- 1 year ago
What does the rate cut last week mean? Is there sector rotation? We discuss our buy and holds and the latest high risk, high reward plays. Are we in for a long bull market or not? Stick around, we'll talk about all of it.
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00:00🎵Jazzy Music🎵
00:30🎵Jazzy Music🎵
00:48Welcome back to Show Me The Money. Today is the
00:5524th day of September.
01:00And this is our 56th episode of Show Me The Money. Now, I mentioned this before,
01:08if you go to my site on Daily Motion, and you'll see the the address at the end here,
01:17there are, in addition to the Show Me The Money, which is just sort of every few weeks or every
01:24month, topical talk, there are a number of talks on investing and the economy. And for people who
01:33are new to investing, or just learning about economics, there's some nice tutorials on there,
01:42and I urge you to encourage people to go check those out if they're just trying to learn. They're
01:48just trying to learn. They're simple, they're short, 20 minutes a piece, and whatever.
01:53Okay, so where are we today? And why have I come back now? Well, I was waiting until the Fed
01:57did something. Now, I will admit I was right. I've been right for nine months. I said the Fed would
02:06drop rates in September. They did. I was also wrong. I did not see them dropping a half a point.
02:18There was no need for the Fed to lower their rates at all. Things were going along pretty good.
02:27They told us hire for longer. We believed them. I didn't believe them, but other people believed
02:33them. And that would have probably worked out pretty good. But instead, they cut rates.
02:38Was this political? You know it was political. The interesting thing is, apparently, the powers
02:46that be don't think that Camilla's campaign is doing all that well, because they had the Fed lower
02:54a half a point, not a quarter, as most of us thought they would do. They've been very careful
03:01about not making changes too fast or too hard, and now all of a sudden they've lowered by a half
03:08a point. I said the market would be euphoric. The market would have been,
03:15but when they lowered a half a point, people started looking around going,
03:21do they know something we don't? Are they reacting because they see a recession, a horrible problem
03:28coming down the road? Well, based on their history, I don't think they're that smart,
03:35frankly. So, I think this was purely political, the idea that the Fed is independent. Please.
03:46So, they're going to continue to lower. But I noticed in the last couple of days,
03:54there's just this hint that inflation may not be as dead as we are led to believe.
04:02So, when they're cutting, are they going to basically induce more inflation like they did
04:08in January? We'll see. They won't care. The election will be over. But now if we have more
04:16inflation, are they going to raise again? They're going to look very foolish if they have to,
04:22but we'll see. I see this as
04:29you're sitting in your cubicle, you're working away, everything's good, things going along okay,
04:34and all of a sudden, a bunch of firemen come running through your office carrying fire
04:40extinguishers going towards the back of the building. Now, some people would say, huh,
04:47keep working. Most of us would stand up and go, hey, is there a fire? Should I be worried? Do I
04:54need to get out of here? Okay, that's kind of the situation the market did. When the Fed lowered as
05:00hard as they did and then told everybody, don't worry, everything's fine, people naturally got
05:05worried. And so, yeah, the market is going to respond upwards. It's just not going to be the
05:13euphoria that I predicted for the simple reason that the market thinks maybe the Fed sees
05:18something they don't and they should be cautious. So, the articles I've read recently said what
05:27I've been saying for the last two years. The overall broad market is a function of the Fed,
05:36okay? Forget anything else. It's all about the cost of money for Wall Street.
05:43And now that the Fed is lowering, that should be a good thing unless their lowering causes
05:51more inflation again and we go through this all over again. And I'm not sure the American public
05:58can afford another 20 or 30 percent inflation over the next six or seven years. So, we'll see.
06:07But anyway, now there's two schools of thought on the Fed. One is that they're idiots.
06:17The other, they claim that they're data-driven. If they're data-driven, are they just making
06:24decisions on bad data? Well, the answer is yes. Yeah, both of those are true. Let's take a look.
06:36So, the first question is, is the Fed really data-driven? They say they're going to make
06:47decisions based on the data that comes in, okay? Here's the problem with that. As I have mentioned
06:53before and others have, their statistical estimates are always undergoing huge revisions. And I don't
07:00mean small, I mean big, really, really, really, really big. So, that means that their data,
07:07the most timely data, is basically no good at all. And they're making decisions based on this
07:14timely data that later gets revised and doesn't get revised once. It may get revised every month
07:22for five months. So, the initial data that they were making decisions on is completely erroneous.
07:31And yet, they're making decisions and they're data-driven on bad data.
07:38The other, you know, point that people have made is, is the Fed really run by idiots?
07:44Over the last few years, they seem to always be in panic mode. They waited too long to act.
07:51And then when they acted, they overreacted. They raised too fast.
07:59And now, there was no need for a rate cut at this point at all. Things were going along pretty good.
