In this episode of Wealthion, guest host Andrew Brill interviews Adam Johnson, portfolio manager of the Bullseye American Ingenuity Fund and author of the Bullseye Brief Investment Newsletter. Adam provides keen insights into the current state of the economy, discussing inflation trends, the impact of rate cuts, and the volatility in tech stocks. He also shares his strategies for navigating market chaos and generating long-term gains. This episode is sponsored by BetterHelp. Give online therapy a try at betterhelp.com/Wealthion and get on your way to being your best self.
Adam Johnson 0:00 As far as small caps go, they had the biggest move that they've had. First of all, just, you know, just in terms of raw, you know, price percentage move. They had the biggest move in several decades. But they've all they also, about two weeks ago, had the largest outperformance versus the S p5 100. In other words, they didn't just move up a lot, but they moved up more than the S p5 100 by a magnitude that goes back like, I think, 55 years. So small caps have suddenly sprung to life on the promise of rate cuts because small companies generally are less mature companies, so they need constantly to borrow money. So lower rates help them, obviously. And then the other thing is, because they don't yet have earnings, those future earnings are worth a lot more today as rates come down, which means we can afford to pay more for the stocks. Andrew Brill 1:01 Welcome to wealthion. I'm your host. Andrew brill, is it time to start putting some of that money that is sitting on the sidelines to work? We'll answer that question and some more right now, I'd like to welcome Adam Johnson back to wealthion. Adam is the portfolio manager of the bullseye American ingenuity fund and author of the bullseye brief investment newsletter, Adam, welcome back. It's always a pleasure to talk to you. You're always upbeat, whether the market is soaring or tech stocks are plummeting. Adam Johnson 1:35 and there's been a little bit of both over the past week. I mean, isn't it just amazing how quickly the narrative changes. You know, everyone's been talking about how wonderful rate cuts will be. And then we finally get confirmation from from Jay Powell, Yep, looks like September. We're going to get cuts. And then all of a sudden everyone says, Oh my gosh, this is terrible. Are we going into a recession? And why is he waiting till September? Right? You know, damned if you do, damned if you don't. So, you know, the volatility has been intense, but I am someone who generally believes you go against the grain, so on days when my beloved semiconductor stocks are down, I'm buying them and, you know, I guess the corollary is when, when they run and maybe get ahead of themselves, peel a little bit off, but I'm not really a trader, so I tend to just kind of, kind of ride out the volatility, and, you know, I'm trying to generate long term gains for my clients. So that's, that's my approach. Andrew Brill 2:32 We're both here in New York City, and it is hot as blazes today, and I want to commend you your walk and talk this morning. If you haven't seen it, check out Adam on Twitter, but a shirt and tie walking to work through Central Park, you're brave. I, you know, I'll peel back the curtain a little bit for our our people. I take the subway to work. I wore a polo shirt, and because of today's humidity, when I got here, I was soaking wet. So you know, kudos to you for being able to walk in a shirt and tie through Central Park. Adam Johnson 3:01 Well, what you don't realize is, I was on my way down to Fox Business to join Stu Varney for for his show at nine o'clock. I got there about 8:15 and I was completely soaked through my shirt, and one of the makeup gals basically brought out a hair dryer, put it on cold and then just blew cold air on me for 10 minutes, because, you know, I mean, I couldn't get in front of a TV being soaking wet. So, yeah, it's a crazy time. Andrew Brill 3:27 You did look great in your walk and talk, though. So where do you see the economy right now? Obviously, Powell left rates where they were, but did indicate a rate cup coming in September. According to your tweet this morning, all the indices coming back under 3% except for, you know, the CPI, which is right around the 3% level. Where do you see the economy at this point? Adam Johnson 3:50 Yeah, so there are a couple different components to the economy, I think that we need to consider equally in order to, you know, paint a fair and balanced picture, starting with inflation, right? There four primary measures of inflation, consumer prices, producer prices, personal consumption expenditures, PCE and then the GDP Price Index. If you average all four of those together, as you just pointed out, that's 2.6% the Fed's target is two. And you say, Oh, well, that means we're so six tenths above it, yes, but CPI was as high as 9.1 and PPI was as high as 11.3 so we are way down, and arguably, we are very close to the Fed's target, which I think is why Jerome Powell has said, yeah, it's probably time to cut rates. I mean, if you're within six tenths of a percent of the target, and you took rates from effectively zero up to five and a half, it makes sense that you would take back 1, 2, 3 who knows, at some point, maybe even four of