In this week’s edition of Wealthion’s Weekly Market Recap, Andrew Brill highlights key insights from our expert guests:
Christopher Vermeulen examines the broader macro picture, focusing on oil and offering chart analysis for uranium. Michael Gayed explains why traditional models may no longer apply in today’s economy and touches on the debt crisis. Anthony Pompliano discusses his new book and shares his perspective on Bitcoin. Finally, Ram Ahluwalia differentiates between value and growth stocks and explains how recent rate cuts affect Baby Boomers’ investment decisions.
Investment Concerns? Get a free portfolio review with Wealthion’s endorsed financial advisors at https://bit.ly/4eGNgs8
Andrew Brill 0:00
We’ve received new economic data in the past few days, and the results were mixed. I’m your host. Andrew brill, let’s see what our experts had to say this week. Christopher Mulan is founder and CIO of the technical traders. Took a look at the broader macro picture and how things are unfolding behind the scenes. He feels the market has room to grow. He took a look at the oil market and how conflicts around the globe are affecting it, and analyzed uranium with a detailed chart.
James Connor 0:32
Before we start looking at the charts, maybe you can just give us your view of the big macro picture. Sure, yeah. Well,
Chris Vermeulen 0:38
thanks for having me, James. Uh, overall, like when I look at the big macro picture, kind of the overall view of what’s going on, I believe we are getting closer and closer to a major market reset. But as you just stated, the market is still in a very strong uptrend. In fact, that August shakeout that you and I talked about and we’re experiencing in our last talk, and the volatility that we’ve seen has really kind of cleansed the market. When the market has a sharp pullback and a pause, a couple month pause, like we’ve just seen across the board, it re energizes the market that could have another push higher. So I do think overall equities have another three to 8% upside on the SP 500 or the NASDAQ, if this traction continues to follow suit, but in the big picture, I do feel like things are starting to slow. I think we’re seeing unemployment slowly creeping up, although it did dip a little bit last week, but we’re seeing delinquencies on credit cards. Cards are maxed out and they’re going delinquent. I think it’s one of the largest times ever we’ve seen maxed out credit cards that are delinquent. A lot of people will just have small, small amounts of debt and just not want to pay it, but cards are maxed out. We’ve got residential, commercial real estate mortgages are starting to default and take off. We’ve got a lot of defaults starting to happen actually, in the multi family, which is like, not a good sign at all, because that’s the most affordable to build, has the most potential. So there’s a lot of stuff behind the scenes unfolding telling us that, you know, people are running out of money. People aren’t finishing projects. Everything’s costing more. And we’re seeing like leisure and activities, as we’ve seen, some of the biggest cuts in that area, people just aren’t spending the same amount of money as they used to travel. You know, all kinds of discretionary products are coming to a grinding halt, and we’ve seen the biggest layoffs in that space. So when people start closing their wallets and tightening up, it’s going to take a few months, a quarter or so, but it’ll ripple through. And we’re seeing, you know, cut in manufacturing, which manufacturing is like, three or four month lead time. They’re not getting the orders from the stores, so they’re laying off employees. So there’s a lot of stuff coming down that by the end of this year, I think we could be like, you know, getting very, very weak in terms of recession being a lot clearer down the road. So that’ll that’ll tip the scales and make people even more nervous. And it’s kind of a self fulfilling prophecy. I think we’ll see equities and things sell off and go from there. So I’m short term bullish, but longer term, I see the music coming to an end. Okay,
James Connor 3:09
so why don’t we start looking at charts, and why don’t we take a look at the S, P to begin with, it’s up 20% on the year, and it’s currently trading around 5700 you think there’s another three to 4% upside? Yeah, I
Chris Vermeulen 3:21
think there’s, there’s still some pretty good upside. I like to use Fibonacci extension as a technical trader, which gages how much momentum there is. And this big correction that we saw back July, August, if we use a Fibonacci extension, which I find is the most accurate tool to project upside targets, I only use two measurements on this. I use a 618, so meaning this rally and this pullback. If the market rallies 61% of this first leg here and takes a pause, which it has, we almost always go up and hit this 100% measured move. So there’s about 4% upside here on the SP, 500 to the upside, the NASDAQ has about an 8% upside potential based on its chart pattern. But is this whole consolidation right through here, where the VIX spiked like 175% we saw all kinds of fear. When the market has one of these fear driven events, it cleanses the market. Anybody who’s who’s going to get shaken out. Got shaken out. That’s what all of these are. This one isn’t quite as severe, but it led to the next major leg up. And of course, this is another one of these little pauses. The smaller they are, the smaller the potential upside. But when we have one of these big ones, it can push the markets to have a pretty big move. But we’re definitely seeing some warning signs. All last week, we saw distribution selling on the indexes, meaning every time the market drifted higher on light volume, we’d see heavy volume step in and hammer the price. There’s some big institutions lightening their portfolios, dumping billions of dollars into the market, but they’re doing it in a controlled way. The market drifts a little high. Prior to resistance, they they unload, you know, few 100 million or a billion dollars worth, drive the market back down. Then they stop selling. They let the market repeat that. And we saw that all last week. So these are early warning signs that these huge institutions are starting to lighten their portfolios, reduce exposure, and they take months to unload portfolios. So all it is is an early warning sign, along with other things, gold and silver and miners are telling us that, you know, I think we’re very close to some type of black swan event, to a recession, to a big stock market reset. Obviously, oil taking off, all these things we’ll touch on are leading to, I think, a bigger bearish picture for the economy and the equities markets? Yeah.
