Chris Versace and TheStreet's Todd Campbell discuss a differentiated move with Nvidia shares, why the Fed is in a tough spot, concern for retail earnings, recession or stagflation, and more!
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00:00Wondering what the Fed is actually going to do next?
00:05Looking for a differentiated view on NVIDIA and capital spending?
00:09I'm Chris Versace, and I manage the Street's Pro Portfolio.
00:13Joining me to talk about all that on this week's Stocks and Markets podcast,
00:17where we talk about, you guessed it, all things impacting the market, is Todd Campbell.
00:22Chris, thanks for having me on. It's been a long time.
00:32I hope we have some people that remember some of our chats from a couple of years ago,
00:38but I'm excited to get back into the saddle with you and chat a little bit about Marcus today.
00:42I'm looking forward to it too, Todd, and it's funny.
00:44I was just going to say that folks who have been around as members for the Pro Portfolio
00:49probably remember our past conversations, but for the newer folks,
00:54tell us a little bit about yourself, Todd, your investment background, if you will,
00:57your acumen, what you look for.
00:59Yeah, I'm a stock market junkie, self-professed.
01:03I love everything that has to do with the markets.
01:07Yeah, I sold research to hedge funds and mutual funds for 20-plus years.
01:12I love to write and talk and do podcasts like this with you.
01:15So I wrote and had a product on The Street Pro for a while called The Street Smarts.
01:21I did a stint as the editor-in-chief for The Street.
01:25Again, I just love everything that's markets and just thrilled to be able to sit here today
01:30and talk to you about what we're thinking in the markets now and see what stocks are doing what
01:35and where we could be going.
01:37Well, there is no shortage of things to talk about, Todd, but before we get to that,
01:41let's just kind of get folks a little more familiar with you, right?
01:45There's a lot of different investment styles.
01:47Some folks are more technical.
01:49Some are more fundamental.
01:50Some are a mixture.
01:52Some are short-term, long-term.
01:54Tell us about your investing style.
01:57Well, like many people who are probably listening, I think I've tried every single investment style
02:01known to mankind with mixed results.
02:05And all of that has been part of a journey for me that has brought me to something I guess I'd call opportunistic buy and hold.
02:16So I tried my hand at day trading, and I found, like many people do, that day trading is great and can be horrible.
02:25Yeah, you know, it's funny.
02:28The one thing I will share with folks is that a lot of people probably think that we're sitting there watching every little tick and tack of the market.
02:38And I learned a long time ago that checking in throughout the day is smart, but sitting there and staring at it, it can drive you crazy.
02:45You see things that aren't there.
02:49Correct.
02:49You know, I mean, the more, and again, this is just me.
02:53Maybe there are listeners out there that are just crushing it and have been for a long time.
02:57I've known a lot of professional investors.
03:00And anybody who has been a very successful day trader has done so for very short periods of time.
03:05So they're very successful, and eventually they burn out or they wash out.
03:09And it's just, you know, it's a risky game.
03:12And I think that that's more, I don't want to say that's more akin to the gambling aspect, but it's kind of a little bit more to the gambling aspect.
03:18You know, I don't know.
03:20I would say that there are folks out there, and this is not, I'm not judging, right?
03:24I think there are folks out there that like the juice that they get from that.
03:27I would say I'm much more like yourself, that I like to sit back, collect data, do the detective work, if you will, and make a, what I like to say, an increasingly well-hedged move.
03:40That's what I would say.
03:42Yeah, I think that that's smart.
03:44You know, I like to sort of tilt depending on what risk-reward shows.
03:49So, you know, I look at Warren Buffett, right?
03:51I mean, why not just follow in Warren Buffett's footsteps, right?
03:54You know, and I'm not talking about, hey, I'm going to go buy, you know, a railroad and own it for 50 years.
03:59I'm talking about Berkshire Hathaway portfolio and the way he approaches it.
04:04You know, he goes into these things, buys them at prices that he thinks is fair, where he's going to have, you know, solid risk-reward.
04:09He's going to make some money, but he is ruthless.
