WEBVTT
00:00:03.503 --> 00:00:05.371
Beating the market.
00:00:05.371 --> 00:00:06.706
Not enough.
00:00:06.706 --> 00:00:08.742
Not this year.
00:00:08.742 --> 00:00:12.211
Not with dispersion at 70 percentage points.
00:00:13.112 --> 00:00:19.853
That's the widest we've seen outside of a recession since 2007. Why?
00:00:20.420 --> 00:00:27.960
I guess there's lots of reasons, but at the top of anyone's list has to be the weak performance from the market's biggest stocks by market cap.
00:00:29.262 --> 00:00:37.804
With Apple, Microsoft, Tesla and Alphabet all in the water year to date, the opportunity set for investors to outperform actually increases.
00:00:39.039 --> 00:00:44.109
We are staring at the widest stock dispersion in nearly two decades.
00:00:44.576 --> 00:00:45.578
Winners and losers.
00:00:45.578 --> 00:00:48.213
The gap is massive.
00:00:48.213 --> 00:00:53.453
If you're in the right names, you’re killing it in the wrong ones, dead money.
00:00:53.453 --> 00:00:55.889
And trust me, I've owned both this year.
00:00:56.689 --> 00:00:59.192
Cut your losses and let your profits run.
00:00:59.826 --> 00:01:04.730
Don't let your biases control what stocks or sectors you should own.
00:01:05.498 --> 00:01:08.200
This year could turn those theories upside down.
00:01:08.501 --> 00:01:10.003
Welcome to the Money Runner.
00:01:10.003 --> 00:01:13.239
I'm David Nelson.
00:01:31.424 --> 00:01:34.927
For too long, investors got lazy.
00:01:35.894 --> 00:01:37.831
Buy the index, grab some Mag seven.
00:01:37.831 --> 00:01:39.399
Call it a day.
00:01:39.731 --> 00:01:44.736
Look, there's nothing wrong with using the index for large portions of your funds.
00:01:45.572 --> 00:01:48.507
But every now and then, an opportunity comes along.
00:01:48.575 --> 00:02:01.587
Like the present equity concentration is so extreme that even a minor tilt away from some of these mega-cap giants has enormous implications for equity returns.
00:02:02.454 --> 00:02:05.757
It doesn't even matter if a couple of them find their footing.
00:02:06.525 --> 00:02:12.331
Meta is certainly a standout winner, and Nvidia has finally crawled back into the Green Year to date.
00:02:13.066 --> 00:02:15.835
Even Apple is showing signs of life.
00:02:16.635 --> 00:02:24.009
But if as a group, the top of the market does not outperform, then the opportunity in front of us gets more real.
00:02:25.145 --> 00:02:28.046
The bigger question Does it last?
00:02:28.213 --> 00:02:30.650
And if it does, for how long?
00:02:33.752 --> 00:02:36.788
Let's go through a couple of examples.
00:02:37.456 --> 00:02:42.361
Here's two on opposite ends of the spectrum Trade Desk.
00:02:42.694 --> 00:02:51.236
An advertising technology company in the communications sector missed on the top line for the first time in 33 quarters.
00:02:52.171 --> 00:02:56.408
The punishment was severe opening down more than 30%.
00:02:57.276 --> 00:03:08.420
On the other side, Applovin, one of the best performing stocks last year, gapped 24% to the upside on the heels of their report last week hasn't looked back.
00:03:09.421 --> 00:03:14.493
This one hurts because I took profits in Applovin last year and early this year.
00:03:15.427 --> 00:03:22.201
It's a lesson in how volatility can shake you out of a good investment subject for another pod.
00:03:23.235 --> 00:03:27.206
We are probably two thirds of the way through the earnings season.
00:03:27.941 --> 00:03:32.078
Only two of the Mag seven stocks traded higher on earnings.
00:03:32.878 --> 00:03:36.181
The Kahuna Nvidia poster child of the A.I.
00:03:36.181 --> 00:03:37.650
trade reports.
00:03:37.650 --> 00:03:41.854
Next week, we'll see what happens.
00:03:44.122 --> 00:03:45.858
Price momentum.
00:03:45.858 --> 00:03:48.394
Which market has the MO?
00:03:48.394 --> 00:03:56.703
Investors always chase price momentum and at the index level that is not here for weeks.
00:03:57.002 --> 00:04:03.075
Markets in Europe have traded higher on the increasing prospects to an end of the war in Ukraine.
00:04:03.842 --> 00:04:07.212
Or, at a minimum, a ceasefire.
