaning based on the value of the current price less the strike – which means that the extrinsic value – time premium – is super small. 

Buying 100 shares of GLD will set you back roughly $35,200 at $352 but buying the November $210 call will set you back roughly $14,000 or so based on a current bid/ask of $142.60 x $143.75 as I type. 

As always, if you have no idea what I am talking about, do NOT attempt to follow along with this trade idea under any circumstances. 

5 – Bet on bipartisan brains? – I am 

The markets are moving higher as I type despite yet another deadline dance. (Read) 

History shows that this stuff is usually short-term noise. 

The data is sparse but about a 2-5% falloff under “normal” abnormal circumstances. The shutdowns to take more seriously are the ones related to debt ceilings or a change in credit quality à la 2011 which tend to result in a temporary 5-15% decline. 

Either way, history also shows that the markets tend to be higher 3-6 months because lawmakers inevitably thread the proverbial needle. 

Keith’s Investing Tip: Volatility is almost always an entry ticket, not something to fear. As for our lawmakers… I think all of ‘em ought to be required to take and pass basic economics classes, have vacations and privileges halted and penalties levied for every day they fail to do their jobs. But that’s just me. 

Bottom Line 

Wondering what to do next? 

You’re not alone. 

Keep it stupid simple. 

You’ve only got to get 2 things right as an investor:  

1. Buying the world's best companies making "must have products and services" when nobody wants 'em & selling when others can't resist buying then  
2. Keeping risk as low as possible at all times by using the right tactics and concentrating on the very best names you can find (like the OBA Family does) 

As always, let’s MAKE it a great day and start the week strong.  

You got this – I promise! 

Keith 😀