Mission 47.24 Target

The Briefing Room

Last week, the markets sent a mixed signal, underscoring the complexity of the current landscape. The Nasdaq dropped 3.6%, the S&P 500 shed 2.3%, and the Russell 2000 plummeted 5%. These movements introduce a compelling data point that challenges my ongoing theory: Are we witnessing a shift away from dominant large-cap indices in favor of small- to mid-cap equities? While the theory faces pressure, the broader slowdown in equities—particularly after breaking all-time highs—suggests the market may continue cooling as we move into Week 47.

On the crypto front, the market is bustling with activity. The total cryptocurrency market cap surpassed $3 trillion, marking a significant milestone. Bitcoin soared to approximately $90,000 per coin, Ether held steady at $3,000, and Solana traded at $232. Unlike traditional markets, the crypto world doesn't pause for weekends, keeping the momentum alive and maintaining its distinct rhythm.

While diving into global equities, I stumbled upon an illuminating chart by Callum Thomas, Head of Research at Topdown Charts. It highlights the strong potential for Emerging Markets (EM) to break out. China, a key component of the MSCI EM Index (27%), is showing early signs of directional movement—a result, perhaps, of the recent surge in Chinese stimulus.

China's weight in the MSCI EM Index is amplified by major players like Tencent Holdings ($TCEHY), Alibaba ($BABA), and Meituan ($MPNGY), which rank among the top five constituents. These stocks are categorized as American Depositary Receipts (ADRs)—securities that allow US investors to own shares of foreign companies, traded on US exchanges. Understanding ADRs is vital, as they bridge international equity markets for broader participation.

The dynamics across both equities and crypto suggest multi-asset divergence, with opportunities opening in less traditional corners of the global markets. How these themes evolve will define the upcoming weeks, but the narrative is clear: markets are recalibrating, setting the stage for potential inflection points.

Visiting Past Intelligence

This debrief pivots toward revisiting a theme rather than individual stock names, bringing the "Spend Narrative" back into focus—a concept explored across multiple Agent Reports. As a brief disclaimer, I hold substantial personal exposure to this space, so bear with me as I “talk my book.”

Recent developments in the financial sector are framing the narrative: the Federal Reserve has delivered 75 basis points of rate cuts over the past few months. However, the effects have been overshadowed by headlines around the Yen/Carry Trade dynamics, election outcomes, and earnings seasons. My belief is that another 25 bps rate cut could materialize in December, barring any drastic shifts in Fed policy.

Yet, if the anticipated rate cut doesn’t happen, regional banks—like those in the $KRE ETF—stand vulnerable. Unlike larger financial institutions, these banks lack diversification from M&A, advisory services, or global deal-making; their cash flows lean heavily on deposits. A prolonged slowdown in the rate-cutting cycle could intensify this strain, hurting their earnings further.

The "Spend Narrative" 

The inspiration for this framework comes from the seminal work of Nobel Prize-winning economist Dr. Robert Shiller and his book, "Narrative Economics." Shiller's insights on how popular stories influence economic behavior and markets led me to explore the psychological factors driving consumer and business spending—a cornerstone of the Spend Narrative. 

This theme stretches across financials and fintech, with names like $SQ, $PYPL, $AFRM, $BILL, $PAY, $FOUR, $TOST, $SOFI, and $UPST forming its backbone. These stocks align with a macro trend rooted in consumer behavior: when markets hit new highs, there’s a psychological impact that drives individuals to spend more.

Think of it this way: as 401(k)s swell, younger demographics—especially those holding crypto assets—may justify saying yes to a dinner date, booking casual trips, or indulging in lifestyle splurges. On the flip side, homeownership remains unattainable for many, keeping discretionary spending in focus. Payment systems like Toast ($TOST) and Block ($SQ), as well as Buy Now, Pay Later players like Affirm ($AFRM), are primed to benefit.

Here’s a look at the recent moves:

- $TOST: up 40% since initial coverage.

- $PYPL: up 23%. 

