The Morning Line

A Long-Term Play: Buy TSLA, Short AAPL

Here’s a long-term trading opportunity that seems foolproof: short Apple shares and buy Tesla. Looking out over the next 10 years, this hedge position has the potential to produce outsize profits. How could Apple stumble badly enough to make it work? This is hardly inconceivable. Since Steve Jobs died 14 years ago, the company he co-founded has demonstrated again and again that it couldn’t innovate its way out of a wet paper bag. How many more iPhone versions will it take to solve the battery-drain problem? Whatever happened to the Apple car? And how about the device that was going to manage your TV and all of your home entertainment gizmos with a single remote control? Apple’s new-products division has repeatedly failed to deliver, and its idea of a technological breakthrough is an iPhone camera with a longer lens and a few million more pixels. As for the AI mania that is raging in the tech sector, the Cupertino-based firm doesn’t even have a horse in the race.

It wouldn’t be the first time an iconic company failed to keep up with the times. Here’s a partial list of shockers to remind you how often this has happened: Eastman Kodak, RCA, Intel, Radio Shack, Enron, Woolworth’s, Compaq, Digital Equipment Corp. and Polaroid. One could argue that none of these stalwarts achieved Apple’s size or market share. True enough, but that hardly guarantees unforeseeable changes in telephony will not blindside Apple.

The Pi Phone

Tesla and Elon Musk, on the other hand, have the vision not only to see the changes coming, but to bend them toward opportunity. The Pi phone, a potential category killer, is a good example. Musk has repeatedly denied that this device is even on the drawing board, and Wall Street seems to believe him. But why would a guy who has his sights set on a trillion-dollar payday pass up an opportunity to crush iPhone with an alternative that is better, cheaper, and which, using Starlink, could eliminate monthly phone bills?

Look at the sneak attack Musk just pulled off in Texas, where a relatively small fleet of driverless Robotaxis learned to navigate Austin’s streets in almost no time. Ultimately, what his engineers learned there will enable Musk to get Robotaxis safety-certified relatively quickly anywhere in the world, and to operate at a much lower cost than Waymo, Uber or Lyft. They are all dead ducks, even if Wall Street’s best and brightest cannot yet see this coming. Creative destruction seems likely to take Waymo down first. Realize that in the time it takes them to negotiate a deal with Jaguar for 1,000 more cars, Musk can produce 5,000 Robotaxis.

A ‘Comfortable’ Tim Cook 

Apple CEO Tim Cook would get laughed out of the boardroom if he asked for a trillion-dollar compensation package. After all, what has he done besides protect the iPhone franchise and placate cult buyers with gratuitous improvements in each product cycle? Musk would never allow himself to grow so comfortable. The fact that his seemingly outrageous pay demand is up for debate shows how valuable he is to Tesla. He will need to grow Tesla’s market cap from $1.5 trillion to $8.5 trillion by 2035 to earn the full $1 trillion. Ambitious as that may sound, only a fool would bet against him. He stands to reap more profit from revolutionizing the trucking industry with driverless rigs than Apple does from selling 225 million iPhones a year.

Concerning the hedge trade, odds were juicier than ever when last week ended. AAPL’s canny handlers goosed the stock to new all-time highs simply because they could. TSLA, on the other hand, got pummeled because strong EV sales did not translate into higher profits. There are many ways to put on the trade, including with options, but to keep it simple for tracking purposes, I will use equity shares in a 1.65:1.00 ratio. That means shorting 165 shares of Apple for $263 apiece while buying 100 shares of TSLA for $434. Good luck!  [Click here for my latest interview with Jim Goddard at This Week in Money.]

Is Deep Fear Driving Gold, or Just the Bubble

The aging bull market smells like it’s in a topping process, although it could take a vicious head-fake or two to new highs to set the hook. Last week, I raised the possibility that shares had entered a vortex similar to the one that led to the 1929 Crash. A key similarity is that investors have begun to freak out over tariff news they’d grown accustomed to shrugging off.  Is it possible the reason for the stock market’s hysterical behavior lies elsewhere? The mainstream media and its vaunted experts used China’s ‘rare-earths’ threat ten days ago to explain why shares plummeted that Friday. However, when the market began to recover Sunday evening, they changed their tune with sheepish second-day stories about how rare-earth minerals turn out to be not so rare after all.

It is the breathtaking stupidity and incompetence of journalists who invent the news that has caused me to tune out their blather and focus solely on charts when I forecast market trends. As far as I’ve observed over 50 years, price movement is caused mainly by arcane cyclical forces that color our perceptions of news. Is it not, therefore, reasonable to infer that the stock market’s ups and downs create the headlines, not, as is almost universally believed, the other way around?

