Business as Usual

Default is off the 'debate' table... Warren Buffett is 'all out' of Taiwan Semiconductor... 'I don't like its location'... An unsolvable problem... An update on cryptos... Gold's bullish pattern... Waiting on a breakout...

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We've got ourselves a deal – almost...

As we have long expected, our dear "leaders" in Washington, D.C. aren't going to let the U.S. government default on its massive debt and throw the world – including their own insular political parts of it – into chaos.

The top Republicans and Democrats in Congress were on television today, saying as much. House Speaker Kevin McCarthy told CNBC this morning...

I think at the end of the day, we do not have a debt default.

President Joe Biden later spoke from the White House to say...

We're going to come together because there is no alternative.

There have obviously been negotiations among the major parties, and we'll learn the details soon enough. But the main point today is that the outcome of this debt ceiling "debate" will be the same as all the others that politicians of all stripes have had for decades.

Uncle Sam's debt limit will be going up, so it can pay for spending that Congress already approved. So get ready for all of the consequences of that (again).

Treasury Secretary Janet Yellen has said the "X date" for a U.S. debt default is as early as June 1, so I (Corey McLaughlin) would expect some developments – be it a stopgap measure or something more substantial – before then.

The markets appeared to react positively to the news today. The benchmark S&P 500 Index was up about 1%, though there was more than one reason for that... The financial sector – which got a separate boost from suddenly surging regional bank stocks – was up 2%.

And just like that, he's gone...

In a Monday filing, Warren Buffett's Berkshire Hathaway (BRK-B) disclosed that it was no longer holding any stake in Taiwan Semiconductor Manufacturing (TSM), the world's largest chipmaker.

Last week, we wrote about how Buffett had sold about 85% of Berkshire's stake in the chipmaker earlier this year, which his holding company had purchased for more than $4 billion just a few months earlier. (No word yet on the profit or loss that Berkshire took on this investment.)

The quick sale was unusual for a guy known for long-term value investing, and even rarer is selling out completely, but that is what has happened. Berkshire has sold the remaining 15% stake.

And the reason is fairly straightforward...

The geopolitical risks in Taiwan today – which, let's be clear, include no less than a Chinese military invasion – worry Buffett more than the rewards excite him about holding shares in the business. There are other places he can and has put his money... like, recently, Japanese financial companies.

I shared some details about this last week via our colleague and Stansberry Venture Technology editor Dave Lashmet, who has been all over this and the semiconductor/Taiwan/China/U.S. story for years. Dave recently recommended a different chip company to his subscribers that should benefit from a military conflict in Taiwan.

But back to Buffett...

He said on an analyst call earlier this month of Taiwan Semiconductor, which he still called one of the best-managed and most important companies in the world, that simply...

I don't like its location, and I've reevaluated that.

This all sent me on a search for advice that Buffett may have given over the years about when he decides to sell companies from the Berkshire Hathaway portfolio, and I want to share the most relevant comment I found.

It's from Charlie Munger, Buffett's longtime business partner (and notorious cryptocurrency hater, but we won't hold that against him in this discussion). Munger said in a 2016 interview for an HBO documentary about Buffett...

We sell them if they present problems we just can't solve.

That's one to write down somewhere for investment advice, or even life in general. Today, Buffett's recent behavior is a warning and insight, too – about the real influence of geopolitical tensions between the U.S. and China, with Taiwan squarely in the middle.

There are other places to put money to work instead.

A crypto portfolio 'built for anything'...

On a related note, we talked yesterday about why "weighing the odds" rather than making investment decisions based on predictions or what you might hear from many mainstream financial pundits can be so valuable.

Another case in point... which arrived to subscribers of our colleague Eric Wade's Crypto Capital newsletter yesterday. In a brand-new monthly issue, he wrote about the importance of building a crypto portfolio "that's ready for anything"... and how to do it right now.

Sentiment around cryptos has been extremely negative for much of the past year after they sold off in 2022. Now, some people don't want to touch bitcoin, Ethereum, or any other coin anymore, but that's probably the exact wrong way to think about things.

