Elon’s Robot Dreams and Nuclear Energy: Future Power Grabs?

Chris Needs:

More all time highs.

Noah Brooks:

All time highs. They just keep coming. I think it’s 45 or 46 for the year and I feel like a broken record. There have been so many people Poo-pooing this rally over the last two years telling you all the reasons that you shouldn’t be investing and here we are up 22% for the year on the major market. It just keeps getting better and better and better and we have all of these things kind of on the peripheral that don’t sound particularly great. We have an election coming up. We have mass amounts of debt, we have earnings that are flopping around a little bit. We have high interest rates and yet the market continues to run.

Chris Needs:

Yeah, I mean the very surprising part is we finally got those rate cuts we were waiting on for so long and boom, yields start going up on it. Mortgage rates are up half a percent over the last month since the rate cut. You have the expectations for Fed funds rate end of year 2025. We were expecting in the market about a month ago, 2.8% and it’s all the way up to 3.4% now. So there’s some expectations being adjusted, but the market is just chugging right through.

Noah Brooks:

Yeah, it seems to me that the large cap tech, the Mag seven is, I don’t want to say it’s not important because it is and it makes up a gigantic portion of the s and p 500 as well as the Russell of 1000 growth, but it’s not necessarily leading the market anymore. So I have the data right here, I pulled it today. Five of the seven out of the mag seven are underperforming. The s and p 500, the two that aren’t are meta Nvidia. Nvidia is up 160% for the year. Meta is up almost 70% for the year s and p total return up over 24% for the year. Amazon up 23, apple up 20, Microsoft up 12, alphabet up 18 Tesla down 12 for the year. How was that a robo Taxii launch?

Chris Needs:

Ooh, there was a lot of hype behind it. They kind of postponed the Robo Taxii launch from, I think it was originally supposed to be in August, late August and they had it last Friday and it was like a 10:00 PM start. I guess maybe it was on the west coast but wasn’t received that well. The stock was down 8.8% the next day. I guess they expect production of the Robotaxis will be out in 2026. If you know Elon Musk, those deadlines are movable, but they also debuted the Optimist Robot looked pretty cool until we found out it was just remote controlled by someone in another room and it wasn’t AI powered.

Noah Brooks:

He was being, this is the thing that looks like the Terminator a little

Chris Needs:

Bit. Yeah, it looked like it was from iRobot and it didn’t go

Noah Brooks:

So well.

Chris Needs:

I didn’t see that. Elon says Optimist will be the biggest product ever.

Noah Brooks:

So just for our listeners, describe to us what this optimist looks like.

Chris Needs:

I mean, if you’ve seen iRobot, it’s essentially that it’s,

Noah Brooks:

How about for the people that haven’t seen iRobot?

Chris Needs:

It just looks like a human with a weird black mask over their head. A humanoid. A humanoid. Yeah,

Noah Brooks:

A humanoid robot. Six feet tall. That looks like something out of your nightmares quite frankly.

Chris Needs:

Kind of. Yeah,

Noah Brooks:

Right. It doesn’t look happy and healthy and doesn’t look like

Chris Needs:

If it’ll do my dishes, it’s okay. I can deal with the weird factor, but

Noah Brooks:

It looks creepy is all good.

Chris Needs:

Yeah, they had them serving drinks. I guess that was one of the things, playing cards and stuff.

Noah Brooks:

Interesting. I don’t know that I need a robot at home. I wouldn’t mind a robot lawnmower. We have a robot vacuum, but I don’t know that I need an actual robot at least now. Would you have a robot in your house like humanoid robot to do all my chores. How much?

