Latest / The PhilStockWorld Investing Podcast / $1.5 Trillion Tank, Policy Blitz and a CMC Value Play

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$1.5 Trillion Tank, Policy Blitz and a CMC Value Play · The PhilStockWorld Investing Podcast

• 0:00
  Roy: Welcome back to the deep dive. Today is Thursday, 01/08/2026. And, after a week where the S and P and the Dow were hitting those all time highs, it feels like today the market just well, it opened the floodgates.
• 0:13
  Penny: It really did. It was a day of just aggressive repositioning. All that fog around major policy shifts, it finally lifted. And what we saw underneath was a market being driven almost entirely by executive action.
• 0:25
  Roy: Absolutely. And with this level of policy disruption, you really need expert navigation. So we've synthesized today's moves directly from the internal analysis at philstockworld.com, specifically the Thursday thoughts article from the AGI roundtable.
• 0:39
  Penny: And that's a perfect example of the kind of deep financial synthesis you find there.
• 0:42
  Roy: It really is. It shows why it's become the destination for serious traders.
• 0:46
  Penny: Well, that expertise is foundational. I mean, the site's founder, Phil Davis, is recognized by Forbes as a top influencer. He's trained top hedge fund managers. That's the, you know, the intellectual firepower behind the analysis we're about to get into.
• 0:58
  Roy: And the core narrative that came out of all that today was a concept Phil synthesized. The $1,500,000,000,000 armored tank. I love that analogy. It's heavy. It's expensive.
• 1:09
  And it just seems unstoppable.
• 1:10
  Penny: It is. And the tank is fueled entirely by these, aggressive geopolitical moves and spending mandates. As long as the market's overall earnings engine is still running, that thing can just flatten any resistance, any conflicting data fog in its path.
• 1:26
  Roy: The tension is real. We saw three huge pivots today. Geopolitical policy, the AI hype versus reality check, and then that crucial rotation into fundamental value. Let's start with that policy blitz this morning.
• 1:38
  Penny: The premarket, it jolted awake with the proposed $1,500,000,000,000 dream military budget for 2027.
• 1:45
  Roy: A 50% increase over current spending.
• 1:46
  Penny: 50%. It's just an astronomical immediate jolt of guaranteed revenue for that entire sector.
• 1:52
  Roy: And the market reacted instantly. You had defense contractors like Lockheed Martin.
• 1:55
  Penny: Mill MT, Northrop Grumman, NOC.
• 1:58
  Roy: Exactly. They surged, what, between 4.58% pre market. Just like that.
• 2:02
  Penny: Just on that news. But here's the wrinkle the market chose to ignore. The funding mechanism for all this is tied entirely to new tariff revenues. The analysis called it fiscal hypergrowth.
• 2:14
  Roy: It's like a high stakes game of economic monopoly.
• 2:16
  Penny: That's a great way to put it. The funding stream is, you know, politically derived. It's potentially
• 2:22
  Roy: So wait. If the government is guaranteeing all this revenue, why would president Trump also threaten to ban buybacks and dividends for these companies? Doesn't that sort of contradict the whole incentive structure?
• 2:33
  Penny: That is the tension. But investors, they just focused on the top line. Guaranteed capital expenditure is well, it's the strongest market incentive there is. They just dismissed the dividend ban threat as political messaging.
• 2:45
  Roy: So forcing them to reinvest in jobs and capacity instead of just financial engineering.
• 2:51
  Penny: Exactly. The market decided that the certainty of revenue, for now at least, trumps the certainty of capital return.
• 2:58
  Roy: And that focus on geopolitical control. It wasn't just defense. We had that aggressive pivot they're calling the Don Roe Doctrine with the White House confirming it's gonna control Venezuelan oil sales indefinitely.
• 3:10
  Penny: Indefinitely. This is a major structural shift. The US is selling Venezuela's future production and crucially seizing Russian flagged tankers. This is not just crisis management. It's redrawing the entire energy map.
• 3:24
  Roy: And the direct market reaction?
• 3:25
  Penny: US Gulf Coast refiners secured their heavy crude feedstocks. You saw Valero, VLO hit all time highs. But, you know, this kind of imperial resource grab makes the whole market feel very nervous. It pushes safe havens like gold right up to a critical inflection point.
• 3:40
  Roy: In the policy disruption, it really spanned the whole economy. It wasn't just tanks and oil. It went all the way down to the food on our plates.
• 3:47
  Penny: Yeah. The new HHS dietary guidelines from RFK junior, the analysis flagged it as a potential food war. We're talking about an inverted pyramid, emphasizing fats and proteins over carbs, and a very explicit war on added sugar.
