00:00:00
Speaker 1: It's been quite amazing that during a war, and a war that in particular had a ton of unknowns throughout it, the stock market continued to set records. A lot of the reasons the stock market has been setting so many records over the last couple of years is the all the AI tech stuff. The biggest companies in those top tier stocks that are driving so much of the gains tech companies, and they all got scared about AI just the other day, all of a sudden at the same time, Which is kind of interesting how that would happen like that. Nasdaq dropped two point two percent on Tuesday alone. The Philadelphia Semiconductor Index fell nearly eight percent in one day. Stocks like Navidia, AMD, Intel, Marble, Micron, sand Disc all got hammered.
00:00:51
Speaker 2: What is going on there?
00:00:52
Speaker 1: I wanted to talk to an expert because I am certainly not, and Stephen Kates joins this. He is a finance expert clock Tower Financial Consulting.
00:01:01
Speaker 2: Stephen, thanks for taking a little time for us today.
00:01:03
Speaker 3: My pleasure. Happy to talk about this kind of thing.
00:01:06
Speaker 2: Uh great, because.
00:01:09
Speaker 1: Well, is this the bursting of the tech bubble that a lot of people have been worried about or a mini burst or what is it?
00:01:17
Speaker 3: Honestly, it's me there. It's not a bursting at this point. I mean, we can look at the what the market has done. Just in the first six minutes of the market open, Nasdaq is up half a percent. Obviously that doesn't erase yesterday is drop, but you know it's not a continuation. We're not careening lower on the second day here. Yesterday was just a bad.
00:01:41
Speaker 1: Day, just just a singular bad day, like with no greater significance.
00:01:48
Speaker 3: I mean, that's what it seems to be. I mean, you can look at you know, where the market's moving, and you know, if we were careening lower, opening another two percent down, well, that would certainly show some signs that there's continued concerns, you know, a risk off attitude from investors. But you know, I think we've all been conditioned over the last couple of years to expect that, you know, if the market is not going straight up, that something is wrong and that doesn't happen. You know, sometimes we do just have bad days. Yesterday, you know, there was a catalyst for that. Semiconductor stocks were down and down a lot and going into yesterday's open, uh, in the US. South Korea, which is incredibly exposed to semiconductor stocks UH was very negative. It's sell ten percent UH in their market. That happens before the US market opens, and so that did affect us, and that was one of the reasons that you know, investors were a bit skittish yesterday. Micron has earnings at the end of the day today after the market closes. That's a big earnings announcement. They're a major player in the semiconductor space. So there are some things going on that investors are concerned about. But you know, this doesn't appear to be the bottom falling out of the market. It was a bad day. We seem to be slightly recovering today across the NASDAC, the S and P, you know, the Russell two thousand, which is small cap stocks, and that's good to see that, you.
00:03:22
Speaker 2: Know, we're seeing a little bit of a bounce.
00:03:24
Speaker 1: I just a couple of weeks ago opened a index fund for each of my teenagers, the high schoolers, and you know, to get them and got the app on their phone and they can follow it on a regular basis and put their Christmas money in there and all that sort of stuff.
00:03:39
Speaker 2: And I thought.
00:03:40
Speaker 1: Maybe we get a crash and they maybe that would be a good thing to have their first lesson of investing be that it doesn't always go up.
00:03:47
Speaker 3: I don't know, Well, it's not a bad lesson. It has and I think to have those lessons early on is ideal. I learned that lesson firsthand actually in the industry watching the been great, you know, coming out of the Great Financial Crisis. I didn't love that lesson, but it was it was a valuable one. Nonetheless, you know, for a lot of people, understanding the way the market moves and what is and isn't normal is one of the most foundational things that you can understand. A lot of people have been conditioned to expect that the market just goes higher, that we get up, up, up all the time, twenty percent growth year over year or year.
00:04:29
Speaker 2: That isn't the case.
00:04:30
Speaker 3: We've been very lucky in the last five even fifteen years.
00:04:34
Speaker 1: Yeah, I'm thinking we're going to time it perfectly for retirement to crash right when I need it. So I'm going to let you argue with chat GPT. I asked the question, what can you tell me about the big tech sell off?
00:04:44
Speaker 2: And it said.
