Premarket Prep 2024 Stock Market Outlook Special - Gene Munster, Cameron Dawson, Todd Gordon, Michele “Mish” Schneider - video Dailymotion

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Premarket Prep 2024 Stock Market Outlook Special - Gene Munster, Cameron Dawson, Todd Gordon, and Michele “Mish” Schneider.  #1 Morning Stock Show To Get You Ready For The Stock Market Open, PreMarket Gainers, Earnings This Week, Economic Data & More!  Benzinga PreMarket Prep 8:00AM ET- 10:00AM ET BenzingaTV on YouTube.

Transcript

00:00:00 Todd Gordon, founder of Inside Edge Capital and trading analysis.com. Todd, how you doing

00:00:07 this morning?

00:00:08 Good morning, guys. How are you?

00:00:10 We're doing pretty good.

00:00:11 Thanks for having me.

00:00:14 So what do you think your biggest mistake was? I know you've had a decent year, but

00:00:21 if you had to pick one thing in 2023 that kind of stumped you, and then I'm going to

00:00:27 follow up and ask you what your biggest mistake in 2024 is going to be.

00:00:35 Biggest mistake in 23, probably trying to diversify my growth fund a bit too much, get

00:00:45 a little too much sector allocation. I think that's probably a similar story. That's

00:00:52 my worst mistake. I guess I've given myself a pass, but just not concentrating on mega

00:01:00 cap growth on the way back and just trying to get more exposures or seeing more of a

00:01:06 rotation into value. So the growth portfolio drag just to touch on that. I'd have to think

00:01:13 about that, but nothing catastrophic in 23. A few weeks left, but one week left, but it

00:01:19 was a good year.

00:01:23 And then follow up, what's going to be the biggest mistake in 24? Let's see. Not taking

00:01:34 your advice on the Belmont that's going to be here in Saratoga, Joel.

00:01:40 The Belmont's going to be in Saratoga?

00:01:41 It's going to be in Saratoga this year. Yeah.

00:01:45 I would have to adjust my plans there.

00:01:51 So Todd, I'm going to just take you back into stocks here too, because 2023 was a year where

00:01:59 a lot of people were fooled. 2023 was a year where a lot of people, including myself, I

00:02:03 stayed underinvested in my long-term account. Did pretty well trading. Trading is kind of

00:02:07 independent of my predictions, but I mean, I probably stayed bearish too long. And I

00:02:13 think, what is 2024? I want to ask you, coming into 2024, we've had this set up in 2023,

00:02:20 where it seemed like it was going to be pretty tough. Interest rates were going higher. Inflation

00:02:24 was still rampant. Well, now we set up the opposite where inflation, the Fed appears

00:02:29 to have gotten on top of it and interest rates are supposed to be going down. So it sets

00:02:34 up pretty well for the bulls. Is there a potential that this could be a rug pull or is the bull

00:02:39 just continue humming along and we just have a fantastic year once again for the bulls?

00:02:43 What are your thoughts for 2024?

00:02:46 Yeah, it's been an unbelievable move. I think we've all become macro economists this year,

00:02:53 I think, to successfully trade. And I think the biggest thing, I brought along a few charts.

00:02:58 I don't know if you guys want to go ahead and steer, keep it conversational or what.

00:03:05 Let me see, share screen, share screen, window number, what is this year? Three. I think

00:03:16 the biggest thing is this whole concept of nominal versus real yields. And I've showed

00:03:22 you guys this chart before. But yeah, we have inversion where obviously 10s are going to

00:03:30 be lower than twos. But if you look at the real yields, the expected inflation, the 50

00:03:38 to 60 basis points of inversion that we continue to have here on the top end exist. But if

00:03:45 you look at the real yield curve, we have really come back to flat, no inversion. So

00:03:53 I think the thing that we got to look at is what happens if the 10 to real yield curve

00:04:00 continues higher. And I think this has been one of the, I think the best tells for me

00:04:05 is, yeah, we have seven and a half percent interest rates, mortgage rates, right? But

00:04:10 if your net cost is three and a half or 4%, all of a sudden it doesn't look so bad. Companies

00:04:16 continue to borrow, they invest, they can do stock buybacks. When you have that embedded

00:04:21 3% inflation, that sticker shock on the nominal rate doesn't look too bad. So I think the

00:04:27 real yield curve is a big one. And then I've showed you guys this one before. I don't often

00:04:34 go quant and do a whole bunch of backtesting and stuff like that. But this one was interesting.

00:04:40 And I keep hearing, OK, what happens when if and when yield curve comes out of inversion,

00:04:47 do we go into recession? And I look back into the 80s, 1982, which is as far as I could

00:04:54 get for the real yield curve. When we come out, if we come out of inversion, the average

00:04:59 return one to year out is 14 and 22%. So what would take the 10 to real yield curve further

00:05:09 out or into normal status? There's a couple of different ends to that. So for me, I think

00:05:16 I have another chart over here somewhere. Yeah, I mean, this is the nominal yield curve.

00:05:21 We're hanging at like 50 basis points of inversion. If we just don't drop down into 60, 70, 80

00:05:28 points of inversion, I'm thinking that this growth value ratio, which you can see is clearly

00:05:35 correlated, if we could just hang around 50 basis points of inversion and work on the

00:05:40 inflation expectations, value is probably going to underperform growth. Provided earnings

00:05:47 are good. The geopolitical, domestic political stays as is. I love the way the markets are

00:05:54 trading. I think earnings have been solid. And again, factoring in that real versus nominal

00:05:59 yields and where we are in the yield curve, if things can stay the same and we could start

00:06:03 to look at expected inflation in a different way, I think that's what continues the rally.

00:06:08 I hope that, sorry for that long-winded answer. So your concern and maybe others concern is

00:06:15 that the Fed's going to get a little bit too easy. Because we've talked about this a lot

00:06:22 and we're like, why can't rates just stay here? Why can't we just have the fixed income

00:06:28 market? People interest bearing rates be a decent return. Because I mean, yeah, five,

00:06:35 six, I mean, four or five, I mean, it's not too bad, of course, what the market did in

00:06:40 the last couple of months. But people feared that Powell was going to go too far raising

00:06:44 rates and now people are like, is there any fear that he can go too far lowering rates?

00:06:49 For sure. And that's one of the, I think the trips that I have, like I said, I'm super

00:06:55 bullish. I love this rally, but I prepared this for you guys as well. One of the things

00:07:01 that can trip us up here next year, I'm going to get heavily technically on you. I'm sorry.

00:07:06 Apologetically, I'm an LA wave guy. I just can't be without it. I just-

00:07:09 Don't be apologetic about it.

00:07:11 Don't worry. I love it. I love it.

00:07:13 It works for you, man. You do what works for you.

00:07:15 Push about the way, push these guys out of here. Let's get to the fibs. Talk fib to me,

00:07:21 Todd.

00:07:22 You guys are like my psychologists here. And this was super fun. I mean, this sent the

00:07:31 LA, and I'm going to answer your question, Dennis, like this sent the LA wave community

00:07:34 into a tizzy, just all the debates as to what this mess was at the end of 22 and 23. And

00:07:40 they're still arguing about it. I'm right in the midst of it. It's really fun. But if

00:07:44 the uptrend started here in October, it's a clean five wave move up. And we may have

00:07:50 a zone of resistance on the break to new highs in the S&P. The NASDAQ is through highs. The

00:07:55 S&P is into highs. So after every five wave move, I mean, Charles Dow gave us this even

00:08:01 before Ralph Nelson Elliott came around and Bob Frechter interpreted his work years after

00:08:05 the fact. But after every five wave move, we're going to need a three wave pullback.

00:08:10 So what is that going to be? And one of those points, Joel, I think you said is, I don't

00:08:14 think we need to cut six times. What happens when the market realizes we might get one

00:08:19 of those 2018, 19 mid cycle adjustments, maybe back it off once or twice, and then let's

00:08:25 leave it at four, four and a half percent provided earnings continue to be as good,

00:08:29 as strong, like one of the catch up sectors that I have for is consumer discretionary.

00:08:33 Like, you know, that could be it seasonality. And then, you know, maybe unfortunately, this

00:08:38 is a very politically charged environment here in the 24. So any of those reasons, and

00:08:43 maybe a train that we get hit that we don't see coming around the bend is a fourth or

00:08:47 fifth reason that market sells off. But, you know, I do think we settle in maybe summerish,

00:08:53 and then maybe they ramp it into the end of next year. So I love being bullish. I love

00:08:59 the money we've made. But I'm very aware that this might be five off the lows.

00:09:06 I'll hop in here. I think that, you know, you're definitely looking at that. And it

00:09:10 makes sense. Statistically wise, I know I've been watching kind of like Ryan Dietrich's

00:09:15 presidential cycle, and the first quarter is the toughest one of the next year. So this

00:09:20 kind of makes sense. And I can see that coming into play, just running into a little bit

00:09:24 of a wall, especially with all this optimism that has built up in the market. And then,

00:09:30 of course, as we get closer and closer to elections, some optimism coming back into

00:09:36 the market. So at least that kind of makes sense to me with the current environment.

00:09:40 Yeah, yeah. You know, and to I mean, if earnings continue to go, I mean, I, I was giddy sitting

00:09:47 waiting for these new money market funds to these new money market figures to come out.

00:09:52 Just go share screen again. So we just we just came out at six point. So I was like,

00:10:00 OK, I was making sort of a friendly bet with my my clients and research members. We're

00:10:06 at five point nine one trillion in Q2 of twenty three for money market funds. And I was like,

00:10:12 can we can we go six bid six point one four trillion in money market funds that again,

00:10:19 they're making five percent nominal but real is two percent when you're seeing earnings

00:10:25 growth in what's the S&P going to make this year, Dennis, two hundred and I don't know

00:10:30 what is it going to be, two hundred and forty two hundred thirty two hundred forty bucks.

00:10:33 Do we know for the year that estimates all over the place, like obviously. But yeah,

00:10:38 I've heard estimates that high. That's a little bit higher. I was thinking two twenty five.

