How AI and Levi's Jeans Could Make You A Lot of Money

Talking Equities is a weekly newsletter that provides information regarding equity analysis, investor spotlights, market conditions, and investing strategies. All information provided in Talking Equities should be considered an opinion and not a fact. All information should also be considered as strictly educational. While I would love to claim I have all the answers to cracking the stock market, I simply do not. Invest at your own discretion!

Hello Investors,

The tech market continues to barrel upwards, regardless of consumer savings running dry and the majority of the S&P 500 experiencing a decline. There is really is no end to the absurdity that is the AI bubble.

In this week’s newsletter we will be looking back in history to discover an investing strategy that I believe will help you discover opportunities that most retail investors aren’t looking at. We will also dive into what each economic metric means and how it can help you make investment decisions in the future.

Oh yeah, and I lied about not talking about Roaring Kitty. Stick around till the end to learn why the meme investor now has $245 million invested in the dog food company Chewy.

Let’s jump in and get started with some numbers.

All values are weekly and based on 06/28/2024 data
Index metrics are weekly. Economic metrics vary depending on release schedule.

This week I thought it would be helpful to go through these metrics and break down what each of them mean. After all, what’s the point of tracking these numbers if we don’t know how to use them?

Below is a comprehensive guide to what each of these metrics tells investors and how they can guide your investment decisions.

1. S&P 500 - This metric tracks the top 500 companies in the U.S. stock market. It is comprised of the largest market cap companies, meaning they are the largest valued companies in the United States.

2. NASDAQ - The second largest market cap index in the United States. It is largely comprised of U.S. tech stocks and is a good metric for assessing the value of the technology sector.

3. Dow - One of the oldest indices created and is a metric widely used around the world. The main difference between the Dow and other indices is that it is price-weighted instead of market-cap-weighted.

4. 10-Year - The 10-year treasury bond is a metric that investors use to establish what is known as the “risk-free rate”. This is because investors can allocate their money into a 10-year treasury bond and have a guaranteed return at that rate in 10 years (as long as the U.S. economy doesn’t implode in that amount of time).

5. Bitcoin - Bitcoin has become the main metric to determine the value of cryptocurrency. It is the most widely used and commonly accepted coin.

6. GDP - The GDP, or Gross Domestic Product, measures the economic health of a nation. Many investors look at the overall GDP of the U.S. to determine the economic standing of the stock market. GDP is comprised mainly of consumer spending, government spending, investment allocation, exports, and imports.

7. CPI - CPI, or Consumer Price Index, represents the purchasing power of the consumer. This is an important metric because it shows how likely consumers are going to make purchases in the future.

8. PPI - PPI, or Producer Price Index, is similar to CPI however it measures the pricing power of the producer. If the PPI is increasing, the producer is receiving a higher price, which means the effects of inflation are likely occurring.

9. CCI - CCI, or Consumer Confidence Index is a metric used to determine how optimistic the consumer is about the economy. The psychological view of the consumer is important because it gives investors more insight into consumer spending behavior which comprises around 70% of U.S. GDP.

10. Unemployment Rate - The U.S. unemployment rate tells investors how constricted the economy is. If the unemployment rate is low, that means U.S. citizens have more money from their jobs and are more likely to spend. It also means that companies are expanding and producing more monetary flow. If the unemployment rate is high, consumers will be spending less and companies are likely to be experiencing less revenue.

11. Interest Rate - The U.S. interest rate is a metric used to determine the borrowing power of consumers and companies. If the interest rates are high, less money will be circulating in the economy because consumers and companies are less likely to purchase using credit.

12. Inflation Rate - The inflation rate is a metric that measures the rate at which prices are increasing. It also measures the strength of the dollar as price variability changes over time. 

Levi’s Jeans Could Make You A Lot of Money

We’re kicking it off strong this week with a story I recently came across about how Levi’s Jeans was created. By now you’ve seen the title and have probably thought to yourself, “How on Earth are AI and Levi’s Jeans anywhere near relatable?” In this week’s story of “Author’s Opinion” I will show you not only how they are relatable in our modern era, but also how the creation of Levi’s jeans can be translated to immediate application and potentially make you a lot of money as an investor.

