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☕ Nvidia is the most anticipated earnings report in a decade

Aug 28, 2024

Howdy! 👋

I feel like a boxing announcer this morning.

Let’s get ready to ruuuuummmmmble....

In this corner, Nvidia.....

And in this corner, everybody else...

It’s arguably the single most anticipated earnings report in a decade, perhaps more.

First though, let’s get our heads screwed on straight.

Stocks are mixed in early going with the S&P 500 and Nasdaq both red as I type while the Dow has tracked green. That combined with a slight decrease in US 10YR rates tells me traders are playing conservatively while staking out which way they want to take things later.

Kinda like two boxers sussing each other out when they emerge from their corners for the first time and before the first jabs are exchanged.

Here’s my playbook.

1 – Nvidia is the most anticipated earnings report in a decade

CNBC has chosen to take the fear angle, reporting that

FBN is reporting that UBS’s Scott Zelniker expects a “hurricane.”

Reuters has gone with...

Me?

You know I’m a big fan of keeping things stupid simple.

So, two things are top of mind this morning for me.

The vast majority of investors fail because they lack the longer-term perspective needed to see past short term market chaos; and,
Nvidia is at the very center of the greatest single transformation in recorded human history.

The question you need to ask yourself this morning if you're nervous is the one I alluded to Sunday night. (Watch)

Are you an investor or a trader?

If you’re the former, then who gives a rip about what happens in the next 24 hours based on Wall Street traders who operate on a knife’s edge and will do their very best to separate you from your money?

You should be thinking about considerably longer time horizons.

If you’re the latter, you’re prepared for the volatility that will likely be our travelling companion for the next 24-48 hours. And planning trades that fit that window.

Me?

I’ve got a plan and I’m sticking to it using the roadmap I laid out for OBAers in the Monday update. In fact, I’m probably going to take the dogs for a walk during the earnings call, so I’m tempted NOT to second guess myself.

Crazy?

Not so much.

NVDA is selling every chip it makes and is already working on next generation products. The company commands an 80% market share and operates at ridiculously high margins.

The stock has returned 176.77% over the past 12 months while the SPX has returned 27.56%. And 3,061.86% over the past 5 years versus 95.88%.

If you’re worried, that’s on you because a) you are risking too much or b) don’t own enough shares.

Both of which are fixable.

Chill.

Keith’s Investing Tip: Your job as an investor is NOT to guess what might happen next. But to let the markets show you then take action based on your goals, your skills, and your risk tolerance and what’s likely to happen. Investing isn't a competition so stop treating it that way.

2 – Junk fees are death by a thousand cuts

The Chinese used a particularly nasty form of capital punishment for centuries called “death by a thousand cuts” in which the unfortunate individual sentenced to die would literally be cut to bits once slice at a time.

Critics argue that cash back fees are the same thing.

They’re making it harder for consumers who really need the cash to get by because big retailers are charging amounts ranging from $0.50 on cash back of $100 or less to $3.00 or more for larger amounts. $90B last year alone if one report I saw recently is accurate.

Retailers blame the banks which have created “ATM deserts” where as many as 12 million people live without a local bank branch but banks cry foul because retailers pay for every transaction fee anyway.

MyPOV: Technology has created a conversation we’re not ready to have as a society. Is money free or not? That's the real question and so far the answer is no. It makes sense to charge a handling fee if you’re in business to make money. If not, deem it a necessity and make some sort of non-profit mechanism available to anybody who wants it a la a Federal USD crypto currency or by reforming the EBT system.

Either way, banks are banks. My favorite is already well ahead of the digital clearing that is required and ultimately a part of whatever solution presents itself.

If you’ve got this covered, cool. If not, you’ll want to. And if you’d like some help sorting out what’s what, I’ll be here.

The “rules of money” are changing and if you’re an investor, you need to change up your game, too.

3 – Berkshire Hathaway hits $1T

Awesomeness.

Unka B.’s firm is the first non-tech company to top a $1T valuation. (Read)

Is it a buy?

I’m not so sure.

Buffett is 94 years old, and has been dumping shares left, right and center recently. What concerns me most, though, is that many of the sprawling businesses he owns are not businesses I would own in the first place.

I think there’s a day of reckoning coming.

And if I owned Berkshire – which I don’t - I’d be thinking very seriously about trimming or hedging my position. Meanwhile, the trader in me is eyeballing put options but there aren't any for BRK.A. 🤷‍♂️

4 – Even more to it: Durov

Now we’re beginning to get a glimpse of what’s really happening.

Reports from France suggest that Telegram CEO Pavel Durov’s phone was hacked in 2017 as part of a joint operation between France and the UAE which were and presumably remain concerned about Islamic terrorism according to the Wall Street Journal. (Read)

The bigger issue in this case – and what has yet to come to light but will – is that both Russia and Ukraine apparently use the service heavily to support their respective narratives and communicate with users and groups of users viewing posted content.

My conjecture is that Putin’s extremely interested Durov’s detention because he knows that Russia’s SVR is deeply involved in ways that may compromise the organization’s ability to advance Russian foreign policy goals if revealed. Imagine somebody releasing the CIA’s communication playbook and you get the idea.

Anyway, as I noted when I first picked up on this story, there’s a lot more than meets the eye and the investing implications aren’t yet known... but emerging.

There are no pure-play cryptography stocks but digital information isn’t just about social networks and it’s a mistake to think about ‘em that way as an investor.

They're going to increasingly be national security assets.

And considerably more valuable.

Palantir.

5 – Lego goes enviro

Lego has said that it’s on track to replace the oil used to make and sell billions of bricks with renewable and recyclable plastic after finally arriving at a suitable substitute. (Read)

The challenge?

The new material – renewable resin - may cost 70% more.

CEO Niels Christiansen says that, “it's a privilege that we can pay extra for the raw materials without having to charge customers extra.”

Excellent if he can do that!

Meanwhile, the play here is Neste OYJ (NTOIY) and just happens to be the world’s leading producer of renewable feedstocks.

The market is in its infancy.

I like the idea of tucking away a few speculative shares for a decade.

Tactically speaking, there’s almost no volume whatsoever so using limit orders up to $11.65 strikes me as prudent. Not interested above that.

Hmmm.

Keith’s Investing Tip: Investing should be fun which is why having a little “mad money” available to take advantage of situations like this that are outside the usual or beyond the disciplined approach (I hope) you’d otherwise use is great. Smiling is optional.