00:10:41 Yeah, twenty five. Yeah. Yeah. I mean, whatever the earnings growth are, I mean, they continue

00:10:46 to go. And I think we're in an environment where, you know, CEOs are just they have such

00:10:50 a pass with, you know, citing the macro uncertain macro environments at the bar low under promise

00:10:57 or deliver. And then, you know, maybe guidance is as bad as they think. And I mean, earnings

00:11:01 continue to go with this amount of money, that earnings growth that comes out pretty

00:11:05 soon. People are going to get tired of making that two percent. And I hate to be this money

00:11:09 on the sideline guy, but the Nasdaq is going to close. We have a couple of days to go at

00:11:15 all time highs. Like, wait, what? Like we're supposed to go into recession and the Nasdaq

00:11:20 at all. Like what? People are going to say, what the hell did I just miss? And I'm trying

00:11:26 not to ramp. But, you know, the other thing is, OK, are we going to recession? And I just

00:11:32 saw some stat seventy five. This is a funny one. Seventy five percent of economists. They

00:11:38 don't know the source of the stat. Seventy five percent economists expect a 50 percent

00:11:42 chance of recession next year.

00:11:44 I got you. That's from the National Association of Business Economics. So I got to thank you,

00:11:49 Mitch. Seventy six percent. I got you. But that's something that I had written down also.

00:11:54 They still see the recession.

00:11:56 So 50 percent chance we go higher or lower from here. Is that the call?

00:11:59 Yeah. Next 12 months is 50 percent or less. So pretty much works every time. Just flip

00:12:05 a coin. Let's see what happens.

00:12:07 So what do you avoid it, Todd? What do you what do you.

00:12:10 I want to tell you this, Charles Changer, but I want to just get into a point here.

00:12:14 Let me just round this point. Let me just round this point. Unemployment better spike.

00:12:19 I mean, these are all the recessions from wide charts back into the 60s, 50s. Every

00:12:24 time we come in a recession, unemployment spikes. I mean, sometimes it happens before

00:12:28 recession. Sometimes it's coincident with recession. We're a long way from unemployment

00:12:33 spiking. So some shock needs to come in to start putting people out of work for the recession

00:12:40 to come in. If you're going to use 60 plus years, the data.

00:12:43 OK, sorry.

00:12:44 What what brings I just want to add to this. What brings that money market money into equities

00:12:49 and back into equities is not the growth potential. It's if rates actually go down, because there's

00:12:56 a lot of people quite comfortable, Todd. Five, six percent. And what I've done in my long

00:13:01 term portfolio, I'm a perfect example of this is I had a lot of preferred stock, which would

00:13:05 be considered equities.

00:13:06 And the most of it I had is consumer staples. I had some of that stuff. I sold all that

00:13:12 stuff a year and a half ago when rates started to go high enough that I'm like, why am I

00:13:16 going to jump into Coca-Cola for a three percent dividend when I can get five percent in a

00:13:22 money market instrument? So I think a lot of that money isn't so much that it was coming

00:13:27 out of growth and hiding for recession, but it was actually coming out of conservative

00:13:32 investments and going to guaranteed safety.

00:13:35 So I don't think it's like the growth. I think it's going to be if interest rates start going

00:13:38 down, that money market yield starts going from five to four and a half to four. Those

00:13:42 consumer staple stocks that have been killed, some of them general mills, have been punished

00:13:47 because there's just been an alternative here.

00:13:50 So if we can get down where it starts to make sense to own those stocks again, that's where

00:13:55 you start to see that money market money start to come back into equity.

00:13:58 So I think, and for myself as well, I will move out of those money market instruments

00:14:04 like and I have all the growth stuff. I didn't touch a lot of the growth. I own Nvidia, I

00:14:08 own AMD, I own that stuff. But I have a balanced portfolio. I'm a little bit older now, so

00:14:13 I'm not building just 100 percent growth like maybe I was doing 25 years ago. I like to

00:14:18 get paid. So I would go back into more dividend type stuff if that yield started to drop and

00:14:23 that would move me back in too. So rates really have to go down for that money market money

00:14:28 to come back into the markets.

00:14:30 I think you're, yeah, I hear you, but there's a lot, I think you're picking specific, highly

00:14:37 defensive sectors within defensive that have been punished where I think you could go back

00:14:42 out as where it seems to be. Look at the rotations happening in real estate and financials right

00:14:46 now. I mean, there's dividends, yeah, but there's also a good amount of value stocks

00:14:50 that are rotating in, not just that the large market cap down into the mid and small that

00:14:55 are also putting capital appreciation, capital growth in there as well.

00:14:59 I mean, yeah, I mean, look at IBM. I mean, Costco is more of a more of a growth stock,

00:15:07 but there's plenty real estate, XLRE, the right names like Prologis and Digital Realty

00:15:13 Trust. I mean, some of these guys, they're paying three, four percent, but they're up

00:15:17 10 percent on the year. You know, there's plenty of value stocks that you're getting

00:15:21 growth, which I think if you're not in the ones that are being pegged like I, you know,

00:15:27 I don't know if that marginal one percent drop in yields relative to what you can make

00:15:32 risk free is enough for people to forego underlying capital appreciation along with the dividend.

00:15:39 Yeah. And if you think that's the case, but there's obviously been a lot of stocks to

00:15:43 like, I mean, we can cherry pick anything as well.

00:15:45 There's been a lot of stocks that have performed well, a lot of stocks have underperformed.

00:15:49 I mean, XLP in the last two years is flat to down.

00:15:52 Yeah. So, you know, if we just grab the bulk of them, XLU has not had a good couple of

00:15:57 years. I mean, if we really look at where XLU is for the last five years, we're at

00:16:00 the same spot we were five years ago. And again, that's because people are buying the

00:16:04 growth and they're hungry for growth. And I think I'm with you. I think there's a catch

00:16:07 up trade in some of these stocks. So I'm not saying I'm kind of with you. I'm just saying

00:16:12 I think it's the interest rates themselves that are going to drive people out of this

00:16:16 stuff. So I think when it's once interest rates actually start to go down, other people

00:16:20 like, oh, crap, my money market's not yielding four and a half anymore. If you have to find

00:16:24 somewhere for a while. Right. I think that's what brings it back in.

00:16:27 Right. Right. No. And that's absolutely fine. I mean, it's you know, and I agree with you.

00:16:32 If it takes that to get that marginal buyer into some of the beaten down growth or value

00:16:38 stocks, fine. But even more so if those rates start coming down and inflation expectations

00:16:43 remain steady, then I mean, that's just going to further propel growth higher. Right. I

00:16:49 mean, if you look at look, check it, look, take a look at this chart. Sure. Screen. Sorry.

00:16:55 It's a couple of couple of steps here. This is my favorite. This is my favorite one. So

00:17:00 this is nominal 10 year yields over value growth. And from 20, the chart even shows

00:17:07 correlation prior to prior to 22. But as yields are going up, value outperforming growth.

00:17:12 And all of a sudden, first couple of weeks to 23 value growth ratio said peace out as

00:17:20 yields kept going higher, major rotation into growth. And it's almost like a little bit

00:17:25 of a tail wagging the dog. And I guess to your point, if rates do drop, I don't think

00:17:30 they need to drop the equivalent of five cuts, you know, next year. But if we get a few,

00:17:36 you know, if we could settle into a three, eight, three, six, 10 year yield, I think

00:17:41 this rotation, this continued outperformance of growth in the value is here. I mean, listen,

00:17:45 I don't want to sound like I'm drinking the Kool-Aid with this exponential age, but you

00:17:49 know, the way the semis are acting, sans NVIDIA, NVIDIA can't break out of 500. But there's

00:17:55 so many other semiconductors that are ripping. Yeah. Yeah. Catch up trade ins in semis themselves.

00:18:02 I mean, AMD is the best example. I mean, in the last two months, it's been one of the

00:18:08 best. I mean, semi equipment, KLA 10 core. I mean, there's 20 of them out there and semis.

00:18:16 I mean, the widespread application of this is real. It's just an increased margins, increased

00:18:21 efficiency. That's why I think valuations are going to continue to go. I think earnings

00:18:26 continue to be good. The CEOs continue to set the bar low and under promise over deliver.

00:18:32 I don't know. I don't want to be a permable. I never want to be accused of that because

00:18:36 I pride myself. I'm a trader like you guys. Like I run money. I've been trading, you know,

00:18:43 not quite as long as you as you guys, Dennis and Joel. But, you know, I could be short.

00:18:48 I could be cash and short an hour and both my money management, you know, certainly my

00:18:52 own stuff. But I don't know. I'm just Dennis, what you're conscious. You're a cautious bull.

00:19:00 I'm a cautious bull, but I'm with you, Todd. I like I'm on the same side as you because

00:19:06 it's hard to be bearish in twenty twenty four rates are actually going to start going down.

00:19:10 So the reason that I've been in a lot of cash and I'm not saying I'm in a lot of cash for

00:19:15 now, like I raised and everybody can listen to show for a while. I sold the majority of

00:19:19 my stocks back in late twenty twenty two when it was overdone and the Fed told us that rates

00:19:24 were going to. So I'm using dips to slowly start to rebuild here. So, you know, and it's

00:19:29 been a mistake of mine to obviously have as much cash as I have. But it really when you

00:19:33 add it all up, I mean, the S&P is back to where it was when I sold it back in twenty

00:19:37 twenty two. So I didn't get a chance to maybe get back in at the very lows on a lot of stuff.

00:19:43 But there's still that opportunity that there could be some good times ahead of the Fed.

00:19:47 If the Fed is on the market side, I'm kind of bullish for twenty twenty four as well.

00:19:51 So people will say, oh, you got so much cash, you must be really bearish. And I'm like,

00:19:55 no, I think we could just have a tough maybe week or two early January to get some profit

00:19:58 taking in there and then you rebuild it up from there.

00:20:01 Yeah, yeah. No, I'm with you. I'm with you. No, so many people. And that's why I just

00:20:07 that's why I continues to ramp is because so many people, I think, were so many astute

00:20:11 investors with firepower of the same opinion. Like, you know, and I just it was more of

00:20:16 a sentiment call in, you know, Q4, twenty two and Q1 of twenty three.