James Connor 5:41
Well, to your point, it’s going to be interesting to see we’re going to start seeing q3 numbers coming out here in earnest in the next couple of weeks. The big, first big one is JP Morgan at the end of this week. And it’s going to be interesting to see the narrative coming out of these companies, just in terms of the consumer and the health of the consumer. So just to recap, here your short term target on the S P would be 6000 by the end of the year.
Chris Vermeulen 6:05
Yeah, roughly about 6000 Yep.
James Connor 6:08
And why don’t we move over to the NASDAQ now? And let’s get your thoughts on that. It’s also up 20% on the year, but it’s not making new highs like the S P is,
Chris Vermeulen 6:19
yeah. So it’s struggling a little bit more. Obviously, everybody, the masses, always pile into the big, Magnificent Seven whatever is in the news and moving. For some reason, the masses all want to own it. And so when the market starts to correct, they’re all they all dump the same stock. So the NASDAQ really got hit. And people are nervous. We saw like, a 20 plus percent drop in the markets and Nvidia, but we have seen, you know, a rally. We had a pullback, and now we’re playing around this 618, level, and it’s got about enough to go up to about 21,000 or pretty much a double top for the nav, for the NASDAQ going forward. So there is still upside potential, but definitely had, there’s been some damage done, people who were involved in the Magnificent Seven really went for a roller coaster ride, and now they’re a little gun shy, and that’s why we’re not seeing it go high, making new highs like the SP 500 it’s just people are nervous, and they’re worried that it’s going to be another collapse. So this is not a good sign. We want to see the tech leading the way, because where tech goes is pretty much going to drag the rest of the market with it, but it’s not quite as strong as the overall broad market here.
James Connor 7:24
So as you mentioned, one of the big unknowns is inflation, and one of the things that’s really been helping us here in the past year is the price of oil, and it’s been kind of hovering in between the 70 $80 a barrel and but recently with the hostilities in the Middle East, it has caught a bit of a bid. But what’s your take on oil here?
Chris Vermeulen 7:46
Yeah, I mean, I’m, I’m bearish on oil. To me, the chart pattern is, you know, we’ve got a sell off and we’ve got a pause. And usually this pause, or this pennant formation, is usually known as a halfway point, and so whatever this first leg down was measures where, you know, the next one should go. So I believe we’re going to probably see like 40, $45 per barrel at some point, which a lot of people say there’s no way. But in reality, we’ve hit this $40 per barrel a ton of times, going going back over the last, you know, 1015, years or so, it’s not that significant. In fact, we went negative. So, I mean, you can’t really argue anything anymore in terms of where price could go. So I do think that is probably going to be the case. Now, obviously we have the wild card, the black swan of, you know, the Middle East. You know, World War Three going on, and bombs start flying, then all bets are off. Oil will probably skyrocket. Gold will probably want to move higher as well. Typically, those two go up in sync during a massive war. So other than that, I do think most things are stalling out and weak. And I’m bearish on oil unless there is, you know, unless bombs start flying around and oil refineries start getting hit, that’ll probably completely make oil take off.
James Connor 9:08
It’s amazing, with everything that’s going on in the world, that oil is hanging in where it is. And you got to wonder, if we didn’t have these hostilities, and we didn’t have the war in Ukraine, oil would probably be at 40 or 50 bucks,
Chris Vermeulen 9:20
yeah. And I think, though, I think the world has really changed a lot. I remember back in the Gulf War and all that stuff going on, it was such a different time. Now, I mean, when we hear war, we’re all I’m picturing are all those tracers across the skies and jets and bombs going off. I mean that to me is like, that’s obviously what I picture in my head as war. Now it’s just like a digital and, like, you know, a digital war of zeros and ones and, you know, interviews and people bashing each other, and people trading trade swapping, trade policies. Who can buy this, who can’t buy that. So it’s really, really different. I think, I think if we saw explosions in a big way in terms of refineries going. Fire and all that stuff. It would probably dramatically change oil. But I think, you know, war right now is so it’s very different. I think, I mean, I’m not in that space. I don’t know it, but it’s just not the same as what we picture back in, you know, back a long time ago, and there was, like, really, guns going off and missiles going off. So if those start to fly, I think oil will do what we’re expecting. But I think people don’t realize maybe how bad things are, because it’s all just information, and we hear news all the time, so we’re all kind of, like, pretty numb to like, Oh, there’s another more tension in the Middle East. And I mean, we have, we’ve heard that forever, so it doesn’t really spark huge fear, in my opinion. Okay,
James Connor 10:39
Chris, I want to ask you about one more medal before we move on, and that’s uranium. I in my opinion, I don’t think there’s another commodity that has a more positive backdrop than what’s happening within the nuclear energy sector, and uranium. And when you look at the sprite, physical uranium trust or spot, what do you think of this chart?
