Latest / The Financial Exchange Show / The $1 Trillion Chip Race: Are Semiconductor Investors Headed for Tears?

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The $1 Trillion Chip Race: Are Semiconductor Investors Headed for Tears? · The Financial Exchange Show

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Speaker 1: Zada and Mark Fandetti.
1:10
Speaker 2: It's Chuck, Mark and Sucker with you here, and as
1:14
Speaker 2: we kick things off, I gotta tell you this is
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Speaker 2: one of the weirder market days that I've seen, just
1:21
Speaker 2: because honestly, like today, like nothing makes any sense. I
1:26
Speaker 2: gotta be honest with you. The SB five hundred is flat,
1:30
Speaker 2: it's it's down three points. It's fine. Dow's up three
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Speaker 2: hundred and one points point six percent. Fine, uh Nazdak
1:36
Speaker 2: composite down sixty one points. Finally, go all that makes
1:40
Speaker 2: sense on its face. Tenure Treasury not really moving a lot,
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Speaker 2: down one point six bases points to four point four
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Speaker 2: to seven. Okay. Also fine Dollar Index up point zero
1:51
Speaker 2: three percent at ninety nine twelve. Again fine. It's when
1:56
Speaker 2: you start getting into commodities that, like, all of this
1:59
Speaker 2: just kind of looks strange to me. You got gold
2:03
Speaker 2: off sixty nine dollars an ounce, despite treasuries coming in
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Speaker 2: a little bit. It says a little bit strange to
2:11
Speaker 2: see a move in gold like that. I don't quite
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Speaker 2: get where it would be coming from. On top of it,
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Speaker 2: you've got it happening the same time that crude oil
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Speaker 2: West texts intermedia down three dollars and seven cents a
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Speaker 2: barrel on Iran earlier this morning saying hey, here's like
2:27
Speaker 2: we've in Iranian TV station said here's a here's you know,
2:31
Speaker 2: the draft of the memorandum of understanding that we have
2:35
Speaker 2: the US just came out. The White House specifically denied
2:38
Speaker 2: it now about a half hour ago. But either way,
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Speaker 2: oil's down three ten a barrel right now, and oil
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Speaker 2: and gold have basically been negatively correlated during this whole cycle.
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Speaker 2: As oil goes, the opposite move has typically been what
2:52
Speaker 2: we've seen from gold. So the fact that they're moving
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Speaker 2: in conjunction today is kind of like, Okay, I don't
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Speaker 2: really get what's going on there. On top of that,
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Speaker 2: you take a little under the hood, Semiconductor stocks are
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Speaker 2: getting popped today by the tune of, you know, two
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Speaker 2: and a half percent, the best performing stuff. If you
3:09
Speaker 2: take a little get you know, broad sectors and themes,
3:12
Speaker 2: you've got airlines. Okay, that makes sense in the context
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Speaker 2: of oil. Home builders up two percent, even though the
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Speaker 2: tenure is not really moving at all. You've got uh again,
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Speaker 2: this one's been good. Like anything space related has been
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Speaker 2: going nuts for the last couple of weeks. Just because
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Speaker 2: of excitement about the spacexipo, and then you've got defense,
3:35
Speaker 2: consumer staples, and healthcare holding this thing up. So it's
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Speaker 2: it's just it's a weird rotation today. It's not like
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Speaker 2: bad or good. It's just kind of, man, the correlations
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Speaker 2: that have been in place for the last month or
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Speaker 2: two aren't present today, and so it makes you wonder like,
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Speaker 2: is there some kind of regime shift afoot in markets
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Speaker 2: and how they might move in the near future, or
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Speaker 2: is this just Hey, it's one day. It's towards the
3:59
Speaker 2: end of the month, and generally when you get towards
4:02
Speaker 2: like end of month trading, there's only two more trading
4:05
Speaker 2: days in the month after this. If you're looking at
4:08
Speaker 2: markets too closely, like you end up, you know, just
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Speaker 2: being missing the fact that it's end of month, and
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Speaker 2: sometimes there's just end of month rebalances that are taking effect.
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Speaker 2: And it could be related to that.
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Speaker 3: Because it's a good reminder that correlations are just averages.
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Speaker 3: We often use a scatterplot, and a lot of you
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Speaker 3: have seen them. We use that tool a lot internally
4:26
Speaker 3: because it's a neat way of visualizing them and the
4:28
Speaker 3: points never lie along a straight line. When you say
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Speaker 3: something is positively correlated. There are always oddball pairings, and
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Speaker 3: there's no law, and not that you say there was,
4:38
Speaker 3: but there's no law that says, for example, stocks and
4:40
Speaker 3: bonds have to move in different directions simultaneously. They do
4:44
Speaker 3: on average over long periods, which is why bonds are
4:47
Speaker 3: helpful diversifier. Not part of the suite of examples that
4:50
Speaker 3: you gave, but it's a common one. But there are
4:53
Speaker 3: some days when they move together and it's inexplicable. A
4:56
Speaker 3: researcher would just say, well, that's noise. It doesn't really
4:59
Speaker 3: convey it anything. It's just sort of random.
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Speaker 2: Yep, yep. So that's what's going on in markets, and
5:06
Speaker 2: we will continue to watch things, but just kind of
5:09
Speaker 2: a weird day, quite honestly. Let's take a look at
5:13
Speaker 2: this piece from the Wall Street Journal, the Idaho chip
5:18
Speaker 2: maker that doubled to a trillion dollars in forty eight days. Now,
5:22
Speaker 2: normally you think about Idaho and chips and you're thinking potatoes.
