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, everybody.
Noah Brooks:
Hey, thanks for joining us. You might all recognize that I am not in my normally monkey suit shirt, right? I have my US Open shirt on, and actually, feeling like a champ. Was up there on Monday night into Tuesday, we saw a Tiafoe win in five sets. That was a great time. So great experience up at Mets-Willets Point, I think that’s where it is.
Chris Needs:
Opening weekend, so lots of matches going on.
Noah Brooks:
Oh, everywhere you look, there was tennis. As far as the eye could see, there was tennis. Now I don’t play tennis, but I love watching it, so this has been a little bit of a routine for us for the last few years going up there. Interesting point, cost us $200 less this year to go up than it did last year.
Chris Needs:
Is that deflation?
Noah Brooks:
Ask me why.
Chris Needs:
Why?
Noah Brooks:
Well, last year, we took an Uber from Midtown all the way out to the courts. Surge pricing. And that was $200. This time, we used subway, mass transit, it was $3 a person. I felt like a champion-
Chris Needs:
Keep those savings.
Noah Brooks:
I felt like a champion of the world. What’s going on here today?
Chris Needs:
Well, today is the day we’ve all been waiting for. The market seemed to be on pause waiting for these NVIDIA earnings which just came out. They did very well, beat on the top and bottom lines. They had lofty expectations obviously, and they did beat them. We’re waiting obviously to get a little color on that and hear from Jensen Huang, their CEO, but 122% year-over-year revenue growth, 140% earnings per share growth year-over-year. Huge numbers. Now, obviously, it’s all in the guidance going forward, but they kept doing it.
Noah Brooks:
So you said 140% EPS growth, right? That’s great. But the stock reflected that, right?
Chris Needs:
Yep.
Noah Brooks:
I mean, so if I’m not mistaken, it’s the number one performing stock in the S&P 500.
Chris Needs:
It is.
Noah Brooks:
Right? There’s a little bit of trivia behind that too-
Chris Needs:
Yeah, I was going to ask Noah the top performing, which you just answered there in NVIDIA, and the worst performing is also a semiconductor, which is-
Noah Brooks:
Intel.
Chris Needs:
And see, he got it.
Noah Brooks:
Yeah. Yeah. I knew that one. I didn’t have to look it up. I knew that one. But everybody’s been waiting for it. We heard about watch parties and all of this stuff. Everybody’s been waiting for it because NVIDIA is such a bellwether in artificial intelligence.
Chris Needs:
It used to be Salesforce, and Apple, and Microsoft. And now, it’s NVIDIA with the AI-
Noah Brooks:
Yeah. Yeah. There’s no question about it. And, I mean, they obviously did really well. They’re going to be talking… We don’t know what their commentary is. They’re going to be talking about the rollout of… What’s the next-gen chip?
Chris Needs:
Blackwell chips.
Noah Brooks:
Blackwell, right now, they’re on the H100, guys. They’re going to be talking about that. And I just always question with this hardware stuff, and it goes back into the ’90s with Microsoft and everybody getting a computer for the first time and getting Windows. At some point, that upgrade cycle slows down, but we haven’t really gotten to an upgrade cycle. I think most companies are just getting their first artificial intelligence chips out there in the data centers, right?
Chris Needs:
Right. Yeah.
Noah Brooks:
So people will say, “Well, AI’s… We’ve already had this massive run and you want to do the comparison. Are we in the ninth inning? Are we in the seventh inning?” I’m not sure we’re even in the second inning.
Chris Needs:
Yeah, it’s still very early. I mean, most of these products that the major tech companies have been invested in, they’re not out yet. They’re not really reaping the benefits yet. One interesting stat was I saw Microsoft and Meta, 40% of their CapEx spend was on essentially, I assume, NVIDIA chips. On chips. So that’s a huge spend, huge boon for NVIDIA. So we knew they’d have a strong earning-
Noah Brooks:
[inaudible 00:04:24] so you said 40% CapEx on chips, but we don’t know how much of that is going to NVIDIA.
Chris Needs:
Right. I assume it’s a very large portion. It’s not going to Intel. I think we’re sure of that.
Noah Brooks:
Yeah, I’m pretty sure of that one. I think about it from a moat, and historically speaking, obviously I mentioned Microsoft, but at some point, whether it’s AMD, there’s lots of other semiconductor companies out there, but somebody’s going to come up with an AI chip, and AMD is right there. They have a chip that is a little less performance-oriented, 5% to 10% less performance, but it’s significantly less expensive. And I think to myself, if “I’m a purchasing manager of one of these companies, I don’t care if it’s an X, if it’s a Microsoft or some company that we don’t look at every day, and I have to… How much are the H100 chips?
Chris Needs:
I think they’re around 80,000-
Noah Brooks:
For one chip? All right. So I’m going to buy 100 of these or I’m going to buy 1,000 of these for a data center. And I think to myself, “Well, okay, let’s say the difference is 10% in performance, but it’s 30% or 40% in cost. I don’t know. I have to give consideration to that lower cost product.”
Chris Needs:
Yeah, it’s tough because the majors are in an arms race here, obviously. The first one to get that premier AI product out there that they can get out to all of their users and customers is going to have a lot to gain. So you think of an Apple, if they put in maybe the premier product on all their phones, all their computers, how much value that’s going to bring back to them, it’ll be huge. And same with Microsoft. I mean-
Noah Brooks:
And certainly-
Chris Needs:
They’re in an arms race, so that’s why I think they’re willing to pay these top dollars for NVIDIA chips.
Noah Brooks:
And they have the money to do it.
Chris Needs:
They do.
Noah Brooks:
The big guys. The Apples, Microsofts, Metas of the world.
Chris Needs:
But downstream, you’re certainly correct, there has to be a trade-off at some point between performance and price. And over the coming years, I’m sure that’s going to come together and margins are going to start to compress as chips start becoming more commoditized.
Noah Brooks:
Yeah. I mean, their margin number I think was a little over 75%. Obviously, that’s really good-
Chris Needs:
Huge profit margin.
Noah Brooks:
But it’s one of those things that I think to myself, in a year or two years or three years from now, I don’t think it can be as high. They’re going to add people, they’re going to add factories, the expenses are going to go up-
Chris Needs:
People are going to poach from them.
Noah Brooks:
People are going to poach for them, right? Yeah, there’s no question about it. That’s not a buy or sell on NVIDIA. It has been, as Chris said, the number one performing stock in the S&P 500 year to date. Intel, the number 499th?
Chris Needs:
Down 60%. NVIDIA’s up 155% coming into today.
Noah Brooks:
Yeah.
Chris Needs:
Drastic difference between those two.
Noah Brooks:
Yeah. Well, we’ll wait and see what happens tomorrow. And certainly, the commentary from CEO Jensen is going to be big and that’s going to drive the market. I mean, that’s one of the reasons that everybody’s looking at it because they are about weather, and it’s one of the reasons that we’re standing here talking about it, right? What else is going on economic-wise?
Chris Needs:
I would say one of the bigger news items from the last couple of weeks is we had that revision on jobs. So-
Noah Brooks:
Ooh, people did not like it.
Chris Needs:
Yeah.
Noah Brooks:
Well, the news didn’t like it.
Chris Needs:
Yeah. So we have the QWEC who works with the Bureau of Labor Statistics and they basically audit the jobs over the past year now. The big revision we’re talking about was a revision down of 818,000 jobs and that is from April 2023 to March 2024. So basically-
Noah Brooks:
So the math is old, right? The numbers are old.
Chris Needs:
It is. Yeah. 6 to 18 months backward-looking essentially. But that works out to about 68,000 jobs per month that weren’t actually there that were reported in the initial non-farm payrolls.
Noah Brooks:
That’s not nothing.
Chris Needs:
It’s not nothing. But again, we were kicking around how much value does this hold now since it’s so outdated though, and I don’t know if there’s any read throughs there.
