PREPARE FOR VOLATILITY IN THE STOCK MARKET + The New AI Trade.

There are four things that we must cover in today's video. Number one, yes, midterm volatility is coming, but it might not be a full-blown crash, and I'll explain what I mean by that in obviously this video. Number two, post-midterm rally positioning. After the midterms, what's going to happen? Why are we going to see a rally? Where do you want to be positioned? Number three, what I'm doing right now in my portfolio. Keep in mind, in the trading community portfolio that we started really at the start of this year, is up 91 and 1/2%. Massive gain. Wall Street, we're we're beating I don't think there's a fund that is doing better than us, okay? We're beating Wall Street to the opportunity, and we will continue to do so. If you guys want to join us, that link is down below in the description of today's episode, but you know, if you're like us and you're sitting on a massive gain this year that almost doesn't seem like should be real, even though we do this consistently, what do you do with that? Is it time to take a profit? Is it time to hedge? I I will share what I'm doing in this portfolio with you in this video. Number four, the new AI trade. There is a very clear new trade in AI where 12 months from now, you're going to regret not paying attention to this. Ladies and gentlemen, we have a banger for you today. The only thing that I ask you to do is hit the like button for the YouTube algorithm to help push this video out to more people that need to see it quite desperately. Okay, so let's begin this video with number one here. Midterm volatility is coming. Now, when you hear this, you probably think like a crash is coming or even a correction. And that's not exactly what I what I mean. Okay? But volatility is coming. Volatility itself, that can be bigger moves up or down. That's volatility. The reason volatility is coming is because event risk hedging. So, Wall Street, they look at events and seasonals and all these different factors and you know, markets are up a lot. Like the S&P is at new all-time highs heading into a midterm. Wall Street right now, they're locking in some profits. They're hedging their portfolios, just in case we do have a midterm correction. Now, I would make the argument that even though the S&P is at all-time highs, the Nasdaq fell 11 and 1/2%. And and just bottomed July 29th. Not too often do you fall 10 plus percent and then proceed to fall another 10 plus percent in uh one or two month time span. That doesn't tend to happen. So, you've kind of already seen the correction for the midterm election. But, there's going to be a lot of nervousness out there in the big money land, right? Especially after we reported earlier, Jane Street had their only losing month of trading in the past 10 years in July. They have never lost money in the last 10 years trading in the markets. They lost 15 billion dollars in July. Jane Street went on to say in a note to their employees that they are going to reduce risk. A fancy way of really saying they're going to sell stocks and uh you know, get out of their concentrated positions. Okay? So, with that going on, situational awareness fund, AI hardware stocks kind of, you know, that have pulled back quite a bit. With the midterms coming up yeah there's going to be some volatility. But, I don't think you're actually going to have another like 10% correction. I just think it's going to be volatile. I also have my own beliefs. Earlier today, I spoke to you guys about how Democrats are now projected to win the Senate. I don't think Trump likes that. I think there is a um, need to de-escalate the Iran conflict to get gas prices lower. Or else, you know, Republicans are going to get slapped in the face on midterms. And Trump doesn't want that, right? Trump wants to keep the Senate Republican. He wants to keep the House Republican, right? So, it's easier to get things done. So, I think there is a bias towards de-escalation in this Iranian conflict, and that would be really good for the markets. On the other hand, I don't know exactly what's going to happen. And if there is escalation, well, that's not going to be great for the stock market. So, even though I don't think we're going to have a correction, things can change. So, don't just take my word for it. That brings us to point number two. The post-midterm rally positioning. With this event risk, with all of the the tail risks out there right now, like the war with Iran restarting again, causing the Fed to hike rates, right? Um, the leverage in the system around the AI trade, and just the midterms themselves, there's a lot of reasons that Wall Street is hedging right now. Okay? Well, after the midterms, I would imagine we're going to have more clarity around what the Fed's going to do. The midterm election itself is over with. The the big, you know, event risk is done. Hopefully, there's some kind of understanding with Iran and the Strait of Hormuz. Over the next couple of months, you should see a lot of the problems clear up in the markets. But, even if they don't, getting the midterm election over with