3 Tech Stocks Turning Negative Sentiment Into Positive Returns

With the U.S. Treasury set to exhaust its workarounds and run out of options to manage the national debt until the self-imposed debt ceiling is raised or suspended, the world’s richest economy, which also issues the global reserve currency, is projected to run out of cash and fail to meet its obligations as early as June 1.

While Treasury Secretary Janet Yellen has deemed it ‘unthinkable’ to let the U.S. default on its debt and has urged lawmakers to set their differences aside to ensure that “America should never default.”

However, with Republicans such as Donald Trump playing hardball and endorsing the notion of letting the nation default if Democrats don’t agree to spending cuts, it’s probably fair to say that Ms. Yellen’s words are going largely unheeded.

Given that the alternatives to raising or suspending the debt ceiling, like the U.S. has done almost 80 times since the 1960s, seem either unviable or unattractive, the extent to which the U.S. and global economy could be undermined if the default comes to pass would, in the words of Yellen, be an “economic catastrophe.”

With business leaders such as Jamie Dimon convening a ‘war room’ over the debt ceiling standoff, even the markets have begun pricing in the worst. The S&P 500’s net loss since the beginning of the month could only worsen further the longer the crisis drags on.

Do you see the U.S. defaulting on its debt this time?

  • Yes
  • No
  • Can’t Say

However, the sliver of silver lining that could encourage investors alarmed by the looming cloud of fat tails is that if the worst comes to pass, it would also mean a potential devaluation of the U.S. dollar.

This could be a significant tailwind for the export prospects of technology stocks, which have been under pressure due to 10 interest-rate hikes over the past year and are witnessing a watershed due to the advent of generative artificial intelligence. Continue reading "3 Tech Stocks Turning Negative Sentiment Into Positive Returns"

Cathie Woods: Bold Prediction for Tesla

Recently the renowned stock picker and Tesla (TSLA) bull made a new price prediction on the automaker, which sounds just as crazy as the last time she made a wild prediction, but the first prediction has come true, and then some.

Cathie Woods is the Founder and lead stock picker for the Ark Invest family of exchange-traded funds. Woods initially started Ark Invest in 2014 and made heavy bets on technology companies.

She became a household name when her original $2,000 price target on Tesla, when the stock was trading for around $300 per share, came true on a split-adjusted basis.

When Cathie initially made her case for Tesla at $2,000, people thought she had lost her mind. They couldn't understand how she arrived at that valuation and why she was so confident in that prediction.

Which, by the way, she was, considering she invested millions in Tesla before it went on its run higher.

Those investments in several different Ark Invest ETFs helped propel several Ark ETFs into the top ten best-performing ETFs for several years in a row.

Cathie is at it again, possibly giving investors a second chance to catch lightning in a bottle.

Cathie Woods Ark Invest owns a little more than $850 million worth of Tesla stock (stock price is currently around $170 per share). She believes the stock price can go to at least $1,400 per share by 2027.

That price is her bear case scenario, with a bull case scenario of $2,500 and a base case price of $2,000 per share. Those figures would represent an eight, eleven, and fourteen-fold return from today's price.

Furthermore, the base-case price of $2,000 per share would give Tesla a market capitalization of $6.3 trillion. For context, two of the largest companies in the world Apple (AAPL) and Microsoft (MSFT), have market caps of $2.7 trillion and $2.2 billion. At $6.3 trillion, Tesla would be worth more than both of them combined. Continue reading "Cathie Woods: Bold Prediction for Tesla"

Natural Gas: Opportunity of the Year?

It's difficult to imagine that this energy commodity could offer a promising opportunity for profit when you observe its performance across different timeframes, including yearly, half-yearly, and even year-to-date. Below is a chart displaying its performance over the course of one year.

NG Futures 1Y Performance

Source: finviz.com

Natural gas futures have performed the worst among all commodities on the mentioned timeframes, losing 73% of their price in one year. They are almost double the percentage loss of the next worst-performing commodity, oats futures.

The chart below sheds light on the poor performance of natural gas futures. Continue reading "Natural Gas: Opportunity of the Year?"

Countdown To Catastrophe

If you believe Treasury Secretary Janet Yellen, the U.S. is headed to “an economic and financial catastrophe” if Congress doesn’t agree to increase the federal debt ceiling.

Even worse, she warned in an interview with ABC News, we are headed to a “constitutional crisis.”

You know something is purely political and not to be taken too seriously when a prominent official in Washington warns that something is a “constitutional crisis,” as if that is the absolute worst thing that can possibly happen, short of war or some other real calamity.

According to Yellen, doomsday will occur around June 1, at which time the government will purportedly be unable to pay its bills, unless the Republicans in the House knuckle under and agree to increase the debt limit.

For good measure, she wrote in a letter to Congress that “we have learned from past debt limit impasses that waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States.”

All of which has never happened.

When the government “defaulted” back in 2011 I seem to remember that the biggest imposition was that the national parks were closed for a few days. Anyone who was owed money, such as federal employees who had their paychecks delayed, soon got all the money that was coming to them.

Yes, Standard & Poor’s lowered the U.S. government’s credit rating to AA-plus from triple A - where it still stands - but did anyone really care? (Moody’s, Fitch and DBRS all still rate the government’s credit rating at triple-A).

If you were wondering, other countries with AA-plus ratings from S&P include Austria, Finland, New Zealand, and Taiwan. Canada, Germany and the Netherlands, among others, sport AAA ratings. With all due respect to those countries, does anyone seriously believe that you run a greater a risk lending money to Uncle Sam than you do to those nations? Continue reading "Countdown To Catastrophe"

Why Banks Fail and What It Means for the Stock Market?

A lot, if not everything, in the world of finance, is based on trust: trust that the future would be better than the present; trust that a dollar bill would guarantee an equivalent worth of goods and services at a given point in time; and trust that wealth created would be safe, accessible, and transferrable at all times.

So, when events like those unfolding over the past fortnight undermine one or more of the aforementioned collective beliefs, the ensuing risks can quickly become systemic and existential.

On February 24, KPMG signed an audit report giving SVB Financial, Silicon Valley Bank’s parent company, a clean bill of health for 2022. On March 10, federal regulators announced that they had taken control of the bank, which reopened the following Monday as Deposit Insurance National Bank of Santa Clara.

This was the second-biggest bank failure since Washington Mutual’s collapse during the height of the 2008 financial crisis. It was soon followed by the third-biggest, with Signature Bank shuttered by the regulators to stem the fallout from Silicon Valley Bank’s failure.

The resulting crisis of confidence has somehow been contained with an assurance that all insured and uninsured depositors would get their money back, the announcement of a new lending program for banks, and 11 banks depositing $30 billion in the First Republic bank.

However, the contagion risk subsided only after claiming an illustrious victim from the other side of the Atlantic, with UBS agreeing to take over its troubled rival Credit Suisse for more than $3 billion in a deal engineered by Swiss regulators.

Since we are more or less up to speed, let’s look deeper into what can make banks seem unbankable in a little over two weeks.

Continue reading "Why Banks Fail and What It Means for the Stock Market?"