Welcome back to another Market opening live stream. Let's go ahead and today, get started with this individual: A Bastion The FED for suggesting Fed would be transitory and suggest the next move. Let's listen in on rates. They seem hell-bent on changing the labor market right to lower wages and I think that's that's awful I Think what the benefit of a tight labor market is wage growth.

We wanted the middle class to and the lower income people to do well and to push them into unemployment. So I've been focusing on like how are they going to succeed There's the jolt state of the jobs that are open. There's 10 million 10.5 million jobs in November that's normally four and a half to five. so they have to get through five million job openings have to go away and then they have to reduce unemployment by a point or two.

And that's another three million jobs with interest rates. You're going to fine-tune the economy so that you can somehow figure out how to lose 8 million jobs. So I went back and looked at a 70809. right? Where were the job losses in the great Financial crisis? We lost a million four manufacturing jobs and we're going to lose some manufacturing jobs because rates have gone up and and things like cars and everything are less dishwashers.

But a million construction jobs were lost. That was a number two category. You're going to see that this time but you haven't seen it yet because I'm building I'm all real estate people and all corporations are finishing their plants. We didn't stop construction because he increased interest rates.

Of course he's not doing new ones, we're not doing new ones. We just sat down to look at a project we have in Fort Lauderdale and said it doesn't pencil. We're going to just wait. So as these projects finish, you will see massive layoffs in the commercial construction markets and companies who delay the investment in.

Plants you saw your Chevron buyback. they could be drilling Wells They're just going to buy back stock because the cost of capital has gone up so he will get that. but he should be focusing on the government should be Focus focusing on increasing the supply of labor because uh, in conversation. but that's not really something the FED can do.

Yes, there is. the Fed can help there so well. politicians can help First fix immigration immigration. We're 200 000 immigrants.

we do a million one. You've got to fix immigration I was in Washington on Monday I mean the both sides All right I Think we've got an idea here of this guy's opinion. so the uh, he's not wrong immigration would would definitely help with uh uh with with the job market and and eating up some of those job openings. But what's fascinating is this this idea that hey, look, a lot of companies are trying to bang out the rest of their construction uh for either developments that they've already agreed to, either new construction homes or Office Buildings or whatever what happens after that boom of construction is over, layoffs could be right on the money.

With that, especially as the real estate market has slowed down. though, we'll talk about the real estate market a little bit more later. Today we have earnings coming out from American Airlines Valero MasterCard JetBlue Southwest Nokia and Blackstone as well as Sherwin-Williams and the Dow Chemical Company. So we'll get some insights into really the real estate consumer.

Uh, on uh, on what's going on with Sherwin-Williams and DOW Whether that's commercial or residential, we'll also get insights on that travel. Market What? I'm really watching for in the travel Market between American JetBlue Southwest Once we get those earnings calls, I would be looking for any sign that these companies are getting Prime to start a price of War think Tesla of Autos It's only going to take one of these Airlines to do larger price cuts across the board and I would expect all of them will follow. That's something that United Airlines actually already alluded to in their earnings. Call that if somebody else Cuts they already to cut as well.

So the price war or the seeds of the price War are being planted for the Airlines and we'll see these companies are highly indebted. Uh, massive massive interest expenses and uh, you know, until they have a price War At least hopefully they can continue to pay off, pay, pay down some debts. but until then, get some Uh You get a pretty competitive environment so we'll see what happens. Uh, later today you'll Also, since this morning we'll be getting MasterCard.

It's almost like it's tradition we'll be getting Visa later, followed by Intel uh and uh Robert Half L3 Harris and a few other companies as well. So we'll get a lot of consumer data today from earnings reports. We're also getting economic data today, which should be fascinating. The first one we're going to get is actually at 5 30 a.m so that'll actually be during this podcast.

We'll get that in about 52 minutes. We'll get the annualized quarter over quarter GDP numbers survey says 2.6 prior release was 3.2 We'll get some numbers on personal consumption. We'll get core Pce we will get Advanced Goods Wholesale inventories, retail inventories, initial jobless claims, continuing claims, durable good orders, capital Good orders, new homes sales, and new home sales activity month over month. Then we'll also be going into or heading into the Kansas City manufacturing report.

Uh, And then tomorrow we'll get some more information on uh, the Uh Fed's favorite number, which is the Pce the personal Consumption expenditures read which comes out tomorrow along with inflation expectations via the University of Michigan consumer sentiments read. So we'll get a lot of data over the next two days on the 31st, which is when the Federal Reserve meeting actually begins. We'll also be getting ECI that's the employment cost and Uh read: employment Cost index. These are all important numbers leading into that Jan 31 to Feb 1 meeting.

Uh, we'll take a look here at five Year Break evens. We obviously have a lot of excitement. uh following Tesla Earnings I think they as I mentioned yesterday I Really think that, uh, there were a lot of folks waiting on the sidelines, uh to to really get into the stock market again to see okay, what what do we think earnings are going to do I think this Q4 earnings Set uh could end up being this substantial Catalyst that uh, that actually tries to induce people to get back into the market where people see, oh, look, things just aren't that bad. Institutions cover shorts, institutions, maybe start nibbling again on stocks.

retail starts buying again on stocks. could be very interesting. What we see now, whether it ends up being a bear Market Rally or not. TBD I Think that is ultimately going to come down to whether or not we have a uh Black Swan style catalyst.

So uh, then we have, uh, five-year break even sitting at 2.35 Unfortunately, these keep ticking up slightly. The FED wants to see these declining, not ticking up. Uh, so, uh, not not fantastic in that term in that direction. Either way, the stock market mostly green.

You've got s p Futures up about a quarter of a percent Nasdaq Futures up 0.64 Dow flat 10-year treasury. Again, it's holding 3.491 So basically three and a half Been sitting at three and a half for quite a while and there's an expectation that uh, three and a half could end up holding uh for uh for for potentially the rest of the decade now. I Think that's a little extreme I I Don't think the rest of the decade is what we're looking at, but uh, potentially for the next few months until the Federal Reserve relaxes? Yeah, Absolutely, absolutely so. Uh Comcast Speed on its numbers this morning? Uh, excited to go see some of these others.

Uh, come in. especially the earnings calls. I think the earnings calls are going to be the most entertaining? Uh, so we'll review those as they come out. uh, later today.

