☕️ Why I see an “epic” rally ahead and where to put your money now

Howdy! 👋 

We’ve had a busy morning so I’m a little later than I’d like getting this to you today – thanks for understanding! 

The US 10YR is back under 5%, oil is back under $100 and – right on cue – the markets are zooming higher. 

I hope you paid attention during the most recent pullback. 

Many of the stocks that folks sold in a panic-induced huff lead the charge yet again. 

Which reminds me. 

History shows very clearly that being invested in markets that may not be perfect beats waiting to invest in perfect markets.  

Here’s my playbook.  

1 – Why I see an “epic” rally ahead and where to put your money now 

There’s a lot of doom and gloom in the air. 

Excellent! 

That’s almost always a great contrarian indicator and part of the reason that I believe the markets are poised for an “epic” rally into the end of the year.  
 
Where should investors put their money? 

Funny enough, the super-savvy Stuart Varney asked me exactly that this morning. (Watch) 

Keith's Investing Tip: Doom and gloom sells clicks and gathers huge followings for those who do it. However, history shows very clearly that it doesn’t build wealth. You’ve got to be in to win… if you are serious about winning. If not, well… 

2 – Step right up: Wall Street's latest casino is wearing your portfolio 

Jane Street – yep, the trading giant you've probably heard about via the meme-stock and prediction-markets— just muscled into a new corner of the market: swaps for leveraged and inverse single-stock ETFs. (Read) 

Here’s what that means without the $5 words… and why I think this is at once a massive risk most investors don’t see coming AND a big opportunity for those smart money mavericks who do. 

Jane Street offers leveraged funds that allow traders to bet 2x or 3x on a single stock’s daily move, up or down.  

Great, right? 

Not so fast. 

To make that leverage work, fund issuers need a "dealer" – meaning a big bank or trading shop with a deep balance sheet and a stomach for risk – on the other side of a "swap" – basically a side bet that mimics the stock's return. 

Here’s where this hits your portfolio. 

Every dealer offering these products is on the hook for that exposure every single trading day, and the only way to stay flat is to hedge it by buying or selling the actual underlying stock, in size, right into the close. 

In other words, every new dealer engaging in swaps on top of the same small list of single-stock ETFs adds another layer of forced, mechanical, price-insensitive buying and selling that has nothing to do with the company's fundamentals and everything to do with the fund's daily reset.  

Especially towards the end of each trading day. 

The path to profits is all about perspective… yours and everybody else’s. 

Keith's Investing Tip: Leave the leveraged casino chips to the folks getting paid to hold the other side of the bet. Meanwhile, Buy the best, ignore the rest®  

Btw, I call this kind of financial shenaniganry “phantom money” because it’s a much bigger piece of what moves your stocks day to day than most investors realize. Those investors who do – understand – have a significant advantage over those who don’t. I’ll have more on this for OBAers in the upcoming October issue which’ll publish next week if everything goes according to plan.  

3 – Crypto on the move

Bitcoin is back to its highest level since January this morning. (Read) 

That’s great and I’m happy for anyone who owns it. 

My opinion hasn’t changed, though. 

It doesn’t matter whether you “like” Bitcoin, or any other cryptocurrency for that matter. Bitcoin still hasn’t solved the usability problem at scale which is why I prefer choices “around” Bitcoin but not Bitcoin itself. 

That’s why I’d rather invest in the digital infrastructure instead of betting on the various coins themselves. 

Why? 

Because I think the performance is that much better and it fits with my investing outlook. 

If you're in bitcoin because you don't trust the current system, I don't blame you one bit. That instinct isn't wrong… I'd simply rather own the plumbing everybody's still forced to use than bet on the alternative replacing it. 

Case in point, my fave moves $10T+ a day and is heavily involved. It’s returned ~155% over the past 3 years versus ~85% from the S&P 500. Plus, it pays a super stable dividend growing at an average of 12.79% for the past decade.  

To be fair, bitcoin's returned about the same as my fave – but bitcoin got there by nearly quintupling, then giving back half of it, then clawing back.  

Same destination but a wildly different ride… and only one of ‘em paid you to hang on. 

It’s not perfect, but it works for me. 

Keith's Investing Tip: Two assets can arrive at the same return and still be two completely different investments. Ask what you had to survive to get there and invest accordingly. 

4 – Novo shares take a hit 

The problem with medical stocks is that they’re constantly fighting the next battle, and investors are constantly betting on it like moths attracted to a porch light. Most get zapped. 

It’s not surprising that companies like Novo tend to take a hit when they tell you the truth instead of promising a miracle.  

Case in point, CEO Mike Doustdar directly addressed that semaglutide (the active ingredient in Wegovy and Ozempic) loses key patent exclusivity starting in 2032 in the U.S. – a market that made up more than half of Novo's total sales last year. (Read) 

Predictably, shares tanked. 

The more successful approach – and the one I advocate – is to understand which companies have the best, brightest, and most consistent path to profits.  

For example, one of my faves in this space has returned ~52.07% over the past 12 months versus the S&P 500 which has turned in ~15.36% over the same time frame. That’s a 3.4 to 1 performance advantage based on a dominant market position, real pricing power, a management team that actually executes and – importantly to my point – a pipeline that is going to be hard to beat. 

Should you buy Novo? 

I could make the case that’d be a smart move but I think there are far more profitable choices out there at the moment. 

LowBall Orders could be interesting… albeit quite a bit lower at which point the stock is a bargain too big to pass up. 

Keith’s Investing Tip: We’ve been told for a generation that “buying the index” is a great way to go but the data are increasingly clear… concentrating on the world’s best, most successful companies can be an even better way to get the job done. Even just a few extra percent in the right companies can really move the needle and go a long way towards ensuring that you don’t fall behind. 

5 – Security!!! 

Here we go again. 

Google’s Gemini was told to hack fake companies then escaped to find a real one. (Read) 

Sigh. 

4 of 4 recent reports highlighting serious jailbreaks continue to point to OpenAI and Anthropic. Meta too. 

Investors are falling all over themselves to predict the “best” AI models and have already picked their champions. 

Fine. 

Stuff like this makes it clear to me that they’re going to need defense even more. 

What most investors don’t understand is gonna cost ‘em. 

CEOs are practically in blank check mode and that means an unprecedented wave of profit potential ahead no matter what happens to AI spend in the next 12 months. 

If you need help or would find that – well – helpful, I’ll be here.  

Bottom Line 

Today’s innovation is tomorrow’s necessity.   

• Get your money there as early in the game as you can. 
• Be consistent. 
• Buy when others run for the hills. 

Your portfolio will thank you. 

You got this — I promise.  

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

Keith 😀