those in kind of 25 basis point increments. So it's gradual. So yes, inflation is coming down. That's foremost and very important. Yeah. Number two, yeah, I'm sorry. Andrew Brill 5:03 Go ahead. Go ahead. Adam Johnson 5:05 Number two, growth, GDP, we just found out through the most recent data, is rising 2.9% Well, that's pretty good. In fact, that's above the long term average of 2.7% so if, if we have inflation coming down and we have growth going up, that's a good combination. The third component is employment. And there it's maybe not as crystal clear, because it's been at, you know, close to 50 year lows, and it's unemployment starting to percolate, which is one reason why Mr. Powell saying he wants to cut rates, get ahead of that. While fewer people working means that there's less inflationary pressure, it also means the fewer people are working, and that's not great. So you know for now, I think when you look at the data in its totality, inflation coming down, growth going up, and unemployment still really low, 4.1% or thereabouts. That's a pretty decent combo, and I think it's why earnings, and that's the next sort of point in this conversation, that earnings, that's why they're up 10% which is higher than the previous quarter, which was eight, and the quarter before that, which was seven. So we're steadily seeing an improvement in earnings. And so for all those reasons, I feel good with where the economy is. I feel good with being fully invested, and I feel good with Chairman polis decision to start reducing rates. Andrew Brill 6:34 Can you explain to me? And I know that nobody's got a crystal ball, what is this volatility we're seeing? You know, everybody thought that. Look, rate cuts great. We're going to pump money into the market. You've said that lowering rates will increase the market. It's good for the market. And all of a sudden people are selling off like crazy. We saw it early, early in the week last week. Sell offs in tech sell offs and techs. Everybody's buying small caps. Then yesterday, good news from AMD, and all of a sudden, tech boom. It pops, and now it's the whole market today, Thursday, as we record, this is is plummeting again. What is going on? Adam Johnson 7:16 I know you know, Wednesday, it was one of the best days in months, and the next day, one of the worst days in months. And then, to put a little bit longer term perspective on that, I mean, is it amazing that actually, effectively, in the first call it, two weeks of July, the NASDAQ dropped nine percentage points. The S&P 8 percentage points. Drill down a little further, Nvidia, everybody's favorite play for AI has fallen 23% in three weeks for effectively the second time in six months, right? So what I think is happening is that you have massive, massive computerized programs, algos, right? That's what everyone likes calling the algorithmic traders who've been programmed to trade certain levels. And they trade those levels, so if stocks get to certain price points, and that may be to be determined by the actual price, or by volatility bands, or by money flow in or a percentage move over x period of time, whatever. There are all kinds of ways different program, different ways to program these algorithms, but they hit these stops, and then all of a sudden, the computers just sell. And then investors look and say, oh my gosh, what am I missing? No, you're not missing anything. It's the computer. It's a predetermined sort of bands where you should buy and bands where you should sell, and we are in the midst of all of that. In fact, the New York Stock Exchange estimates that as much as three quarters of the trading on any given day is programmatic trading. You know, it's not smart. Smart people sitting around the table and say, hey, you know, what do you think of the AMD earnings and how they compare to Intel. And you know, Nvidia is coming up in a week and a half. That's not what it is at all. It's computers that are programmed to look at the, let's say, seven essential metrics on any given earnings report, top line, revenue growth, right gross margins, net margins, the actual earnings themselves, right, guidance, right all these different metrics. And let's say six of the seven are strong, but one of them is not. Well, guess what? The algorithm automatically shorts the stock, and because you no longer need a plus tick to short the stocks. All of a sudden, it's down 10, 11% and you say, well, that doesn't make sense. And you listen to the earnings call, and you read the press release, and you say, Yeah, we should be buying that. And it takes a couple days, but so we're just that's what we're dealing with. It's kind of man versus machine. And then I guess the other thing is people, and we kind of touched on this. Are saying, Wait, what's Mr. Powell? What? What does he see? Why is he lowering him now? I mean, is there something bad on the horizon? And that just gets all kinds of people nervous. So take the long view. Recognize computers are messy. Recognize markets move, and just, just pick wonderful companies and and have the confidence in your views and in your process, because you did the work that got you there in the first place. Have the confidence. Just hold the socks through all this release. Andrew Brill 10:28 So those are probably big corporations