00:04:07.212 --> 00:04:16.322
Many oppose how the deal is coming about, and certainly European leaders are all screaming that, at least so far, they aren't inside the room.
00:04:17.290 --> 00:04:20.759
However, stocks don't have political biases.
00:04:21.560 --> 00:04:32.204
They follow the money and are convinced that an end to the hostilities means increased revenue and earnings across the European Industrial Complex.
00:04:32.204 --> 00:04:33.872
The numbers don't lie.
00:04:33.872 --> 00:04:38.644
Year to date, the MSCI EAFE Index is up 8.22%.
00:04:39.444 --> 00:04:45.752
That's two times the total return of the S&P 500.
00:04:47.819 --> 00:04:49.422
Challenges.
00:04:49.422 --> 00:04:50.456
Every market has them.
00:04:51.658 --> 00:04:55.961
Here in the States, the inflation genie is not back in the bottle.
00:04:57.029 --> 00:05:00.333
Investors know it and so does Fed Chairman Jay Powell.
00:05:01.634 --> 00:05:03.636
What does that mean for us?
00:05:03.636 --> 00:05:08.341
Well, for starters, get it out of your head that you're going to see rate cuts any time soon.
00:05:08.908 --> 00:05:12.577
And if they do come, it will be for all the wrong reasons.
00:05:13.446 --> 00:05:19.685
Either there's been a significant downturn in the economy or the Fed breaks something in the banking sector.
00:05:20.653 --> 00:05:28.528
At a minimum, equity investors have to factor in the possibility, if not probability, of a rate hike.
00:05:29.829 --> 00:05:37.036
If inflation numbers don't start to come down soon, futures markets will shift from predicting the next cut to the next hike.
00:05:38.538 --> 00:05:50.449
Jay may imply the Fed is nowhere near considering a hike, but you can bet dollars to donuts that he’s not going to go down as the next Alan Burns and get inflation wrong two times on his watch.
00:05:51.983 --> 00:05:53.418
As a reminder, Mr.
00:05:53.418 --> 00:06:06.331
Burns was Fed chairman from 1970 to 1978, and he was often criticized for cutting interest rates too soon in response to economic slowdowns failing to control inflation effectively.
00:06:07.733 --> 00:06:10.569
Challenge number two the deficit.
00:06:11.870 --> 00:06:12.538
The U.S.
00:06:12.538 --> 00:06:19.512
budget deficit presents both a challenge and opportunity for President Trump.
00:06:19.512 --> 00:06:24.449
Look, inheriting a budget deficit that is 7% of GDP, not a great hand.
00:06:25.584 --> 00:06:34.826
The long end of the yield curve already speaks to the concerns of a widening deficit, and any deterioration will force ten year yields even higher.
00:06:36.194 --> 00:06:50.442
If, however, and it's a big if over the next four years, administration policy can shift the trajectory so that bond investors can visualize a return to a deficit that is 3% of GDP.
00:06:51.511 --> 00:06:57.649
That would go a long way toward increased confidence, keeping long rates in check.
00:07:01.319 --> 00:07:07.492
You can't have a conversation about deficits without talking about DOGE.
00:07:07.492 --> 00:07:11.497
Doge is one of the more controversial efforts by President Trump.
00:07:12.665 --> 00:07:17.970
The Department of Government Efficiency has sparked both praise and outrage.
00:07:19.071 --> 00:07:25.577
Elon Musk, CEO of Tesla Space X, x and yes, the richest man in the world.
00:07:26.012 --> 00:07:31.817
Heads up doge and has made the claim that he can cut the deficit by half.
00:07:31.817 --> 00:07:34.653
Now, while I'm certain that's an exaggeration.
00:07:34.653 --> 00:07:41.259
Anything that approaches even a fraction of that number is a step in the right direction.
00:07:41.394 --> 00:07:46.264
The controversy over doge and its cost cutting techniques not surprising.
00:07:47.533 --> 00:07:53.072
One man's waste and fraud are another’s source of income.
00:07:53.072 --> 00:07:57.910
We can debate whether there are those in government with too much power or even that all.
00:07:57.910 --> 00:07:59.678
This is happening too fast.
00:07:59.678 --> 00:08:02.714
But what isn't up for debate is that this has to happen.
00:08:04.016 --> 00:08:16.963
The United States is no longer in a position to waste money or keep government employee levels at anything above what is absolutely necessary to serve the people.
00:08:17.663 --> 00:08:21.600
There are approximately 4000 federal agencies.
