– Tom Lee shares his bold prediction of Bitcoin reaching $250k next year and explores the broader crypto market’s evolution, including the impact of Gen Z and AI on the S&P’s long-term growth, which he projects will reach 15,000 by 2030. – Jason Trennert offers a measured outlook on earnings, capital expenditures, and housing affordability while analyzing the potential implications of new Treasury leadership. – Ron William discusses post-election market euphoria, potential corrections, and Bitcoin’s meteoric rise alongside the importance of risk management. – Ram Ahluwalia delves into value vs. growth stocks, investment opportunities in agency mortgage bonds and private credit, and the challenges of investing in nuclear energy.
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Andrew Brill 0:00
We’ve officially entered the holiday season with the Dow and NASDAQ moving in opposite directions. We’re here to give you insights that’ll help you navigate your financial future. I’m your host. Andrew brill, let’s see what our experts had to say this week.
Andrew Brill 0:17
This week on speak up, Tom Lee joined Anthony’s caramuci. Tom gave us a prediction for Bitcoin, and what coins, besides Bitcoin, we should be keeping an eye on. He also thinks with more of Gen Z getting into the market, the S P will reach 15,000 by the end of the decade. And have we thought about the downside of AI, since there are no ethical boundaries?
Anthony Scaramucci 0:41
You are genius level at predictions. Okay, so let’s imagine on the show Bitcoin, it was in the mid 50s to high 60s range. You said, we’re going to 100,000 I said, What are we getting? 100,000 you said, by the end of the year. Okay, yeah, so why did you say that? What did you see and what do you see for Bitcoin over the next six months?
Tom Lee 1:09
Part of the reason we have stayed constructive on Bitcoin is the price is falling closely the prior having cycles, the having cycle for your viewers is when the block reward gets cut in half. That happened earlier this year, so there’s a reduction in new supply, and the sweet spot of that price gain as supplies cut starts to happen towards the end of this year and then into next year, and I think that that has supported why we expected Bitcoin to be 100,000 and over the next 12 months, I think something over 250,000 possible, but maybe highly probable based on just this following this price cycle. The second reason I think Bitcoin has maybe more upside than that is because the new administration is running, has run on a pro Bitcoin platform. And I think that the possibility of the US not only legitimizing Bitcoin, but make making it a strategic reserve asset, I think raises the raises what would be the possible price scenarios for Bitcoin? Because if the US government, as they intend, ultimately gets to a million Bitcoin, they’ll be the largest holder of Bitcoin in the world, and they exert enormous positive influence on legitimizing Bitcoin. And maybe I would just add to that, it’s almost like taking a playbook from MicroStrategy, because MicroStrategy has proven that using Bitcoin as a balance sheet asset has really created a lot of value for MicroStrategy shareholders.
Anthony Scaramucci 2:59
So I so I’m a Bitcoin holder. I believe you’re a Bitcoin holder. There are other coins out there. Some of those coins have not done it well at all. They’ve diverged from Bitcoin. And there’s a few coins like Solana, that have done quite well. I had an investment in something that I think you did some research on, called algorand, unfortunately, has not done well. So away from Bitcoin, are there things that you like? Are there tokens that you think, from a utility perspective, from a use case perspective, that you like, away from the store of value Bitcoin?
Tom Lee 3:39
Yeah. I mean the answer is yes. We’ve recommended to our clients that if they didn’t want to be Bitcoin only, that they could look at Bitcoin, Ethereum and Solana, because we put those largely in the same category as like, sort of core cryptos. We are also entering what I think is Alt season. You know, next year is really when I think the crypto market could broaden. And this is where those who are really experts on crypto, and I know you run a crypto fund, actually we’re gonna are gonna have some alpha, because that is actually when many alt coins could do really well. I think that the stronger bitcoin is, the stronger the ecosystem becomes. And so so many of these utility tokens and things that are tokenizing really start to have a lot of expected value. But I, you know, I don’t follow this as closely. Sean Farrell is much closer to sort of how to play alt season and, of course, sky bridge.