00:04:47
Speaker 1: Investors starting asking a question that they haven't asked much over the last year around the whole tech thing. Are all these trillions of dollars being spent on AI actually going to earn enough money to justify it?
00:04:59
Speaker 2: Is that a question people are asking.
00:05:02
Speaker 3: I think that's a legitimate question to ask, and certainly people are asking that. You know, it's a question of how long will it take for this to play out? You know, is there you know, really a thesis here that that can can can bear out? And you know, in some ways, when you look at companies like open ai or Oracle, uh, you know, they're spending a lot of money, the revenue is not quite catching up. I think open ai Financials leaked recently and they lost twenty billion dollars last year or something to that effect. So that's not encouraging, But you know, it is a it is a situation where you know, a lot of the companies that are involved with open ai or backing some of these AI ventures, uh, like your Amazon's, your Google's, your Microsofts, they are still incredibly profitable companies and still earning an enormous amount of money. Where things get a little bit dangerous is if they continue to make you know, make the spending larger and larger, to the point where the revenues never grow, but the spending keeps increasing and they have to take out additional equity for debt to supply the funding for this. That's where things start to get a little concerning. We are potentially crossing into that threshold, and we're going to need to see these companies and this debt actually start to pay off in some way. We're going to need small companies, regular companies actually to see efficiency gains. We're not necessarily seeing that profits for major tech companies have been enormous, but you know your small cap companies, your regular mom and pop shops, you know, the everyday businesses all around our cities and towns. Are they getting any benefit out of this? Are they even using it? And if the answer is no, then it gets a little bit concerning whether this actually has a there there.
00:07:11
Speaker 1: So Friday before last we were talking about fullmo fear missing out around the whole SpaceX stock and I didn't invest. If I had invested in SpaceX, would I be happy today or not?
00:07:22
Speaker 2: I haven't been checking.
00:07:24
Speaker 3: If you oh, you're still happy, but you're not as happy as you were Wednesday of last week. Today, if you, I think, and I'll have to see exactly where it opened, because I didn't look before we talked. Is surprised is about one hundred and fifty one dollars. It peaked at over two hundred and twenty, I believe, or two hundred and fifteen or so, So we're down considerably from from where we were just a week ago. Almost everybody who bought, possibly everybody who bought post IPO. So in the secondary market you didn't get the IPO price, but if you bought after that, you may have already been been losing money.
00:08:10
Speaker 2: What uh you got? You got?
00:08:12
Speaker 1: You know this?
00:08:13
Speaker 2: You know?
00:08:13
Speaker 1: No, no, I'll tell everybody to turn off, turn off for radio.
00:08:16
Speaker 3: Just now.
00:08:17
Speaker 2: It's just between me and him. Are you personally invested in space X No not, you're not. No.
00:08:24
Speaker 3: The you know it was exciting to watch. I think everybody probably felt that fomo you know where, could I have gotten some shares and then wow, what a pop?
00:08:32
Speaker 2: I'm up forty.
00:08:33
Speaker 3: Percent you know or whatever that was from Monday to you know, Friday to Wednesday. But now, if you bought the secondary market, you're losing money. Uh, And that isn't surprising because five percent of the total space x stock is available for for buyers. Uh, there is going to be another forty or fifty percent of that stock that's going to become available over the next eleven months, and so there's going to be an incredible amount of insider selling pressure. People who are part of the company or they have been investors in the past when it was private. They're going to be selling their shares to actually create some liquidity for themselves to actually utilize some of the wealth that they have created from being investors in FASEX. That kind of supply coming into the market is going to push this price even lower. So there's not a good case for buying in now and expecting a profit over the next six.
00:09:31
Speaker 2: Or twelve months.
00:09:32
Speaker 1: Okay, I'm really glad I asked. That's very interesting. I'm mostly in the prediction market. I've got a lot of money on whether or not Prince Harry and Megan market divorce in the next year.
00:09:41
Speaker 2: That's mostly where I put my money to top market.
00:09:46
Speaker 1: I regularly say that the stupidest mainstream reporting in all of journalism is economic reporting. Does does mainstream economic reporting drive you crazy? Because the way they react to little market jigglings. It drives me nuts, and it probably should.