00:08:22.300 --> 00:08:25.471
Many have duplicative or overlapping services.
00:08:26.105 --> 00:08:32.945
Some continue to survive, even though their mandate and function no longer exists.
00:08:32.945 --> 00:08:34.514
They all have two things in common.
00:08:34.514 --> 00:08:39.150
They have a budget and want a bigger budget next year.
00:08:39.351 --> 00:08:47.293
Now, the agency with the largest budget now approaching 1 trillion is, of course, the Department of Defense.
00:08:48.360 --> 00:08:54.100
The DOD has repeatedly failed to complete a successful audit.
00:08:54.100 --> 00:09:03.208
To their credit, the Defense Department has already offered up weapons systems and other cost cuts in advance of those doing their analysis.
00:09:04.342 --> 00:09:10.816
Many of these systems likely have been carried at the request of members of Congress on both sides of the aisle.
00:09:11.918 --> 00:09:19.225
Where the cut of a program or base could impact both jobs and the economy of a congressional district.
00:09:19.225 --> 00:09:20.893
Here's where I come out.
00:09:21.126 --> 00:09:27.399
Our military programs should be based on national security needs, not political interests.
00:09:28.167 --> 00:09:34.740
We can no longer justify funding systems solely because they provide jobs in certain districts.
00:09:35.541 --> 00:09:46.952
Every defense dollar must go toward programs that effectively protect the United States from threats both foreign and domestic.
00:09:49.621 --> 00:09:51.990
Some final thoughts before we close out the show.
00:09:53.192 --> 00:09:56.528
We're in a market unlike any other in recent memory.
00:09:57.897 --> 00:10:01.033
The winners are pulling away from the losers, and that gap is growing.
00:10:02.268 --> 00:10:12.778
We are in a news cycle that does not sleep so investors who recognize these changes in both policy and market dynamics will benefit in a big way.
00:10:14.212 --> 00:10:15.181
That's it for this week.
00:10:15.181 --> 00:10:16.381
Thanks for joining.
00:10:16.381 --> 00:10:20.552
And if you want to learn more about the money runner go to my substack site.
00:10:20.952 --> 00:10:24.123
dcnelson123@substack.com.
00:10:24.856 --> 00:10:29.528
I'm David Nelson and this is The Money Runner.
00:00:03.503 --> 00:00:05.371
Beating the market.
00:00:05.371 --> 00:00:06.706
Not enough.
00:00:06.706 --> 00:00:08.742
Not this year.
00:00:08.742 --> 00:00:12.211
Not with dispersion at 70 percentage points.
00:00:13.112 --> 00:00:19.853
That's the widest we've seen outside of a recession since 2007. Why?
00:00:20.420 --> 00:00:27.960
I guess there's lots of reasons, but at the top of anyone's list has to be the weak performance from the market's biggest stocks by market cap.
00:00:29.262 --> 00:00:37.804
With Apple, Microsoft, Tesla and Alphabet all in the water year to date, the opportunity set for investors to outperform actually increases.
00:00:39.039 --> 00:00:44.109
We are staring at the widest stock dispersion in nearly two decades.
00:00:44.576 --> 00:00:45.578
Winners and losers.
00:00:45.578 --> 00:00:48.213
The gap is massive.
00:00:48.213 --> 00:00:53.453
If you're in the right names, you’re killing it in the wrong ones, dead money.
00:00:53.453 --> 00:00:55.889
And trust me, I've owned both this year.
00:00:56.689 --> 00:00:59.192
Cut your losses and let your profits run.
00:00:59.826 --> 00:01:04.730
Don't let your biases control what stocks or sectors you should own.
00:01:05.498 --> 00:01:08.200
This year could turn those theories upside down.
00:01:08.501 --> 00:01:10.003
Welcome to the Money Runner.
00:01:10.003 --> 00:01:13.239
I'm David Nelson.
00:01:31.424 --> 00:01:34.927
For too long, investors got lazy.
00:01:35.894 --> 00:01:37.831
Buy the index, grab some Mag seven.
00:01:37.831 --> 00:01:39.399
Call it a day.
00:01:39.731 --> 00:01:44.736
Look, there's nothing wrong with using the index for large portions of your funds.
00:01:45.572 --> 00:01:48.507
But every now and then, an opportunity comes along.
00:01:48.575 --> 00:02:01.587
Like the present equity concentration is so extreme that even a minor tilt away from some of these mega-cap giants has enormous implications for equity returns.
00:02:02.454 --> 00:02:05.757
It doesn't even matter if a couple of them find their footing.