So uh, let's get started with we have. uh, let's do a quick look, a quick check here. Uh, the order of things we're going to cover today. First, we're going to cover a little bit about a lot of U.S households turning into sellers I'd like to talk a little bit about that I Want to talk a bit about advertising chat GPT Some more insights here.

Talk a little bit about the Fed and the potential U-turn Talk about the potential, not U-turn Also talk about Ukraine and Russia as well as some more insights into uh, what's going on in the real estate world. So we'll get started with uh, some of that information. Uh, the first that I'd like to start with is a U.S sellers potentially become a or or U.S households being stock sellers now I'll never forget when I was uh oh gosh in high school uh and it was around 2007 and I was just getting ready to graduate high school. started working on my real estate license in high school I ended up getting my real estate license at 18.

I'll never forget uh in in 2009 around this time, my uh, family members were dumping their 401ks because they had real lies. The valuation I've fallen so much it was almost kind of like they'd never been into stocks. They're sort of just blind to the idea of the stock market and it's almost as if all of a sudden you had folks decide oh well, I'm gonna go look and see what my retirement is and oh no, it's down like 40. Well dang, if it's down 40, I may as well go and sell because if I sell now, at least I'll still have the other 60.

And sure enough, many of these folks, uh, and not just uh, people that were close to me, but but also just you. saw the story repeat itself over and over again. We're selling essentially at the bottom of the market. Uh, and as difficult as it is to time the market perfectly I Think it's very clear when markets tell you.

okay, we're near a top of a cycle. It's time to buy. Okay, we're near a bottom of a cycle. Or sorry, we're near a top of a cycle.

It's time to sell. We're near a bottom of a cycle. It's time to buy right? That's pretty logical I Think we could say that pretty clearly. For example, with the real estate cycle and the real estate cycle is something that I've been teaching probably for about 12 years originally in coffee shops and at open houses to folks, I would draw the or I actually had a picture of the real estate cycle up.

uh, and it was. It was sort of customized for Real Estate But folks were so worried about this idea of oh my gosh, you know, well what if home prices continue to fall and the the most simple and I think comforting concept that you should think of as an investor is not to try to be perfect to sell right here at the end of 2005 and try to buy right here in November of 2011 when the housing market bottom and this applies to stocks as well, right? But instead the goal is to try to draw a line through the middle here and try to do your best to buy over here right to buy here and to ultimately sell here. that is actually a lot easier to do. We can time that the market in this sense by looking at the macro cycle.

This is one of the reasons why why in November of 2021 over here I started shorting Arc K wish I held on to those shorts longer. It's also why in January of 2022 I'd say probably on this side I sold my entire portfolio uh and and removed uh what? I thought were some of the most riskiest positions all together as we were in this sort of macro cycle. and it wasn't to say that oh, we could perfectly time the bottom. It's to say that we know we're at sort of a macro Peak right and now I would argue that we're probably somewhere near a macro Bottom Now that might be here or we might be here I Personally believe we're probably on the left side unless we have some form of Black Swan event that we haven't actually seen occur yet.

Which means if we are on the left side, we're certainly well. Either way, whether we're on the left or the right. Black Swan event or not I Believe we're certainly almost certainly I would say on the bottom half of this cycle I Think that's pretty evident with with some of the Uh declines and and the shifts in the economic data that we've seen, we'd really have to see a U-turn uh, in inflation to the dark side or some kind of Black Swamp to suggest that we're not in the bottom half of the economic cycle. uh, the macro cycle here or you'd have to really believe that.

Look, you know, maybe inflation is going to pop up again and things are going to get even worse, But then you wonder, hey, does that mean we're just right here And okay, fine. so things are going to get a little bit worse, right? The point is, we're not at Euphoria anymore and my belief is, forget about trying to perfectly time the top or the bottom time the macro cycle and look at it as an individual and say, look, we're obviously in a difficult and recessionary style of time. Why not try to, uh, take advantage of this, uh, environment, work harder now. Make more money now.

Build more wealth Now by investing more now. So basically what you're doing by investing more now is You're Building more potential wealth, right? You work harder. Now you take your money, you buy more quantity of exposure to either prep for Real Estate or buying equities. or maybe you're buying bonds.

whatever. Uh, and then that way you're rewarded as we enter the upswing of that cycle. Whenever that cycle comes, I Personally think that is actually quite easy for anyone to do. it's it's not difficult to know.

Okay, when when are we? When are we turning on a macro cycle to the dark side, And and when are we? When are things getting better, right? Yeah, that that I think are those are the things that I think we will end up having shown as true between November and January is sort of our top uh, for the the peak of the cycle and uh, hopefully somewhere between October Uh, certain stocks even as as early as July somewhere between July and October Who knows that could have about been a bottom. Maybe you get a double bottom? Who knows. Uh, But let's take a brief look over here. So uh, this is where.

Uh, the reason I started with this is because there are so many research pieces discussing the differences between what investors are doing and how investors are positioning themselves and and almost daily. I Read content: Uh, about how uh, investors are just in in such different positions. Uh, for example, here you've got: uh, you've got this argument that the current Equity rally we're seeing is due to systemic buying and hedge fund short covering which may have legs and there are always so many reasons for why the market could be going up right. Uh, in the short term.

I actually agree I think I think in 2022, it was easy to make money just shorting the market. You could sell covered calls and milk money. You could short the market and milk money. It was easy.

Uh. and and unfortunately I think that actually, for a lot of hedge funds leaves them under allocated to equities and and uh, what? You know, what could eventually be a sustained rally and then what happens, Whether it's hedge funds or individuals, they'll end up saying oh, don't worry, the latest bounce is just a bear Market rally and it'll plummet to new lows again. Maybe? Or it doesn't. And then all of a sudden they look back and they're like, wow, the Nasdaq's up 40.

You know, whatever from from where it was. Uh, and they're like, dang, well now everything's just overpriced. I'll wait for the double dip and then that double dip never ends up coming. Uh, that's that's a danger or risk that individuals run into I Believe and so do institutions.

Uh, but uh. Here's here's an interesting uh piece on the difference on how individuals and institutions are positioned. They do say that short interest has actually halved for, uh, the fourth quarter for European equities. However, in the United States we still sit at elevated levels of short interest now.