A Bitcoin ‘Tell’  

Far more interesting to me these days than the stock market’s headless-chicken act is the spectacular bull market in gold.  Prices have risen by 31% in the last two months, impaling Hidden Pivot targets as though they were as mushy as journalists’ brains. Until recently, I’d assumed quotes were rising so steeply because gold, traditionally a haven in times of uncertainty, had glimpsed some horrible economic catastrophe ahead. However, there is a second possibility — that gold is caught up in the Everything Bubble, albeit with high relative strength that factors its superiority over other investable assets on which the ever-gluttonous 20% have gorged themselves since the covid hoax. (Note: Bitcoin wackos who see it as a store of value should have noticed how the cryptos died during this latest phase of bullion’s moonshot.)

My technically derived targets for gold go no higher than 5020 (basis the December futures), but I am open to the possibility of a further doubling in price to $10,000 or so. That would be logical if the Everything Bubble is the reason for gold’s rally so far to a record 4392. But speaking as a hard-core collapsitarian who sees no possible endgame other than a deflationary bust, the $5020 target could prove to be as high as it gets. That doesn’t mean gold’s real value would stop increasing, only that its nominal value might be capped at levels far lower than estimates promoted by publicity hounds in my line of work.

A Lucrative Plateau

I have always maintained that gold would outperform all other investments in an economic collapse; however, it could do so by simply plateauing while most other investable assets plunge as they did in the 1930s. In the meantime, the bulletin I sent out to subscribers on Thursday night about gold futures and GDXJ may have caught an intermediate top. I have made both ‘touts’ publicly viewable on the Rick’s Picks home page for those who are interested in the details.

Have Stocks Entered a 1929 Vortex?

Although in recent years October has not lived up to its reputation for scaring the pants off investors, we should take Friday’s punitive reversal seriously, since it could mark the start of a bear market that is arguably years overdue. Although we have grown accustomed to ‘freaky’ Fridays producing headline events now and then, there was something especially disconcerting about this latest episode. It was driven unmistakably by news that Trump had threatened to slap a 100% tariff on Chinese goods in retaliation for restrictions they placed on so-called rare-earth exports to the U.S.

These minerals, while not actually rare, are essential to the production of powerful magnets that are used in electronic hardware, including components vital to the aerospace industry and the military. The U.S. was already focused on establishing alternative sources for rare earth minerals, but it will take time and money, since extracting ‘rare earths’ from dirt requires processing that is costly and complicated.

Downplaying China’s Threat 

In any event, Western factories and computers are not going to grind to a halt simply because of China’s threat. And it is likely to be no more than that, since Trump has cards of his own to play, including access to advanced computer chips that China is presently unable to produce.

The foregoing is all secondary to the matter of why U.S. stocks plunged on the news. The broad averages were up sharply in the early going, but by day’s end the Dow had reversed by nearly 1200 points. A corresponding reversal took place in the institutionally-driven lunatic sector (aka the Magnificent Seven), wiping trillions of dollars of dubious  ‘wealth effect’ lucre from the macro ledger. Clearly, this was an extreme overreaction to the news, since investors had grown used to Trump’s frequent tariff shenanigans.

Although the mainstream media will insist there was a direct link between Trump’s retaliatory threat and the stock market’s plunge, I would disagree. I have always maintained that little-understood cyclical forces cause the stock market’s swings, and that it is the swings themselves that color our perception of the news. This implies that the stock market was ready to fall hard on Friday, regardless of the news.

Unusually Powerful Whipsaw

You can take the unusually vicious whipsaw as evidence that investor psychology has finally synchronized with 1929. The Smoot-Hawley tariff laws under consideration at the time were an obsessive concern.  These days, tariff news has become just background noise — Trump’s stupid little game, worthy of no more than a shrug and a yawn. This is true partly because not a single economist ensconced in the benighted world of punditry can remotely predict what changes the tariffs will bring, let alone whether the changes will be good or bad for the U.S. and global economy.

Now that the news media have elevated tariff news to our top concern, we can infer that the bull market begun in 2009 has entered an endgame that will track 1929’s ups and downs more closely. A bear market, therefore, lies just ahead, and there is nothing Wall Street’s fraudsters and hype mongers can do to prevent it. Their lies and obfuscations, even with a boost from shills in the news media,  cannot mask the fatal economic problems of a middle class that is suffocating under the weight of rising unemployment; wages that will never catch up with inflation; manufacturing ‘growth’ that will occur largely without human workers, if at all; and debt we cannot possibly outgrow before it crushes what little remains of the American Dream.