04:13Like, you know, if he buys something and his mind changes, that stock has gone from Berkshire Hathaway's portfolio within a quarter or two, or how quickly he can unwind it depending on how much he bought.
04:24But his timetable, though, is extremely long.
04:28So getting back to where you say opportunistic buy, I think folks who are watching this can kind of wrap their head around that.
04:34But when you say hold, how, like, what's your time horizon?
04:37So I have all my stocks in two buckets, forever and rental.
04:46So forever, quote, unquote, stock would be one where I have no timetable to sell it.
04:51So, for example, I've owned NVIDIA since 2017.
04:56I bought NVIDIA.
04:57So I'm up, like, I don't know, 2,500% or some crazy.
05:03You've done well.
05:04You've done well, Todd.
05:05And I bought it because of, I believe that their GPUs were better than AMDs and anybody else's.
05:11And I believe that GPUs were the best solution for gaming and for crypto.
05:16That was my original thesis, right?
05:18That they were going to enjoy revenue strength and profit growth off of that.
05:21Because I do believe that stocks follow earnings over time.
05:23They just don't do it in a straight line, up or down.
05:26Correct.
05:27So, you know, that was the thesis originally.
05:29So the thesis has changed, obviously, as the market has changed, as NVIDIA's business has changed.
05:35But there was really no reason for me to wholesale sell it.
05:40Now, does that mean that I've never tweaked my exposure to it?
05:43No, of course.
05:44Of course I have.
05:45You know, I've paired it off when I felt like I needed to.
05:49And I've added to it when I felt like I could and I could make some money, including early in early April.
05:55That's you just headed my question off because that has been a very volatile time.
06:01A lot of questions about AI capital spending, data center spending.
06:04Now that we're coming out of that with earnings, you know, I think people are a little more comfortable with that.
06:09We've had Amazon, Alphabet, Meta upsize its guidance.
06:13Well, you know, those others have reaffirmed their capital spending guidance.
06:17But what so what led you to decide to add to NVIDIA during April?
06:25Whenever the market gets significantly, I believe most stocks will follow the market.
06:30Right.
06:31So when you get these major turning points, either the stock market itself goes parabolic or you get this very, very steep sell off.
06:39And you get, you know, RSI's below 30 on the S&P, all sorts of sentiment indicators on the stock market that we're telling you, oh, my God, the world is going to end.
06:50Whenever that happens, I found that and you don't go crazy here, folks.
06:55Don't like bet the farm.
06:57These are not buy on margin bets.
06:59It is it is like, OK, well, why not buy X amount of shares here on sale in over time that that strategy has worked out?
07:10So, for example, I bought shares in video on April 4th.
07:13Did I get the bottom?
07:14No, I didn't get the bottom.
07:15Right.
07:15Did I make money on it?
07:16Yeah.
07:17I think I'm up like 20 percent on that basket of shares.
07:19Right.
07:21I also, though, did the first breaking news.
07:25Right.
07:25I did the first major sale of my NVIDIA position since 2017.
07:31Too soon, you know, but middle of the month.
07:34And I actually cut my exposure to it by about 50 percent.
07:38So I still it's still my largest position, but now it's only about six and a half percent of my portfolio.
07:44I like to own a lot of stocks, Chris.
07:46So I will share that the pro portfolio around the time you bought NVIDIA, we picked up more shares of Marvell.
07:53So similar similar thought process with the RSI's in the market.
07:57And then about a week to 10 days later, we bought more stocks, about six, you know, shares of six other positions.
08:05So did we buy big?
08:07No, we did not go, as they say, you know, chips in.
08:10We did more, you know, prudent nibbling is what I would call it.
08:14But what I'm curious here, Todd, is why did you sell the NVIDIA when you did in, you know, in April?
08:19I am very concerned about my exposure when I think that the market risk becomes extremely uncertain.
08:30Because, again, you know, a stock like NVIDIA that represented a fairly large portion of my portfolio, I think it was 15 to 20 percent, which for me is massive.
08:40I didn't want to take the chance that that thing was going to roll over and really bury me.
08:46And my feeling was if the market does decide that it's going to double top up here now that it's hitting some resistance, roll back down, which is kind of what I'm thinking.
