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MAY MARKET PERFORMANCE
Noah Brooks: Welcome back everybody to another installment of the Market Enthusiast. I’m Noah Brooks, and with me, Chris Needs.
Chris Needs: Hello, hello.
Noah Brooks: Thanks so much for joining us this week. A lot to go over. We had a pretty big march forward in the markets in May.
Chris Needs: Yes.
Noah Brooks: So S&P up almost 5%, Dow Jones up maybe two and a half. Nasdaq obviously had to move forward, up almost 7%. So some of those numbers are still negative two months into the quarter, but really gave a lot back in April and [inaudible 00:00:49] most of it back in May. So, feeling pretty good. We talked about Dow Jones, 40,000, that last installment. We didn’t make 41,000. Nope.
Chris Needs: Took a little step back.
Noah Brooks: Yeah, a little step back. Not even close. I think we got to 40,100 maybe, just shy of that. And then in a matter of a few days, we lost about 1400 points, Dow Jones points.
Chris Needs: Salesforce, I know, and UNH had a couple rough days-
Noah Brooks: Yeah, United Healthcare-
Chris Needs: UNH had a… Was it a hack? And then they had the Medicare news, and Salesforce didn’t necessarily have a horrible report but just didn’t live up to the standard they’ve set for themselves over the years-
Noah Brooks: It got smoked.
Chris Needs: It got crushed.
Noah Brooks: Yeah.
Chris Needs: I think it got down 18 to 20% or so.
Noah Brooks: Yeah, 100 points or so, 90 points. So that did a pretty good number on the Dow Jones, shortly after we talked about 40,000. And so now today we’re sitting here the week after the Memorial Day holiday waiting for the jobs report to come out later in the week, and Dow Jones right around 38,700 or so today. Up a little bit today, so feeling good about that. Lots of reasons to be positive. As always, there’s certainly a plethora of negative things coming out there. We’re going to try to talk a little bit about the positives and negatives, right?
Chris Needs: Yep.
NVIDIA EARNINGS
Noah Brooks: All right. So big positive, NVIDIA earnings.
Chris Needs: Very big positive. So they crushed it, announced a stock split, which when you’re on a roll like they’ve been, is obviously met with a positive outcome where people who can’t afford to get into a higher stock price can then get in. It helps retail get in, but boy, the numbers were incredible. Revenue was 26 billion, I think, 262% year-over-year, 57% profit margin. Just insane numbers. And obviously, they’re the AI leader for a reason. It seems like they’ve got a six-month to a year lead on everybody else, and they’re taking advantage of it while they got it.
Noah Brooks: How long before that moat gets smaller? You can’t be in the chip industry not preparing and retooling for AI. Intel and AMD and GlobalFoundries, there’s a plethora of applied materials of chip companies and material companies that all want to get on the NVIDIA train.
Chris Needs: Everyone wants to be on it, for sure. Everyone agrees in the industry that they’ve got a headstart right now. They are ahead of everyone else. And we’re coming up on a corporate refresh cycle, which they estimate to be every five to six years, and it looks like NVIDIA is best positioned to get the premium dollars in that space for that corporate refresh. We even saw the headlines. Did you see where Elon Musk and Tesla ordered a ton of-
Noah Brooks: Oh, they’re switching.
Chris Needs: They ordered a ton of chips and they actually didn’t have an immediate use for them or place to put them and plug them in and actually use them. They just didn’t want to run out and be left without chips. So that might be a downside for NVIDIA, is that people are over ordering and then they’re going to find there’s a glut of, they ordered too much so they didn’t run out and weren’t left behind.
Noah Brooks: Well, two things as you say that come to mind. One is, that process is inflationary. Buying them when you don’t actually need them drives up the overall cost within the industry. And then secondly, the thing that comes to mind is, what are we going to do with all these AI chips?
Chris Needs: Got to plug them in so they can learn and do their thing. Like he said, they were going to be essentially sitting in a warehouse, so that’s why he repositioned them to X and xAI-
Noah Brooks: But I know that there’s a demand from corporations to plug these chips in in their server farms and to utilize them. Is there a demand from people like you and I? How is it going to make our lives better? What type of demand pull is really there? And we all know about ChatGPT and the different AI tools that are coming out from Google and Meta, Facebook, and other companies, but isn’t there a point here in the near future that maybe at least from a short period of time, that there’s a saturation of it?
Chris Needs: Certainly-
Noah Brooks: [inaudible 00:05:32].
Chris Needs: What are the end uses for people like us that aren’t running large data machine learning algorithms, things like that? So it would be people who are insane about gaming or maybe trying to do their own Bitcoin mining thing. What would be the uses where you’re only getting one NVIDIA chip?
Noah Brooks: Maybe I’m just being naive right at the moment and everything is going to be AI, but I don’t see how it’s going to improve my life. I saw something the other day, it was something like, if AI could do my dishes and do my laundry, I would be really happy because then that would give more time to read my books and do my art, and [inaudible 00:06:12] I’m not an artist, but I don’t want AI to read my books and do my art for me while I do the laundry and the dishes.
Chris Needs: That’d make our lives more comfortable.
Noah Brooks: Give me the robot that’s doing the dishes so I can enjoy the other things in life that are important to me, but I don’t know that I need it for the things that it’s doing right now. I don’t know.
Chris Needs: I guess it’ll benefit us in the workplace before our personal lives, our off hours.
Noah Brooks: Maybe in the long term… Not maybe. In the long term, it seems like everything is going to go that way. Certainly in healthcare and in manufacturing, AI is going to be all over the place. I use the example, I might’ve said it on here a few months ago, but I use the example of going to a dermatologist. You have something weird on your back and nowadays, dermatologists will look at it and he or she, based on their own medical knowledge and what they’ve seen in the past, they’ll make a determination of whether it’s cancer or something that should be scraped off, sent to the lab.
I have this feeling that in a few years, they’re going to take a picture, or there’s a machine that’s going to take a picture and it’s going to scan it against 2, 3, 4, 5 million other pictures and make an instant determination of whether it needs to go any further. That to me is interesting. That’s helping humanity. Better healthcare outcomes, I’m sure, is on the list of hospitals of what they want to see for people. Better healthcare outcomes. I’m just not sure how it’s going to impact everybody on a day-to-day basis. And I could be wrong, but I feel like NVIDIA maybe got a little ahead of itself. It’s close to 1200 bucks a share. I’m sure the next time we come on, it’s going to be 1400.
Chris Needs: Yeah, they’re a short jump, especially the way they’re moving, from becoming the largest company in the world. Microsoft isn’t that far ahead of them anymore. They were worth 144 billion, I think, in 2020, so now they’re like 19, 20 times… Someone do the math for us there-
Noah Brooks: Oh, boy-
Chris Needs: 19 times-
Noah Brooks: We’re close to 3 trillion.
Chris Needs: Yeah, 19 times larger than that now. It’s a heck of a move. It’s one of the best, I would say, moves and stories in the history of markets.