that rely on those algorithms. I almost equate it to baseball, and I go way back with baseball, before Analytics was even a thing. And sometimes you say to yourself, well, the manager doesn't, what does the manager do anymore? He's relying on the, you know, he used to call it the book. Well, the book says you don't swing three and oh, now people swing three and oh, it's, it's almost like we're relying on these computers to take care of all the analytics for us. Is that a dangerous thing? Because you don't do that. You see it, you watch charts and graphs and say, okay, you know what? This is a great buying opportunity, like you just said, before you said, I'm adding money to the market right now. Adam Johnson 11:08 Yeah. Well, take one of my favorite names, Celestica, ticker, CLS, and I'm just pulling this randomly. I could make this kind of argument about any number of names, but Celestica, oh, call it a week and a half ago, beat earnings estimates handily on both the top and the bottom line. Raised guidance. The stock went up, oh, seven or 8% and then suddenly it traded down. And now Celestia, by the way, partners with Nvidia to create AI platforms. So you know, if you and I wanted to start some company, we wanted AI to be a part of it. We would go to Celestica and say, you know, we need to create this platform. And they would source the NVIDIA chips, they'd source the servers, the workstations, they'd wire them all together. They'd put them on a rack. They'd get coolers so that they don't overheat, you know, they would literally create the whole hardware. And then they'd show up at our office, install it, and, you know, we're in business, right? That's Celestica. So wonderful results, but because it's caught up in this AI trade where all of a sudden everyone's saying, Oh, the trade's over. No, it's not, but that's what they're saying. So here's a company growing gangbusters that just beat estimates that guided up, and then it's suddenly trading down 20% and by the way, trading at 13 times earnings, an AI related company at 13 times earnings, that's growing double digits. That doesn't make sense. That's when you buy. And so that's why I say you just you know you have to do the work. You have to know your companies and and you have to have the confidence in your view. Andrew Brill 12:42 I do want to ask you about, you know, the rate cuts in the market, and how slippery is the slope for the Fed. You know, they're trying so hard to make this a soft landing. And, you know, with the unemployment numbers that ticked up, and you really have to read between the lines with the unemployment numbers that came out, because a lot of that unemployment came from Michigan. It's a seasonal thing where the end of the summer they take off, they lay off some workers, and then they bring them back. And also hurricane barrel added to that too. But nobody looks at that. There's, oh, my god, unemployment ticked up. We're recession bound. So how slippery is the slope for the Fed to help try and create a really soft landing here. Adam Johnson 13:23 Well, I think actually, the Fed has done a reasonably good job. And no one likes to give the Fed credit, because the Fed's an easy target. You know, it's easy to just say, Oh, the Fed's always late. You know, they're, they're they keep rates too low for too long, and they keep rates too high for too long. And that's the problem. It's not that any of us made a mistake, right? Or any of my companies, or the CEOs, I believe in, no, no, it's the Fed. So I think the Fed takes an unfair amount of heat, but I do think, as you suggest, they've, they've done a reasonably good job at threading this needle, and I do think maybe they've held on a little too long. I think they probably could start lowering rates. But, you know, I don't think 678, weeks make a whole lot of difference in an economy that's $23 trillion especially when the rate cuts, only going to be 25 basis points, you know. So, yeah, okay, maybe they've held on too long and they should be cutting fine. They'll be cutting soon enough. And and by the way, GDP was a lot higher than we thought, at 2.9% so you know, it's not like all of a sudden, there's no inflation. Andrew Brill 14:35 There's talk of, obviously, interest rate cut. Lot of money, they say, poured out of AI and semiconductors and into small caps. Would you consider that a decent play right now is look at some of those stocks, or is it still look maybe some of those little stocks are have an AI background, also, like Celestica that you talked about. Are there stocks like that that you know you would take a look at? Adam Johnson 15:00 So a couple of comments. And being a stock picker, I think it's most important that you focus on individual stocks, not the market, not sectors. You know, you know, I appreciate themes like AI or computing power, but you know, you got to know the company or the four or five companies that are part of that theme, that is part of your portfolio, and so you have to really do the work on individual companies. But as far as small caps go, they had the biggest move that they've had. First of all, just, you know, just in terms of raw, you know, price percentage move, they had the biggest move in several decades, but they've all they also, about two weeks ago, had the largest