Like A Good Neighbor…

insurance co. cuts and runs from California
 
   
     
   
 
MARCH 22, 2024
   
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PROSPERITY PUB MARKET TALK
Like A Good Neighbor…
 

Like a good neighbor, State Farm is... leaving California high and dry?

Our friends at State Farm, known for their cheery commercials and khaki-wearing agents, just announced they're dropping a whopping 72,000 California home and apartment insurance policies.

Seems those wildfires are a bit too "catastrophic" for their taste.

California residents: Crack open another almond milk latte and prepare for some sticker shock. State Farm claims they need to "maintain adequate claims-paying capacity" (fancy way of saying they don't want to lose all their money), so they're packing it in.

This follows a trend of insurers fleeing the Golden State like it's a particularly crowded (and smoky) family reunion.

So, what are Californians to do? Well, you could try the state's "insurance of last resort," the poetically named FAIR Plan.

Just be prepared for prices that would make your groceries cry. The whole situation is a bit of a mess, and with fire season around the corner, things could start getting spicy.

On the bright side, at least you won't have to deal with those creepy talking khakis anymore…

On the flip side, investors in competing insurance company Allstate (ALL) could be in for a treat.

Our own analyst, Scott Welsh, recently called insurance “one of the top 25 hottest sectors in the world” (no pun intended)…

And shared a chart showing that ALL could be getting ready to break out in a big way.

He tells us a break now above $168.05 could lead to a nice bullish run.

— The Prosperity Pub Team

 
 
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SCOTT WELSH’S ANATOMY OF A GREAT TRADE
Anatomy of a Great Trade: RETL
 

Great traders are always telling us to buy what we know.

Which is good advice.

What’s good about it, though, is not that we can maybe buy something familiar that goes up. That may happen but there’s more than that.

Buying something we know also gives us confidence to stay in when things get tough.

In life, we’re only as good as our worst day. (That’s deep.)

In trading, we’re not going to profit if we can’t handle the drawdowns.

And buying what we know keeps us in the game.

For example, in 2020, retail took a temporary hit. 

Of course, discretionary spending will slow down for a moment if there’s a pandemic.

But is retail over? 

Will we really never shop again?

Of course not. We know we’re going to shop again.

So, when the 3x triple-leveraged retail ETF, RETL, went down below its 800 period Bollinger Band™ (2 standard deviations), this was a buying opportunity. 

Not a give-up opportunity.

Here’s the chart:

 
 

In April 2020, we could have bought RETL at any point below the lower band.

If we did, we would’ve gotten a price around $3.20.

What happened?

RETL rose up to “fair value”, hitting $11.20 in October 2020 for a 360% gain:

 
 

If we can stay in the game and buy things deeply on sale, we can get big wins.

Knowing what we’re trading can help us do that.

Happy trading,

Scott
   
 

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