08:54You know, I'm thinking that's a likely, potentially likely outcome.
08:59I mean, there's a lot of work for the market to do.
09:00I'm sure we can talk more about that.
09:02Oh, and we will.
09:03Don't worry.
09:04Yeah, so for me, it was more of a risk management move.
09:09So you were being prudent, right?
09:10It was your biggest position, probably got outsized relative to others, took some chips off the table, you know, as people like to say, rang the register, that sort of thing.
09:19Yeah.
09:19You know, I made some fast money on that April 4th buy.
09:22So I took that off and I took off, you know, a good chunk of, like I said, I've reduced that position by about 50% from what it was still, you know, a massive position for me at 6.5%.
09:34So it's not like I'm thinking that the wheels are off the bus on that stock.
09:39But I think that it's prudent when things become incredibly uncertain to play a little bit of defense and pay a little protection.
09:47And you might say, well, Todd, you know, you know, you sold.
09:50I actually, Chris, I have more cash now.
09:54I think I'm at 40%, which again is massive for me.
09:58Probably the most cash since 2022.
10:03All right.
10:04Todd, stop, stop.
10:05Let me use a word that I hate to use.
10:07Let's unpack that real quick.
10:09Okay.
10:10So you sold NVIDIA.
10:12Did you sell anything else?
10:13And what I'm trying to get at is between when the market bottomed out in early April and we've had this nice run in the balance of April and last week as we started off May, were you getting a little concerned as we started to hit these resistance levels?
10:29If memory serves, we blew through the 50-day on the S&P 500.
10:34You're staring down the 100, the 200.
10:36There's a lot of hopium in the market about what trade deals could bring.
10:41Is that kind of why you raised your cash levels back up?
10:45Yeah.
10:45Yeah.
10:46100%.
10:47100%.
10:48And I did.
10:49I sold a lot of things that I haven't touched in many, many years.
10:53Most of them were both were reductions in exposure.
10:57Most of them.
10:58So you didn't cash out of anything?
10:59There were a few stocks that I would consider rentals that weren't in my forever portfolio.
11:05All right.
11:06Now, let's talk about that because you said that you're more long-term active buy and hold, opportunistic buy and hold, I think were your words.
11:16But rentals.
11:17Rentals to me is a couple days, short-term.
11:21You know, A, is that right?
11:23And then B, how do you identify these things?
11:26So for me, rentals is longer than that.
11:29I go into it with a position trading mindset that maybe I'll own it for three to nine months, something like that.
11:36But if I make a lot of money in a week, I'll be gone.
11:38And if I lose a lot of money in a week, I'll be gone.
11:42Right, right.
11:43So for me, it's not a hard and fast ownership rule, either for a forever or a rental stock.
11:51It's more of a mindset.
11:53So for a rental, for me, it's like, okay, there's some sort of development that I think is going to be a catalyst that's going to cause this thing to go up.
12:02But it's not necessarily something that deserves a full-time position in my workplace.
12:07It's like a part-time worker.
12:09One stock, for example, that I sold out of entirely, I made a lot of money on, was SoundHound.
12:15SoundHound was an AI company.
12:17They did things like AI for the drive-thru at your local restaurant.
12:23Oh.
12:24Right, right?
12:25I remember a different company doing that, and they did not do so well.
12:29Yeah.
12:29That's okay.
12:29So SoundHound was quite a hot stock.
12:33I felt like we were at a point in the AI cycle where people were going to start looking beyond NVIDIA for other ideas that proved to be correct.
12:43The stock made a really nice move up, but it's not something that I wanted to own forever.
12:50And given the market uncertainty right now, it doesn't really deserve a spot in my portfolio.
12:56It doesn't mean I might not consider it again.
12:58But, you know, you have to go through and pick these.
13:01You know, you can't be emotionally attached to these things.
13:03No.
13:03Oh, no, no, no.
13:04You're just looking to put capital to work in opportunities, right?
13:08And your rentals, it sounds to me like it's something that you would like to have in your portfolio.
13:17You think it's going to go higher, but you're by no means wed to it, right?