TELSA AND DOG MODE
Noah Brooks: Yeah. Well, and that’s like Tesla, what happened from 2020 to top of March of 2022. Monster move, tenbagger in 20 months or something like that. That was a pretty big move. Hasn’t done much lately. I did see this report out… I don’t know if it was number one selling, but the biggest increase in electric vehicle sales was the Hyundai IONIQ 5. And it just turned out my wife’s dad picked one up a few months ago and I had a drive in it. Nice car. Yeah, it works. And for all the news about people not buying them, I have a feeling that maybe that’s just a short-term blip. We’re moving in that direction, slowly but surely. Everybody knows here that you have a Tesla, I think. I’ll bring that up. I don’t have one yet. We’ll get there-
Chris Needs: I’m trying to convince my wife to let me drive it down to Nags Head, North Carolina next week-
Noah Brooks: How far a trip is that for you?
Chris Needs: I think it’s like 400-some miles. I would have to recharge once, but if we’re thinking stopping in a hotel on the way down in Virginia, so then I’d be fine.
Noah Brooks: See, that’s the type of range anxiety that I don’t know that I’d want to do. Because if you have, and you do, you have two cars, you have an internal combustion engine vehicle and you have your Tesla, I wouldn’t even want to put it out there to have to deal with it.
Chris Needs: But I get 300 miles on it. That’s more than half the trip. Everywhere down I-95 in the major highways, there’s Wawas that have them. So I don’t know, I’ve found it hasn’t been as much as a concern as I thought I would be, for sure.
Noah Brooks: Okay. I don’t know what we’re going to do with the next car, but the car after that one is going to be-
Chris Needs: I told you about Dog Mode.
Noah Brooks: What’s Dog Mode?
Chris Needs: The Dog Mode where it has the air conditioning on, you can watch your dog. They say Dog Mode because they don’t want you to leave your kids in there, but you can watch the dog through the camera.
Noah Brooks: Oh, wow.
Chris Needs: I told you about that.
Noah Brooks: I completely forgot. We have a dog. I would use it, because the number one thing that I want to avoid is people saying I’m a bad dog dad.
Chris Needs: It says right on the big screen in the middle, it’s like, my driver will be here shortly. It is 67 degrees, or whatever in the cabin. I’m a salesman now-
Noah Brooks: So people that come up to the car-
Chris Needs: Don’t break the window-
Noah Brooks: Oh, wow. Wow, that’s strange. I don’t want to be in charge of putting any more animals down. I wasn’t sure I was going to say this, but we put our cat down the other day, Mr. Ted, of 16 or 17 years, and just a really weird experience. We had this company called Laps of Love come to the house. The cat hated the carrier and we didn’t want to take him to the vet and stress him out, but he was on his last legs, and keeping him around any longer I think would’ve been more about for us than him. His life was going-
Chris Needs: Laps of Love, you said?
Noah Brooks: Yeah, Laps of Love.
Chris Needs: What were you calling it though?
Noah Brooks: I made the reference of Dr. Death. So they come to the house, this was the best part about it, they come to the house, they tell you what they’re going to do over the phone. It’s at your house, obviously, and the lady said, “Where would you like to do this?” That’s the Dr. Death lady. And we said, “Well, right here, if that’s okay.” She said, “Anywhere you want.” We had him on the counter, on a blanket. She asked us if we wanted to say goodbye. We had done our goodbyes. So essentially, she told us what was going to happen briefly and she gave him some painkillers, and you could see he relaxed a little bit.
And then she said, “I’m going to give him an overdose of anesthesia.” And she did as she was talking to us, and you could see he really stopped breathing and went off. And the whole experience from her walking in the door to her leaving our home was only about eight minutes. We had done the payment method and everything prior to that. And so for myself and my wife and I think for the cat, because what it’s about, it was quick, painless. I didn’t have to worry about it. Didn’t have to stress the cat out prior to it. The strange thing is that we were left there with the cat. They offered to take the cat with them and do a cremation or something like that, and we just said no. It was okay. We buried them.
My wife had never buried an animal before. I grew up in the country, so we had a mini graveyard out in the corner of our property with the dogs that we had accumulated over the years. But it was really interesting, and anybody out there that has that scenario that they’re facing, I would highly recommend it. I don’t know too much about the company, but it’s Laps of Love. Come to your home and make it really easy for you. So I don’t know, went down that rabbit hole there. Let’s go back to finance for a minute or two. It wasn’t cheap, I’ll say that. It was about $400 or $440, but it was well worth it. That’s all.
Chris Needs: Lots of money there in the pet carrying business on-
Noah Brooks: People love their animals. I’ll tell you, we do. So, no question about it. Hopefully we don’t have to put anything else down anytime soon.
Chris Needs: When I was a kid, I was in third grade, my bird, Tweety Bird, little Canary died, and to make me feel better, my parents, we got a dog the next week. So we had buried Tweety Bird behind our shed. First thing, our new Collie does is dig up Tweety Bird.
Noah Brooks: We put a big rock on top of Mr. Ted because I didn’t want any foxes or… I put him down pretty deep in the ground, but I didn’t want Tweety Bird to happen.
Chris Needs: To make a reappearance.
JOB MARKET AND REMOTE WORK
Noah Brooks: Yeah, no reappearances there. So let’s go back to May for a second. We had a big May, I mentioned up at the top of the program. One of the things out there, people were concerned about jobs. So, jobs report coming out this week. We have the four-week moving average of new claims. That’s new unemployment claims. Relatively flat, about 222,000. So it got down to the lowest it ever was since 1969, I think. It was under 200,000. I think it was 179,000. Been floating around 200, 210 for the last six, seven months. It used to be anything under 400,000 a week. Anything under 400,000 was putting pressure on wage inflation. We’ve been under 400,000 a week for, I don’t know the exact number, but it’s at least a year now.
So I think that’s one big thing that people are looking for. And this Friday, as I mentioned, new jobs report coming out, that’s going to be really important, as it is always every month that comes out. On that note, I saw some information from a website called the Ladders this week, and they’re talking about remote jobs. They said that high-paying remote jobs, which apparently is over 250,000, fell nearly 60% year-over-year. So it went from around 10% of the jobs being offered to only 4% of the jobs being offered, 60%. And another survey by a company called Resume Builder, might be owned by the same company, I’m not sure on that, their survey said 90% of the companies that they surveyed, which were a thousand of them, expect a full-day, five-day, week work. Week-
Chris Needs: Work week?
Noah Brooks: Work week, to come back into the office by the end of this year. I’m not 100% sure about that. We know we’ve seen some high-profile companies, specifically some of the banks, Barclays and Citi. HSBC said that they are requiring employees to come back to the work. And you had an interesting observation, we were talking about it earlier, about potential growth.