I’m not in love with it. I’m not in love with that idea. So going back to the Mag seven for a moment. I think what we’re seeing here, Nvidia is up, it is at all time highs actually this week, 1 36, 1 37 yesterday. But what we’re seeing, we keep talking about it is this rotation into the rest of the market, the equal weight s and p 500, even though it is not up 24%, like the total return regular market is, it’s up almost 17 for the year and at one point it was trailing by 15 or 16% and now it’s trailing by seven or 8% back in July. It was fairly positive. It really, really moved in the third quarter and so it just seems like this is really healthy for the expansion in the market and I mean I suspect a lot of that has to do with interest rates coming down even though rates, you mentioned mortgage rates came up a little bit, but overall rates coming down, businesses paying less to borrow capital and some of those companies that were really affected by the higher rates were those smalls and mid caps, but it’s a little bit strange because the equal weight s and p 500, these are all still large cap companies.

They’re the smaller large cap companies, but they’re not small. It’s not like they’re $50 million, you’re talking $50 billion or 35 billion, but they’re impacted by rates as well.

Chris Needs:

Yeah, definitely. I mean we’ve talked about what we’ve seen utilities and real estate do industrials do, and those are I guess maybe more rate sensitive or maybe on the industrial side more cyclical, but they are big fans of those rates coming down. And funny how we’ve seen rates tick up utilities at least last week were the worst performer.

Noah Brooks:

Yeah, I mean they’re still up almost 27 or 28% for the year and up 20% or 19% for the quarter or for the third quarter. Is it just that rates are coming down that utilities are shining or is it also the need for more electricity?

Chris Needs:

I think it’s both. I mean we go back and anytime we can feed into the soft landing narrative where we just got a bombshell jobs report, I mean that would signal we’re not slowing down like the numbers we got the previous three months. That’s a good thing for the economy as a whole. That’s also sort of propped up rates along with the CPI report we got. We’ll certainly get into that, but I think it’s all the above a little bit more demand that’s going to prop up and move up. GDP?

Noah Brooks:

Yeah, you mentioned jobs report. So it came out, it was positive 245,000. The prior two months were actually revised upwards and we’ve been in a series of downward revisions almost the entire year. So it was nice to get a little bit of tailwind there and to really get something a little bit positive. It feels like maybe that was the change that we needed to take people going from, well, it’s going to be a hard landing to hey, it’s probably going to be a soft landing because the jobs are still being created. Now. I had made, I dunno if it was a silly comment, but I said something about job growth picking up after summer maybe two or three months ago, September,

Chris Needs:

Seasonality,

Noah Brooks:

Seasonality. And it does seem like that is a seasonal phenomenon. So obviously everybody’s going to wait until the next one to make a determination, but it really does feel like this could be a soft landing to a no landing scenario here. The Federal Reserve has threaded this needle that everybody was worried. They came in, they whacked us with this giant hammer, this a thousand pound hammer gave us 5% interest rates after 0% interest rates for a long, long time during Covid. It doesn’t seem to have the effect that some people thought they were going to have last year. Michael Burry, he’s the gentleman who called the mortgage crisis, the global financial crisis. Everybody remembers him from what was the movie they made about him or he was in the movie The Big Short. The Big Short. He came out on Twitter in January, first week of January of last year and his basic tweet was Sell mark’s up 60% since then. I mean there’s a lot of reasons not to invest, but if you have missed that move off the lows from whether it was 2022 or even off the lows from last year in 2023 in October, I mean you really are going to be able to make that up. That is going to damage your lifetime returns is missing a move like

Chris Needs:

That. And you really have to be careful listening to these people who became famous on a short call that hit because they fall into normal human behavior. They’re going to be chasing that same call again because they want to show they can do it over and over and over and obviously it didn’t work out for him this time, but always take it with a grain of salt. When someone’s famous for one individual call or calling one macro event, they’re going to try and relive that and they might be,

Noah Brooks:

I would

Chris Needs:

Might be a little sensational in their estimates or their outlook

Noah Brooks:

And it seems like you maybe go back to the, well, your bias is I did this, I got it right and I think it’s going to happen again. Who’s Dr. Doom? Nouriel? Reini. He’s always calling for the end of times and the market is going to crash 50%

Chris Needs:

From year, any given month. You can see an article from him saying that.

