Dear Student,
Over the past week, we’ve been focusing heavily on AI stocks, including my prediction for AI stocks over the next 50 days and how the Fed’s surprising half-point interest rate hike could affect a particular AI stock the most.
There’s a reason for this…
And in my new episode of the Patterns & Profits Podcast, I’m going to tell you exactly why – as well as a major news story you may have missed about one of the top 10 AI stocks in the world.
But first, since a few emails came in from new readers, I want to revisit some of the biggest questions I’ve received about the AI coming AI boom and my Money Calendar.
Remember, you can ask me a question right here at any time, too. Just keep in mind that I can’t give personalized investment advice – so save that for your broker or financial professional.
Now let’s get started…
Q: Tom, you said you’re not expecting AI stocks to crash anytime soon and that there’s more upside potential. But aren’t AI stocks like Nvidia already too expensive?
A: I recently shared my thoughts on NVIDIA Corporation (NVDA), which you can check out here. And when it comes to trading in the short term, I don’t really pay much attention to valuation. That said, there’s no denying that, if you compare today’s valuation with what happened during the dot-com boom, AI stocks are not crazy expensive – yet.
The entire Nasdaq could double from here… And we would still not reach the crazy valuation we saw at the peak of the internet frenzy in 2000.
In fact, I’m expecting a lot more chaos in this last phase of the AI boom. For example, back in the late 1990s, we had a huge IPO boom around internet stocks. Companies with zero profits were just slapping “.com” at the end of their names, going public, and watching their stocks skyrocket.
But last year, we only had 154 IPOs on the U.S. stock market – a 15% drop compared to the previous year. That’s nothing compared to what we saw in the internet frenzy in 1999 and 2000 when more than 600 companies went public. And most of those companies going public were not even profitable.
So, this AI boom is far from over.
Q: How does the Money Calendar work with unexpected market events, like Covid, for example? Are the patterns still reliable?
A: There will always be an unexpected news story, economic event, or geopolitical unrest that could shake up the markets at any time. My engineers and I factored and built this into the Money Calendar based on over 10 years of historical analysis. And while the seasonal calendar has no guarantees of future accuracy (like anything else), I look at it in the same way I look at the seasonality of weather patterns… Summer is typically hot; winter is typically cold. That doesn’t mean we won’t have a cold summer or warm winter some years… but the overall patterns are the same. It’s all about consistency – that’s what matters to me.
Q: “Tom, do you have a patent on this calendar software?”
A: This may be surprising…ABSOLUTELY NOT! And here’s why… When you file a patent, you have to give the patent officer all the details behind your system. Now, I don’t know about you – but I don’t trust the U.S. government with that kind of information.
Think about it… in an age of pretty much daily security breaches, ANYONE could hack into their system and steal my code. I’ve invested too much of my time, energy, and money building and developing this software (as well as an amazing team of tech geniuses around it) to take that risk. That’s why I decided not to patent it.
Q: “What happens when a trade doesn’t work out? What’s the risk in each trade?”
A: Listen, if anyone ever tries to tell you that they have a trading system that works 100% of the time – RUN! And run fast!
There’s no holy grail in the investment world. Anyone who tells you otherwise, to be frank, is lying to you.
The Money Calendar gives us an edge in the market – especially when using options. But it’s not perfect. That simply doesn’t exist. Not all trades will be winners. It’s about building a strong portfolio and a string of profits over time. We also reduce our risk by trading only the most reliable seasonal patterns – the ones that have happened between 90% and 100% of the time over the last 10 years.
That brings me to the final (and most common) question I receive about the Money Calendar…
Q: Tom, you predicted an AI boom… How will the Money Calendar help when stocks are going down?
A: That’s the beauty of the Money Calendar. You’ve heard me talk a lot about these short-term profit cycles on stocks that have gone up at least 90% of the time over the last years… But it doesn’t just work on stocks that move higher. Just like some stocks tend to rise almost every year during certain periods… Other stocks tend to drop almost every year during certain periods.
The Money Calendar also flags those periods of weakness. It not only shows these 30-day profit cycles – but also 30-day bust cycles, when stocks tend to crash. So, we can use those dates to either avoid those stocks… or even profit from their drops.
Thanks again for your questions! If you keep sending them, I’ll keep answering them in our special Mailbag Friday issues every week.
And now, let’s get to the podcast – click on the image below to jump right in…
Have a great weekend!
Tom Gentile
America’s Pattern Trader