Dear Reader,
Today I want to talk about a note out from Bank of America, and how to play this market.
Bank of America says, “stocks flash big sell signal after cash holdings tumble.”
And this Bank of America note really talks about the percentage of cash investors have.
What they said basically is that 60% of portfolios were in cash in September 2022…
Right now, this month, that number is down to 3.9%.
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Meaning most people have drawn down their cash and invested in the stock market.
So for every $100,000, let’s say $60,000 of it was in cash at the end of 2022.
Now, only $3,900 of it for every $100,000 is in cash.
Which means that a massive amount of cash has gone into the stock market.
And as Bank of America’s note which came out this week says, that is flashing a sell signal.
Because historically, whenever that has happened, the market has gone down in the months that followed.
And this jibes with what we’ve been saying.
So, one of the questions we face as investors here is, when is this going to happen? When will it be triggered?
Now, that’s a lot harder to say.
There’s a value for any business, whether it’s publicly or privately traded, and when that value pops up absurdly higher than the underlying business’s worth, what do you do?
First, you avoid the stupid things.
A good way to look at this for those who’ve never thought about the markets like this is, you think of Palantir – we were recommending it around $7 a share. Now it’s $70 a share.
Would you be buying Palantir here at $70 a share?
I can tell you a professional investor would not be buying Palantir at $70 a share.
And that’s a really good tracker for the stock market – this “AI stock market” we’ve had.
Now, the second question is, where do you go?
So, Rule #1: don’t swing at pitches outside your strike zone.
If you’re not into something, if something doesn’t feel exceptional, just don’t touch it.
Say no.
Saying no is also an investment decision.
That’s something it took me a long time to learn when I was younger.
Like young people, I had a big head. I needed all these lessons banged into it very painfully.
But the second side of that is, where do you go?
One of the cool things is, the biotech index has just gotten hammered this year.
It’s been tepid all year, but ever since Trump nominated RFK Jr. to be his Health and Human Services Secretary, the biotech index has gotten demolished.
Money has poured out of this sector.
And these are some of the finest, most-innovative companies in the world…
Doing some of the coolest friggin’ things.
Truly, they are just killing it.
But money has left…
Trading has left.
Fund managers have left the biotech sector and it’s deflated.
It hasn’t been a stampede… but just a deflating… drifting down for no rhyme or reason…
For nothing that matches the actual prospects of the underlying businesses.
I see tremendous opportunity in the biotech sector.
This market for biotech actually reminds me of 2018, where the same thing happened where biotech just deflated down…
And then, all of a sudden, big pharma companies started to make acquisitions…
They started to buy these small companies because they had killer $1 billion, $2 billion drugs.
So, these big pharmaceutical giants like Glaxo or Pfizer, etc., saw these deflated stock prices and just started saying, alright, we’ll take you, and you, and you.
At Biotech Insider we got four takeovers in four months.
It was just a fabulous time for us.
And I see the same opportunity right now.
When I look at Biotech Insider and I see stocks we’ve recommended trading this cheaply, I get very excited.
I think it’s a great time to invest in this unloved sector.
Like when Palantir was at $7 a share – this is how I see the biotech sector right now.
And I believe in the next year-plus, this will be very good for us.
This is just a tremendous opportunity to buy assets selling at a discount to what these businesses will be worth.
A market at all-time highs doesn’t hand out a lot of gifts – we’ll take them where we can get them, and this is the big opportunity I see right now.
See how Biotech Insider works right here.
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