5:25
Speaker 2: Am I doing russets? Am I doing some red some yellows?
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Speaker 2: You know what. Nope, we're talking about Micron technology, which
5:32
Speaker 2: gotta be honest, until this story, didn't know that they
5:36
Speaker 2: were based in Idaho. No, I know, know, I like
5:39
Speaker 2: you hear Micron Technology, you're not thinking you know Idaho,
5:43
Speaker 2: Like certainly, I'm not good for that. But they went
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Speaker 2: from five hundred billion dollars to a trillion dollar valuation
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Speaker 2: in forty eight trading days, which is by far the
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Speaker 2: fastest that we've ever seen. Now, some of the companies
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Speaker 2: mentioned here, you know, did this, you know, eight, ten,
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Speaker 2: twelve years ago, So you could make a case like, well,
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Speaker 2: should you adjust for inflation, and guys, it doesn't matter.
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Speaker 2: Inflation hasn't been high enough over this time period for
6:07
Speaker 2: this to be you know, relevant. When we talk about
6:10
Speaker 2: the next closest, we're talking Tesla in Broadcom, which did
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Speaker 2: in like two hundred and fifty days each. So it's
6:15
Speaker 2: not like, you know, it's not like Micron Technology edged
6:19
Speaker 2: them out by a day or so. This is an
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Speaker 2: absolutely massive run up in this stock in a short
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Speaker 2: period of time, and quite honestly, I think that the
6:31
Speaker 2: I think that this is kind of selling Micron short
6:34
Speaker 2: in terms of what they've done, just talking about this doubling,
6:38
Speaker 2: because when you actually look at the market cap of
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Speaker 2: this thing, the doubling is just the latest This was
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Speaker 2: a stock that a year ago last April was worth
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Speaker 2: seventy nine billion dollars and now is north of a trillion.
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Speaker 2: So it's like the doubling is capturing the last piece.
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Speaker 2: The fact is, even before that doubling happened, it had
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Speaker 2: doubled two and a half times over the previous eight
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Speaker 2: months leading up to this, and then found another doubling
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Speaker 2: within itself. It's kind of remarkable, and the fact is, look,
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Speaker 2: if you want to know why this is happening, yes,
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Speaker 2: it is reminiscent. As I've said with semiconductors for a while,
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Speaker 2: semiconductor boom's always in the same way with investors in tears.
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Speaker 2: I don't know when this will end, but it will
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Speaker 2: at some point. What I can tell you is the
7:35
Speaker 2: reason that the stock is moving in this fashion is
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Speaker 2: that in the last couple of years they're trailing. Twelve
7:42
Speaker 2: month revenue has already gone from fifteen billion dollars to
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Speaker 2: sixty billion, So they've quadrupled their revenue since Q two
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Speaker 2: of twenty three. And the projections are pretty rock I'm
7:55
Speaker 2: not gonna say they're rock solid, because you never know
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Speaker 2: that they're going to realize them. But the projections are
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Speaker 2: for significant additional revenue and profit growth over the next
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Speaker 2: year or two, and if you believe that to be sustainable,
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Speaker 2: then you would be dumb not to slap a trillion
8:10
Speaker 2: dollar valuation on the company because it sure looks like
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Speaker 2: they are going to be able to print money. But
8:17
Speaker 2: that's how it always looks for semiconductor companies, right before
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Speaker 2: cheap international competition comes in, floods the market with supply
8:27
Speaker 2: and has everyone screaming what happened by the time it's
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Speaker 2: all done.
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Speaker 3: Yeah, I think you have to buy into these I'll
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Speaker 3: just call them valuations because behind the scenes, that's what's happening.
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Speaker 3: The valuation is going up. Incomes gone up to so
8:42
Speaker 3: that's not necessarily an unreasonable thing, but valuations arising, and
8:48
Speaker 3: that only makes sense if you think investment in I'll
8:51
Speaker 3: just say AI stuff. I mean data centers and the
8:55
Speaker 3: things necessary to get a data center up and running
8:58
Speaker 3: and to maintain it. If that clip will continue. If
9:03
Speaker 3: your answer to that is yes, then you're buying into
9:06
Speaker 3: some assumption about growth increasing overall growth as a result
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Speaker 3: of AI. So there are a lot of assumptions piled on.
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Speaker 2: Walk me through why am I buying into overall growth increasing,
9:18
Speaker 2: Well don't you have?
9:19
Speaker 3: Okay, So, if I'm a shareholder, I care about free
9:24
Speaker 3: cash flow. I guess I also care about one level
9:27
Speaker 3: up cash flow from operations, right, sure, because I want
9:30
Speaker 3: to make sure that my company can sustain itself, yes,
9:33
Speaker 3: reinvesting over time without necessarily having to tap capital markets.
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Speaker 3: And in order for that to happen, the orders have
9:39
Speaker 3: to keep coming.
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Speaker 2: Oh so you're talking about overall growth of the company. Yeah,
9:45
Speaker 2: well you could, you know.
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Speaker 3: Yeah, No, I was a little slippy. I was a
9:48
Speaker 3: little slippery there. You're right to pin me down, And
9:50
Speaker 3: I'm not sure that I want to take a stand.
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Speaker 3: I think I think it's contingent on both Chuck, I'm
9:55
Speaker 3: not saying it's not applausible. Scenario one that you justifies
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Speaker 3: the the remarkable appreciation of Micron and the remarkable run
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Speaker 3: up and semiconductors generally, But you cannot deny the investment boom,
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Speaker 3: over capacity, economic slow down, investment bust. I'm probably missing
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Speaker 3: a few points in that. Fun in that, in that,
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Speaker 3: in that, in that a cyclical, I want to say periodic,
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Speaker 3: you know, function, but whatever, But you can't deny that history.