Chris Needs: Yeah, so I know I’d seen Goldman Sachs talking about having people back in office, and they were one of the first ones, I think, to do it because they’re basically noticing all of their young analysts, who they were used to continuing their growth because they’re in the office working side by side with the senior leaders and the VPs in the organization. They weren’t advancing as quickly as they were previously because they were doing work from home, and they weren’t learning [inaudible 00:17:48] with those senior leaders. So, a lot of organizations and cream of the crop on Wall Street are hoping to have people in more often than not.
Noah Brooks: Speaking from personal experience, I started in the late ’90s at a company called Prudential Securities. And you’re with your compadres, you’re learning from the old guys and gals in your office, and you’re going and you’re talking, you’re discussing things, you’re collaborating, or at least trying to collaborate in some cases when you’re a young guy. But working from home doesn’t really give you that. Now I’m sure that there’s a way that there’s, we’ll call it forced collaboration, if you will. Weekly meetings or daily meetings, whatever it happens to be. But it’s not organic. It happens when you’re sitting in the office with people and you can just walk over and talk to them. So I think there’s probably something to be said for raises as well, and promotions. Unless you’re killing it and you’re really standing out to everybody in the org, it’s probably going to be harder for you to get that raise or to get that promotion working remotely. When you’re in the office, you’re potentially seeing your boss every day and things like that. I think it’s going to be easier.
Chris Needs: It’s easier to measure up what you’re doing compared to others and what you’re contributing.
Noah Brooks: Yeah, absolutely. So remote work, not that it’s disappearing. I don’t know that it’s ever going to disappear, but it’s slowly going back to five days a week depending on where you’re at.
CHEAP VEGAS AND PERSONAL EXPERIENCES
Chris Needs: So let’s hear about your Vegas trip.
Noah Brooks: I was going to start by saying that we had some data on Memorial Day travel.
Chris Needs: [inaudible 00:19:29]
Noah Brooks: It was very high. My wife and I, we did take a trip to Las Vegas. That was a little bit nutty. I’ll get into that here. Let’s talk about these numbers first. So going back to 2019, we did a six-day average. Not average, we did a six-day total of Friday through Wednesday, with Monday being the national holiday. 2019 was, 14,200,000 people traveled. This is TSA. This is the number of people that went through TSA, so it doesn’t include people driving, or I don’t think boating has a TSA, but maybe they do, I don’t really know. So 2019, 14.2 million. 2020, about 1.9 million.
So, pretty dramatic drop. Call it a 90% drop. 2021, picked it back up almost 10.5 million. 2022, back up to 13. Last year, we finally got above our 2019 number, 14.5 million. And then this year, we added another million passengers over last year, 15.56 million people traveled on that, I don’t know if six-day weekend or six-day travel holiday. So things are coming back to normal and we’re well beyond normal at this point. We’re increasing pretty dramatically over last year. A million people more traveled in that holiday period. Here’s what I want to know, there’s been all over these reports about the Turks and Caicos. Have you seen them?
Chris Needs: Yes.
Noah Brooks: So Americans traveling home from Turks and Caicos, and they keep getting busted with ammo in their luggage. So here’s the thing that I keep thinking, didn’t they take that ammo with them to Turks and Caicos? And didn’t TSA miss that? There’s something askew there, I’m not sure what it is, but if the people at Turks and Caicos are getting the ammo, locating it on their way out, but we’re not getting it when they’re flying to Turks and Caicos, there seems to be a problem. And that hasn’t been addressed on the news at all. They keep talking about it, but hasn’t been addressed.
Chris Needs: Yeah, that’s interesting. So you can travel with a gun if you have it all boxed up, locked-
Noah Brooks: Yeah, there has to be a TSA-approved-
Chris Needs: But ammo is no-go?
Noah Brooks: No, I think you can travel with it. It has to be in that locked box and it has to be in your… It can’t be in your carry-on, if I’m not mistaken. I have never traveled with a firearm or anything like that, I don’t necessarily intend to. But people go hunting. If you’re headed out Northwest or BC to hunt elk or something, you’re going to bring your firearms with you.
Chris Needs: Is there a difference in laws there? What I was getting at is, so yes, we allow that as long as it’s properly contained and what have you. Do they, Turks and Caicos, for example, not have that-
Noah Brooks: I’m not sure if [inaudible 00:22:49] big hunters down there.
Chris Needs: I don’t think so. Maybe fishers.
Noah Brooks: Maybe fishermen. I think the rule was actually changed to stop exporting or importing arms in and out of Turks and Caicos to help stop the drugs, the drug trade. And people are getting caught up in this. Now, why they have ammo in their purse or in their carry-on, I don’t know. You should probably check that out beforehand. I went through one time and they found a knife, and I had been on a guy’s weekend and I had a Buck knife with me and forgot all about it, and I used that same bag next week traveling to England. And the lady stopped me and she said, “Do you have anything sharp in here?” And it was early morning, I was tired. I said, “The sharpest thing in there are my keys.” And she said, “Well-“
Chris Needs: He was wrong.
Noah Brooks: Yeah, I was wrong. I was wrong and pulled out a honey knife and I was just like, oh, shoot. My wife was with me. She was not happy about that. We had a much easier trip this week. We did three nights in Las Vegas for her birthday and it was phenomenal. The main reason that we went there was to see Adele, the singer, for anybody who doesn’t know who Adele is. So we did that on Friday night. It was amazing when we realized, when I got the tickets and we were talking about going, this was not on the list, but it turned out the Sphere, the Grateful Dead, we’re having a residency at the Sphere at the same time, like Thursday, Friday, Saturday, every week for a few months.
And so we wound up getting tickets to the Sphere. I’m telling you, I’m never going to go to another concert again that’s not in the Sphere. This thing was amazing. It was incredible. Every seat in the place was amazing. I was going to say projection and it’s all LED, so they’re not projecting anything, but the visual artwork that they’re putting up there. Anybody who’s been to a concert knows that they try to put something up on the sides. At least they do nowadays. I don’t know about 20, 30, 40 years ago, or 50 years ago. But this entire thing was an artistic representation of what they were trying to get across to the audience, in addition to the music, of course. So anybody who has an interest in seeing the Dead, I think they’re out there until August 10th or so.
Chris Needs: [inaudible 00:25:34] had a picture. At one point, it looked like they had every one of their passes or tickets over the years-
Noah Brooks: Hundreds of tickets and the flyers just sitting up there. It was brilliant. It was brilliant. We got home and we thought to ourselves, “Can we go again before August?” I don’t know if we’re going to, but we thought about it. So a few snapshots in my mind from this trip, there was lots of things going on, it’s really expensive in Vegas. So there’s two sides to Vegas. There’s the Strip where you have the giant hotels and the luxury stuff going on, and then you have Fremont Street, which is Old Vegas. Old Vegas is a lot cheaper than New Vegas, a lot cheaper. I took a picture of it. It was steak and lobster, 13.99, all-you-can-eat prime rib, 10.99 on Fremont Street at the Fremont Casino. And that was nothing compared to what was going on at the steakhouses where we were up on the Strip. It was-
Chris Needs: But the buffets are gone, you said, right? It’s now steakhouses?