13:21This is not part of your core position.
13:23Correct.
13:24I have one wife, been married to her for a long time.
13:28I'm not going to marry any stocks or anything else.
13:31Todd, I'm not really sure that analogy holds between foreholding and rentals.
13:36But, you know, we'll let the pro members below in the comments section give you some grief on that.
13:43What do you say we move on?
13:44Because I want to get your thoughts here as the market has rebounded, you know, and we both agree that it is staring down some resistance levels.
13:52Now, pro contributor Bob Lang a while back said that the market would really need to retest its April lows.
14:01Now, we will see if that happens, but I kind of want to flip the conversation a little bit and say, as you look forward, we still have more earnings to go.
14:10We'll talk about it.
14:11Trade deals.
14:12The Fed is coming up.
14:13What do you think it's going to take to push the market through those resistance levels?
14:19And here's the key on a sustained basis.
14:23Yeah, everybody hopes that it's going to be trade deals.
14:26But, you know, the market has a way of frustrating the masses.
14:32And I think that, you know, a lot of people believe that, you know, we're going to come up with these trade deals.
14:37And that's going to be what causes the market to soar to new highs.
14:42I don't know if that's going to happen or not.
14:45Right.
14:45I mean, nobody knows what's going to happen in the future and how people will react to it.
14:49Well, I will say is I feel like a lot of the fear that was built into the market in early April has been resolved.
14:57You're not nearly.
14:58Yeah, you're not nearly as dealing.
15:01Even Trump is saying, oh, you know, at some point I'm going to have to roll back these tariffs on China.
15:07But what I love about it is then he says, we're going to tariff the movie industry as well.
15:14So he so he's got this like I'll give you a little bit, but then I'm going to take this back.
15:18It's this constant uncertainty.
15:21And what I thought was funny today, Treasury Secretary Besant called it strategic uncertainty.
15:28Yeah, strategic uncertainty.
15:29I saw that quote and thought it was kind of a brilliant quote.
15:33So, you know, I think that we have to remember is that even if you negotiate trade deals, you're still talking about tariffs that weren't there.
15:43Well, yeah, all you're doing is moving the dial up or down.
15:46Right.
15:46So we don't know what that impact will.
15:48We know that tariffs historically are inflationary in the short term and deflationary in the long term.
15:54And I think that's why, you know, he's he's so mad at Powell because he knows he needs Powell to cut rates.
16:01Yeah.
16:01Well, well, that's look, I agree with you that he's going to need that because as we're seeing in some of the data, the economy is slowing, but not as much as people feared.
16:10But the inflation numbers are clearly marching higher.
16:14It doesn't give the Fed a lot of room to do anything.
16:16No, the Fed isn't a rock and a hard place, Chris.
16:20You know, this could very well be.
16:22And Powell even admitted it last month when he was in a speech.
16:26He said that the dynamic, they may be even more intention than normal, whatever.
16:30Right.
16:30You've got the dual mandate, low unemployment, low inflation.
16:34And the two often work contrary to each other.
16:37Right.
16:38If you raise rates.
16:40Right.
16:40You can lower inflation, but you'll cause job loss.
16:43If you cut rates, you cause inflation, but you increase, you increase inflation.
16:50But you, you, so you get the idea.
16:53You know, I do.
16:55I do.
16:55It's this, this rock and a hard place.
16:58It's that they have to walk.
17:00And there's really, you know, no incentive for Powell to go out on a limb and say, yeah, I'm going to cut rates.
17:07Because if you get this inflationary spike, it is going to cause a re-ratcheting, a rethinking of spending.
17:15And then you can end up with deflation.
17:17And at the same time, unemployment, you know, has risen from 3.4 in 2023 to 4.2 now.
17:25You've got Challenger Gray and Christmas's layoff numbers are, you know, if you back out 2020, the layoffs are as high as they were in 2000.
17:34You're going to have to go back to 2009.
17:36And we haven't seen those flow through the employment data yet.
17:41No.
17:42And this, see, one of the things that we have to always remember is that there are lagging indicators and there are leading indicators.
17:48Right.
17:48So, you know, the lagging indicators, everything's still okay.
