Liz here, wading through massive technical difficulties.
Today’s issue may be a tad shorter than usual, as I’m sitting in a sea of boxes in my new house in the forest, with no internet, and with my child running shrieking through the rubble, followed by multiple deer who have somehow breached the encampment .
On top of it all, Garrett Baldwin is suddenly admitting the possibility that he might be wrong about China.
That’s enough to unsettle anyone.
A chink in his incredible armor of always being right? Is the world ending?
At this point, I might as well embrace the chaos, so as I welcome the deer and direct them into the bathroom so they can drink out of the toilet, I’ll just drop this incredible bombshell from Garrett right here as well:
“What if I’m wrong about China? What if the worst of the crackdown on companies is over? What if Jack Ma’s release into the wild is a sign that China is done destroying its businesses? What if we approach Chinese New Year and I miss out on the reversion trade of the century?”
If Garrett is wrong, in his words, you could win big on a “lottery ticket to the stars.”
So he wants to bet, in a small way, against himself. I admire the humility, and I would almost feel bad about taking the money, but not really .
Here’s how to make triple digits in upside-down world.
Garrett Gets Philosophical While the Neighbor Lady Gets Nosy
No sooner had I ushered the deer out of the house when my child invited a random neighbor lady inside to see all of our boxes. She was impressed and invited us to a block party.
I had to decline because, given the current unpacking situation, none of us were really wearing any clothes.
Fortunately, my phone seems to work, so I messaged Garrett, ostensibly to get some trade details, but really just to hear from someone who isn’t insane.
I wasn’t prepared for how deep this got.
“Why am I wrong?” Garrett mused. “I ask myself this 10 times a day.”
He then went down the rabbit hole REAL fast.
From Garrett:
“I mean, the problem with the media is that eventually you start to look for things to confirm your bias. I don’t like China, at all, but I can’t ignore Alibaba’s (BABA) rebound and that Charlie Munger went in on the stock.
“We usually want to continue to maintain our conviction on a subject. And when it goes the other way, we look for confirmation to keep agreeing with our sentiment.
“That was very obvious in 2020 when COVID hit, and the market was falling. People were looking for any reason possible to be short or to stay out of the market… when the most obvious sign ever was that the market had bottomed — that insiders were buying up the stock left and right.
“Now, I don’t have insiders to track on BABA, but I have guys like Munger and other value investors out there sounding the alarms.
“And they’re saying that this is a buying opportunity of a lifetime.
“Even though I hate China, and I want nothing to do with them from an investor standpoint, I can’t ignore the valuations and I can’t ignore how much these stocks have pulled back. There is money flowing back in, and I can’t let my bias blind me to the risk/reward here.”
Liz again:
At this point in the conversation, I took a deep breath and said, “Wow, this is really powerful stuff,” while ducking to avoid a stray fawn that just jumped out of my linen closet.
I then asked Garrett if he was going to actually play BABA, and he said no.
Basically, his moonshot China trade is the “Wish” version of Baba.
“I bought BABA at $155. I don’t think it’s worth it,” he said. “My play today has the same profile, it’s just cheaper.”
(If you’ve never tried to find cheap online substitutes for things that would probably make more sense to buy new, Congratulations, you probably don’t need trade recommendations at all.
Go buy yourself a nice steak dinner, and while you’re at it, send some professional movers and unpackers to my house. Not like Johnny Szymanski. Let us never speak of Johnny Szymanski again.)
At Some Point, You Just Have to Hold Your Nose and Say F*** It
When Garrett dropped this gem, I immediately said, “There’s my subject line.”
But then thought better of it. After all, I had a bunch of asterisks in the Mark article the other day, and too many asterisks lose their power.
“This mimics crisis investing,” Garrett went on. “Buy on the sound of cannons, sell on the sound of trumpets.”
He then got into the specifics on his “Wish” pick: Vipshop Holdings (VIPS).
It’s an $8B online retail company headquartered in Guangzhou, with a history of violently volatile whipsawing in 5,000% waves since its 2012 IPO.
“I don’t want to be blind to my conviction about China,” Garrett said. “But I look out to May on VIPS and the way the stock rallied on Tuesday and think, hey, it’s still cheap to speculate on this.
“Now, let me be clear. I want to be very small in this trade. A lottery ticket to the stars, as I said.
“Alibaba is too expensive to speculate on. I just want to get back to like $14 on VIPS in the next two-three months to make this worthwhile.”
That means a Nickel Slots trade, with cheap options, over a slightly longer-term hold time than most of our recommendations.
This one goes out to February, so we have a little time to see if Garrett is actually wrong.
The word I believe I’m searching for is “Schadenfreude,” but it’s probably hidden somewhere in one of these boxes and I’m not sure.
Here’s what to do:
NICKEL SLOTS
Action to Take: BUY to open Vipshop Holdings (VIPS) Feb. 18, 2022 $15-strike call with a limit price of $1.05. Enter as a Good til Canceled (GTC) order |
This is the first time I’ve ever rooted for one of our experts to be wrong, and I’m not quite sure how I feel about it. On the bright side, the deer seem to have left my house and migrated to my neighbors’, so maybe they can all go to her block party and leave me alone.
If this is the move, I have high hopes for how organized the wedding will be.
I’ll be back tomorrow with a play from AK, and hopefully much less complicated feelings about everything.
Hang loose!
Liz