Noah Brooks:
Yeah. You can tell by looking at this chart, if you guys can see it. So 2024 was a big down year. 2009, which is also a big down year. Let’s not conflate those two things, right? Please don’t do that. And here’s the reason why. As Chris stated, these numbers are from March to March, all right? If you look at 2020 and you go from March of ’20 to March of ’21, there was only a 7,000-job revision in this report. If you look at that 2009 number, you’re actually looking at a 2008 number, and everybody tries to extrapolate, “Oh, well, what’s this number going to tell me?” I’m not sure that it tells us a lot. I really don’t think it holds a lot of value.
Chris Needs:
I think a lot of people are saying, “Why is a job market this strong? It seemed like we’re doing 200,000 jobs every month.” And I think this just lends credence to those people who maybe had more of a bearish outlook or said, “Something’s not adding up here,” and now they’re like, “See? We told you.”
Noah Brooks:
I mean, that is certainly possible… It’s not possible. It’s what’s happening. Right? I mean, we see that. These numbers are six months old. But trying to use them to extrapolate that the economy is good or bad or something like that just doesn’t seem to work.
Chris Needs:
You don’t drive looking in the rear-view mirror.
Noah Brooks:
You don’t. But even so, I’m not sure… Even if you did drive looking in the rear-view mirror, which would be really weird, even if you did that, historically, when you look back on these numbers, it’s tough to assign a market return or an economic forecast to what you’re seeing from these revisions.
Chris Needs:
Yeah, we looked at and tried to infer, some way, it could be valuable and we couldn’t really come up with anything that would be actionable.
Noah Brooks:
So as a side note, this isn’t a one-time audit where someone goes, “Hey, I don’t like these numbers.” These numbers… I mean, we have this chart that’s going back 20 years, 22 years or so. This is a regular audit of the jobs report that comes out every August.
Chris Needs:
Jobs report is just essentially a large survey and then this QCEW basically odds that with the state jobs numbers and filters it down and obviously gets it a little more precise than just a large survey.
Noah Brooks:
Yeah, no question. And I’m going to put this out there for everybody. The headline number, including the regular revisions, the regular preliminary… Moving from preliminary to a hard number, we’re at 5.4 million net new jobs created after COVID. So if you do take those down by 800,000, do the math. We’re at 4.6. It’s not a dramatic change. Yeah, it’s definitely a change, but I don’t think you can garner any real movement in the economy or the market from this number.
Chris Needs:
Notable, but not thesis changing.
Noah Brooks:
Yeah, absolutely.
Chris Needs:
How about Jackson Hole though? Let’s get into Jay Powell.
Noah Brooks:
Oh, Jay Powell, did he say something?
Chris Needs:
He said something. He said it’s time for policy to adjust. So we’re there. He gave the all clear, basically gave the go-ahead on a rate cut in September. Now 50, 25, that we’re not sure of yet.
Noah Brooks:
They’re not going to do 50. You heard it here first, not going to do 50.
Chris Needs:
The market took those comments and started pricing in 100 basis points by year-end. Now we know the market doesn’t forecast out very well, so that doesn’t mean anything. But he was very clear in what he said. It’s time for policy to adjust.
Noah Brooks:
Well, I mean, I think the fact of the matter is if you believe what they say, they say they’re data-dependent, the data that we’re seeing is that inflation is essentially done. And what we’ve been saying to listeners for a year or two now has certainly been they don’t want to make the mistake that was made in the ’70s and early ’80s, which is lowering before inflation is actually over. Right? That’s the number one position that they want to avoid, is not making that mistake. And so it is certainly possible that they’ve waited… I hate to use the word too long, but they weren’t early.
Chris Needs:
Yeah.
Noah Brooks:
Right? It is certainly possible that doing something in September, or even possibly waiting until after the election, which was my original forecast, isn’t too long. Right? I mean, the data we have last month, CPI came in with a two, first time since March of ’21 that started with a two, I think that’s big news. And, I mean, everywhere you look, we see inflation numbers coming down.
Chris Needs:
Yeah, he said the risk to inflation going upwards are much lower than the risk to the labor market now. So it seems like fully shift from keeping an eye on the labor numbers compared to their former battle with just inflation.
Noah Brooks:
Yeah. The issue from an inflation standpoint is that those prices aren’t going to go down. And what we went through is cumulative. The cumulative effect of this inflation over the last year or two, it has brought prices up and even if the CPI is 2 or 2.25, where it eventually may land, it’s unlikely for prices to go down. There’s certain things like gasoline, going down pretty dramatically. There’s other items like medical costs that aren’t going to go down. Schools aren’t going to go down. Grocery store stuff, it’s coming in just a little bit. But, I mean, that cumulative effect of inflation is probably not going to deteriorate. If we got into a situation where we had deflation, that would probably be bad for the economy. It’s very rare that you have deflation. Low inflation, great. Deflation, not so good. Not so good. Although the government wouldn’t necessarily mind some deflation, right?
Chris Needs:
For their debt?
Noah Brooks:
For their debt. They would not mind that at all.
Chris Needs:
Yeah.
Noah Brooks:
I mean, 35 trillion, let’s uninflate. Is that a word? Uninflate our way out of it.
Chris Needs:
Devalue the dollar?
Noah Brooks:
Yeah, we don’t want to do that. I want to go back to big companies. Obviously, everybody knows that there’s a few big companies out there over a trillion dollars, and over two trillion, and over three trillion, right? That happens. And it certainly has happened this year and last year. We had our first trillion-dollar non-tech company. You know what it is.
Chris Needs:
Berkshire.
Noah Brooks:
Berkshire Hathaway. Right? So obviously, a diversified holding, if you will. They own everything from-
Chris Needs:
Insurance, financials…
Noah Brooks:
Railroads.
Chris Needs:
Railroads.
Noah Brooks:
Right? They don’t own them, but they invest in them. And it’s the first non-tech trillion-dollar company, Berkshire Hathaway. And so what we’re actually seeing, and if you follow the growth and value trade, obviously technology is big growth, not the only companies in the growth market, but Berkshire Hathaway is one of the largest companies on the value index. And so we’re actually starting to see value companies rotate, right? We talked about small companies, mid-sized companies in value over the last few episodes and we’re continuing to see… Not that growth is underperforming, but it has on a short term, but we’re starting to see some of the value companies including Berkshire Hathaway, which is up over 20% year-to-date beating the market. We’re starting to see those companies really outperform.
Chris Needs:
Equal weight. S&P 500 has been outperforming the market cap-weighted S&P 500, something we didn’t see earlier in the year. It was getting bludgeoned by the market cap-weighted. We’re seeing low vol and value type stocks still performing. So it looks like that rotation, which paused a little bit, is back again. I have some year-to-date numbers for you. Utilities up 21%, financials up 20%, consumer staples up 16.5%, and then you have tech at 16%. And this was as of yesterday, so-
Noah Brooks:
You heard it here, everybody. Utilities now beating technology year-to-date, right? Not NVIDIA, but sector as a whole, utilities are beating. Now why do you think… We’re not going to dissect it here, but why do you think utilities are beating? What’s the short story?
Chris Needs:
Well, earlier in the year, it was AI, and the energy required to run all these chips and data centers is just massive. And we talked about, several podcasts ago, right now, there’s analysts out there that project 25% compound annual growth rate in electricity usage. So utilities are taking advantage. The second best performing stock in the S&P 500, Vistra, they’re a utility. They’re more of a clean energy utility, but still a utility.
Noah Brooks:
They generate. I mean, they have solar, but they do traditional generation as well. You said 25% CAGR, compound annual growth rate. I have a note here. There was a new IPO in India. I don’t think you can buy it here, I don’t know that I would, but it’s the largest electric scooter company, to my knowledge, in the world. Ola Electric Mobility. And they sold something like 700,000 electric scooters last year in India and they went public a few weeks ago. It’s one of the largest Indian IPOs in years and years and years. They’re on a 25% compound annual growth rate and they expect to sell a lot of electric scooters.