00:20:21 Some call watching interest rates, watching real interest rates, but then really just

00:20:24 the technicals, you know, the ship was so far on the sell side that it was such a crowded

00:20:31 trade. You know, I mean, we, you know, knock on wood, I'm I'm trying to stay humble. I

00:20:36 mean, we got right after that shorts into it. And, you know, we we play both sides of

00:20:41 the market. You really need to play both sides of the market.

00:20:44 All right. We're up against the clock. Todd Gordon, founder of Inside Edge Capital and

00:20:49 trading analysis dot com, breaking it all down for us, as he will in twenty twenty four.

00:20:55 Thanks a lot, Todd. We really appreciate you coming on.

00:20:58 Thanks guys. Appreciate having me. Have a great twenty four. OK, there we are. Good

00:21:03 morning. I caught you off guard. Hi, Misha. How you doing today?

00:21:07 I'm doing great. I hope you don't hear what's behind me. My entire building has a fire alarm

00:21:13 going off. Oh, my gosh. You know, you're going to burn down. Get out of there right now.

00:21:19 And the truth is, is that it knows how hot Mish Snyder has been. So that's what it is.

00:21:25 It's all that's good. Setting the alarm there, man. And I hear the alarm also at my house.

00:21:31 That's how good it is. You know, so the drill. Yeah, I hope you're not scared now, Misha.

00:21:38 I'm scared for you. That's that's dedication. Well, that is free market prep so much. You

00:21:44 won't even leave for the fire alarm. What about when there are fire drills at the bright

00:21:48 office and we would be like, oh, well, they would come in like, you guys got to get out

00:21:55 of here. And we're like, yeah, I had to leave all the guys away from the screen. I like

00:21:59 a hundred day trades on. I'm like, oh, great. Let's start with twenty three. I mean, you

00:22:05 want to talk about one of the hardest working people on Wall Street here. I think she makes

00:22:11 Ryan Dietrich have someone to look up to. But you put out an extensive report for twenty

00:22:18 three. Just just put it. You know, how did you do put a put a quick bow on it? Well,

00:22:26 what was interesting was this was the year really to be a technical analyst. And because

00:22:32 we have quant models, essentially they all got long in in April and caught that big move

00:22:40 in the growth stocks, which many people missed. And then from a discretionary standpoint,

00:22:46 you know, I really kind of just sort of search and stuck the guns with certain things. I

00:22:50 mean, it wasn't like every trade was a winning trade. There were a couple of stocks that

00:22:54 disappointed. But but for the most part, I really stuck to what the plan was for me personally

00:23:01 was to stick with Coinbase. I think the last time I was on, we talked about Coinbase when

00:23:06 it was trading at like seventy five eighty and now it's up close to one eighty. And that

00:23:12 kind of made my year. So, you know, I've really kind of for this year. Didn't over trade.

00:23:21 I let the quants do their thing. And and here we are now. I'm trying to plan for what I

00:23:27 think for twenty twenty four. So Modern Family has been, you know, really to me, always been

00:23:32 my guide. I talk about the Santa Claus rally so far,

00:23:38 and we had quite the lead up and it's continuing. How much more legs does it have? S&P all time

00:23:44 highs and striking distance. So we're going to get there.

00:23:48 Well, it's possible. I think the average Santa rally is about three point seven percent.

00:23:54 We've already had a couple of percent up since there. So we may have some more. I mean, right

00:23:59 now the market is it started out when I woke up early this morning. It was red. Now it's

00:24:04 green. So it seems to me like the momentum and the amount of money that's pouring in

00:24:12 now and possibly can continue in twenty twenty four is showing the signs that this market

00:24:17 wants to go higher. And you can't argue with it. I mean, I read people like Harry Dent.

00:24:21 I don't know. Have you seen his prediction? No, Harry, it's a perma bear. There's not

00:24:27 a lot of perma bears. He's not just going bearish. He's going like

00:24:35 he's going like eighty six percent decline in twenty twenty four.

00:24:39 He's in a bunker. He's in a bunker right now. That's what you're telling me.

00:24:42 Asteroid hits the earth. He's wearing tinfoil. He has a tinfoil hat on right now.

00:24:49 So I mean, apart from the Harry Dent camp, I mean, you look at somebody like Ed Yardani

00:24:54 and he thinks we're going up to like fifty two hundred. So I think you have to really

00:24:58 enter this year, obviously more friendly than not. But, you know, this is you know, and

00:25:04 I know you read the report. So this is coming up the year of the dragon. Right. So I love

00:25:08 to talk about this stuff because it's such a great metaphor and it makes a lot of sense.

00:25:13 Last year was the year of the rabbit and that year was so much like a rabbit.

00:25:19 Yeah. Right. If you stayed back with the hounds, you lost out on the rally. If you ran with

00:25:25 the rabbit, you did really well. And now we're going into the year of the dragon. And what's

00:25:30 interesting is when you say dragon, people go, oh, my God, that's a prosperous thing.

00:25:35 You know, everybody loves dragons. But the truth of the matter is that dragons and this

00:25:40 is a direct quote from Raymond Lowe, who is one of my gurus in terms of really understanding

00:25:47 a whole idea of the Chinese astrology. And I always say, you know, two and a half billion

00:25:51 people can't be wrong that the dragon can be the gate of heaven or the gate of hell.

00:25:57 And I think that's kind of going to be a good theme as we go into twenty twenty four, is

00:26:02 that you have to really look at the signs. And if, you know, we're seeing all this money

00:26:08 coming in and we're seeing things like the Russell 2000 and the retail sector and the

00:26:12 transportation sector continuing to hold and even the regional banks will be a key here

00:26:16 as well, then, you know, we're in the gate of heaven. But if those things start to turn,

00:26:22 regardless of what's going on or any of the tinderboxes that we see in the world with

00:26:28 geopolitics, I mean, people have discounted all of this or the debt cycle comes back to

00:26:33 haunt or any I mean, we're in an election year, which is typically very bullish. But

00:26:38 the two years that weren't were in the dotcom bubble. And in 2008, we have any of those

00:26:44 kind of watershed negative activities. Then we could be entering the gate of hell or we

00:26:48 could be going back and forth. I'm not quite so sure we're going to have this straight

00:26:52 up type of market. Well, seeing how I'm going to have twins this year, that's not too bad

00:26:58 because the year of the dragon brings extra blessings and good fortune. But one of the

00:27:03 things that we're definitely seeing is this exuberance in the market, I'll call it and

00:27:09 it seems like the greed has really gotten to a whole nother level, right? And if I think

00:27:13 about the consumer, because we were talking about this just two or three months ago that

00:27:18 we could see the consumer slow down into the next year. And then I see stats like that,

00:27:24 you know, more than one third of consumers went into debt this holiday season. Things

00:27:30 like this are what really scare me when everyone's getting so optimistic. What do you feel is

00:27:35 going to happen here? Is something going to break or could we just continue with this

00:27:41 optimism?

00:27:42 Well, you know, what's so interesting about the people in this country, consumers in this

00:27:48 country is that we really don't allow a lot of bad news to last too long in terms of our

00:27:54 spending habits. And in fact, we've had the last several months of sort of let's just

00:28:00 go out and spend money anyway. I mean, some people are calling it revenge spending. I

00:28:05 was calling it YOLO, you know, this sort of like you only live once. Let's just go out.

00:28:09 Who cares what's happening? There is actually more money. If you look, you mentioned Ryan

00:28:14 Dietrich, he actually put out that there's actually more money in people's pockets than

00:28:17 one would think. It depends on where you look. I think that the spending habits will change

00:28:24 into 2024. And I think what's going to happen is people are like, OK, we got through that.

00:28:29 We're on all time highs. You know, I still have my money basically safe right now because

00:28:34 there's still a lot of money in bonds and things that are giving yields and that are

00:28:40 relatively safe. And I think we're going to see the consumer go from I'm going to spend

00:28:44 on travel and dining out and my family to more I'm going to spend it on myself. I think

00:28:49 we're going to go into like a vanity year with people. And that's why we're watching

00:28:54 a lot of areas that have to do with fashion and beauty and skin care, weight loss drugs,

00:28:59 you know, all of a sudden everybody wants to get fitter in going into 2024. So I think

00:29:04 this is a thing that we can continue to see. So we may not see the great rise still in

00:29:09 airlines and in restaurants and in some of the leisure like we saw. But I'm looking more

00:29:14 for, you know what, I'm going to take care of myself this year and what stocks are going

00:29:18 to be impacted in that.

00:29:20 What about commodities? You know, that's one thing that could upset the Fed's plan, right?

00:29:26 We've seen some of the commodities come in, some of state elevated levels. What's your

00:29:32 outlook for the commodity in the first half of the year, the second half of the year and

00:29:36 why?

00:29:37 Well, in the first half of the year, I'm really focused on gold and silver and silver has

00:29:42 really been underperforming gold. And I think that could make a comeback. In fact, I just

00:29:46 read that aluminum is at an eight month high. So these industrial metals are starting to

00:29:52 look pretty good. But really, it's the gold that has been telling us, I mean, considering

00:29:58 where gold is right now, that regardless of what's going on, people are looking at gold

00:30:03 as a safety play. And I think that that can continue in the second half of the year. I

00:30:08 mean, this is the super cycle, right? That people say, oh, Mish, how can you be talking

00:30:12 about a super cycle? Look what's happened in commodities. Look what's happened in inflation.

