Latest / Felix Nikolas Prehn's Podcast / US Jobs Data *Just* Out // Stock Rally at Risk + Stock Market News 23 May 2024

Transcript

US Jobs Data *Just* Out // Stock Rally at Risk + Stock Market News 23 May 2024 · Felix Nikolas Prehn's Podcast

• 0:00
  Speaker 1: Felix here and we are live.
• 0:01
  Speaker 1: I thank you for your patience.
• 0:02
  Speaker 1: I'm live streaming here from London, which is getting buried in cables and things.
• 0:08
  Speaker 1: What an exciting day, right.
• 0:11
  Speaker 1: What a day we had yesterday.
• 0:13
  Speaker 1: First, the Fed kicks us in the groin fairly hard and then our pal Jensen pulls it out of the you-know-what and just absolutely smashes it.
• 0:24
  Speaker 1: And we need to look at what that is today's nvidia actually done.
• 0:28
  Speaker 1: Why is the stock up?
• 0:29
  Speaker 1: How much is it up by?
• 0:30
  Speaker 1: Did it do more than expected or less?
• 0:32
  Speaker 1: And look at what the fed said.
• 0:35
  Speaker 1: What are the opportunities today?
• 0:36
  Speaker 1: How do we make money today?
• 0:38
  Speaker 1: And, of course, answer your questions.
• 0:39
  Speaker 1: That's why we do this live.
• 0:40
  Speaker 1: So hit me with your questions in the in the live chat down below.
• 0:44
  Speaker 1: I'm going to shrink myself to a.
• 0:46
  Speaker 1: Here you go.
• 0:47
  Speaker 1: You can see what it looks like on the back end, and this is Nvidia earnings in a nutshell.
• 0:53
  Speaker 1: We've had very, very good beat on revenue, profits beat earnings per share, beat just pretty much across the board.
• 1:05
  Speaker 1: Everything looks absolutely wonderful, and one of the big things people seem to be really excited about is the 10 to 1 stock split, because it means you'll be able to buy an NVIDIA share for like $100 rather than $1,000.
• 1:18
  Speaker 1: So why does that matter?
• 1:20
  Speaker 1: Well, there are a lot of investors out there.
• 1:24
  Speaker 1: There are also smaller pension accounts and so on.
• 1:27
  Speaker 1: We maybe want to buy NVIDIA, so people who want to buy more NVIDIA.
• 1:35
  Speaker 1: But $1,000 is a lot for them.
• 1:41
  Speaker 1: So say, you have a 30k portfolio and you want to add one share of NVIDIA.
• 1:53
  Speaker 1: Well, one share is 3% right now.
• 1:58
  Speaker 1: That's quite a lot.
• 1:59
  Speaker 1: It's not like you want to buy three shares, it's like almost 10%.
• 2:03
  Speaker 1: You have to make these changes in quite big increments.
• 2:06
  Speaker 1: So that helps.
• 2:08
  Speaker 1: The second thing with stock splits that helps is it makes options cheaper, options trading cheaper.
• 2:16
  Speaker 1: So right now I'll show you that.
• 2:18
  Speaker 1: Where are we?
• 2:20
  Speaker 1: What happened?
• 2:23
  Speaker 1: Where are we?
• 2:24
  Speaker 1: Here we go.
• 2:25
  Speaker 1: So right now, say, if you want to buy a core option on Nvidia for the end of June, that would cost you $3,697.
• 2:34
  Speaker 1: That's sort of out of the reach of a lot of retail investors, right?
• 2:40
  Speaker 1: So if, whereas after the stock split, that will be $369.
• 2:44
  Speaker 1: So that will be possible for pretty much everybody out there.
• 2:49
  Speaker 1: So that's, I think, one of the real reasons they're doing it is just to make the stock more liquid, allow more money to flow into it.
• 2:56
  Speaker 1: So is it a positive yes.
• 2:58
  Speaker 1: Does it massively move the needle?
• 3:00
  Speaker 1: No, also it doesn't, but it does help.
• 3:02
  Speaker 1: I think stocks at these kinds of price points become harder to buy, harder to trade, harder to invest.
• 3:09
  Speaker 1: But let's just have a look at quickly here the revenue breakdown and see what's really really driving this and you can see it's pretty much all data center growth, which is basically AI.
• 3:22
  Speaker 1: So AI is what's growing this.
• 3:24
  Speaker 1: You've had this monstrous increase in revenue on that.
• 3:29
  Speaker 1: Gaming is kind of irrelevant.
• 3:31
  Speaker 1: Other is sort of like the new service businesses that they're working on, pretty irrelevant at this point.
• 3:36
  Speaker 1: It might turn into something down the road.