Chris Vermeulen 11:00
Yeah. I mean, this is a really strong chart, just using Fibonacci extension based off this last level. Here we can, we can get a gage of where this could run. This is a super strong looking bull flag pattern as a technical trader, a bull flag pattern as you creates a flagpole so a move up and then a flag usually flags in the opposite direction in the wind, flagging downward. And then here’s the second half of this move should bring us up to 618, level. And then from there, it can run all the way up to 32 so 2650 to 3250 is the upside potential based on on this chart, and from where that is, that’s a 60% upside move, 61 potential, if this was to unfold. Now this is the monthly chart, so obviously this could take very similar to this one, which is a 12345677, or eight months, minus two here. So you know, in five months, it could potentially run up there. So it does have a very strong chart pattern, and it is pointing to higher pricing, and see if we can get some traction here.
James Connor 12:06
The second largest uranium producer in the world is Cameco. It’s based in Canada. Why don’t we take a look at that?
Chris Vermeulen 12:13
Yeah, camecos got a little bit of volatility. I think the the big sell off we saw kind of this summer in the overall stock market created a little bit of a pattern I don’t like, which is a broadening formation. You got higher highs, lower lows. It’s known as a megaphone pattern. It just means volatility is increasing. It’s rallying up, but it’s to higher highs, but it’s also selling off to lower lows. It’s a sign of indecision. Increased volatility generally means you’re the previous move, which would be this move up is running out of steam, and eventually, you know, it could roll over. So there is definitely a little bit of weakness in this megaphone pattern. It’s much better when price consolidates into like a narrowing pattern, so it rallies up and then pauses and then breaks out. So increased volatility, obviously you need to be aware it’s gonna can probably continue to be more volatile. So you have to take smaller positions, manage those. I’m not a huge fan of this chart pattern. I like the other chart we just looked at, the sprout one, much more than this, just because this, at any point, could sell right back down, or it might push up to higher highs. It just doesn’t have a very super strong chart pattern. It looks like a sign of kind of exhaustion that’s not my, my favorite type of pattern.
Andrew Brill 13:34
Michael Guyette, portfolio manager of title Financial Group and publisher of the lead lag report, something you should check out, explain how traditional models may not apply to today’s economy. He touched on the debt crisis and feels there is room to grow in AI investing in some other sectors. He also took a look at nuclear power and the future of commodities. Have you seen anything like this before, where there’s been such a weird time, you know? We, yeah, we did go through covid. We pumped a boatload of money into the economy just to try and keep it moving when people weren’t working and things seemed to be at a standstill. But it almost seems like the regular economic models we follow don’t touch on any of this. It’s like, you know, now economists like, oh my god, I have to think outside the box. And you know, when you go to economics class, like, no, no, this is the way it works. But it doesn’t work that
Michael Gayed 14:31
way anymore, does it? Yeah. And actually, there have been some interesting posts I’ve been seeing on x1 for example, that looks at how the copper to gold relationship, which used to be a great predictor of yields, suddenly broke post covid, right? And actually a lot of interesting relationships have largely broke post covid, you can argue. So I think it makes it hard to really have a sense of where things are when you can’t rely on what’s worked before, right? Right, right now, maybe you can’t rely on what’s worked before as an indicator, because you’re still in this weird lagged window where, again, all these things are still reverberating. You know, you got to remember four or five years in the context of history, it’s nothing, right? And that’s only how far we are removed from from covid and all these monumental dynamics that took place. But I think it makes it hard for a lot of you know, more traditional fundamental analysts, more traditional economists, to really get a handle on things. I mean, listen, I’ve been saying for, for, for, you know, almost a year now, gold is sending a warning. Not because I’m trying to be dramatic, okay, but because, factually, gold tends to move in advance of tail events. It’s not my opinion. You can, you can back test that. You can prove that you’ve had no tail events, you’ve had no risk, right? And you have not, not had other than the carry trade momentarily. And these junctures where it looks like World War seven or eight or nine is going to start between Israel Iran, right, gold’s movement hasn’t really meant anything as a signal, at least not yet, right, whereas historically it has right. So the question becomes, do you abandon, you know the historical you know cause and effect, the messaging, the signaling, effect of these indicators, because they aren’t working now. Or if you do that, are you doing that at the exact on time when it’s about to matter
Andrew Brill 16:11
again? I don’t know the answer. All I know is that it’s very hard to really get a handle on where things are going here. Do individual charts, like stock charts still work? You know, because other things are not working. The predictors, like you said, gold is a predictor of negative events or slowdowns, but are the stock charts still working?