- $SQ: more reluctant but now up 22%, offering opportunities to increase exposure along the way.

- $AFRM: surged 31%. 

- $UPST: climbed an impressive 45% after debuting on our Target Acquisitions List. 

While these names cater primarily to consumer spending, others like $BILL and $PAY tap into business expenditure. As market sentiment improves, businesses could unlock newfound spending power, reinvesting in R&D, CAPEX, and other growth initiatives. A favorable political landscape—with potential tax reforms—could further amplify this trend.

Caution Amid Optimism 

This is not a call for unbridled enthusiasm. The tide of market weakness offers opportunities to buy into the dip, but headwinds remain. Market sentiment, consumer confidence, and Fed policy are critical variables that could dictate the pace and scale of this broader trend.

The Spend Narrative, inspired by Shiller’s focus on the power of stories, is about capturing the ripple effects of economic inflection points. Whether consumer-driven or business-oriented, this theme has layers worth exploring in both the short and long term.

Food for thought, brought to you by the Agent. 

Novum Cognitio: New Knowledge -Tesla’s Path to a Lofty Valuation of $510/Share 

This week’s Novum Cognitio turns its gaze to Tesla ($TSLA)—a name surprisingly absent from past discussions, but one whose time has come. Tesla’s narrative has been a blend of volatility and vision, and I believe it’s primed for a move toward a lofty valuation of $510/share. Here’s a breakdown of why, from three critical perspectives:

1. Technicals 

Tesla has rebounded impressively this year, up 32% year-to-date. It’s a long way from the January 2023 slump at $101/share or even the mean reversion to $138/share in April 2024. The stock has consolidated, forming what looks like a local bottom—and at the cheapest it may get. Consider the broader implications: during this consolidation phase, Tesla was offering Model 3 leases as low as $202/month, a move signaling demand stimulation strategies.

Looking ahead, the technical chart suggests Tesla is poised for a breakout toward $365-$375. However, we should anticipate pullbacks along the way, likely tied to macroeconomic data points or market digestion phases. Still, this trajectory sets the stage for a sustained push to higher valuations.

2. Fundamentals 

Admittedly, the fundamentals have been a mixed bag. Recent quarters have seen -9% earnings misses and declining revenues, as outlined in analyst reports. But Tesla’s most recent earnings report delivered a 21% earnings surprise, a pivotal moment in regaining investor confidence.

Tesla's unique position in the market remains compelling: its diversified revenue streams, from EV sales to energy solutions and autonomous software, provide a multi-pronged growth strategy that can weather economic fluctuations. Despite near-term headwinds, Tesla continues to innovate, which will likely reflect positively in its forward valuations.

3. Sentiment 

The sentiment surrounding Tesla is turning increasingly favorable, spurred by key macro and political developments. For instance:

- Bloomberg Report suggest regulatory easing for autonomous vehicles in the US under the Trump administration. This shift could bolster Tesla’s position as a leader in autonomous driving and drive positive public perception.

- Tesla’s stock rallied +13% the day after the election, a possible reflection of market optimism regarding future policy direction.

- Elon Musk, often a polarizing figure, appears to be enjoying more favorable terms in executing ambitious projects. This could translate into smoother execution of Tesla's pipeline initiatives, further bolstering investor confidence. Alongside SpaceX and

Valuation Outlook 

Tesla's road to $510/share isn't without its hurdles, but the confluence of technical momentum, fundamental resilience, and improving sentiment creates a compelling case for this target. Whether driven by a breakout in price action, regulatory tailwinds, or investor re-engagement, Tesla’s narrative is regaining steam—and $510/share may be closer than it appears. 

For those tracking broader themes within disruptive innovation and consumer adoption cycles, Tesla’s current positioning could serve as both a short-term trading opportunity and a long-term value play.

Target Acquisition

The Field Report

Bruce Lee’s Philosophy on Water and how to be malleable to all situations…give it a watch

“Acquire empirical knowledge & apply it with integral focus”

Thank you for your time

Nedrick H.M

EquityAgent ∫︎