08:08And they overreacted again. Is this purely politics? Oh yeah, yeah, yeah.
08:17So, in cutting as they did, the Fed has indicated that they're worried about something. And
08:29historically, we have a recession after the Fed starts cutting rates like this,
08:36and it bottoms out about two years to 18 months down the road.
08:41So, now the market is somewhat cautious about moving ahead too quickly
08:46for fear that the Fed sees something the rest of us don't. Well, I don't think they do. Everybody
08:50has pointed out the possibility of this for years now. But if they're really idiots,
08:57why is the market worried about what they think they see? We've just decided that they're not
09:02very good at this. And so, if we're worried that the Fed sees something we don't, we probably
09:08shouldn't be because we've just decided that they're probably not that smart.
09:13They weren't right about how long inflation was going to last. Remember, they said it was
09:18transitory. I said it wasn't. I said it was here to stay. Everybody else said it was here to stay.
09:24But they said it was transitory and you had to laugh at that one. Remember, Biden was just coming
09:29in and they didn't want to admit that all their spending and their money printing was going to
09:34cause inflation. So, in the bottom line, if the market overall is affected primarily by the Fed,
09:46what drives the Fed? Is it driven by economics and data or is it driven by political necessity?
09:54Well, the answer is it's driven by political necessity. I'm sorry, that's just the truth.
10:00Let's talk about where I am in my long-term hold.
10:04All right, so I've got three, Microsoft, Cadence Design, and Costco. And those are the ones that
10:11I'm holding for the next 20 years or until I die and then I don't have to worry about it anymore.
10:20There are others I could potentially hold. I don't think they would do any different than
10:25these three. These three are all down right now over the last couple of months.
10:30I'm buying them really cheap and I'm buying just, I'm nibbling, just a little bit every month. I'm
10:35doing dollar cost averaging and I'll buy for probably the next year or so and then I'm going
10:40to back off and just let them do their thing. Maybe the end of next month, I'm going to start
10:47acquiring a little gold. My favorite gold is GLDM. It's a smaller gold fund. You can look at
10:54GLD, which is a bigger gold fund. They hold bullion and I think with all the spending we're
11:00going to have to do, even if Trump wins, which I don't think he will because I think the Democrats
11:06have figured out how to cheat pretty well and I don't think the Republicans care enough.
11:10And I'm not sure Trump really wants to win. He may want to just have fun campaigning and say,
11:15I'm out of here. I'll get my court cases settled and I'm going to go play golf.
11:21But I think gold over the next few years, probably a good, not a big hole, but a good
11:28long-term hole. Two, three percent of your portfolio in gold, maybe four, maybe five, but more than one.
11:36All right. What have we taken a fly around recently? I told you a few months ago, iHeartMedia.
11:46At the time I told you I liked this one. It's a turnaround play.
11:54I bought it then. Not a big stake, but I bought some. And in a couple of months, I made 60%
12:03on it. I would have held it and I probably would have made more, but I had something else I wanted
12:08to do with the money. So I sold it and I made 60% on it. Lumen. Lumen was CenturyLink, I think.
12:19They've had a real problem. Their stock is down. Their bonds are degraded.
12:24Just because I didn't think they were really going to go out of business that fast. I bought
12:30some Lumen at the start of the year. I still own it. I've made 324% on it. Okay. This is what we
12:38would call a fallen angel. It was a really hot stock at one time in the cell phone and the
12:44communication business. Overexpanded, fell on hard times since it's coming around, but they're still
12:52around. And so they might be a good long term. Trump Media. Trump Media was an IPO,
13:02so you'd expect it's going to go down. They all do. When I first recommended it,
13:08it was in the low 40s. I just bought some the other day at 15. It's down around 12.
13:14You know, because the election is coming up. The anti-Trumpers are shorting this like crazy.
13:22I'm not surprised it hasn't become, I am surprised it hasn't become a mime stock because
13:33there's so much shorting on it. Okay. But I do know why it hasn't. I won't go into it here.
13:41They're shorting it so much. People who want to short it can't find shares to borrow
13:48because all the available shares are already being used by somebody to short it. So they can't
13:54short it much more because there are no available shares. Okay. They have a new video sharing
13:59platform that's going to be, I think, a very nice source of revenue. And I think, frankly,
14:04they're one of the few new companies in the internet video entertainment business
14:11that will probably make it long-term. They may merge with a few other people along the way.
14:16They might merge with Twitter or X. I don't know. But I think if you can start buying it
14:22down around 10 or 12 or 15 and then hold it for 30 years, I think you're going to be glad you did.
14:31Nine Energy. Nine Energy is falling in a hard time too. But they're an energy company. Okay.
14:36Energy company. Okay. And they're not horribly managed. So right now the stock has been beaten
14:43down to about a dollar. And over the next few years, you know, it may spike up to two or three
14:50bucks. You could take your profit when you see it. So it might be worth a look.
