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25% upside, perhaps more!

Mar 27, 2023

Good morning! 👋

People are so busy falling all over themselves because they fear another bear market.

Reality is different.

The markets—to a point I make often and to the point of sounding like a broken record—have an upside bias... so it’s important to play to that, even if you hate every minute or the thought of doing so scares the heebee-jeebees out of ‘ya.

Think about it.

There’s so much “bad” news, sentiment is plumbing new lows, banks have failed… yet the S&P 500 is climbing within a whisker of 4,000 again.

That’s how bull markets act, often long before they’re recognized as such.

Not an accident that Tech and Comms lead the way.

Here’s my playbook.

The banking crisis is doing the Fed’s job

Love him or hate him, Jim Cramer is one of the hardest-working guys in the business, and he just said something we talked about a few weeks back, “The banking crisis is doing the Fed’s work” and is creating a window for a stock rally. (Read)

Yep.

This is one of the very few instances where boosting upside with a directionally based leverage, bullish spreads, or even covered calls could be appealing (if you have the chops and the discipline).

With appropriate risk management, naturally!

Investing implication: People get caught up in their own biases and, predictably, that works against ‘em. Generally speaking, it’s better to be long than wrong over time, especially when it comes to great companies like those we talk about frequently. Dividends, appreciation and compounding never go out of style. Upgrade to Paid

Why wouldn’t I own Tesla??!!

The fantastic Stuart Varney asked me about both TSLA and MSFT (more in a moment) this morning ahead of the opening bell. (Watch)

Tesla is building new stuff while Toyota, Ford, VW, and nearly every other automaker are cannibalizing existing production/parts and talent. Of course, it’s got high margins!

Musk leads the way while every other competitor is “following”... and most not very well, I might add.

Case in point, Tesla recently showed in a slide that a Model 3 can drive over a mile on the energy it takes to boil the water for a pot of pasta. They compared this to a Toyota Corolla, and... well, see for yourself how the Corolla fared. (Watch)

Tesla also launched an Extended Service Warranty for some vehicles, including the Model 3. As I said last week, Elon Musk leaves no i’s undotted and no t’s uncrossed. This is another genius move, IMHO. (Read)

I can see $200 without much trouble, then it’s time to think about far higher prices ahead.

MSFT to $350 a share in 24–36 months
People still can’t grasp what’s happening.

Rallies are like that.

MSFT is not only a cash machine, but one of the most pivotal companies ever created.

ChatGPT has competitors like Google in defense mode. Moreover, Microsoft is an industry leader in two of the biggest markets on Earth—AI and Cloud Computing—each of which will be a trillion-dollar market or more by the end of the decade.

I hope I have enough (shares, that is).

Coinbase practically begs for SEC regulation

Here’s a wild story: Apparently, Coinbase is practically begging the SEC to regulate it, but so far to no avail. (Read)

Talk about a head scratcher!!

After more than 30 meetings with the SEC over 9 months “to share the company’s data, files, practices, product information, and answers to any question the SEC wanted to ask,” Coinbase hasn’t gotten any further in its efforts to get regulated.

A few weeks afterwards, the SEC served Coinbase a Wells notice, which usually comes right before a regulatory enforcement action. Execs are stumped and apparently with good reason: “We’ve simply been told nothing, even [after we asked the SEC what they’re concerned about],” said one of them. And another: “If there aren’t clear rules, how can we be expected to follow them?”

The conspiracist in me wonders if the SEC is simply trying to slow down the crypto freight train until the Fed can roll out its own central bank digital currency (CBDC).

I could make the case for crypto going far higher but will stick with my favourite bank and digital clearing because I’m leery that a) the FTX stink will drag some big names into the light while exposing staggering manipulation, and b) George Soros is apparently in on the game.

Want a loan? Good luck with that!

The SVB-induced banking crisis will cause far tighter credit conditions for most Americans by making lending standards drastically more restrictive. (Read)

Part of me says, “Good,” because the banks have gotten away with far too much for too long.

Part of me says, “This absolutely stinks,” because millions of hard-working people are going to be punished for the avarice of a few choice individuals.

The investment opportunity here is one most do not yet see coming.

The first company that creates a direct-to-consumer lending model could “make bank” by redefining how the loan process works and what’s needed to gain access.

Pairs Trade Idea: Long the banks, short the credit reporting agencies?

Hmmm.