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The Middle East ceasefire breaks down… Luke Lango says corrections are a feature, not a bug… his gameplan for where to buy… a contrarian 14% Bitcoin play from Jonathan Rose…
As I write on Wednesday, the ceasefire between the U.S. and Iran is over. At least, that’s how President Trump described it.
Overnight, three commercial vessels transiting the Strait of Hormuz came under Iranian attack. The U.S. responded with what Central Command called a “series of powerful strikes,” hitting more than 80 targets across the country. The targets included air defense systems, command-and-control networks, and coastal radar sites.
Meanwhile, the U.S. Treasury withdrew the waiver that had allowed Iran to sell its oil on the global market. And Trump said he may reimpose the naval blockade on Iranian ports.
Speaking at the NATO summit in Ankara, Turkey, the president sounded fed up:
I don’t want to deal with them anymore…
As far as I’m concerned, it’s over.
He added that the U.S. would “very probably” strike Iran again by nightfall.
Iran’s Foreign Ministry called the strikes a “gross violation” of the memorandum of understanding both sides signed in June, and Iran’s Revolutionary Guard claimed to have hit military bases in Kuwait and Bahrain in response.
This leaves investors with a question…
Is this a genuine return to war and, along with it, a sustained spike in energy costs? Or is it just another round of brinkmanship? Trump has hedged before, and he hedged again earlier today, saying he’d let negotiators keep talking “if they want.”
For the moment, the investment markets are unsettled but not panicked – so, they’re treating this as brinksmanship. Stocks are lower, but it’s an orderly retreat, not a stampede for the exits. In fact, as I write, they’re rebounding and well off their lows.
Crude oil is the more interesting story – up about 7% – and that’s the number to watch. Pricier oil means stickier inflation, which means even less room for the Federal Reserve to cut.
There’s plenty riding on how this story evolves. We’ll keep tracking it.
Checking in on the AI trade’s ongoing correction
Semiconductor and AI-related stocks have been under pressure for weeks, and today’s Middle East headlines aren’t helping. But our tech investing expert, Luke Lango, editor of Innovation Investor, has been telling subscribers to zoom out.
In yesterday’s Innovation Investor Daily Notes, he provided helpful context for this AI drawdown, as well as how to handle it in your portfolio.
In short, the semiconductor sector is currently down about 14% from its highs – the 13th correction of 10% or more since the AI boom kicked off in late 2022. None of the previous 12 ended the boom. In fact, semis are still up roughly 565% from the start of 2023, corrections and all.
Luke sees parallels to the Dot Com era: Two separate ~40% semiconductor drawdowns hit between 1995 and 1999, and each one felt like the end of the tech bull market at the time. Neither was. Semis still rallied more than 1,100% into the March 2000 peak.
Here’s his takeaway:
The 13th correction is painful. It is not the end.
Now, a naysayer might respond, “Well, there must be an end at some point. So, why not now?”
Luke has an answer – how the hyperscalers are fueling their AI capex spend, and what that signals about confidence.
Yesterday, news broke that Amazon.com Inc. (AMZN) is reportedly raising another $25 billion in bonds to fund AI infrastructure. That pushes global AI-related debt issuance to roughly $335 billion this year – more than double 2025 levels.
To Luke, that’s a massive signal – investment-grade bonds don’t get issued in $25 billion tranches, oversubscribed multiple times over, at 30-year maturities, unless the people signing off on them expect decades of cash flow to back it up.
Here’s Luke with the significance for investors:
These are the financing decisions of companies that see an arms race and are raising every dollar they can to stay in it.
Returning to our naysayer from a moment ago, yes, the AI boom will end at some point. But Luke says that will be when the underlying fundamental dynamics powering it suddenly and dramatically reverse course, which is not happening today.
So, what’s the actual game plan for AI investors staring at red screens today?
Luke points toward the VanEck Semiconductor ETF (SMH) – a proxy for the AI trade. He says it’s fallen to the exact level where garden-variety corrections have historically bottomed. Buying here in anticipation of a bounce is reasonable as part of a planned accumulation program.
But if SMH doesn’t find support here, there’s a deeper pullback coming. Luke recommends holding some cash in that scenario, where SMH drops toward $560.
Either way, remain focused on the other side of this flush. On that note, here’s Luke’s bottom line:
The late July earnings are the real recovery catalyst, and being positioned before those reports — even if the entry timing is imperfect — is the right posture for investors with a multi-month time horizon.