I Find that very interesting that we're still sitting at elevated levels of short interest in the United States because at some point those shorts are going to have to cover when when when movements and the the equity Market continue to prove that they're going to Trend uh in in a positive direction. Uh. In contrast, mutual funds rather than remaining short are long cash and have actually been dumping equities in recent months. As a result, their Equity beta is close to lows.

beta is is a measure of of the difference of your portfolio uh to uh to to an index usually like the S P 500.. Similarly, the Uh bid from retail investors has waned with U.S households turning to outright sellers of stocks. Think about how weird this is. you're potentially sitting at I would potentially say the bottom 20 of the macro cycle.

Again, no guarantees whether we are on the left or right, but the bottom twenty percent would probably look something like this of the macro cycle right. Again, it means we could potentially go a little lower or potentially means we've already lifted off of the bottom. Nobody knows that. uh, but we.

We do have high confidence that we're on the bottom half, potentially even within that bottom 20 percent. Yet at that same time, look at how investors are positioned. In my opinion, it's ludicrous. You have households seller being sellers.

You have mutual funds, long cash, and you have hedge funds in the United States I Guess I should write three. There we go. One, two three. There we go.

and you have hedge funds in the United States Still relatively short. So think about I Mean there's a reason why Morgan Stanley has said there is so much cash on the sidelines waiting to be put to work. and when you see a report like this from Barclays, you kind of reiterate that argument. I Thought Well, yeah, if households are sellers, mutual funds are dumping and they're long cash and hedge funds are short, Well, either.

They think we really are going into some form of double dip or the bottom still isn't here. They're trying to be perfect or they're making a big mistake. Uh, so that's something quite interesting I believe for watching your own individual portfolio. Uh, they do believe that currently.

Uh, this is the short interest that we're seeing in the United States Uh, it is a chart here on the right side. Short squeeze in the United States is less clear to us. in other words. we've seen Short covering here in the United in in the Eurozone, But look at this.

you could see almost no drop in short interest through December uh in the United States and into the early part of January TBD How uh, that has moved in the last uh in the last week here. But a lot of information about how uh, ultimately exposure to equity uh is is by no means uh, high or excessive. If anything, it's low. Uh, so I Think that's that's quite fascinating.

So uh, we'll see how things move here. Cash and treasuries? Uh. catching up with Equity flows. We've got cash and corporate credit and demand year to date.

Okay, so plenty of other charts and information from Barclays, but uh, something here to consider. Are we potentially near the bottom of that uh of of that macro cycle? And again, for me, I Think the big question is where where's the Black Swan and I Suppose the idea is that nobody knows where that Black Swan is right. But what we do know is there's a lot of repositioning happening uh in Investments Uh, Whether it's again, hedge funds going uh for for short positions or mutual funds being Loan cash. One of the things that I'm paying attention to actually is advertising and we know that advertising is expected to slow by five percent in 2023.

The consensus in 2022 was actually a uh, it slowed down or sorry, a growth of about uh 10 uh and that is now slowing to about five percent in 2023 and potentially falling as Um or Rising, then again to 8.5 growth in 2024.. Now the reason I bring this up is because personally, there's a position that I hold that I think is actually going to really benefit from this movement in advertising. So so if you look closely at this here, you see advertising in consensus boomed about 21.6 in 2021, 9.9 of 2022, only 5 in 2023, and then 8.5 percent in 2024 so not actually going negative on Advertising uh. But what's remarkable is even though advertising is slowing down, you have this sort of rejiggering expected and where advertising spend is going.

and one of the biggest markets that it really seems to be benefiting from this recruit or sort of remarking uh or redesigning of advertising spend budgets is the U.S connected TV advertising sector You can see here it is expect to have tripled from 2020 to 2024 from about 10.9 billion dollars in 2020 to 17 in 21, 21, and 22 20 nearly 7 2023, and then 31 in 2024 according to E-marketer Now what's fascinating about that is I Think there's one play that is worth paying attention to. Uh, and that is the Trade Desk. So if you are thinking about that macro cycle and you're looking, where are stocks and positions that uh, you know, maybe they've been beaten up over the last year trade deaths down, about 20 over the last year. Uh, and and how are companies positioned to potentially take advantage of that shift in advertising? Well, Trade Desk might be one of those to consider for that sort of bottom of the macro cycle play.

Again, not calling an exact bottom, but something to pay attention to. Now, one of the reasons we're seeing an explosion in Connect to TV is because Disney is introducing advertisements via Connected TV to their platform and this follows. obviously Netflix's move into Connected TV Advertising Now Connected TV via Microsoft via Netflix excuse me is provided by Um by Microsoft. However, Connected TV For Uh, companies that that Disney owns like Hulu are provided by a trade Desk and we expect trade desks to be heavily involved in providing ads for Uh Disney plus.

So I think there's a a pretty substantially exciting opportunity in Trade Desk. and when I look at the actual fundamentals of that particular company. I I Kind of like that. take a look at just some of these notes.

Here Some of these notes, by the way, are notes that I've put together with course members. Oftentimes in the mornings, we'll do course member analysis on certain stocks either that you're looking at or that I'm looking at. Uh, we'll either do this on real estate. we'll do this on stocks ta, you name it, and you can join those and get lifetime access for those using that final coupon code link down below which expires January 30th, which is just in a few days.

Go to Metcaven.com Join to learn more, but take a look at the statement of Cash flows for Trade Desk. This is from their earnings report ending September 30th 2022. We've got 1.3 billion dollars available in free cash. We'll see that on their balance sheet.

We're adding about 125 million dollars in free cash from operations, which is incredible. This is an incredible cash flow here. If we look at free cash flow, we're well above 90 mil. This is a smaller company of course, but Revenue in the last three months of 2022, growing at 30 percent now, they did have a one-time boost of GNA for their well.

I mean there could be future booths here, but they had GNA explode here in Uh, In in 2022. Uh, in the three months ending in September relative to 2021. I Actually think that's a positive Catalyst Now you might think that's crazy, but most folks aren't paying attention to the fact that this G a boost was, actually, in my opinion, a one. Well, I look at it, it is heavily based on a one-time CEO stock comp payment.

In other words, we're not expecting to see that kind of G a expense boost again for future quarters, which could actually boost EPS substantially from where it sits now. Positive: Uh, it's been positive. It was positive in 2021. Uh, it was slightly negative for the first nine months of 2022.