Noah Brooks:

And if you’re always saying that, I guess you’re going to be right, occasionally you’re right in 2022 when the market’s down 20%, but you’re not doing the average investor any justice, you’re really not helping them build wealth over time. You might be helpful to the shorts, you might be helpful to people that trade on a really short timeframe, and I don’t mean intraday, but people that are short for the week or for the month. But for the average investor that we work with and our financial advisors work with, we’re looking at a 10 year plus timeframe and those bare calls and the sky is falling type of stuff that’s not helpful for long-term returns for our clients.

Chris Needs:

And like you said with Rubini, he may be calling for 50% drawdown, but if the market goes up 150% in that time, he’s calling for it. You missed out on a hundred percent if you’re right.

Noah Brooks:

If you’re right, I’m going to go back to the well don’t bet against America. I think it’s a bad thing to do. There are lots of reasons why you could point out that things should be worse, but here we are sitting at all time highs. I’ve been reading some things that point to when the market’s up during an election year, especially the three months before the election, it’s positive for the incumbent. I’m sure there’s data points out there that suggest otherwise, but that’s the general consensus that I’ve seen over the last 30 years that it’s positive for the incumbent when the market’s up over the three months prior to the election. And certainly we don’t know we’re what, 20 days away from the election under three weeks. There’s some significant differences between the candidates. The market doesn’t seem to care who’s going to win or who’s going to lose. It’s, it’s really strange to me.

Chris Needs:

You’ll hear talking points from financial media, but yeah, the market isn’t showing a sense of fear right now.

Noah Brooks:

Yeah,

Chris Needs:

It’s been fairly risk on lately.

Noah Brooks:

Bottom line is though that earnings are up pretty dramatically over the last few years and the prices that we pay or we’re willing to pay for stocks are a function of what their earnings are and so if their earnings continue to rise, we’re going to continue to be buying common stocks. Right. Yeah. So we talked about energy, we talked a little bit about utilities. There was an article out this week suggesting that Google was going to be looking into and possibly have agreements in place with some nuclear reactors, seven specifically from a company called Caros. Did you look at this at all?

Chris Needs:

I did see that They’re looking at I guess seven modular reactors, which are, they’re not the quote three mile islands. They’re much smaller, but they could use them to power, I guess their data centers to sort of make themselves a little insulated from the outer power grid, I guess is the goal. And I mean modular reactors are what we hear to be possibly the future of nuclear power. So I would like to see how that ends up working out for ’em and seeing how scalable these modular reactors can be.

Noah Brooks:

Yeah. They’re the little ones that you put in the ground or is that not the ones that are,

Chris Needs:

I don’t know exactly for the placement of them, but my understanding is it would be like a 10 by 10 box, obviously somewhat contained and what have you, but that’s sort of the footprint you’re looking at is a 10 by 10 type area.

Noah Brooks:

Well, that’s not a traditional reactor. That’s a micro reactor and it seems like you could put that anywhere that would allow you any township or any state that would allow you to do it. You build your giant warehouse of data and servers and backups and then you’ve just put your power station, not right outside the door, but a few hundred yards away, a mile away and there you have it and you don’t have to worry about being connected to the grid or having a power outage or any of that stuff.

Chris Needs:

Someone was talking on Bloomberg this morning, and this is the name of the group that’s pushing for is mothers for nuclear energy. I’m like, what on Earth? Interesting.

Noah Brooks:

I remember Mothers against Drug driving in the eighties mad.

Chris Needs:

Well now they’re for nuclear power.

Noah Brooks:

Oh, that’s crazy. I mean, the fact of the matter is in a hundred years from now, we’re probably not going to be burning oil for power. It’s going to be solar or it’s going to be nuclear or something that isn’t out at the moment. Cold fusion.