Noah Brooks: We only saw one buffet. I think it was being advertised in, I don’t know if it was Mandalay Bay. We only saw one. There was nothing in our hotel. We wound up staying at The Mirage, which turns out is closing down in July. Has been there, I think, 45 years or something like that, 39 years. They didn’t have a buffet. We weren’t necessarily looking for one, but they didn’t have it. And we had this conversation, I don’t think they need them anymore. Vegas is such a destination. It used to be that cheap food was bringing people into the casinos. Now they have… It seemed like the more expensive the steakhouse, the more appealing it is to people. So yeah, it was phenomenal. It does take a little bit of money to go out there, but we said if we go back out, we’re going to stay at the cheap spot, the Fremont Street. I don’t know that we’ll do the 10.99 prime rib, but we’ll definitely stay on Fremont Street. It’s incredible. Great experience.
Chris Needs: A couple of things I was thinking about, you had mentioned the drug trade in Turks and Caicos and to how that played in. So we had two major elections. Mexico, which was a very violent election season, apparently, apparently various governorships and offices during election season, 37 assassinations in Mexico of people running for office.
Noah Brooks: Wow.
Chris Needs: That’s crazy.
Noah Brooks: That’s dangerous to be a politician.
Chris Needs: Yeah. They did elect their first woman president, first Jewish president, and she is in line with Obrador. She’s under his tutelage. She’s with his party. So same party winning, but they came just short of a supermajority. And the market was worried they would have a supermajority, so the market was falling. They fell 6% in Mexican markets and then did recover after they slimly did not get a supermajority. And then the alternative happened in India where Modi, he’s been in power for how many years now, this is going to be his third term but I think their terms are longer than ours, he lost supermajority even though he’s been doing a great job. They have one of the best up-and-coming emerging markets economies, but their market fell 7% because Modi lost a supermajority. So, interesting thing there. I think we said coming into [inaudible 00:29:24], we might mention on a podcast, 60% of the world’s GDP was up for election in 2024. So, important year in terms of politics.
UPCOMING ELECTION
Noah Brooks: Yeah. Do we have an election coming up?
Chris Needs: I think we do.
Noah Brooks: Oh, boy. I keep thinking, June 27th.
Chris Needs: I just keep thinking, how much could be done with all those ad dollars if they put it to good use rather than wasting it on TV ads and billboards?
Noah Brooks: My feed and the stuff that I’m seeing sounds so fatalistic. And I will say on both sides, it sounds very fatalistic, maybe more on one side than the other. But we’re not even close to the election. I don’t know how I’m going to get through it. I think there’s going to be a lot more, maybe mental health issues by the time the election rolls around because quite frankly, I’m going to tune out. It’s not like I’m going to tune out of politics, but when I see an ad come on or I see an ad and I’m scrolling through it, it’s not something I’m going to look at. I don’t need to do that. But it seems like it’s getting tougher to avoid.
Chris Needs: [inaudible 00:30:41] there.
Noah Brooks: All right, so here we are. We have the market up almost 12% for the year. We had a really nice May, big turnaround after a crappy April.
Chris Needs: But we’ve been hyping up the breadth and expansion [inaudible 00:30:59] the returns, but we did have a narrower May. Great May. Best May in 15 years at 4.8% on the S&P 500, but it was narrower. 75% of the gains were accounted by Apple, Google, Microsoft, NVIDIA, Meta… I’m missing one.
Noah Brooks: It wasn’t Tesla.
Chris Needs: Amazon-
Noah Brooks: It wasn’t Tesla.
Chris Needs: It wasn’t Tesla.
Noah Brooks: Yeah, so Tech was up 705 in May. Was it the best performing sector? Nope. Do we know what it was? Yep. Utilities, up almost nine in May. So, combination of a few different things. Expectations for mass energy consumption from AI chips and in general, the realization that everything we do takes a lot more energy than it used to. And I suspect that there’s a growing narrative that rates are going to come down, so that’s going to be wonderful for the utilities. They’re all leveraged pretty heavily. So best performing sector in May was utilities, which we do not normally say that. I don’t know that I’ve ever said that before.
Chris Needs: Not during bull markets?
Noah Brooks: Not during bull markets, no. But that’s important to me. I don’t want to rely on those six stocks because at some point, one of them is going to stumble. We talked about NVIDIA trading at [inaudible 00:32:36] sales last year when we started this podcast. And we’re looking at the forward P/E right now, we looked at it earlier today, it was around 44. That’s not that bad for a high growth company.
Chris Needs: For the move they’ve made, to only be at 44 forward P/E is pretty amazing. Shows how much their earnings are doing.
Noah Brooks: Well, during the time period where Tesla was moving up exponentially, their P/E was either, they didn’t have one in the beginning because they-
Chris Needs: Weren’t profitable.
Noah Brooks: They weren’t profitable. And then when they did, it was 180, 200 times net forward earnings. You have NVIDIA who is wildly profitable, growing at leaps and bounds, super high margins, and the forward P/E is 44, which anything could happen, but it doesn’t seem that much at the moment.
Chris Needs: Their net income was a 628% year-over-year increase. Wild. Jensen is the man. You’ve seen him interview and stuff. He’s always happy, super upbeat, and he’s just killing it with all of his [inaudible 00:33:41] earnings report and speaking arrangements. The new revolution is here, the industrial revolution, the AI revolution.
Noah Brooks: All right. So listen, as we wind down, I just want to throw a shout-out to Morgan Spurlock. Do you remember that guy? He did the Super Size Me back in early 2000s. He died last year.
Chris Needs: RIP.
Noah Brooks: Yeah, RIP. So he was the guy, he ate at a McDonald’s for 30 days in a row, three meals a day. I think he gained something like 28 pounds over those 30 days. His cholesterol went through the roof. It was interesting to watch, I don’t know how real the whole production was. I think he had a pretty heavy drinking problem as well. I don’t know that it was the McDonald’s that killed him, so please don’t sue me, but he passed away. Interesting. And I think for me, I think that was 2002 or 2003, that was one of the times where I thought to myself, hmm, maybe I shouldn’t eat like crap all the time. Maybe throw in, [inaudible 00:34:48] going to say Chipotle, but maybe throw in a carrot here and there.
Chris Needs: I’m seeing shots fired right now. I’m on a four-day Chipotle streak.
Noah Brooks: Are you going to make it five?
Chris Needs: I don’t know. We’ll see. That Chicken al Pastor is amazing.
CLOSING REMARKS
Noah Brooks: Okay, they got me. All right, well, listen everybody, thank you so much for joining us. The markets are always volatile. Key is long-term investing. Stay in. And until next time, I’m Noah Brooks, Chris Needs. Thanks so much for joining us on the Market Enthusiast.
Disclaimer
The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual to determine which strategies or investments may be suitable for you. Consult the appropriate qualified professional prior to making a decision. The economic forecast set forth may not develop as predicted, and there can be no guarantee that the strategies promoted will be successful. All performance referenced as historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
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Table of Contents
MAY MARKET PERFORMANCE
Noah Brooks: Welcome back everybody to another installment of the Market Enthusiast. I’m Noah Brooks, and with me, Chris Needs.