Unless you’ve been living under a rock you know how prevalent AI has become in our society. NVIDIA has quickly rushed to the top of the S&P 500, with its market cap being larger than the entire German economy. If this isn’t a signal that a major societal shift is happening, then I don’t know what is.

NVIDIA has been the center of many news articles, broadcasts, and videos; it has drawn billions of dollars from retail investors over the last year. At this rate, it continues to grow and astonish investors with how resilient it is.

The S&P 500 has quickly become dominated by six companies, NVIDIA, Microsoft, Apple, Amazon, Meta, and Alphabet. So much so in fact, that these six stocks comprise a third of the entire S&P 500. Not only have all of these companies placed a major bet on AI, but major hedge funds and private investors have also made their claim.

With the world in full focus on the AI rush, it can be hard to determine where you can get your own piece of the pie. After all, there’s got to be a way that you can make money with all of this new potential being introduced to society, right? This is a correct assumption, but maybe not in the way that you are currently thinking.

I believe that history is a great teacher of what can happen in the future, so let’s take it back to 1848 when news of gold in California caused around 300,000 people to enter into a mass frenzy to make their fortune on the West Coast.

During this time, many families were willing to take on mass hardships holding the dream of achieving an even better life. Many lost their lives and were subject to major illnesses, starvation, and injuries. I give them props, I don’t think many in today’s society are cut out from the same cloth and would be able to do the same thing.

Here’s where the story starts to tie into modern application. Intrigued by the mass number of people that were swarming to the West Coast, Levi Strauss saw his opportunity. What if he was able to profit off of the people who had their eyes set on making their fortune in California? He would move to the West Coast with this idea in mind and sell everything that a miner would need to find gold like pickaxes, gold pans, hats, overalls, dry goods, and jeans.

Selling his jeans turned out to be so successful that in a way, Levi Strauss found his own gold. He became the largest merchant to ship materials to the West Coast and made a fortune while doing it. That is how you recognize opportunity in a mass movement and make the most of it.

I believe that we have a similar situation on our hands today. Think about the similarities between the mass panic to invest in AI and the Gold Rush in California. There are so many opportunities like the one Strauss found that we can also take advantage of in the modern era. As investors, we should be looking for sectors that are directly and indirectly affected by the rapid growth of AI companies.

Here are some examples:

1. AI development is highly dependent on servers that have enough capacity to fulfill the amount of queries that are entered by users. Companies that are on the front line of developing these servers could hold huge potential.

2. Fulfilling AI prompts takes an enormous amount of energy, especially if large corporations are using it for their services. Companies that are at the forefront of fulfilling this energy capacity could hold huge potential.

3. Materials to create semiconductors like silicon, germanium, and fluorine are becoming ever more important as new hardware must be released to advance the development of AI. Companies that sell these resources could hold huge potential.

Do you see where I’m going with this? Everyone is so fixed on the pitcher throwing the ball that no one sees the runner stealing to second base. There is still an opportunity to make a lot of money in different sectors that aren’t specifically invested in the development of AI, we just need to think about the market as a machine filled with a lot of moving cogs rather than one giant piece.

Hopefully, this story adds perspective to your investing strategies moving forward and allows you to see different opportunities that could soon allow you to have your own gold rush.

Yes, I know I promised I wouldn’t discuss Roaring Kitty in last week’s newsletter, but the GameStop investor has returned with his newest scheme and it is as surprising and weird as ever.

A recent SEC filing exposed that Keith Gill, a.k.a Roaring Kitty, has a considerable position in the dog food distributor brand Chewy. Gill is said to have a position of around $245 million in Chewy, which equates to around 6.6% stake in the entire company.

While many of his followers were quick to assume that this would mean a sharp influx in price, the stock quickly dropped 7% after this news was released on Monday.

My theory is that investors who had a previous position in the company wanted nothing to do with the volatility and press that is associated with the meme investor. Many of the companies that Gill has targeted in the past, like GameStop and AMC, have been met with drastic price changes, and for an investor trying to mitigate risk, this is the last thing you want to worry about.

Gill’s strategy for investing in the company has yet to be exposed, but some speculators say it has something to do with Gill’s interest in Ryan Cohen, who co-founded Chewy and also recently became Chairman at GameStop.

That’s all for this week! If you found value in any of the points above I’d love to hear your feedback! Also, if there are specific topics that you would like to learn more about, or would like me to cover, please let me know!