🏖️ Invest to Enhance Your Life, Not Stress

What’s on the Menu 🍴

We’ve got an all-you-can-eat buffet of investing ideas, lessons from legend investors, and the latest news!

Let’s get right to it:

• Lessons From Michael Burry, The “Big Short” Investor 💎

• Solar Stocks: Darkness Before Dawn ☀

• Invest to Enhance Your Life, Not Stress 🏖️

• How To Build Wealth With Concentrated Bets 🎯

• The Hottest Crypt-Dough News 😋

Today’s newsletter is a 5 minute read.

Lessons From Michael Burry,
The “Big Short” Investor 💎

Michael Burry is a hedge fund manager famed for his bets against the subprime mortgage market in the lead-up to the 2008 financial crisis.

Immortalized in the book and film "The Big Short," Burry has also turned heads with successful ventures in tech, healthcare, meme stocks, and even cryptocurrency.

Investment Philosophy

Burry epitomizes the value investor's quest for assets priced below their intrinsic value. His independent thinking and intensive research into fundamentals are equally noteworthy.

A contrarian at heart, Burry stands by his motto: "I'm not paid to be popular. I'm paid to be right."

Case Study 1: The Big Short

• The Setup: Foreseeing the 2008 crash, Burry examined mortgage data and detected a toxic rise in subprime lending.

• The Play: He persuaded investment banks like Goldman Sachs to offer him credit default swaps against subprime mortgage bonds.

• The Outcome: Scion Capital, his hedge fund, soared by almost 500% as the market crumbled, making billions for Burry and his investors.

Case Study 2: GameStop

• The Setup: Amid Reddit-driven fervor, GameStop shares surged to unsustainable heights in early 2021.

• The Play: Burry positioned himself with GameStop puts, options giving the right to sell at a specified price.

• The Outcome: As expected, the stock imploded, fortifying Burry's knack for recognizing market follies and capitalizing on them.

Lessons from Losses

Even Burry has faced setbacks; his short on Tesla in 2021 materialized as a loss. The critical takeaway is timing; market mania can defy logic in the short term.

It underscores the importance of risk management and the willingness to admit when you're wrong.

Quirks and Anecdotes

Burry, known for his obsessive attention to detail and combative online presence, has Asperger's and often deletes his tweets.

He's regarded by many as an autistic role model and is lauded for promoting awareness around the condition.

Legacy and Takeaway

Burry’s exploits validate that meticulous research can uncover overlooked opportunities, irrespective of fund size.

His methods serve as a playbook for investors:

1. Think independently; defy herd mentality.

2. Diligence and risk management are key.

3. Be ready for short-term pain for long-term gain.

"Volatility is not risk. Risk comes from not knowing what you're doing," cautions Burry.

These words echo the core philosophy that has made him one of the most impactful investors of our time.

Solar Stocks: Darkness Before Dawn ☀ 

Few sectors of the market have suffered worse than solar stocks have thus far this year.

The carnage in this group has been absolutely brutal, with no positive returns year-to-date among the major publicly traded solar stocks in the US:

In fact, the median year-to-date return in this group is roughly -36% despite the major indices posting positive returns up to this point! 😳

Why have investors soured on solar stocks so much? And might this be an opportunity?

The driver of the poor sector performance seems to be due to fears that the deployment of new solar projects will grind to a halt because of high interest rates.

Higher rates make financing large solar projects much more expensive, particularly for residential customers.

Thus near term growth projections for solar companies have been severely cut by analysts.

It’s surprising timing given the passage of the Inflation Reduction Act in late 2022, which allocated tens of billions of subsidies for solar manufacturers, installers, and buyers.

The next decade has the potential to be a golden age of growth for solar companies, but the very near future looks like a rocky start.

Perhaps this is where opportunity exists for longer term investors to take a bold stand however.

Almost every solar stock now trades at a single digit P/E multiple when using 2025 estimated earnings, a historically low level for the sector.

Investors who are willing to ignore the pain of the short term and invest for the long term could be getting great bargains on some of these stocks.

Other rate sensitive sectors such as homebuilders have held up better than expected this year as they have sacrificed some pricing & margin to maintain volume.