Chris Needs: Hello, hello.
Noah Brooks: Thanks so much for joining us this week. A lot to go over. We had a pretty big march forward in the markets in May.
Chris Needs: Yes.
Noah Brooks: So S&P up almost 5%, Dow Jones up maybe two and a half. Nasdaq obviously had to move forward, up almost 7%. So some of those numbers are still negative two months into the quarter, but really gave a lot back in April and [inaudible 00:00:49] most of it back in May. So, feeling pretty good. We talked about Dow Jones, 40,000, that last installment. We didn’t make 41,000. Nope.
Chris Needs: Took a little step back.
Noah Brooks: Yeah, a little step back. Not even close. I think we got to 40,100 maybe, just shy of that. And then in a matter of a few days, we lost about 1400 points, Dow Jones points.
Chris Needs: Salesforce, I know, and UNH had a couple rough days-
Noah Brooks: Yeah, United Healthcare-
Chris Needs: UNH had a… Was it a hack? And then they had the Medicare news, and Salesforce didn’t necessarily have a horrible report but just didn’t live up to the standard they’ve set for themselves over the years-
Noah Brooks: It got smoked.
Chris Needs: It got crushed.
Noah Brooks: Yeah.
Chris Needs: I think it got down 18 to 20% or so.
Noah Brooks: Yeah, 100 points or so, 90 points. So that did a pretty good number on the Dow Jones, shortly after we talked about 40,000. And so now today we’re sitting here the week after the Memorial Day holiday waiting for the jobs report to come out later in the week, and Dow Jones right around 38,700 or so today. Up a little bit today, so feeling good about that. Lots of reasons to be positive. As always, there’s certainly a plethora of negative things coming out there. We’re going to try to talk a little bit about the positives and negatives, right?
Chris Needs: Yep.
NVIDIA EARNINGS
Noah Brooks: All right. So big positive, NVIDIA earnings.
Chris Needs: Very big positive. So they crushed it, announced a stock split, which when you’re on a roll like they’ve been, is obviously met with a positive outcome where people who can’t afford to get into a higher stock price can then get in. It helps retail get in, but boy, the numbers were incredible. Revenue was 26 billion, I think, 262% year-over-year, 57% profit margin. Just insane numbers. And obviously, they’re the AI leader for a reason. It seems like they’ve got a six-month to a year lead on everybody else, and they’re taking advantage of it while they got it.
Noah Brooks: How long before that moat gets smaller? You can’t be in the chip industry not preparing and retooling for AI. Intel and AMD and GlobalFoundries, there’s a plethora of applied materials of chip companies and material companies that all want to get on the NVIDIA train.
Chris Needs: Everyone wants to be on it, for sure. Everyone agrees in the industry that they’ve got a headstart right now. They are ahead of everyone else. And we’re coming up on a corporate refresh cycle, which they estimate to be every five to six years, and it looks like NVIDIA is best positioned to get the premium dollars in that space for that corporate refresh. We even saw the headlines. Did you see where Elon Musk and Tesla ordered a ton of-
Noah Brooks: Oh, they’re switching.
Chris Needs: They ordered a ton of chips and they actually didn’t have an immediate use for them or place to put them and plug them in and actually use them. They just didn’t want to run out and be left without chips. So that might be a downside for NVIDIA, is that people are over ordering and then they’re going to find there’s a glut of, they ordered too much so they didn’t run out and weren’t left behind.
Noah Brooks: Well, two things as you say that come to mind. One is, that process is inflationary. Buying them when you don’t actually need them drives up the overall cost within the industry. And then secondly, the thing that comes to mind is, what are we going to do with all these AI chips?
Chris Needs: Got to plug them in so they can learn and do their thing. Like he said, they were going to be essentially sitting in a warehouse, so that’s why he repositioned them to X and xAI-
Noah Brooks: But I know that there’s a demand from corporations to plug these chips in in their server farms and to utilize them. Is there a demand from people like you and I? How is it going to make our lives better? What type of demand pull is really there? And we all know about ChatGPT and the different AI tools that are coming out from Google and Meta, Facebook, and other companies, but isn’t there a point here in the near future that maybe at least from a short period of time, that there’s a saturation of it?
Chris Needs: Certainly-
Noah Brooks: [inaudible 00:05:32].
Chris Needs: What are the end uses for people like us that aren’t running large data machine learning algorithms, things like that? So it would be people who are insane about gaming or maybe trying to do their own Bitcoin mining thing. What would be the uses where you’re only getting one NVIDIA chip?
Noah Brooks: Maybe I’m just being naive right at the moment and everything is going to be AI, but I don’t see how it’s going to improve my life. I saw something the other day, it was something like, if AI could do my dishes and do my laundry, I would be really happy because then that would give more time to read my books and do my art, and [inaudible 00:06:12] I’m not an artist, but I don’t want AI to read my books and do my art for me while I do the laundry and the dishes.
Chris Needs: That’d make our lives more comfortable.
Noah Brooks: Give me the robot that’s doing the dishes so I can enjoy the other things in life that are important to me, but I don’t know that I need it for the things that it’s doing right now. I don’t know.
Chris Needs: I guess it’ll benefit us in the workplace before our personal lives, our off hours.
Noah Brooks: Maybe in the long term… Not maybe. In the long term, it seems like everything is going to go that way. Certainly in healthcare and in manufacturing, AI is going to be all over the place. I use the example, I might’ve said it on here a few months ago, but I use the example of going to a dermatologist. You have something weird on your back and nowadays, dermatologists will look at it and he or she, based on their own medical knowledge and what they’ve seen in the past, they’ll make a determination of whether it’s cancer or something that should be scraped off, sent to the lab.
I have this feeling that in a few years, they’re going to take a picture, or there’s a machine that’s going to take a picture and it’s going to scan it against 2, 3, 4, 5 million other pictures and make an instant determination of whether it needs to go any further. That to me is interesting. That’s helping humanity. Better healthcare outcomes, I’m sure, is on the list of hospitals of what they want to see for people. Better healthcare outcomes. I’m just not sure how it’s going to impact everybody on a day-to-day basis. And I could be wrong, but I feel like NVIDIA maybe got a little ahead of itself. It’s close to 1200 bucks a share. I’m sure the next time we come on, it’s going to be 1400.
Chris Needs: Yeah, they’re a short jump, especially the way they’re moving, from becoming the largest company in the world. Microsoft isn’t that far ahead of them anymore. They were worth 144 billion, I think, in 2020, so now they’re like 19, 20 times… Someone do the math for us there-
Noah Brooks: Oh, boy-
Chris Needs: 19 times-
Noah Brooks: We’re close to 3 trillion.
Chris Needs: Yeah, 19 times larger than that now. It’s a heck of a move. It’s one of the best, I would say, moves and stories in the history of markets.
