☕ The best, most obvious trade of the year?

Howdy! 👋 

Indices are down this morning on news that the OpenAI IPO is delayed.  

Like that’s gonna matter in 10 years??!! 

I think there’s a good chance the S&P 500 is positive by the time you read this but that’s neither here nor there. 

Stay focused.  

Invest in optimism for the simple reason that cowering in pessimism is to ignore history. Not to mention billions in profit potential. 

 Here’s my playbook. 

1 – The best, most obvious trade of the year? 

Here's one for ya. 

The Mag7 are spending gazillions on semiconductors and shares are down ~5% year to date. 

Yet… 

Semiconductor stocks have returned ~89% year to date (because the Mag7 are spending gazillions). 

Remind me again how this works. 🤦‍ 

Trade idea: Buy MAGS — the Roundhill Magnificent Seven ETF and simultaneously short the Semiconductor ETF SOXX. Alternatively, buy puts on the SOXX to balance deltas – a more advanced and nuanced version of the same idea. 

This is called a pairs trade.  

What you're betting on — if you follow along or implement something similar — is a reversion to reality. In this case, the Mag7 get rewarded for the AI buildout they're funding while chip stocks, which have already priced in years of perfect execution give some of it back.  

What I like about this tactic at times like the present when both elements have made abnormal moves is that you don't need the market to go up or down to make money.  

You just need the gap between these two to close — and history says it always does. 

Keith's Investing Tip: Many investors think they must bet on the markets and/or specific stocks going up or down, but what they miss or never understood in the first place is that the relationship between two assets can be another source of profit potential entirely. 

2 – Wall Street has a gambling problem and Polymarket just proved it 

Polymarket announced this week that its annualized revenue has crossed $1 billion. Six weeks after opening its U.S. waitlist. Daily trading volume went from $50 million in mid-May to over $200 million by June 20. (Read) 

While that’s great for Polymarket, the bigger issue is what that says about how many people perceive investing… as indistinguishable from gambling. 

MyPOV: Popular or not, this is information laundering dressed up in a bow tie and handed a CFTC license. 

Keith's Investing Tip: If ya wanna gamble, go to Lost Wages – err, Las Vegas. But if you want to invest, try buying the world’s best companies with a focus on those making “must have” products and services for the very simple reason that history shows very clearly that they tend to be top performers over time. Buy the best, ignore the rest® 

I’ve got a few ideas and you know where to find me if that’s of interest.  

3 – This is just asking for trouble, imho 

Airwallex just raised $320 million at an $11 billion valuation. Revenue up 74% year over year. T. Rowe Price and Baillie Gifford writing checks. (Read) 

The goal is to build AI agents that autonomously handle your bookkeeping, tax, compliance, and corporate payments.  

No doubt the sales pitch is compelling. Faster transactions. Lower costs. No tired accountants making errors at 11pm. Round-the-clock execution with no human bottleneck. 

Here’s where it gets complicated. 

Roughly 40% of Airwallex's employees are based in mainland China and Hong Kong and Chinese investors still own more than 20% of the company.  

Umm, yeah. 🤦‍♂️ 

4 – Apple price hike fears are misguided 

Apple dropped 6.12% yesterday on news that the company will be hiking prices because of memory related price increases. (Read) 

Makes no sense. 

Apple has 2.5B installed devices, an estimated 1.1 billion subscribers and an incredibly interlinked consumer base. 

The average consumer keeps a Mac nearly seven years, which means the $200 price increase that has everybody so flustered translates to a mere $2.38 a month — less than 37% of the price of an average Starbucks cuppa Joe. 

Keith's Investing Tip: If you're a trader, great. But if you're an investor and a day like yesterday bothers you, sorry, but you're kidding yourself. 

5 – Bigger than a single heatwave 

Europe is getting crushed – baked actually – as the current heat dome shatters numerous temperature records across the EU. (Read) 

As you can imagine, this is causing massive strain on health, agriculture, labor productivity and infrastructure. More that 85% of EU buildings were constructed before 2001, which means they are almost totally ill-equipped to handle what’s happening. 

The renovation and retrofitting backlog is massive. 

Names like Beijer Ref – a leading HVAC and cooling wholesaler come to mind as does Ariston which makes energy efficient heating and cooling systems. 

At the same time, I’m drawn to both Trane and Carrier Global which both have big European presence. Vertiv could be interesting too but it’s more of an AI data center choice because the company’s focus is on thermal management. 

Hmmm. 

Bottom Line 

Every investment has risk, but not all risks are worth the investment. 

Choose wisely. 

Odds are excellent that your portfolio will thank you.  

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

You got this — I promise! 

Keith 😀