outperformance versus the S and p5 100. In other words, they didn't just move up a lot, but they moved up more than the S and p5 100 by a magnitude that goes back like, I think 55 years. So small caps have suddenly sprung to life on the promise of rate cuts, because small companies generally are less mature companies, so they need constantly to borrow money. So lower rates help them, obviously. And then the other thing is, because they don't yet have earnings, those future earnings are worth a lot more today as rates come down, which means we can afford to pay more for the stocks. So that's really why small caps rally. Yes, that is a very viable trade. Small caps are still well below their all time high. That goes back to, I think, 2021 and so there's more room for them to run, because, you know, the S, P and the Nasdaq have just recently made new highs. Now is that are the small caps are still catching up. But I would, I would also caution viewers and listeners against simply buying small caps because they're small and it's a hot space now you got to find high quality companies. And by high quality, I mean good management teams, a good product. Maybe they have pricing power, they're barriers to entry. They don't have too much debt. They're growing cash flow, ideally, they have earnings, right? I mean, there are, there are a lot of different ways to sort of define quality. Those are a few of them. And I think all of those are important in making a decision about a company. Andrew Brill 17:26 Can you explain how the rate cuts help companies that are the smaller companies? Obviously, the big companies have their own cash, and they use that cash. And then I'll have another question about what Netflix just did. But how do the rate cuts help these, these smaller companies. Adam Johnson 17:41 So if you're a small company, you're small because, you know, you you're still growing your sales and trying to get them above a certain threshold. And chances are that means that you every few quarters, or maybe every year, or every other year, or whatever it is, need to go out and borrow some more money. You might do that through a secondary stock offering. You might do that through a bond offering. You might do that actually from just, you know, taking out a loan or a line of credit, or what they call a revolver. It's a revolving credit facility where just kind of sits on the shelf, and as you need it, you pull money down, and then you pay it back. And then as you need more, they rotate it, and you bring them fresh capital, right? That's a revolver. So if rates are coming down, the by definition, the the cost of all of that borrowing is also coming down. So it's easier on the company, right? It's cheaper, you know, it's cheaper money. You know, in the same way that when mortgage rates come down. You can afford to buy a bigger home, or you just buy the same home, and it costs you less. So you can, you know, use the money that you saved and, you know, go take the family for a vacation, whatever. So lower rates in terms of cost of borrowing, that's pretty simple to understand, right? It's just cheaper to run your finance, your business, fine, but I do think, and this is maybe what you're you're getting at, and I touched on it, but I'll say it again in a sort of slower way. And it's really, it's a subtle thing, but it's kind of in the weeds. But our our folks, need to understand the notion of a discount rate, so analysts like you and me, right? You know, we look at, we look at a company, we say, Okay, what do? What do I think earnings will be next year, and then the year after that, the year after that, and the year after that. And what I do is I put together this stream of what I think will be future income, but I have to discount, to put it in in terms I can understand today. I have to discount those future cash flows back to the present. So $10 next year, at, you know, a 10% interest rate is, is like, you know, $9 today. So if you pay me $9 today or $10 next year, you know, at a 10% interest rate, it's kind of the same thing. Three but all of a sudden, if interest rates, you know, drop to 5% Oh, wow, now I'm better off, because, actually it should be, you know, nine and a half dollars. That's this, right? So as as as that discount rate gets smaller, you can afford to pay more for stocks future earnings are worth more today. That's, that's what a discount rate ultimately determines. It's bringing tomorrow's money into today's dollars. And again, as interest rates come down, that discount rate goes down, which means the value of those future dollars goes up. Andrew Brill 20:35 This show is sponsored by better help in these crazy times we live in, it's probably the last thing on your mind you and your self care. We all deal with it work, kids, obligations, bills, you name it, everything takes priority, except you. If you've ever worked out or been an athlete, you've heard the saying never skip leg day, but how about never skipping therapy day? That's right. I'm talking about taking care of you talking to someone who will help ease some of your burden so you can get back to what it is that makes you happy. I talk to a therapist and it really helps to take the edge of everyday life. Maybe you're going through something and can't really pinpoint what is what it