17:52I mean, you know, sure, GDP in the first quarter was the advanced estimates negative.
17:56Right.
17:57But, of course, there's all sorts of people who are pulling forward imports because of the unexpected tariffs.
18:03You had a surge in gold.
18:04Nobody really talks about that.
18:05You had the surge in gold activity that affected GDP numbers as well.
18:10You back all that stuff out and you're still talking 2% to 3% GDP.
18:16Well, that's historical.
18:18It's rear-wing stuff.
18:21Right, right.
18:22So I haven't paid a lot of attention.
18:23I shouldn't say I haven't paid a lot of attention.
18:25I haven't weighted it in my thinking as much because it's kind of like, you know, BCAD, right?
18:32It's kind of like, you know, before tariffs, after tariffs, right?
18:36So to me, the data that we get in April is going to be a lot more important.
18:39And that's really what stood out to me.
18:42Yeah, we saw, you know, the prices components and the April ISM data, you know, jump higher.
18:47We knew that was going to happen, but I think what really surprised me was the uptick in new order activity in the April services PMI.
18:57I think a lot of people are expecting that to ratchet down and point to the economy slowing, not perking up compared to April.
19:06Yeah, I don't know how to interpret that, Chris.
19:10Do you have any?
19:10I don't.
19:12It's not something I've spent a lot of time thinking about.
19:14So I'm going to say it like this, that for folks who are thinking the Fed's going to deliver three to four rate cuts in the back half of the year, come this afternoon when Fed Chair Powell gives his comments, do not expect him to support that line of thinking.
19:27You know, really the two big jumps in ISM manufacturing services prices, there's no way that he can deliver on that.
19:35And the economy between that services PMI number and the April employment report, you know, like you just said, Todd, 2%, 2% plus on GDP.
19:45Yeah.
19:45And you look at those ISM numbers.
19:47Okay.
19:47So I'm a little concerned about manufacturing, right?
19:52But manufacturers struggled for a long time and we all know that, right?
19:56But so here's the thing, manufacturing is what percent of GDP, 10%, 15% maybe?
20:03So it's all on the services sector.
20:05Yeah.
20:06And the services sector is not, it's not horrible, right?
20:09It's above 50 on both the S&P.
20:11It's still growing.
20:13So it's still an expansionary, but it is retreating.
20:16And I think what people have to remember is this is a rate of change game, right?
20:21You know, you got to think about what the rate of change, the rate of change accelerating or is it declining?
20:26So I think that, and then you can't just think one month is not a trend.
20:30This applies to.
20:30Totally agree.
20:31Right?
20:32Totally agree.
20:32So you have to say to yourself, well, are we really making progress?
20:36So you can go inflation and say, yeah, inflation is down from three months ago, but it's flat to where it was last September.
20:42I mean, there are so many things.
20:43So here's the big conundrum, right?
20:46With the services number.
20:47Okay.
20:48So the April print was below the first quarter average.
20:53So you would say, oh, slower to your point, a slower rate of change.
20:57Yet that new order number for April above the first quarter average.
21:02And, you know, I'm sitting there scratching my head going, okay, what is going on to drive this?
21:07Could they be, could they, and again, I don't, you know better than me on this.
21:13Could companies be adding more orders to try and sure up supply later on, assuming that because we're going to have this supply chain Armageddon again with the port of the Los Angeles?
21:24I think that's a good point.
21:26I think there is some of that.
21:27I think people were expecting to see, you know, that in March, the pull forward.
21:33But then over the last few weeks, what have we heard from, you know, or seen, I should say, in port data?
21:40What have we heard from air freight handlers, right?
21:42Uh-oh, orders are falling.
21:44Get ready to get hit in May.
21:46So that does stand to reason that we might have seen some pull forward in orders.
21:50But, you know, we won't really be able to confirm that, unfortunately, until we get the May data, which means about four weeks from now.
21:59So.
22:00And the other thing we haven't even talked about here, Chris, is consumer confidence.
22:05I mean, that's another leading indicator that's in the toilet.
22:08Oh, 100%.
22:09100%.