Anthony Scaramucci 4:55
You know, you’ve previously predicted that the S P would reach 50. 1000 by 2030, and what I loved about what you said is it would be factors like Gen Z, finally, entering into the market advancements in AI, use you sticking with that? Have you moderated it anyway? If so, how and what are some of the key drivers that support your forecast,
Tom Lee 5:20
yeah, it’s, um, yeah, that’s still our case. You know our base case that the we’re in a an earnings driven cycle, aided by AI, also supported by this prime age workforce surge coming from millennials, and then also Gen Z, because those two generations are larger than Gen X. So Gen X is the generation born between 1960 to 1980 roughly, and and those folks are, you know, just in the heart of the prime ages now, and now they’re exiting, and now you have two huge generations behind it. So that’s think of it as like a second wave driving further growth. S and P earnings next year are roughly 300 for, let’s say, just sort of simple measures. And so that’s why S p6, 1000 is just 20 times earnings, right? Which I don’t think is that demanding. By 2030 we estimate S and P earnings could be 600 to 650 Okay? And, and I think multiples will be higher because of the larger share coming from AI and technology earnings, which naturally have higher PE multiples. And so if you just apply a 20 to 25 multiple, you’re getting 15,000 so I know it sounds like people say, well, 15,000 sounds crazy, and two years ago it might have sounded crazy, even though we that forecast was in place more than two years ago. You know that forecast been in place probably for five or six years, but you know now that we’re at 6000 we’re that much closer to 15,000 it’s not a quantum leap any you know any longer.
Anthony Scaramucci 7:19
How do you assess the impact of the artificial intelligence, you know, and is it all positive? Is it’s could it be dystopian? Could military adversaries of ours get a hold of it? Could? Could someone figure out how to put an artificially intelligent worm into our Pentagon or our power system, or are you just not worried about any of that?
Tom Lee 7:49
I i would say, if based on my conversations with our clients and with other sort of folks following this, I do think we’re underestimating the negative consequences of AI, you know, foremost, because in in a human like, in our human intervention endeavors, you know, we we work with ethical boundaries. Because even though there might be a shortcut, like, let’s say you’re waiting for coffee, you know, you wait in line and other people in front of you, but in an AI world, there’s no benefit to being ethical, you know, so that in the AI world, that machine will just cut the line in front of everybody to get coffee, and I haven’t seen Any attempts to create ethical boundaries within AI, especially other nations pursuing it. So to me, this means there’s going to be much greater risk of cyber security hacks, and it’s going to be much harder for us to protect our identities in this world of AI and social engineering and generative AI videos, and it’ll be very easy to spoof people, um, and so I think profits are going to do fine. There’s going to be a much higher cost in the economy around cyber security. And already, JP Morgan, you know, 7% of their activity, well, all banks, really, 7% is now suspicious. It’s actually been rising. So in a world of cybersecurity, banks are kind of losing the war because there’s more fraud now than less. And so I think that’s makes crypto so much more important, because it does secure your information. I think that’s one solution, but I Yeah. So I think there’s a lot of risks, actually, personally, I, you know, I think if, if you unleash AI systems in the financial market, there’s going to be a lot of people who make dirty trades that trick people and spoof people, and there’ll be fake headlines, because that’s how you manipulate markets.
Andrew Brill 9:58
Are you concerned about? Your financial future or think your investments could be doing better. I’m Andrew brill, one of the hosts here on wealthion, and I’ve been there not sure my money was in the right places. It’s why I’ve gotten help from a financial advisor. Maybe it’s time you think more about your financial future or get a second opinion about your investments. We’ve made that process easy. Simply go to wealthion.com/free to speak with one of wealthions registered investment advisors for a free, no obligation portfolio review. Again, that’s wealthion.com/free I’m now less anxious and confident I can achieve the financial goals I’ve set for me and my family. Top Wall Street analyst and CEO of strategas research partners joined us this week. He noted post election optimism with single digit earnings expectations. He also wondered out loud how Donald Trump’s Wall Street picks will affect debt and inflation control. Jason also talked about the housing issues the country is having with high mortgage rates and prices, and should there be a cap on interest rates? We I know you noted in your research that you sent over to us that now that the election has passed, things have calmed down a little bit. Obviously, the markets went crazy and earnings were at the end of earnings season. You believe that earnings into next year are going to continue to be very good?
