Debt ceiling: Get your ducks in a row right now

Good morning! 👋

The computers are busy this morning as traders have taken things higher ahead of what is believed to be progress related to debt ceiling talks.

I doubt it, but that’s just me.

Here’s my playbook.

How I got it right and wrong at the same time

I raised a lot of eyebrows back in the day when I hypothesized that Uncle Elon would open his charger network to other competitors and that Tesla’s technology would, in fact, become key to the entire EV industry who would then “follow” the lead he’s created.

Imagine my surprise when I read news that Tesla is opening its charging network to Ford EVs. (Read)

I got it right AND wrong at the same time.

Right because I correctly anticipated Tesla’s move and the corresponding payoff. Wrong because I took a trade on Ford early and wound up taking a small loss.

What’s next?

Tesla is still the much stronger player, but this changes Ford’s trajectory.

Bottom fishing could be interesting.

Get your ducks in a row right now

“Political buffoonery of the highest order” […] at the expense of the American people. (Watch)

But the prospect of a solution may be at hand when you least expect it.

Most investors are focused on what happens if there isn’t a deal—but the real thought you want rattling around in your brain is, What if there is??!!

Big Tech… will take off like a rocket.

Oil… will take off like a rocket.

So-called protective names will take a header.

Gold may follow.

The last place you want to be as an investor is left at the station when the train leaves. And sadly, predictably, many will be.

OBAers: We’re already concentrated in the right names. And, thanks to choices like NVDA that we made months ago, smiling ear to ear too. I’ll have more in today’s AMAs shortly.

Meanwhile, click here if you’d like to get on board with other successful, motivated, and confident investors making hay while the sun don’t shine. Upgrade to Paid

If you think the markets are rigged now, you ain’t seen nothing yet!

CNBC is reporting that JPMorgan has filed a trademark application for IndexGPT, an AI product that the bank intends to use to provide tailored investing advice. (Read)

Hah, I thought to myself.

Here’s the rub.

A. Individual investors will undoubtedly latch on because they think they’re going to find great advice and better stock picks. Like moths to a flame.

B. JPMorgan doesn’t file a trademark for kicks and giggles. I’ll bet you dimes to dollars that Team Dimon is thinking 5 steps ahead.

C. If you think Dark Pools and big money manipulate the markets now, you ain’t seen nothing yet.

En garde!

A failing trade is failing investors

It used to be a popular strategy for individual investors who fancied a little oomph to buy stocks when they are added to major indices and sell ‘em when they’re taken out.

That doesn’t work anymore. In fact, it hasn’t worked for a decade.

My research shows that computerization, arbitrage, and 0DTE (Zero Days To Expiration) options have changed the game.

Now I’ve got company.

“The abnormal return associated with a stock being added to the S&P 500 has fallen from an average of 3.4% in the 1980s and 7.6% in the 1990s to 0.8% over the past 10 years,” according to research from Robin Greenwood & Marco Sammon in a paper published by the Harvard Business School. (Read)

Trades get “crowded” first, which proves something we talk about all the time… yet again.

Liquidity is key.

When in doubt, zoom out.

And yes, you STILL have to get there first.

When electricity is too cheap

I talk frequently about the Law of Unintended Consequences when it comes to finding great investing opportunities.

Here’s one for ya.

Finnish electricity prices dropped below zero after the country switched on its newest nuclear reactor.

Naturally, they “throttled it” by limiting output because electricity was too cheap...🤦(Read)

This is the kind of stuff that makes my head spin because it highlights the super-tough choices ahead.

We can have EVs and an all-alternative future after strip mining our planet to pull that off.

Or…

We can embrace technologies we already know about while planning a measured, controlled transition.

Either way, we face a continuum of choices.

Makes sense to invest accordingly.

OBAers: You know what to do and which companies to buy. Why is only the half of it! How makes all the difference in the world.

Bottom Line

Make sure to appreciate the things giving you meaning.

In life and in the markets!

Let’s finish the week strong—and while we’re at it, take a moment this Memorial Day to remember those who have given all.

Keith 😊

PS: We’ll be celebrating Memorial Day here in the United States on Monday, so there will be no 5 with Fitz or OBA Weekly issue. Let’s plan on resuming our conversation Tuesday.