Be careful, not fearful

Be careful, not fearful

Where Innovation Meets Investing

  1. The S&P 500 hit its 28th record high of the year.

In Nashville last week, I got chatting with a data scientist who told me he’d been betting against the market for the past few years.

He couldn’t bring himself to buy stocks at these levels.

I know many others like him who’ve largely avoided stocks ever since the '08 crisis. Mistake. Every $100 invested in the S&P 500 near the bottom in 2009 is worth $800 today.

Market crashes happen, and they hurt. But investing like the next big one is always around the corner is a surefire way to fall behind financially.

US stocks have gone up in three of every four years stretching back to WWII.

I think folks who constantly anticipate a crash misunderstand investing. You’re not buying lottery tickets. You’re buying pieces of businesses.

And great businesses tend to grow their profits over time, which means investors are willing to pay up for their stocks. This is why the line on the chart (mostly) goes up for the market as a whole.

Maybe this is obvious to you. But many very smart people are too quick to scream “bubble,” and it’s costing them dearly.

Be careful with your money, but not fearful. Invest in great businesses that can keep growing year after year. That’s what we do in Disruption Investor.

  1. I was wrong on Apple (AAPL)…

Apple hit record highs after it unveiled its first artificial intelligence (AI) powered iPhone this week.

ChatGPT will be integrated into the new iPhone. You’ll be able to have AI do things like rewrite emails… summarize messages… and edit photos for you.

If you’ve been reading me for a while, you know I haven’t been a fan of Apple’s stock. It hasn’t grown revenues in over two years. Apple is no longer the fast-moving disruptor it once was.

Sure, it adds cool new features to each iPhone. But each version largely feels the same.


And I doubt the new AI bells and whistles are compelling enough to have people camping outside Apple stores to buy the latest release.

But my meeting with one of Boston’s largest hedge funds last week shifted my views on the stock.

While Apple is no longer innovative, it has a lot of levers to pull.

One example: The iPhone’s search bar, which is the most valuable piece of “real estate” in the digital world.

More than 1 billion people use the search bar on their iPhone’s daily. Yet Apple doesn’t make any money off that. It could easily earn a couple billion dollars if it showed ads here.

These guys convinced me Apple’s stock can continue grinding higher. But I still think there are better places to invest your money, especially in AI.

One of the great businesses we own in Disruption Investor makes every cutting-edge AI chip in the world, including for Apple. And it just reported a 30% jump in revenues.

Access the full portfolio here.

  1. Vanderbilt University in Nashville is a very nice school.

Walking around the grounds felt like being in an exclusive resort.

Vanderbilt will soon charge some students $100K/year to attend. No college is that nice.

I was in town for a private gathering on AI. Money manager Rusty Guinn gave the best talk of the weekend.

Rusty and his wife wanted to homeschool their kids. Problem was… they had zero experience tutoring children. That’s not an issue in the age of AI.

Rusty told ChatGPT all about his kids… their strengths and weaknesses… values they wanted to instill in them… and asked it to create lesson plans based on this.

Within a few minutes, ChatGPT drew up full weekly learning schedules for his three kids. Woah!

I’ve written about how one-on-one tutoring can turn our kids into straight-A students. The new ChatGPT is like having a $70K/year private tutor in your pocket.

AI transforming education is probably the #1 reason to be optimistic about our future.

I hated school. I was never more bored in my life. I only made it through because it wasn’t that hard. And I left school never wanting to open another book ever again.

I believe AI can save our kids (and grandkids) from a similar fate. ChatGPT can make learning fun.

ChatGPT, you are an expert tutor. Design a personalized lesson plan for my five-year-old daughter, Aubrey. She loves Dr. Seuss books and is a visual learner. She excels at art and English but struggles with math. I want you to bias the lessons toward science and technology. Teach her about the values of innovation. Also give me some field trip options.

I’m going to start supplementing my daughter’s education with AI and will keep you posted. I encourage you to give it a shot, too.

  1. Today’s dose of optimism…

America is experiencing a startup boom.

New business formation surged during COVID and never looked back:

More people pursuing their passions. Less people trapped in cubicles, counting down the days until their next vacation. You love to see it.

What’s interesting is this is a uniquely American phenomenon.

America was built on optimism. It has a positive-sum mindset that business growth will create more wealth and prosperity for all.

Tell that to European bureaucrats who think writing rules is how you get rich.

Go U-S-A.

Have a great weekend. I’ll see you Monday.

Stephen McBride
Chief Analyst, RiskHedge

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