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Speaker 2: No, And this is the thing like I I pulled
10:32
Speaker 2: for the last twenty five years. Give me, what's a
10:36
Speaker 2: company that you think of as like boring Procter and Gamble, Right,
10:39
Speaker 2: like Procter and Gambles.
10:40
Speaker 3: Any consumer boring staples?
10:42
Speaker 2: What else is? What else is not boring? But what
10:45
Speaker 2: else is just you know, more consistent. Like let's even
10:48
Speaker 2: look at Microsoft. Okay, it doesn't have like that capex
10:51
Speaker 2: heavy history, just as an example. So since two thousand,
10:56
Speaker 2: here is what we've seen from I got Walmart, micro Soft,
11:00
Speaker 2: and Procter and Gamble. If we take a look at
11:04
Speaker 2: Walmart first, their free cash flow in April of ninety
11:07
Speaker 2: nine was around four billion dollars. The lowest it ever
11:10
Speaker 2: got was negative thirty seven million, and it's a pretty
11:13
Speaker 2: steady upward arching slope to around twelve billion dollars in
11:18
Speaker 2: free cash flow. That so it looks like I'm looking
11:20
Speaker 2: at it's that trailing twelve months doesn't specify, but I'm
11:23
Speaker 2: pretty sure it is. So Walmart pretty consistently okay, even
11:28
Speaker 2: despite you know, all these different business cycles, their free
11:32
Speaker 2: cash flow is pretty consistently marching upward. It's the exact
11:35
Speaker 2: same picture with Procter and Gamble, going from you know,
11:38
Speaker 2: around two billion dollars in free cash flow in late
11:42
Speaker 2: ninety eight up to fifteen billion today, steady aty, just consistent. Microsoft.
11:48
Speaker 2: Remember the big thing about you know, conventional tech companies,
11:51
Speaker 2: they're software companies, they're not capex heavy. Microsoft has gone
11:55
Speaker 2: from around eight billion in free cash flow in December
11:58
Speaker 2: of ninety nine up to north of seventy billion dollars today.
12:02
Speaker 2: And it's been again through multiple cycles, just a steady,
12:06
Speaker 2: you know, move up. Yeah, there's some little wiggles, but
12:08
Speaker 2: that's it. You then take a look at Micron, and
12:11
Speaker 2: this is the story of semiconductors. Micron back in two
12:16
Speaker 2: thousand had free cash flow of eight hundred and eighty million,
12:20
Speaker 2: then in the tech bubble, went down to negative six
12:22
Speaker 2: ninety nine, then before the financial crisis, up to one
12:25
Speaker 2: billion in free cash flow, then down to negative two
12:28
Speaker 2: point three, up to two point four, down to six
12:32
Speaker 2: twenty six, up to three point two, down to two
12:35
Speaker 2: point nine, up to eight point five, down to six
12:39
Speaker 2: point one. It's just that this is what happens the
12:41
Speaker 2: semiconductor stocks, is their free cash flow. It doesn't consistently
12:46
Speaker 2: move up. It is these massive boom bus cycles that
12:49
Speaker 2: you just see every three to five years of the
12:51
Speaker 2: technology evolves and the next thing comes and they have
12:54
Speaker 2: to retool and reshift. And this is why, despite what
12:58
Speaker 2: you're seeing now, at some point there will be a
13:01
Speaker 2: reckoning for all of these companies. It could be next week,
13:04
Speaker 2: next month, next to your next decade. I don't know,
13:08
Speaker 2: but this is what we see with semiconductor companies that
13:10
Speaker 2: makes them funnally different, fundamentally different from a lot of
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Speaker 2: other ones. Let's take a quick break. When we return,
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14:49
Speaker 2: Peace and market Watch. Goldman Sachs hikes S and P
14:52
Speaker 2: five hundred target and rejects bubble era comparisons the I'll
14:55
Speaker 2: say you having to read the piece.
14:57
Speaker 3: Uh.
14:58
Speaker 2: Goldman has raised its year end S five hundred target
15:01
Speaker 2: to eight thousand from seventy six hundred. And look, here's
15:06
Speaker 2: the big thing is if you look at the very
15:11
Speaker 2: simple math in terms of earnings projections forward earnings per
15:16
Speaker 2: share on the S and P five hundred now discordinated
15:19
Speaker 2: data from your Deni research now up to three hundred
15:22
Speaker 2: and fifty eight dollars and eighty two cents. This is
15:26
Speaker 2: also your daily reminder that you can't actually invest in
15:29
Speaker 2: an index. You can invest in products that track it,
15:31
Speaker 2: but you can't actually buy the index in it of itself.
15:35
Speaker 2: But if you take three hundred and fifty eight and
15:38
Speaker 2: you stick a twenty two x multiple on it, you
15:40
Speaker 2: get to seventy nine hundred, which is again a twenty
15:43
Speaker 2: two x multiple. Is you know the multiple we were
15:45
Speaker 2: trading at last year. Goldman's not doing anything crazy here
15:48
Speaker 2: other than hey, earnings estimates have continued to move up.