Michael Gayed 16:28
Again? Depends on who you if they’re profiting from it. I mean, you know, the thing about charts is that if you actually back test what people reference when it comes to charts, none of this stuff has predictive power. It’s just, it’s, it’s the mind needs a narrative and needs a reason, and a chart is an easy way to give a reason to buy or sell, even though there may not be any predictive power at all. So I don’t know. I mean, it’s like, look, momentum is still obviously very real as a phenomenon, right? The argument that past performance is not is not indicative of future results, which we all have to say in the industry, momentum is past performance, it being indicative of future results. So trend following from that sample, you can argue works, but it’s been very thematic and very concentrated in just a select number of companies and just a select number of themes. Most things I keep going back to have been chopping right at some point that changes the charts have a breakout, and maybe you have some persistence. But it’s like, tell me, show me any Chartist that thought suddenly China would be up 20% or whatever the number is in a week and a half, right? It’s like, you know, sometimes it has nothing to do with the chart. Sometimes it’s just a matter of being there luckily at the
Andrew Brill 17:35
right time. Let’s talk about the debt for a minute. And what effect do you think that that’s going to have, because that’s not getting any lower. And we’re going to continue to service this debt, which means we’re going to have to continue to print money to service this debt, and it’s going to be a vicious cycle. So unless we stop spending, which neither one of these presidential candidates is going to do, because, you know, on one side, I hear seven and a half trillion added to it. On the other side, there’s all kinds of infrastructure spending. So, you know, how do we get a handle on it? The way to do it is get Nancy Pelosi to train the entire government portfolio,
Michael Gayed 18:10
because she will just, I’m just, obviously the profits will take care of the debt. Clearly, I don’t know. I mean, debt only matters when people care about it. I mean, look, right, it’s like, we talk about it, but nobody cares about it until it actually creates, you know, some kind of a crisis. And you haven’t had that yet, right? And then it’s a question, okay, well, okay, so debt to GDP? What is the magic debt to GDP number where the so called vigilantes kick back and say, you know, we’re not gonna pay government debt. And then if the so called bomb vigilantes say we’re not gonna buy bonds, then the Fed will. And, you know, as long as the dollars the reserve currency, as long as we have military bases over the world, that dynamics not gonna change, right? So, what’s the, what’s the debt to GDP? Where it becomes, you know, the real crisis point? That’s the only question that matters. But who knows that could be 200% for always it could be 300% I mean, I don’t know. The one thing that I think you can say about the debt situation is that it further makes the point that no matter what they need, they in quotes the policymakers, they need negative real interest rates, meaning they need inflation to be higher than the cost of capital, to eat away at the interest expense from an inflationary perspective, right, right? So which is why would you can argue to me, one of the reasons the Fed did lower rates because they want to get back to negative real rates, right? If there’s another wave of inflation and they keep rates where they are. So from that standpoint, it goes back to this point that they’re going to keep on jamming, you know, money into the system. It’s, that’s gold bullish. That’s, you can argue, non correlative assets bullish. I think a lot of large part the gold move is because of that government debt and the realization that they have to keep rates negative. And gold does well when you’re in a negative real rate environment, in
Andrew Brill 19:59
sticking with. Theme of markets, AI has been like the big you know thing, and is it as big as from a market standpoint, it seems to have died down. Obviously, Nvidia isn’t climbing the way it was, and other AI stocks have taken a hit, but it’s now grown tentacles into other places, are we still watching AI, or are we looking at the peripheral of the periphery of AI? And you know what it can do for other things, like energy, like, you know, stocks that not don’t, aren’t, don’t build the chips, but they build the racks, they build the cooling systems. Are we looking at all of those things? I mean, it hasn’t mattered much
Michael Gayed 20:39
from a market perspective recently, but it matters a lot from a marketing perspective, right? Because how many companies are now saying they’re using AI and getting subscriptions? Because people are like, Oh, it’s got AI, it’s gonna be better than ever was. It’s the same damn service, right? And deliverables are all the same. I The one thing I have confidence in is that the human mind is notoriously bad at estimating how long things take to play out, right? It’s like no different than construction. You do something Construction wise. There’s an estimate that’s gonna take nine months, and suddenly it takes two years, right? It’s the same thing the human mind is. There’s all kinds of studies on this. We’re very bad at estimating time. So is AI the future? Sure. Is it going to happen as quickly as people think? I don’t think so at all. Right, it’s fine. You’re still moving in that direction, right? But we got to temp our expectations a bit, I think. So, what
Andrew Brill 21:31
sectors are we looking at that? Are like, obviously, utilities, energy, powering, AI, you know, depending on who you ask, either you know, natural gas or natural power, whether it be wind or solar. Where are we looking these days? That is it interesting to you? Yeah. Look, I
Michael Gayed 21:53
think I argued at the start of the year, utilities would likely be the best performing sector, partially because of the defensive nature, and partially also because of the AI play, right, because of the electricity usage demands. I think energy broadly. I think commodities and material sector broadly, right? Again, I go back to that’s a bit of a China play. From that standpoint, I think those are probably sleeper sectors that should start to outperform. And I do think in general, healthcare is probably do. And I say healthcare outside of GOP, one place, primarily biotech type companies. I think again, let’s go back to if AI is real. Nothing is more complex than the human body. So you would think that if AI is going to be this, this incredible, you know, driver of breakthroughs. It should apply mostly to to health, right? So I think, I think those areas are probably the most powerful. If you’re going to have some kind of recession or slow down, consumer staples end up being the place to be from defensive allocation perspective, again, I I’ve been wrong on emerging markets for a while. I am hopeful that this is, you know, a turn for that as an investable play, because as long as we’re in an environment where it’s just large cap tech, and that’s the only thing that works, like it has been, the truth is, yeah, if you’re a retail investor, it’s great for you. You’re making money. Those in the industry hate environment like this, right? Because you can’t beat the S, P, what’s the S P, when it’s the only game of town, you can’t beat the NASDAQ once the only given town you can’t raise assets. When, if it ain’t broke, don’t fix it with the S P, the NASDAQ. And that’s a story of tech commodities.