Jason Trennert 11:25
Yeah, it looks like it, especially given our view of of the economy, which is say, the chances of recession, in our opinion, next year are pretty low. And obviously profits are in nominal terms. So if you have a little higher inflation, it tends to imply higher earnings. The issue really comes if it tends to, if that, if that higher inflation results in higher long term interest rates, and then whatever you get on the earnings side, you tend to give back on on earnings multiples, but, but I do think the earnings, earnings are probably not going to be as good as what the street is expecting, which is about 14% 13, 14% increase next year, but they’ll probably be in the high single digits, something along those lines. So
Andrew Brill 12:11
And where does that sit with normal? I you know, 14% growth is probably a little bit higher than normal. Where does single digits or high single digits. Where does that sit in terms of normal?
Jason Trennert 12:23
Well, over the longer term, you know, the normal is about 7% nominal for profits. So we’ve definitely been over earning, and a lot of that, I would say, at least recently, has been due to a relatively small group of companies. You know, if you if you excluded the mag seven from the earnings calculations, you’d probably be below normal. So if you took the s, p4, 93, versus the mag seven, you’d probably be in the four, four to 5% range in earnings growth next year, as opposed to 13 or 14. But those companies are earning so much cash, or earning so much in terms of earnings, but also generating so much cash that it’s it all evens out for the market as a whole, to, you know, to something that’s above average. You
Andrew Brill 13:10
mentioned cap x spending. Is that an assumption that interest rates will continue to come down so people, companies will be able to borrow to spend? Or is that you think that people have some cash around to spend on? I think they have
Jason Trennert 13:24
some cash. And I think, again, I think the range of outcomes from the election was so wide, in my opinion, with the two candidates that it was pretty prudent, I think, for a lot of companies, to hold off on any sort of big capital expenditures until they knew who won, and then they could decide whether they would proceed or hold off or change the plans. So now that it’s over and there’s some certainty, and I would argue to be overly political about it, I think President Trump winning is better for capital formation than vice president Harris were to have won. I think all those things bode well for capex, I’d also say that corporate credit spreads are very, very tight, and so interest rates don’t necessarily have to go down, but companies are able to fund themselves at very, very attractive rates relative to history, and so that that helps out as well.
Andrew Brill 14:18
You’ve heard some of the names, I’m sure about the people that could possibly head the Treasury. Do you think that that’s a possibility, that they’ll think about this differently? You know, Donald Trump is looking at Wall Street people to head the Treasury. Do you think it’s a we could be entering a different time and a different way of looking at things?
Jason Trennert 14:38
I think so. I really do think so, and I think I don’t want to cast aspersions on the current Secretary of the Treasury, but in my opinion, she’s behaved in ways that are more politically oriented, more politically motivated than perhaps that, in ways that would be in the benefit. Of the long term interests of the economy and the American taxpayer. And I think it’s good that you have people with market experience, especially now, people with market experience in that role. We just had a conference two weeks ago, or a week ago, it seems like four days ago. I don’t even it was in London. I think it was last week, last Thursday. I’ve been everywhere. But we had it with Liz truss, and Liz truss, former Prime Minister of the UK, and you know, she, she would, we had her speak to our clients, specifically because of this idea that she was there when the bill came due in the UK when the bond market vigilantes really kind of forced her hand. And that’s important. It’s instructive. And again, US has reserve currency status, so you get away with a lot of bad behavior when you have the reserve currency, but it’s not there are limits to what you can get away with. And I think having a markets person in there makes a lot of sense, because this is going to, this is going to require alert, a certain amount of flexibility, I think, intellectually, and a good understanding of the markets to get through this without a lot of pain.
