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Dec 16, 2024

Good morning! 👋

I hope you’re ready to rock and roll this week like I am after a wild weekend winter storm here in the PNW. We lost power, trees, wires and more… but made up for it with some great campfire cooking and candlelight dining. 😀

The indices are all up in early going.

Makes sense.

The big money is trying to pre-run the Fed not because they believe anything Powell will say but because they have no choice. Professionals must keep their money moving to earn their keep.

Individual investors like us, on the other hand, can be very choosy when it comes to the stocks we buy, when and how.

Here’s my playbook.

1 – Two of the best AI stocks on the planet & new price targets

I’ve made the case that AI is a trillion-dollar business by 2030 several times over the past 24 months.

I increasingly think that’s low.

Moreover, my latest research makes me think that AI will accelerate even more dramatically than I initially projected, which is why I also think that AI will be a $20T business by 2040. (Watch)

2 – Russian rate hike as inflation soars, makes Putin very, very dangerous

I’m watching the situation very closely and don’t like what I see one bit.

Russia’s monetary system is under tremendous strain which is why Putin’s either got to wrap up Ukraine quickly or push strongly to build hard-currency-driven relationships with China and whatever BRICs are willing to be at the table.

You may think ‘so what’ and I get that, but that would be an expensive mistake.

High inflation puts immense pressure on the Russian economy, leading to a cost-of-living crisis and hurting the cash savings of ordinary people. This could lead to social unrest and destabilize Putin's regime. Think about how dangerous a caged animal is and you get the idea.

At the same time, Russian officials appear to be increasingly worried they are losing control over the economy, which could be seen as a sign of weakness for Putin's leadership. And he wouldn’t find that appealing either.

And finally, Putin may be willing to accept a consumer recession as a lesser evil to runaway inflation, which could have severe consequences for the Russian economy. This could lead to increasingly desperate or risky decisions to maintain control.

The situation reminds me very much of pre-WWII Japanese military decision making which relied on aggression to achieve geopolitical goals justified by historical grievances and nationalism.

Defense stocks are still very much a no-brainer.

One of my faves has returned 43.70% versus 27.08% from the S&P 500 YTD. The other is undervalued and poised for a jump imho. Both pay healthy dividends, btw. (Learn more)

3 – JPow on deck

Fed Chair Jerome “JPow” Powell speaks again Wednesday. (Read)

The markets are expecting him to lower rates, but I think there’s an outside chance he’ll hold pat or reference doing that in 2025.

That would obviously roil markets a bit but to a point I made in last night’s thoughts about the markets, any short-term drop would be great for investors like us but terrible for speculators who think they’re investors. 🤦‍

Meanwhile, keep an eye on banks and bitcoin.

The former tend to do well as rates rise or merely hold steady because they can make more money while the latter will get tested if there’s a hiccup.

OBAers, I will have special instructions and a quick trade idea in today’s update so please keep an eye on your email. 😀

4 – These three earnings reports could be worth 10X what Powell has to say

GIS, Nike and FedEx all report over the next few days.

I don’t own any of ‘em and am unlikely to, but I am watching closely.

Here’s why.

All three companies will provide an important look at consumers who, I contend, remain skittish, increasingly willing to opt for lower-cost items rather than name brands and who have reached the limit of what they’re willing to put up with vis a vie price increases.

Any massive jump in revenue or profits – preferably both - would be worth 10X what Powell has to say.

“Buy the best, ignore the rest” has never looked better!

5 – GM: Another one bites the dust

GM has stopped their Robotaxi venture. (Read)

No surprise.

GM couldn’t compete with Tesla even on a good day.

Trade idea: About six months ago I suggested that investors consider what’s called a “pairs trade” meaning that you’re simultaneously betting that one stock rises while another falls. In this case long Tesla, short GM. So far Tesla has returned 150.12% while GM has returned 12%... so pretty darn much as expected. I can see the trade accelerating into 2025 without much effort.