is that's bothering you. If you need to talk to a professional or thinking about giving therapy a try. Give BetterHelp a try. It's easy, entirely online convenient and flexible to fit your schedule. Just fill out the questionnaire and get matched to a licensed therapist. Anytime. never skipped therapy day with better help, visit betterhelp.com/wealthion today to get 10% off your first month. That's better, h e l p.com/wealthion. Netflix and not in the AI, although they do use AI, because they're always recommending some sort of every time you log as, oh, you watch this. Watch this. So, but Netflix just did something very interesting. They issued investment grade bonds to raise capital. How does that work? And is that should more companies be doing something like this when they need to raise capital? Adam Johnson 20:59 Well, you know, you could argue that raising debt is cheaper than raising equity, because if you raise equity, you dilute your earnings per share. You know, if you have X number of shares and you do a secondary stock offering and increase the float by 10% well, by definition, you just lowered your earnings per share by 10% because you're now dividing the earnings by more shares, right? And so some will view that as value destructive. The other thing is, or the other advantage to bonds is, you know, you can deduct the interest on bonds against your taxes. So not only do you get the financing, you don't dilute your shareholders, and you get the interest rate deduction, so your after tax cost of borrowing is lower than the nominal interest rate cost of borrowing. So for some companies, actually, that does make sense. The other thing is, for invest investment grade companies, as opposed to companies that aren't investment grade, which are, you know, they have to issue junk bonds. But investment grade companies, they invest you issue investment grade which carries a lower interest rate, so it's much cheaper than issuing junk bonds. And so, you know, that can be very attractive because it's a low rate. And I should point out right now that even though rates are still high, corporate bond spreads are at record lows. In other words, bonds trade at a differential versus the risk free rate or treasuries. So if treasuries, just to make the math easy, are at 5% and the spread for corporate bonds is is 1% well, then the total cost of borrowing is 6% five plus one, 6% that 1% is the spread. Well, that 1% and that's about where it is right now, is the lowest it's ever been. So even though rates are high, bond spreads are low, and so they're for all those reasons. That's why a company like Netflix is issuing debt. Andrew Brill 23:09 where does someone find out about those bond sales? Let's say you know what? Netflix is, a good company. They're trading in the $600 range. I think they're good for the money. They're going to pay their debt. They're raising this obviously, raising this money, obviously, because they want to do something constructive with it. How do I find out about these bond sales and get in on this action? Adam Johnson 23:29 Well, you need a broker. You know, it's a lot easier for for the public to buy stocks than to buy corporate bonds, which is ironic, because the corporate bond market is so much bigger, but the corporate bond market tends to be a pros market, I think, for people who actually want to trade corporate bonds, and I hate to say trade, because I should really say invest in corporate bonds, I actually think they're better off looking at some of the ETFs out there. And you could just Google ETF, you know, exchange traded fund for bonds. And what you probably find is that there are two dozen super liquid, very transparent bond funds that will effectively forward all that interest income to you, because you own a little tiny sliver of those bonds through the ETF. And I think that's a better way to do it. I mean, yes, you could go to a full service broker, you could go to Schwab, and Schwab probably has a page where you'll see a bunch of liquid bonds, and you could buy them. Okay, fine. But if you want to find some of the more esoteric stuff, that's kind of a pros market. And I'm not sure that, you know, small retail investors should be messing around. I think they'd be better off just in an ETF or a bond fund. Andrew Brill 24:47 I heard you on WABC radio. You said, You know what, I'm putting more money to work now that now we know that there's $6 trillion or there was at least $6 trillion sitting on the sideline and money Mark. Accounts, because obviously, money market accounts get in good interest as the rate goes down. Do you see that money getting put back to work? Adam Johnson 25:06 I'm shocked that it hasn't already been put back to work. I mean, I really am right. 