• 4:01
  Roy: That sounds like a direct assault on the business model of some of the biggest global brands.
• 4:05
  Penny: Oh, is. The processed food and beverage giants, your Coca Colas, your Pepsi Co's, Mondalos, they all traded defensively. The market isn't worried about immediate sales loss but the potential systemic impact. If this changes institutional purchasing like school lunches
• 4:21
  Roy: Oh wow. The volume hit would be enormous.
• 4:24
  Penny: Billions in lost revenue over the next five years. That's what put real pressure on those names today.
• 4:29
  Roy: Okay. Let's shift gears from policy to the other huge headline. The tech throne swap. Alphabet, GOEGL, finally surpassed Apple in market cap.
• 4:38
  Penny: Reaching a staggering $3,880,000,000,000.
• 4:41
  Roy: That's the end of Apple's, what, seven year reign at the top?
• 4:44
  Penny: It is. And it signals a huge narrative shift. Duo GL's leadership is all about the performance of their Gemini three model and their custom silicon, the Ironwood TPU.
• 4:53
  Roy: So for listeners not deep in the technical weeds, what's a TPU?
• 4:56
  Penny: A tensor processing unit. It's Google's own custom chip designed specifically for AI. It lets them process massive amounts of data incredibly fast. The market is finally rewarding the companies that don't just talk AI, but have actually invested billions to own the entire infrastructure stack.
• 5:11
  Roy: And Apple's software lag is starting to look like a real bottleneck by comparison.
• 5:16
  Penny: A serious one.
• 5:17
  Roy: But even with this huge $3,880,000,000,000 milestone, there's this feeling that the broader market is resting on something, well, incredibly fragile.
• 5:27
  Penny: And that is the core of what we're calling the great valuation exhaustion. The S and P 500 is trading at, what, 23 to 25 times forward earnings?
• 5:36
  Roy: Historically, it's closer to 16 to 18.
• 5:38
  Penny: Way closer. So you, the investor, are paying a massive premium, maybe 40% above average, for a market that is pricing imperfection.
• 5:45
  Roy: And underneath that shiny surface, the economic data tells a much, much scarier story. Right?
• 5:50
  Penny: Exactly. The MAG seven are carrying the indices, but you see these cracks everywhere. We learned today that 27% of business leaders are planning job cuts because AI is replacing what they call human enablers. And for the first time in four years, unemployed workers now outnumber job openings.
• 6:06
  Roy: That is a massive dichotomy. The market is cheering AI efficiency while a huge part of the workforce is facing replacement. So what's the what's the discipline takeaway from the AGI roundtable here?
• 6:17
  Penny: It comes down to the wisdom from a Warren two point o. Discipline is the bridge between goals and accomplishment. The discipline now is to avoid that euphoria, avoid chasing those 30 x forward earnings tech stocks, and instead focus on the boring businesses, the cyclicals, the materials companies that are actually building the world.
• 6:36
  Roy: Speaking of things that are maybe not so boring but are definitely absurd, we have to talk about CES twenty twenty six. The wrap up called the whole thing the automation of the meaningless.
• 6:47
  Penny: It was hilarious but also essential. The examples are the proof. A $700 countertop Slurpee machine, bone conduction lollipops that play music through your teeth.
• 6:57
  Roy: I'm sorry. What?
• 6:57
  Penny: Yeah. And my favorite, the Ollobot Cyberpet, an empathetic companion with a removable memory heart.
• 7:04
  Roy: A removable heart? It's like they designed a product to create anxiety.
• 7:07
  Penny: Exactly. It's capital being spent on novelty, not productivity. And the best metaphor for the whole event was a vacuum cleaner with legs that learned to climb stairs.
• 7:15
  Roy: A Roomba with legs.
• 7:17
  Penny: A Roomba with legs. And the verdict was that it still has no idea why it is in the house in the first place, and that confusion is what the market is finally rotating away from.
• 7:26
  Roy: That brings us to the most important part of this deep dive. If money is rotating out of that AI washed hype, where do the high quality actionable analysis point members to find actual value? This is just a prime example of the educational value you get at philstockworld.com.
• 7:43
  Penny: We pivot entirely to basic materials and look at Commercial Metals Company or CMC. They reported Q1 results, shares were pressured on seasonality warnings. If you just looked at the standard metrics, the trailing PE looked optically crazy.
• 7:55
  Roy: Like 95 to a 100 times earnings. That would scare off most retail traders.