Andrew Brill 16:17
It’s, you know, I talked to you about this, it occurred to me that if you do the longer, even a 20 year bond, you add a new group of people, like retirees are saying, oh, you know what, if I can do 20 years at five and a half or 5% I know that’s coming in. This is a whole new group of people you have buying bonds so, you know, and Tony, that light went off in my head. I don’t understand why it doesn’t go off it, yeah, in the Treasury’s head,
Jason Trennert 16:47
I think it’s really just, I honestly believe it’s political expediency that, you know, at the margin, it kept the deficit a little bit lower by issue, especially when the Fed was engaged in QE, it was just cheaper to issue shorter term debt. But the problem is that once you start to have an inflation problem and the Fed has to raise rates, that benefit turns into a detriment, because now the weighted average cost of our debt not to get two in the weeds here, the weighted average cost of our debt is below every part of the yield curve. So no matter where we funded that, even if we continued to fund it with bills, our interest expense would rise because we have committed ourselves to so much short term funding that anywhere we would fund it, it would increase the interest expense on our debt. And so again, no one you know in terms of, not to be overly simplistic about it, but certainly any person with that was taking out a mortgage, if they had an ability to fix their long term interest rate at very low interest rates, would take it out as long as possible. Uh, Uncle Sam basically took out an adjustable rate mortgage on its future, and it can get away with it, but it’s not without cost, and the cost is the potential for higher government spending, higher deficits, higher inflation in the long term.
Andrew Brill 18:14
It seems to me that that’s the smart thing to look at, although some would look at a flat screen TV or a trip to Barbados as a necessity. It’s really not. But those are the things that are necessary. I mean, housing, which is totally out of control, and with the 10 year you know, housing prices, mortgage rates, they’re all way higher than a lot of people can afford. How do we get that under control? Yeah,
Jason Trennert 18:39
no. I mean the the irony really, is that mortgage rates have increased right meaningfully since the first fed easing in September, right? And so they’re up about 4050, basis points. If I’m not mistaken, they’re close to seven, I believe, right now. And that’s a tip. That’s a very it’s a very tricky problem, because there are a lot of there are a lot of reasons why. There’s a certain there’s a bottleneck in the housing market. Part of it is just because interest rates rose very quickly, and so you have a lot of people that are quote, unquote stuck in lower interest mortgages. I also think the immigration policy over the last four years has not helped the housing market, right? Because you have, depending on who you’re listening to, you know, another 15 million people in the housing market, and so that that soaks up some supply as well, right? So everything is at the margin. And so here, it’s not a particularly easy thing to fix, right? And it or it takes time, their estimate is that we’re probably short somewhere between four and 5 million single family homes. We we produce, we manufacture, single family homes at a rate of about a million a year, maybe a little less than a million a year. So the bottleneck in that in and housing is. Meaningful and not easily is not easily fixed. And so it’s really, I wish there were a better answer, but it’s really more of a function of time, more than anything else.
Andrew Brill 20:10
So I was reading about credit and credit cards, and obviously President Trump wants to put a cap on credit card interest, and I was reading that that could cause credit card companies to start canceling credit cards. So that would tighten credit, and that would be a drain on the economy as well, because now people can’t spend as much as they used to because they don’t have that credit all the cash, but they don’t have the credit either.
Jason Trennert 20:40
Yeah, I’m not a big fan of price controls, and whether those are price controls on groceries or price controls on money, on interest paid, on the cost of money. And so I understand the impulse, because these interest rates are pretty much in the usurious levels, you know, you’re looking at 25% by the same token, you know, again, this is it’s, as you’re pointing out, the credit is only available, probably at those Types of interest rates for some people. And so I think again, I’m for free market capitalism. You know more I think markets tend to do a better job of organizing an economy than the decisions of relatively small groups of people, especially small groups of unelected people, like at the Federal Reserve Board, right? So I so I would rather see just more market, market influence in the economy. I think the incoming administration is much more pro market in that regard. But I would resist the temptation to try to fix everything via the government, because I think, as we’ve talked about before. Once you start going down that road, it’s very hard to get out of it. We should be moving back to less government, more markets, and then, of course, having a strong rule of law, punishing the bad guys, all of that stuff. But I again, I think the price mechanism, the incentive system, works exceedingly well. I thought
Andrew Brill 22:24
it was a great idea, you know, but I didn’t look at it from the credit card company side, where they said, Okay, you know what, we’ll just cancel credit cards. So it’s a very slippery slope, maybe not 10% 15, you know, they have to be able to make their money, obviously. So, right? You’re
Jason Trennert 22:39
balancing, you know, the credit card companies. And again, no one, no one’s a big fan of credit card companies. I mean, in terms of, you know, what, what they’re charging. And I’m not defending them, necessarily, but it’s a business, right? And then, you know, they have to, they have to balance the potential for loss with the interest rates that they they pay, right? And so that’s kind of the way it it works. And again, as I said, I’m kind of more for more for free markets than anything else. Founder
Andrew Brill 23:06
and principal Market Strategist at RW advisory, Ron Williams spoke with us at wealthion this week. He talked about market risk, and can we go from pullback to collapse, the upside and downside to Bitcoin, and how to minimize the risk in your portfolio, was a topic of conversation, along with what to expect in the coming commodity super cycle.