Andrew Brill 23:29
They’ve been beaten down for a while. Is that, because China was in such a such bad shape, does China, does the Chinese economy, drive the almost the the commodity market. I
Michael Gayed 23:41
think in the in the eyes of most investors, they are the, the marginal driver, right of of demand. Now India is a part of that too, because they there’s a whole bunch of infrastructure that that needs to take place, or many, many, many years for that country. But I think, you know, from a, from a, from like a Pavlovian response perspective, China rallies, commodities rally,
Andrew Brill 24:06
it’s just the defense, just the way it’s been,
Michael Gayed 24:08
the way the algorithms love it. You know, that’s how they respond to it.
Andrew Brill 24:14
So, you know, we talked about energy. Do you see nuclear becoming a much bigger thing? You know, Microsoft just reactivated Three Mile Island, which is not far from where I grew up. So it makes me nervous a little bit, but the world is using nuclear power. I know here in the United States, we try and shy away from it a little bit because of the nuclear waste and the dangers of it. But do you see nuclear power as being something that we get further into imagine
Michael Gayed 24:41
so Microsoft, in that restart, doesn’t suddenly have a blue screen of death when it comes to nuclear, because that would scare me, given the history of how Windows operating as a force. I’ve been bullish in nuclear for the last like two years. I’ve written about it extensively. I think it makes a lot of sense. I think the concern. Are overblown from a lot of perspectives. It’s actually among the safest forms of energy when you look at aggregate statistics against coal, against a lot of other things, as far as deaths per unit power, let’s call it, having said that, there’s always going to be the stigma, right? And these are very long tail type of dynamics. When it comes to nuclear, I don’t think you can possibly have an AI driven future of that nuclear. You’re not going to power that stuff with wind. You’re not going to power this stuff with solar. So that is the bottleneck. Right to AI, it is the nuclear play. I think it’s it’s going to likely continue, as you know, it’s volatile, as you know, it’s a relatively small part of the mythical landscape. But I think it makes sense for most people to consider, you know, sizing it appropriately, somewhat of a position in anything you read. Anthony
Andrew Brill 25:42
papliano was out with a new book and joined Anthony Scaramucci on speak up. He talked about breaking the cycle of pessimism and shifting toward a path of optimism. He also spoke about how to handle risk and his view on a recession. Anthony also voiced his concerns over central bank digital currency, and played devil’s advocate on Bitcoin.