Chris Needs:

Right. I’m sure science will pick up. And I mean the biggest thing against solar is we don’t have a way to efficiently store it, I guess to account for how the grid uses and fluctuates during a day as consumers use energy differently, obviously at times a day. So as we get that all science is amazing as we know

Noah Brooks:

It actually is. I’d just like to say in terms of the storage, it’s going to be digital storage. And so for people that are familiar with that, your battery in your car is a traditional, a lead acid battery, some type of chemical reaction in there and digital storage is like in your cell phone or in your computer ram instead of serving, instead of keeping data on it, it’s going to keep little electrons on one of these tiny little nanoparticles. And really when we get to the scalability of that type of stuff, these conversations about charging and recharging are going to be out the door. It’s going to take you a minute or two to charge your entire car and it’ll give you five, 600 miles without thinking about it. We’re not there yet. And the scalability side of it is they’ll be able to do it on a small scale, but they’re not going to be able to do it on a countywide scale for a long time. But it is coming.

Chris Needs:

Speaking of technological things, we already hit on Elon Musk, but how about them catching that booster right out of thin

Noah Brooks:

Air? That was pretty cool. Yeah, this little chopstick thing. Yeah, I watched that For people that didn’t see it, they sent a booster up or they sent a rocket up booster, fell off and then came back down and they actually caught it from the same spot that it had lifted off from with these little chopstick things.

Chris Needs:

Yeah, interesting. They previously did out in the ocean, they would catch it. I don’t know how that could be.

Noah Brooks:

What’s the point of catching the booster

Chris Needs:

Quickly? Recharging, I guess refill it. It’s right there on the spot. They don’t have to haul it in from somewhere else where they preload it.

Noah Brooks:

I get the idea of catching the shuttle. That would be awesome if you could just go up and it comes right back down with something else in it or landing in that instead of landing on a runway type style like Cape Canaveral. But I didn’t necessarily follow the rationale of catching the booster other than reusing it. And I wouldn’t want to be in a reused rocket. I wouldn’t want to be in a reused rocket. That doesn’t seem appealing to me. It doesn’t seem appealing to me. So data centers have really transformed over the last 20 years. It’s where all of our data is stored. It used to be you were storing everything on your computer, your laptop. Now I don’t know that anything that I do is stored on the computer itself. It’s all stored somewhere out in the cloud. It’s a transformative technology over the last 20, 25 years. And I don’t know that it’s going to ever disappear. And we’re not going back to everybody’s story and everything on their hard drives. Right.

Chris Needs:

The only downside to all this is think about Hurricane Helene and all the areas without power for so long. Say we’re in a cashless society in a fully digitized society. Well, the electricity goes out, you’re done for, you can’t run your business, you can’t do any of these things. You can’t swipe your credit card. You can’t access

Noah Brooks:

Your data data. That’s why a terrorist attack on the grid or a complete denial of service from internet, it would be

Chris Needs:

Devastating.

Noah Brooks:

I mean, we would be SOL across the board. So many different ways mean, I should say we had

Chris Needs:

Little substation

Noah Brooks:

Around us. We had had a substation that blew up this morning here locally, and we were without power in the building for about 35 minutes. And some of us have backup systems, but it’s really just meant to,

Chris Needs:

You have a backup system,

Noah Brooks:

I have a backup system.

Chris Needs:

I was twiddling my thumbs over there.