00:10:06
Speaker 3: I love that kind of news, but that's just me. I don't think most people do. It is important to not get so in the weeds where every little market movement, every little adjustment to every economic report, sends you into a tizzy. You know. The media promotes that kind of attitude where we have to react to everything and you shouldn't, whether you're investing for your retirement and you're just trying to keep your sanity, or whether you're trying to figure out how is the job market? Can I change jobs? Can I buy a house? You know, reacting to every little nuance of the economy or the stock market is going to drive you absolutely bananas. You have to have a longer view, and you have to try to make decisions with the information you have in the moment you have it.
00:10:56
Speaker 1: If you could give me a short answer on this, because I got a break and I appreciate your time, But the the the no spend, no politics. What's the state of our economy?
00:11:06
Speaker 2: Good? Bad, poor, excellent? I'll give you those.
00:11:10
Speaker 3: Four some good things, there are some bad things, and your circumstances are going to dictate sort of whether you feel you know better or worse about that. Hiring a swell, but most people still do have jobs. If you want to buy a house and you are a first time home buyer, life is pretty terrible because you just can't get one.
00:11:35
Speaker 2: That's interesting.
00:11:37
Speaker 1: That's like the old reminded me, the old saying of it's a recession if you have a job, if you lose your job, it's a depression. I mean, it matters to your personal situation, what the economy is like.
00:11:47
Speaker 2: It's a very much so.
00:11:49
Speaker 1: Yeah, okay, Stephen Kates, appreciate your time. Finance expert clock Tower Financial Consulting. Thanks a lot for coming on on short notice about.
00:11:56
Speaker 2: The tech stocks.
00:11:57
Speaker 3: My pleasure, happy to do it.
00:11:58
Speaker 2: Yeah.
00:11:59
Speaker 1: I need to talk to people like that regularly to calm down because, as Joe says, everything's clickonomics and then the money is to be made by the Wall Street Journal or CBS News or whoever. To make it seem like whatever the stock market did up or down is a really really big deal, when quite often it's not. It's just the market goes up and down. You got to see trends over you know, weeks or months to really start talking about it. I got more on that. First, I need to tell you about simply Safe, which I absolutely love. Every time I pull away from my house seeing the simply Safe sign right there to remind me that my house is protected with the system that I ordered from simply Safe. I went online. I customized it to the house that I currently live in. The cameras, the censor's, all the different sort of stuff, It comes in the mail fast. I set it up myself in about thirty minutes. They'll offer help to you if you want, but you can't do it yourself. It's super easy. You don't have to be some sort of you know, handyman to be able to do that. No long term contracts, because simply safe believes you're gonna like it enough to keep using it, and it's dang dang impressive if you want to experience the same peace of mind that I do every time I pull away from my house, which is why we've partnered with simply Safe to offer this exclusive discount to our listeners.
00:13:17
Speaker 2: Right now, you can get.
00:13:18
Speaker 1: Sixty percent off and a free outdoor camera, which is essential on your new system by visiting simply safe dot com slash armstrong, simply safe dot com slash armstrong.
00:13:28
Speaker 2: There's no safe like simply safe.
00:13:31
Speaker 1: Yeah, my kids, my brother actually had brought this up to them over Christmas, and it took me five months to get it done.
00:13:38
Speaker 2: But they now have this.
00:13:40
Speaker 1: They both have a little index fund, and hopefully I'm going to encourage them strongly to put birthday money, Christmas money, any money they earn from chores, that sort of stuff, at least part of it into that index fund and see how it grows. Because the most valuable thing you've gotten me You know this, once you're old, and maybe you missed out, the most valuable thing you've got in investing, more than anything else in the world is time. Time is the big multiplier.
00:14:07
Speaker 2: I wish I had done that.
00:14:09
Speaker 1: Everybody says that it's so hard to convince young people that I don't care how broke you are. Put money in your four oh one K. I do not care how broke you are, put money in your four o K. It makes so much difference. You just it's so hard to imagine ever being old when you're when you're twenty five, you think I'm never gonna be sixty. It just ain't gonna happen. It's weird that human beings deny the reality of the calendar the way we do. Anyway, that's a topic for a different day. We get a lot more on the way to stay here.