is going to allow Wall Street to take off some of their hedges. Wall Street, they're hedging right now for the midterms. They're not going to be hedging for the midterm 6 months from now, 2 months 3 months from now, right? Once the midterms come, if nothing happens, they start to reduce those hedges. And normally, that actually begins to happen in October. So, really Wall Street right now, they're really hedging for the rest of August and for September. They probably start taking off a lot of hedges in October. Hence, you tend to see quite a rally, right? If Wall Street is shorting stocks right now, selling them into the markets, that's going to create volatility right now. But, come October, if nothing happens heading into the midterms, Wall Street, they're going to start covering on those shorts, which means buying those stocks back again. And that's partially why you're likely to see a pretty strong post-midterm election rally. On top of, again, I think we're going to have clarity around the Fed. I think the economy's holding up. I think inflation's on a downward trajectory. And I do think the war with Iran can stabilize, you know, over the next couple of months. So, as long as that happens, you're going to follow a pretty historical trend of rallying for about 9 to 10 months after the midterm elections. Like, this is the 12 months before a midterm, kind of sideways and even trading lower and then the 12 months after which is a massive rally. I think that is what we need to be positioning for at this moment. If you care about what happens to the stock market over the next month and a half you're missing the ball here. Who gives a what happens? I don't care if stocks go up, down, spin in circles, go sideways. I I don't care what happens between now and the midterms. I'm going to take the opportunities and position for the post-midterm rally. When you have such a historical precedence of this strong of a rally. We're not talking about like a two-week kind of rally thing. We're talking about a 9-to-10 month rally. You want to position for that right now. Even if the rally's half as good as it normally is that's going to be one hell of a move. And again, I do think you want to be positioning into the broadening trade, right? I don't think AI hardware the FOMO's coming back. Now, I'm actually bullish on Qualcomm, Marvell, AMD some of these names but look, when Jane Street loses 15 billion dollars in their in their first losing month in 10 years, they're not going to be rushing back into AI hardware. It's just not going to happen and that's Jane Street. There's probably many other firms out there that also were down in the month of July. They are going to put that money into other areas and I think it is in the new AI trade in which we'll talk about that in just a moment, but I don't think you want to be buying hardware stocks here. I continue to have that view that you're not the FOMO's not coming back. These stocks have very high expectations. Some of them will will smash expectations and do well. But a lot of them will not. You're playing musical chairs at this point. Now, I don't think they're going to collapse, but I think you could miss a massive rally if you're buying AI hardware. And again, that's how the trading community is up 91 and a half percent year-to-date. There's no AI hardware in this portfolio at all. None. Okay? We're just taking the opportunities when Wall Street gives them to us outside of AI hardware. And I think that's what you need to be doing right now. It's the post-midterm rally and how to really position for it. Again, keep in mind, I'm not a financial advisor. I am not a financial planner. Like anything can happen that is unforeseen and change all of this. But as it as we see it right now, that's how I'm looking at things. Moving on to number three, what I'm doing right now. Again, this portfolio is up 90 91 and a half percent year-to-date. At one point it was up like 94 95%. That's a massive move. The portfolio doubled in the last 8 months. Okay? The natural instinct is to want to sell everything, take the profits. But in the areas that I'm investing in right now, there is still so many bears. Like look at AppLovin following their earnings. AppLovin barely missed on earnings. The stock has went from 600 $620 or so back on June 1st, June 1st, 2 and a half months ago, down to where it currently is today at $316. Oh, I don't like where that closed. That's That's ugly. Um those numbers are ugly, but it's down 50% in 2 and 1/2 months. Does that make sense? Management's projecting 30% compound growth for the next 10 years. Highly profitable company. I view that as more than likely an opportunity, right? That Wall Street is ignoring. Just as an example. So, when you're buying into companies like an Applovin or other software or other, you know, cyber or cyclicals or whatnot financials and you're seeing some of these earnings reactions that are so negative based on overall pretty good earnings, it's a good sign that we're still very early to the broadening trade. You know, in fact, um small caps have underperformed systematically for about 15 