Chris Needs:
We took a quick peek at them and they have regular motorcycles too that are electric, but it looks pretty cool. And the US dollar, relatively strong, it’s coming back in a little bit lately, but looked affordable.
Noah Brooks:
You’d get a Tesla and an Ola scooter?
Chris Needs:
I don’t know if my wife will let me on a… We’ll call it a crotch rocket because that’s what that-
Noah Brooks:
The other one was.
Chris Needs:
… Roadster Pro was, but… Yeah, you’re not going to catch me on a Vespa equivalent.
Noah Brooks:
So think about this. I mean, you have utilities leading the charge year-to-date up 21%, and people like yourself that have an electric car are charging at home. Right? You have this electric scooter company, again, not here in the United States, but it just goes to show you, if we start to get real demand for electric vehicles and charging at home, it is going to do a number on… When I say a number, it is going to do a number on the demand for electricity, which will probably do a number on the grid.
Chris Needs:
Yeah. And we have an outdated grid, so maybe there’s a play for the companies that are in charge of engineering and materials for that.
Noah Brooks:
Oh, there’s definitely plays out there for the electric grid stuff. But I am pretty excited about the next 10 or 20 years. I mean, I’m always pretty excited. I’m a relatively positive guy when it comes down to it, but to see where we go in the next 20 years or 10 years from a transport standpoint, I mean, I don’t think in 10 years from now, there’s going to be too many new cars… And I could be wrong on this, and maybe the number’s 20 years instead of 10 years, but I don’t think we’re going to see everybody buying an internal combustion engine car. Trucks, buses, commercial vehicles, yeah, it’s going to take a lot longer. You’re talking about the Tesla Semi today.
So apparently, they came out and they’ve opened their first public charging station for the Semi, and it’s really close to where the manufacturing facility is of that vehicle. I don’t see how that’s going to play out. You’re not going to get a guy who wants to drive an electric truck from New York to San Diego. And it’s just not going to… At least not now. Not with the current technology and not in the horizon. For what we would call, let’s say, closed loops, if you’re driving from Redding to Philadelphia three times a day, no problem. I think the electric trucks are probably the way to go in that respect. You could do a battery swap or something. Long-distance trucking, I don’t see that happening. It doesn’t seem possible. Any way you slice it, the demand for electricity is going to be really big.
Chris Needs:
Yeah, it’s definitely going to-
Noah Brooks:
I mean, this isn’t a one-year spike or something. It’s going to be something, and I’m not talking about the stock performance. I’m talking about the demand for electricity itself. It’s going to be with us for a long, long time. No question about it. So we’re talking about utilities. Right now, S&P 500 is sitting just a little bit below, its all-time close, up 17% from the year. It’s only down about 1% from its all-time high. Not too bad. The Dow made an all-time high yesterday. The equal-weight S&P 500 made an all-time high in the last, let’s say, four trading days.
So that rotation is certainly happening. The Dow, although there’s growth companies in it, tends to be a little bit more value-oriented. So value seems like it’s making inroads into the growth trade, if you will. Small caps, this quarter, up 6%. For the year, they’re closer to 10, but for the quarter, up 6%. So not too bad. Mid caps, not as great. [inaudible 00:22:29] year-to-date close to 10 as well. And quarter, they’re moving right along. So we are seeing what I’ll call a continuation of that rotation, it just really comes down to what’s the rest of the year going to look like. And I think that’s why there were viewing parties today for NVIDIA, right?
Chris Needs:
Yeah.
Noah Brooks:
So what’s going to be driving the market over the next month or two?
Chris Needs:
I think it’s still going to stick on how growth goes. So you’re going to see this AI story discussed after NVIDIA after we get more of their guidance, and I think that will depend on how much money will continue flowing out of those Mag 7 stocks into the rest of this trade. And again, if you have a 1% coming out of Microsoft and going into the other constituents, that’s going to go a long way because Microsoft is a $3 trillion company. So it’s not like it’s a one for one. You’re going to have an outsized effect in those individual companies who are getting the proceeds from these large tech stocks. And I think we’re going to trade on some election policy. We have a couple debates coming up. When you hear policy stances, that can certainly move money.
Noah Brooks:
Oh, no question about it. If I’m not mistaken, September 10th is the first debate. There’s some question whether or not former President Trump will debate. He came out this weekend and did a little hemming and hawing, let’s put it that way.
Chris Needs:
Yeah. He likes to do that.
Noah Brooks:
He likes to do that. Yeah. So we’ll see how that happens. I don’t know that it would be good for him not to debate. Just if he just said, “No, I’m not going to do it,” I’m not sure that that would be helpful. Hey, anything’s possible out there.
Chris Needs:
It’s not the primary process where he was so far in the lead where he could forego those debates. He’s in a tight race, certainly, now and lost some momentum. So he needs to do that and needs to put out a good performance. So he’s not going to be [inaudible 00:24:33].
Noah Brooks:
Yeah, yeah. I had said that the Federal Reserve wasn’t going to move until after the election, because they didn’t want to seem… Where they’re supposed to be apolitical, right? They didn’t want to seem they were putting their finger on the scale for anybody. And I suspect that that’s incorrect. Right? It sounds like they’re going to do something in September, Jay Powell came out and all but said it last Friday. And interest rates have come down in line with those expectations for a cut. The 10-year has come down, it is under 4%, pretty handily, 3.83 I think it was today when I looked at it. The two-year is 3.84. I mean, so that [inaudible 00:25:22] spread is getting tighter and tighter and tighter.
Chris Needs:
You’ve seen the ag start to perform a little bit better?
Noah Brooks:
Yeah.
Chris Needs:
I think it’s up 8.8% or 8.9% year-to-date… Or over the last 12 months, sorry.
Noah Brooks:
Year-to-date, about 3.6.
Chris Needs:
Yeah.
Noah Brooks:
3.6.
Chris Needs:
But over the last 12 months, it’s now surpassed [inaudible 00:25:40]. We’re waiting for that to get out of its epically long drawdown and looks like it’s on its way to do that now that rate cut’s around-
Noah Brooks:
Yeah. Well, so most fixed income investors, at least I hope they don’t, they don’t have all of their assets, capital placed in the ag, but it’s a benchmark, right? It’s the most widely used benchmark out there. And certainly, some people do track it in their own investments, but I think this is going to be a relatively good year. And it already is. If we ended the year right now, even though the ag’s only up 3.5 or so, a lot of other fixed income in [inaudible 00:26:16] is doing significantly better, 5% and 6%. Whether it’s strategic income, whether it’s corporates, I think people are feeling a little bit better about fixed income land. Especially after 2022 when the fixed income market was down 12%, 12.5%. So that 60/40 portfolio, I think, is coming back from the dead. Pretty sure it’s-
Chris Needs:
It has new life?
Noah Brooks:
That has new life. I don’t know what it holds over the next 10 years, but it’s certainly coming back this year. I think that’s important to be said for everybody.
Chris Needs:
Couple random points here for you as we get towards the close here. Top my country ETFs. Let’s play some trivia, Noah.
Noah Brooks:
You mean performance?
Chris Needs:
Yeah, by country, based on their ETF investment vehicle, what is the top performing country year-to-date?
Noah Brooks:
Norway?
Chris Needs:
Not Norway.
Noah Brooks:
It’s not China. It’s not Mexico-
Chris Needs:
It’s not China, it’s not Mexico-
Noah Brooks:
Mexico’s down, I don’t know, 20% year-to-date. China’s not down for the year, but I don’t know [inaudible 00:27:30] they’re doing so great.