Uh, this. uh, the stock comp payment didn't help. uh, but uh, positive Here again in 2021. Positive 2022 Q3 And so in my opinion, well, while we're kind of on the edge there of of, uh, profitability, it's a company that's growing revenues phenomenally.

Uh, and uh, once, some of these one-time expenses Fall By the wayside, EPS growth could look pretty dang phenomenal. Uh, and it's a player in that connected TV space. It's really, really killing it. Uh, so so here are just some notes that I wrote wrote about that: a CEO expense platform operation costs 17.7 percent of Revenue Uh, and uh, they've got pretty decent margins bringing income uh from operations uh to about 26 uh of of their Top Line Not bad.

So uh, then we have, uh, let's see here. this is Uh. this is just an example of of potentially a company to look at. Uh, near.

Well, I mean most most of the the text style and advertising style plays have really Fallen by the wayside in this macro cycle. So I'm I'm really paying attention to what do I think is potentially positioned for that bottom of macro cycle? Uh, Trade Desk could be one of those. so it's definitely one that I'm paying attention to. uh and I think it deserves a high allocation and uh in ETFs Uh, whatever.

Maybe managing ETFs out there? Pretty fascinating. So um, that gives us a little bit of insight into ads. a little bit of insight into sellers where we might be in the macro cycle. Curious to know what you think in terms of where we are in the macro cycle.

so leave a comment Down Below on that next. Uh, worth uh Making a few notes: Here on chat GPT Now to be confused with Chat Gbt, which is much easier to pronounce than chat GPT I Can't get over that one. uh Microsoft's uh, obviously. uh, working on their 10 billion dollar investment into Open AI But what I really think is most fascinating about this is the amount of money that is going to potentially go into Gpus.

This is another potential area to pay attention to. You look at GPU Revenue forecasts. You see a little bit of actually a stall there in 2022 where GPU Uh, growth has this sort of compounded annual growth rate of 14 measuring from 2017 to 20 uh 26 And we see billions of dollars of Revenue Here, we can see between 2021 and 2022, revenue is almost flat sitting somewhere here around. uh, what do we have? uh, 20, 21, maybe billion here in GPU revenue forecast.

However, we see that exploding again via estimates in Uh, by over 20 in 2023 via estimates uh, and then steady growth all the way through about 2026.. So a lot of excitement also in the chat ship space for potential GPU growth, especially with companies like Open AI Maybe driving reinvestments into chips I did find the server refresh cycle article I was talking about yesterday I had it saved. Just put it in the wrong place. And really, it was an argument that the more companies invest in AI the more we're going to shorten the replacement cycle for TR for chipsets.

However, you might see more of an investment also into hyper scale Cloud Obviously, hyperscale providers being companies like Google Facebook Microsoft Amazon There's a belief that Google might actually, according to Bloomberg have an advantage over Microsoft in distributing servers for AI So server space or server power or compute power for AI over Microsoft Uh, and then of course Nvidia seen as a substantial player for that GPU push for data centers. Keep in mind every single Quarry for chat GPT So if you've used it and you've you've prompted uh, chat GPT with something. Every single query is estimated to cost about seven cents of compute. So somebody that money obviously goes somewhere right and that money is going to Cloud providers.

and it's going to uh, chip providers like Nvidia in AMD and it's trickling through to chip manufacturers like Warren Buffett's favorite investment Taiwan Semiconductors Uh, Taiwan Semi Semiconductor says 92 market share of the Advanced microchip uh sector of course. Then you have a lot of folks that look at companies that also manufacture. You're kind of going through the supply chain line here of open AI right? you're looking at Okay, well if AI is great, then AI is probably good for a company that has an investment in it like Microsoft But then it's also good for server providers like Google. But if it's good for server providers, it's probably good for chip provider is like Nvidia and AMD probably more heavily heavily Nvidia But if it's good for chip designers, then it's good for chip manufacturers like Taiwan semiconductors.

But if it's good for chip uh designers and manufacturers, then it's probably also good for the companies that make the manufacturing machines like Asml and Lamb Research who just reported a pretty pretty solid earnings yesterday. Honestly, they have a phenomenal balance sheet. We looked at that yesterday at Lamb Research nominal balance sheet. Phenomenal cash flow.

Really impressive. So when you're thinking about investments into, uh, you know, a space like Chat GPT Really, you, you could get a basket of the entire a market that may have pricing power as a result of artificial intelligence. I'm actually personally not the biggest fan of looking at profitless, uh tech companies that that say, you know, hey, you know, invest in Us because we have Ai uh for example I'm I'm very gun shy about a company like C3ai I'm not super enthusiastic about a company like Snowflake. Uh, even though I know they're expanding like crazy I am worried about the SAS business model still not having reached a bottom.

A lot of layoffs happening in Tech which is going to lead us to less seats, less substantial growth at some of these companies. and I hate to say it, but some of the valuations for software companies are insane right now. Uh, just as an example, Bill.com trading for a hundred times PE I mean you're looking at Peg ratios that are three to six x for some of the growth some of these companies are expecting and valuations that are very sensitive even Beyond a PEG ratio to Falling Any company that tends to have a high p E ratio no matter what the PEG ratio is, uh, can can oftentimes be a cell. uh, in recessionary environments because it's just it's it's simple for them.

Uh, to it's simple for institutions to argue. Oh, it's a high P E ratio. So, but even a company like Snowflake which which, yeah is expected to have a positive uh EPS this year, uh, expect it to be positive about 23 Cents by the end of the year expecting to be positive by about 50 cents which is great growth I Mean that's doubling on EPS right? But you're trading for 144 bucks with 50 cents of earnings for the year. you're trading for 288 times as a multiple for snowflake? That's insane.

Absolutely insane. Uh I I mean even even if you gave them a double for growth which on EPS which is not sustainable, you're still trading for a three peg with a 200 188 valuation and the likelihood that more money has to be raised now, a rising tide will eventually lift. All Ships But if I potentially had to structure something that I thought was was really exposed to the pricing power of of uh of AI and a chat GPT Probably my biggest Investments would would be companies like Nvidia AMD Taiwan Semiconductors I would consider Asml I would consider lamb research. although I have to put a little asterisk on the manufacturers because a concern about the manufacturers is that maybe companies like Taiwan semiconductors have already bought a lot of equipment in the last year and that maybe there could be a Slowdown in growth going forward for some of these manufacturers.

