☕ Talking the Fed, Nvidia, Tesla and small caps

Good morning! 👋 

Fed Chair Jerome ‘JPow’ Powell said yesterday – and I’m paraphrasing here – we’re not there yet [with inflation]. 

We’ve seen this script so many times. 

You can worry about what the Fed might do or you can concentrate on what the markets and world-class companies are likely to do. 

Go higher over time. 

Both the S&P 500 and Nasdaq just took out new record highs again to close at 5,509.01 and 39,331.85, respectively. 

Incredibly, the “yeah but” crowd still doesn’t get it. 🤦‍♂️ 

Talk about an advantage for everyone who does!!! 

Here’s my playbook. 

1 – Talking the Fed, Tesla, Nvidia, Small caps and more

I was honored to be invited back for a wide-ranging discussion with the super savvy Kelly Evans and the Power Lunch Team at CNBC yesterday. (Watch) 

Some of what we covered: 

• Why the Fed’s a caveat  

• My new S&P 500 price target 

• Nvidia & Tesla 

• Should you take profits or stay in the game 

• Small caps and mid-caps: why picking carefully is paramount 

Thanks for watching! 

Keith’s Investing Tip: Remember, buy and hope is NOT an investment strategy. Buy and manage is!! So do that by using the right tactics to control risk and stick to world class companies in a process I call, Buy the Best, Ignore the Rest. 

2 - State Farm: “Allow us to increase prices 50% or we’re outta here” 

State Farm has apparently told California that it needs some whopping price increases or it’s going to pack up its toys and leave. (Read) 

I can’t blame ‘em one bit. (Read) 

3 – BaaS was BS the entire time 

People got all over me when I said to steer clear of BaaS – banking as a service - stocks. 

I hope you did. 

Millions of folks are finding out the hard way that a) I was on to something and b) that doing business with a company trying to be a bank without really being a bank is a problem.  

This time around, more than 100,000 Americans with $265M in deposits have been locked out of their accounts since Synapse, a BaaS company collapsed. (Read) 

Uggh. 

MyPOV: Just because something is a new idea, doesn’t mean it’s a worthy investment. It’s the difference between 0 to 1 (which is something truly new) and n+1 (which is simply an iteration). Read Peter Thiel’s book by the same name if you haven’t yet. Then, incorporate what you learn into your investment strategy immediately. Or, consider joining the OBA Family which is built around many of the same concepts. Learn more. I’d be honored. 

4 – China’s charm offensive is working 

The German car industry is the latest to urge EU lawmakers to drop tariffs on Chinese-made vehicles. (Read) 

They claim that tariffs could hurt EU and US carmakers exporting from China but what they really fear is Chinese retaliation and counter-tariffs that would make it all but impossible to sell into China. 

Makes sense. 

The value of German made cars exported to China last year was 3X the value of cars imported from China. 

They literally have everything to lose, and China knows it. 

My Two Cents: The Dragon is coming to lunch. You can be at the table or on the menu.  

5 – How I pick price targets 

I got a fabulous note from S.C. asking how I pick price targets and his take on the disclaimers needed to ask had me rolling on the floor. Well done – and thank you for asking! 

Top of the Morning Sir, 

Can't thank you enough for the Daily Dose of Vitamin C (CA$H) and P (Profits). I know you’re not smoke and mirrors when it comes to price targets and that there are real numbers and common sense behind it. I'm inquiring whether or not the number crunching sequence/formula is available? I know it will come with the appropriate warning and I'm good with that…don't try this at home/ consult your doctor (financial advisor) before taking/ your results may vary/ results not guaranteed / may have side effects including loss of capital, loss of sleep and loss of bedroom privileges/ recommended by '0' Wall Street analysts/ do not operate- should only be used by a trained professional / I said don't try this at home. But….I'm asking for it anyway. 

Keep up the great work - S. Callahan. 

Morning and thanks for asking – you are very kind and, evidently, share a wicked sense of humor, too. 

Price predictions are like bellybuttons in that everybody has one. 

Mine are based on proprietary predictive non-linear calculations – aka Chaos Theory. 

For example, I am looking at XYZ.  

I already know where it fits from a macro standpoint and with regard to my risk tolerance, objectives and circumstances, so there’s no need to split hairs about all the underlying fundamental data, liquidity or even volatility. 

The math suggests a lower close 5 days from now with a high degree of accuracy expressed as a percentage of past pricing and trend predictions. 

If I’m interested in trading XYZ, this helps me choose bearish tactics like spreads, putskies, inverse funds, etc.

If I’m investing, I can use the anticipated move to harvest profits, sell covered calls or even to identify the next probable buying opportunity.  

I can (and often do) run similar analysis on everything from tick level data to days, weeks, months and even years.  

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

Keith’s Investing Tip: The danger with price predictions and the reason why I almost never share stuff like this is that people jump to conclusions. The temptation is to think projections are a crystal ball when they're more like a series of guideposts you can use to adjust course as needed. 

Bottom Line 

Risk is the price you pay for opportunity. 

Manage the former and, odds are, you will have plenty of the latter. 

You got this – I promise. 

As always, let’s MAKE it a great day, too. 

Keith 😊 

PS: We’re going to shut down the office for the balance of the week so that I can give the team some well-deserved time off with their families as we celebrate the Fourth of July here in the United States. That said, I will be back with the fantastic Liz Claman on FBN this Friday as we head into the final hour of trading. Hope you can join us for what is always a great conversation!