Chris Needs:
We have Argentina leading the way.
Noah Brooks:
Argentina?
Chris Needs:
Yes.
Noah Brooks:
Wow.
Chris Needs:
Up 22%. Followed by Peru, up 21%.
Noah Brooks:
Wow.
Chris Needs:
Malaysia at 20%, USA at 19%. This is prior to today. So now I guess-
Noah Brooks:
So Argentina recently elected a new president who has been doing some hard slicing and dicing of social programs and spending, right?
Chris Needs:
Yeah, he’s knocked down inflation so far, it seems. I mean, there’s been hiccups here and there, but inflation, which has always been a huge problem for Argentina, he seemed to have knocked it down in the short term. Whether that lasts, I’m not sure, but he was a major catalyst for their market, that’s for sure. He’s-
Noah Brooks:
What was it before it started coming down, the inflation rate?
Chris Needs:
It was over 100.
Noah Brooks:
So, I guess, any decrease is good, right?
Chris Needs:
It was definitely a hyperinflationary economy prior to. And he really took… I don’t even know if you’d call it a scalpel. He took an axe to a lot of things there and cut down a lot of spending and totally changed, took out tons of regulation. And good for the stock market, I don’t know if it’s good for the country in the long term, but we’ll find out. But, yeah, their economy’s leading the way this year.
Noah Brooks:
I’ve never been to Argentina, or Norway for that matter, but two places that I’d love to go.
Chris Needs:
Yeah.
Noah Brooks:
Absolutely.
Chris Needs:
Heard it’s beautiful, both of them.
Noah Brooks:
This time of year?
Chris Needs:
Yeah. Another random thing for you here. So there’s an oil shutdown in Libya. They normally produce 1.2 billion barrels per day. It’s a lot of oil. And there’s this strife going on between the east and the west. So still one nation, but they had this breakup about a decade ago between the east and the west. And right now, the west is trying to oust the central bank governor. So the east is protesting it by shutting down their oil production. And right now, it’s just in the east, but apparently, they think it’s going to land over to the west as well. So that wouldn’t be good on the oil front. It’s 1.2 billion barrels per day. Nothing we won’t get-
Noah Brooks:
Billion? I don’t think it’s billion.
Chris Needs:
I think you’re right. 1.2 million barrels per day.
Noah Brooks:
Yeah, I think it’s-
Chris Needs:
Get my Ms and my Bs mixed up.
Noah Brooks:
Yeah. That’s a big difference. That’s a big difference. But either way, Libya, not on my bucket list of places to go.
Chris Needs:
Not where I’m going either.
Noah Brooks:
Not without a fixer. I would definitely need a… I mean, I’d go almost anywhere these days, but I don’t know that… It’s not on my top 10.
Chris Needs:
Yeah. Another story obviously that’s been out there, the British Bill Gates, Mike Lynch-
Noah Brooks:
Ooh, I read about this guy.
Chris Needs:
Yeah. He sold his company, Autonomy, to Hewlett Packard, and then was embroiled in a fraud scandal that he defrauded HP on the purchase. Well, he was just acquitted, I guess, in California courts, and he took a yacht out to celebrate with all his closest friends and family, and-
Noah Brooks:
It’s like right out of a movie.
Chris Needs:
Yeah. And the yacht sunk, he died. And oddly enough, less than 24 hours beforehand, his co-defendant, Stephen Chamberlain, died, was hit by a car in England near Cambridge.
Noah Brooks:
My dad always said there’s no such thing as a coincidence. Now-
Chris Needs:
Within 24 hours-
Noah Brooks:
… sometimes there is.
Chris Needs:
There’s lots of conspiracy theories, understandably, because that is strange.
Noah Brooks:
That’s tough.
Chris Needs:
Yeah.
Noah Brooks:
Now that leads us to… I thought it’d be worth bringing up, the CEO of Telegram was arrested-
Chris Needs:
Also arrested.
Noah Brooks:
Arrested in France for… Now, this guy seems like a character. They’re calling him the Russian Mark Zuckerberg. I don’t know if that’s true. They said he fathered… Well, the news says he’s fathered 100 people. That’s not what he’s arrested for. But the news says he fathered 100 people. He’s been arrested for not cooperating and assisting in criminal activities because he won’t give over any information to the police about criminal activities that are taking place on Telegram.
Chris Needs:
So he ran from Russia to avoid getting arrested there, lands in France, and, boom, cuffs on him.
Noah Brooks:
He doesn’t know about Interpol. They have an extraction agreement, I believe.
Chris Needs:
Even now? That’s crazy.
Noah Brooks:
I don’t know.
Chris Needs:
But, yeah, he thought he was safe running to France, and turns out he wasn’t.
Noah Brooks:
Well, they may not actually have an extraction agreement. I’m not sure if that’s the right word I’m using. But if France has a warrant for him… He wasn’t arrested by Russian authorities, he was arrested by French authorities, because [inaudible 00:32:16] the Western courts are after him for those crimes on Telegram. Now, if you’re following any of this, and I’m vaguely following it, but everybody’s in a kerfuffle about it because they’re saying that free speech is being trampled on. And I’m not sure how I feel about it. I don’t know that I can take a side on it, but you have this app, this Telegram app, this messaging app that essentially you can use for anything, and there’s no boundaries, whatever, in any respect. And I’m just not sure where I draw the line on it.
So there’s a difference between free speech… I mean, in the United States, if you want to burn a flag, you can do it. It’s not something that I would do, but you can’t be thrown into jail for it. And so this messaging app, they’re saying essentially isn’t free speech. You’re using electronic communications to commit fraud and many other things. So I don’t see it. I mean, for people that are in Twitterland or in X-land, everybody’s going crazy about it. And I don’t know if Elon has said anything about it, but I don’t really see it as a free speech issue. I see it as assisting a criminal.
Chris Needs:
Yeah, it’s almost like it’s not quite content moderation because I think a lot of the supposed crimes are within almost chat rooms on Telegram. I don’t even know how Telegram works, to be honest-
Noah Brooks:
I’m not a user of Telegram.
Chris Needs:
But it sounds like, yeah, I don’t know, things are… Is there a chat group titled Human Trafficking and they’re just allowing that to keep running, and then it’s led to people being trafficked? I don’t know. But if that’s the case-
Noah Brooks:
So just [inaudible 00:33:55] you and I are not users of this Telegram, the information that I read said they were just shy of a billion users on [inaudible 00:34:02]. A billion users on one app. It’s nutty.
Chris Needs:
It’s a big business. Yeah.
Noah Brooks:
Right? Instant messaging that is untraceable, that the police can’t find. I mean, I don’t know. All right. We have anything else good? I have a note here. I just want to go back to the Olympics for a second. I love the Olympics personally. We whipped up on China.
Chris Needs:
Oh, barely on gold.
Noah Brooks:
Barely on gold.
Chris Needs:
Totally [inaudible 00:34:33].
Noah Brooks:
Actually, so gold I think was 40 and 40, so we didn’t whip up on the gold medals. Total medals, 126 versus 91 for China.
Chris Needs:
Hey, we have far less people than them too. We’ll take that as a win.
Noah Brooks:
Absolutely. Across the board. And just one last thing. I said something to Chris about this earlier today, and I’m telling you, he literally doesn’t know who I’m talking about, but Phil Donahue died. And I grew up watching the Donahue Show. I mean, I’m not that much older… But I guess I am a little bit older. I grew up watching Donahue, and Jerry Springer, and all that stuff. And Donahue died, so, yeah, I’m going to pour one out for him at some point. Maybe this weekend.
Chris Needs:
I know who Springer is.
Noah Brooks:
All right, everybody. On that note, thank you so much for joining us. Questions, comments, concerns, topic, ideas, marketenthusiast@goodlifefa. Thank you. We’ll see you next time.
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. Economic forecast set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
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, everybody.