15:52
Speaker 2: And remember that's forward estimates. Now, if you project out
15:55
Speaker 2: ahead based on where earnings estimates are going, you'll say, okay,
15:58
Speaker 2: they'll be a little bit higher, and so yeah, if
16:00
Speaker 2: you want to slap a twenty two x multiple on that,
16:03
Speaker 2: that's your path to s and P. Eight thousand. This,
16:05
Speaker 2: by the way, is the same thing that I laid
16:07
Speaker 2: out about a month ago, where I said, look this
16:11
Speaker 2: market right now, you need to have two different thoughts
16:13
Speaker 2: in your head. One is the price of oil is
16:16
Speaker 2: going to be all over the place, in kind of nuts,
16:18
Speaker 2: and we're approaching some problems in the US later this
16:22
Speaker 2: summer if there's no resolution to the hormones issue. But
16:25
Speaker 2: at the same time as we're all grumbling about gas prices,
16:28
Speaker 2: earnings estimates are going through the roof because of what's
16:31
Speaker 2: going on with AI and also you know, the energy sector,
16:35
Speaker 2: and so if you are missing that because you're too
16:39
Speaker 2: nervous about what's going on in oil, then hey, again,
16:42
Speaker 2: your path to getting the seventy five hundred on the
16:44
Speaker 2: SMP was getting back to last year's multiples with this
16:47
Speaker 2: year's earnings. And that's what we've done. That's why the
16:49
Speaker 2: S and p's at seventy five hundred right now. So
16:52
Speaker 2: I'm saying this because you have to hold two conflicting
16:57
Speaker 2: thoughts in your head that are kind of uncomfortable to
17:00
Speaker 2: So one, yeah, like, it's really not fun paying four
17:03
Speaker 2: fifty a gallon for gas, but that's not what's driving
17:07
Speaker 2: the market since early April.
17:09
Speaker 3: If you have strong conviction about that, then you probably
17:12
Speaker 3: also believe the economy is likely to tip into i'll
17:14
Speaker 3: just say recession, even though that may not be officially declared.
17:18
Speaker 2: Which piece the If you have strong conviction.
17:20
Speaker 3: About high gas prices pure you're really worry if you're
17:22
Speaker 3: one of those folks that's really worried about worst case
17:25
Speaker 3: scenarios for oil and what high gas prices on a
17:28
Speaker 3: prolonged basis we do to the economy. Then your target
17:31
Speaker 3: multiple for the s and by target multiple we just
17:34
Speaker 3: mean the price earnings ratio is exactly what it sounds like.
17:37
Speaker 3: It's P divided by E. If you believe the right
17:39
Speaker 3: P divided by E is equal to twenty, then you
17:42
Speaker 3: can just move the E from the left hand side
17:46
Speaker 3: to the right hand side and multiply the twenty by
17:48
Speaker 3: your E, and that's how you get the P. We're
17:50
Speaker 3: just doing a little bit of like algebras of fraction. Yeah,
17:52
Speaker 3: and then I know we're saying P divided by E
17:54
Speaker 3: equals twenty. That's all we're doing, right, Like you said, Sure,
17:57
Speaker 3: but maybe your right P toe because you're more pessimistic
18:02
Speaker 3: in terms of potential outcomes of this whole morass in
18:06
Speaker 3: the Middle East, your right P upon E is fifteen.
18:10
Speaker 3: That gets you to a very different conclusion. So there
18:12
Speaker 3: are there, there are some optimistic assumptions baked into a
18:15
Speaker 3: seemingly anxious mathematical exercise like this, there.
18:19
Speaker 2: Are and I think during times where there are things
18:24
Speaker 2: happening that we've never seen before, I think you have
18:26
Speaker 2: to remain flexible. I think you have to remain open
18:28
Speaker 2: to things evolving in different ways. And look, I'll be
18:33
Speaker 2: the first to tell you I'm nervous about the potential
18:35
Speaker 2: for higher gas prices later this summer based on pormu's
18:39
Speaker 2: still not being open.
18:40
Speaker 3: So does a p of twenty one sound high, low,
18:42
Speaker 3: or about right to you? Where do you do you
18:44
Speaker 3: think of the world in that way?
18:45
Speaker 2: I have no idea if it's high, low, or right.
18:48
Speaker 2: All I know is that the market is sticking that
18:51
Speaker 2: on it right now. And in order for me to
18:54
Speaker 2: be able to say yes, I need to either go
18:57
Speaker 2: heavier or lighter. I need to have some kind of
19:00
Speaker 2: conviction that that higher oil prices will translate into problems.
19:07
Speaker 2: And the reason that I don't get there, quite honestly,
19:09
Speaker 2: is because even with everyone grumbling about higher gas prices
19:13
Speaker 2: right now hasn't made any problems in the broader US
19:16
Speaker 2: economy that we've seen. There's still are issues that are
19:19
Speaker 2: present in the US economy. They're not new as a
19:22
Speaker 2: result of higher energy prices. Yet could they get there? Yeah, maybe,
19:27
Speaker 2: but we'll have to see to take a quick break here.
19:30
Speaker 2: When we return, We've got the trivia answer in Wall Street.
19:32
Speaker 1: Watch, bringing the latest financial news straight to your radio.
19:43
Speaker 1: Every day. It's the Financial Exchange on the Financial Exchange
19:47
Speaker 1: Radio Network. Tell out full Wall Street Watch tracking the stocks,
19:53
Speaker 1: the data, and the headlines driving markets so far today
19:57
Speaker 1: right here on the Financial Exchange Radio Network.