00:30:16 It's come down so much. We're going into disinflation, et cetera. And I think that with all this

00:30:21 talk of the Fed, I mean, my God, I've seen everywhere from three to six or eight times

00:30:27 that they're planning to cut because of issues that they're seeing with the slowdown of the

00:30:32 economy, even though we're not seeing it in the stock market. That could be where the

00:30:36 super cycle comes into effect. And what's really interesting, and I know I sent this

00:30:41 chart with my report, is if you overlay the CPI from 1966 to 1982 to what's happened in

00:30:49 the last 20 years here now, it's almost a complete utter mirror image in that in 1975,

00:30:59 when the rates peaked, just like they did here in 2022, we had this big dive down to

00:31:05 CPI went from like, I don't know, like it was like 10% down to about 2%, just like we

00:31:11 saw here in 2022. Now down as we're heading during 2024, we've gone up from eight or 9%

00:31:17 down closer to the 3%. And then in '77, things started to come back hugely. And so if we

00:31:25 look at that point, what happened? The dollar went down, the Fed got more accommodative,

00:31:33 money started pouring into the market thinking recession was over, and then all of a sudden

00:31:37 geopolitics took control. And I think that that and also whether we're having some people

00:31:43 are talking about shortages, not just in rice, which is global, but even I've heard now that

00:31:48 there's going to be concerns about some of the grains here in this country. So I think

00:31:52 second half could be more, the super cycle comes back when it comes to some of the food

00:31:58 commodities in particular.

00:31:59 All right, Miesha, I hope you don't upset too many people here. But what do you think

00:32:06 about the EV market?

00:32:09 Yeah, well, I think that's the one place I may not want to be in 2024. Now, listen,

00:32:16 long term, we're definitely going towards an EV type of market. But I think what happened

00:32:21 in this year is that people got too overzealous about infrastructure being able to support

00:32:27 EV cars. I mean, yes, you charge at home, but as soon as you get on the road, you have

00:32:32 an issue. There's a glut of EVs, used EVs are not selling. We get the shiny penny rallies

00:32:40 like we saw in NIO launching a new SUV. You know, Tesla, obviously, people are very, very

00:32:48 bullish. But I actually would avoid the EV space. And I'm not necessarily thinking Tesla

00:32:53 is going to go much up past 260. And I think it's got more room to the downside than the

00:32:59 upside at this point. I think that this will not be the year where people will go out and

00:33:03 buy EVs. I think they're going to step back and wait and see what happens with infrastructure

00:33:10 and how realistic. We have a power out. You can't get your car charged. You can't go anywhere.

00:33:15 And we saw that happen this year with storms. So that's why that's not the area I want to

00:33:20 invest in.

00:33:21 I think they're just too expensive, too. I mean, Ford has figured out like, we've got

00:33:26 trouble here. We put out this truck. It's a really cool truck, the Lightning. And this

00:33:31 ticket price is just way too high. They've tried to drop the price and drop the price.

00:33:35 And they're trying to figure out how to do this profit. I mean, Tesla's figured it out.

00:33:39 But I mean, these are not cheap vehicles. And you know, despite the economy humming

00:33:43 along, it's really been like the apples. And you know, obviously, I've been talking smaller

00:33:48 ticket stuff that's really hummed this economy along. I just don't think there's a lot of

00:33:52 people that can afford an $85,000 or $90,000 truck. And they're cool. And I mean, I've

00:33:59 seen the Lightning and the Rivians are awesome, too. But it's expensive. And I mean, interest

00:34:03 rates, we can talk about interest rates going lower and maybe they do eventually afford

00:34:07 those. But interest rates at this moment in time are still very high.

00:34:11 I got a buddy trying to find out and he's trying just to finance a car here. And he's

00:34:14 like, the financing rates are 7.5%, 8% here right now. I mean, that is not the, you know,

00:34:20 and even if they go down to seven or six and a half, it's still not that easy for people

00:34:25 to just get financing on $100,000 vehicle.

00:34:28 Absolutely. I think that's what I'm saying. I think there'll be a wait and see, like,

00:34:32 I'm not going to buy an EV in 2024. Let me see what happens in 2025, if rates come down,

00:34:38 if the infrastructure improves. But right now, that to me is not where I would think,

00:34:43 just like you're saying with your friend with interest rates being so high to put money.

00:34:46 I mean, even with the housing market is kind of so aberrant too, right? So you still have

00:34:51 high interest rates, but you have housing prices go up, but yet home sales going down.

00:34:57 So the line of these areas, that's what I'm saying. I think people are just going to say

00:35:01 the heck with all of that, buying homes, buying cars. Let me just like focus on myself. I

00:35:06 want to look better. I want to feel better. And in this year, that's really where I'm

00:35:11 going to put my money.

00:35:13 Well, that's a great segue into a couple of stocks that you like, COTI and ALF. And

00:35:20 this ALF has just been a beast. So talk to us about those two stocks.

00:35:25 Well, COTI is something that, you know, it's only trading about $12 and a half. And so

00:35:30 I think that's got a lot of upside. That could definitely wind up being closer to a $20 stock.

00:35:36 Yeah. ALF has made a big move. I probably, I mean, listen, we know that certain things

00:35:41 can go totally parabolic. I'm more focused on COTI than ALF. I'm also, you know, watching

00:35:47 stocks like Estee Lauder, although that's a higher level brand. You know, obviously

00:35:52 we've seen great returns in some of the other cosmetic type stocks. I like that. I like

00:35:59 Ralph Lauren. I like, you know, some of the other type of fashion stocks that we've been

00:36:05 looking at, but you know, at this point now, I just, I also really like, by the way, some

00:36:12 of the medical cannabis space. That's another area we've been looking at to just move away

00:36:17 from that for a moment. AbbVie is one of my top picks for 2024 ABBV. And the reason why

00:36:27 is because they are actually using more and more cannabis in terms of their medical research.

00:36:34 And what that tells me, and we had a big rally in cannabis yesterday in general, but I think

00:36:39 if the big farmer starts looking more towards that area, that's going to put a lot of lobbying

00:36:45 pressure on federal regulation to ease up on cannabis. And that stock looks particularly

00:36:53 ripe. It's trading at around 150. I'm looking at around 144 as a good buy opportunity, and

00:36:58 we can really get through this 155, 160. I see no reason why that stock can't fly. And

00:37:03 there's a couple of others in that space to keep an eye on. Altria would be another one,

00:37:08 MO. Believe it or not, even Molson is also getting into recreational beverages with cannabis.

00:37:15 I just feel like this is part of the feel good theme that I'm looking at. So it's not

00:37:22 just makeup and weight loss and fashion, but also like, you know, hey, how can I feel better

00:37:28 too?

00:37:29 Yeah, I think Dempik plays into that, right? And this whole kind of move, right? I think

00:37:33 that we're all trying to better ourselves and consider more mental health. And I think

00:37:38 that this all kind of weighs in to what we're seeing. And we're even seeing developments

00:37:43 in the psychedelics market and things like that, right? I think that you're definitely

00:37:49 seeing a move towards that. So I like the vanity year mentioned. I'm going to have to

00:37:53 put that in quotations there. Definitely keep your eyes on that. And there's a lot of these

00:37:58 stocks that have been hot now. One stock that I've thought about, and it's been kind of

00:38:03 a laggard, but I'm looking for technology stocks that just maybe haven't gone. What

00:38:08 about Roku?

00:38:09 Yeah, well, Roku, you know, by the way, one of the things about this year is that the

00:38:18 whole idea of entertainment, that's another thing, you know, streaming and entertainment,

00:38:23 Roku would be one of those. That also could look pretty hot. I keep an eye on it. That's

00:38:27 another one that's been very volatile. But, you know, I think the theme is, is no matter

00:38:32 what I'm talking about, even though I think we can see obviously any of these stocks out

00:38:37 before me, I just want to quickly put up a chart of Roku here so that I'm looking at

00:38:42 it with...

00:38:43 I can...

00:38:44 Yeah.

00:38:45 There's a couple other media stocks that you like too. Why don't you give us those as well?

00:38:50 Yeah. Live Nation would be another one. I've been watching that stock forever. It hasn't

00:38:57 really done that much. Oh, here's Roku. If you look at Roku on a daily chart, I mean,

00:39:02 obviously it looks good. But if you look at it right now on a weekly chart, it's been

00:39:06 basic since 2022. So we get through like 110 in that stock. That might be something really

00:39:14 worthwhile. And then the other one would be... And I see that a lot of these streaming stocks

00:39:21 now are starting to do merger deals, you know, what they call bundling. I think bundling

00:39:25 could be a theme. Live Nation's another one. It hasn't really been able to get through

00:39:30 95 to 100. That would be another area. So these are stocks that I wouldn't necessarily

00:39:36 be buying right here, but I'm waiting for, particularly if the market stays hot, for

00:39:42 these to be really good catch up stocks. Again, all in the idea of vanity, feel good, going

00:39:49 on with this, you only live once attitude, but with more of a shift into the individual.

00:39:57 Got to ask you about a couple more here. And Triple D wants the Triple D symbol. And I guess

00:40:03 you don't, I don't see, you don't think it's going away anytime soon here. You mentioned

00:40:07 it before. What do you like about 3D systems? Yeah. And I think last time we were on, we

00:40:14 talked about the fact that the intellectual property of 3D systems is tremendous. It was

00:40:19 the original 3D printing stock. And so they have IP and they have been swirling around

00:40:28 with a takeover, Stratasys, they've been talking with all these different deals. You know,

00:40:35 desktop metal would be, they're all involved. And I sniff something coming up in terms of

00:40:42 them being bought out by, I'm not sure who, or maybe they collaborate or merge or what

00:40:47 have you. But 3D systems, I read the CEO started buying the stock at four and a half dollars.

00:40:53 So we started buying the stock at four and a half dollars. Why not? Right? I mean, it

00:40:58 was like, really, could it get much cheaper? And now the news has come out that they're

00:41:02 looking at $18 a share. Last year was $24 a share in terms of a buyout. They rejected

00:41:08 that. Rumor is they may reject the $18 a share, but why do they keep rejecting these higher

00:41:13 prices? Obviously they know something. And so I'm going with it. It's trading at about

00:41:19 seven and a quarter as of yesterday. I mean, I'll probably take some profit. I don't buy

00:41:25 and hold. That's not our thing. We are very much active traders. We get certain parameters.