Instead, weigh the odds... Since the start of the year, for example, bitcoin – the headline cryptocurrency – is up 60%. And it has been trading sideways much like stocks, except since the middle of March. As Eric wrote...

Right now, cryptos are trading in a tight range... They're being tugged between entering a new raging bull market and economic pressures pulling down speculative assets.

Yet longtime subscribers who have followed Eric's advice in his model Crypto Capital portfolio are still sitting on massive gains... As you see in the "Top 5 Crypto Capital Open Recommendations" table at the bottom of every Digest e-mail, these include a 619.6% gain in bitcoin, a 1,455.7% gain in an Ethereum investment, and gains of 800% to 1,100% in three other coins. As Eric continued...

We believe the potential gains we can make from the next bull market will more than make up for any losses we might see from a dip. So we want to be patient and hold on to great projects.

He and analysts Andrew McGuirk and Stephen Wooldridge II then ran through an update of the Crypto Capital model portfolio. They explained why it's well prepared for a bull run and why some blockchain solution-focused recommendations "should survive a recession" and "they may even make us money."

They also recommended selling one holding in the portfolio and gave updates on the latest sentiment and volatility trends in the crypto space today. If you haven't taken a look at your crypto holdings in a while, be sure to check out Eric's latest issue. Existing Crypto Capital subscribers and Stansberry Alliance members can find his latest advice here.

Lastly, take a look at gold...

For those who have been patiently waiting for the gold price (in dollars) to break out, that moment might be getting closer, even with a roughly 2% sell-off over the past two days. Our DailyWealth Trader editor Chris Igou published a technical analysis of gold yesterday...

Gold has been showing a "bull flag" pattern that has been known to precede sharp moves higher, Chris says, again from a technical-analysis standpoint. Take a look at this one, and read Chris' full note for more...

We repeat, though: Gold hasn't broken out just yet. As Chris writes...

It could trade sideways for a little longer before that happens. But given that it has been trading in this range for two years, and we're only 2% away from the high, we're likely close to the breakout. And once that happens, another vicious rally in gold is likely to get underway.

DailyWealth Trader subscribers are already up more than 20% in a gold trade recommendation, and Chris says there's still plenty of upside potential left. Existing subscribers and Alliance members can find the details here.

New 52-week highs (as of 5/16/23): Eli Lilly (LLY), OMRON (OMRNY), PulteGroup (PHM), and Verisk Analytics (VRSK).

In today's mailbag, feedback on our parlor game of "Name That Fed Horse" – timely again with the Preakness Stakes upcoming this weekend, just down the road from our offices here in Baltimore... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"We all had a good laugh over the horse names. (I thought everyone would send in 'Windbag' as the Fed's horse, so I didn't.)

"But seriously, here is a quote I came across when cleaning off my desk today: 'The Fed (and all government enterprises) pursues the path of least embarrassment.' – Jared Dillian of Daily Dirtnap

"I would like to see some (more) commentary as to how much value Stansberry's team feels the Fedspeak has. Is it all spitting into the wind? Or does it have value simply because the people believe it has value? Dillian made the comment that 'Many popular analysts are 'mood mirrors' who simply reflect back the popular sentiment.'

"Does the daily newspaper have any value at all if you don't have a birdcage in need of a lining?" – Paid-up subscriber Jacqueline G.

Corey McLaughlin comment: Great thoughts and suggestion, Jacqueline. It's definitely a topic worth exploring in more depth, and we will look to do so. But in general, I agree with the idea that listening to "Fedspeak" has value mainly because enough other people tend to believe it, or at least seem to want to hear it...

Fed officials also have no hesitation to do interviews to get their message out, which is then regurgitated by TV and other analysts.

I'm glad you quoted Jared also. He's an entertaining, bright market analyst for sure. And I simply love the name of his newsletter, the Daily Dirtnap, and the content. Not sure if this is where you heard it, but Jared actually made that comment about the Fed during a presentation at our Stansberry Conference last year in Boston, and he'll be back at this year's event in October in Las Vegas. (Tickets are now available here.)

All the best,

Corey McLaughlin
Baltimore, Maryland
May 17, 2023