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☕ Should you buy Lilly or something else?

Aug 08, 2024

Good morning! 👋

The markets continue to waffle as traders look for anything that remotely implies Fed action.

My guts tell me we could have a ripper of a day on our hands by the time you read this.

Here’s why.

Jobless claims fell to 233k which is a) less than policy wonks expected and b) being viewed as a positive sign that the US economy isn’t in a recession.

At the risk of sounding like a broken record (again)...

Missing opportunity is always more expensive than trying to avoid risks you can’t control.

Here’s my playbook.

1 – Unka Warren owns more Treasuries than the US government

News broke yesterday that Warren Buffett’s Berkshire Hathaway now owns more Treasuries than the US government. Some $234.6B (Read)

News outlets are positioning this as some sort of cautionary tale, implying that Buffett is worried about the markets. That may be true, but the attribution is wrong.

Buffett is simply doing what he’s always done, only this time the numbers are big enough to get everybody’s attention.

Not for nothing, but I encourage investors to do the same thing in One Bar Ahead® using a simple ETF to stash cash and earn a decent return while we do so. Click here if you’d like to learn more.

Better yet, ask your brokerage firm for a Money Market Fund alternative; you’d be amazed how many investors miss out on what is otherwise a logical, simple, and safe cash flow. 😊

2 – 10-year Treasury yield back above 4%

The 10-year US Treasury yield rose above 4% earlier this morning after Wall Street interpreted the weekly jobless claims data as below expectations which, in turn, allays concerns about a weakening labor market and recessionary fears.

Retail investors tend to think about yield in terms of return but professionals see it as a reflection of risk. What this tells you is that the big money sees risk as lower this morning.

Keith’s Investing Tip: Yield and prices move opposite directions. That’s why I constantly urge you to forget about the headlines, the clickbait, and the hype. Watch the US 10YR yield if you want to see what’s really happening. If it’s rising, risks are going down. If it’s falling, risks are going up.

3 – Eli Lilly proves my point

I have repeatedly suggested over the past few months that pharmaceutical companies would be a logical place to invest if the rest of the market began to slow down or hit a rocky patch.

Seems I may have been on to something.

Eli Lilly reported Q2 earnings and revenue that crushed expectations. The company also hiked its full year revenue outlook by $3 billion. Lilly expects revenue for the year to come in between $45.4 billion and $46.6 billion, an increase of $3 billion at both ends of the range. (Read)

Should you buy Lilly?

I wouldn’t hold it against you if you did, it’s a great company and a popular choice. Personally, I prefer three other pharma choices because they’ve all got substantially higher True Shareholder Yields but that’s just me.

MyPOV: AI is going to change the business model, so I encourage you to have at least one big pharma choice in your portfolio. Just make it a good one. I think prices move sharply higher over the next few years and, not for nothing, the cold hard cash they kick off in dividends is pretty nifty, too.

4 – More than 50% of all vehicles sold in China last month are hybrids and EVs

If you are like most Westerners, you’re going to shrug your shoulders and say “so what” or react with in difference.

That’s a mistake, and potentially a very expensive one.

China is now operating at scale when it comes to NEVs and there is zero doubt in my mind that the trend will go global. (Read)

Put this in context.

NEV sales were just 7% total vehicles in China 3 years ago. Now, they’re over half according to China Passenger Car Association (CPCA). By comparison, electric and hybrid vehicles were just 18% here in the US during Q1 according to the EIA.

Half.

Let that sink in.

The Dragon is coming to dinner. The only choice you have to make is whether to be at the table or on the menu. And in case you’re wondering, Tesla is the only western car maker capable of mounting a defense imho.

5 – Microsoft and Palantir expand their partnership

I told you recently that Microsoft mentioning Palantir as a “leader” during its recent earnings call was material.

Now we know why.

The two companies announced that they’re going to significantly expand their partnership with the goal of providing sophisticated cloud, AI and analytics capabilities to the Defense and Intelligence communities. (Read)

Good!

For our warfighters.

For our nation.

For investors.

I hope you’re on board with both.

Keith’s Investing Tip: Wall Street’s constant caterwauling about valuations and not understanding what Palantir does is a smokescreen. Big money has been buying constantly which is reflected in the increasing percentage of institutional ownership.

$50 a share.

Once again, always do what Wall Street does, not what it says.