Noah Brooks:
Hey, thanks for joining us. You might all recognize that I am not in my normally monkey suit shirt, right? I have my US Open shirt on, and actually, feeling like a champ. Was up there on Monday night into Tuesday, we saw a Tiafoe win in five sets. That was a great time. So great experience up at Mets-Willets Point, I think that’s where it is.
Chris Needs:
Opening weekend, so lots of matches going on.
Noah Brooks:
Oh, everywhere you look, there was tennis. As far as the eye could see, there was tennis. Now I don’t play tennis, but I love watching it, so this has been a little bit of a routine for us for the last few years going up there. Interesting point, cost us $200 less this year to go up than it did last year.
Chris Needs:
Is that deflation?
Noah Brooks:
Ask me why.
Chris Needs:
Why?
Noah Brooks:
Well, last year, we took an Uber from Midtown all the way out to the courts. Surge pricing. And that was $200. This time, we used subway, mass transit, it was $3 a person. I felt like a champion-
Chris Needs:
Keep those savings.
Noah Brooks:
I felt like a champion of the world. What’s going on here today?
Chris Needs:
Well, today is the day we’ve all been waiting for. The market seemed to be on pause waiting for these NVIDIA earnings which just came out. They did very well, beat on the top and bottom lines. They had lofty expectations obviously, and they did beat them. We’re waiting obviously to get a little color on that and hear from Jensen Huang, their CEO, but 122% year-over-year revenue growth, 140% earnings per share growth year-over-year. Huge numbers. Now, obviously, it’s all in the guidance going forward, but they kept doing it.
Noah Brooks:
So you said 140% EPS growth, right? That’s great. But the stock reflected that, right?
Chris Needs:
Yep.
Noah Brooks:
I mean, so if I’m not mistaken, it’s the number one performing stock in the S&P 500.
Chris Needs:
It is.
Noah Brooks:
Right? There’s a little bit of trivia behind that too-
Chris Needs:
Yeah, I was going to ask Noah the top performing, which you just answered there in NVIDIA, and the worst performing is also a semiconductor, which is-
Noah Brooks:
Intel.
Chris Needs:
And see, he got it.
Noah Brooks:
Yeah. Yeah. I knew that one. I didn’t have to look it up. I knew that one. But everybody’s been waiting for it. We heard about watch parties and all of this stuff. Everybody’s been waiting for it because NVIDIA is such a bellwether in artificial intelligence.
Chris Needs:
It used to be Salesforce, and Apple, and Microsoft. And now, it’s NVIDIA with the AI-
Noah Brooks:
Yeah. Yeah. There’s no question about it. And, I mean, they obviously did really well. They’re going to be talking… We don’t know what their commentary is. They’re going to be talking about the rollout of… What’s the next-gen chip?
Chris Needs:
Blackwell chips.
Noah Brooks:
Blackwell, right now, they’re on the H100, guys. They’re going to be talking about that. And I just always question with this hardware stuff, and it goes back into the ’90s with Microsoft and everybody getting a computer for the first time and getting Windows. At some point, that upgrade cycle slows down, but we haven’t really gotten to an upgrade cycle. I think most companies are just getting their first artificial intelligence chips out there in the data centers, right?
Chris Needs:
Right. Yeah.
Noah Brooks:
So people will say, “Well, AI’s… We’ve already had this massive run and you want to do the comparison. Are we in the ninth inning? Are we in the seventh inning?” I’m not sure we’re even in the second inning.
Chris Needs:
Yeah, it’s still very early. I mean, most of these products that the major tech companies have been invested in, they’re not out yet. They’re not really reaping the benefits yet. One interesting stat was I saw Microsoft and Meta, 40% of their CapEx spend was on essentially, I assume, NVIDIA chips. On chips. So that’s a huge spend, huge boon for NVIDIA. So we knew they’d have a strong earning-
Noah Brooks:
[inaudible 00:04:24] so you said 40% CapEx on chips, but we don’t know how much of that is going to NVIDIA.
Chris Needs:
Right. I assume it’s a very large portion. It’s not going to Intel. I think we’re sure of that.
Noah Brooks:
Yeah, I’m pretty sure of that one. I think about it from a moat, and historically speaking, obviously I mentioned Microsoft, but at some point, whether it’s AMD, there’s lots of other semiconductor companies out there, but somebody’s going to come up with an AI chip, and AMD is right there. They have a chip that is a little less performance-oriented, 5% to 10% less performance, but it’s significantly less expensive. And I think to myself, if “I’m a purchasing manager of one of these companies, I don’t care if it’s an X, if it’s a Microsoft or some company that we don’t look at every day, and I have to… How much are the H100 chips?
Chris Needs:
I think they’re around 80,000-
Noah Brooks:
For one chip? All right. So I’m going to buy 100 of these or I’m going to buy 1,000 of these for a data center. And I think to myself, “Well, okay, let’s say the difference is 10% in performance, but it’s 30% or 40% in cost. I don’t know. I have to give consideration to that lower cost product.”
Chris Needs:
Yeah, it’s tough because the majors are in an arms race here, obviously. The first one to get that premier AI product out there that they can get out to all of their users and customers is going to have a lot to gain. So you think of an Apple, if they put in maybe the premier product on all their phones, all their computers, how much value that’s going to bring back to them, it’ll be huge. And same with Microsoft. I mean-
Noah Brooks:
And certainly-
Chris Needs:
They’re in an arms race, so that’s why I think they’re willing to pay these top dollars for NVIDIA chips.
Noah Brooks:
And they have the money to do it.
Chris Needs:
They do.
Noah Brooks:
The big guys. The Apples, Microsofts, Metas of the world.
Chris Needs:
But downstream, you’re certainly correct, there has to be a trade-off at some point between performance and price. And over the coming years, I’m sure that’s going to come together and margins are going to start to compress as chips start becoming more commoditized.
Noah Brooks:
Yeah. I mean, their margin number I think was a little over 75%. Obviously, that’s really good-
Chris Needs:
Huge profit margin.
Noah Brooks:
But it’s one of those things that I think to myself, in a year or two years or three years from now, I don’t think it can be as high. They’re going to add people, they’re going to add factories, the expenses are going to go up-
Chris Needs:
People are going to poach from them.
Noah Brooks:
People are going to poach for them, right? Yeah, there’s no question about it. That’s not a buy or sell on NVIDIA. It has been, as Chris said, the number one performing stock in the S&P 500 year to date. Intel, the number 499th?
Chris Needs:
Down 60%. NVIDIA’s up 155% coming into today.
Noah Brooks:
Yeah.
Chris Needs:
Drastic difference between those two.
Noah Brooks:
Yeah. Well, we’ll wait and see what happens tomorrow. And certainly, the commentary from CEO Jensen is going to be big and that’s going to drive the market. I mean, that’s one of the reasons that everybody’s looking at it because they are about weather, and it’s one of the reasons that we’re standing here talking about it, right? What else is going on economic-wise?
Chris Needs:
I would say one of the bigger news items from the last couple of weeks is we had that revision on jobs. So-
Noah Brooks:
Ooh, people did not like it.
Chris Needs:
Yeah.
Noah Brooks:
Well, the news didn’t like it.
Chris Needs:
Yeah. So we have the QWEC who works with the Bureau of Labor Statistics and they basically audit the jobs over the past year now. The big revision we’re talking about was a revision down of 818,000 jobs and that is from April 2023 to March 2024. So basically-
Noah Brooks:
So the math is old, right? The numbers are old.
Chris Needs:
It is. Yeah. 6 to 18 months backward-looking essentially. But that works out to about 68,000 jobs per month that weren’t actually there that were reported in the initial non-farm payrolls.
Noah Brooks:
That’s not nothing.
Chris Needs:
It’s not nothing. But again, we were kicking around how much value does this hold now since it’s so outdated though, and I don’t know if there’s any read throughs there.