20:00
Speaker 4: The markets are mixed and sort of just hanging out,
20:03
Speaker 4: with oil prices pulling back after a rand State broadcast
20:08
Speaker 4: are reported at at seen a draft of the framework
20:11
Speaker 4: four talks with the US that includes a return of
20:14
Speaker 4: traffic through the Strait of for moves within a month. However,
20:18
Speaker 4: in agreement has not yet been finalized. Right now, the
20:21
Speaker 4: Dow is up about four tenths of a percent, SMP
20:25
Speaker 4: five hundred is flat down by three points, the Nasdaq
20:29
Speaker 4: is down about a tenth of a percent. RUSS two
20:32
Speaker 4: thousand up modestly only a tenth of a percent. Ten
20:36
Speaker 4: year Treasure reeled down two basis points at four point
20:39
Speaker 4: four to six percent, in oil pulling back three percent,
20:43
Speaker 4: trading right around ninety dollars a barrel after yesterday's milestone
20:48
Speaker 4: stone for Micron Technology, with a chip maker surpassed one
20:53
Speaker 4: trillion dollars in market valuation. Micro Run stock today is
20:56
Speaker 4: now edging higher. Meanwhile, cybersecurity companies z Scaler offered a
21:00
Speaker 4: cautious outlook for its full fiscal year, citing increasing memory
21:04
Speaker 4: costs and changes to its sales leadership. Shares are plunging
21:08
Speaker 4: by thirty one percent. Elsewhere, Abercrombie and Fitch posted mixed
21:13
Speaker 4: fiscal first quarter results and weaker than expected guidance after
21:16
Speaker 4: the conflict in the Middle East weighed on sales. However,
21:20
Speaker 4: that stock is jumping by eleven percent. Boeing up by
21:23
Speaker 4: nearly two percent after CEO Kelly Orkberberg said that the
21:28
Speaker 4: company has met requirements set by the FAA to increase
21:31
Speaker 4: production of its seven thirty seven Max aircraft to forty
21:35
Speaker 4: seven jets per month. And after today's close, we'll see
21:39
Speaker 4: more earnings from Marvel Technology and Salesforce. I'm Tucker Silvan.
21:44
Speaker 4: That is Wall Street watching. In the previous segment, we
21:46
Speaker 4: asked you the trivia question which movie beat Top Gun
21:49
Speaker 4: Maverick in worldwide box office returns back in twenty twenty two,
21:53
Speaker 4: and that would be Avatar Way of the Water. And
21:57
Speaker 4: Mike from Rochester, New Hampshire is our winner today taking
22:01
Speaker 4: on the Financial Exchange Show.
22:03
Speaker 2: Teacher.
22:04
Speaker 4: Congrats to Mike. We play trivia every day here on
22:07
Speaker 4: the Financial Exchange See complete contest rules at Financial Exchange
22:11
Speaker 4: Show dot com.
22:13
Speaker 2: Mark, we got a PC here from the Boston Globe.
22:14
Speaker 2: It's titled The Math and Mindset of Retiring Early. Let's
22:20
Speaker 2: talk about the math. The general convention that people use
22:25
Speaker 2: to figure out, hey, how much can I take out
22:26
Speaker 2: of my portfolio? It's the four percent rule, the idea that, hey,
22:30
Speaker 2: if you take four percent out of your portfolio on
22:33
Speaker 2: an annual basis, historically, in most the vast majority of scenarios,
22:39
Speaker 2: you don't run into any problems with running out of money.
22:44
Speaker 2: The key pieces to keep in mind about the four
22:47
Speaker 2: percent rule. Number one, when it was developed, which was
22:50
Speaker 2: was it early nineties that that was developed early to
22:53
Speaker 2: mid nineties, I think sounds about right.
22:55
Speaker 3: That's somewhere in the financial we should give Bergen credit.
22:57
Speaker 3: I think he's the financial advisory sort of real that
23:00
Speaker 3: that was sustainable. Yeah, it sounds about Ray Chuck.
23:03
Speaker 2: So number one, like when it was originally developed, didn't
23:06
Speaker 2: include the last you know, thirty plus years of returns. Well,
23:09
Speaker 2: in the last you know, fifteen years, the returns have
23:11
Speaker 2: been pretty good. The previous fifteen not so good, So
23:14
Speaker 2: you know, take that for what it's worth. The other piece,
23:18
Speaker 2: there was a big period during the twenty tens where hey,
23:21
Speaker 2: one of the key components of the four percent rule
23:23
Speaker 2: is acid allocation. Looking at a sixty forty portfolio split
23:26
Speaker 2: between equities and bonds. During most of the twenty tens,
23:30
Speaker 2: your bonds yielded next to nothing, and so that was,
23:32
Speaker 2: you know, a risk that was present that wasn't when
23:35
Speaker 2: this was developed. But the other pieces, Hey, this looks
23:39
Speaker 2: at a thirty year retirement, and if you're talking about
23:43
Speaker 2: retiring early, especially with some of the advances that we're
23:46
Speaker 2: already seeing in medicine and some of the ones that
23:49
Speaker 2: quite honestly, like if you look at some of the
23:52
Speaker 2: stuff that's in like phase one and phase two trials
23:54
Speaker 2: right now, that is just absolutely insane. Like, I gotta
24:02
Speaker 2: be honest, there's a really good chance that normal life
24:06
Speaker 2: spans could like stretch by anywhere from like five to
24:09
Speaker 2: seven years over the next generation with some of the
24:11
Speaker 2: stuff that we're seeing. And I know, people be like, oh, like,
24:13
Speaker 2: what's five to seven years like that is a huge
24:16
Speaker 2: move in life spans.
24:18
Speaker 1: That's fantastic.