00:41:30 We take money off, we raise our stops. So I'm looking right now close to a 200 day moving

00:41:36 average resistance, which means I'll probably take some off and then raise my stop. But

00:41:40 yeah, I like that. Gets through eight. I don't see any reason why it can't continue to go

00:41:45 up to maybe 15 or even 20.

00:41:47 And a lot of times what we see in 2024 in the first week of January is a laggard effect

00:41:53 I've been talking about that on the show. And this stock has been a major laggard for

00:41:57 a very long time. So I think it sets up well into January here. If you think some money

00:42:02 might come into some laggards here and obviously, you know, moving, you know, maybe from some

00:42:06 of the leaders that would get some profit taking there, maybe this is a stock that benefits.

00:42:10 Yeah, absolutely. I mean, would it be my top pick? No, but I think it's certainly a fun

00:42:15 stock that could, and like I said, there's definitely a lot of chatter going on with

00:42:21 that company and what I'm reading in terms of takeovers. And of course, like I said,

00:42:25 the CEO himself went out and bought a whole lot of stock.

00:42:29 You got it. All right, Misha, put a wrap on it for us for 2024. Where are you expecting?

00:42:37 We're talking to you for a year from now, an election year, seasonality, put a wrap

00:42:44 on it.

00:42:45 Well, I think that in terms of the small caps, again, you know, like you're talking about

00:42:50 the laggard effect, well, obviously we've seen this incredible rally right here in small

00:42:54 caps. And I think that in an election year, I mean, statistically every year has been

00:42:59 great except for the two that I mentioned, that we probably, though it won't be in the

00:43:04 growth stocks, I think that we'll continue to see more rotation into the small cap area,

00:43:10 into the areas I just mentioned in retail. But I do believe that we have to keep our

00:43:15 eye out for everything switching. I wouldn't necessarily dismiss some of the perma bears

00:43:21 because we could have a credit event. We could have a major situation geopolitically. Things

00:43:26 are not dying down, in which case by the middle of the year, if we can hold 4,600 in the SPY,

00:43:35 to me, that would be a signal that we could see a much major correction. So as long as

00:43:39 we're over 4,600 and as long as we're over about 2,000 in the Russells, we're good. We

00:43:44 break those levels. I would start to get very nervous.

00:43:47 All right. Mee Schneider, Market Gauge, joining us here on Pre-Market Prep. Great information.

00:43:54 We'll talk to you again soon.

00:43:55 Happy New Year, you guys.

00:43:58 Let's move on to our next guest and that's Cameron Dawson. She's CIO over at New Edge

00:44:04 Wealth. We'll bring Cameron in this morning. And hey, Cameron, how you doing?

00:44:09 Hey, guys. What's going on?

00:44:11 Oh, we're just, you know, enjoying the Santa Claus rally here. And I just I want to ask

00:44:17 you, you like to lead all your newsletters off with some kind of musical note, right?

00:44:25 And you're pretty good. You're spot on with it. So I'm going to give you a tough one.

00:44:31 What are you going to be singing? What's the music going to be at the end of 2024? Are

00:44:36 we going to be whistling Dixie?

00:44:39 Well, this week's theme was Tools Invincible, which is the lead off line in it is long and

00:44:50 tooth and soul and hoping for another win. And the reason that I chose the song was because

00:44:56 wanting to really take a look at positioning and sentiment, because I think that's one

00:45:01 of the most important lessons from the last couple of years is just how these swings in

00:45:06 positioning and sentiment have been so very important drivers for the broad market. So

00:45:13 you start 2022 with positioning very stretched, sentiment very stretched. We are invincible.

00:45:19 Nothing's going to stop this rally. Look at all the support that we have. Tech is undying.

00:45:24 And of course, the exact opposite happened. We had a really tough 22 and tech underperformed.

00:45:30 Then the exact opposite happened in 23. We start the year, everybody's underweight. Positioning

00:45:35 is blown out. People are expecting a recession. You can't invest in tech because real yields

00:45:40 are still continuing to go up. And in result is tech blows everybody out of the water and

00:45:45 the market has a great year. And so in 2024, with this idea that the market loves pain

00:45:51 trades, the question that we're continuing to ask is where are we stretched on sentiment?

00:45:56 Where are we stretched on positioning? And what would be the most painful thing for the

00:45:59 market to have to endure in 24 from a rotation standpoint? The conclusion from there is that

00:46:05 sentiment is very stretched. It has room to get more extreme, a little bit more extreme,

00:46:10 but it's not a great timing tool. So what you can observe is that things like AAII are

00:46:17 at their highest levels since for the bull reading is since mid 21. But that doesn't

00:46:22 have a great predictive power over the next three to six months necessarily. And so you

00:46:28 can see it persist for at least a short period of time. Put call ratio probably has a little

00:46:34 bit more room to get even more complacent back to those 2021 lows. But we're in the

00:46:40 territory of extreme greed for things like CNN, fear and greed index. So that should

00:46:44 be on the back of everybody's mind. Positioning the other one probably has a little bit more

00:46:49 room to run as well as far as getting people drawn in. You can look at different measures

00:46:53 of positioning from institutional to retail investors. And what you can see is that we

00:46:58 are overweight, but we're not quite to the extremes that we had back in times like into

00:47:03 21, beginning of 22. So it seems like the pain trade on positioning is still draw people

00:47:08 in. But once you get that combo of sentiment positioning, both being really stretched,

00:47:13 I think that's where kind of regardless of the fundamental story, you should you kind

00:47:18 of have your your ears perked up because it would mean that we all agree on everything.

00:47:22 We're all on the same side of the boat. Yeah. And that's what scares me the most about 2024

00:47:28 is exactly what you're citing, is that the crowded trade. And it feels like, you know,

00:47:34 back in October, we had a lot of stocks. It was a tale of two markets two months ago where

00:47:38 the IWM was sitting near 52 week lows, but Magnificent Seven would not relent and was

00:47:43 holding us up and carrying us. And that has reversed here now where actually the Magnificent

00:47:47 Seven has not really done much over the last month, but it's the other stocks that are

00:47:52 just ramping and going and the bulls have grabbed us by the horns and saying, hey, look,

00:47:56 now we actually have, you know, breadth in this market. We have participation from all

00:48:01 these underperformers and these laggards. And it's like all this put together here

00:48:06 is speaking, you know, like it's going to be as fab as 2024 and interest rates. Powell

00:48:11 even on the side, Powell talking about cutting rates when the markets are sitting up here

00:48:15 at all time high. So there's so many people now that are on the bullish train. And I know

00:48:19 some people on Twitter say everybody's bearish. I don't see it. I don't see a lot of bearishness

00:48:23 anymore. I see a lot of bulls. And this is what scares me a bit. Like I want to kind

00:48:27 of jump in here, too. If rates are going to start going down, it does feel like it should

00:48:31 be good for stocks. Is there a catch up trade maybe still here like the IWM has run? But

00:48:36 could we continue to catch up here? Cameron, I'm lost here. Help me for 2024.

00:48:41 Well, Joe, I love that I put together this meme of I'd like to send an invitation to

00:48:49 the pivot party, because certainly that's where where we all are living right now is

00:48:53 this idea that all of the parts of the market that were being hurt because of the prospect

00:48:59 of higher for longer have seen the biggest mean reversion trades over the last couple

00:49:04 of months. This idea that in a higher for longer world, those with bad balance sheets

00:49:09 are going to have trouble refinancing their debt. Of course, a lot of that was concentrated

00:49:14 in the small caps, mostly the Russell 2000 versus the S&P 600, which tends to skew a

00:49:19 little bit higher market cap, a little bit higher quality. But Russell 2000 has a much

00:49:25 higher percentage of companies that are unprofitable, have floating rate debt and are high yield

00:49:30 borrowers for the fixed rate debt that they have, which just means that refinancing was

00:49:34 going to be a problem. So if all of a sudden you go from, hey, the Fed is saying higher

00:49:39 for longer, we're going to keep rates elevated to now where, you know, you Dennis, you mentioned

00:49:45 that that rates could go lower. I would argue that they've already corrected a great deal,

00:49:52 a great amount in just the past couple of months, two year down, 75 basis points. I

00:49:57 agree. Very short end of the money market rates, for example, have not come down because

00:50:02 they are set by that that that base rate from the Fed. You haven't seen the true reset of

00:50:08 rates. Anything out beyond the three month time period is where you're all you're seeing

00:50:13 the downward pressure on rates. But what matters or what used to matter for valuations, things

00:50:18 like 10 year yields, real yields and even two year yields have already priced in a great

00:50:24 deal of expected cutting. And I think that the question for us in 24, there's two main

00:50:30 questions. The first one is, what would have to happen for the market to be right that

00:50:35 the Fed actually delivers the six and a half interest rate cuts that are priced in? What

00:50:40 is the economic backdrop and scenario that that is a reality? And then the next question

00:50:45 is, if that is a reality, does the market care if it if it doesn't happen and we see

00:50:51 those cuts priced out and interest rates move back up? Will the market have have an issue

00:50:56 with it in 2023? Arguably it didn't. We started the year expecting a four and a half percent

00:51:02 Fed funds rate based on the work function in 2020. At the end of 2023, we end closer

00:51:08 to five and a half percent in a Fed funds rate. So that's 100 basis point delta of higher

00:51:13 rates. And the market in a in maybe years past might have put a downward pressure on

00:51:19 valuation multiples, given that backdrop. But anything but that happened as a few multiples

00:51:25 up 20 percent this year, Nasdaq multiples up over 35 percent this year. So the relationship

00:51:32 that you had with interest rates and valuations completely broke down in 2023 in the benefit

00:51:38 of equities. So it's a question of if we see some of these cuts priced out in 24, will

00:51:43 equities care? I never like to make it this time is different kind of argument. So I think

00:51:49 it's something to watch closely. Cameron, one thing that we look at in 2021, where we

00:51:56 kind of got head over heels in the market and the meme stocks and everything was the

00:52:01 FINRA margin loan loan balance compared to the S&P 500. We'll bring up that graphic here.