Noah Brooks:
Yeah. You can tell by looking at this chart, if you guys can see it. So 2024 was a big down year. 2009, which is also a big down year. Let’s not conflate those two things, right? Please don’t do that. And here’s the reason why. As Chris stated, these numbers are from March to March, all right? If you look at 2020 and you go from March of ’20 to March of ’21, there was only a 7,000-job revision in this report. If you look at that 2009 number, you’re actually looking at a 2008 number, and everybody tries to extrapolate, “Oh, well, what’s this number going to tell me?” I’m not sure that it tells us a lot. I really don’t think it holds a lot of value.
Chris Needs:
I think a lot of people are saying, “Why is a job market this strong? It seemed like we’re doing 200,000 jobs every month.” And I think this just lends credence to those people who maybe had more of a bearish outlook or said, “Something’s not adding up here,” and now they’re like, “See? We told you.”
Noah Brooks:
I mean, that is certainly possible… It’s not possible. It’s what’s happening. Right? I mean, we see that. These numbers are six months old. But trying to use them to extrapolate that the economy is good or bad or something like that just doesn’t seem to work.
Chris Needs:
You don’t drive looking in the rear-view mirror.
Noah Brooks:
You don’t. But even so, I’m not sure… Even if you did drive looking in the rear-view mirror, which would be really weird, even if you did that, historically, when you look back on these numbers, it’s tough to assign a market return or an economic forecast to what you’re seeing from these revisions.
Chris Needs:
Yeah, we looked at and tried to infer, some way, it could be valuable and we couldn’t really come up with anything that would be actionable.
Noah Brooks:
So as a side note, this isn’t a one-time audit where someone goes, “Hey, I don’t like these numbers.” These numbers… I mean, we have this chart that’s going back 20 years, 22 years or so. This is a regular audit of the jobs report that comes out every August.
Chris Needs:
Jobs report is just essentially a large survey and then this QCEW basically odds that with the state jobs numbers and filters it down and obviously gets it a little more precise than just a large survey.
Noah Brooks:
Yeah, no question. And I’m going to put this out there for everybody. The headline number, including the regular revisions, the regular preliminary… Moving from preliminary to a hard number, we’re at 5.4 million net new jobs created after COVID. So if you do take those down by 800,000, do the math. We’re at 4.6. It’s not a dramatic change. Yeah, it’s definitely a change, but I don’t think you can garner any real movement in the economy or the market from this number.
Chris Needs:
Notable, but not thesis changing.
Noah Brooks:
Yeah, absolutely.
Chris Needs:
How about Jackson Hole though? Let’s get into Jay Powell.
Noah Brooks:
Oh, Jay Powell, did he say something?
Chris Needs:
He said something. He said it’s time for policy to adjust. So we’re there. He gave the all clear, basically gave the go-ahead on a rate cut in September. Now 50, 25, that we’re not sure of yet.
Noah Brooks:
They’re not going to do 50. You heard it here first, not going to do 50.
Chris Needs:
The market took those comments and started pricing in 100 basis points by year-end. Now we know the market doesn’t forecast out very well, so that doesn’t mean anything. But he was very clear in what he said. It’s time for policy to adjust.
Noah Brooks:
Well, I mean, I think the fact of the matter is if you believe what they say, they say they’re data-dependent, the data that we’re seeing is that inflation is essentially done. And what we’ve been saying to listeners for a year or two now has certainly been they don’t want to make the mistake that was made in the ’70s and early ’80s, which is lowering before inflation is actually over. Right? That’s the number one position that they want to avoid, is not making that mistake. And so it is certainly possible that they’ve waited… I hate to use the word too long, but they weren’t early.
Chris Needs:
Yeah.
Noah Brooks:
Right? It is certainly possible that doing something in September, or even possibly waiting until after the election, which was my original forecast, isn’t too long. Right? I mean, the data we have last month, CPI came in with a two, first time since March of ’21 that started with a two, I think that’s big news. And, I mean, everywhere you look, we see inflation numbers coming down.
Chris Needs:
Yeah, he said the risk to inflation going upwards are much lower than the risk to the labor market now. So it seems like fully shift from keeping an eye on the labor numbers compared to their former battle with just inflation.
Noah Brooks:
Yeah. The issue from an inflation standpoint is that those prices aren’t going to go down. And what we went through is cumulative. The cumulative effect of this inflation over the last year or two, it has brought prices up and even if the CPI is 2 or 2.25, where it eventually may land, it’s unlikely for prices to go down. There’s certain things like gasoline, going down pretty dramatically. There’s other items like medical costs that aren’t going to go down. Schools aren’t going to go down. Grocery store stuff, it’s coming in just a little bit. But, I mean, that cumulative effect of inflation is probably not going to deteriorate. If we got into a situation where we had deflation, that would probably be bad for the economy. It’s very rare that you have deflation. Low inflation, great. Deflation, not so good. Not so good. Although the government wouldn’t necessarily mind some deflation, right?
Chris Needs:
For their debt?
Noah Brooks:
For their debt. They would not mind that at all.
Chris Needs:
Yeah.
Noah Brooks:
I mean, 35 trillion, let’s uninflate. Is that a word? Uninflate our way out of it.
Chris Needs:
Devalue the dollar?
Noah Brooks:
Yeah, we don’t want to do that. I want to go back to big companies. Obviously, everybody knows that there’s a few big companies out there over a trillion dollars, and over two trillion, and over three trillion, right? That happens. And it certainly has happened this year and last year. We had our first trillion-dollar non-tech company. You know what it is.
Chris Needs:
Berkshire.
Noah Brooks:
Berkshire Hathaway. Right? So obviously, a diversified holding, if you will. They own everything from-
Chris Needs:
Insurance, financials…
Noah Brooks:
Railroads.
Chris Needs:
Railroads.
Noah Brooks:
Right? They don’t own them, but they invest in them. And it’s the first non-tech trillion-dollar company, Berkshire Hathaway. And so what we’re actually seeing, and if you follow the growth and value trade, obviously technology is big growth, not the only companies in the growth market, but Berkshire Hathaway is one of the largest companies on the value index. And so we’re actually starting to see value companies rotate, right? We talked about small companies, mid-sized companies in value over the last few episodes and we’re continuing to see… Not that growth is underperforming, but it has on a short term, but we’re starting to see some of the value companies including Berkshire Hathaway, which is up over 20% year-to-date beating the market. We’re starting to see those companies really outperform.
Chris Needs:
Equal weight. S&P 500 has been outperforming the market cap-weighted S&P 500, something we didn’t see earlier in the year. It was getting bludgeoned by the market cap-weighted. We’re seeing low vol and value type stocks still performing. So it looks like that rotation, which paused a little bit, is back again. I have some year-to-date numbers for you. Utilities up 21%, financials up 20%, consumer staples up 16.5%, and then you have tech at 16%. And this was as of yesterday, so-
Noah Brooks:
You heard it here, everybody. Utilities now beating technology year-to-date, right? Not NVIDIA, but sector as a whole, utilities are beating. Now why do you think… We’re not going to dissect it here, but why do you think utilities are beating? What’s the short story?
Chris Needs:
Well, earlier in the year, it was AI, and the energy required to run all these chips and data centers is just massive. And we talked about, several podcasts ago, right now, there’s analysts out there that project 25% compound annual growth rate in electricity usage. So utilities are taking advantage. The second best performing stock in the S&P 500, Vistra, they’re a utility. They’re more of a clean energy utility, but still a utility.
Noah Brooks:
They generate. I mean, they have solar, but they do traditional generation as well. You said 25% CAGR, compound annual growth rate. I have a note here. There was a new IPO in India. I don’t think you can buy it here, I don’t know that I would, but it’s the largest electric scooter company, to my knowledge, in the world. Ola Electric Mobility. And they sold something like 700,000 electric scooters last year in India and they went public a few weeks ago. It’s one of the largest Indian IPOs in years and years and years. They’re on a 25% compound annual growth rate and they expect to sell a lot of electric scooters.