Speaker 1: It's been quite amazing that during a war, and a war that in particular had a ton of unknowns throughout it, the stock market continued to set records. A lot of the reasons the stock market has been setting so many records over the last couple of years is the all the AI tech stuff. The biggest companies in those top tier stocks that are driving so much of the gains tech companies, and they all got scared about AI just the other day, all of a sudden at the same time, Which is kind of interesting how that would happen like that. Nasdaq dropped two point two percent on Tuesday alone. The Philadelphia Semiconductor Index fell nearly eight percent in one day. Stocks like Navidia, AMD, Intel, Marble, Micron, sand Disc all got hammered.
00:00:51
Speaker 2: What is going on there?
00:00:52
Speaker 1: I wanted to talk to an expert because I am certainly not, and Stephen Kates joins this. He is a finance expert clock Tower Financial Consulting.
00:01:01
Speaker 2: Stephen, thanks for taking a little time for us today.
00:01:03
Speaker 3: My pleasure. Happy to talk about this kind of thing.
00:01:06
Speaker 2: Uh great, because.
00:01:09
Speaker 1: Well, is this the bursting of the tech bubble that a lot of people have been worried about or a mini burst or what is it?
00:01:17
Speaker 3: Honestly, it's me there. It's not a bursting at this point. I mean, we can look at the what the market has done. Just in the first six minutes of the market open, Nasdaq is up half a percent. Obviously that doesn't erase yesterday is drop, but you know it's not a continuation. We're not careening lower on the second day here. Yesterday was just a bad.
00:01:41
Speaker 1: Day, just just a singular bad day, like with no greater significance.
00:01:48
Speaker 3: I mean, that's what it seems to be. I mean, you can look at you know, where the market's moving, and you know, if we were careening lower, opening another two percent down, well, that would certainly show some signs that there's continued concerns, you know, a risk off attitude from investors. But you know, I think we've all been conditioned over the last couple of years to expect that, you know, if the market is not going straight up, that something is wrong and that doesn't happen. You know, sometimes we do just have bad days. Yesterday, you know, there was a catalyst for that. Semiconductor stocks were down and down a lot and going into yesterday's open, uh, in the US. South Korea, which is incredibly exposed to semiconductor stocks UH was very negative. It's sell ten percent UH in their market. That happens before the US market opens, and so that did affect us, and that was one of the reasons that you know, investors were a bit skittish yesterday. Micron has earnings at the end of the day today after the market closes. That's a big earnings announcement. They're a major player in the semiconductor space. So there are some things going on that investors are concerned about. But you know, this doesn't appear to be the bottom falling out of the market. It was a bad day. We seem to be slightly recovering today across the NASDAC, the S and P, you know, the Russell two thousand, which is small cap stocks, and that's good to see that, you.
00:03:22
Speaker 2: Know, we're seeing a little bit of a bounce.
00:03:24
Speaker 1: I just a couple of weeks ago opened a index fund for each of my teenagers, the high schoolers, and you know, to get them and got the app on their phone and they can follow it on a regular basis and put their Christmas money in there and all that sort of stuff.
00:03:39
Speaker 2: And I thought.
00:03:40
Speaker 1: Maybe we get a crash and they maybe that would be a good thing to have their first lesson of investing be that it doesn't always go up.
00:03:47
Speaker 3: I don't know, Well, it's not a bad lesson. It has and I think to have those lessons early on is ideal. I learned that lesson firsthand actually in the industry watching the been great, you know, coming out of the Great Financial Crisis. I didn't love that lesson, but it was it was a valuable one. Nonetheless, you know, for a lot of people, understanding the way the market moves and what is and isn't normal is one of the most foundational things that you can understand. A lot of people have been conditioned to expect that the market just goes higher, that we get up, up, up all the time, twenty percent growth year over year or year.
00:04:29
Speaker 2: That isn't the case.
00:04:30
Speaker 3: We've been very lucky in the last five even fifteen years.
00:04:34
Speaker 1: Yeah, I'm thinking we're going to time it perfectly for retirement to crash right when I need it. So I'm going to let you argue with chat GPT. I asked the question, what can you tell me about the big tech sell off?
00:04:44
Speaker 2: And it said.