Noah Brooks:

It’s just meant to be able to shut down your work, close it down and turn the computer off. It’s not like you can continue to work, but I mean at that point, no power, you’re done. We don’t have the capability of really doing anything. We can go find a spot that does, which is what we were about to do before it got turned back on. But without power, we’re done. You mentioned central bank digital currency. I’ve had a bunch of people ask me over the last few months there’s an electronic dollar that’s coming and my client wants to somehow prevent the death of the US dollar and wants to get out of dollar-based investments. And it’s a real head scratcher. I know that China has a vested interest in creating a digital yuan to track its people. And one of the things that I’ve read about it was with a digital dollar. They were tracking the people and apparently they have something similar on their phones. It’s like a currency app if you will, but they were tracking the people that were going to the protests, they were taking the subway or training to these protests and they could easily see who was going to the protests, the Hong Kong protests,

Chris Needs:

And they can shut people from accessing those trains and subways

Noah Brooks:

And whatnot too. So I mean to me, that’s big brother, but everybody’s not everybody. A lot of people are asking about central bank digital currency and I mean the fact of the matter is that we’re probably going to have a digital dollar at some point in the future here in the us. I don’t think cash will ever completely go away, but you do hear about businesses that aren’t taking cash traveling a few

Chris Needs:

Weeks ago, other than investing in different blockchain technologies. I don’t know how you would invest to prevent that though. I don’t know what the thesis would be like.

Noah Brooks:

What I said to the people that were asking this was, well, does the client want to invest in China? If they don’t want to invest in dollars, what do they want to invest in? And then there was a pause and they were like, oh, well you should bring that up to that. You can’t really not. You can invest in Euro based companies. You can invest in all sorts of different international currencies, but you’re not really going to get away from the US dollar gold trade in it. Most of the metals are certainly oil at the moment. And yeah, I think China and Russia have a vested interest in moving away from the dollar because we can hurt them with,

Chris Needs:

We essentially weaponized it. When we did those sanctions on Russia, we locked them out and sort of held those funds.

Noah Brooks:

When you in limb, when you sanction them, it’s because we have the dollars and we stop letting them trade in dollar based items, goods like oil, things like that. So the more that they move away, the less power or control that we have over them at some point in the future. And I think China’s well aware of that, but for clients out there that want to not invest in dollar-based goods services and companies, I just don’t see how that’s possible. Bitcoin, I’m not doing it. I’m not doing it. So we talked a little bit about the jobs number that came out, 254,000 with a little bit of revision. What do you think the next month is going to look like?

Chris Needs:

I think we’ll go back into a high a hundred thousands on jobs. It won’t be a bad number. I doubt we’re going to see a low hundred thousands. I think there’s still a little bit of a seasonality lag here. People do tend to go back to work when kids go back to school. It’s just easier to do whether it’s part-time or full-time. And as you know, that’s not delineate in that headline number. So I think we’ll have another decent month. A lot of companies are hiring for the winter season, the holiday season as well. I mean, Amazon just announced they had their biggest October Prime Day event in their history. Obviously with inflation, things going up, you would expect it to be larger, but just another confirmation, the consumer spending. So between that and holiday ramp up, I think we’re going to have another decent jobs number.

Noah Brooks:

So you’re in the no landing camp?

Chris Needs:

I don’t know if I would go that far. I think I’m in a soft landing camp. I think 2025 is where the rubber’s going to meet the road and we see where this cycle’s going to go.

Noah Brooks:

Yeah, no question about it. 2025 is likely to be more volatile than 2024 this year. We’ve had two drawdowns. We had a five and a half percent drawdown with regional banking issues in early May, if I’m not mistaken. And then we had an eight and a half percent drawdown from top to bottom from pizza trough in August and then boom off to the races. I mean, so sitting at all time highs this week, everybody that I talk to is anxious about the election. It’s a giant election for the United States and quite frankly for the world, and it always is, but this one is probably elevated to a spot that we haven’t seen before. I said it earlier, market doesn’t seem to care who’s going to win. Does the MR market just want to get the election over with?

Chris Needs:

Yeah, I don’t know. Maybe we’ll see a little bit of a hangover after the election. We seem to be running up into it. We’ll see.

Noah Brooks:

I would give you that. It seems like, okay, the party’s going to be over on November 6th. That’s presuming that

Chris Needs:

Normally the market likes certainty. So you would think it would be happy to have the election done, but I dunno if we would keep running up like this. You’re looking at 30 plus percent into a seasonally strong time of year.