James Connor 23:31
So these financial markets, and I’m going to start with the s, p, it’s like a runaway train, and it doesn’t matter what you look at like so many stocks, Bitcoin, so many other asset classes, they’re just making new highs every other day. The S P is at or near the 6000 it’s up 25% on the year. And why don’t we just start here with the US market? So what are your views of the US market? Do you think it continues to go higher into the new year? Yes,
Ron William 23:58
for now, the market remains euphoric post election. However, the view on risk proxies, S and p5 100, case in point is by the rumor sell or fade the fact vis a vis the past election, so November 5 was the expected Republican and Trump win. That’s what we see here on our follow up visual of interest rates long term, 10 year interest rates resurging higher from lower levels, but also tracking back then the Trump Republican win odds. So that was not so much the surprise factor. What was was the clear, decisive and broad win in terms of the red sweep and the policy market implications in terms of fiscal policy potential, inflation of. Tailwinds, as well as revived animal spirits for equity markets and deregulation friendly environment for Bitcoin. But what all of this means is that the market has just continued to get hot and euphoric into and then after the most important event risk in many years, and arguably even more than that, compared to other elections. And so what that will likely lead to is a overheated, overbought situation where those risk proxies that drove up into the election start to unwind into inauguration as part of a profit taking and reality check on the policy rollout to come. And that’s that’s something I can add more to in terms of the statistical work that we do here at RW advisory on election patterns, behavioral, sentiment and markets in general,
James Connor 26:02
and Ron, the other thing that really stood out to me was the pullback that you’re looking for. It’s not much of a pullback. It’s less than 5%
Ron William 26:12
yes, absolutely. So that’s that’s purely in terms of clearer signals as to whether this market holds up or not, in terms of a much more bearish risk scenario. Certainly the one that we are following is the 2008 double financial crisis. Now that that’s, that’s, that’s gonna concern a whole lot of people hearing me say that, and so I do say that carefully. It’s not let me, let me, let me back up with his with a disclaimer, it’s not a repetition of oh eight or any other time in history. It’s the pattern rhyme that we’re looking at. And so if you look at this chart here, the most important pattern, rhyme, comparison is what we term as a bullish trap signal, ie excessive euphoria on elevated leverage and typically low vol, all flipping the other way when ultimately market consensus gets it wrong, and a lot of that portfolio positioning is forced to sell. It’s not a choice, it’s a pressure reversal that happens in the market. The same thing happened in 08 we had an all time high just after a Fed pivot, after many years of doing the opposite, and then we had a three stage corrective pattern, fall rally, rest of fall, but that middle part of the rally was an all time high, and ultimately a head fake, which then became A bull trap signal that then led into what became the historical top of 07 into 08 it was a six to 12 month topping pattern, but it began in the second half of one year, and then developed over the first half of another year, which I think is what is likely happening here and now, between 2024 going into 2025 and this is typically when everyone is most bullish, most euphoric, and that’s the point. It’s non consensus. It’s not meant to be in line with everyone’s thinking. It’s the exact opposite. And for that reason, we get caught out. We’re blindsided. And typically it can be quite a turbulent and volatile change in market environment. And just to add what would confirm this pattern on S, p5, 100 right now is a move back through 5670 and then 5400 so not just 5% 10% 20% and of course, if you go back to bear market analogs, 30 to 50% in terms of the big bears. And just to, just to add, one of my educational good, bad and ugly charts is looking back at bear markets, the the small ones that are short lived, such as 87 and 2020 COVID, which recovered way faster than anyone expected. Then the so called Bad during 2002 1008 a lot of people alluded back to 2000 in terms of the tech concentration risk, and then last but not least, the one that I encourage everyone to have a strong cup of coffee or something even stronger. On the far right, the ugly chart, which is basically sideways roller coaster, volatile market environment, such as the 1970s that included. Are all shock and and ongoing geopolitical risk premium. And then lastly, of course, the infamous 29 Wall Street peak and crash. Now, our view is that we’re likely going to get a hybrid off the bad and the ugly. I’d love to say it’s it’s probably going to be good days ahead, and summer is going to last for as long as possible. I’m here in the UK, and i i Miss summer, so I’m more than more than happy to project some of that bias onto the market. But the reality is, we have to go through different seasons of the year, and markets do the same. And given that we’ve had such a strong bull and business market cycle, the autumn and winter season is longer due, and this time will likely be a hybrid of of the two that I just mentioned, partly because of the inflation effect that is building up with all this debt and and just general exuberant market moves so so that will need to re shake out reset before a healthy bull market recovery follows.