Anthony Scaramucci 26:05
What do you say to somebody who I don’t know, maybe they grew up in a family where everybody in the family sees the glass half empty, and so they’re walking around in life where the glass is half empty to them, because maybe they got born into a family like that, or maybe they’re genetically predisposed to that. You know, sometimes pessimism is also a survival mechanism. Right? People worry about what, what could happen, and they try to prevent it from happening. Um, but you, you don’t. I correct me if I’m wrong, but I read your book. I interact with you. I see a congenital optimist. But what do you say to somebody that isn’t
Anthony Pompliano 26:43
break the cycle? You know, it reminds me of the story. There’s a alcoholic father, and he has two kids, one’s an alcoholic and one’s not. And they go to the alcoholic son, they say, why are you an alcoholic? And he says, because my father was and then they go to the second son who doesn’t drink, and they say, why don’t you drink? And he says, because my father was an alcoholic. And so, you know, just because you grew up in a certain environment, just because you were surrounded by certain people, you can still love your family, but understand that you want a different path, or, you know, you want to be the one to break the cycle. And that’s true, I think of pessimism, of poverty, of many things. But you know, frankly, it takes somebody who’s courageous, it takes somebody who is resilient, and it takes somebody who, you know is okay trying to do things when the people they care about most probably are going to give them a hard time, make fun of them, you know, tell them that they’re being stupid or unrealistic. And so that’s why it’s so rare, right? I mean, how hard is it to, you know, be successful in life and then do it while the people you care about, you know, are basically teasing you or taunting you. It’s very, very difficult. And so people who are in that situation, I don’t envy, but I do think that, you know, it is possible. It just takes somebody with the the courage to do it. So,
Anthony Scaramucci 27:50
so pump embedded in all that, though, is being able to take risk on the future, right? So, you know, I’m 24 years older than you, and so I’m on, I’m supposed to be this old fuddy duddy. You look 15 years younger than me. Well, there’s a lot of Botox on my forehead and pop. You could use a little bit of my my hair tonic, which we’ll talk about offline. Okay, I could, I could straighten that whole thing that’s going on. You know, you know, you don’t want a five head pump in life. Just remember that. Okay, you want to keep it in a four. Okay, just remember that. Okay. We’ll talk about it offline. But, but, yeah, I got a lot of tricks that way pump. You know that, but, but my point is, is that you’re this young man who sees the world as it could be, and you’re willing to make investments towards that end. Okay, you got the Bitcoin, I don’t know, five, six years before I did what do you say to somebody that has a hard time with that? What do you say to somebody that is resistant to change or is resistant to investment? Thematic change sees Apple, uses Apple every day, but can’t bring themselves to buy Apple because it’s a tech stock. They use Microsoft’s operating system every day at the office, but yet they don’t own any of it in their personal account. Or they see something like Bitcoin, this incredible technology that you and I both think are changing the world on its way to changing the world, and they say, oh, it’s worthless. It’s useless. What do you say? How do you break them from that? Well,
Anthony Pompliano 29:27
I think one is, you don’t try to convince anyone of anything they don’t want to do right. You kind of get the results that you deserve. And so if you take action and you’re right, you’ll be rewarded. If you don’t take action and you’re wrong, then you’ll get punished. And that’s kind of how markets work in general, but also, I think that the people who end up, in my opinion, being most successful, investing, building and creating kind of their own version of what their extraordinary life is, are people who they never get mentally stuck in hardened concrete. They’re constantly. Changing their mind. They’re constantly looking for more information. They’re constantly curious. And so, you know, we’re having a conversation in the office recently where I explained to someone, hey, I read something in the news. I thought it was true for years. Somebody told me that it wasn’t. And so I went on this, like fact finding mission. I went and I tried to read as much of the source material as I could, and I was blown away by what I read. And you know, what ended up happening is the news was partially right, what the person that told me was partially right, but it forced me to go and learn for myself. And so I think that, you know, there’s kind of two different types of people in the world. There’s a famous chess player, Josh, I think his name is Wade sick, who is thought to be kind of the next Bobby Fischer, right? Yep. And he wrote this great book called The Art of Learning, and in the book, he talks about something called entity intelligence and iterative intelligence. And the idea of entity intelligence is basically your parents tell you you’re winning chess games because you’re smart. You’re winning chess games because you are good at chess. You’re winning chess games because you are a winner. But the problem is that when you lose, you then say to yourself, I’m a loser. I’m dumb, right? I’m not good at chess. And so he says, those people end up not going very far in life, because when they’re met with adversity, they cave instead. The idea of iterative intelligence is when you’re winning a chess game, your parents tell you you’re winning because you worked hard. You’re winning because you put the effort in. You’re winning because you practiced and you positioned yourself correctly and you did all this. So when you come to a loss, what you say to yourself is not, I’m dumb. You say, I need to work harder. I need to put more effort in. I need to be better prepared next time. And I think that in life, you come to the iterative intelligence one of two ways. It’s kind of nature versus nurture. You either kind of born that way and you happen to be in the right environment all that kind of stuff, or you got to work really, really hard to learn that. And both can work. You just kind of kind of figure out, like, do I have the entity intelligence, or do I have the iterative intelligence? If I don’t have iterative intelligence, I gotta, I gotta start working that way, right? And the beauty is that with the internet, and, you know, kind of all the access we have to information and people today, you can do that, but it goes back to this idea of agency. You know, how many people really think through, do I want to change anything about my life? Do I want to improve anything about my life, and then have the discipline to go and act? Not very many people. And so I think that, you know, it’s why we as a society celebrate or kind of look for these stories where people have had extreme economic and social mobility, or, you know, radical change with health transformations, etc. It’s because it’s so rare, and a lot of people want to have that. They just don’t want to do the work to to get there. Recession coming. No recessions have been outlawed. We had a recession, and they refuse to acknowledge it. And so no matter how many recessions we have in the future, they’re just going to print money suppress interest rates, and a random fake nonprofit is going to determine whether it’s actually called a recession or not. So I’m out on recessions for the foreseeable future. Okay, so
Anthony Scaramucci 32:58
we have a tendency to use the money to sugarcoat, is what you’re saying, Yeah, which speaks to Bitcoin. Let me be the bear for a second. Okay? And obviously I’m bold, but let me be the devil’s advocate. I bought my bitcoin in November of 2021 pump, and I paid $67,000 for it. It’s three years later, and it’s at 63,000 so am I a bear? Am I feeling bad about myself or Well, I, of course, I didn’t buy my bitcoin then. So I’m actually feeling good about myself, but I want to be devil’s advocate. I purchased it at the high in 21 so how should I be feeling about Bitcoin?
