What you missed last night; The 'Magnificent Seven' as a single stock; More on a big problem at Meta Platforms; The Most Important Debate on Wall Street: Is Inflation Licked?; A big win on my family's recent international flight

1) Last night, my friend and colleague Joel Litman went on camera to deliver an urgent crisis warning...

In fact, another one of my colleagues teamed up with Joel to share the story: Wall Street legend Marc Chaikin, the founder of our corporate affiliate Chaikin Analytics.

Keep in mind that I'm overall bullish on the economy and stock market... but it's always good practice to pay attention to what smart folks on the other side of the argument are saying.

In their broadcast, Joel and Marc shared an investment blueprint that they say could save your nest egg from a dramatic shift they see playing out on the deepest level of the market. It's a shift they say could have a devastating effect on your short-term wealth if you're not prepared.

Meanwhile, Joel and Marc also say there's a little-known investment that could absolutely skyrocket in the early weeks of 2024 – to potentially deliver 5 times gains in the new year.

If you missed the special broadcast, you're in luck... You can still watch a replay of it and get all the details directly from Joel and Marc right here.

2) Following up on yesterday's e-mail, in which my analyst laid out the case that the rally in the "Magnificent Seven" tech stocks – Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), Nvidia (NVDA), Meta Platforms (META), and Tesla (TSLA) – was long in the tooth, he shared this interesting follow-up analysis in a private e-mail:

As a fun follow up, I summed the names to invent a single merged company called Mag7, which is a leader in social media, e-commerce, advertising, electric vehicles, software, and GPU chips. Here are the truly astonishing stats on Mag7:

• The stock (the average of the seven) is up a staggering 71% this year.

• It has an $11.7 trillion market cap, equal to half of the U.S. GDP (let that sink in).

• It trades at 33.1 times current (2023) earnings and 27.5 times forward (2024) earnings.

• Last quarter it reported earnings-per-share ("EPS") growth of 51%, the best quarter of this current cycle.

• In the current quarter, EPS growth is expected to be 44%.

• However, as the year-over-year comparisons get more and more difficult, EPS growth is expected to decelerate dramatically to 30%, 14%, and a mere 8% over the next three quarters.

Here's a table with the data:

(Note that these are all adjusted net income numbers. If we actually charged for stock compensation, it would be a little bit more expensive... but that's not a battle we need to fight to make this case.)

In summary, Mag7 has an enormous valuation despite massively decelerating growth. That doesn't sound like a stock that I would want to own, even if this company does make the coolest headsets/cars/cloud solutions...

I agree with my analyst, which is why many of my colleagues here at Stansberry Research are focused on other sectors to find the next big winners.

In fact, in the latest issue of Stansberry's Investment Advisory – released this past Friday – my team and I identified an opportunity in a world-class business led by a legend in the investing world... and this stock is undervalued today.

If you aren't already a subscriber, you can find out how to gain instant access to this recommendation – and the rest of the Investment Advisory portfolio of open recommendations – by clicking here.

3) Speaking of one of the Magnificent Seven – and following up on two stories in last Tuesday's e-mail, Instagram's Algorithm Delivers Toxic Video Mix to Adults Who Follow Children and At Meta, Millions of Underage Users Were an 'Open Secret,' States Say – the Wall Street Journal published this story on Friday: Meta Is Struggling to Boot Pedophiles Off Facebook and Instagram. Excerpt:

Meta Platforms has spent months trying to fix child-safety problems on Instagram and Facebook, but it is struggling to prevent its own systems from enabling and even promoting a vast network of pedophile accounts.

The social-media giant set up a child-safety task force in June after the Wall Street Journal and researchers at Stanford University and the University of Massachusetts Amherst revealed that Instagram's algorithms connected a web of accounts devoted to the creation, purchasing and trading of underage-sex content.

