Transcription
Palantir here is down 4% over the last month. It's actually down 16% over the last week. Palantir has taken a big nosedive off of a cliff, and it's performed very badly. In this video, I'm going to explain why the stock is down, if I'm going to be buying the stock, what I'm doing, and am I taking profit, am I getting out of it, and what you should be doing with Palantir because this is some pretty bad underperformance in the market. I am adjusting my strategy right now.
So first of all, I want to say that the slowdown in the stock market in general is a combination of mounting debt in the US and the increased chance of the Federal Reserve actually doing the unthinkable, which is pivoting back to raising interest rates from being a dovish Fed to a hawkish Fed. So there's a whole lot of issues. Raising interest rates means we're going to be having to pay, as Americans, more interest on the debt that we keep borrowing. The debt ceiling keeps increasing, and looking at mortgage rates, those are getting more expensive. That goes along with auto loans, credit cards, and business loans as well.
Higher rates make bonds and savings accounts more attractive compared to stocks. So when there are bigger problems in the market, and inflation starts to get out of control, and interest rates are higher, I mean, why would you invest in stocks when you have a guaranteed return from the federal government? That's what bonds are. People invest in the 10-year bond, which is around 5%. It's very high right now, almost 5%, and that makes bond investing and stocks, you know, bonds more attractive and stocks less attractive.
It also increases the risk in the stock market in general. You know, with the increased chance of the Federal Reserve being hawkish, stocks are just less attractive. There's a shift from riskier assets into safer assets. So when I'm looking at Palantir here, this is a big reason why Palantir is down. Also, the reason Palantir is down is because it has a high beta.
Okay, so what is beta? Beta is a sensitivity to the market. So when the stock market falls 1%, Palantir will fall 3% because it has a three beta. Beta is a sensitivity that a stock has in comparison to the market. So if the market is down 10%, the stock will be down 30%, and it has that type of relationship. Beta gives you the relationship, or beta is pretty much a correlation between the stock's performance and the stock market's performance.
It also doesn't help that Cathie Wood sold Palantir. It's a whole perfect storm in the stock market for Palantir going down. You can see that in the past week, Palantir is down to $66 per share. I'm still holding my shares strong, but I'm no longer up as much money as I was. It's not easy losing some of the gains, but I did say that I'm trying to make as much money as possible in the bull run, and when the bear market comes, you know, we're trying to protect ourselves.
So I am protecting myself. I am doing covered calls, and I think covered calls are a really important investment strategy that you should have in your portfolio. I'm becoming increasingly aggressive with my covered calls because covered calls are a great way to hedge any stock. It can be Palantir; it can be a number of other stocks, including Tesla. I've started to sell covered calls around a 40 Delta, actually, because as we get a stall in the market and as the market starts to essentially pull back, a covered call will give you a margin of safety.
It'll also give you premium to protect yourself. You can actually see here, this is an example. It's actually what I did in my Discord community. Pretty early on, I did have a covered call position here on Palantir, so I haven't had as much full exposure as I say on YouTube. I didn't want to go into the full details just because I don't have time, and I save this for my community.
But I'm up $199,000, and I have been hedging half on Palantir. Half I am unhedged, so that means half I've lost as much money as everyone else with the stock going down. The other half, you can see here that I'm up $119,000, which has helped me outperform. That's why my portfolio has not gone down as much as the general market has gone down, and that's just because I'm using hedging strategies.
So, you know, when I see investors panicking, it's really important to understand that the long-term projection or the long-term prospects of the market is still very bullish, in my opinion, in 2025. But there's obviously going to be a heightened increase of volatility. How January goes, the rest of the year, is an increased chance of having higher volatility.
So, and I'm smiling, but it's going to be a tough ride, guys. But that's what we're here for. If you want to get rich, it's not easy. If you're thinking about cutting losses, I'm going to tell you how to put your portfolio in perspective right now. I'll give you the full breakdown of what else I'm doing in the market, my thoughts.
There's a difference between long-term and short-term. You have to really understand that short-term, there's a high correlation to emotional investors who perform poorly. Investors that panic, you know, they're looking for the exit door; they're looking to get out. This is a short-term kind of panic and on the reactive side. Being reactive is not the best way of getting good results.
I would say that I am not personally reactive right now on Palantir, although it does have a wide range of possibilities for 2025, with my base case being that we're still going to see $80 to $85 per share in 2025. But, you know, the stock market does behave irrationally, and the reactive market that we see right now is an example of a lot of newer investors who have recently piled into the market getting cold feet and exiting stocks, including Palantir and all the others.