James Connor 31:12
Now you showed in one of your earlier charts, one of the strongest asset classes out there is Bitcoin. It’s up over 100% on the year, and I can’t get over the amount of chatter on X relating to to Bitcoin, but what are your thoughts here? Does it’s very close to going through 100,000 does it keep going? Yeah. I
Ron William 31:34
mean, clearly this has been the best performing asset, bar none, just because crypto is crypto. And when it goes up, it really, it really does, it rockets. And just since the election of November five, it’s, it’s up more than 40% just since then, year to date, even more now. And just just to add that’s partly down to the dereg Crypto deregulation story that is likely to follow a Trump Republican presidency. So there is policy tailwind as to why Bitcoin is strong now in the crypto complex in general, in addition to the halving cycle and in addition to just a very strong and resilient trend, but nothing goes up in a straight line. There’s one thing I’ve learned in all these years of studying and trading markets and engaging with clients is exactly that. So do expect a zigzag behavioral pattern, even in strong markets like crypto, the average volatility, daily average volatility on Bitcoin is 20% so while it looks super cool on the upside, it can equally surprise on the downside. And I think most prudent crypto and Bitcoin traders know that that’s, that’s, that’s the price they pay as part of the risk reward profile. But I would caution those that go all in late into the move, because it’s just when you expect to at least expect it that the market strong trend gets overheated, unwinds as people take profit, and ultimately as momentum rolls over. And that is true both from the price momentum indicates I’m looking at on Bitcoin and crypto, but also the cycle model that I follow, which suggests that we could get a little bit of mean reversion risk coming into the new year on Bitcoin and most of the risk proxies that ran up into the election. Last thing I would want to encourage is a smart diversification across not just Bitcoin, but also gold. It’s otherwise known as bold, bold, a blend of the two. And if you just think of an 8020 allocation, 80% gold, 20% Bitcoin or less, depending on if you’re depending on how supportive you are on either those markets. But that is a more prudent and and better diversification of your escort profile across both markets. I wouldn’t suggest going all in on crypto now, because I think most of the move is done and we’re likely going to get an unwind soon.
James Connor 34:36
And do you have specific targets for the upside than downside? Yes,
Ron William 34:40
so upside, we’re at it right now. 100,000 it’s a big figure. Celebrate. This is something that six digits, and we’ve been, you know, many crypto bulls have been talking about for some time, and we’ve hit a milestone. Can it go higher? Yes, and I don’t think there’ll be too much surprise to the upside, because it’s. It’s pretty much expected and baked in in terms of the crypto dynamics. So certainly I’m happy to speak more to the upside once we get a shakeout, but not before, just because I think the mean version risk is probably stronger at this stage and on that point, I would say at the very least, moved back down to the previous all time high at 73,700 is likely and potentially lower than that the 50,000 mark. So we can, we can literally swing the other way and still be demonstrating a healthy bull market correction with a lot more upsides ahead. So if you just think about it, that alone, those levels alone, are big enough. Maybe that’s a bounded opportunity for crypto, for those who maybe are feeling a little bit of FOMO and want more upside ahead, or maybe people who just want to profit, take and celebrate the year end season.