However, Asml did just report and what they report, they report that they still expect manufacturing equipment sales to actually increase by 25 in 2023. so my thesis isn't actually being super well corroborated to say maybe stay away from those equipment manufacturers but right there these are: These are five potentially great stocks for investing in. AI Uh, if you then wanted to look at Cloud distribution a simple a simple exposure to Google Amazon Uh, Facebook uh and Microsoft could be a consideration now. I do have concerns about all of the well, a lot of uh Facebook's cash flow going into things like the Metaverse.

I'm not the biggest fan of uh, virtual reality even Apple expects their virtual reality headsets to just be a loss leader for other products. So with Facebook you do have a bit of a of an anchor that some of your cash flow might be going to. Uh, you know the future of the Metaverse, so you have to be comfortable with that as an investor. Facebook stock is actually done decently over the last six months on in its recovery.

Amazon You have to be careful that on on their side you're seeing a lot of cash flow get thrown into. How can we get quicker delivery time frames to continue to be competitive? Uh, in in our fulfillment networks and I think that's a very expensive Endeavor Uh, and so maybe that makes Microsoft and Google slightly more pure plays for uh Cloud Compute uh, that would be your Microsoft Azure your Google Cloud platform. So look at what now. all of a sudden we're potentially building this this portfolio of companies that maybe have pricing power around artificial intelligence without being exposed to the insane multiples of uh uh, multiple exposures of uh of AI of strictly AI right? Uh, which is is heavily exposed to a software service? companies that are extremely expensive right now I mean even companies that I like in the cyber security space like uh, Crowdstrike and Cloudflare.

Great companies, but pricey. Very pricey right now. But uh, either way, maybe you introduce a small exposure to companies like that, right? That could be a consideration. So maybe maybe if you're building a portfolio and you say hey, I really want to be exposed to uh chat GPT Uh, how could I build a portfolio of say 11 stocks around that? What kind of stocks would I consider? Well, I I on screen here I just kind of slapped this together while we were talking here and I wrote just sort of in order of something that might look like a decent portfolio.

Uh, you've got uh, number one while just reading them off in order here: Nvidia AMD Taiwan Semiconductors, Asml and research Microsoft Google Amazon Facebook Meta and then maybe snowflake at the bottom right? So this is this is an example of how you could build a portfolio and then what you could do is you could maybe provide a lower allocation for some of the the more Cloud providers or Starnet Cloud providers. the the more pure AI plays, then maybe you would be allocating to some of the others, right? Uh yeah and too bad you can't ask. Chat PT for stock picks because a the data is for chat GPT Still stuck in 2011 but even beyond that, uh, you know you have to be pretty tricky with how you try to prompt it for stock info since it likes to tell you uh, it doesn't want to give Financial advice. but uh, but anyway, yeah, look the more AI blows up, the more we actually expect that we are going to see the chip world have to re-invest in itself.

Uh, to stay competitive. Now you have to be careful because Big Tech is laying off a lot of individuals. So again, with layoffs in Big Tech you're probably going to see more pain where in, uh in software service. But what does that free up if you lay off white collar workers? What do you have more of? Well, potentially you have more cash flow and if you have more cash flow, what can you do more of in a recessionary environment? Well, hopefully you do what I regularly suggest and that is in a recessionary environment.

You invest that I think is extremely exciting. Invest, Invest, Invest. Uh and so this is where if I pop on over to a piece that was sent over. uh from Bloomberg Somebody sent me This.

They sent me. Look at this. AI infrastructure spending poised to stay elevated. There's a long runway for companies to replace their legacy servers installed base with AI accelerators.

now. Honestly I think that's kind of remarkable because on like I feel like I I still and I know servers obviously have been around for you know, well, like 50 years, probably more widely over the last 20 years obviously since the.com bubble. Uh, but it's weird to me to think that all right time to upgrade. but you know all the servers.

but then again, you know I I try to relate and I look at my uh my Apple computers for example and maybe this is just Apple screwing us. but um, you know this is how they get their pricing power right. but uh, you will pick up a 2018 Apple laptop which I have a few of like three or four 2018 uh, 2017 18 19 laptops sitting around from from uh well, previous employees or or you know us having upgraded and I've I've used some of these for just other purposes I turn them into like little back server backups and that they're terrible. It's incredible how how miserably slow they have gotten.

uh and I think it's just relative to what we're used to here in 2023 now and so it's really incredible. So when I think about about that as an individual, I'm like yeah, no kidding, servers are going to need upgrades. uh, whether those are new hard drives or new network area storage. Bays Nvidia has seen rapid adoption of his Gpus for data centers Beyond its customer use cases for gaming and Bitcoin mining.

Beyond that, right? We're moving beyond that. Autonomous driver is another secular driver for Gpus, but Chat GPT has the potential to further unlock new Computing use cases. Folks, there is so much money in artificial intelligence that you don't actually have to bet on the artificial intelligence company like chat. GPT which is not a public company.

It is not a company you can invest into and it's really only a company who could get sort of ancillary access to. but it is. It is a a movement. Uh, where the additional free cash flow that is now going to go into artificial intelligence? uh, research and Investments is probably going to pump quite substantially.

Uh, the the distribution and operating systems for AI at massive companies throughout. Uh, not just the United States but the world. uh, and I think it's it's it's a win for all of the companies that I mentioned. Uh, you know you've also got companies like Tesla heavily exposed to AI Uh, the more they double down on AI, the more you're going to see a movement towards uh chip Investments at Uh Tesla Now, of course Tesla manufacture or Tesla designs a lot of their own chips.

Uh, but uh, at any point that they need to purchase chip manufacturing equipment uh or third-party contract manufacturer chips like Nvidia or AMD do Guess who's a beneficiary of that? Well, potentially companies like Asml and Research Taiwan My conductors right? Apple Investing in AI Who benefits while substantially Taiwan Semiconductors the more Apple invests in AI the more we see their chips designed by Apple and get manufactured by Uh by companies like Taiwan Semiconductor. So personally very excited I Am not as excited. although it might be worth the potential exposure into companies like an Intel uh or an IBM. Although these companies have been seen as a potentially not innovating as quickly as uh, some of the the other companies that we've mentioned.

