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The S&P 500 is on the cusp of a correction, down 10%. The technology- laden NASDAQ is already well beyond a correction. Energy is the only S&P 500 sector in positive territory YTD.



The problem is inflation and the Fed raising rates to combat it. There is a realization that inflation can’t be handled seamlessly. That means we could face continued high inflation, or much slower economic growth induced by a hyperactive Fed making up for lost time. Neither scenario is good for stocks.



While the year might be difficult for the overall market, the energy and financial sectors should shine. These sectors actually like inflation and rising interest rates. While portfolio positions in those sectors have been dragged lower by the recent indiscriminate selling, I expect them to regain momentum when this selloff ends.



Two fantastic portfolio positions in energy and finance are highlighted to buy in this issue. They had momentum going into the selloff and should pick up where they left off when the selling abates.

“Only the paranoid survive.” -Andy Grove

Nvidia (NVDA) met high expectations yesterday for the July quarter, hitting $46.7 billion in revenue, up 56% from the year-earlier period. However, it cautioned that third-quarter revenue growth will not be as impressive, disappointing analysts and investors.

Explorer stocks did not disappoint this week, with many of our positions posting solid gains. Coeur Mining (CDE) shares continue to outperform for us, up 8.9% this week, and Dutch Bros (BROS) shares were up a stellar 16.3%.

This is a big week for financial markets, with the Fed holding interest rates steady, $11 trillion worth of tech companies reporting earnings, a key jobs report, and a tariff deadline with China and India looming. The market pulled back as Chairman Jerome Powell indicated the Fed may not be ready to cut interest rates as expected.

But 7,392 miles from the canyons of Wall Street, an AI global governance plan was released at the World Artificial Intelligence Conference in Shanghai, which called for establishing an international open-source community through which AI models can freely be available. About 800 Chinese and international companies attended the summit.

Lower inflation numbers yesterday made interest rate cuts inevitable which moved the market, led by Nvidia (NVDA), which surged 8%. I intended to recommend Nvidia at a price of 100 so I will patiently watch this bellwether stock closely.

To be a good, patient and calculating investor, one needs to do two things at once: Be aware of big macro issues and trends and focus attention on micro issues. That is, closely watch specific companies and stocks, especially smaller, micro stocks offering the biggest upside and risk demanding closer attention.

Today, we recommend a fund that does just that - with a history of remarkable outperformance.

While there are a lot of healthy signs of growth out there, stocks that do not meet high expectations are being punished.

Super Micro Computer (SMCI) was off 29% this past week after some allegations of faulty accounting by short sellers was followed by the company reporting yesterday that it was postponing filing of its annual report with the SEC to assess “internal controls over financial reporting.”

Given the uncertainty, we have little choice but to sell the stock. We took some profits earlier this year, and the stock is still up 43% so far this year. My guess is that we will be back to Super Micro at some point, and I will watch this stock carefully.

I recently noticed a few popular stocks such as MicroStrategy (MSTR) offering exposure to leveraged Bitcoin which to me seems like excessive risk and a sign of potential trouble.

This is like pouring gasoline on a roaring fire. It reminds me of a quote from Edward Chancellor’s book The Price of Time, which offered this gem:

“……as a rule, panics do not destroy capital; they merely reveal the extent to which it has previously been destroyed by [the taking on of excessive leverage in good times].”

It was a quiet week for Explorer stocks as mega tech momentum stocks have led a sharp rebound from the lows of April’s tariff-driven market pullback. This has led the broader markets to close near all-time highs.

But this is nothing compared with Spain’s IBEX 35 index, which is up almost 40% year-to-date, crushing the Nasdaq’s anemic 4% gain. Spain is now Europe’s fastest-growing major economy with electricity prices helping manufacturing and logistics. Spain brought in 94 million visitors last year and I was one of them. In 2024 alone, 170,000 people migrated from Latin America to Spain, further propelling growth and productivity.

Inflation cooled for the second straight month in May, the U.S. labor market seems back to pre-pandemic levels, and the economy is expanding at a low but steady pace.

Therefore, the Fed is holding back on interest rate cuts. Probably the right move. Keep the ammo dry for when it is really needed. This was a solid week for Explorer stocks with all making gains except for a small pullback in Super Micro (SCMI).

As many analysts focus on inflation and the job market, they miss that earnings per share for companies in the S&P 500 for the first quarter now look to be up 5.2% from a year earlier, according to FactSet. Since profits and profit growth are the lifeblood of an economy and stock market, it pays to watch them closely.