But you really need to take a bird's eye view here, guys, as well, and understand that, listen, on the long-term perspective, when there's a bump in the road, it's uncomfortable, but we still have a long-term viewpoint. Balancing your long-term viewpoints and your short-term viewpoint is very important.
Short-term, sell more covered calls, and the way I'm changing my strategy is by going more aggressive on 40 Delta covered calls. I'll show you what that looks like in a moment once I finish up more of the presentation that I have here and information in my notes. I'll show you a covered call.
So, you know, all trees shed leaves, but it doesn't mean that the trees are done growing, right? So when the trees shed their leaves, come colder weather, it has nothing to do with the actual roots and the actual tree not growing; it's just a cycle.
I want to point out that if you're concerned about the long-term cycle, don't be. It's completely okay. But if you're concerned over the short term, I don't blame you. I mean, we have volatility, and I don't see that really going anywhere. That's part of being an investor. So it's normal for stocks to falter or even to correct. It's actually a healthy part of the market cycle.
And Mr. Market, as Warren Buffett calls it, I've read many books. Warren Buffett calls the market Mr. Market, and he says that he doesn't have to buy stocks at prices that he doesn't want to. So it's okay for you guys to wait and to invest in a stock when you want to. I do that by selling puts. I sell puts and get premium, and then I buy a stock that I want to at a strike that I choose, which is why I've been teaching the wheel strategy for, you know, five years on YouTube.
It's selling puts to get in and covered calls to get out. I have a lot of free content on the wheel strategy, which is the most powerful strategy, and I'm back to really enjoying the wheel strategy. You can watch my wheel strategy course; I'll link it in the description. It's free, and that's the strategy that is going to perform very well in 2025.
That's the strategy that outperforms in a choppy bearish market or a sideways market, especially as a 10-year bond reaches nearly 5%, as I mentioned. That's really high, and according to Goldman Sachs, government bond yields reaching 5% historically signify a problem for equities.
So a problem doesn't mean we're going to get a crash, but a problem means that we might not get 20% a year again. We've got 20% in 2023. I performed over 50% return that year, so I've more than doubled the market. In 2024, I've also outperformed the market like crazy and essentially have doubled my portfolio to about $2 million or so, and then I ended the year off with $4.1 million.
So, you know, I have a good outperformance on the market. However, I'm still human, and if the market doesn't perform well, I will not have double-digit returns, not triple-digit returns, maybe not multiple double-digit returns. Maybe I'll get a 10% return; I don't know, right? It depends on the market. My goal is to outperform the market and create steady passive income. That's what I teach, and that's what I'm best at.
So we'll see because these basically 5% government yields do historically signify a problem for equity, as Goldman Sachs has mentioned. A pullback in the stock market is due to higher rates, and if the Fed intervenes and raises rates, this will be a huge problem, and they will create a market crash.
That is going to be, again, a short-term issue. On a long-term basis, I'm bullish on America. I'm bullish on AI, especially. I'm very bullish on Nvidia and AMD. So for me, I'm looking at still holding, and my favorite period, as Warren Buffett has a forever holding period on many of his stocks, I also have the same logic for the majority of stocks that I have.
I'm not really going to change my mind, except for I'm going to use hedging strategies like covered calls, which I'll get into in a moment. Let me get through it real fast. If you're thinking to sell, take profit, or if you're brave, you'll buy more. You'll be buying more right now.
So if you're brave, you'll buy more. If you're a little bit scared and you don't have as much experience, it's okay to pile up some cash on the side and wait for more of a bottom in the market until we get a more bottoming out.
Okay, so I'll explain my strategy in a very simple way. Eliminate looking at too many opinions right now and ask yourself what is the best logical move and where do you think the stock market will go in the next 6, 12, and 24 months? For me, looking at Palantir in the next six months, we're going to see some good news from Alex Karp. In the next 12 months, we're going to continue to see the company grow their revenues.
You know, the government's not going anywhere. The contracts that Palantir has are not going to go anywhere. The momentum has cooled off, and if you bought it based on only rumors and short-term gains, just get out of the stock because you don't know what you're doing. But if you've bought this stock because you actually understand what Palantir does, and you actually learn what the business does, which is very important for you guys to do if you're holding a stock, you need to know what it does.
In that case, it's a long-term hold, and there's no reason to panic. There's no reason to change anything except for your option strategy, and you have a lot to learn, my friend. If you're just buying this stock based on rumors and YouTube videos, you have a lot to learn on how to understand the stock market.
I've been at it for 11 years. Goldman Sachs, all that stuff, you know, you guys make fun of me for saying that a lot. So look, chasing gains isn't how you make money in the stock market or the options market. You need to have solid reasons to stay in the stock long-term, and don't be surprised if panic short-term selling turns into another bull market, and you end up selling, and then the stock goes back up, and you're like, "Oh, why did this happen to me again?"