Chris Needs:
We took a quick peek at them and they have regular motorcycles too that are electric, but it looks pretty cool. And the US dollar, relatively strong, it’s coming back in a little bit lately, but looked affordable.
Noah Brooks:
You’d get a Tesla and an Ola scooter?
Chris Needs:
I don’t know if my wife will let me on a… We’ll call it a crotch rocket because that’s what that-
Noah Brooks:
The other one was.
Chris Needs:
… Roadster Pro was, but… Yeah, you’re not going to catch me on a Vespa equivalent.
Noah Brooks:
So think about this. I mean, you have utilities leading the charge year-to-date up 21%, and people like yourself that have an electric car are charging at home. Right? You have this electric scooter company, again, not here in the United States, but it just goes to show you, if we start to get real demand for electric vehicles and charging at home, it is going to do a number on… When I say a number, it is going to do a number on the demand for electricity, which will probably do a number on the grid.
Chris Needs:
Yeah. And we have an outdated grid, so maybe there’s a play for the companies that are in charge of engineering and materials for that.
Noah Brooks:
Oh, there’s definitely plays out there for the electric grid stuff. But I am pretty excited about the next 10 or 20 years. I mean, I’m always pretty excited. I’m a relatively positive guy when it comes down to it, but to see where we go in the next 20 years or 10 years from a transport standpoint, I mean, I don’t think in 10 years from now, there’s going to be too many new cars… And I could be wrong on this, and maybe the number’s 20 years instead of 10 years, but I don’t think we’re going to see everybody buying an internal combustion engine car. Trucks, buses, commercial vehicles, yeah, it’s going to take a lot longer. You’re talking about the Tesla Semi today.
So apparently, they came out and they’ve opened their first public charging station for the Semi, and it’s really close to where the manufacturing facility is of that vehicle. I don’t see how that’s going to play out. You’re not going to get a guy who wants to drive an electric truck from New York to San Diego. And it’s just not going to… At least not now. Not with the current technology and not in the horizon. For what we would call, let’s say, closed loops, if you’re driving from Redding to Philadelphia three times a day, no problem. I think the electric trucks are probably the way to go in that respect. You could do a battery swap or something. Long-distance trucking, I don’t see that happening. It doesn’t seem possible. Any way you slice it, the demand for electricity is going to be really big.
Chris Needs:
Yeah, it’s definitely going to-
Noah Brooks:
I mean, this isn’t a one-year spike or something. It’s going to be something, and I’m not talking about the stock performance. I’m talking about the demand for electricity itself. It’s going to be with us for a long, long time. No question about it. So we’re talking about utilities. Right now, S&P 500 is sitting just a little bit below, its all-time close, up 17% from the year. It’s only down about 1% from its all-time high. Not too bad. The Dow made an all-time high yesterday. The equal-weight S&P 500 made an all-time high in the last, let’s say, four trading days.
So that rotation is certainly happening. The Dow, although there’s growth companies in it, tends to be a little bit more value-oriented. So value seems like it’s making inroads into the growth trade, if you will. Small caps, this quarter, up 6%. For the year, they’re closer to 10, but for the quarter, up 6%. So not too bad. Mid caps, not as great. [inaudible 00:22:29] year-to-date close to 10 as well. And quarter, they’re moving right along. So we are seeing what I’ll call a continuation of that rotation, it just really comes down to what’s the rest of the year going to look like. And I think that’s why there were viewing parties today for NVIDIA, right?
Chris Needs:
Yeah.
Noah Brooks:
So what’s going to be driving the market over the next month or two?
Chris Needs:
I think it’s still going to stick on how growth goes. So you’re going to see this AI story discussed after NVIDIA after we get more of their guidance, and I think that will depend on how much money will continue flowing out of those Mag 7 stocks into the rest of this trade. And again, if you have a 1% coming out of Microsoft and going into the other constituents, that’s going to go a long way because Microsoft is a $3 trillion company. So it’s not like it’s a one for one. You’re going to have an outsized effect in those individual companies who are getting the proceeds from these large tech stocks. And I think we’re going to trade on some election policy. We have a couple debates coming up. When you hear policy stances, that can certainly move money.
Noah Brooks:
Oh, no question about it. If I’m not mistaken, September 10th is the first debate. There’s some question whether or not former President Trump will debate. He came out this weekend and did a little hemming and hawing, let’s put it that way.
Chris Needs:
Yeah. He likes to do that.
Noah Brooks:
He likes to do that. Yeah. So we’ll see how that happens. I don’t know that it would be good for him not to debate. Just if he just said, “No, I’m not going to do it,” I’m not sure that that would be helpful. Hey, anything’s possible out there.
Chris Needs:
It’s not the primary process where he was so far in the lead where he could forego those debates. He’s in a tight race, certainly, now and lost some momentum. So he needs to do that and needs to put out a good performance. So he’s not going to be [inaudible 00:24:33].
Noah Brooks:
Yeah, yeah. I had said that the Federal Reserve wasn’t going to move until after the election, because they didn’t want to seem… Where they’re supposed to be apolitical, right? They didn’t want to seem they were putting their finger on the scale for anybody. And I suspect that that’s incorrect. Right? It sounds like they’re going to do something in September, Jay Powell came out and all but said it last Friday. And interest rates have come down in line with those expectations for a cut. The 10-year has come down, it is under 4%, pretty handily, 3.83 I think it was today when I looked at it. The two-year is 3.84. I mean, so that [inaudible 00:25:22] spread is getting tighter and tighter and tighter.
Chris Needs:
You’ve seen the ag start to perform a little bit better?
Noah Brooks:
Yeah.
Chris Needs:
I think it’s up 8.8% or 8.9% year-to-date… Or over the last 12 months, sorry.
Noah Brooks:
Year-to-date, about 3.6.
Chris Needs:
Yeah.
Noah Brooks:
3.6.
Chris Needs:
But over the last 12 months, it’s now surpassed [inaudible 00:25:40]. We’re waiting for that to get out of its epically long drawdown and looks like it’s on its way to do that now that rate cut’s around-
Noah Brooks:
Yeah. Well, so most fixed income investors, at least I hope they don’t, they don’t have all of their assets, capital placed in the ag, but it’s a benchmark, right? It’s the most widely used benchmark out there. And certainly, some people do track it in their own investments, but I think this is going to be a relatively good year. And it already is. If we ended the year right now, even though the ag’s only up 3.5 or so, a lot of other fixed income in [inaudible 00:26:16] is doing significantly better, 5% and 6%. Whether it’s strategic income, whether it’s corporates, I think people are feeling a little bit better about fixed income land. Especially after 2022 when the fixed income market was down 12%, 12.5%. So that 60/40 portfolio, I think, is coming back from the dead. Pretty sure it’s-
Chris Needs:
It has new life?
Noah Brooks:
That has new life. I don’t know what it holds over the next 10 years, but it’s certainly coming back this year. I think that’s important to be said for everybody.
Chris Needs:
Couple random points here for you as we get towards the close here. Top my country ETFs. Let’s play some trivia, Noah.
Noah Brooks:
You mean performance?
Chris Needs:
Yeah, by country, based on their ETF investment vehicle, what is the top performing country year-to-date?
Noah Brooks:
Norway?
Chris Needs:
Not Norway.
Noah Brooks:
It’s not China. It’s not Mexico-
Chris Needs:
It’s not China, it’s not Mexico-
Noah Brooks:
Mexico’s down, I don’t know, 20% year-to-date. China’s not down for the year, but I don’t know [inaudible 00:27:30] they’re doing so great.