James Connor 36:01
So I want to ask you about this commodity super cycle, and oil is currently trading around $70 a barrel. Where could oil go to during the Super Cycle?
Ron William 36:12
Much higher this can more clearly be seen if you look at oil stocks. All Stocks have been strong for some time, although clearly they hit a ceiling and unwound. But look at what happened 2022 when there was last a surge in inflation and rates, oil stocks surged up higher. We didn’t really see it in the underlying oil, crude oil market. Having said that, what’s changed now is that is certainly we have an administration, us, administration that is more pro energy as that new saying, being revived, drill baby. Drill being being clearly supportive for the market in terms of more production. Look at the new appointee that has come into office now that is also very supportive of that market, but but in combination, not just policy, in combination with ongoing geopolitical risk. Last time I checked, Europe is still in a conundrum, and we’ll see how that plays out. But also the Middle East is still hot, and latest headlines are that there might be an Iranian retaliation strike. Iran being a strong oil producer that would be disruptive both oil and the global economy. These risks remain. They’re tail risks. We don’t know if they play out and if so, when, but certainly that does add a premium to the upside in oil, which, from a price dynamic perspective, lasts. Third and final factor is already oversold, range bound at key support. So even from a chart tactical perspective, surprises are likely on the upside in terms of what I just mentioned, policy friendly environment, vis a vis the new administration, geopolitical tension which remains there, look at the latest headlines, and then of course, the chart and tactical overlays which are oversold at Support
James Connor 38:20
and gold can do very well during an inflationary environment. Do you have a target price for gold?
Ron William 38:25
Yes, absolutely. I mean, certainly we could see further upside into the 3000 mark. That’s that’s the next psychological milestone level to the upside. Also, there’s an analog, which I don’t have ready here, but I can bring on for future discussions oil, oil and gold. But more to your question on gold typically spikes during uncertain and disruptive times. In 1980 gold actually spiked by several $100 in just a few weeks on the back of double digit inflation, as well as geopolitical tensions that also happened in but to a lesser extent, in the 1970s so go back in time, and gold really does rocket in a short space of time if uncertainty continues, coupled with further inflationary risks and devaluation of currency, remember, a big Part of the gold trend up is currency devaluation. The money in our pockets are losing value day by day, no matter what we think or believe. And so gold is the hedge reflection of that. And we’re now starting to realize that in in terms of gold upside this year 2024 central bank. Demand alone has been at record levels and clearly also supporting and we’re only just starting to see ETF flows starting to build into the gold market. On Thanksgiving
Andrew Brill 40:11
Day, we heard from RAM awalia, founder and CEO of lumita wealth. He explained to us the difference between value and growth stocks. He also touched on the current rate cutting cycle and how it is affecting baby boomers and their investment decisions. He also discussed investment vehicles. That could be a good bet. I want to ask about that value stocks versus growth stock. How do you differentiate between the two? Sure
Ram Ahluwalia 40:39
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 stocks, 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 earnest per share growth in the form of a higher multiple.
Andrew Brill 41:10
That’s right, 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 41:17
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 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’re 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, adjust to the prevailing set of circumstances. So when you suddenly change one variable, then the economy needs to go through this adjustment process again. So
Andrew Brill 42:37
the shift 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 in another to, I guess keep that dividend.
Ram Ahluwalia 42:49
We’ll see. I It’s too early to say. I hypothesize that we’re going to go see that. So you might measure it in travel and leisure spend and demand for like cruise, of course, restaurants, consumption of golf clubs at Dick’s Sporting Goods. So probably a few ways you might measure it, or you’ve seen weakness in, say, stocks like Hilton Garden vacations, 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 They squeezed here and then something gave there. And in a way, it’s offset 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 interest rates was also lower.
Andrew Brill 44:44
Would you throw bonds into that, into that portfolio as well? Well,
Ram Ahluwalia 44:47
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. One 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 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 those 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.
Andrew Brill 46:22
So, you know, talking So 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 to turn
Ram Ahluwalia 46:42
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, by the way, having 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 de linking their 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 a really good idea. We’re going to 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 miners. 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 meet, so they have to go buy in 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 49:09
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