00:52:09 It certainly doesn't look like it did in 2007 and 2008. But go over this with this graph

00:52:18 with us and some possible implications. Yeah, I'm watching margin loans is a great way to

00:52:24 gauge risk appetite for investors. When you think that you can juice your returns by taking

00:52:30 on margin debt, it typically means that you have a pretty optimistic outlook about the

00:52:35 future. And we certainly saw that in 2020 and 2021. Margin loans went absolutely berserk.

00:52:41 You saw a huge surge. We almost hit one trillion dollars in margin debt in the peak in late

00:52:46 2021. And what's really interesting is that the peak in that margin debt preceded the

00:52:53 peak in the equity market by just a couple of months. Now, part of the reason that that

00:52:58 was so strong in 2021 is because interest rates were so low because you could borrow

00:53:03 at near next to nothing. You didn't really have a high bar, a high hurdle rate to get

00:53:09 over when you were trying to make you make money off of borrowing and then investing

00:53:13 investing those proceeds from the borrowing. So what we've seen this year is that margin

00:53:18 loans have remained rather subdued, even though the equity market is almost back near all-time

00:53:24 highs. This could be because of two factors, either a because interest rates are high and

00:53:29 so the borrowing cost is higher. So maybe, Dennis, to your point is that is if interest

00:53:33 rates fall and what you're using is your index rate starts to fall, maybe people return to

00:53:37 margin loans. That's another kind of cash on the sidelines dynamic that can be pulled

00:53:43 into this market. But the other aspect and it's a it's a question is that if a lot of

00:53:49 this risk on trading is being replaced by zero date to expiration options activity,

00:53:55 meaning options are another way to add leverage to a portfolio that is not captured in this

00:54:00 metric. And so you've seen this huge surge in not just zero DTE options, but other short

00:54:06 term options and single stock options that have absolutely ballooned over the course,

00:54:12 really since twenty twenty, but have grown a lot in twenty twenty three as well, which

00:54:16 just raises the question of maybe people are getting their margin other places. So the

00:54:20 signal from this may not be as strong as it was in the past, but I think Dennis, to your

00:54:24 point, lower interest rates may be something that spurs people to get back to margin loans.

00:54:29 But this is something that tends to as you can see, it's very correlated to the market.

00:54:33 So people reduce debt when when the equity market is down and raise it when it's up and

00:54:38 a typical chase trade. So what about. Oh, sorry, go, Joe. Ask unemployment. We're staying

00:54:47 economic. I'm going to go into stocks. So go. OK. So, you know, for these causes for

00:54:53 rates to to go down in the recession and everything, unemployment still holding kind of steady

00:55:00 here. When when do you think to justify these rate cuts in twenty twenty four? When do you

00:55:06 think we're going to see some changes in this key indicator? Yeah, we're not really seeing

00:55:11 any distinct signs yet of an imminent deterioration in the employment market. It's been something

00:55:18 that's continued to remain very resilient. I think an important observation from twenty

00:55:24 twenty three is that, yes, we did see an uptick in the unemployment rate, but that didn't

00:55:29 come because demand was weaker. It came because labor supply increased a lot more than expected.

00:55:35 So labor supply went up a lot in twenty three because the normalization of immigration flows.

00:55:41 That's a very benign and actually very happy outcome for the Fed and for markets, because

00:55:47 what you had is that increase in labor supply took a little bit of heat, a little pressure

00:55:51 off of wage growth, wage growth decelerated. You also had the benefit of lower income people

00:55:58 entering into the labor market, a lot of from that from the immigration. So what you saw

00:56:03 as well is things like productivity got boosted because you were growing a lot in a quarter

00:56:08 like the third quarter, but you were seeing an increase in lower income wage growth, which

00:56:13 increased your productivity statistics, which essentially said you're doing more with less.

00:56:17 But part of that was because you're just adding lower income workers into the equation. So

00:56:22 the question for twenty twenty four is that do you continue to see this very healthy dynamic

00:56:27 of an increase in labor supply with no decrease in labor demand? And what we're seeing

00:56:33 is no signs yet of a distinct deterioration in demand. There are arguments that around

00:56:40 the surface or around the edges that you are seeing some deterioration, things like temporary

00:56:47 workers, some hours worked kind of around the margins in different areas. But overall,

00:56:52 we would argue that this still remains a resilient labor market. And what's interesting is that

00:56:57 some of the leading indicators in the labor market are actually pointing to higher wages

00:57:03 going forward, not a continued deceleration in wages. This data is highly volatile, so

00:57:08 it's way too soon to make the argument that we're going back into a wage acceleration

00:57:12 period. But watch the NFIB small business survey indicator about the plans for wage

00:57:19 increases. Like I said, it's volatile. It bounces all around, but it it has typically

00:57:25 led wage growth by about six months and it's turned back up again. Now, it could plunge

00:57:31 next month and then this whole argument goes away. But if it continues to moderate higher,

00:57:36 kind of climb higher, this would be a really good indication that maybe some of these ultra

00:57:41 benign golden path kind of dynamics that helped us get a slightly less hot wage market without

00:57:50 seeing truly painful higher unemployment, that maybe some of that dynamic changes in

00:57:56 23 where we stay in a tight labor market, wage growth returns. And then what does the

00:58:01 Fed do? I mean, this is the question here and the Fed has always been data dependent,

00:58:07 which is why I was surprised when Powell basically pivoted without having the data really to

00:58:13 say, hey, you know, like they've talked about 2 percent inflation, 2 percent inflation.

00:58:16 It's not there yet. But then he's coming and saying that we feel like we've done enough

00:58:21 here. Is the Fed looking at, you know, potentially what you're looking at here and actually just

00:58:28 saying that maybe we need to stay ahead of the curve here instead of falling behind it

00:58:32 now? And the pivot is for the reason some of those that you're citing, that maybe there

00:58:36 is some weakness here that the economy could be experiencing going into 2024. Why do you

00:58:41 think Powell pivoted?

00:58:43 I think there's one of three reasons. The first reason could be is that they're looking

00:58:48 at soft data, but soft data has been wrong all year. So soft data is your sentiment,

00:58:54 your survey data. So think of comparing something like a PMI, which is asking you how you're

00:58:59 feeling about your business to industrial production. What did you actually make? That's

00:59:03 hard data, soft data, PMIs, similar things, retail sales, hard data, consumer sentiment,

00:59:09 soft data. Soft data has been weak really since 2022, even arguably since mid 2021.

00:59:18 And hard data yet has held up. So if you look at the leading economic indicators, they've

00:59:23 had one of their longest streaks of being negative since the great financial crisis.

00:59:28 Part of that is because if you go down the list, it's all the soft data that's weak,

00:59:32 but the hard data is holding up. So maybe the Fed is looking at soft data and going,

00:59:36 oh, we're really concerned that maybe something is going to be brewing. So that's the, you

00:59:41 know, that there may be looking at the wrong data. The other one is that they're seeing

00:59:45 something that we're not seeing. Maybe that they have insight into data that we don't

00:59:49 see yet and they're seeing more weakness. That could be reason number two.

00:59:54 Reason number three is that, and this is maybe the less popular one that probably we should

01:00:00 discuss though, is the interplay with the treasury and how much pressure was on the

01:00:06 treasury in refinancing debt. The fact that they have increased the bill issuance so much

01:00:13 in order to keep liquidity strong, in order to keep that coupon debt lower. The fact that

01:00:19 you were seeing interest rates or interest expense start to climb and be projected to

01:00:25 hit a trillion dollars in a short period of time. The fact that it was going to be larger

01:00:30 than the defense budget. I know we like to think of the Fed and the treasury as completely

01:00:35 separate entities and they will argue of course that they of course are completely separate

01:00:40 entities. But it's really hard to, as you said, Dennis, to make the argument that based

01:00:46 on the data that you can actually confirm the weakness of what Powell is saying that

01:00:52 justifies this kind of cutting of rates. Of course, they're talking about it from a deceleration

01:00:57 and inflation and a look at real rates, but that's a very narrow look at things like financial

01:01:03 conditions, which are now at their easiest level, easier than when they started hiking

01:01:08 rates. So there could be some interplay here in the fact that lower interest rates take

01:01:14 a lot of pressure off the treasury when they're having to refinance what is going to be a

01:01:19 big huge wave of refinancing in 2024 for them. And it reduces the interest rate bill. And

01:01:26 maybe there is some relation to why pivot? Why now with this data? And that interplay

01:01:34 is something that will probably never be acknowledged, but something that shouldn't be lost on any

01:01:40 of us. Okay, Cameron. So putting your wrap on a year from now, is it going to be more

01:01:47 like a Jay Giles house party or an REO speed wagon ride in the storm out?

01:01:57 I mean, go for deep tracks. I like it. I like it. Maybe it's a talking heads road to nowhere.

01:02:06 We could have this market where we see this pull everybody in momentum melt up kind of

01:02:17 trade kind of like early 2018 that we had. Everybody's rushing to get into the market.

01:02:24 And then we acknowledge that earnings estimates have actually been cut recently. They're not

01:02:29 necessarily going up, meaning that they're probably well calibrated, assuming no big

01:02:34 upside surprise to efficiency and that type thing from AI. But valuations as of this morning

01:02:43 are at 19.8 times forward earnings. That's a very full valuation for the S&P 500. Of

01:02:48 course, for the equal weight, not nearly as stretched. So when we see valuations hit those

01:02:53 levels, when we see sentiment positioning kind of hit those peaks, what we could have

01:02:58 is an environment where maybe we hit a new all time high, but then we consolidate and

01:03:03 digest and consolidate and digest. And over the course of the year, that creates a lot

01:03:07 of opportunities for being tactical, for trending positions, adding to positions. But we could

01:03:12 find ourselves in a state where both the bulls and the bears are right, where we get confirmation

01:03:18 of both sides in this wonderful road to nowhere.

01:03:21 Okay. We have Cameron Dawson, New Edge Wealth, joining us here on Free Market Prep. Frequent

01:03:27 guest, absolutely love your input and we'll be dialing you up again real soon.

01:03:34 Wonderful. Thanks, guys. Happy New Year.