Chris Needs:
We have Argentina leading the way.
Noah Brooks:
Argentina?
Chris Needs:
Yes.
Noah Brooks:
Wow.
Chris Needs:
Up 22%. Followed by Peru, up 21%.
Noah Brooks:
Wow.
Chris Needs:
Malaysia at 20%, USA at 19%. This is prior to today. So now I guess-
Noah Brooks:
So Argentina recently elected a new president who has been doing some hard slicing and dicing of social programs and spending, right?
Chris Needs:
Yeah, he’s knocked down inflation so far, it seems. I mean, there’s been hiccups here and there, but inflation, which has always been a huge problem for Argentina, he seemed to have knocked it down in the short term. Whether that lasts, I’m not sure, but he was a major catalyst for their market, that’s for sure. He’s-
Noah Brooks:
What was it before it started coming down, the inflation rate?
Chris Needs:
It was over 100.
Noah Brooks:
So, I guess, any decrease is good, right?
Chris Needs:
It was definitely a hyperinflationary economy prior to. And he really took… I don’t even know if you’d call it a scalpel. He took an axe to a lot of things there and cut down a lot of spending and totally changed, took out tons of regulation. And good for the stock market, I don’t know if it’s good for the country in the long term, but we’ll find out. But, yeah, their economy’s leading the way this year.
Noah Brooks:
I’ve never been to Argentina, or Norway for that matter, but two places that I’d love to go.
Chris Needs:
Yeah.
Noah Brooks:
Absolutely.
Chris Needs:
Heard it’s beautiful, both of them.
Noah Brooks:
This time of year?
Chris Needs:
Yeah. Another random thing for you here. So there’s an oil shutdown in Libya. They normally produce 1.2 billion barrels per day. It’s a lot of oil. And there’s this strife going on between the east and the west. So still one nation, but they had this breakup about a decade ago between the east and the west. And right now, the west is trying to oust the central bank governor. So the east is protesting it by shutting down their oil production. And right now, it’s just in the east, but apparently, they think it’s going to land over to the west as well. So that wouldn’t be good on the oil front. It’s 1.2 billion barrels per day. Nothing we won’t get-
Noah Brooks:
Billion? I don’t think it’s billion.
Chris Needs:
I think you’re right. 1.2 million barrels per day.
Noah Brooks:
Yeah, I think it’s-
Chris Needs:
Get my Ms and my Bs mixed up.
Noah Brooks:
Yeah. That’s a big difference. That’s a big difference. But either way, Libya, not on my bucket list of places to go.
Chris Needs:
Not where I’m going either.
Noah Brooks:
Not without a fixer. I would definitely need a… I mean, I’d go almost anywhere these days, but I don’t know that… It’s not on my top 10.
Chris Needs:
Yeah. Another story obviously that’s been out there, the British Bill Gates, Mike Lynch-
Noah Brooks:
Ooh, I read about this guy.
Chris Needs:
Yeah. He sold his company, Autonomy, to Hewlett Packard, and then was embroiled in a fraud scandal that he defrauded HP on the purchase. Well, he was just acquitted, I guess, in California courts, and he took a yacht out to celebrate with all his closest friends and family, and-
Noah Brooks:
It’s like right out of a movie.
Chris Needs:
Yeah. And the yacht sunk, he died. And oddly enough, less than 24 hours beforehand, his co-defendant, Stephen Chamberlain, died, was hit by a car in England near Cambridge.
Noah Brooks:
My dad always said there’s no such thing as a coincidence. Now-
Chris Needs:
Within 24 hours-
Noah Brooks:
… sometimes there is.
Chris Needs:
There’s lots of conspiracy theories, understandably, because that is strange.
Noah Brooks:
That’s tough.
Chris Needs:
Yeah.
Noah Brooks:
Now that leads us to… I thought it’d be worth bringing up, the CEO of Telegram was arrested-
Chris Needs:
Also arrested.
Noah Brooks:
Arrested in France for… Now, this guy seems like a character. They’re calling him the Russian Mark Zuckerberg. I don’t know if that’s true. They said he fathered… Well, the news says he’s fathered 100 people. That’s not what he’s arrested for. But the news says he fathered 100 people. He’s been arrested for not cooperating and assisting in criminal activities because he won’t give over any information to the police about criminal activities that are taking place on Telegram.
Chris Needs:
So he ran from Russia to avoid getting arrested there, lands in France, and, boom, cuffs on him.
Noah Brooks:
He doesn’t know about Interpol. They have an extraction agreement, I believe.
Chris Needs:
Even now? That’s crazy.
Noah Brooks:
I don’t know.
Chris Needs:
But, yeah, he thought he was safe running to France, and turns out he wasn’t.
Noah Brooks:
Well, they may not actually have an extraction agreement. I’m not sure if that’s the right word I’m using. But if France has a warrant for him… He wasn’t arrested by Russian authorities, he was arrested by French authorities, because [inaudible 00:32:16] the Western courts are after him for those crimes on Telegram. Now, if you’re following any of this, and I’m vaguely following it, but everybody’s in a kerfuffle about it because they’re saying that free speech is being trampled on. And I’m not sure how I feel about it. I don’t know that I can take a side on it, but you have this app, this Telegram app, this messaging app that essentially you can use for anything, and there’s no boundaries, whatever, in any respect. And I’m just not sure where I draw the line on it.
So there’s a difference between free speech… I mean, in the United States, if you want to burn a flag, you can do it. It’s not something that I would do, but you can’t be thrown into jail for it. And so this messaging app, they’re saying essentially isn’t free speech. You’re using electronic communications to commit fraud and many other things. So I don’t see it. I mean, for people that are in Twitterland or in X-land, everybody’s going crazy about it. And I don’t know if Elon has said anything about it, but I don’t really see it as a free speech issue. I see it as assisting a criminal.
Chris Needs:
Yeah, it’s almost like it’s not quite content moderation because I think a lot of the supposed crimes are within almost chat rooms on Telegram. I don’t even know how Telegram works, to be honest-
Noah Brooks:
I’m not a user of Telegram.
Chris Needs:
But it sounds like, yeah, I don’t know, things are… Is there a chat group titled Human Trafficking and they’re just allowing that to keep running, and then it’s led to people being trafficked? I don’t know. But if that’s the case-
Noah Brooks:
So just [inaudible 00:33:55] you and I are not users of this Telegram, the information that I read said they were just shy of a billion users on [inaudible 00:34:02]. A billion users on one app. It’s nutty.
Chris Needs:
It’s a big business. Yeah.
Noah Brooks:
Right? Instant messaging that is untraceable, that the police can’t find. I mean, I don’t know. All right. We have anything else good? I have a note here. I just want to go back to the Olympics for a second. I love the Olympics personally. We whipped up on China.
Chris Needs:
Oh, barely on gold.
Noah Brooks:
Barely on gold.
Chris Needs:
Totally [inaudible 00:34:33].
Noah Brooks:
Actually, so gold I think was 40 and 40, so we didn’t whip up on the gold medals. Total medals, 126 versus 91 for China.
Chris Needs:
Hey, we have far less people than them too. We’ll take that as a win.
Noah Brooks:
Absolutely. Across the board. And just one last thing. I said something to Chris about this earlier today, and I’m telling you, he literally doesn’t know who I’m talking about, but Phil Donahue died. And I grew up watching the Donahue Show. I mean, I’m not that much older… But I guess I am a little bit older. I grew up watching Donahue, and Jerry Springer, and all that stuff. And Donahue died, so, yeah, I’m going to pour one out for him at some point. Maybe this weekend.
Chris Needs:
I know who Springer is.
Noah Brooks:
All right, everybody. On that note, thank you so much for joining us. Questions, comments, concerns, topic, ideas, marketenthusiast@goodlifefa. Thank you. We’ll see you next time.
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. Economic forecast set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
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