☕ Today’s selloff isn’t a coincidence – what’s next?

Howdy! 👋 

All three indices – meaning the S&P 500, Nasdaq and Dow Jones – are in the red and falling as I type for a third straight day. Predictably, tech layoffs and oil are the reasons being cited. 

We know better. 

It’s higher yields that have prompted the selling. 

Why? 

The go-fast crowd borrows a ton of money to magnify their returns and when the cost of the “vig” – meaning the vigorish goes up as yields go up – they need to sell to avoid the institutional version of a margin call. 

Starting with stocks that are the most leveraged, including Nvidia, Tesla and Apple all of which are huge index components, have single stock futures swirling and are part and parcel of dozens of highly leveraged ETFs. 

Don’t fall for it. 

The most important investment skill you can learn today is to calculate the future cost of decisions you make today. 

Speaking of which… 

Here’s my playbook. 

1 – Today’s selloff isn’t a coincidence 

I’ve been doing this a long time – 4+ decades and counting – and if there’s one thing I’ve learned in all that time it's that “coincidence” isn’t a word you use on Wall Street. 

The Dow briefly recaptured 50,000 last week while the S&P and Nasdaq were printing all-time highs.  

Three red days off that kind of a peak isn’t a crisis despite what the headlines and clickbait artists want you to think. 

The market is sitting on its hands ahead of one of the most anticipated earnings reports of the year… Nvidia which reports after the bell tomorrow.  

I think it crushes numbers, but and to a point I made Monday during an appearance on Varney & Co, the algos are going to take over. 

Big money traders have a much harder time making money when things are quiet so they are setting up ahead of time for earnings. 

Contrary to the retail investors who are betting on which way Nvidia will go – higher or lower – the big money doesn’t care. The only thing that matters to them is that it does get moving. 

They’re playing probabilities while you are playing stocks. 

Don’t confuse the two. 

Keith’s Investing Tip: Investing is about focus, not noise so 1) plan, 2) execute and 3) repeat. This isn’t rocket science, especially when it comes to companies like Nvidia. 

2 – Palantir + Dell = a whole bunch of new profit potential 

His Excellency, Michael “Big Shortimus Maximus” Burry has been awful quiet lately when it comes to Palantir.  

No surprise why imho. 

People are growing tired of his shenanigans while the really big money has said, pfffft! 

Case in point, Palantir and Dell just partnered up to introduce an on-premise AI driven operating system that ensures data sovereignty, zero-trust security and compliance for highly regulated industries and governments. (Read) 

Translation? 

Locked-down AI for the people who can't afford a data breach — defense, banking, healthcare. That's not a niche. That's the whole game. Burry can stay quiet. The business is doing the talking. 

You know what to do. 

And if ya don’t, you know where to find me. 

Keith’s Investing Tip: Buy the best, ignore the rest®. 

3 – Home Depot: Great news, sales +5%... but nobody’s actually shopping 🤷‍ 

Home Depot numbers came out today. (Read) 

• Sales up 5%.  
• Earnings per share of $3.43 against expectations of $3.41.  
• Full year guidance reaffirmed.  

The Street is happy. 

I call baloney. 

The real story is always buried in the notes – something we have talked about many times over. 

Here's what the fine print really says.  

• Comparable sales up just 0.6% — third quarter in a row going nowhere.  
• Customer transactions down 1.3% — fourth straight quarter of declines.  
• Gross margin lighter than expected.  

In other words, Wall Street lowered the bar faster than a limbo contest so that even the weakest numbers would be a “beat.” 🤦‍ 

Plus – and call me crazy – Keith’s Kitchen Sink Index is still flashing caution. Customers are engaged — management said so themselves — "up to a certain point."  

That matches.  

In plain English, they’re still fixing the sink, not redoing the entire bathroom and as long as that continues, HD is operating on a wing and a prayer. I think Lowe’s is the better player in this space, btw. 

MyPOV: A beat is a beat and that’s great, but it’s not investable in this instance, at least to me anyway. When the bar is that low, I want more than a stumble over it before I get excited. 

4 – Altman 1, Musk 0, Justice TBD  

A federal jury in Oakland ruled against Musk in his lawsuit against Sam Altman and OpenAI. (Read) 

Astonishingly, the jury never even got to whether Altman actually "stole a charity" as Musk claimed. They ruled Musk simply waited too long to file. Statute of limitations. Case dismissed. 

Musk called it a "calendar technicality” and I think he’s right. 

But that’s not the point. 

I've been following this case closely and I said from the start that the real question wasn't about Elon's money or a billionaire grudge match.  

It was – and still is imho – about whether Sam Altman converted a nonprofit — founded explicitly to benefit humanity — into a for-profit entity worth hundreds of billions of dollars and enriched himself in the process. 

That question was never answered because – according to the jury - the clock ran out before the game was played. 

That’s as bad for investors as it is for AI imho. (Read) 

Musk is appealing, but the judge involved has apparently already said she will dismiss that on the spot which strikes me as a prejudiced opinion if I’ve ever heard one. 

Our court systems have devolved to a game of technicalities. 

What’s right doesn’t matter. 

Sad. 

Now come the IPO wars. 🤦‍ 

5 – Blue collar workers just became the most valuable people in the room 

You and I have been talking about this for several years now. 

But the mainstream press and corporate America are finally catching up. 

Blue collar workers are being led to believe that AI will take their jobs when the reverse is truer than many think. (Read) 

Trades rock and always have!!!! 

Here's why Wall Street keeps getting this wrong. 

AI is eating white-collar work from the inside out… paralegal research… junior analyst reports… customer service … all gone or going.  

But nobody that I am aware of has built a robot that can rerun conduit in a 1960s commercial building, diagnose a hydronic heating system, or weld a pressure vessel to code. Moreover, they won't anytime soon. 

To a point of view that I share with the fabulous Mike Rowe of Dirty Jobs fame, the trades have had a supply problem for decades — a generation that was told college was the only path left the pipelines empty.  

Now demand is through the roof and there's nobody to do the work.  

AI just poured gasoline on that fire by redirecting every ambitious 22-year-old toward a laptop job that's suddenly a lot less secure than it looked. 

This isn't just a feel-good story about guys with tool belts but a structural labor shift with serious money behind it.  

Wages in the skilled trades are rising and I’m hearing that apprenticeship programs are oversubscribed.  

I can’t think of a better environment for investors. 

Infrastructure spending — from the grid to data centers to onshoring — doesn't happen without people who know how to build things with their hands. Data centers need electricians. Chip fabs need millwrights. The energy transition needs pipefitters.  

You get the idea. 

AI is creating demand for the trades, not destroying it. 

Find the picks-and-shovels in the trades and you may be looking at one of the most durable, underappreciated growth stories of the decade. As usual, I’ve got a few ideas.  

Keith's Investing Tip: The best opportunities hide in plain sight — usually right next to the "expert consensus" pointing the other way. 

Bottom Line 

You can wake up every day and take what the world gives you OR go out and make it your oyster. 

I know which alternative I prefer. 

Do YOU? 

As always, let's MAKE it a great day. 

You got this – I promise. 

Keith 😀