Similarly, it seems reasonable for solar companies to share some of their subsidy windfall with their customers to offset higher financing costs and keep project volumes healthy.

For example, First Solar (FSLR) pre-sold their entire production capacity through 2027 and expect profit to TRIPLE by 2025, so there’s plenty of wiggle room!

Plus we doubt interest rates will remain this high forever as consumer spending cools and official inflation figures are projected to decline below the 3% level by early 2024.

These days individual stock prices often reflect extreme optimism or pessimism based on a very short term outlook, but patient investors can gain an edge via a longer time horizon.

Things may look bleak for solar stocks at this very moment, but there will likely come a time when some of these stocks will once again shine!

Invest to Enhance Your Life, Not Stress 🏖️

In the world of wealth building, there’s a truth that often goes overlooked:

Your investments should not only grow your wealth, but also align with your unique lifestyle.

Welcome to the world of "Lifestyle Investing".

It’s a concept that emphasizes the importance of tailoring your investment portfolio to fit your individual preferences, goals, and way of life.

When we think about asset classes, some are more “passive” than others.

For example, investing in real estate takes more work and awareness than investing in stock market index funds.

It’s important to invest in asset classes that are going to:

1. Enhance your life

2. Help you actually build your wealth, and

3. Not stress you out

If you travel a lot or love living outside of the country, and don’t want to be bothered, owning a lot of real estate may prove to be challenging (and/or expensive if you plan to hire a property manager).

This doesn’t mean you shouldn’t own any real estate.

There’s likely a strategy for you to own land or a home in your dream area with the goal to have a paid off house in retirement.

You simply don’t have to load up on an asset class if it truly doesn’t fit your lifestyle, risk tolerance OR desired stress level!

On the other hand, some people thrive living the real estate professional lifestyle and it’s their favorite asset class.

The beauty of building wealth is there are so many ways to do it, and you can be as passive or active as you want to be.

Here’s a layout of how asset classes and investing strategies stack up as either truly passive (you don’t do much), to very active (you do a lot).

Real estate can be passive if you’re investing in REITs (Real Estate Investment Trusts), semi-passive if you have a property manager, to 100% active if you’re a real estate professional.

One thing not listed on here as well is being a business owner.

Your business is essentially an asset that is active (which you may love for your lifestyle, especially if you can do it from anywhere).

All-in-all, diversification is very important for any portfolio… but, you also want to invest in assets that will fit into your actual lifestyle today (and in the future).

Video of the Day:
“How To Build Wealth
With Concentrated Bets” 🎯

In this week’s We Talk Money episode, we’re interviewing a guy who’s known for making big “bets”.

He’s built a lot of wealth making 3 investments where he essentially went all-in and risked everything.

The crazy part? They’ve ALL paid off… huge.

What seems like insane risk taking to many, might just actually be a fully thought-out, disciplined move.

Click Here To Check Out - “How To Build Wealth With Concentrated Bets”

You’ll learn:

• The RIGHT way to think through taking big risks

• How to spot big opportunities and know when to go “all in”

• Why poker was instrumental in learning how to manage bank roll

• How new investors, traders, and entrepreneurs can make smart bets

• And a whole lot more

The Hottest Crypt-Dough News 😋

• Federal Judge Denies SEC's Appeal Against Ripple
  The SEC's appeal against a favorable Ripple ruling was swiftly denied by a federal judge. This landmark decision sets a legal precedent affecting numerous crypto cases.

• Chainlink Says Crypto and Banks Can Coexist
  Chainlink is breaking the 'crypto vs. banks' stereotype by collaborating with financial institutions like Swift, signaling a more inclusive future.

• Crypto Cards Rack Up $3 Billion in Transactions
  Visa's partnerships with crypto exchanges have facilitated $3 billion in transaction volume since 2021, underscoring the growing symbiosis between traditional finance and digital assets.

Food For Thought 🧠

"The market is a group of people, and people can be wrong."
- Michael Burry

DISCLAIMER: We are not investment advisors, and this content is for educational purposes only. We don’t offer financial, legal, or tax advice. Nothing we say is a recommendation to buy or sell any assets. Trading and investing are extremely risky, so please be careful and do your own research.