24:20
Speaker 2: While we're on this topic, I know this is a
24:22
Speaker 2: complete divergence here. Actually, let's let's finish this and then
24:25
Speaker 2: we'll talk.
24:25
Speaker 3: Can I correct myself? I said Burgin, I should have
24:27
Speaker 3: said Benjin with Benill.
24:29
Speaker 1: No.
24:29
Speaker 2: I didn't correct you either. Is it benj R? Bengen Bengen?
24:34
Speaker 2: I think Been.
24:36
Speaker 3: I watched his I'm sorry if anybody knows him be
24:39
Speaker 3: Eng and I think you're right.
24:41
Speaker 2: I think he would just nod along and say thanks
24:43
Speaker 2: for giving me credit. Guys, Well he deserves it. He does.
24:47
Speaker 2: But the big thing is when you're talking about in
24:48
Speaker 2: early retirement, you might be talking about you know, a
24:51
Speaker 2: forty to forty five year you know window that you
24:54
Speaker 2: got to cover, and your expense is also evolved throughout
24:57
Speaker 2: that retirement as well. You've got to cover health insurance.
25:00
Speaker 2: It's more heavily before you get onto medicare, there's you know,
25:03
Speaker 2: all kinds of additional spending that you got to account
25:05
Speaker 2: for as you get into later years where you might
25:08
Speaker 2: need more medical care. So it is something where you
25:11
Speaker 2: do have, you know, kind of some things that you
25:14
Speaker 2: need to play around with. And the big thing is
25:17
Speaker 2: the Armstrong Advisory Group. This is what we do all day,
25:21
Speaker 2: every day. We take a look at people's retirements. We
25:25
Speaker 2: assess the specific circumstances that they are trying to retire,
25:29
Speaker 2: into all of the different family dynamics, health, you know, age,
25:34
Speaker 2: all these different pieces, and you get beyond just hey,
25:38
Speaker 2: pull four percent and you're gonna be fine. And instead
25:40
Speaker 2: it's this is what you do at this age. Here
25:44
Speaker 2: are the accounts that you start withdrawing from. Then you
25:46
Speaker 2: progress to these. Here's how you minimize taxes over the
25:50
Speaker 2: course of time. If leaving an inheritance is important, here's
25:53
Speaker 2: how you minimize taxes over multiple life spans. Because you
25:57
Speaker 2: don't want to just leave your kids this huge tax
25:59
Speaker 2: time bomb that you're you know, leaving for them. And
26:02
Speaker 2: so these are the considerations that you need to take
26:04
Speaker 2: into account. To schedule an appointment with someone from the
26:08
Speaker 2: Armstrong Advisory Group, call eight hundred three nine three four
26:12
Speaker 2: zero zero one again eight hundred three nine three four
26:16
Speaker 2: zero zero one. You can also go to Armstrong Advisory
26:19
Speaker 2: dot Com, click the get started button and then you
26:22
Speaker 2: can schedule time to chat with someone there. Again, that
26:24
Speaker 2: phone number is eight hundred three nine three four zero
26:28
Speaker 2: zero one.
26:29
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
26:32
Speaker 1: registered investment advisor. Nothing in the ad or in any
26:34
Speaker 1: Armstrong guide a specific financial, legal, or tax advice. Consult
26:37
Speaker 1: your own financial tax into state planning advisors before making
26:40
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
26:43
Speaker 1: advisory services.
26:45
Speaker 2: I want to just talk about again when you're talking
26:47
Speaker 2: about the uh, like the advances that we're seeing in
26:50
Speaker 2: medical stuff right now. Did you guys happen to cover
26:54
Speaker 2: the Eli Lilly Phase one trial yesterday?
26:57
Speaker 4: Uh? No.
26:59
Speaker 2: So here's the deal. Eli Lilly, about maybe a year
27:03
Speaker 2: or two ago, they bought a drug from a company
27:08
Speaker 2: called Verve for a billion dollars. The drugging it in
27:12
Speaker 2: the pipeline is called VERV one oh two and basically
27:15
Speaker 2: it's a gene editor for a gene in your liver
27:18
Speaker 2: called PCSK nine. And what they found is that a
27:23
Speaker 2: single shot of this one infusion reduces bad cholesterol by
27:33
Speaker 2: sixty two percent across their patients in this phase one trial.
27:37
Speaker 2: And they're pretty sure. Again, they don't know because like
27:40
Speaker 2: the trial's only gone on for so long. They're pretty
27:44
Speaker 2: sure that because you are editing that gene within your
27:47
Speaker 2: body at again the genetic level, they're pretty sure that
27:51
Speaker 2: it's going to be maintained at that lower level of
27:54
Speaker 2: cholesterol for the rest of your life with a single infusion,
27:58
Speaker 2: No statins you need to take, no you know, eat
28:01
Speaker 2: this just hey, that's it, is what they're pretty sure of. Now,
28:07
Speaker 2: if you know anything about the science of like what
28:10
Speaker 2: causes you know, heart attacks, like basically anything any bad
28:14
Speaker 2: cardio whatever, bad cholesterol is at the absolute core of it.