14:56Where do we stand right now in terms of our momentum? Here's the QQQ, which represents the
15:06NASDAQ. This reddish brown here is the momentum. This bluish is the QQQ. And you see that the dips
15:17of the momentum have gotten a little bit out of phase with the stock itself. And you see that
15:24with the stock itself. But now the stock has come off these lows. And I'll talk about this dip here
15:33in a minute. And the momentum is up and the stock is going up. Well, this corresponds to when the
15:39Fed cut rates. It didn't go zooming up like I thought it would. I thought over the next two
15:45weeks we'd see a 10 percent gain in this thing. But again, they just spooked everybody. Okay.
15:52But the NASDAQ and growth stocks will be going up. Here's the, excuse me, here's the broad market.
16:02And this is for the last, oh, about two and a half years. And you see this little dip right here.
16:09And now we cut rates and it's gone up. What was this dip? Okay. I call this dip the Wall Street
16:16rope-a-dope. When Wall Street knows something is going to happen that's going to cause the market
16:21to move forward, they very often manipulate it so that prices go down. That way they can get the
16:31small investor out, they can buy in cheaper, and they can move ahead after, in this case,
16:39the rates were cut. They typically do this. I've seen it done in the beginning of December.
16:45All the brokers want to make their bonuses, but they need an extra couple of percent to get their
16:51bonus. And so they will force the market down in early December. It'll have a profound dip.
16:59They'll buy in and then let the market come back. And by the end of December,
17:05they've made their bonus. And I think that's what happened this time.
17:11It hasn't gone ahead as it might have because of this uncertainty the Fed has introduced, but
17:18it will. And let's take a look at the sectors. I'll interpret this for you. The solid blue is
17:26by business development companies. You notice after the rates were cut, they haven't done much.
17:32Well, a lot of these have variable rate loans. So as rates are cut, then their loan
17:42goes down, and they may have to cut their dividend a little bit.
17:46And this dotted red is energy. You see it dipped here about two weeks ago,
17:50but it's coming back pretty strong. And everything else, you notice utilities and
17:55real estate investments, they're near their new highs. This is over about a year or two period.
18:02Bond funds, yeah, they're doing well because, again, they've cut rates. So the bond funds are
18:08looking more attractive. The dotted blue is growth. The Nasdaq, it's up near a new high.
18:15And even the solid red is the overall market. It's doing well. So the only person who's hurting is me
18:21because I'm holding a lot of business developments companies. But you know what?
18:26I'm reinvesting my dividends. So when the stock price is down, I'm getting to buy more
18:32shares with those. And over the long term, I'll take it. I'll take it any time. So
18:42where do we stand? Remember the playbook.
18:48We're going to cut rates hard. The market's going to go up. Now you already hear in the
18:54last few days, market's making all-time new high. That's going to be the mantra.
19:01Market's making new high. By the way, have your stocks made a new high? Might have it.
19:06The broad market may be making a new high, but most of us don't invest in the broad market.
19:12Even if you invest in the QQQ, these new highs are fractional. But my stocks,
19:20Microsoft's down. Costco hasn't done much. Cadence is down. Nothing else has done much
19:27on an individual basis. But the mantra is going to be market's making a new high.
19:35Wall Street equals Main Street. Main Street ought to be doing well. Bidenomics works.
19:41Vote Democrat. I told you the long time ago. That's the playbook. So you're going to be
19:47hearing more and more and more and more over the next month or two, month and a half,
19:52that the market is making all new highs. And the economy of this country is rosy.
20:00And of course, half the people are going to believe it. Because apparently they don't
20:05fill their gas tank up and they don't go to the grocery store. Prices are still rising,
20:10my friends. I don't care what the government tells you. I go shopping. I fill my tank.
20:16You know, we're paying $3.30 a gallon down here on a good day.
20:21And my relatives in California tell me it's double that out there.
20:26Okay, so we'll come back probably in a few weeks as soon as we see things shaking out.
20:35And we'll tell you what we see then. But as of right now, check out my daily motion.
20:44You can find the address here at the end. And if you need some tutorials, they're there.
20:51And you can also go look at some of my older, if you don't believe me that I made these
20:55predictions, go look at some of my older show me the money. I don't keep them on there too long.
21:00I get rid of them. But I've been predicting this September rate cut for a long time now.
21:05But I said it was political. And I think it was political. But I didn't see the 50 points.
21:12And that's got a lot of people concerned, not particularly me, because I don't think the Fed
21:17is smart enough to see anything coming down the road. It would have to run them over before they'd
21:22see it. Okay, so until next time, I have just one question. Who is John Gold? You better find out.
21:36It's getting late in the game. And you better listen to John Gold. He is the man. I'll see you
21:43next time.
22:13Transcribed by https://otter.ai
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