• 3:38
  Speaker 1: But look at this.
• 3:40
  Speaker 1: This is a thing of beauty.
• 3:43
  Speaker 1: They now have a 78% gross margin.
• 3:48
  Speaker 1: That's like a software business Like Microsoft has about a 78% gross margin.
• 3:53
  Speaker 1: They don't manufacture anything.
• 3:55
  Speaker 1: Okay, you're going to say Nvidia doesn't manufacture, they got someone else to do it.
• 3:58
  Speaker 1: It's still a product that's manufactured.
• 4:00
  Speaker 1: It gets boxed and shipped and typically manufacturing companies, if they're great, have sort of 40%, 50%, maybe 60% gross profit margin.
• 4:09
  Speaker 1: 78% means there is no competition.
• 4:13
  Speaker 1: That's pretty much what it means.
• 4:14
  Speaker 1: There is nobody else out there who's making something similar.
• 4:18
  Speaker 1: You get what am I doing here?
• 4:22
  Speaker 1: You look at profit margin.
• 4:25
  Speaker 1: 57% of every dollar they receive is just pure profit at the end.
• 4:32
  Speaker 1: After everything paying tax and investments and staff and all of it.
• 4:35
  Speaker 1: That's extraordinary.
• 4:37
  Speaker 1: 57 cents on the dollar.
• 4:38
  Speaker 1: It's really extraordinary for a manufacturer.
• 4:41
  Speaker 1: I know someone's going to say it's not a manufacturer, it probably gets manufactured.
• 4:45
  Speaker 1: It's like Apple.
• 4:46
  Speaker 1: Apple isn't a manufacturer either, but it's the same idea, right?
• 4:49
  Speaker 1: Apple does not have a 57% net profit margin and they're actually spending less on R&D as a percentage, which is also quite extraordinary and, yeah, just really mind-blowingly wonderful numbers.
• 5:05
  Speaker 1: Now, if you look at the market, we were expecting NVIDIA to come in in this box, right.
• 5:11
  Speaker 1: $825, it was terrible.
• 5:13
  Speaker 1: $1,045, it was great.
• 5:15
  Speaker 1: We're trading right now free market at $1,014.
• 5:20
  Speaker 1: So we are very much within expectations.
• 5:22
  Speaker 1: So results were good, but they were not so mind-bogglingly wonderful that the stock is really blowing up.
• 5:32
  Speaker 1: It's kind of very much within the expected range.
• 5:41
  Speaker 1: But if you look over here, the new blue box has moved up.
• 5:48
  Speaker 1: Can you see that?
• 5:48
  Speaker 1: Let me draw that in for you here.
• 5:50
  Speaker 1: We don't have particularly good drawing tools over here, but may I?
• 5:55
  Speaker 1: So the new expected move by the end of the week is this.
• 6:02
  Speaker 1: So we are definitely moving up.
• 6:05
  Speaker 1: Give me one second.
• 6:07
  Speaker 1: Okay, the antihistamines typically come out when I get to London or I have to go to a Chinese doctor.
• 6:24
  Speaker 1: That's actually more efficient, but yeah, so just you can see that we are now expecting the week to end between $900 and $1,133.
• 6:34
  Speaker 1: So the market's pricing in a monstrous move up.
• 6:37
  Speaker 1: There are a ton of $1,200 call options on there already.
• 6:42
  Speaker 1: If you go out into like next month, then it'd be interesting to see how this moves.
• 6:50
  Speaker 1: So market's still positioned at $1,100 and at $1,200.
• 6:53
  Speaker 1: $1,100 will be a hard resistance.
• 6:56
  Speaker 1: For that reason these green bars act as resistance lines.
• 6:59
  Speaker 1: But I suspect that's going to move up.
• 7:02
  Speaker 1: I think that's going to move up to 1200, 1300, 1400.
• 7:05
  Speaker 1: Even so, very, very, very, very positive here and we basically have them to thank for pretty much all the green that we're seeing here.
• 7:13
  Speaker 1: Pre-market, that's all Nvidia Up 6.7% right now, tesla's up, amazon's up, google's up, meta's up, microsoft's up, netflix's up, amd's up, intel's up, everybody's up.
• 7:24
  Speaker 1: Basically, intel's up just a touch 0.3%.
• 7:31
  Speaker 1: How do we make money out of these things?
• 7:37
  Speaker 1: So for me it's two things.
• 7:39
  Speaker 1: One, I buy high-quality companies that I hold for a long period of time and then, two, I look for trending things, things that are trending and I literally get an email every single day now from Options Watch, which is something we build, and it's a momentum indicator that I literally started building 20 years ago when I was working in banking.
• 8:02
  Speaker 1: That was the first thing I did was build this indicator.