00:02:06.525 --> 00:02:12.331
Meta is certainly a standout winner, and Nvidia has finally crawled back into the Green Year to date.
00:02:13.066 --> 00:02:15.835
Even Apple is showing signs of life.
00:02:16.635 --> 00:02:24.009
But if as a group, the top of the market does not outperform, then the opportunity in front of us gets more real.
00:02:25.145 --> 00:02:28.046
The bigger question Does it last?
00:02:28.213 --> 00:02:30.650
And if it does, for how long?
00:02:33.752 --> 00:02:36.788
Let's go through a couple of examples.
00:02:37.456 --> 00:02:42.361
Here's two on opposite ends of the spectrum Trade Desk.
00:02:42.694 --> 00:02:51.236
An advertising technology company in the communications sector missed on the top line for the first time in 33 quarters.
00:02:52.171 --> 00:02:56.408
The punishment was severe opening down more than 30%.
00:02:57.276 --> 00:03:08.420
On the other side, Applovin, one of the best performing stocks last year, gapped 24% to the upside on the heels of their report last week hasn't looked back.
00:03:09.421 --> 00:03:14.493
This one hurts because I took profits in Applovin last year and early this year.
00:03:15.427 --> 00:03:22.201
It's a lesson in how volatility can shake you out of a good investment subject for another pod.
00:03:23.235 --> 00:03:27.206
We are probably two thirds of the way through the earnings season.
00:03:27.941 --> 00:03:32.078
Only two of the Mag seven stocks traded higher on earnings.
00:03:32.878 --> 00:03:36.181
The Kahuna Nvidia poster child of the A.I.
00:03:36.181 --> 00:03:37.650
trade reports.
00:03:37.650 --> 00:03:41.854
Next week, we'll see what happens.
00:03:44.122 --> 00:03:45.858
Price momentum.
00:03:45.858 --> 00:03:48.394
Which market has the MO?
00:03:48.394 --> 00:03:56.703
Investors always chase price momentum and at the index level that is not here for weeks.
00:03:57.002 --> 00:04:03.075
Markets in Europe have traded higher on the increasing prospects to an end of the war in Ukraine.
00:04:03.842 --> 00:04:07.212
Or, at a minimum, a ceasefire.
00:04:07.212 --> 00:04:16.322
Many oppose how the deal is coming about, and certainly European leaders are all screaming that, at least so far, they aren't inside the room.
00:04:17.290 --> 00:04:20.759
However, stocks don't have political biases.
00:04:21.560 --> 00:04:32.204
They follow the money and are convinced that an end to the hostilities means increased revenue and earnings across the European Industrial Complex.
00:04:32.204 --> 00:04:33.872
The numbers don't lie.
00:04:33.872 --> 00:04:38.644
Year to date, the MSCI EAFE Index is up 8.22%.
00:04:39.444 --> 00:04:45.752
That's two times the total return of the S&P 500.
00:04:47.819 --> 00:04:49.422
Challenges.
00:04:49.422 --> 00:04:50.456
Every market has them.
00:04:51.658 --> 00:04:55.961
Here in the States, the inflation genie is not back in the bottle.
00:04:57.029 --> 00:05:00.333
Investors know it and so does Fed Chairman Jay Powell.
00:05:01.634 --> 00:05:03.636
What does that mean for us?
00:05:03.636 --> 00:05:08.341
Well, for starters, get it out of your head that you're going to see rate cuts any time soon.
00:05:08.908 --> 00:05:12.577
And if they do come, it will be for all the wrong reasons.
00:05:13.446 --> 00:05:19.685
Either there's been a significant downturn in the economy or the Fed breaks something in the banking sector.
00:05:20.653 --> 00:05:28.528
At a minimum, equity investors have to factor in the possibility, if not probability, of a rate hike.
00:05:29.829 --> 00:05:37.036
If inflation numbers don't start to come down soon, futures markets will shift from predicting the next cut to the next hike.
00:05:38.538 --> 00:05:50.449
Jay may imply the Fed is nowhere near considering a hike, but you can bet dollars to donuts that he’s not going to go down as the next Alan Burns and get inflation wrong two times on his watch.
00:05:51.983 --> 00:05:53.418
As a reminder, Mr.
00:05:53.418 --> 00:06:06.331
Burns was Fed chairman from 1970 to 1978, and he was often criticized for cutting interest rates too soon in response to economic slowdowns failing to control inflation effectively.
00:06:07.733 --> 00:06:10.569
Challenge number two the deficit.