6.1 trillion. That's the most ever in terms of just raw dollars. It's also the highest as a percentage of investable assets, about 23% so it's at a record high, no matter how you measure it, you know, raw dollars or as a percentage of assets. And so I'm just amazed that there are so many people who are still so afraid to put their money to work. And what's really sad is that they've missed a huge opportunity because markets have been up so much over the past, you know, 12, 13, 14, months. But investing is not hard, or investing is hard, and, you know, it's not for everyone. Some people just want the security of knowing they have cash. And I get that. I think probably the smart approach is to always have some money in the market and then have some cash as well. And you just vary the percentage you can shift back and forth depending upon your risk tolerance and what you think of the economy and the market at any at any one time. Yeah, I I've been putting money to work. I mean, on on a day when stocks are down a lot, you know, I sort of say, oh geez, I wish I had waited until today. But look, no one's that good. No one ever picks the bottom and no one ever sells at the top. You know, it just, it's just not the way life works. Andrew Brill 26:27 Do you look for a percentage? And it's always it's funny, when I was younger and just starting out, I had a broker who called me say, You know what, why don't you put some money in this stock? Three days later, he said, it's up 10% we should get out there. Is there a rule of thumb you now talking 30 plus years ago, but is there a rule of thumb you look at and or you're like long term, let it ride, and here we go. Adam Johnson 26:53 My rule of thumb is before I buy a stock, I set a target because, as my long time mentor said, once you're only rational once, and it's before you buy the stock, because once you own it, you fall in love, right? So set the target in advance, and when the stock gets to your target, sell half. Doesn't matter how strong it is, how much you love it, just sell half. It got to your target, fine, and then decide what you want to do with the other half. And the way you figure that out is rerun your numbers, and if you can comfortably raise your target, then hold the balance. And when the balance gets to that target, again, sell half. Or if you can't justify raising your target, say, You know what? Maybe that's, maybe that's all there is on this one, and then go redeploy the money somewhere else. So no, there's no rule of thumb whereby I sell if it's gone up X amount. But there is a very important rule, and it's not a rule of thumb, an important rule, where you sell half the position whenever it hits the target. Andrew Brill 28:07 So we have that going in, don't, don't make that up as you go along. You're going to have that target before you even go in. Adam Johnson 28:13 by the way, when you have that kind of process in place, it just makes life easier. Oh, hit my target, sell half. Boom. Okay, now what I'm going to do with the balance. Well, market's getting a little expensive, you know what? Then I'll just sit on that extra cash. And over here, I've got my watch list, group of names that, you know, get to a certain point I'll buy. I should also note on the downside, it's equally important to have, I don't want to say a target, because you don't set a target for it to go lower, but, you know, an alert, is what I call it. And for me, that's typically down 30 or 35% if I'm long stock that's gone down that much, I stop and say, Yeah, this isn't working. What's what's wrong? Have I missed something? Has something changed? Or is it just the market? If nothing's changed, and and I'm really confident I may stay with it. I may even add a little bit, but you know, from from time to time, it'll go down 3035 and say this just yeah, it's just not working. Let it go. There's something wrong that I don't understand, and I got it wrong. Andrew Brill 29:15 What have you thought about this earning season? Has there been any surprises? There's a lot of companies that are doing very, very well, have good forward guidance, and then they get clobbered anyway, which doesn't make a lot of sense. Adam Johnson 29:27 that's the typical old Wall Street saw about, yeah, sell the news. If a company comes out with with great earnings and they guide up, you've always got those people saying, Yep, that's as good as it gets, just what we thought, you know, it's like your guy said, Oh, you're up 10% three days sell it, you know. And so they're always nervous people who are going to say, oh, yeah, I'm just going to book the game. Nervous people never get rich because they think about where they bought the stock, not where the stock is going. So they're always. Playing defense and trying to preserve their gains rather than thinking about how much they could gain in the future, not to get giddy about it. But you know, that's that's the downside of looking back over your shoulder and looking at where you bought it and whether you have a gain. So I think that's a real pitfall that people make. Andrew Brill 30:18 Where do Where do you see? Where would you tell people is the best place to get information when they're looking for guidance on exactly what you say, okay, you know what I'm going to buy a stock, but I want to have my my out price, where I'm going to sell 50. So where do I go to find that information, or the information that will educate me. Adam Johnson 30:37 Well, I think information is about accumulated knowledge. So I'm not sure there's any one place where you can go and and look up, where do I sell, but what you can do is start to build your own body of knowledge, and I think a great way to do that is to subscribe to two publications, the Wall Street Journal, for one, which is just so laden with information and insight. I mean, you read the journal