☕️ The "bad" number Wall Street has backwards

Howdy! 👋 

Shares are down this morning ostensibly on “rotation.” 

How predictable.  

What’s really happening is that short-term traders have enjoyed a big run up lately, so they’re a) taking profits and b) rebalancing risk. 

People talk about rotation like it’s some sort of magic pill. 

It’s not. 

Heck, it’s not even “rotation.” 

It’s big money traders simply repricing risk and slapping a Wall Street label on herd behavior, so nobody has to admit that’s what it is. 

Do not let the headlines convince you otherwise.  

This happens every time the markets run hot and on increasingly shorter time frames. Somebody needs a reason, so they invent one. 

Smart investors know better. 

That’s why they use the noise as a gift to snap up shares in great companies while they’re “on sale” while everybody else overthinks a Tuesday. 

When in doubt, zoom out.  

Here’s my playbook. 

1 - Time to buy Toyota?  

Toyota is dropping $3.6B to move Tacoma production out of Mexico, and into San Antonio, Texas while adding nearly 2,000 jobs and roughly doubling the plant’s footprint by 2030. (Read)  

Why? 

Washington let the USMCA renewal deadline pass last week without a new deal, opting instead for annual reviews rather than locking in fresh terms for the years ahead. The USMCA, in case you’re not familiar with it, is the trade agreement governing how cheaply cars and trucks can cross the Mexico-U.S. border. 

By putting the USMCA under annual review, the arrangement is now up for reassessment every single year instead of being settled for the long haul – a materially different risk environment for any company with cross-border manufacturing.  

Toyota's response was immediate… to stop betting on trade politics like the company has in the past and start building where the tariffs can't touch you. 

Toyota, btw, isn't the only automaker staring down the same exposure via Mexico. In fact  General Motors, Nissan, Stellantis, and Volkswagen all have plants sitting on the same border risk right now which means they face the same risks. 

That’s actually the opening. 

When politicians can't give companies the certainty they need, management tends to fend for itself usually by building at home. It’s expensive, it's slow, and it's exactly the kind of multi-year, un-sexy capital cycle Wall Street tends to underprice until it's obvious. 

Hmmm. 

Time to buy ‘Yota? 

I could make the argument that’d be a decent bet, albeit one that would take away from what I believe are higher, better and more productive uses for my money. 

If you’ve got this covered, good on ya. If not and you’d like some help, I’ll be here. 

Keith’s Investing Tip: Money flows like water – always to where it’s treated best.  

2 – The "bad" trade number that's actually a buy signal for smart investors 

Headlines are calling this bad news… the U.S. trade deficit blew out to $105.8 billion in May, the widest gap in over a year. (Read) 

Wanna bet? 

Here's what the headline artists buried.  

Capital goods imports — semiconductors, computer equipment, industrial machinery — all hit a record high because the wider trade deficit is being driven by AI capex, not consumption. 

Funny how that works. 

Innovation keeps increasing profit potential faster than the doom squad can keep up with the headlines… and badly out of date data. 

Invest accordingly. 

Keith's Investing Tip: GDP reports what already happened. Capex tells you what's coming. Read the receipt, not the recap. 

3 – Rivian kicks profitability down the road to fund someday - again 

Shares are down 10% this morning as the company sells 75 million shares to raise capital. (Read) 

Should you buy it? 

Tough call. 

Rivian makes a great product, but the company has suspended its 2027 profitability target because of rising R&D costs for autonomy and next-gen technologies. 

I’d be more inclined to buy puts, a bet the stock price decreases. 🤔 

4 – What could go wrong, other than everything? 🤦‍♂️ 

US companies are increasingly using Chinese AI models because US versions cost too much. (Read) 

What could go wrong… other than everything, I mean. 

I understand the allure because open-source Chinese models are 60-90% cheaper than leading Anthropic and OpenAI modes. Any CEO worth his or her salt has to make a decision. 

Not to rub salt in all this, but Palantir CEO Alex Karp has been very vocal about what’s happening. And I’m paraphrasing here… own the stack, own your data… or else. 

I hope I have enough shares. 

Keith’s Investing Tip: If I’ve said it 1,000 times, I’ll say it again. The Dragon is coming to dinner. You can be at the table or on the menu. Just make sure your portfolio isn’t served up on somebody else’s plate along the way. 

5 – Keith on Behind the Ticker.  

I recently sat down with the fabulous Brad Roth for a wonderful, wide-ranging chat about investing, the Fitz-Gerald Must Have Portfolio® and more. (Watch) 

Learn more by visiting www.fitzetf.com. 

Keith’s Investing Tip: Owning a thousand names to "spread your risk” sounds great in theory – but what most investors fail to realize is that doing so increasingly buries your winners under a mountain of stocks that may never be going anywhere in the first place. 

Bottom Line 

The world is reorganizing itself around themes and in ways that don’t respect Wall Street’s old categories. 

Invest accordingly. 

Now and as always, let's MAKE it a great day and week. 💯 

You got this — I promise! 

Keith 😀