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Time to buy this stock even though it’s going BK?

Aug 28, 2023

Good morning! 👋

The S&P 500 and Nasdaq snapped a 3-day losing streak Friday—can that continue?

Yes.

It’s still early going, of course, but there are two important things to think about:

The markets decided the Fed is all but irrelevant, and the irony is that the Fed can’t see it (which I’ll get to in a moment).
That means my projections for a higher close this year are still very much in play. We took out 4500, the annual target set last January, and now we sit on the cusp of that again. I continue to think 4750 or so by year-end.

There are a few caveats, of course.

First, big leveraged traders will press this advantage for everything they can, which will result in even more volatility. So, it won’t be a straight line higher.

And second, most individual investors are not prepared to deal with the volatility that’ll come with it. Predictably, many will get sucked into an increasingly myopic view of the markets when the key at moments like this is to zoom out.

To put this in perspective, consider the following... the odds of a higher close tomorrow are roughly 51.3% (I run these numbers nightly, in case you wonder) but jump to 80%+ if you have a 3- to 5-year horizon, and to over 90% if you have a decade or more.

The best companies will do even better, which is why, of course, I want to own ‘em. (Watch)

Here’s my playbook.

Fighting the Fed just isn’t what it used to be [sigh]

Last Friday’s trading action was pretty telling.

Fed Chair Jerome Powell started talking about inflation, the need to remain vigilant, and his willingness to keep rates high until things calm down. (Read)

Good luck with that.

The Fed has a fiscal problem, not a rates problem.

That’s why trillions of dollars continue to flow into the world’s stock markets, particularly with regard to stocks like Apple and Microsoft, which have returned 38.76% and 35.56% this year alone, respectively, according to Koyfin as I type.

I sure hope you’re on board.

Rite Aid is going BK, but not like you’d think

Rite Aid is reportedly going “BK,” an expression meaning bankrupt in Wall Street-speak. (Read)

Turns out that the company’s management may be taking preemptive action over the slew of lawsuits related to its role in the opioid crisis. Specifically, that it knowingly, unlawfully oversupplied prescription painkillers.

Why?

The bankruptcy would halt opioid lawsuits and allow the company to restructure debts.

It’s a punt and a half, but I could make the argument that, if successful, Rite Aid will reemerge or package itself for a sale.

At just $0.70 a share… might be worth a Vegas-style (tiny) bet.

Will Elon unlink LinkedIn?

Elon Musk slammed job search platform LinkedIn’s “cringe level” as too high to use it and promised that he’d come up with a “cool” competitor. (Read)

I agree with the former and bet dimes to dollars on the latter.

No doubt in my mind that Unka Elon has a strategy in mind already. Don’t forget, he’s working on a “super app” on par with Chinese equivalents that don’t yet exist in this country.

What I would give to be able to buy Twitter stock right now!

Jobs report and inflation data ahead are a sideshow

The interwebs are all a-flutter with the prospects of the latest jobs report and inflation data set to be published this week. (Read)

Most of it will be a sideshow, for reasons that are a lot like a Keynesian Beauty Contest in that traders will be more concerned with how they think other traders will react to the news than they themselves do. (Watch)

Investors don’t need to worry, though.

In fact, I suggest turning off the volume when the news hits because whatever happens will create an opportunity. Almost always does.

So, get your buy list ready now while everybody is looking the other way. Upgrade to Paid

Instacart IPO: No, thanks

Headlines would have you think so, especially with the way Instacart is being lauded.

I wouldn’t touch it with a 10-foot pole.

Naturally, the company is touting AI as a way to predict grocery availability, but no matter how you cover that or try to swing the headlines, just two large players—Sequoia Capital and D1 Partners—own at least 5%, with a few others interested in purchases at the IPO. Perhaps not surprisingly, Goldman is leading the offering; I say that because Instacart’s finance chief, Nick Giovanni, used to work there. (Read)

IPOs are one of the worst, most dangerous opportunities in the market today for unsuspecting investors with visions of quick riches in their heads.

Let the company prove itself for a quarter or two... if it really does have legs, the numbers will reflect that, and you can invest with a higher level of confidence.

Meanwhile, Instacart is an “n+1” choice and a “nice to have.”

No, thanks.

I’d rather buy companies making “must have” products and services the world can’t live without any day of the week!

Zero to 1!