00:04:47
Speaker 1: Investors starting asking a question that they haven't asked much over the last year around the whole tech thing. Are all these trillions of dollars being spent on AI actually going to earn enough money to justify it?
00:04:59
Speaker 2: Is that a question people are asking.
00:05:02
Speaker 3: I think that's a legitimate question to ask, and certainly people are asking that. You know, it's a question of how long will it take for this to play out? You know, is there you know, really a thesis here that that can can can bear out? And you know, in some ways, when you look at companies like open ai or Oracle, uh, you know, they're spending a lot of money, the revenue is not quite catching up. I think open ai Financials leaked recently and they lost twenty billion dollars last year or something to that effect. So that's not encouraging, But you know, it is a it is a situation where you know, a lot of the companies that are involved with open ai or backing some of these AI ventures, uh, like your Amazon's, your Google's, your Microsofts, they are still incredibly profitable companies and still earning an enormous amount of money. Where things get a little bit dangerous is if they continue to make you know, make the spending larger and larger, to the point where the revenues never grow, but the spending keeps increasing and they have to take out additional equity for debt to supply the funding for this. That's where things start to get a little concerning. We are potentially crossing into that threshold, and we're going to need to see these companies and this debt actually start to pay off in some way. We're going to need small companies, regular companies actually to see efficiency gains. We're not necessarily seeing that profits for major tech companies have been enormous, but you know your small cap companies, your regular mom and pop shops, you know, the everyday businesses all around our cities and towns. Are they getting any benefit out of this? Are they even using it? And if the answer is no, then it gets a little bit concerning whether this actually has a there there.
00:07:11
Speaker 1: So Friday before last we were talking about fullmo fear missing out around the whole SpaceX stock and I didn't invest. If I had invested in SpaceX, would I be happy today or not?
00:07:22
Speaker 2: I haven't been checking.
00:07:24
Speaker 3: If you oh, you're still happy, but you're not as happy as you were Wednesday of last week. Today, if you, I think, and I'll have to see exactly where it opened, because I didn't look before we talked. Is surprised is about one hundred and fifty one dollars. It peaked at over two hundred and twenty, I believe, or two hundred and fifteen or so, So we're down considerably from from where we were just a week ago. Almost everybody who bought, possibly everybody who bought post IPO. So in the secondary market you didn't get the IPO price, but if you bought after that, you may have already been been losing money.
00:08:10
Speaker 2: What uh you got? You got?
00:08:12
Speaker 1: You know this?
00:08:13
Speaker 2: You know?
00:08:13
Speaker 1: No, no, I'll tell everybody to turn off, turn off for radio.
00:08:16
Speaker 3: Just now.
00:08:17
Speaker 2: It's just between me and him. Are you personally invested in space X No not, you're not. No.
00:08:24
Speaker 3: The you know it was exciting to watch. I think everybody probably felt that fomo you know where, could I have gotten some shares and then wow, what a pop?
00:08:32
Speaker 2: I'm up forty.
00:08:33
Speaker 3: Percent you know or whatever that was from Monday to you know, Friday to Wednesday. But now, if you bought the secondary market, you're losing money. Uh, And that isn't surprising because five percent of the total space x stock is available for for buyers. Uh, there is going to be another forty or fifty percent of that stock that's going to become available over the next eleven months, and so there's going to be an incredible amount of insider selling pressure. People who are part of the company or they have been investors in the past when it was private. They're going to be selling their shares to actually create some liquidity for themselves to actually utilize some of the wealth that they have created from being investors in FASEX. That kind of supply coming into the market is going to push this price even lower. So there's not a good case for buying in now and expecting a profit over the next six.
00:09:31
Speaker 2: Or twelve months.
00:09:32
Speaker 1: Okay, I'm really glad I asked. That's very interesting. I'm mostly in the prediction market. I've got a lot of money on whether or not Prince Harry and Megan market divorce in the next year.
00:09:41
Speaker 2: That's mostly where I put my money to top market.
00:09:46
Speaker 1: I regularly say that the stupidest mainstream reporting in all of journalism is economic reporting. Does does mainstream economic reporting drive you crazy? Because the way they react to little market jigglings. It drives me nuts, and it probably should.