for a month, and you will just feel smarter, you will sound smarter, and you'll start connecting dots in a way that you hadn't before. And number two, buy subscription to investors business it used to be called Investors Business Daily. Now I think they call Investors Business digest, because the paper copy only comes out once a week. But they have several great stock lists, the IBD 50, the long term IBD 20, you know, etc, IPO leaders. And while it's slightly more technical in nature, meaning it's looking at price levels and money flow and and as opposed to earnings growth, or, you know, the products that are made, I think it just puts the market and then individual stocks into context. And so I think the combination of the Wall Street Journal for fundamental information and IBD for technical information, I think that combination makes for a very strong learning platform. And yeah, as I say to anyone new to this business or just new to investing, read each of those for a month, and I think you'll be amazed by how far along you've come. Andrew Brill 32:26 aside from tech Adam, is there something else that you're keeping your eye on? Obviously, AI, and there's the tentacles are starting to really, really reach deep. Is there something else you're keeping your eye on? Adam Johnson 32:39 Well, I think there are all sorts of opportunities out there. I mean, I love logistics companies that are focused on helping other companies deliver stuff more effectively and more cheaply. Robotics and Automation play a huge part of that. I think there's still a lot of companies, great American companies that are normalizing After the craziness of covid, that still haven't quite gotten back to where they ought to be, whether that's Blackstone, world's largest private equity company or Chubb, the largest and highest quality insurance company here in the US, though it recently did make a new high, But it's very cheap at like 11 times earnings. You know, Delta got clobbered on those earnings. It's a one quarter thing because they have 3% too much capacity. Fine. We had the most number of people ever transiting through US airports, July 4 weekend. So consumers have money they're spending. Ditto on Expedia, DraftKings comes under what I would call my new mouse trap category, where they're taking something that we've done for a long time, been on sports, and packaging it in a different way and making it more accessible, I think that's got a lot of upside. You know, Uber is kind of half logistics, half consumer, and they're going to build out their advertising platform, because, you know, think about it, when you order an Uber and you're just staring at your screen. Where is it? Where is it? Oh, there's the car. Okay, two blocks. It's coming. You're staring at your screen for 3, 4, 5 minutes. You're captured eyeballs. So put ads on there, and if you just run the numbers of how much they can generate for those ads, and how many minutes people spend looking at the screen, and how many people are looking at the screen any given day, you can easily get to $2 of additional earnings within two years. Well, all of a sudden, you know, Uber's earnings just went up by 50% stock just got cheaper, right? So there's some really exciting opportunities like that. It's not all just tech. Andrew Brill 34:46 So I have to ask you about geopolitical tensions and how it's going to affect the market. The you know, Hezbollah person was just killed by Israel, and you know, they're still after Hamas. Obviously, tensions in the. The least are getting higher, which means there could be a an oil issue. How do you look? How do you view the geopolitical tensions? Adam Johnson 35:10 Pretty interesting, there hasn't been an oil issue already, though. I do think that if we didn't have war in Ukraine, if we didn't have war in the Mideast, if we didn't have tensions around Taiwan, my guess is that oil would be trading in the low 60s instead of the low 80s. So there is a war premium baked in. And remember also, even though the US is pumping the most ever Biden administration has been very restrictive on drilling on federal land, and that's where a lot of the cheapest oil is. So that too, I think you know, you know you talk about political outcomes. If Trump gets in office, he's going to lift all those restrictions. We're going to have more cheap oil, not just more oil, also have more cheap oil. So the price of oil will come down, I believe. So. Yeah, oil is probably a little higher than it ought to be right now, given the fact that Russia and Iran are both exporting barrels, Venezuela is too incredibly they're allowed to, you know, not my backyard Biden administration would rather have Nicolas Maduro in Venezuela, the dictator of Venezuela rather, yeah, let him pump. We in America, we're clean. We, you know, we don't write a certain disingenuity about that. But fine. I think gold is probably elevated for a similar reason. You know, geopolitical concerns. Maybe even you could, you could, you know, make the argument that Bitcoin is elevated. You know, trading in the high 60,000s geopolitical concerns, it's outside the realm. So there's no question that geopolitics put people on edge. You know, that may be in addition to the rate cuts. Why? Over the past week or two, we have seen yields on treasuries