22:10And it has me bracing for what retailers are going to say.
22:14Think of the two things that we just, you know, pieced together, right?
22:17You know, supply coming from overseas and are consumers willing to open their wallets and buy?
22:25So you look at the results we're going to get, you know, Macy's, Kohl's, you know, Dick's, you know, you name it.
22:33I'm a little concerned that those numbers are going to be, you know, let's just say coming up short.
22:38Like, I'm not sure if we'll see that yet.
22:42I'm not sure.
22:43It'll be interesting to see what they say and what their guidance is, what their forecast is.
22:47The only reason I'm not sure we're going to see that yet is because real wages are still positive.
22:53So people are still growing their income faster than inflation.
22:58And typically speaking, that's good for households, right?
23:01And it's good for household spending.
23:02If that flipped the other way, like it did back in 2022, well, then, yeah, you know, look out below, right?
23:11But if you look at the expectations index, right, of the conference board and University of Michigan,
23:17it doesn't matter which one you look at, the inflation expectations have skyrocketed.
23:23Yes.
23:24To the highest since 2011, in one of them, it's even longer than that.
23:29And I think one of the things that we have to remember is that that weighs on people's spending decisions.
23:35So it may not be affecting how much they spend at Macy's this month or last month.
23:39But it certainly may be weighing on their decision on whether or not to repair the roof or get new siding or go out and buy themselves a new motorcycle or, you know,
23:50some of these some of these decisions, I think, are going to get put off, especially the larger.
23:56Durable goods, Todd, that what you're saying?
23:58Durable goods.
23:59Yeah.
24:00The, you know, discretionary purchases that are very expensive and, you know, some of these durable goods, if you can still, you know, make it work for now.
24:08So I'm concerned about that.
24:11But I'm also concerned about corporate spending because, you know, the tariff, the tariff scheme regime, whatever you want to call it,
24:19is incredibly frustrating to business owners.
24:24That's what are you referring to the uncertainty around all the numbers and the shifting numbers, trade deals, no trade deals or something else?
24:31How do you plan for that?
24:33You can't.
24:34That's why that's why that's why if you look at the NFIB Small Business Index, the uncertainty component is at record levels because they don't know what to do.
24:43No, you can't have a sit down and figure out a plan for where you want to build.
24:47Do you want to build your.
24:48OK, so you don't want to build in China.
24:49You don't want a factory in China anymore.
24:51Right.
24:52So where do you build it?
24:55I guess the U.S. is where do they want to build?
24:57Oh, that's what that's what the goal is.
24:59Right.
24:59But, you know, I mean, you know, are you going to look at India or are you going to look somewhere out?
25:04You don't know what the other you don't know what those trade deals are going to be like.
25:07That's correct.
25:07So you just pause on everything because you need to know what the numbers are so you can run the math.
25:14I agree with you.
25:15But I think if you look at what Apple did and how they said on their earnings call, you know, last week that China is going to serve for iPhone production.
25:25All the markets outside the U.S. for the U.S. it's going to be India.
25:30Why?
25:30Well, odds are those tariff numbers are going to be way less than whatever China's are.
25:35So it's an educated guess, I would argue.
25:37Yeah.
25:38I mean, educated guessing is not necessarily the way that a lot of businesses want to run their businesses.
25:43No, no, I understand.
25:44And I think that, you know, yes, some companies are going to spend X amount.
25:48But are they going to ramp up their spending or are they going to tap the brakes a little bit on their spending?
25:55I think they're going to tap the brakes on the spending until they have some clarity.
25:58So, yeah, you'll get people who will say, I'm going to build this or I'm going to do that.
26:02Well, they would do that anyways.
26:03Right.
26:03I mean, you have to keep the lights on.
26:05You have to keep your business.
26:06I think what you're saying is they are going to spend where they have to spend.
26:11Right.
26:11They're not going to necessarily spend on large capital plans because of the uncertainty in and around things.
26:18So, like, if you look at, like, the big tech guys, right, Amazon, Meta, Microsoft, Google, they are still capacity constrained for cloud and data center.
26:27They have to spend, in some cases, they're spending very big, but they have to spend to add that capacity.