• 8:06
  Speaker 1: Of all the indicators, we've now combined that Wow, it's really hitting the throat here.
• 8:15
  Speaker 1: Combine that into something that's automated, that you can get into your inbox every single day and you can try it out for free of charge.
• 8:25
  Speaker 1: We will be adding this as a paid feature, but if you join now for the free trial and you stick around, it'll be part of your usual like 15 bucks a month subscription.
• 8:38
  Speaker 1: So we're basically going to give it to people for free for as long as you want if you join right here, right now.
• 8:43
  Speaker 1: And yeah, there's some really good ones there.
• 8:45
  Speaker 1: I've done a bit of backtesting so far on Apple.
• 8:48
  Speaker 1: That over the last year would have made so much freaking money.
• 8:51
  Speaker 1: It's unbelievable.
• 8:52
  Speaker 1: So obviously it's an indicator to take it with a pinch of salt and do your own research and so on, but yeah, it looks very, very positive.
• 9:00
  Speaker 1: Let me have a quick look here at your comments, if I can find them.
• 9:04
  Speaker 1: Welcome back, danzo in the UK Appreciate that.
• 9:14
  Speaker 1: Yeah, guys, no, yeah, exactly.
• 9:19
  Speaker 1: So here we are, life and kicking.
• 9:23
  Speaker 1: So a couple of things from the Fed.
• 9:25
  Speaker 1: This is still important, even though it is kind of like drowned out now by the NVIDIA noise.
• 9:30
  Speaker 1: There are quite a few many in fact officials who are saying is policy restrictive enough?
• 9:39
  Speaker 1: And I think this is going to be a short one today, with the throat itches from the bloody hay fever.
• 9:49
  Speaker 1: They're basically saying maybe we should keep spreading money and not just wait longer.
• 10:01
  Speaker 1: But there is a little bit of that here saying look, we're disappointed with reading on inflations taking longer than anticipated, but, yeah, a weakening in the labor market would help.
• 10:15
  Speaker 1: So I think it's a little bit more hawkish than I wanted it to be.
• 10:20
  Speaker 1: But really, what they'll do is they'll do this, they'll be patient and they'll let the high interest rates destroy the US economy and then we're going to get a recession.
• 10:28
  Speaker 1: That's just been the playbook of the Fed for forever.
• 10:32
  Speaker 1: They have never not done that.
• 10:41
  Speaker 1: If you look at US interest rates and then go back in time and you see the green zones, those are recessions.
• 10:50
  Speaker 1: Every single freaking time when they have increased interest rates significantly here and there, and here and here we've had a recession.
• 10:59
  Speaker 1: Why should this time be any different?
• 11:01
  Speaker 1: I don't think it will be.
• 11:05
  Speaker 1: I don't think it will be, and we probably already would have had one if the government hadn't bent its way out of one.
• 11:10
  Speaker 1: But they're going to keep rates high for too long and they're going to crush the economy.
• 11:19
  Speaker 1: Is that a bad thing?
• 11:19
  Speaker 1: No, you can have stock markets that do really really well in recessions.
• 11:24
  Speaker 1: I don't think it's necessarily a bad thing.
• 11:25
  Speaker 1: Can we overlay?
• 11:26
  Speaker 1: Let me see if we can do that.
• 11:28
  Speaker 1: Can we overlay the S&P?
• 11:29
  Speaker 1: Yeah, recessions can be a little bit of a kicker.
• 11:39
  Speaker 1: Yeah, recessions can be a little bit of a kicker.
• 11:40
  Speaker 1: Okay, global financial crisis, that's different.
• 11:43
  Speaker 1: That really matters.
• 11:44
  Speaker 1: But most of the time you get a little bit of a dip buying opportunity and then you just roll onwards and rally up.
• 11:50
  Speaker 1: So, orange line here being the S&P, the red line being the US interest rates and the green being recessions.
• 11:56
  Speaker 1: Maybe take a screenshot of this if you want to make some sense to it about it or explain it to somebody later on in the pub today.
• 12:02
  Speaker 1: But I still think we're going to get rate cuts.
• 12:07
  Speaker 1: I do think the economy is going to get worse.
• 12:09
  Speaker 1: I think the labor market is showing definite signs of weakening and really the only thing stopping us is government bailouts.
• 12:19
  Speaker 1: The student loan forgiveness thing again that's a massive bailout.
• 12:23
  Speaker 1: Again it's not forgiveness.
• 12:25
  Speaker 1: The people who've gone to college, mostly those with relatively decent incomes are now not having to pay it back, whereas the people who didn't go to college are going to have to pay it in taxes.
• 12:40
  Speaker 1: So it's a very, very weird policy decision, if you ask me.