28:20
Speaker 2: And these are the things. I point this out, not
28:23
Speaker 2: because like I know enough to be able to say, like, oh,
28:26
Speaker 2: I here, this is the stuff that is in the
28:29
Speaker 2: pipeline now that we are talking about seeing is being
28:34
Speaker 2: able to eliminate causes of problems before they happen, as
28:38
Speaker 2: opposed to needing to address them and treating them after
28:42
Speaker 2: they do. And I just think that we are on
28:47
Speaker 2: the verge of some miraculous stuff that between this and
28:52
Speaker 2: now what we're seeing with you know, all the peptides,
28:54
Speaker 2: the glp ones and things like that. The other one
28:57
Speaker 2: that came out that I'm pretty sure is also a
28:59
Speaker 2: lily prop last week, did you see the results from
29:03
Speaker 2: their new GLP one that they were testing that pretty
29:06
Speaker 2: much the it was producing the same kinds of results
29:11
Speaker 2: as the whatever the band surgery is called the gastric
29:16
Speaker 2: bypass or whatever it is that typically like is only
29:19
Speaker 2: done in extreme situations. It was showing like median weight
29:23
Speaker 2: loss of like seventy two pounds. I mean, it's we're
29:28
Speaker 2: truly getting into some some very wild stuff that it
29:34
Speaker 2: really has the potential to transform society from having all
29:40
Speaker 2: of these issues related to you know, weight and die
29:44
Speaker 2: and this and that into things that aren't really problems
29:49
Speaker 2: going forward. And it's it's kind of wild that we
29:53
Speaker 2: are getting there. Obviously, we'll have to see, you know,
29:56
Speaker 2: what comes out in terms of you know, potential side
29:58
Speaker 2: effects and this and that, because it's always you solve
30:01
Speaker 2: one problem and you create another. But I gotta tell you,
30:07
Speaker 2: I know that I hear from people all the time like, oh, like,
30:10
Speaker 2: you know, I can't believe like we're having to go
30:12
Speaker 2: through like all this stuff today. And I keep saying, look,
30:14
Speaker 2: this is the single best time in history to be alive.
30:17
Speaker 2: And I don't know why anyone would want to live
30:20
Speaker 2: in any time other than this, because you're simply discounting
30:24
Speaker 2: all the problems that we didn't we don't have to
30:27
Speaker 2: deal with that used to be issues, and the problems
30:29
Speaker 2: that we do have to deal with now so many
30:32
Speaker 2: of them are going to be solvable in our lifetimes
30:34
Speaker 2: because of the technology that we're developing, and I continue
30:38
Speaker 2: to be really optimistic as a result of that. So
30:41
Speaker 2: I thought this was very cool. Let's take a quick
30:44
Speaker 2: break and when we come back, we'll do a little
30:45
Speaker 2: bit of stack roulette.
30:47
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30:50
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30:53
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30:56
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31:00
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31:49
Speaker 2: I'd like to start off stack rule it if that's okay.
31:52
Speaker 2: Mark piece in Bloomberg is titled ordinary Americans deserve a
31:59
Speaker 2: fair Shot, and it's talking about how you've got these
32:01
Speaker 2: big IPOs that are coming this year, and when they
32:04
Speaker 2: do go public, the ones that have had access to
32:08
Speaker 2: the VC funds over you know, the past, you know,
32:10
Speaker 2: decade or so are going to be the ones who benefit.
32:13
Speaker 2: In most Americans will be left out. Few things. The
32:17
Speaker 2: first is, let's say that you want all Americans to
32:20
Speaker 2: be able to like participate in venture capital. The first
32:24
Speaker 2: problem is that the venture capitalists do not want you
32:26
Speaker 2: to do that. They don't want to be trying to
32:29
Speaker 2: manage like who has twenty dollars invested in this company
32:32
Speaker 2: and who's got one hundred? Like they're not record keepers
32:36
Speaker 2: at that scale.
32:37
Speaker 3: They don't need the capital either.
32:39
Speaker 2: No, and this is the second part number two. If
32:41
Speaker 2: you get more supply of money coming into these firms
32:45
Speaker 2: early on. All you're doing is driving valuations up early
32:48
Speaker 2: on such that the benefits won't actually be able to
32:51
Speaker 2: accrue once you hit public markets anyways, because you have
32:55
Speaker 2: already bought in it higher valuations because of supply and demand.
33:00
Speaker 2: Number three, most people don't realize that most IPOs suck. Okay,
33:06
Speaker 2: the vast majority of them never end up going anywhere
33:10
Speaker 2: except down. You know, think about all of the high
33:13
Speaker 2: flying ones from the last you know, decade or so
33:15
Speaker 2: that people were excited about. You remember the Ubers of
33:18
Speaker 2: the world, You remember the Teslas of the world. You
33:22
Speaker 2: totally forget about the blue Aprons of the world. You
33:25
Speaker 2: totally forget about the go pros of the world. You
33:28
Speaker 2: totally forget about the beyond meats of the world. You
33:32
Speaker 2: totally forget about the rivians of the world. These are
33:35
Speaker 2: companies that iPod with a ton of fanfare, and they
33:38
Speaker 2: went splat flat on their face for basically their entire
33:42
Speaker 2: publicly traded life. So I think it's important to realize, yes,
33:48
Speaker 2: like some IPOs do win, the vast majority of them
33:52
Speaker 2: don't really go anywhere, and in fact end up being
33:55
Speaker 2: horrible investments once they make it to public.
33:57
Speaker 3: Marcat of a lottery ticket for people that can afford
34:00
Speaker 3: the risk. Very discerning sophisticated institutional investors making investments with
34:05
Speaker 3: very specialized venture capital and other types of private equity
34:09
Speaker 3: managers will say again, Chuck, they've got plenty of capital,
34:11
Speaker 3: several hundred billion dollars in so called dry powder money
34:14
Speaker 3: that they've raised. Moneies that say, pension funds and endowments
34:20
Speaker 3: have committed to them, but they haven't yet called because
34:22
Speaker 3: they haven't found a way to deploy it. Yeah, they
34:24
Speaker 3: don't want like, like you said, they don't want our money.