Five months later, tests conducted by the Journal as well as by the Canadian Centre for Child Protection show that Meta's recommendation systems still promote such content. The company has taken down hashtags related to pedophilia, but its systems sometimes recommend new ones with minor variations. Even when Meta is alerted to problem accounts and user groups, it has been spotty in removing them.

The tests show that the problem extends beyond Instagram to encompass the much broader universe of Facebook Groups, including large groups explicitly centered on sexualizing children. Facebook, which counts more than three billion monthly users worldwide, promotes its groups feature as a way to connect users with similar interests.

Meta claims to be taking this seriously...

Meta said its task force, which at times has numbered more than 100 employees, had banned thousands of hashtags that pedophiles used to promote or search for content sexualizing children, removed pedophilic accounts and provided more guidance to content reviewers. The company said it is working to bolster software tools to restrict its algorithms from connecting pedophiles and to help target the forums and content that attract them.

... but it's clear that this isn't a high priority:

Meta in recent years has shifted attention and resources to artificial intelligence, virtual reality and the metaverse. Broad cost cuts over the past year have resulted in the layoffs of hundreds of safety staffers focused on "high severity" content problems, including some child-safety specialists, according to current and former employees.

If Meta can invest tens of billions of dollars in AI and the metaverse, it can certainly spend a lot more to keep children safe from predators... so hopefully the media, regulators, and politicians will hold the company's feet to the fire on this.

In light of this, I was glad to see this news of a lawsuit in the WSJ yesterday: Facebook and Instagram Steer Predators to Children, New Mexico Attorney General Alleges in Lawsuit. Excerpt:

Facebook and Instagram recommend sexual content to underage users and promote minors' accounts to apparent child predators, the state of New Mexico alleges in a lawsuit against parent company Meta Platforms and its CEO.

The civil lawsuit, filed Tuesday in New Mexico state court, alleges that "Meta has allowed Facebook and Instagram to become a marketplace for predators in search of children upon whom to prey." It also claims that Meta has failed to implement protections against usage by children below the age of 13 and has targeted the age-related vulnerabilities of children in the interest of increasing its advertising revenue. The suit says Chief Executive Mark Zuckerberg is personally responsible for product decisions that aggravated risks to children on Meta's platforms.

The New Mexico attorney general's office filed the suit after it ran an investigation that included setting up test accounts on Instagram and Facebook purporting to other users to be those of teenagers or preteens, including artificial-intelligence generated photographs of the fictional account-holding children. The suit says that Meta's algorithms recommended sexual content to those accounts and that they were inundated with explicit messages and sexual propositions from other users.

4) Following up on Tuesday's e-mail about inflation, I believe this problem is solved, which means that the U.S. Federal Reserve should be finished raising rates.

That does not mean, however, that I think the Fed is going to start cutting rates anytime soon, so I'm actually more on the pessimists' side of the debate about inflation covered insightfully in this WSJ article: The Most Important Debate on Wall Street: Is Inflation Licked? Excerpt:

Progress on inflation has been decisive enough that most investors think rate increases are over. But many say markets are underestimating how long the Fed could keep rates at current levels.

They say that the economy has cooled – but not enough.

I think that the economy will remain strong next year, which will be good for corporate profits and stocks... but investors shouldn't count on an additional tailwind from Fed cuts.

5) My wife, three daughters, and I hit the jackpot on our nearly 16-hour flight home from Johannesburg to Newark last week...

Since we were stuck in Economy class, we were looking for empty groups of three seats so we could lie down and sleep – and that's what all five of us were able to get thanks to some clever planning.

When we checked in, we noticed that there were a handful of three-seat groupings available in rows 35 and 45 to 48 (see the seating chart we saw below – our assigned seats in row 53 are circled in green). They were still there when we looked right before we boarded, so we let everyone else go ahead of us and take their assigned seats, and then I snagged the three in row 35, Emily and Alison grabbed the middle and right three in row 46, and Susan and Katharine did the same in row 53 (all circled in red).

SCORE!

(But don't share this tip widely, as it doesn't work if everyone is trying to do the same thing!)

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.