Anthony Pompliano 33:43
I think there’s a couple things. One is, if you made one lump sized purchase, you know, if you want to see the kind of optimistic perspective, Bitcoin stored value for you better than the US dollar did, right? The dollar has been eroded more than even bitcoins price over those years. Two, I think, is if you dollar cost averaged into Bitcoin, and you started buying right at the top of the last bull market, you dollar cost average all the way through the bear market, till today, you’re up significantly. And so, you know that lump sized purchase versus $1 cost average obviously has different results. But more importantly is, you know, I think of Bitcoin as a savings account, right? I you know, one of the things I tell people now is like, you got a checking account, a savings account. I think Bitcoin is your savings account. I think that these stable coins or digital dollars are gonna be your checking account. You’re gonna want to spend the dollars. Gonna want to save the Bitcoin. And so, sure, it’s nice when Bitcoin goes up in dollar terms, but I very much think of Bitcoin today as 20 years from now, will it be at least worth what it is today in purchasing power terms, if not more? And if it accomplishes that, it probably be one of the only assets that will do that. You know, there’s even been periods over the last five years where gold has lagged inflation. And so I do think that there’s this very interesting dynamic of the promise of. Coin being the protection of your purchasing power. Now that doesn’t help. When you look at your brokerage account or your Coinbase account, you see that the dollar price is down. But let’s see what happens 90 days from now, might be a completely different story. What’s
Anthony Scaramucci 35:13
your take on the impact of CBDCs on the future of decentralized currency? That’s Alex from Australia. Go ahead. Anthony,
Anthony Pompliano 35:21
CBDCs, I am not a fan of very, very scary to me. People have obviously talked at nauseam about the surveillance of these assets. I’m more worried about things like personalized monetary policy. You know, everything in our life is personalized, and so how Google Maps directs your route, the music you listen to your Google searches, all that stuff is personalized, if they have the ability to personalize monetary policy. And the fact that, you know, maybe Anthony Scaramucci, inflation rate is set at 2% but mine is set at four. Or maybe there is some degree of devaluation, or there is, you know, other aspects of personalization. I think that that while they may see it as economic solutions for problems, I think of it as kind of opening a can of worms that could be quite scary. Ram
Andrew Brill 36:08
alawalia, founder and CEO of lumita wealth, joined wealthion this week and explained how to differentiate between value and growth stocks. He also explained how rate cuts are affecting the baby boomers investment decisions. He believes agency bonds, mortgage bonds and private credit present an opportunity and are mispriced. He also touched on why Microsoft is investing in nuclear power. I want to ask about that value stocks versus growth stock. How do you differentiate between the two? Sure,
Ram Ahluwalia 36:41
it’s an excellent question. So when I think about growth stocks, I think of stocks that, on average, are 50% plus in terms versus their median PE ratio for that category. Okay, so if you’re a high multiple stock, simply put your growth stock. If you’re a low multiple stock, your value stacks, very simple, clean distinction to make. You know, growth stocks tend to have higher earnings per share growth than value stocks, and investors pay for that earnings per share growth in the form of a higher multiple. That’s right,
Andrew Brill 37:12
right where we want it is like, look, you know what? We’re not we’re not going crazy, we’re not going down. We’re just, you know, steady shit.
Ram Ahluwalia 37:19
Arguably, we were right where we wanted to be before the rate cuts, right? So now we’re adding some gas and fuel to the fire, and over the last year and a half, we’ve really developed this Boomer economy where you’ve got retirees living off of T bills and their spending. You know, if you know, if you go to your local restaurant, the restaurants are packed. Restaurant stocks are quite expensive, and you can usually spot like a grandma or grandpa around the table, and they probably paying the bill. So now, with rate cuts and treasuries paying less, that means less income for boomers, all right, so that means for retirees especially, and that means you’re going to see a shift in spending behavior and risk taking behavior, and so you’re starting to see dividend paying stocks that are going up so grandma grandpa now being forced to rotate from treasuries into equity markets, which have a lot more risk, where you’re at the top decile evaluations now, and, you know, I don’t know if that’s the right move, because the economy, you know, adjusts to the prevailing set of circumstances. So when you suddenly change one variable, then the economy needs to go through this adjustment process again.
Andrew Brill 38:39
So the shift Do you are you seeing a shift in some of those things where, you know, the older people are taking money from one place and putting it in a in another to, I guess keep that dividend.