34:26
Speaker 3: We couldn't give it to them if we wanted to know.
34:27
Speaker 2: They don't want my one hundred dollars coming Like they're
34:31
Speaker 2: gonna be like what do I do with this? Like
34:32
Speaker 2: send it back to him, you know, put in the mail.
34:35
Speaker 2: What do you got? Mark?
34:37
Speaker 3: We talked in the first hour about inflation being one
34:41
Speaker 3: battle after another sometimes in the nineteen seventies it was
34:44
Speaker 3: certainly that way, and you can get things come and
34:46
Speaker 3: at you out a left field. I referenced the disappearance
34:50
Speaker 3: of anchovies off the Peruvian coast.
34:52
Speaker 2: I stole that example.
34:54
Speaker 3: A famous economist, Alan Blinder uses that example or he
34:58
Speaker 3: did in his research on the Great Inflation of the
35:00
Speaker 3: nineteen seventies. Lo and Behold, Bloomberg publishes an article just
35:04
Speaker 3: in the last hour El Nino threats prompt Peru to
35:09
Speaker 3: extend halt on anchovy fishing. Peru has extended a halt,
35:13
Speaker 3: the article says, on anchovy fishing off the country's coast.
35:16
Speaker 3: It will remain in place until June tenth. There's apparently
35:21
Speaker 3: a bumper crop for a certain very limited period every summer.
35:25
Speaker 3: And what I didn't explain well is that they grind
35:28
Speaker 3: these suckers into fish meal, which is used to feed
35:31
Speaker 3: at least in the nineteen seventies, it was used to
35:34
Speaker 3: feed chickens. So the knock on effect of scarcity of
35:40
Speaker 3: Peruvian anchovies in the seventies and perhaps today is higher
35:44
Speaker 3: chicken price. Is not something you could predict or you
35:48
Speaker 3: would suspect would contribute to the rise in inflation. But
35:52
Speaker 3: it can, and it's coming, as it did in the
35:54
Speaker 3: early seventies, in an awful time.
35:56
Speaker 2: So what you're telling me is that an anchovy flaps
36:01
Speaker 2: its wings off the coast of Peru something like that,
36:04
Speaker 2: and Kevin Wars has to hike.
36:06
Speaker 3: Yeah, I guess that is a good example wild that effect.
36:11
Speaker 2: Yeah, how you ever, Like, are you guys pro anchovy?
36:16
Speaker 2: Very Yeah, they're they're good, They are good. I I
36:20
Speaker 2: don't enjoy them on their own, but you know, I
36:26
Speaker 2: enjoy popping a little anchovy paste into something to give
36:29
Speaker 2: it that little extra umami.
36:32
Speaker 4: I mean, I've had an anchovy on a caesar salad,
36:36
Speaker 4: Like laying on a caesar salad.
36:38
Speaker 1: I like that.
36:38
Speaker 2: Don't love that. I'd rather cure them up into the
36:41
Speaker 2: dressing personally.
36:42
Speaker 4: Give me the whole thing, you know.
36:43
Speaker 2: Okay, Yeah, that's that's fine. Oh no, it's it's great again.
36:48
Speaker 2: It gives that little extra pop there. Yeah, and I
36:51
Speaker 2: do enjoy that. NASA laying out a uh it's it's
36:54
Speaker 2: moon base plans, including landers, buggies, and drones. Uh. Basically
37:00
Speaker 2: where we're heading according to NASA's latest plans, Uh, we're
37:05
Speaker 2: going to have working moon bases by twenty thirty.
37:08
Speaker 3: Two, working on what extracting minerals move moon stuff.
37:13
Speaker 2: Mo, moon stuff, don't worry about it. Yeah, moon stuff,
37:17
Speaker 2: noney of business.
37:17
Speaker 1: Now.
37:19
Speaker 2: I'm particularly excited about this because I could see myself
37:23
Speaker 2: doing very well on the Moon.
37:25
Speaker 3: Yeah, I could see that as well.
37:26
Speaker 2: I think me and grayscale it's good, like you know, makes.
37:31
Speaker 3: Me You're like a data center person.
37:33
Speaker 2: No, the moon would make my eyes pop, is what
37:35
Speaker 2: I'm saying. You know, like, I think it would be good.
37:38
Speaker 2: I think I could do well there. I could open
37:39
Speaker 2: a nice little restaurant.
37:41
Speaker 3: You know you'd be supporting that, yeah, your services.
37:45
Speaker 2: Yeah, services, Yeah, I would. I would very much be.
37:48
Speaker 3: You're going to need financial moony soon.
37:51
Speaker 2: Honestly, I've done that here. I don't want to do
37:53
Speaker 2: that on the moon. I see myself. You send me
37:57
Speaker 2: the anchovies up there and all will make you a
38:00
Speaker 2: nice little sauce for your noodles, you know, little moons.
38:03
Speaker 3: Seriously, what are we doing on the moon. What's this for?
38:05
Speaker 3: What's the base for?
38:06
Speaker 2: Why not just research? I think the eventual goal is resource.
38:11
Speaker 3: Expression and habitat at some point for an alternative diversification. Yeah, no,
38:15
Speaker 3: it makes total sense. I'm not mocking it. I'm just
38:17
Speaker 3: I'm genuinely curious.
38:18
Speaker 2: We're done for the day. We'll see you tomorrow on
38:20
Speaker 2: the Financial Exchange