00:06:11.870 --> 00:06:12.538
The U.S.
00:06:12.538 --> 00:06:19.512
budget deficit presents both a challenge and opportunity for President Trump.
00:06:19.512 --> 00:06:24.449
Look, inheriting a budget deficit that is 7% of GDP, not a great hand.
00:06:25.584 --> 00:06:34.826
The long end of the yield curve already speaks to the concerns of a widening deficit, and any deterioration will force ten year yields even higher.
00:06:36.194 --> 00:06:50.442
If, however, and it's a big if over the next four years, administration policy can shift the trajectory so that bond investors can visualize a return to a deficit that is 3% of GDP.
00:06:51.511 --> 00:06:57.649
That would go a long way toward increased confidence, keeping long rates in check.
00:07:01.319 --> 00:07:07.492
You can't have a conversation about deficits without talking about DOGE.
00:07:07.492 --> 00:07:11.497
Doge is one of the more controversial efforts by President Trump.
00:07:12.665 --> 00:07:17.970
The Department of Government Efficiency has sparked both praise and outrage.
00:07:19.071 --> 00:07:25.577
Elon Musk, CEO of Tesla Space X, x and yes, the richest man in the world.
00:07:26.012 --> 00:07:31.817
Heads up doge and has made the claim that he can cut the deficit by half.
00:07:31.817 --> 00:07:34.653
Now, while I'm certain that's an exaggeration.
00:07:34.653 --> 00:07:41.259
Anything that approaches even a fraction of that number is a step in the right direction.
00:07:41.394 --> 00:07:46.264
The controversy over doge and its cost cutting techniques not surprising.
00:07:47.533 --> 00:07:53.072
One man's waste and fraud are another’s source of income.
00:07:53.072 --> 00:07:57.910
We can debate whether there are those in government with too much power or even that all.
00:07:57.910 --> 00:07:59.678
This is happening too fast.
00:07:59.678 --> 00:08:02.714
But what isn't up for debate is that this has to happen.
00:08:04.016 --> 00:08:16.963
The United States is no longer in a position to waste money or keep government employee levels at anything above what is absolutely necessary to serve the people.
00:08:17.663 --> 00:08:21.600
There are approximately 4000 federal agencies.
00:08:22.300 --> 00:08:25.471
Many have duplicative or overlapping services.
00:08:26.105 --> 00:08:32.945
Some continue to survive, even though their mandate and function no longer exists.
00:08:32.945 --> 00:08:34.514
They all have two things in common.
00:08:34.514 --> 00:08:39.150
They have a budget and want a bigger budget next year.
00:08:39.351 --> 00:08:47.293
Now, the agency with the largest budget now approaching 1 trillion is, of course, the Department of Defense.
00:08:48.360 --> 00:08:54.100
The DOD has repeatedly failed to complete a successful audit.
00:08:54.100 --> 00:09:03.208
To their credit, the Defense Department has already offered up weapons systems and other cost cuts in advance of those doing their analysis.
00:09:04.342 --> 00:09:10.816
Many of these systems likely have been carried at the request of members of Congress on both sides of the aisle.
00:09:11.918 --> 00:09:19.225
Where the cut of a program or base could impact both jobs and the economy of a congressional district.
00:09:19.225 --> 00:09:20.893
Here's where I come out.
00:09:21.126 --> 00:09:27.399
Our military programs should be based on national security needs, not political interests.
00:09:28.167 --> 00:09:34.740
We can no longer justify funding systems solely because they provide jobs in certain districts.
00:09:35.541 --> 00:09:46.952
Every defense dollar must go toward programs that effectively protect the United States from threats both foreign and domestic.
00:09:49.621 --> 00:09:51.990
Some final thoughts before we close out the show.
00:09:53.192 --> 00:09:56.528
We're in a market unlike any other in recent memory.
00:09:57.897 --> 00:10:01.033
The winners are pulling away from the losers, and that gap is growing.
00:10:02.268 --> 00:10:12.778
We are in a news cycle that does not sleep so investors who recognize these changes in both policy and market dynamics will benefit in a big way.
00:10:14.212 --> 00:10:15.181
That's it for this week.
00:10:15.181 --> 00:10:16.381
Thanks for joining.
00:10:16.381 --> 00:10:20.552
And if you want to learn more about the money runner go to my substack site.
00:10:20.952 --> 00:10:24.123
dcnelson123@substack.com.
00:10:24.856 --> 00:10:29.528
I'm David Nelson and this is The Money Runner.