01:03:36 All right. Our final guest of the day is Gene Munster, managing partner at Deepwater Asset

01:03:43 Management. Who better to talk about tech stocks than Gene Munster. Gene, thanks for

01:03:49 coming on this morning. I know we're doing some short term talking and trading here,

01:03:54 but thanks for coming on today.

01:03:56 Question for Dennis. When you talk about that strength at the end of the last few days with

01:04:02 those stocks that have been up, do they tend to reverse then? We're managing assets at

01:04:09 Deepwater. We don't do the window dressing game, but we know it goes on. Is the general

01:04:15 trajectory that then the first two weeks of the next year, they sell off?

01:04:20 Yeah, that's exactly what usually occurs. You see the leaders become the laggards and

01:04:24 the laggards become the leaders for the first week or so. And then it starts separating.

01:04:28 And if there's a story there that continues to drive, the AI story is going to drive 2024.

01:04:32 That can take effect. But like the January effect that I talk about and some other people

01:04:36 talk about a different type is that laggards to leaders and leaders to laggards.

01:04:39 Because if you've had weakness in certain stocks because they've underperformed, then

01:04:44 you get the tax loss selling at the end of the year. Come the calendar turn, that is

01:04:47 all gone. And sometimes you see people coming and actually buying those stocks.

01:04:50 And the opposite occurring is that if you're sitting on a huge gain in Nvidia and you have

01:04:55 the window dressing here, maybe money managers coming in to buy here at the end.

01:04:59 But if you're sitting on a big gain, you don't want to book that gain three days before

01:05:02 the end of the year and have to pay that tax. Coming up here, you want to push that tax

01:05:07 bill a year from now. So if you just wait the three days, that's when you usually sell.

01:05:11 So what often I see happen is that those stocks that have been really strong show weakness

01:05:16 the first week of January as some of that selling, the profit taking actually starts

01:05:20 to occur. And sometimes you get a follow through in 2023. It was a follow through year where

01:05:24 the laggards just continued to lead the entire year. I don't know. I can't predict that

01:05:29 far out. I'm not very good in the prediction game, but I do think you'll see some more

01:05:32 weakness in the Magnificent Seven come the calendar turn. But, you know, that's why

01:05:36 we've got you on the show, because I want to know what the longer game is here for some

01:05:39 of these stocks, because maybe that weakness, if we do see some in the Magnificent Seven,

01:05:43 is going to be another opportunity to get into some of these names.

01:05:46 Gene, what are your thoughts? Let's just start out with the AI talk, because we know

01:05:49 you follow this story very closely. Nvidia has been the leader. There's been some catch

01:05:53 up trades with some of the other chips and some of the other semis have started to catch

01:05:57 up. What are your thoughts on AI going into 2024 and your outlook for AI into 2024?

01:06:04 So big picture is that we think we are in the early stages of what's going to be an

01:06:09 incredible bull market over the next three to five years driven by AI. And if we're going

01:06:14 to use the 2000 analogy, we're in 1995. It's not 1990. There was a nice run from call 92

01:06:20 to 95, but the real substance of the run was 95 to 2000. We think we're going to see that

01:06:25 in the next three to five years. 2024 is going to be, we think, ultimately a positive for

01:06:32 AI, but there's going to be some mixed commentary around the topic. One side is that investors

01:06:39 have been thinking about AI now for a year and are going to want to see some substance

01:06:43 in terms of actual contribution to revenue. And we think that there are a couple of companies

01:06:47 that are going to benefit from that. Ideally, or most likely it's going to be Microsoft

01:06:52 and Meta, but the broader Mag 7, I mean, obviously NVIDIA has a benefit, but that's been obvious.

01:06:59 But the broader Mag 7, we're probably not going to see the real lift in terms of contribution

01:07:04 from AI. And that I think is going to kind of be one of the stories in 2024 is just this

01:07:10 people wanting to see more. And I think it's a head fake. I think that any sort of softness

01:07:15 on that, this is going to play itself out in the first half of the year, really is going

01:07:19 to miss the point. The narrative could evolve to AI is going to take longer than we thought

01:07:23 to have an impact on our lives. But these are step function changes and it's hard to

01:07:27 predict when each step function is going to happen. Therefore you need to be positioned

01:07:31 for it. And so just the biggest picture, we're optimistic about AI. If we're going to put

01:07:37 in context of other trends, we'd put electricity on a scale of one to a hundred at a hundred.

01:07:43 We'd put AI at 90 or 95. We'd put the internet at 50 and we put smartphones at 30. And so

01:07:49 this is something that we're aggressively investing in. We have a deep water frontier

01:07:53 tech ETF that is aggressively investing in all of these themes on the companies that

01:07:59 are sub 20 billion in market cap, which we think is going to be one of the big areas

01:08:05 of performance. Dennis, you talked about kind of areas of weakness becoming areas of performance.

01:08:11 The smaller companies did not perform well in 2023. We think that they will perform well

01:08:15 in 2024. And so big picture here to answer your question is we're optimistic that we're

01:08:21 going to come into a bubble like atmosphere in AI. And I would just mention is that you

01:08:28 want to be nimble because if you stay too long for that bubble, there could be some

01:08:33 consequences. Gene, give us a couple of those smaller names because everybody knows the

01:08:37 Nvidia it's talked about nonstop and media multiple times every single day. They know

01:08:42 that the stocks, but a couple of those smaller names that might be overlooked, you know,

01:08:47 as potential AI plays here going into the next few years.

01:08:50 Well, I'll give you one is that in terms of CrowdStrike, for example, I think is an underappreciated

01:08:56 name. It's moved up significantly, but still is going to be a consolidated. We think they're

01:09:02 going to make acquisitions around improving their security. We think there's going to

01:09:06 be a consolidation of vendors. And we think that AI as a piece of cybersecurity is going

01:09:10 to be increasingly important. There's a story headline today in the New York Times that's

01:09:14 in the head of the tech section in the Wall Street Journal related to what's going on

01:09:20 and just kind of the states using AI as an advantage China versus the US and the impact

01:09:28 of AI on cybersecurity. And there are companies like CrowdStrike that's going to have a profound

01:09:33 impact. There's another company that probably most have not heard of that's using AI. It's

01:09:37 a company called NewBank. They're the fastest growing bank in Latin America. They're using

01:09:42 AI to really change how banking is done historically in Latin America, very different than the

01:09:47 United States. You want to open up a bank account, you set up an appointment, you go

01:09:51 in, there's probably an armed person at the front door. It takes weeks to get your account

01:09:56 open. But what NewBank is doing is allowing AI to better assess credit risk and allowing

01:10:05 basically a massive portion of unbanked population in Latin America to become banked. And so

01:10:12 that'd be another one. NewBank typically falls below most people's radar, but those are the

01:10:16 types of companies that we're investing in our ETF.

01:10:18 Gene, I know you're cautious a little bit at the beginning of the year and then things

01:10:23 turned and I know one stock that you participated in was Meta. The least they talked about the

01:10:30 Metaverse, the better they're doing. Talk about them and with expectations to some of

01:10:35 these smaller stocks. Tremendous run, not yet at all time high. Give us your thoughts

01:10:40 on Meta.

01:10:41 So Deepwater is still invested. We've been investors for maybe the last year and a half

01:10:48 or so. And the basic theme is that this is one that's ultimately going to have an opportunity

01:10:55 related to artificial intelligence. And it's going to be one company, as I mentioned, that

01:10:59 we're probably going to see a benefit from AI in 2024, which may seem a little bit odd.

01:11:05 The reason is that they're coming out with AI powered products. Some of those would be,

01:11:10 for example, a celebrity chat bot that they previewed a couple of months ago, but also

01:11:14 just using AI to better understand and understand the usage, understand how people engage in

01:11:24 their products and how this presents itself is that we could see a maintaining or even

01:11:28 an acceleration in their daily active users. Effectively, the algorithm that sucks you

01:11:34 in is going to get more predictive and more powerful with AI. It's something that I struggle

01:11:40 with as an investor in Meta, that these products are going to become more addictive. But the

01:11:46 way it presents itself is that this step up that we've seen in their daily active user

01:11:50 growth, which has been remarkable, over 2 billion people use their products every day.

01:11:55 There's seven and a half, call it billion people in the world. That is remarkable. And

01:11:59 I think that the growth has been 1, 2, 3% year over year, hard number to grow, but we

01:12:05 think that they can maintain that pace if not accelerate it. So we're still optimistic

01:12:09 on Meta. We're still investors in Meta. And on top of that, you get the optionality around

01:12:14 the Metaverse. And I think the concept of the Metaverse and the concept of spatial computing,

01:12:19 that's Apple's language around it, is going to get a boost early this year, early next

01:12:24 year when Vision Pro from Apple comes out. I think the Meta product, if I was going to

01:12:30 put a scale on that, I'd say the Vision Pro I demoed it last summer, it's a 10 out of

01:12:35 10. It's incredible. I think Meta's best product or Quest product is probably a five.

01:12:39 So it's not even close to how good Apple is, but it will be viewed as the kind of the product

01:12:46 of the Metaverse. This is again from their reality labs segment that gets almost no respect.

01:12:52 I believe that what Meta is doing will effectively be like the Android of the spatial computing

01:12:59 world where there's a large population that cannot afford a $3,500 headset and Meta, even

01:13:04 though it's subpar, it's still good enough. So we're still optimistic on Meta.

01:13:10 For years, you argued that Apple was not given a fair valuation and it finally caught up.

01:13:17 And now it has a high valuation and people are trying to justify it. I mean, Barron's

01:13:23 over the weekend here. I mean, is it going to come from, I mean, they don't do many acquisitions.

01:13:28 It's just going to come from content. Is it going to come from medical? I mean, you cannot

01:13:33 deny the revenue declined over an Apple. What's going to pull it up by its bootstraps?