TELSA AND DOG MODE
Noah Brooks: Yeah. Well, and that’s like Tesla, what happened from 2020 to top of March of 2022. Monster move, tenbagger in 20 months or something like that. That was a pretty big move. Hasn’t done much lately. I did see this report out… I don’t know if it was number one selling, but the biggest increase in electric vehicle sales was the Hyundai IONIQ 5. And it just turned out my wife’s dad picked one up a few months ago and I had a drive in it. Nice car. Yeah, it works. And for all the news about people not buying them, I have a feeling that maybe that’s just a short-term blip. We’re moving in that direction, slowly but surely. Everybody knows here that you have a Tesla, I think. I’ll bring that up. I don’t have one yet. We’ll get there-
Chris Needs: I’m trying to convince my wife to let me drive it down to Nags Head, North Carolina next week-
Noah Brooks: How far a trip is that for you?
Chris Needs: I think it’s like 400-some miles. I would have to recharge once, but if we’re thinking stopping in a hotel on the way down in Virginia, so then I’d be fine.
Noah Brooks: See, that’s the type of range anxiety that I don’t know that I’d want to do. Because if you have, and you do, you have two cars, you have an internal combustion engine vehicle and you have your Tesla, I wouldn’t even want to put it out there to have to deal with it.
Chris Needs: But I get 300 miles on it. That’s more than half the trip. Everywhere down I-95 in the major highways, there’s Wawas that have them. So I don’t know, I’ve found it hasn’t been as much as a concern as I thought I would be, for sure.
Noah Brooks: Okay. I don’t know what we’re going to do with the next car, but the car after that one is going to be-
Chris Needs: I told you about Dog Mode.
Noah Brooks: What’s Dog Mode?
Chris Needs: The Dog Mode where it has the air conditioning on, you can watch your dog. They say Dog Mode because they don’t want you to leave your kids in there, but you can watch the dog through the camera.
Noah Brooks: Oh, wow.
Chris Needs: I told you about that.
Noah Brooks: I completely forgot. We have a dog. I would use it, because the number one thing that I want to avoid is people saying I’m a bad dog dad.
Chris Needs: It says right on the big screen in the middle, it’s like, my driver will be here shortly. It is 67 degrees, or whatever in the cabin. I’m a salesman now-
Noah Brooks: So people that come up to the car-
Chris Needs: Don’t break the window-
Noah Brooks: Oh, wow. Wow, that’s strange. I don’t want to be in charge of putting any more animals down. I wasn’t sure I was going to say this, but we put our cat down the other day, Mr. Ted, of 16 or 17 years, and just a really weird experience. We had this company called Laps of Love come to the house. The cat hated the carrier and we didn’t want to take him to the vet and stress him out, but he was on his last legs, and keeping him around any longer I think would’ve been more about for us than him. His life was going-
Chris Needs: Laps of Love, you said?
Noah Brooks: Yeah, Laps of Love.
Chris Needs: What were you calling it though?
Noah Brooks: I made the reference of Dr. Death. So they come to the house, this was the best part about it, they come to the house, they tell you what they’re going to do over the phone. It’s at your house, obviously, and the lady said, “Where would you like to do this?” That’s the Dr. Death lady. And we said, “Well, right here, if that’s okay.” She said, “Anywhere you want.” We had him on the counter, on a blanket. She asked us if we wanted to say goodbye. We had done our goodbyes. So essentially, she told us what was going to happen briefly and she gave him some painkillers, and you could see he relaxed a little bit.
And then she said, “I’m going to give him an overdose of anesthesia.” And she did as she was talking to us, and you could see he really stopped breathing and went off. And the whole experience from her walking in the door to her leaving our home was only about eight minutes. We had done the payment method and everything prior to that. And so for myself and my wife and I think for the cat, because what it’s about, it was quick, painless. I didn’t have to worry about it. Didn’t have to stress the cat out prior to it. The strange thing is that we were left there with the cat. They offered to take the cat with them and do a cremation or something like that, and we just said no. It was okay. We buried them.
My wife had never buried an animal before. I grew up in the country, so we had a mini graveyard out in the corner of our property with the dogs that we had accumulated over the years. But it was really interesting, and anybody out there that has that scenario that they’re facing, I would highly recommend it. I don’t know too much about the company, but it’s Laps of Love. Come to your home and make it really easy for you. So I don’t know, went down that rabbit hole there. Let’s go back to finance for a minute or two. It wasn’t cheap, I’ll say that. It was about $400 or $440, but it was well worth it. That’s all.
Chris Needs: Lots of money there in the pet carrying business on-
Noah Brooks: People love their animals. I’ll tell you, we do. So, no question about it. Hopefully we don’t have to put anything else down anytime soon.
Chris Needs: When I was a kid, I was in third grade, my bird, Tweety Bird, little Canary died, and to make me feel better, my parents, we got a dog the next week. So we had buried Tweety Bird behind our shed. First thing, our new Collie does is dig up Tweety Bird.
Noah Brooks: We put a big rock on top of Mr. Ted because I didn’t want any foxes or… I put him down pretty deep in the ground, but I didn’t want Tweety Bird to happen.
Chris Needs: To make a reappearance.
JOB MARKET AND REMOTE WORK
Noah Brooks: Yeah, no reappearances there. So let’s go back to May for a second. We had a big May, I mentioned up at the top of the program. One of the things out there, people were concerned about jobs. So, jobs report coming out this week. We have the four-week moving average of new claims. That’s new unemployment claims. Relatively flat, about 222,000. So it got down to the lowest it ever was since 1969, I think. It was under 200,000. I think it was 179,000. Been floating around 200, 210 for the last six, seven months. It used to be anything under 400,000 a week. Anything under 400,000 was putting pressure on wage inflation. We’ve been under 400,000 a week for, I don’t know the exact number, but it’s at least a year now.
So I think that’s one big thing that people are looking for. And this Friday, as I mentioned, new jobs report coming out, that’s going to be really important, as it is always every month that comes out. On that note, I saw some information from a website called the Ladders this week, and they’re talking about remote jobs. They said that high-paying remote jobs, which apparently is over 250,000, fell nearly 60% year-over-year. So it went from around 10% of the jobs being offered to only 4% of the jobs being offered, 60%. And another survey by a company called Resume Builder, might be owned by the same company, I’m not sure on that, their survey said 90% of the companies that they surveyed, which were a thousand of them, expect a full-day, five-day, week work. Week-
Chris Needs: Work week?
Noah Brooks: Work week, to come back into the office by the end of this year. I’m not 100% sure about that. We know we’ve seen some high-profile companies, specifically some of the banks, Barclays and Citi. HSBC said that they are requiring employees to come back to the work. And you had an interesting observation, we were talking about it earlier, about potential growth.
