Dear Reader,
A buddy said to me, how do you feel about the rate cut?
And I feel great! Here's why:
We had our cake, and we got to eat it, too.
I have not been shy to say this market is incredibly overvalued, by every objective measure.
So we took in our sails.
But the good news is, we still have a lot of good stocks that have had a great rally.
So we got our cake – we've gotten to ride this rally up and we put our money into money market funds that invest in T-bills…
And now we're collecting income, and we still have positions out there that are up really, really well.
I mean, look at Palantir (SYM: PLTR), Oscar (SYM: OSCR)… look at Rocket Lab (SYM: RKLB) … Agios Pharmaceuticals (SYM: AGIO ) … Iovance (SYM: IOVA)…
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Why We've Sold a Record Number of Stocks this Year
We've already sold all or part of 52 different stocks this year…
…that's more than any other period in our firms' history.
Find out why right here.
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These have been terrific performers over the past month.
But I am never going to apologize for warning you when a market's incredibly overvalued.
It's kind of like walking in the jungle at night – you hear roaring and you've got to be quiet, and walk very carefully.
The markets are the same way.
When the risk goes up, you have got to lower your exposure. That's what this game is about.
So again, on the macro side, I think the market is overvalued.
Take Palantir…
Palantir is at $37. This is a company growing at around 20% a year with a market cap of $81 billion.
Remember, in a cheap market, we got to recommend Palantir at $7 a share.
Would you buy Palantir up here?
Remember Oscar, we recommended at $5-$6 a share. Now it's $23.
These are good examples of how the market is overvalued in aggregate.
But, would I complain if Oscar goes from $23 to $30?
If D.R. Horton, which we recommended about 30%-40% lower than it is now, keeps going up?
Absolutely not. I'm going to be very, very happy.
Mass delusions can last for a long time.
That's why it's so important in your investment operations that you keep one eye on the risk and one eye on the opportunity.
I learned this growing up on Wall Street.
In the 1990s Larry Tisch, CEO of Lowes and a member of the Tisch family – super smart, savvy billionaire investors…
I remember watching him in the '90s during the dot-com boom.
He got bearish on the market. This was around '97, '98 – and he went short. He bet like $1.5 billion.
I watched him lose billions of dollars as the market just kept climbing.
So, what I learned from that experience is, if you are bearish on the market, the #1 goal is to preserve your capital.
If you find yourself thinking things are really highly priced…
What you do is take in your sails, sell your weaker stuff, hold onto the rest of it and enjoy the ride.
Exactly what we are doing on those stocks I mentioned. Agios is up big. RocketLabs is a big, big winner.
So I feel good going into this weekend. I feel good about the rate cut. I feel good going into the fourth quarter.
And I look forward to continuing to guide you through this with one eye on the reality that this market is historically priced…
And the other eye on opportunity.
Making sure that, as a steward of our money, we're not like Larry Tisch was in the '90s, just defiantly bearish.
Now, he was right – the market was way overvalued – but he was wrong on timing.
He was a couple years too early before the dot-com bubble popped, couldn't hold the short for that long, and lost billions of dollars.
So I learned from that, never go short in a rising market.
Just take in your sails on the risky stuff, hold onto the best bets you have, and wait for the right opportunities to come across the plate.
So I am happy where we stand. I hope you have a wonderful weekend.
And hey – not to be a downer but if you can, do check out my video on the worst case scenario I see coming for the market, because I lay out my full playbook (I wrote a book!) on exactly what to do – step by step. Here it is.
God bless you.
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