For this week’s new idea, we go to a Canadian-based company focused on a different resource and technology crucial to North America and beyond.

This morning, from Normandy to Washington, D.C., there will be ceremonies honoring the 80th anniversary of D-Day. Now, we are amidst a different type of struggle, and semiconductor chips are at the heart of it all. And today’s new Explorer recommendation is one of the more important cogs in that global struggle.

Inflation appears stuck at a much higher level than acceptable for the Federal Reserve so lower interest rates are on pause. Gold is one beneficiary.

This means that some high-flyer tech stocks may be vulnerable. Meanwhile, Japanese stocks remain near all-time highs.

Fortunately, we have exposure to both gold and Japan in the Explorer portfolio, and today we add to that exposure.

Markets remain on edge after Monday’s big selloff, Tuesday’s recovery, and yesterday’s down day. Some disruptive Explorer stocks were hit rather hard leading to Nio (NIO) being removed from the recommended list today while Super Micro (SMCI) is upgraded to a buy.

On Monday, trading in 401(k)s was more than eight times the daily average, the highest since 2020. My guess is that most of this activity was selling rather than buying.

This was a rather tough week for stocks though the financial media always goes overboard calling a 2% drop in the Nasdaq index a “plummet.”

For many analysts, copper prices have long been considered a better leading indicator regarding the health of the global economy. Bloomberg reports that Goldman Sachs has exited a long-term bullish position on copper while slashing its price forecast for 2025 by almost $5,000 a ton. The bank has been one of the biggest supporters of the industrial strategic metal, but the increasingly weak Chinese economy has crimped demand, plus excess inventories overhang supply resulting in copper prices being down almost 20% since May.

JPMorgan (JPM) is due to report results Friday, kicking off bank earnings season. Lately, the market seems to be more focused on earnings than Fed interest rates, and this is a good thing.

As markets move towards the “Great Rebalance”, looking to diversify portfolios with different asset classes and international stocks, the Explorer and I are headed to Europe, Asia, and Latin America during the next year. But today, stick to the U.S. and add a very familiar face to the portfolio.

The Federal Reserve has voted to lower interest rates by a half percentage point, the first since 2020 and more than many expected. The overwhelming Fed board vote suggests more rate reductions are likely this year. This Fed move was clearly already baked into markets but keep in mind that the Fed only controls overnight interbank interest rates. Nevertheless, this action will help support the market and boost interest rate-sensitive stocks such as real estate and utilities.

We need to begin with some bad news. Super Micro Computer (SMCI) stock tumbled 32% yesterday after its audit firm, Ernst & Young, resigned. The auditor said it had recently learned of information “which has led us to no longer be able to rely on management’s and the audit committee’s representations, and to be unwilling to be associated with the financial statements prepared by management.”

This week the Fed left interests rates again unchanged and Super Micro Computer (SMCI) became part of the S&P 500 index. An announcement of a two million convertible shares offering by Super Micro led to a pullback in the stock though long term, it’s smart to raise capital after the sharp rise in the share price.

Elsewhere, Washington is fixated on the potential push to force a change in the ownership of TikTok while China, as strongly expected, objects. This is a bit ironic since X, Instagram, Facebook, and Google aren’t available to Chinese citizens.

Luxury leader LVMH Moët Hennessy (LVMUY) CEO Bernard Arnault has a mantra that can be applied to business and investing: “In times of uncertainty, be patient.”

I would add that this requires playing both defense and offense.

Our offense has been working quite well of late: Super Micro Computer’s (SMCI) share price was up another 40% this week and is now up 300% since the start of the year. Sea (SE) had a good first week in our portfolio as well, up 22% after an encouraging financial report.

This was a difficult week for stocks. Yesterday the S&P 500 sank 2.3% while the tech-heavy Nasdaq declined 3.6%. Collectively, the so-called “Magnificent Seven” lost $768 billion in market value.

America does face some uncertainty but overall has a strong economy but, as I have highlighted, the stock market has become too concentrated at the top and debt is building up too rapidly. China, on the other hand, faces economic issues such as weak consumption, a property slump, 20% youth unemployment, and a struggling stock market in the red so far in 2023. Given the size and importance of China’s economy, this impacts all markets.

Some retail-related stocks are poised to benefit from Black Friday and beyond.