So it's something to pay attention to is that maybe maybe you have an exposure to sort of The Rebirth of an Intel and IBM and maybe therefore in a portfolio. If you have an Intel and IBM what you're able to do is put them in as as maybe a a 12 or 13th position. Uh, in sort of a chat GPT Allocation uh and uh and you see those maybe as a little bit more value-esque in the whole bucket. So obviously I can't advise you how to ideally uh, build your portfolio.

but at least for building a portfolio for myself. These are these are considerations that I have. The nice thing about stocks is you don't have to say oh, it's all in on one stock or it's all in on another stock. Uh, and oh, I'd never touch.

You know, a certain stock with a 10 foot pole you could just allocate less money to stocks that you believe in, but have concerns over valuation right? Uh, that way, if you're wrong, at least you have a stake and if you're right and the valuation compresses well, then you could really start building that stake by adding more of an allocation. And this really goes back to the idea of how difficult it is to to to time perfect uh, tops and bottoms. And it's better that when things are a little frothy to under allocate and when things are obtained to over allocate right and then that way you you just like adjust that way. So I Personally am very very excited.

uh uh about chat GPT and on almost a daily basis I'm looking at how can we rebalance Uh portfolios in in a way that give us the best potential allocation to uh, the future Uh, well, essentially future growth in in the ad space? uh, and AI space rather not the ad space. Ad space still also good. and I think Ai and compute spend will will heavily increase and and even the ad sector. uh, and the compute power for providing connected TV advertising or digital advertising but but certainly less so ads would be uh uh, certainly less so than AI But AI Very, very exciting.

Keep in mind even Elon Musk Yesterday mentioned that AI might be the Uh essentially. uh, well, that Tesla maybe the the leader in artificial intelligence. Of course, he might be a little bit biased. Anyway, some thoughts here.

If you found those helpful, make sure to subscribe, share the video as always, and of course, check out those programs on building your wealth. Link down below. Coupon code expires the final one in four days, and you've gotta get a price guarantee over there folks. Three month price guarantee.

Uh, that? uh, you'll be getting the best price probably ever. Uh, but at bare minimum for three months. All right. let's listen in over here actually of having a soft Landing if he stops he can have a a mild recession is fine.

I mean it'll be fine. You don't destroy all these manufacturing jobs we we bring back we onshore, we we get to we we fix Supply chains he'll be he'll be good I'd be bullish if we keep this up and obviously the political but no good luck. Don't focus on things that matter in Washington I would be if rates are higher. maybe we'll stop.

That's what I'm saying. If we go right back to where you want to go then we'll be like okay, it's not a trillion in interest, we're back down to 300 billion in interest expense. but if if we really are spending a trillion, we should every year it's for two and a half percent lower. What? How do we? finally? What? How can we spend on other things if our debt Services is so high and it's if it goes to 35 trillion.

The plan to reduce the long-term deficit. But here here's a good piece of good news: Healthcare Uh, initiatives are going to change the the the death rates or incidents of many diseases and so Social Security Unemployment and benefits that is probably overstated. We're going to have such incredible medical breakthroughs over the long term and that's a big positive coming down. Let me just ask because you've built up I think 115 000 Apartments over the last seven years or so, You see rents in your own place coming down because you guys had some significant rent hikes last year.

Yeah, we all did. The whole nation did in every market and of course I think rents were up like 20 across the United States it was a pandemic I Don't know what happened I mean none of us modeled it, it just went bananas the uh and it's actually released some pretty nefarious forces. Now is you have people wanting rent control. It's very politically popular and I Fast forward to Mumbai Go to India where you have spectacular British buildings that were built by the British that are completely decaying because they put in rent controls.

Nobody can increase rents so nobody takes care of the building so they rot. and you know the Federal. They mean well. but every time you put in rent control you do.

You know you wind up with very bad housing stocks and we have a five million housing shortage. so nobody's going to build affordable housing unless they give you really aggressive tact and that's the other thing I Mean he wants inflation to go down, but he he's killing the construction of single-family homes and increasing the lack of Supply So we need to balance when. and I'm not saying we wanted zero interest rates Joe We just want a a positive yield curve that doesn't dissuade long-term Investments So companies I'm buying the two-year like I own it I never owned any of it like that's not a bad place to hang out for. While the world sort of sorts itself out, we figure out if they're going to go over the edge or they're going to be reasonable.

And look, this is the fastest increase in rates in history. M2 Our money supply has never been negative in 70 years. I Mean this is a tight tight Financial Market out there, liquidity is tight I'm not saying that the banks are wonderful by the way. I wasn't picking on the banks, but they got the OCC all over them saying stop Landing stop playing.

Don't grow your balance sheets so it's not the banks everyone means well. Pie chart: how much you see you never touched a two year before in your whole life? Yeah, but I moved cash and and I've gotten some liquidity and moved it into six months. One year and two years for a while I'll come out of it as soon as I think the dust clears I think you're sort of in it. when's that desk and we keep talking about a recession? So coming into this year said this thing I agree with which is if you're in business, there's two things you're looking at.

the base rate which we know the FED controls and the spread that we borrow at the spreads have doubled too. All right, the first thing that will happen like Triple A's for example you. they used to cost you a point less than a point over base rates there are two or double. As soon as people feel like the FED is done I think spreads will come in that will help you're getting paid too much for Triple A's today and then he'll he will have to lower base rates because the economy is going to show its right.

You know what? what? I believe and I just want to be so clear. We just heard this individual say hey, I'm waiting for the dust to clear I've allocated a little bit more to cash I I really believe this and I have believed this since January of last year. It has been a year of of believing this. I really believe and I could be wrong so it's not a guarantee.

but at least I'm taking a position. Okay, foreign. I Really believe there's a chance the stock market cycle has bottomed or will bottom rather before the Federal Reserve officially signals the policy of having u-turned and the reason I believe that uh is I Believe the market is so highly expecting the Federal Reserve and their U-turn to Mark the bottom of the market. But if the Federal Reserve gradually u-turns and the market gradually goes up, a lot of people are going to be sitting on the sidelines waiting for the dust to clear and there's not actually going to be a big signal of okay, now it's my time.

We know, we know that history told us the best time to buy was when the FED u-turned when they set the precedent of bailing out markets in 87. And I'm not talking about a nominal like fed pivot like reducing rates or flattening rates although pivots the whole like I've made so many videos on this. If you if you think markets crash after the market pivots, please just type into YouTube meet Kevin fed pivot crash and I pretty much destroy that argument. But what we know and pivot again like slowing down or slight reducing of rates.