Ram Ahluwalia 38:51
We’ll see. I It’s too early to say. I hypothesize that we’re gonna go see that. So you might measure it in travel and leisure spend and demand for, like crews, of course, restaurants, consumption of golf clubs at Dick’s Sporting Goods. So probably a few ways you might measure it. Or, you know, you’ve seen weakness in, say, stocks like Hilton Garden vacations and like timeshare companies. So you’re seeing some weakness there. But I expect that it’ll continue. Look, this will benefit borrowers, of course, and it’s going to penalize savers and creditors, so borrowers will be able to benefit. You’re seeing, you saw, I should say, a boom in mortgage refinancings from homeowners that took out a mortgage at a higher rate. However, now mortgage rates have crept back up due to the tenure moving up and concerns around inflation. So the Fed right now has got to be smacking themselves on the forehead and saying, What the hell. Right? They squeezed here and then something gave there. And in a way, it’s all. Set of what the Fed is looking to accomplish, because the long end of the yield curve is what funds the housing market right access to mortgage credit. It funds capex spending of corporates. It funds and is used to compare the earnings premium and yield that you have in the equity market versus the alternative, which is a 10 year bond of comparable duration. So the Fed is the Fed is confused. I legitimately think they’re not sure the right way to move with high conviction. How can you this is a complex story that the lot of moving parts with a set of circumstances that we haven’t seen before, where consumers refinance at very low mortgage rates. And so the sensitivity to interest rates was also lower. But
Andrew Brill 40:46
balance is the key. You want to have a little bit of everything in there. Would you throw bonds into that, into that portfolio as well? Well,
Ram Ahluwalia 40:53
say what kind which bonds. I would put mortgage bonds in that I think agency mortgage bonds are, once again, mispriced. I would own agency mortgage bonds because an agency mortgage bond is implicitly backed by the full faith and credit of the United States government. However, they offer a yield that is substantially higher than the comparable treasury to the tune of 250 basis points, which is a nothing. So agency mortgage bonds, I think a really interesting idea. That’s one treasuries, I’m not a big fan of you know, you can give away two and a half points of a 4% coupon on the 10 year in inflation. I also see that private credit strategies can dramatically outperform treasury yields, right? You can get 10% to 18% depending on the nature of the strategy in private credit, for example, through funds that provide senior secure lending to middle market companies that have free cash from earnings but can’t get a loan from a bank, so senior secure means you’re first to get paid in line, right? So you’re on the top of what’s called the capital stack. There’s also strategies where you have asset backed financing. You’re making a loan and you’ve got collateral. So I like the strategies. Why would I own Treasury if I can invest in that now, the answer would be liquidity. So those strategies don’t give you liquidity. So
Andrew Brill 42:28
Microsoft is going the nuclear route. Do you see a nuclear play at some point? There’s a lot of talk about uranium, mini reactors, powering things. Do you see in it may not be tomorrow. It may not be, you know, in a few months, but eventually we’re going to have
Ram Ahluwalia 42:44
to turn to that. Yes, yes, it’s inevitable. It’s happening two years ago. Is unthinkable now it’s inevitable and popular, and Congress is starting to focus on it. The Nuclear Regulatory Commission is starting to focus on it. You know, the United States forgot how to build nuclear reactors. We have something like 80 plus nuclear reactors in United States. United States. By the way, haven’t built them in decades, but we have a bunch of them, and United States we ought to build them. South Africa know how to build them. China is building up many nuclear reactors. So China has plenty of energy. And so we have the GPU. China has the energy we need. The energy China needs a GPU. So our race is on the energy side. Their race is on delinking, the dependency on Taiwan and Nvidia, and they’re trying to, you know, get around export controls. So, yeah, nuclear will make a comeback. Building a plant takes over a decade. Though it takes. You got permitting concerns you got not in my backyard, concerns you have technology. Know How? Concerns. I think it’s a great it’s a great thesis to bet on. It’s a very difficult thesis to bet on. By the way, the vast majority of nuclear companies are unprofitable. I see people investing in stocks like SMR, which stands for small modular reactor. The Small Modular actor is actually really good idea. We’re gonna see that too. You can see small modular reactors, not Big Three Mile Island reactors that are right next to the data center. But some of these companies, like small modular reactor, last I checked, like the CEO sold all his shares, like the insiders are sold out. It’s just trading like a beam stack. So you have to carefully pick and choose your spots in the nuclear category. And many of nuclear names are unprofitable. They don’t make money. And then the nuclear miners, they can be upside down, because they make forward commitments to sell uranium at a future price. But if they cannot deliver and mine enough, which many miners experience that issue, then they’re technically short uranium. So you thought you’re buying a uranium miner. So you get long uranium exposure indirectly. And it turns out the miners actually short because they made a commitment to deliver in the future. They cannot. Me, so they have to go buy from the spot market, right? So uranium is a is a difficult category to invest in. I do think they’re good opportunities there. Thank
Andrew Brill 45:11
you for watching this week’s recap. If you need help planning your financial future, head over to wealthion.com/free for a free no obligation financial review and please follow us on social media. All the links are below in the description if you haven’t already done so, please make sure to like and subscribe to our channel. Don’t forget to turn on notifications so you never miss a video. Thanks again for watching. If you like this content and are looking for more ways to keep growing your investments, watch this video next until next time, stay informed, be empowered and may your investments flourish.
