Morning Download from Invincible Money

Personal finance + economics + markets

Finance in 5 minutes a day to help you make better money decisions.

Good morning investors! Goldman and others are positive on the economy thanks to A.I. stocks pulling up returns, an Apple-Disney merger rumor has surfaced again and we discuss what a value investor is.

📊 Economy 

Goldman likes A.I.

Goldman Sachs analysts believe that the S&P 500 is undervalued due to the potential of artificial intelligence (AI).

• They say that AI could boost earnings by 10% to 15% per year over the next decade.

• This would add $1.2 trillion to $1.8 trillion to the market capitalization of the S&P 500.

• As a result, they have a buy rating on the index, so buying an index fund now may be a good idea.

Their strategist said this, "We assume that widespread AI adoption occurs in 10 years and lifts trend real GDP growth by 1.1 percentage point for 10 years. In this scenario, earnings per share in 20 years would be 11% greater than our current assumption and the S&P 500 fair value would be 9% higher than today, holding all else equal,"

He sees the S&P 500 going from today’s 4,274 to 4,719.

Druckenmiller also likes A.I.

• Investor Stanley Druckenmiller says he still expects a hard landing for the US economy due to persistent high inflation.

• However, he believes “AI is real” and said "If it's as big as I think it is, Nvidia is something we're going to want to own for at least two or three years. Not for 10 months. And maybe longer."

Yardeni Research is Looking for Mother of All Melt Ups

The company said a massive melt-up could be happening as people buy into A.I. stocks. This typically happens at the end of a bull market, not the beginning.

• "Now that the latest fiscal cliff has been averted, is another MAMU underway led by stocks that are AI frenzy plays? Maybe," he said.

Yellen sees more bank consolidations

Treasury Secretary Janet Yellen said that she expects more bank consolidation in the coming years.

• She said that this is likely due to the increasing cost of compliance and the need for banks to have a larger scale to compete.

• Yellen said that she would not want to see the diverse banking system threatened by further consolidation, but it would be understandable.

📰 News

🏌🏽‍♂️ Yesterday I wrote about the PGA-LIV tour merger and not everyone is happy as Americans are slamming the deal, accusing the Saudi’s of sportwashing.

I had never heard of the term, but it’s when a country uses sports to improve their image. The PGA is being accused to taking “blood money” from the Saudis.

📈 Stocks

CNN CEO had a short run. Chris Licht is out after just over a year. He presided over mass layoffs, the CNN+ failure and sinking ratings. In fact, ratings were down 25% compared to last year. CNN is owned by Warner Bros. Discovery [WBD +8.43%], whose stock is down 25% YTD, but are up around 8% on the announcement.

Apple - Disney Merger?

Apple [AAPL -0.78%] has been rumored to be interested in buying Disney [DIS +0.39] for some time and the launch of Apple’s Vision Pro goggles have renewed speculation since the goggles need a killer app to be successful.

A deal between Apple and Disney would be a major shakeup in the entertainment industry. It would create a media giant with a vast portfolio of content and brands. It would also give Apple a major foothold in the streaming market.

However, note that this is just speculation and surfaces every couple of years.

There are some potential obstacles to a deal. For example, the U.S. government might block a deal on antitrust grounds. Additionally, Disney's shareholders might not be willing to sell the company for a price that Apple is willing to pay.

Here are some of the benefits of a potential Apple-Disney merger:

• Increased content library: Apple would gain access to Disney's vast library of content, including movies, TV shows, and sports programming. This would give Apple a major advantage in the streaming market, where content is king and would give them a “killer app” for the new Vision Pro googles.

• Global reach: Disney has a global reach, with operations in over 100 countries. This would give Apple a much-needed presence in international markets.

• Brand recognition: Disney is one of the most recognizable brands in the world. This would help Apple to attract new customers and grow its business.

Here are some of the challenges of a potential Apple-Disney merger:

• Antitrust concerns: The U.S. government might block a deal on antitrust grounds. This is because the combined company would have a dominant position in the entertainment industry.

• High price tag: Disney is a large and valuable company. This means that Apple would have to pay a high price for it.

• Cultural fit: Apple and Disney are very different companies. This could lead to cultural clashes and make it difficult to integrate the two companies.

🔐 Crypto

Cathy Wood buys more Coinbase [COIN +2.54%].

Cathie Wood's Ark Investment Management LLC bought 419,324 shares of Coinbase as it tumbled as much as 21% on Tuesday. This increased Wood's firm's stake in the cryptocurrency exchange operator to more than 11.7 million shares, or 6.3% of shares outstanding.

Bitcoin is the winner with SEC lawsuits

The SEC has sued both Binance and Coinbase this week, but Bitcoin is having a great week, up 5% yesterday (before giving up the gains) and another 5% Tuesday.

Why? The SEC has made is clear Bitcoin is not a security, so it won’t be getting sued. Who would they sue anyway?

This tweet from the CEO of bitcoin financial services firm Swan Bitcoin is indicative of the feelings Bitcoiners are having this week:

💰 Be a Better Investor

🧠 Get Smarter

What is a value investor?

In short, it’s an investor who seeks to buy assets that are trading for less than their intrinsic value.

Value investors believe that the market is often irrational and that assets can be undervalued for a variety of reasons. They look for stocks that are trading at a discount to their intrinsic value, which they calculate using fundamental analysis. Value investors typically hold their stocks for the long term, believing that the market will eventually correct and that they will be rewarded for their patience.

Seth Klarman’s value investing

Klarman is known for his book "Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor," which was first published in 1991. The book is a classic text on value investing and has been praised by Warren Buffett and other value investors.

Here are some of Seth Klarman's investment strategies:

• Buy undervalued assets with a margin of safety.

• Invest for the long term.

• Be patient and disciplined.

• Do your own research.

• Don't follow the crowd.

👩🏽‍⚖️ Legal Stuff
Nothing in this newsletter is financial advice. Always do your own research and think for yourself.