That's not a big deal. What a big deal is is when the FED breaks something and then the U-turn kind of like they did in 87. Uh. and they set the precedent for bailing out markets March of 03, uh, Feb of 09, December of 18 and March of 20..

these were like bat signals to buy. These were the best bat signals that are like bye bye bye bye and you would have bought the bottom of the market almost perfectly. You would have bought the bottom of the market. But what happens if we don't get the bat signal this time and this was one of the things I've been thinking of for a while is that those bad signals are so well known and you have a Fed that rather than Breaking something and you turning might end up doing something more like this, getting slightly less and less hawkish over time and there's no giant like bailout v-shaped recovery.

It's instead you get this very very slow gradual Nike Swoosh people on the sidelines don't get the signal, they don't get the memo and so all of a sudden then they look back. You know, six months later and they're like what the hell I missed out, you know and then the fed's like yeah, All right, things are good and they're like wait, where was the bat signal? It's like wow, we didn't break anything. We didn't need a bat signal this time. it's like wow, we didn't break anything, He didn't need a bat signal.

Well damn. I was waiting for my bat signal like wow, we didn't break anything you know. So so that is the risk in my opinion to to um to basically calling everything a bear Market rally Again, that is not to say by any means we're for sure on the bottom. Uh, who knows, if we get bad inflation reports, we're screwed.

Uh, you know the recession ends up deeper and darker than expected or the FED decides to just continue hiking over five percent. Even though the Market's not pricing that in, it's gonna be a problem. It's going to be a problem. The Market's going to have the price in, uh, you know, a ludicrous fed.

basically. Um, okay, interesting. The Fed rate Futures uh Monitor right now is pricing in pretty much a guaranteed 25 basis point hike for the next meeting. That's a shift from yesterday where there's actually some pricing in of a potential pause I Don't think anybody really expected to pause on this next one.

Everybody's mostly looking for that, that .25 hike? Uh, and so uh, we'll see how things uh, end up pricing going forward. but uh, the next 25 basis point hikes certainly being expected. A look at the FED terminal rate monitor and then we we have data coming out in just about five minutes here. So let's see what we have here.

Fed: Peak Uh Monitor right now is a markets are pricing in a peak of 5.07 is what's currently being priced in. Keep in mind that that pricing has basically been stable since about September of last year. Uh, so since September of last year you have this the FED Okay, we're pricing at five percent and since then we kind of hit this level and we've just been bobbing up and down at five percent. So the market really actually hasn't suggested that the FED will with certainty.

uh, end up below five percent though you are starting to see Cuts priced in which is quite entertaining. Uh, by the end of the year and this is where yesterday we covered this potential for the Federal Reserve uh to U-turn and to potentially cut rates uh, earlier and what that would look like? That was a Nikki Leaks article that we went through and was fascinating. So I'll talk more about that soon. But first, we got data coming up here in about three minutes.

so we'll listen in and see what we have uh, gloomberg and CNBC chatting about. and then we'll get that data in uh, three minutes from now. Okay, both of them are on ads. No problem.

we'll do a quick check of the markets. Uh, pre-market Express Seagate up about eight to nine percent Tesla of 7.6 sent after earnings here. It was a big thesis of mine, even though I don't play earnings personally, but it was a big thesis of mine that this earnings call would not be the bottom of margins that you'd probably see that be Q1. That's roughly what we were told as well.

Uh, in the actual earnings call which reiterates that thesis. but also I think a lot of folks expected the numbers to just be so much worse. Uh, and now that that catalyst is gone I think a lot of folks are somewhat trying to move in or move back or reposition back in. uh to Tesla So I don't know if this is just retail buying in the pre-market It probably is.

Uh, generally institutions buy when the Market opens. so we'll see if institutions are going to take this as an opportunity to sell the rip. Uh, so we might see some red candles right out of the gate at the at the open. Or is this a moment where they say damn, The fundamentals actually are pretty good.

Uh, you know, even even if we only get to 1.8 million Vehicles this year, that's also still pretty good. 38 growth. Uh, if we get to the two Mill great, that's 50 growth. Let's maybe allocate a little bit.

Who knows. I Think we'll see that institutional allocation or selling a little bit better. Uh, once the Market opens, waiting for that economic data to come out now should be pretty exciting. again.

We are waiting for a whole host of economic data, including the annualized GDP numbers we're expecting 2.6 uh for Q4 Anything lower is is really potentially going to indicate uh, fears that the recession will be uh, deeper in an environment where the Federal Reserve is more aggressive. wholesale inventories, retail inventories, jobless claims, continuing claims, new home sales I mean all well, actually, new home sales don't come out until 7 A.M But this 530 data comes out in about 60 seconds. We'll have that ready. Um, yeah, yeah, you got to be careful playing volatility on um on on stocks as well, because for example, Tesla had implied volatility or uh, Tesla implied a movement of 10.

But until the earnings call, the stock didn't actually move at all. Which means anybody who bought options before like as puts or calls or straddles could potentially lost just because of a volatility. Crush Uh, However, uh, we did end up getting that earnings call pushing. uh, pushing.

You know. Tesla Stock movement up in that seven percent Direction So it is interesting how sometimes you can get a volatility crush and and no potential, uh, actual activity. All right here we go. All right.

GDP Numbers annualized quarter over quarter or four the fourth quarter are that okay. Waiting for him. We're waiting for it. Come on.

Wholesale inventories, month over month coming up. Point one percent. Instead of the 0.5 expected waiting for the GDP number, retail inventory is up 0.5 GDP comes at 2.9 better than expected. 2.9 is the GDP annualized quarter recorder number for the fourth quarter Advanced Goods Trade Balance Negative: 90.3 Bill versus the 88 expected.

That's for for the balance of Trade wholesale inventories. Again, a Miss on wholesale inventories actually not Rising as much as expected only Rising Point one percent versus the point five percent expected and a revision down on the previous wholesale inventories balance from one percent to point nine percent retail inventories uh up 0.5 versus the point two percent Expected personal consumption coming in at only 2.1 percent versus the 2.9 expected. so individual consumption missing. We've got not uh, core Pce Q over Q 3.9 percent continuing claims coming in hot uh at 16.75 versus the expectation of 1658 and an upward revision of the prior data so more people filing for unemployment claims over the continuing basis, however less this week we were expecting again 205 000 claims We got 186 thousand capital good orders uh, negative point two percent uh, non-defense excluding air.