years. They're probably going to outperform for a couple of years going ahead. And I think we're still very early to that. And again, when I look at Jane Street that lost $15 billion in the month of July, that's that's a sign that Wall Street, and I'm assuming more than just Jane Street lost money in July, they are heavily concentrated in the same trade. As AI hardware winds down, comes to an end, and stops going parabolic, money will rotate into other areas. What are the best areas where that money, the largest chunks of it, are going to flow to? The next AI trade. And we will talk about that in just a moment. So, what am I doing right now in my portfolio that has massive gains for this year? Well, if you have positions that you're trading that you don't feel confident in, that you're not planning to hold for the next couple of years, by all means, nobody ever went broke taking a profit. But, I do think we're very early to the stocks that we are investing in for the next couple of years. With that said, there's nothing wrong with selling a call for an example or hedging your portfolio if you're a little nervous. Now, I don't think this is a moment where you want to go out and hedge your entire portfolio because we're at the start of some imminent decline. Like I don't subscribe to that view for the reasons that I talked about earlier. But, if you do have stocks that are up 100 200% in a short amount of time, selling calls can make a lot of sense. And that is what I favor doing at this moment even though I really haven't done that for the vast majority of the portfolio. If I do feel like hedging in the next couple of weeks, it will likely be selling calls. You know, 20% out the money that are going to give me back 10 to 20% of the overall, you know, cost of the position. You you you you can't lose with that, right? Worst case scenario, you just reduced your cost basis 10 to 20%. Other worst case scenario, which is not bad either, you sell your stock for 20% higher than where it is today a month or so from now and you also reduce your cost basis by 10 to 20% or add that on to your overall profit. You can't lose with selling calls when you're up a lot in a short amount of time. In my experience, obviously you can have like the FOMO if the stocks continue to run. And that's why I'm just taking it a little slow right now. That brings us to number four, the new AI trade, and we've talked about this a lot on this channel at this point, okay? But, I think even more so following the Jane Street news over this weekend, I I hope you guys realize how significant that is. Jane Street, they have not lost money trading the markets in 120 months. Okay? They just lost money in July. Yeah. Um that puts them at basically 100% profitability per month. Okay? What would it be? Like a 0.3% chance of Jane Street losing money in a month at this point in any given month? That's exceptional. Jane Street doesn't like to lose $15 billion. That's a bad look. And I think there's a lot of other firms that are like that that are just not exactly sharing that willingly at this point. Right? Over concentrated, over leveraged, the FOMO was insane. Again, you know, when you hurt yourself, when you sever your pinky finger tendon, you guys see that? That's It's It's ridiculous. When you sever your pinky finger tendon, you don't make the same mistake again. When you burn your hand on the stove, you're a lot more You're a lot more careful the next time you're cooking, right? Um and you typically don't make the same mistake twice. So, I I don't think there's going to be FOMO in AI hardware stocks. I don't think there's going to be some kind of big trade you miss. The next AI trade, I believe begins after the midterms. Once Wall Street takes off their event hedges, event risk hedging, right? Goes away, especially the Iran war clears up or we get some kind of understanding on that, understanding around the Fed, the new AI trade is robotics, automation, AI software, and cybersecurity. These are the areas that Wall Street is still really underweight in that they're still really bearish on that are big winners from AI. All of them. Robotics, automation, AI software, and cybersecurity. Massive winners from AI that the markets are still bearish on. We've seen the markets begin to kind of cozy up to some of these stocks, right? Look at a UiPath. Look at Azenta Global. Look at you know, just really look at Palantir, right? Look at um Zebra Technologies or uh what's another one? Rubric, right? These are companies that have begun to do very well, but still like lots of people are nervous. They're not sold on that. There's definitely not FOMO in those areas. That is the new AI trade. I don't know how long it's going to last. I don't know how fast it'll be. Maybe people position way too quickly and it's quick, you know? Maybe it'll last 3 months or 6 months. It could last the next year or two. That's kind of where I lean, you know? Different stocks are going to be hot at different times within software or within robotics or within automation or cybersecurity. But I do think this is the next big AI trade. Hardware, it'll still