So, there’s the perspective for tech investors. But if you’re still feeling rattled, let’s give you a trade idea courtesy of veteran trader Jonathan Rose that has nothing to do with AI.
Inside the mind of a “creative trader” – Jonathan’s contrarian Bitcoin play
Most traders see a stock sitting at a fresh record low and do the same thing – walk away.
But for trading veterans like Jonathan, editor of Advanced Notice, ignored setups can create opportunities – and I want to show you one.
First, if you’re new to Jonathan, he spent 28 years on some of the most important trading floors in America – the Chicago Mercantile Exchange, bond futures desks, and four years as a market maker at the Chicago Board Options Exchange.
Over that period, he’s made millions in his own trading account, and it’s rarely because he chased what everyone else was running after. It’s because he searches for value in exactly the spots other traders have written off.
He recently flagged one of those spots to his premier subscribers, and it’s worth walking through – both because it could be a genuinely lucrative setup, and because it’s a perfect window into how Jonathan thinks. As he ends his alerts to subscribers: “Remember, the creative trader wins.”
Here’s what he found…
There’s a corner of the market most people never look
Preferred shares.
It’s a strange hybrid security that trades like stocks but pays fixed income like bonds.
It’s here we find an issuance from Strategy Inc. (MSTR), the Bitcoin-holding company formerly known as MicroStrategy.
That issuance – STRC – has a “home base” price of $100. Think of this as the value the security is designed to trade at, similar to how a bond is meant to trade near its face value.
Recently, this preferred share issuance nosedived to around $75, a fresh record low. It has since bounced back, but still trades in the mid-$80s, well below that $100 home-base price. However, during this time, STRC has been paying a cash dividend equivalent to roughly 14% a year.
Now, the headline reads that STRC is a security in trouble. But Jonathan noticed something buried in Strategy’s own filings…
The company has explicitly stated its intention to defend STRC’s price and pull it back toward that $100 home base, using dividend hikes and buybacks as its levers.
In other words, Strategy has a built-in incentive to fight for this investment’s recovery.
And this points us to the difference between how Jonathan and the average investor view this setup…
While most investors would consider this a trade on Bitcoin, to Jonathan, it’s a bet on Strategy’s own machinery doing exactly what the company says it’s built to do. If it works, investors will collect a 14% cash yield while they wait for a price recovery that could add another 15%-plus on top.
It’s already working for some of Jonathan’s subscribers. Here’s a screenshot of a subscriber writing in to Jonathan, commenting on their trade results so far.
If you can’t see it, he’s up 25% on the preferred share of STRC and that doesn’t even include the first dividend payment.
As always, be aware of the risks
Now, Jonathan is upfront about the obvious risk – it’s something we need to take seriously.
STRC is backed by Strategy’s crypto holdings, and Bitcoin has recently fallen to around $59,500 – roughly 21% below what the company paid for it. That’s squeezed Strategy’s cash position, and the company has started selling some of its Bitcoin to help cover the dividend.
Meanwhile, the preferred share payout itself isn’t guaranteed; it’s discretionary, and the board could cut or suspend it if conditions worsen. That risk is exactly why the yield is this fat – the market is pricing in real doubt.
This is the tension that Jonathan and trading veterans navigate every day: opportunity and risk, tangled together.
Want more trades from Jonathan?
STRC was a call Jonathan made for InvestorPlace’s premier Omnia subscribers after doing a great deal of research into filings and footnotes everyone else skips. But not every opportunity announces itself in a company’s fine print…
Some show up first in the money itself – where large trading positions are building before the rest of the market notices.
That’s what Jonathan built his “Convergence Trigger” tool to spot. Working with market veteran Marc Chaikin, he paired his own Unusual Trading Activity tool with Chaikin’s Money Flow system to flag the moment institutional capital starts piling into a stock – before the move that follows.
To see how it works, click here for a deeper dive.
Wrapping up
Three stories today, yet one common thread: Volatility and uncertainty are the price of admission.
The U.S.-Iran ceasefire is fraying, the AI trade is grinding through its 13th gut-check, and Jonathan’s STRC play only pays off if you’ve priced in the downside, not just the yield.
None of it is risk-free. But it never is.
Our challenge is figuring out which risks are worth taking, not avoiding risk altogether. That’s what we’ll keep helping you do here in the Digest.
Have a good evening,
Jeff Remsburg
(Disclaimer: I own AMZN and SMH)