We've got cap good orders at negative point four percent versus the point four percent Expected: durable good orders 5.6 versus the 2.5 percent expected for December. So uh, okay, these numbers actually not like super dark recessionary. Uh, let's see how the stock market is is trying to react to some of this getting a little bit of a red Candlestick on on on the NASDAQ But but barely I mean you're you're moving from uh one percent up to 80 basis point up uh, 80 basis points up. and and you're slightly turning green here.

Now you've got Tesla up now. Eight and a quarter percent actually popping off on this sort of number here I Think the idea here is the market. The market wants inflation to plummet, but we don't want to see, uh, really recessionary environment. Uh, even though we probably are in a recessionary certainly recessionary-ish environment.

Uh, it's interesting that GDP is so well, positive 2.9 Now, keep in mind the way they annualize, that means GDP was actually 0.725 for uh, the fourth quarter and then they just multiply that by four that you don't use that exponents. Here, you're basically just saying if we're traveling at the speed of 0.725 how much is GDP growing over the year, well, it would be about 2.9 again coming in hotter than expected. Uh, and uh, this this, uh, really interesting Divergence Here where retail uh and and personal consumption misses. so individuals are spending less money.

but yet GDP actually coming in stronger. Which is fascinating because it makes you wonder. is it possible that less individualists expending given that the consumer is 70 of the economy could help continue to drive inflation down? while G ADP actually stays positive? that actually is a very Goldilocks result. Uh, now NASDAQ up about point six percent.

So slightly shaving off about uh, you know, four tenths of a percent there on these results. Personally, not exactly sure why they would be. uh, you know, sort of negative about this. To me, this seems a little Goldilocks s.

But let's go ahead and take a look at Uh What Markets are thinking uh, about from a perspective of Wall Street So we have here the Bloomberg dollar Index Rose to a session high after the fourth quarter GDP came in better than expected at 2.9 versus 2.6 jobless claims coming in below their estimates. Again, a little bit hot there, right? and maybe Uh markets are suggesting well if jobless claims are continuing continuing to come in hot in other words, fewer jobless claims than we expect, then maybe the FED is going to have to Hawk for longer and I think that's the longer the FED Hawks the more the dollar goes up. I actually moved from my dollar short position to more of a long growth and Technology position. The reason I did that was I thought we kind of I thought I kind of started maxing out my dollar short position and I wanted to catch more of potentially the bottom and growth intact.

Uh, and so I'm glad I made that positioning move at this point. But yeah, the 10-year treasure yield moving up to about Uh just now over about three and a half percent so yields moving positive on this oil moving positive about one and a half percent on this information here, yields on Euro dollar future slightly higher as well. stronger economy pushing yields up as potentially central banks might be forced to stay with those 25 BP hikes for longer we have uh, this is inside here now from Wall Street I want to get a little bit more Wall Street Inside trade was a significant contributor to GDP at 0.56 percentage points of the overall Uh 2.9 expansion in GDP government spending accounted for 0.64 percentage points. So basically consumption, trade, and government are all kicking in.

consumer spending uh, within consumer spending. Uh oh, it was services that once again propelled growth with positive purchases. Services spending made up 1.16 percent of the overall 2.9 percent annualized quarter growth. This is the other red flag that you have this potential that Services Inflation is going to remain higher for longer, forcing the Federal Reserve to hawk more and for longer.

Uh, we have. Uh, if I Look at the breakdown of this release. it looks like the only negative sector was residential investment. Red flag for your solar companies for end phase Generac Solar Edge However, the other positive sectors here: big positive from uh personal consumption expenditures on Services minor positive on Goods change in private inventories minor positive Government spending was a positive uh.

net exports was a positive Recession Fears are everywhere. Uh, however GDP Positive, Uh, uh, a lot. A lot of you know it's going to be the biggest irony ever if we end up getting no recession like no official recession. the one last year ends up getting revised away and then we don't get a recession this year.

and uh, and and we don't ever end up getting the recession in this cycle. And then everybody. All the economists are just going to take the Big L on. uh, the most productive recession ever.

and it just doesn't happen. Consumption coming in a bit weaker than expected. Again, with that 2.1 percent growth. but again, still.

those Services representing about that 1.2 percent gain of that GDP move. So uh, again. these are. There are definitely some things in here that might make the Fed's antenna move up a little bit right? Uh, more pressure and services? Okay, but still, it's lower than expected overall.

Uh, it's not a recessionary read. It actually builds the case for a soft landing. and in my opinion it it like this is expected. Of course, services are still the hot sector.

Uh, the question is, are those Services going to wear down? Uh, I Think as the markets are are realizing that you know what? Maybe maybe, uh, this is actually more good news than it is bad news. Yes, we know with continuing claims or jobless claims didn't come in as high as expected. but whatever. Maybe we don't have to crush the jobs Market to prevent a recession.

Uh, and to get inflation out. Uh, the stock market actually seems to be now trying to react slightly more positively. The NASDAQ actually seems to be trying to run right now. Now it's up.

uh, over 1.1 percent. Now you know, the the minute-by-minute fluctuations are quite ridiculous in the stock market. but I Think what you have here is more good than bad? I Think you have a reiteration that yes, there are still some stresses that we're not losing as many jobs as maybe the FED might hope, and there's still some Services pressures. But look, let's be clear here: if inflation plummets, the FED does not have to worry about Services spending and the FED does not have to worry about killing jobs.

If inflation goes away, they actually have to go back to their other mandate which is maximum employment. which means the vet does not actually have to destroy this economy uh, and does not actually have to force joblessness. Uh, and I Think that's where we can get to not only looking at the numbers, but looking at the Canadian uh report? Uh, the Canadian Monetary Policy report. Now you might think I'm crazy to say we should look at the Canadian Monetary Policy report, but you know what's fascinating.

They give us insights about the United States They talk more about the United States than they talk about Canada A few things that I want to point out in the monetary Policy report from Canada that came out uh, just recently here was that they actually don't force themselves into the two percent Target like the FED does. Although the FED does have flexible average inflation targeting which I expect, they'll be talking about a lot soon. When they're ready to U-turn they will use that to maintain their credibility. But look at this very similar to the idea of being flexible t