Noah Brooks:

Yeah. We’re in a situation where I think the one thing that could let the air out of this is if we get into an after the election, after Tuesday that we don’t know who the winner is and somehow that becomes a prolonged scenario and not just the day or two where they have to count the votes. But if we get into, well, it’s Tuesday, so Wednesday, Thursday, Friday, I mean if we get into the weekend and we get into Monday and we don’t know who the winner is at that point, I think that would be bad for the market. I think people would start to take some money off the table if they

Chris Needs:

Fixed spike.

Noah Brooks:

Yeah, it definitely could be a VIX spike. It could be. I mean there could be a lot of volatility if we don’t know who the winner is for a longer period of time. No question about it. I’d like to see it. I would love to have a winner announced Tuesday night. I think that’s going to happen.

Chris Needs:

I doubt that. Doubt that greatly. I think Pennsylvania has already come out and said they’re not going to have the votes tallied on election night. Is that

Noah Brooks:

Right?

Chris Needs:

Yeah.

Noah Brooks:

Greatest country in the world. We don’t know who the winner is at the end of the day, it’s a Pennsylvania problem. We’ve trouble counting. No, come on now you want to talk about bonds for a little bit?

Speaker 1:

Sure.

Noah Brooks:

We’re not doing so well after the fed lowered rates.

Chris Needs:

Yeah, I mean yields are taken back up. Now. We sort of touched on the jobs report. We haven’t really hit on inflation, but both of those things, buoyed yields up a little bit. Inflation, the number was 2.4 on headline. 3.3 on core.

A little warmer than expected. Goes against the trend, just sort of like the jobs report did. Going back to the jobs report, unemployment was up to 4.3, which technically triggered the SOM rule and you heard all those things of recession indicators and things like that, but it’s back down to 4.12 straight months where the unemployment rate went down. So we’re getting a couple mixed signals here on the inflation topic. We had a few things. Food is still up. Shelter’s up 4.9 year over year. Health insurance is up 7.5% year over year. There’s some smaller topics. I just went to an Eagles game this weekend, so month over month sporting events are up 10.9%. Why do you think

Noah Brooks:

That

Chris Needs:

Is? People must love football. I don’t know.

Noah Brooks:

I think it’s the experience

Chris Needs:

Playoff baseball too. I don’t know.

Noah Brooks:

It’s paying for the experiences versus paying for some type of good. I just got tickets to New Year’s Eve, Madison Square Garden and they’re expensive,

Chris Needs:

Gets so packed. Why would you want to do that?

Noah Brooks:

Well, not on, well Fish has four nights at Madison Square Garden, so we’re going to go up on the 28th and see a show, but it is definitely more expensive than it has been in recent years. There’s no question about it. And I’m kind of one of those guys that willing to pay up for those experiences if you’re sitting at a concert or a game for a few hours. But it’s a great memory.

Chris Needs:

Yeah,

Noah Brooks:

Great. It’s a great time.

Chris Needs:

Noah is a big fish fan. I was just up in Vermont and I was in Burlington. I took a picture of the bar where they started out. I don’t even remember the name. You probably know the name.

Noah Brooks:

Well, the song Nectar was

Chris Needs:

Nectar that that’s it. So I took a little picture, sent that to Noah.

Noah Brooks:

But didn’t you say there was a homeless lady

Chris Needs:

Sitting outside? Yeah, I didn’t want to get too close to the front. I wasn’t going there. I had the kids, so I wasn’t going into a bar.

Noah Brooks:

On that note, if you’re listening and you have questions, thoughts, concerns, topics for another podcast, please send ’em in to market enthusiasts at Good Life, fa. For everybody at Good Life, I’m Noah Brooks with me, Chris needs and we will see you next time. Thank you so much for listening.