go down. You know when there are uncertain times, when missiles are flying and accusations are coming out of the Mideast about going after Western countries, people get scared, and when they get scared, they buy US Treasuries, and that pushes yields down. So you know that's definitely being reflected in the current market. Andrew Brill 37:22 So the bottom line, do your homework, put your money to work, because now is a good time. How do you see the presidential election affecting everything? I know that there's two sides of the coin, but it seems like you know, Kamala Harris is now a little bit more aligned with some of the things that President Trump would war would want to do, but it's still Democrats versus Republicans. You know, we still have three months before we get there. How do you see the markets playing out to that point? Adam Johnson 37:53 It'll be messy and it'll be volatile, and if, if what we're seeing right now proves to be just a sort of honeymoon bounce for Team Harris and Trump starts to take the lead again. I think markets will take off If, however, it's a dead heat, or if she starts to take a lead. I don't think markets will like that, because she historically, if you just look at a record, historically, she is much more of a Bernie Sanders, Elizabeth Warren, high regulation, high tax type of politician. And you know, markets don't like that. Markets like independence. They like low regulation. They want government out of the way. That's Trump. So the market will sort of tell us who's leading. We can look at the polls, but you know, polls are kind of quirky, because they're polls, whereas, you know, if you if you look at where the wisdom of the market, where people are putting their money and placing their bets that ultimately, I think, carries more weight than just, you know, someone being asked to to respond to a poll on a telephone call. So the markets, I think, will start to tell us, but right now, we're still in the honeymoon phase. The DNC hasn't even had its convention, so you know, you gotta get to September. The amazing thing is how quickly they pivoted from Biden to Harris, how she's been anointed, without having to do a single press conference. We don't really know what she stands for. So that's why I say it's kind of a honeymoon period. You just sort of assume, Oh, well, this is, you know, this is what's going to happen, without really knowing the substance behind what's going to happen. Andrew Brill 39:40 You kind of think it's Biden 2.0 but we don't know. You're right. Adam Johnson 39:45 I think she could be far more radical than Joe Biden. You know, again, based on her track record. Andrew Brill 39:52 We will have to wait and see. Adam Johnson 39:53 Remember she, she was the one who said we need to reinvent policing in America. That's not just defund the police. That's, that's reinvention. She's the one who said we need to rethink the entire border. She's the one who initially said, I completely oppose all fracking. Now she realizes she needs Pennsylvania, and she's saying, No, I know fracking is not all bad, because Pennsylvania has a Marcella shale, and they're 123,000 people involved in that industry, and that's a lot of votes, and it's a swing state, so you know, election year promises, so yeah, just watch what they do, not what they say exactly. Andrew Brill 40:30 Well, Adam, thank you so much. I appreciate you joining me, and I I appreciate and if Adam and I had some internet issues, so we took a little longer to get this done than we wanted, but I appreciate it. So other than the bullseye brief investment letter, where else can we find you? I find you on Twitter. So let give us your Twitter handle so everybody else can see your walk and talks, oh yeah, mark in the morning. Adam Johnson 40:51 yeah at AJ Insight is my Twitter handle, and I put all those 45 second walk and talks on Twitter. Linkedin, you know, interestingly, I get more traction on LinkedIn than I do on Twitter. And, you know, Twitter, I got, I don't know, 30,000 followers, but LinkedIn, it's just amazing that that web is very powerful. You know, that web of people, it's wonderful actually, and very supportive. So, yeah, you can find all the content there, or just go to bullseye, brief calm and read about what I do. In fact, I have a 45 day trial for 45 bucks, for anyone who wants to actually get to know the American ingenuity portfolio in depth. That's probably the best way to do it. Andrew Brill 41:31 Awesome. Adam, thanks so much. I really appreciate we'll see you again soon, and keep up the good work. Adam Johnson 41:36 Okay, look forward to it. Andrew Brill 41:38 Thank you. That's a wrap on another discussion here on wealthion, thank you for joining us. If you need help being financially resilient, please head over to wealthion.com and sign up for a free, no obligation portfolio review with one of our registered investment advisors, and remember to follow us on social media for the latest news and information to help you invest wisely. And if you could like and subscribe to the channel. We greatly appreciate it. Don't forget to hit the notification bell so you can find out when we post new videos to the channel. Thanks again for watching and until next time, stay informed. 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