be there. There will be some winners, right? Maybe the photonics company that comes out with a new technology that gets a lot of orders or maybe Marvell that continues to be in demand from data center connectors or maybe Qualcomm from wearables, right? AMD if they continue to steal market share from Nvidia. Like there's going to be some winners there as well. You don't want to completely forget about hardware, but you really want to shift your focus to the next AI trade at this moment. We are in a gray period in which we are transitioning into the new AI trade. But there's a lot of happening in the macro sense, the Fed, Iran, the midterms, that are slowing down the transition, that are creating some nervousness and hesitancy to go in that new AI trade. But, it is coming. Share these stocks with you as well, right? Zscaler Global for for AI software, Zscaler Global, Rubrik, UiPath, ServiceNow Zscaler HubSpot MongoDB Snowflake Datadog Backblaze Pegasystems. Uh I like cyclicals as well. I like financials. Um but for the high-risk, high-reward investor, the guy that's looking for the next triple, 5x, 10x, you're going to find it in AI software, robotics, automation, or cybersecurity. Robotics, Tesla, Rockwell Automation, Symbotic, Zebra Technologies. Right? That's the robotics and automation side of things, kind of grouping those two in the same category. I also think solar could be interesting for an energy play because why not put solar on top of Walmarts or build a you know, things like they have at gas stations in Walmart parking lots, put solar on them, right? There's There's a way that solar could actually do uh quite well here, right? So, those are some of the ideas that I think are going to get a lot more attention from Wall Street over the next 6 to 12 months. So, to conclude this video, we have a lot of noise right now. There's a lot of things that are happening in the macro sense that are going to create some volatility around the midterms. Just the midterms themselves are going to have hedging, right? Event risk hedging. If you're a Wall Street guy and you know Nvidia reports earnings, um just for like an example, I'm throwing something out here. If you know Nvidia reports earnings and that moves the markets, you're going to hedge a little bit before Nvidia. If you know there's a meeting between, you know, Trump and China, um, China's President Xi Jinping on a certain day, you're going to hedge that beforehand, right? It's event risk hedging. It's going to happen with the midterms, and there's a lot of going on that's amplifying that or potentially will amplify that. You really want to be positioning for the post-midterm rally at this point. Forget about everything else. Prepare for the rally. What are the best areas, in my view, to prepare for the rally? It's in the new AI trade. Robotics, like Tesla, automation, like Zebra Technologies, Rockwell Automation, Symbiotic, even a UiPath, right? These are stocks that have been outperforming now for the past month or two, but I think have a massive future ahead of them, right? The FOMO is not even close to here yet. People are still underweight these stocks. They're still heavily short these stocks, right? Within AI software, you have Ciena Global, you have just just name it, right? AppLovin, Palantir, a a ton of stocks in that category. Cybersecurity, I like Rubrik and Zscaler the most because I think they offer the best risk reward, but name your cyber stock. It's probably going to do well. That's that's the new AI trade. That's where the demand's going to come from at this stage that Wall Street's not exactly pricing in, right? And then, of course, what am I doing right now? I think selling covered calls looks attractive after big moves, but I'm not really doing much right now. I'm waiting for opportunities like a sniper. If on earnings, Target sells off 30% because of some metric that barely missed. Like, that could be an opportunity, right? I'm using this earning season to find the opportunities when Wall Street is emotionally reacting. Like AppLovin, right? AppLovin should not fall 50% in 3 months based on the numbers they reported. With the opportunity ahead, with what management is saying, the valuation that's now dirt cheap for the growth that they're putting up. AppLovin put up 53% revenue growth. Trades at like a 20 times forward multiple. The PEG ratio on that is stupid. It's like half of one. Like 0.5. Maybe even less than that. It's crazy, right? They're pricing AppLovin to basically fail at this point. I'm going to take that every time. But, I'm like a sniper. I'm not going out and buying all of them. I'm going out and buying the opportunities when they make sense. That's how you find 10x'ers. That's how you get the big winners. You you got to got to have some logic when markets are emotional. So, yeah, that's going to conclude this video. Let me know your thoughts on this down below in the comments section. If you guys want to come trade and invest alongside of us, that link is down below in the description of today's episode. Have a fantastic rest of your day, and I will see you in the next one.