Chris Needs: Yeah, so I know I’d seen Goldman Sachs talking about having people back in office, and they were one of the first ones, I think, to do it because they’re basically noticing all of their young analysts, who they were used to continuing their growth because they’re in the office working side by side with the senior leaders and the VPs in the organization. They weren’t advancing as quickly as they were previously because they were doing work from home, and they weren’t learning [inaudible 00:17:48] with those senior leaders. So, a lot of organizations and cream of the crop on Wall Street are hoping to have people in more often than not.
Noah Brooks: Speaking from personal experience, I started in the late ’90s at a company called Prudential Securities. And you’re with your compadres, you’re learning from the old guys and gals in your office, and you’re going and you’re talking, you’re discussing things, you’re collaborating, or at least trying to collaborate in some cases when you’re a young guy. But working from home doesn’t really give you that. Now I’m sure that there’s a way that there’s, we’ll call it forced collaboration, if you will. Weekly meetings or daily meetings, whatever it happens to be. But it’s not organic. It happens when you’re sitting in the office with people and you can just walk over and talk to them. So I think there’s probably something to be said for raises as well, and promotions. Unless you’re killing it and you’re really standing out to everybody in the org, it’s probably going to be harder for you to get that raise or to get that promotion working remotely. When you’re in the office, you’re potentially seeing your boss every day and things like that. I think it’s going to be easier.
Chris Needs: It’s easier to measure up what you’re doing compared to others and what you’re contributing.
Noah Brooks: Yeah, absolutely. So remote work, not that it’s disappearing. I don’t know that it’s ever going to disappear, but it’s slowly going back to five days a week depending on where you’re at.
CHEAP VEGAS AND PERSONAL EXPERIENCES
Chris Needs: So let’s hear about your Vegas trip.
Noah Brooks: I was going to start by saying that we had some data on Memorial Day travel.
Chris Needs: [inaudible 00:19:29]
Noah Brooks: It was very high. My wife and I, we did take a trip to Las Vegas. That was a little bit nutty. I’ll get into that here. Let’s talk about these numbers first. So going back to 2019, we did a six-day average. Not average, we did a six-day total of Friday through Wednesday, with Monday being the national holiday. 2019 was, 14,200,000 people traveled. This is TSA. This is the number of people that went through TSA, so it doesn’t include people driving, or I don’t think boating has a TSA, but maybe they do, I don’t really know. So 2019, 14.2 million. 2020, about 1.9 million.
So, pretty dramatic drop. Call it a 90% drop. 2021, picked it back up almost 10.5 million. 2022, back up to 13. Last year, we finally got above our 2019 number, 14.5 million. And then this year, we added another million passengers over last year, 15.56 million people traveled on that, I don’t know if six-day weekend or six-day travel holiday. So things are coming back to normal and we’re well beyond normal at this point. We’re increasing pretty dramatically over last year. A million people more traveled in that holiday period. Here’s what I want to know, there’s been all over these reports about the Turks and Caicos. Have you seen them?
Chris Needs: Yes.
Noah Brooks: So Americans traveling home from Turks and Caicos, and they keep getting busted with ammo in their luggage. So here’s the thing that I keep thinking, didn’t they take that ammo with them to Turks and Caicos? And didn’t TSA miss that? There’s something askew there, I’m not sure what it is, but if the people at Turks and Caicos are getting the ammo, locating it on their way out, but we’re not getting it when they’re flying to Turks and Caicos, there seems to be a problem. And that hasn’t been addressed on the news at all. They keep talking about it, but hasn’t been addressed.
Chris Needs: Yeah, that’s interesting. So you can travel with a gun if you have it all boxed up, locked-
Noah Brooks: Yeah, there has to be a TSA-approved-
Chris Needs: But ammo is no-go?
Noah Brooks: No, I think you can travel with it. It has to be in that locked box and it has to be in your… It can’t be in your carry-on, if I’m not mistaken. I have never traveled with a firearm or anything like that, I don’t necessarily intend to. But people go hunting. If you’re headed out Northwest or BC to hunt elk or something, you’re going to bring your firearms with you.
Chris Needs: Is there a difference in laws there? What I was getting at is, so yes, we allow that as long as it’s properly contained and what have you. Do they, Turks and Caicos, for example, not have that-
Noah Brooks: I’m not sure if [inaudible 00:22:49] big hunters down there.
Chris Needs: I don’t think so. Maybe fishers.
Noah Brooks: Maybe fishermen. I think the rule was actually changed to stop exporting or importing arms in and out of Turks and Caicos to help stop the drugs, the drug trade. And people are getting caught up in this. Now, why they have ammo in their purse or in their carry-on, I don’t know. You should probably check that out beforehand. I went through one time and they found a knife, and I had been on a guy’s weekend and I had a Buck knife with me and forgot all about it, and I used that same bag next week traveling to England. And the lady stopped me and she said, “Do you have anything sharp in here?” And it was early morning, I was tired. I said, “The sharpest thing in there are my keys.” And she said, “Well-“
Chris Needs: He was wrong.
Noah Brooks: Yeah, I was wrong. I was wrong and pulled out a honey knife and I was just like, oh, shoot. My wife was with me. She was not happy about that. We had a much easier trip this week. We did three nights in Las Vegas for her birthday and it was phenomenal. The main reason that we went there was to see Adele, the singer, for anybody who doesn’t know who Adele is. So we did that on Friday night. It was amazing when we realized, when I got the tickets and we were talking about going, this was not on the list, but it turned out the Sphere, the Grateful Dead, we’re having a residency at the Sphere at the same time, like Thursday, Friday, Saturday, every week for a few months.
And so we wound up getting tickets to the Sphere. I’m telling you, I’m never going to go to another concert again that’s not in the Sphere. This thing was amazing. It was incredible. Every seat in the place was amazing. I was going to say projection and it’s all LED, so they’re not projecting anything, but the visual artwork that they’re putting up there. Anybody who’s been to a concert knows that they try to put something up on the sides. At least they do nowadays. I don’t know about 20, 30, 40 years ago, or 50 years ago. But this entire thing was an artistic representation of what they were trying to get across to the audience, in addition to the music, of course. So anybody who has an interest in seeing the Dead, I think they’re out there until August 10th or so.
Chris Needs: [inaudible 00:25:34] had a picture. At one point, it looked like they had every one of their passes or tickets over the years-
Noah Brooks: Hundreds of tickets and the flyers just sitting up there. It was brilliant. It was brilliant. We got home and we thought to ourselves, “Can we go again before August?” I don’t know if we’re going to, but we thought about it. So a few snapshots in my mind from this trip, there was lots of things going on, it’s really expensive in Vegas. So there’s two sides to Vegas. There’s the Strip where you have the giant hotels and the luxury stuff going on, and then you have Fremont Street, which is Old Vegas. Old Vegas is a lot cheaper than New Vegas, a lot cheaper. I took a picture of it. It was steak and lobster, 13.99, all-you-can-eat prime rib, 10.99 on Fremont Street at the Fremont Casino. And that was nothing compared to what was going on at the steakhouses where we were up on the Strip. It was-
Chris Needs: But the buffets are gone, you said, right? It’s now steakhouses?