A Bruegel Landscape in Amish Country

I’m still in San Francisco, avoiding the withering heat of Florida’s monsoon season. I am also taking a break from my regular commentaries, since writing about the greed and stupidity that have propped up the stock market and the economy for the last decade was growing boring and repetitive. Instead, I’ve featured paintings by friends, most recently Geoffrey Leckie and Deborah Oropallo. The photograph above was taken by Victor Riess, whom I met two decades ago in Colorado when he took my trading course. An avid bicyclist and musician, Victor is also the best photographer I know. He took the picture above near his home in Lancaster, PA. It is a wintry Pennsylvania scene that vividly recalls landscapes painted by the Dutch master Pieter Bruegel in the mid-1500s at the height of his powers. All of Victor’s photos are for sale, including the picture of the Amish girl featured here last week. The work above, a signed, original print, is priced at $32,000. It is approximately 20″ x 30″. Considering that a collector paid $68,750 for this appalling Peter Hujar photo of a dead cow at Christie’s a few years ago, Victor’s beautiful landscape, which makes the heart sing, is a great bargain for $32k. For further details, email me at Rick’s Picks.

‘Oil and Water’

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I’m in San Francisco, taking a break from Florida’s unbearable heat, but also from my weekly commentaries. Writing regularly about the impending collapse of the stock market, Trump hubris and the fatally diseased, fake economy had become drudgery, and so, at least for the time being, I am focusing on more upbeat fare. Recently, I featured paintings by my college roommate, Geoff Leckie. Now I offer the works of another friend, Deborah Oropallo. In the forty or so years I’ve known her, she has broken new artistic ground with each new evolution of her style and subject matter;  then, she moved on when multitudes of imitators glutted the market. Deborah has achieved fame and commercial success, including shows at the Whitney Musuem and the Smithsonian. The work above, titled Oil and Water, was completed in 2016. It is a photomontage and acrylic on wood panel, 26 inches square.  For more information about the artist, click here.

‘Guise’

I’m in San Francisco, taking a break from Florida’s insufferable summer heat, but also from my weekly commentaries. Writing regularly about the impending collapse of the stock market, Wall Street hubris and the fatally diseased economy had grown boring and depressing, and so, at least for the time being, I will be substituting more entertaining fare. Recently, I’ve featured paintings by my college roommate, Geoffrey Leckie. This week, I offer the works of another friend, Deborah Oropallo. In the forty or so years I’ve known Deborah, she has broken new artistic ground with each new evolution of her style and subject; then, she moved on when imitators glutted the market she’d created. Deborah has achieved commercial success and fame, including a show at the Whitney Museum. However, my favorite exhibit of her works was mounted by the DeYoung Museum in San Francisco. It was called ‘Guise,’ and the sly overlay above is an arresting example of the theme. If you want to know more about the artist, click here.

A Holiday Note

I am on holiday for a short while, far from Florida’s disabling seasonal heat and enjoying what so far has been the coolest, foggiest summer anyone who lives in San Francisco can remember. This is a busman’s holiday, since I am updating the actionable ‘touts’ on this page 24/7 and have been fully engaged in the chat room as always, providing timely ideas whenever unusual opportunities arise and answering all questions related to trading. I am also continuing to put out actionable guidance at GoldenMeadow.eu.

However, in this space, instead of the usual weekly commentary and graphics, I am presenting a changing selection of paintings by Geoffrey Leckie, my college roommate during our third year at the University of Virginia. His canvases are beautiful and extraordinary (above: Stacking Hay, a scene from Connemara, Ireland), and they can speak for themselves. If you want to know more about the artist, click here.

Expect ‘Something Big’

Concerning the stock market, I’ve come to expect unusual craziness every time I take an extended holiday. Although my hunch until recently was that the nuttiness would take the form of a melt-up, last week’s weakness, especially in Bitcoin, has caused me to reconsider. Although Trump’s accomplishments have driven the bull market to new heights, the feel-good energy they created may be spent. For that reason, I have lowered the odds of a thousand-point rally in the S&Ps to 50-50. Correspondingly, I will be more cautious at these heights, since the bear market that’s coming will be at least as destructive to the economy as the 1929 Crash.

Your Editor Is Taking a Breather

I will be on holiday for a short while, far from Florida’s disabling seasonal heat and eager to enjoy what so far has been the coolest, foggiest summer anyone who lives in San Francisco can remember. This will be a busman’s holiday, since I plan to update the actionable ‘touts’ on this page 24/7 and to remain fully engaged in the chat room as always, providing timely ideas whenever unusual opportunities arise, and answering all questions related to trading. I will also continue to put out actionable guidance at GoldenMeadow.eu.