01:13:39 Well, one of the shifts that we had talked about is this shift from a tech company, which

01:13:47 can be boom and bust to a consumer staple company. And we talked a long time about those

01:13:52 multiples about Clorox and Coke and Procter and Gamble kind of in the mid twenties. Those

01:13:56 companies typically don't grow much, low single digits. And that's kind of what Apple's growth

01:14:01 has been to now. Apple trades at a slight premium called high twenties versus the mid

01:14:06 to low twenties for some of those consumers. So you're exactly right, Joel, is that that's

01:14:10 happened. And then what's the case going forward is that there's, I know when I talk about

01:14:15 this AI gold rush that we expect in the next three to five years, I think Apple is one

01:14:20 that has been quiet in terms of what they're doing. And we think that we came out with

01:14:24 our predictions this year for 2024. And one of them is that Apple is going to come out

01:14:28 with their own foundation model, and that is going to compete with open AI or Gemini

01:14:33 or Claude from Anthropic. And so this is something that would power Siri. So to answer your question,

01:14:39 I think just them showing something where Siri becomes more conversational, more AI

01:14:44 like, I think is something where the multiple expands on Apple. So the AI piece really hasn't

01:14:50 been reflected in Apple's multiple. And I think that that can move the multiple higher.

01:14:54 A second piece is that they can do things to increase revenue. Now, when you're a $380

01:14:58 billion company, it is hard to grow revenue. And most of the streets looking for around

01:15:02 5% revenue growth. Like you said, it's been down for the past four quarters, but looking

01:15:07 forward typically 5% is where analysts are at. I think that that is exceedable in part

01:15:13 because what I think will be a growing optimism from investors around spatial computing and

01:15:18 vision pro it's going to take a few years. It's too expensive today, but this is a lights

01:15:23 out game changer in terms of how people interact with tech, specifically bringing a digital

01:15:29 world and the real world together. And then separately, there's other things that are

01:15:32 going on at Apple. There are things related to health and wellness. Like you mentioned,

01:15:36 those are small, but there's still orbiting around something in automotive. That's a huge

01:15:41 opportunity, whether it's autonomy, whether it's a car. I think that there's other layers

01:15:46 that they can levers that they can pull to get revenue and earnings to accelerate too.

01:15:51 I think when you put the combination together of multiple expansion as they talk more about

01:15:56 AI next year, along with more optimism on these other businesses that they can get into,

01:16:01 I think you can see the stock continue to climb here.

01:16:05 Is there any way that AI turns out to be a bust? Meaning that like, and I'm with you,

01:16:12 I'm a big AI fan too, but I know I'm just trying to take the counterpoint here. Is there

01:16:16 a way that we have just overhyped AI that it turns out to not be this game changing

01:16:23 thing for everyone and people just reject it? And sometimes it's annoying, I have like

01:16:28 Bing popping up to me trying to talk to me and I'm annoyed by it, trying to talk to me

01:16:32 in a conversational piece. Is there a way that the consumer or is there a way just that

01:16:36 the economy itself just could actually not benefit from AI and that it doesn't become

01:16:42 the next internet?

01:16:45 Before we agreed at Deepwater on our language about where this is going to go and what the

01:16:51 next three to five years and all that optimism, we thought hard about that topic is, could

01:16:56 this be a head fake and maybe not even a head fake, could it just be impactful, but not

01:17:01 as game changing as the market is currently expecting? And what we went back and looked

01:17:06 at is the pace of adoption of consumer behavior. And when there's been times when you've had

01:17:12 this essentially three standard deviation to the right adoption curves, these parabolic

01:17:20 adoption curves. And if we look at what's happened with chat GPT over the last year,

01:17:25 that's in that camp going from call it no users to over a billion people have tried

01:17:30 it in a year, it's the fastest growing product ever. The last time we saw those similar types

01:17:35 of growth, not as powerful, but close to it was what happened with Facebook 2008, 2009,

01:17:42 2010, or the iPhone had some acceleration going from 10, 15% to 60, 70% growth. And

01:17:50 then the time before that was the internet. And of course, the internet adoption, that

01:17:55 was something where you just had to try it. Probably many reviewers are probably too young

01:17:59 to remember what it was like, but it's one of those where it just became part of pop

01:18:04 culture and you had to give it a try. Of course, it took a decade for the internet to realize

01:18:09 its full search to realize its full potential. And in the case of AI, we look at Dennis that

01:18:15 those first that one year adoption curves, what they look like. And this has a lot of

01:18:20 similarities to these other seismic shifts. On top of that, as far as the rejection from

01:18:26 humanity, humans, I think by nature are lazy. And when you create products that allow you

01:18:36 to be entertained easily, think about streaming or think about Tik Tok and social media, these

01:18:42 products that allow you to do things more easily. I think that AI, obviously when it

01:18:48 comes to especially information workers, there's a massive opportunity. And for consumers too,

01:18:54 for businesses to streamline processes, make it easier for humans to be lazy. And then

01:18:59 for consumers too, you think about the potential for all these little, we'll call them paper

01:19:04 cuts of life, where you have to talk to your garbage company or renegotiate a bill with

01:19:09 your cable provider or schedule, trying to find what the best flights are and try to line

01:19:17 up schedules. All these little things can be solved with personalized AI. And I think

01:19:23 that what we've seen in the past year around these foundation models give some substance

01:19:28 to this idea that this is in fact going to exceed expectations.

01:19:32 A lot of talk in the markets, companies adding shareholder value and Google's been a good

01:19:38 stock. It's had a nice run, not back at all time high, but what about spinning off YouTube?

01:19:45 What would be the pros and cons of maybe unlocking some shareholder value and spinning off YouTube

01:19:51 or any other segments of the company?

01:19:54 Well, the pro is that it really simplifies the story. Right now, if you think about Google's

01:19:59 business, just really rough numbers here, YouTube is just over 10% of revenue. About,

01:20:06 call it 55% of Google's revenue is directly search related. Advertising accounts for 90%,

01:20:13 that includes some YouTube in there too. But just generally think of this as call it a

01:20:17 55% search business and call it 10, 15% is YouTube.

01:20:22 And the benefit of spinning out YouTube is right now YouTube's valuation, as you mentioned,

01:20:26 Joel, is being depressed because there is some concern from investors, not Deepwater,

01:20:32 we do own Google because we think they're going to be one of the one, two, three winners

01:20:35 in AI, is that there's some concern that ultimately that their search business becomes impaired

01:20:42 because of generative AI across the internet from other competitors, not just Bing, but

01:20:47 it can be other foundation, could be Grok from Elon's ex company, things like that.

01:20:52 So the benefits of spinning YouTube out is it just allows investors just to look at this

01:20:59 and not have to worry about the challenge of, I guess, the search impact on the business.

01:21:07 And separately is there's another thesis at Deepwater that we have related to the creator

01:21:12 economy, that this, I mean, essentially it's user generated content. We've seen this obviously

01:21:17 grow over the last 15 years, but I think we think we're going to see an acceleration in

01:21:21 the growth because of some of the AI tools that are going to make it easier to build

01:21:25 content to build it automatically, to take a brand and to accelerate and multiply the

01:21:31 brand with generative tools. And so we see an opportunity that specifically

01:21:37 in the, within YouTube, that they're going to accelerate their adoption from that. So

01:21:42 that's kind of the bull case. The bear case for spinning it out is that a lot of the learnings

01:21:49 that Google is doing in AI related to search is also benefiting the YouTube business. And

01:21:54 since AI is so critical to Google, they've been talking about it since 2017, being the

01:21:58 foundation of Google, it would be, I think, a mistake to spin it out.

01:22:03 Okay. Last topic here. Just want to get your thoughts on the EV market because it's been

01:22:10 Tesla's market, it feels like forever here now, Ford has struggled obviously with their

01:22:15 Lightning product. We have Rivian as an emerger here, but just bring it to Tesla because they

01:22:20 have been the leader and bring it to the EV market overall. Some people rejecting, I mean,

01:22:25 the car is somewhat or expensive. What are your thoughts here in 2024? Is Tesla continue

01:22:31 to be the leader here and can they grow into the multiple that they've got?

01:22:36 So in our predictions that we released today, we came out with our, how we did in 2023.

01:22:42 Welcome anybody to check them out at Deepwater MGMT. And one of our predictions at the end

01:22:48 of last year was that this is going to be a difficult year for EVs. And that's exactly

01:22:52 what happened. And we, what we saw, especially in the last four months of the year is large

01:22:57 auto companies backing off of their ambitions related to EV because demand has been slow.

01:23:03 Could be because of some consumers just getting tired of the theme. It could be because EVs

01:23:07 typically are 25% more than a typical car. Interest rates are high, probably more the

01:23:13 latter, but a combination of both. And to answer your question, Dennis, how I think

01:23:17 about the EV market more broadly, I think it's going to be another difficult year, but

01:23:22 there's one vector to it that is a little bit surprising that I'm out of consensus on.

01:23:28 I actually think Tesla is going to maintain their US market share and their market share

01:23:32 has been going down from caught 100% to now it's kind of high 50% as more of these competitors

01:23:38 come on. Because you see for the six major auto companies last few months saying they're

01:23:43 slowing what they're doing in EVs. I think it gives Tesla an opportunity to actually

01:23:47 maintain share, even though it's a hard thing to do. And so I think that to say it a slightly

01:23:55 different way, I'm more optimistic about Tesla today than I've been over the last three years.

01:24:01 And the reason is that I think that what their competition is doing is a grave mistake. And

01:24:07 I believe that, Joel, you've heard me talk about this. I think big brands that have been

01:24:12 around for a hundred years will be around in 10 years, but are going to be a fraction

01:24:16 of what they are today. And I just see this opportunity that the traditional car makers

01:24:22 have presented to Tesla by backing off. And it's ugly today, but absolutely this is going

01:24:30 to be an opportunity for Tesla to maintain share at a fast growing market.

01:24:34 All right. We've been on the line. Gene Munster, Deepwater Acid Management, maintaining his

01:24:42 bullish thesis on tech. Gene, it's always great to have you on and look forward to dialing

01:24:48 you up in 2024.

01:24:49 Thanks, guys. Happy New Year.

Premarket Prep 2024 Stock Market Outlook Special - Gene Munster, Cameron Dawson, Todd Gordon, Michele “Mish” Schneider

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