Noah Brooks: We only saw one buffet. I think it was being advertised in, I don’t know if it was Mandalay Bay. We only saw one. There was nothing in our hotel. We wound up staying at The Mirage, which turns out is closing down in July. Has been there, I think, 45 years or something like that, 39 years. They didn’t have a buffet. We weren’t necessarily looking for one, but they didn’t have it. And we had this conversation, I don’t think they need them anymore. Vegas is such a destination. It used to be that cheap food was bringing people into the casinos. Now they have… It seemed like the more expensive the steakhouse, the more appealing it is to people. So yeah, it was phenomenal. It does take a little bit of money to go out there, but we said if we go back out, we’re going to stay at the cheap spot, the Fremont Street. I don’t know that we’ll do the 10.99 prime rib, but we’ll definitely stay on Fremont Street. It’s incredible. Great experience.
Chris Needs: A couple of things I was thinking about, you had mentioned the drug trade in Turks and Caicos and to how that played in. So we had two major elections. Mexico, which was a very violent election season, apparently, apparently various governorships and offices during election season, 37 assassinations in Mexico of people running for office.
Noah Brooks: Wow.
Chris Needs: That’s crazy.
Noah Brooks: That’s dangerous to be a politician.
Chris Needs: Yeah. They did elect their first woman president, first Jewish president, and she is in line with Obrador. She’s under his tutelage. She’s with his party. So same party winning, but they came just short of a supermajority. And the market was worried they would have a supermajority, so the market was falling. They fell 6% in Mexican markets and then did recover after they slimly did not get a supermajority. And then the alternative happened in India where Modi, he’s been in power for how many years now, this is going to be his third term but I think their terms are longer than ours, he lost supermajority even though he’s been doing a great job. They have one of the best up-and-coming emerging markets economies, but their market fell 7% because Modi lost a supermajority. So, interesting thing there. I think we said coming into [inaudible 00:29:24], we might mention on a podcast, 60% of the world’s GDP was up for election in 2024. So, important year in terms of politics.
UPCOMING ELECTION
Noah Brooks: Yeah. Do we have an election coming up?
Chris Needs: I think we do.
Noah Brooks: Oh, boy. I keep thinking, June 27th.
Chris Needs: I just keep thinking, how much could be done with all those ad dollars if they put it to good use rather than wasting it on TV ads and billboards?
Noah Brooks: My feed and the stuff that I’m seeing sounds so fatalistic. And I will say on both sides, it sounds very fatalistic, maybe more on one side than the other. But we’re not even close to the election. I don’t know how I’m going to get through it. I think there’s going to be a lot more, maybe mental health issues by the time the election rolls around because quite frankly, I’m going to tune out. It’s not like I’m going to tune out of politics, but when I see an ad come on or I see an ad and I’m scrolling through it, it’s not something I’m going to look at. I don’t need to do that. But it seems like it’s getting tougher to avoid.
Chris Needs: [inaudible 00:30:41] there.
Noah Brooks: All right, so here we are. We have the market up almost 12% for the year. We had a really nice May, big turnaround after a crappy April.
Chris Needs: But we’ve been hyping up the breadth and expansion [inaudible 00:30:59] the returns, but we did have a narrower May. Great May. Best May in 15 years at 4.8% on the S&P 500, but it was narrower. 75% of the gains were accounted by Apple, Google, Microsoft, NVIDIA, Meta… I’m missing one.
Noah Brooks: It wasn’t Tesla.
Chris Needs: Amazon-
Noah Brooks: It wasn’t Tesla.
Chris Needs: It wasn’t Tesla.
Noah Brooks: Yeah, so Tech was up 705 in May. Was it the best performing sector? Nope. Do we know what it was? Yep. Utilities, up almost nine in May. So, combination of a few different things. Expectations for mass energy consumption from AI chips and in general, the realization that everything we do takes a lot more energy than it used to. And I suspect that there’s a growing narrative that rates are going to come down, so that’s going to be wonderful for the utilities. They’re all leveraged pretty heavily. So best performing sector in May was utilities, which we do not normally say that. I don’t know that I’ve ever said that before.
Chris Needs: Not during bull markets?
Noah Brooks: Not during bull markets, no. But that’s important to me. I don’t want to rely on those six stocks because at some point, one of them is going to stumble. We talked about NVIDIA trading at [inaudible 00:32:36] sales last year when we started this podcast. And we’re looking at the forward P/E right now, we looked at it earlier today, it was around 44. That’s not that bad for a high growth company.
Chris Needs: For the move they’ve made, to only be at 44 forward P/E is pretty amazing. Shows how much their earnings are doing.
Noah Brooks: Well, during the time period where Tesla was moving up exponentially, their P/E was either, they didn’t have one in the beginning because they-
Chris Needs: Weren’t profitable.
Noah Brooks: They weren’t profitable. And then when they did, it was 180, 200 times net forward earnings. You have NVIDIA who is wildly profitable, growing at leaps and bounds, super high margins, and the forward P/E is 44, which anything could happen, but it doesn’t seem that much at the moment.
Chris Needs: Their net income was a 628% year-over-year increase. Wild. Jensen is the man. You’ve seen him interview and stuff. He’s always happy, super upbeat, and he’s just killing it with all of his [inaudible 00:33:41] earnings report and speaking arrangements. The new revolution is here, the industrial revolution, the AI revolution.
Noah Brooks: All right. So listen, as we wind down, I just want to throw a shout-out to Morgan Spurlock. Do you remember that guy? He did the Super Size Me back in early 2000s. He died last year.
Chris Needs: RIP.
Noah Brooks: Yeah, RIP. So he was the guy, he ate at a McDonald’s for 30 days in a row, three meals a day. I think he gained something like 28 pounds over those 30 days. His cholesterol went through the roof. It was interesting to watch, I don’t know how real the whole production was. I think he had a pretty heavy drinking problem as well. I don’t know that it was the McDonald’s that killed him, so please don’t sue me, but he passed away. Interesting. And I think for me, I think that was 2002 or 2003, that was one of the times where I thought to myself, hmm, maybe I shouldn’t eat like crap all the time. Maybe throw in, [inaudible 00:34:48] going to say Chipotle, but maybe throw in a carrot here and there.
Chris Needs: I’m seeing shots fired right now. I’m on a four-day Chipotle streak.
Noah Brooks: Are you going to make it five?
Chris Needs: I don’t know. We’ll see. That Chicken al Pastor is amazing.
CLOSING REMARKS
Noah Brooks: Okay, they got me. All right, well, listen everybody, thank you so much for joining us. The markets are always volatile. Key is long-term investing. Stay in. And until next time, I’m Noah Brooks, Chris Needs. Thanks so much for joining us on the Market Enthusiast.
Disclaimer
The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual to determine which strategies or investments may be suitable for you. Consult the appropriate qualified professional prior to making a decision. The economic forecast set forth may not develop as predicted, and there can be no guarantee that the strategies promoted will be successful. All performance referenced as historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
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