However, in this space, instead of the usual weekly commentary and graphics, I will present a changing selection of paintings by Geoffrey Leckie, my college roommate during our third year at the University of Virginia. His canvases are beautiful and extraordinary (see above), and can speak for themselves. If you want to know more about the artist, click here.

Expect a Melt-Up

Concerning the stock market, it would not be unusual for it to go nuts while I’m away from my desk for an extended period. If so, expect the direction of the craziness to be UP. I am on record with a prediction that the S&Ps are about to stage a thousand-point rally. A crash will follow, but I doubt it will happen before late October.

Trump Must Outrun the Inevitable Bear Market

Trump looks like a hero now, but he could become a goat when the bull market ends. He campaigned as the man who would make America great again, and no one should doubt the sincerity of this quest or his commitment to returning the nation to its core values. To judge from his accomplishments so far, he is up to the task. Few could have imagined he would crush the entrenched woke movement and hamstring Deep State within less than a year of taking office. If he can finish the job by bringing criminal charges against Obama, Hillary Clinton, Comey, Clapper, Brennan et al., and make the charges stick, his presidency would become one for the ages.

But odds are considerably less favorable that he will be able to prevent the stock market and the U.S. economy from imploding under the weight of public debts grown far too large to repay. They include $37 trillion owed by the U.S. Treasury, as well as the financial liabilities of at least two dozen states, led by the breathtakingly reckless Illinois, whose pension system, along with many others, is just a bear market away from failure. The sums involved are much too big for a taxpayer bailout, and when they are ultimately deflated to zero by bankruptcies, the result will distance America more than ever from greatness.

Many Jobs — for Robots

Trump’s plan is to ignite economic growth robust enough to make public debts manageable and homes more affordable. But the way he is going about it, with a surge in deficit spending and a Federal Reserve Board hand-picked to turbocharge an already overheated financial system, will only add more IOUs to the mountainous pile that already exists. Although there will eventually be offsets from tariff collections and the re-shoring of U.S. manufacturing, revenue growth will take years to make a dent in what Americans owe. And no economist or pundit I am aware of has even mentioned that the new factories would necessarily employ relatively few workers if they are to compete in markets where labor is cheap.

Making America Great before a bear market wrecks the economy is the crux of the challenge Trump faces. But only a blind optimist could believe that revving up debt stimulus past the redline will be a winning strategy.

(Click here for my latest interview — a real doozy — with Jim Goddard on This Week in Money. We discuss the limitations of AI (and Bitcoin!), as well as the reason America’s debts can never be liquidated with a Weimar-style hyperinflation.)

AAPL Back Again as an Engine of Illusory Wealth

You’ve got to hand it to DaBoyz for reviving Apple as a ‘wealth’-effect dynamo. The company couldn’t innovate its way out of a wet paper bag, and it doesn’t even have a horse in the AI race. And yet, the stock recently lurched back to life, emulating those two bull-market superstars, Microsoft and Nvidia. Indeed, any investor who held shares in the company last week, including Vanguard, BlackRock, Berkshire Hathaway and approximately 25,000 other lucky investors, became significantly wealthier on paper without lifting a finger. Rising sharply on gap openings last Wednesday and Thursday (see chart), and on a nasty short-squeeze Friday for good measure, the Cupertino-based seller of iPhones added nearly $500 billion to the world’s store of illusory wealth.

The Element of Surprise

As I’ve explained here before, almost no stock changes hands on gap openings, and what little actual buying occurs comes almost entirely from short covering. In this instance, AAPL ended last Tuesday’s session at around $203 per share. Then news came out after the close that they had sold quite a few more iPhones than benighted analysts had expected. It didn’t matter that the flurry of phone-buying could have been a one-time effect caused by consumers trying to get ahead of new tariffs.

All that was needed to goose AAPL skyward was the element of surprise. After the earnings beat, the stock’s clever handlers lost no time working their levitation scam. By simply pulling their offers overnight and on Wednesday’s opening, they enabled panicked bears to do all the lifting into a supply vacuum.

Rotation Is Costless

It’s easy to underestimate the crooks who ply this game. Although we know they routinely rotate money from one sector to the next to push stocks higher with relatively small outlays, we sometimes overlook that they can top that trick fiftyfold with a handful of megastocks that alone are capable of creating trillions of dollars of gaseous wealth in a trice. Using Apple shares that had been moribund for a year, they waited until the company’s tired story became sufficiently positive to trigger a massive short squeeze.

If this sounds like a perpetual motion machine capable of wafting stocks higher more or less indefinitely, we know the truth. For in fact, bear markets eventually do happen, invariably when everything looks sunniest.