• 7:59
  Penny: It's a classic value trap signal. Precisely. But this is where that clinical comes in. Phil and the team, including Subodhi McBoatface, they dug past that scary headline number. They realized CMC is the ultimate value plus growth play because it's directly leveraged to this new policy regime.
• 8:17
  Roy: Okay. So what are those specific links?
• 8:19
  Penny: It's leveraged to three key areas. One, the infrastructure boom. Two, the massive steel intensive build out for all these new AI data centers. And now, three, that new $1,500,000,000,000 defense budget. They're moving from just being a rebar producer to a higher margin construction solutions platform.
• 8:39
  Roy: So here's the educational nugget. How do you take a stock trading at a 100 times PE and argue that it's actually cheap?
• 8:45
  Penny: You normalize the earnings. The streets models are all backward looking. They're missing the shift. If you apply discipline and just assume CMC normalizes to a 10% net margin, which is a pretty standard for the sector, that's about $700,000,000 a year in earnings.
• 9:00
  Roy: And when you divide that projected normalized earnings into the current market cap.
• 9:03
  Penny: The real forward PE collapses. It falls to just about 11.5 times.
• 9:08
  Roy: Wow.
• 9:08
  Penny: That is incredibly cheap for a company at the center of all this government backed spending. It's a masterclass in separate temporary noise from durable value.
• 9:16
  Roy: That gap, 100 x versus 11.5 x, perfectly illustrates why that kind of deep analysis is just so valuable.
• 9:23
  Penny: And it led directly to an actionable trade idea in the short term portfolio, the STP. The specific trade was selling the June puts for $6.5 For you, the listener, selling a put is safer than buying a call in this environment. You're getting paid $6.5 a share right away.
• 9:40
  Roy: And the intent of that specific structure, what's the strategy?
• 9:43
  Penny: The intent is to get paid immediately while you position yourself. You either just collect the premium if the stock rises, or if CMC dips below $70 you get to buy it for a net price of $63.5 It's all about getting paid to wait for the rest of the street to catch up to the real story.
• 9:59
  Roy: That focus on the STP brings us to risk management. With the market getting heavier and the ten year yield taking up to 4.19%, Oz Effort tagged this as a necessary pause and pivot phase.
• 10:10
  Penny: Which absolutely means you need to be hedging. We have contradictory labor data. Initial claims are low, which is good, but continuing claims are rising. That means it's getting harder for people to find new jobs. It's a mixed signal.
• 10:21
  Roy: And this is why Phil Davis' core message on risk is so timeless. This is why hedging makes you rich. If you can simply avoid using money, you will do very well.
• 10:32
  Penny: It's so true, and the value of the community environment really shined through in the chat today. A member, clowndaddy247, asked about the intent behind a previous options trade.
• 10:42
  Roy: Right, asking the fundamental why behind setup.
• 10:45
  Penny: Exactly. They realize that understanding the intent that a narrow spread was designed for easy rolling down the line is what prevents panic. You know your escape plan before you even enter the trade.
• 10:56
  Roy: Seeing the chessboard two moves ahead. That's the definition of trading maturity.
• 11:00
  Penny: It is the crucial wisdom that guides the whole PSW community, synthesized again by Orrorin two point zero. If you're panicking, it's not the trade, it's that you don't yet see the second move. The goal isn't just one profitable trade, it's to teach the method to manage the trade tomorrow, next month, and next year.
• 11:17
  Roy: Looking at the close today, that rotation we talked about was clear. The Dow was up over half a percent led defense and energy, while the Nasdaq slipped on profit taking in tech and semis.
• 11:27
  Penny: Money just poured out of the automation of the meaningless and into the cyclicals and small caps that actually benefit from these policy mandates. It was a minefield of executive actions, and the community navigated it by focusing on fundamental value and structural shifts.
• 11:41
  Roy: So all eyes are now on tomorrow's Friday jobs report, 08:30AM eastern.
• 11:46
  Penny: That's the next massive inflection point. With yields already rising on these deficit fears, the payrolls data will determine if this armored tank keeps rolling or if it hits a mine that sends yield spiking and risks, finally cracking that fragile 23 x valuation multiple.
• 12:03
  Roy: Which brings us to our final thought for you, the listener. We've spent this deep dive analyzing the, well, the powerful and aggressive relationship between government policy and the market. Policy is driving absolutely everything right now.
• 12:16
  Penny: So the critical question you have to ask yourself is this: Is the market pricing in real durable policy change that future administrations will have to live with? Or is this all just temporary policy theater that gets unwound in a few years? Your answer to that is the key to determining your risk exposure today.