Well, it's because you have short-term panic, and that's not how you make money. Listen, Alex Karp is a fantastic CEO. The fundamentals of Palantir are extremely strong, and Palantir is still getting big contracts with businesses and governments.
So the next quarter report is coming in February, and in February, expect some very strong numbers. We might get weakness for the next 2-3 weeks, so it's okay to hold a little bit more cash for the next 2-3 weeks if you're a Palantir shareholder. But, you know, come February 1st, I think it's going to be business as usual, and we're going to see an increase in the stock, especially prior to earnings.
If you're subscribed to this channel, I may recommend a buy call option before earnings because that is one of the strategies that I have been using for earnings season. Look, Morgan Stanley downgraded Palantir, but it's kind of funny because they hold like 22 million shares of Palantir.
So the street and Wall Street is a little bit, you know, I would say, conflict of interest. There are a lot of content creators that also have conflict of interest when it comes to the stock. They cover the stock; they don't hold the stock, or they hold a lot of the stock, and they pump the stock. I'm just trying to keep a neutral, objective view. I have Palantir, and I'm bullish, and that's what I'm doing with my money, and I'm transparent about it.
So we are in a weird place where rising interest rates pose significant challenges, and hedging now looks to be increasingly attractive for growth investors. I am not buying hand over fist Palantir right now, so I can't really show the buy side over here. I'm going to keep them hidden in this video, and I'm taking a break from investing too much more cash into the market, like new money.
What I am doing instead is doing covered calls. You'll see right now on the screen that I have a covered call roll. I did do this actually in December, and I did this live in my Discord community. I didn't post this on YouTube again; I only post half my trades on YouTube or so.
But essentially, let me show you what this looks like and what you can do personally if you're holding covered calls and if you're thinking, "How do I roll covered calls?" Well, I had Palantir 45 calls as Palantir overreacted on the upside. I ended up buying back a 45 call and selling a 60 covered call. I did pay a lot of money to do this, but I also collected a lot of income off of selling the covered call.
Versus if I didn't sell the covered call, I would have had to pay a huge price. Now, the Palantir is down, and my covered call here is up a lot of money, and that's basically standard procedure for me. I'm selling covered calls, and as they go into the money, I'm always rolling higher and higher and higher. Eventually, you get a correction in the market, and the correction meets the same price point of my covered calls.
So you'll see I have half my shares uncovered, right? Because I have 5,100 shares in Palantir. I have 23, basically 24 contracts, 65 covered call, 60 covered call. You know, you've got to create income, and once the market opens up, you know, at 9:30 right away, I'm going to be selling some more covered calls at the 65 strike price, and I'm going to do that for February, and I'm going to collect some income.
So I'll show you what that looks like. If I go to Palantir trade options, I'll probably do 65. I'll do 70. You know, listen, I can do a combination of this, and I'll tell you the benefits of a combination. So I'll go for February 21st expiration, give myself a little bit over a month.
Look right here, even if I go for the 70, okay, let me explain to you the differences. If you're a Palantir bull like I am, but you know, let's say you want some short-term, you think short-term we're going to get a rise back in the stock, which I do. I just have a lot of Palantir in my other portfolio too; that's why I'm going a little bit aggressive.
Here's the range that you can sell covered calls. If you're really bullish, you can sell covered calls at 75 and get $3.90 worth of premium, and the Delta here will be 38. Now, if you are, you know, very concerned, you will obviously do what I just said, which is a 65 covered call, which is actually in the money, 61 Delta.
So, you know, you're going to collect a lot of income. Let me explain to you. Closer to February 21st, you'll either close this position if the stock is above 65. You'll close this position and say, "Hey, this was a hedge; it's okay. Palantir is back to business as usual." Or if Palantir is essentially below 65, you're going to collect $770 and basically let this position expire and do it again.
So the $770 represents over a 10% return in a month. So you can make over 10% in a bearish market. So imagine that. The balance here can go down 2%, and you can make 10%. It's freaking insane. So, obviously, you will celebrate, and you'll drastically beat everyone else. If Palantir goes down, you can also do something in the middle.
Palantir can go sideways, and you can sell the 67.5 covered call here. It's a 55 Delta, and look, you'll get, again, about a 10% return and basically a 0% return if the stock gets a 10% return in the covered call.
So this is exactly what I'm going to be doing this week in my Discord community. If you're interested in joining the Discord community, go ahead and click the first link in the description. I'll also have that free course for you on the wheel strategy in the description.
I hope that you guys make some money, and I hope this video calmed you down, gave you a cooler head, and some facts on investing better. So see you guys in the next one.