00:10:06
Speaker 3: I love that kind of news, but that's just me. I don't think most people do. It is important to not get so in the weeds where every little market movement, every little adjustment to every economic report, sends you into a tizzy. You know. The media promotes that kind of attitude where we have to react to everything and you shouldn't, whether you're investing for your retirement and you're just trying to keep your sanity, or whether you're trying to figure out how is the job market? Can I change jobs? Can I buy a house? You know, reacting to every little nuance of the economy or the stock market is going to drive you absolutely bananas. You have to have a longer view, and you have to try to make decisions with the information you have in the moment you have it.
00:10:56
Speaker 1: If you could give me a short answer on this, because I got a break and I appreciate your time, But the the the no spend, no politics. What's the state of our economy?
00:11:06
Speaker 2: Good? Bad, poor, excellent? I'll give you those.
00:11:10
Speaker 3: Four some good things, there are some bad things, and your circumstances are going to dictate sort of whether you feel you know better or worse about that. Hiring a swell, but most people still do have jobs. If you want to buy a house and you are a first time home buyer, life is pretty terrible because you just can't get one.
00:11:35
Speaker 2: That's interesting.
00:11:37
Speaker 1: That's like the old reminded me, the old saying of it's a recession if you have a job, if you lose your job, it's a depression. I mean, it matters to your personal situation, what the economy is like.
00:11:47
Speaker 2: It's a very much so.
00:11:49
Speaker 1: Yeah, okay, Stephen Kates, appreciate your time. Finance expert clock Tower Financial Consulting. Thanks a lot for coming on on short notice about.
00:11:56
Speaker 2: The tech stocks.
00:11:57
Speaker 3: My pleasure, happy to do it.
00:11:58
Speaker 2: Yeah.
00:11:59
Speaker 1: I need to talk to people like that regularly to calm down because, as Joe says, everything's clickonomics and then the money is to be made by the Wall Street Journal or CBS News or whoever. To make it seem like whatever the stock market did up or down is a really really big deal, when quite often it's not. It's just the market goes up and down. You got to see trends over you know, weeks or months to really start talking about it. I got more on that. First, I need to tell you about simply Safe, which I absolutely love. Every time I pull away from my house seeing the simply Safe sign right there to remind me that my house is protected with the system that I ordered from simply Safe. I went online. I customized it to the house that I currently live in. The cameras, the censor's, all the different sort of stuff, It comes in the mail fast. I set it up myself in about thirty minutes. They'll offer help to you if you want, but you can't do it yourself. It's super easy. You don't have to be some sort of you know, handyman to be able to do that. No long term contracts, because simply safe believes you're gonna like it enough to keep using it, and it's dang dang impressive if you want to experience the same peace of mind that I do every time I pull away from my house, which is why we've partnered with simply Safe to offer this exclusive discount to our listeners.
00:13:17
Speaker 2: Right now, you can get.
00:13:18
Speaker 1: Sixty percent off and a free outdoor camera, which is essential on your new system by visiting simply safe dot com slash armstrong, simply safe dot com slash armstrong.
00:13:28
Speaker 2: There's no safe like simply safe.
00:13:31
Speaker 1: Yeah, my kids, my brother actually had brought this up to them over Christmas, and it took me five months to get it done.
00:13:38
Speaker 2: But they now have this.
00:13:40
Speaker 1: They both have a little index fund, and hopefully I'm going to encourage them strongly to put birthday money, Christmas money, any money they earn from chores, that sort of stuff, at least part of it into that index fund and see how it grows. Because the most valuable thing you've gotten me You know this, once you're old, and maybe you missed out, the most valuable thing you've got in investing, more than anything else in the world is time. Time is the big multiplier.
00:14:07
Speaker 2: I wish I had done that.
00:14:09
Speaker 1: Everybody says that it's so hard to convince young people that I don't care how broke you are. Put money in your four oh one K. I do not care how broke you are, put money in your four o K. It makes so much difference. You just it's so hard to imagine ever being old when you're when you're twenty five, you think I'm never gonna be sixty. It just ain't gonna happen. It's weird that human beings deny the reality of the calendar the way we do. Anyway, that's a topic for a different day. We get a lot more on the way to stay here.