26:34So, you know.
26:35I'm going to go back to my rate of change argument there, too, though.
26:38Go ahead.
26:39So, CapEx.
26:40CapEx.
26:43So, CapEx, when you say that, if you look at Meta, they boosted their CapEx, but they're not, are you saying they're not boosting it as much as they had in the past?
26:51Correct.
26:52So, you're seeing sequential and year-over-year growth is going to decline in the amount that these companies are investing into these things, right?
27:00So, that's when you put on, okay, let's put on our way-back machine hats, right, Chris?
27:05I mean, because you and I, we were both, we don't like to admit it, but we were both, you know, front row participants in the internet boom and bust.
27:12Oh, you're going to touch on one of my concerns about this whole AI buildup, which is at some point, you know, capacity, the capacity demand outstrips the available capacity, right?
27:26Yeah.
27:27I mean, look at Cisco.
27:29I mean, and this is where you get back to the stock argument, too, right?
27:32So, you know, Cisco rallied up to these crazy levels in 1999, right?
27:36Did the internet fall apart?
27:37Did the internet not become awesome and fantastic and everything that we expected the internet to be?
27:43Of course it did.
27:44But Cisco never got back to that 1999 high, did it?
27:47No, no, no.
27:49So, my concern on this is that, and this speaks a little bit to what we saw back then, right, which was there was this build-out in capacity, right, back for the internet days of all the promise the internet was going to bring.
28:02And all these new business models and everything that we were, you know, hoping to see.
28:07I guess that's where hopium for me originated.
28:10And did we see all those companies succeed?
28:12No.
28:13By definition, they could not.
28:15So, the amount of companies expected to tap all that capacity fell short.
28:21And could we see that this time around again?
28:24I think it's possible.
28:25I don't think we're there yet, but it is possible.
28:27Yeah, and again, that's why I still have, you know, NVIDIA is still my largest position.
28:33But at the end of the day, I still look at NVIDIA and I say, semiconductors are a commodity.
28:40It's a cyclical.
28:41Semiconductors are cyclical.
28:43So, it depends on where you are in the cycle.
28:45Correct.
28:45100%.
28:46100%.
28:48If we start seeing capacity slowdowns on a sustained basis, not a temporary lull, then you've got to revisit what you own.
28:55But now, this is all part of not being what I call a crockpot investor, right?
29:00There is no fix it, forget it.
29:02But to your point, you need to be, you know, an active, I guess, an opportunistic and active buyer.
29:07I think of it more as an active investor, meaning we're constantly pouring over the data, updating our expectations, our assumptions, and making calls as we need to.
29:18You know, one of the things that whenever we have discussions like this, or I have discussions on this kind of subject, one of the things I always point out is that, you know, people say, well, the S&P 500, buy and hold, right?
29:30But the constituents in the S&P 500 are changing.
29:34So, so, yes, just to be fair, it's not just the 500.
29:40Right, right.
29:42So, I mean, I mean, it's not like, so what happens with the S&P 500 is that the companies that get small and are out of favor get tossed out of it.
29:50And the companies that are rising and going into favor get added to it, right?
29:54And you look at Buffett's portfolio.
29:56And if you look at Berkshire Hathor's portfolio, the things where he thinks he's going to make money, he buys them and he buys a lot of them.
30:01And when he's wrong, you know, or if it's a rental, you know, like he goes in and out of energy stocks the last 15 years.
30:08Oh, I'll buy some.
30:09No, I'm going to sell them.
30:09You know, I'm going to go to airlines.
30:11Oh, I'm going to buy them.
30:11I'm going to sell them, you know.
30:12So, you know, I think that you make a great point.
30:15Active investor, opportunistic, buy and hold, whatever.
30:18You know, I think that you just have, there's just so, if you just bet on $19.99 names being the ones you can sell, how does that work out?
30:32How many of those $19.99 names are still around?
30:35That's the question.
30:37Yeah, not many.
30:38I mean, even if you, even those that are like Intel, have those been the stocks that you would have wanted to own over the last year?
30:45No, no.
30:46I mean, it's very rare that you find companies that are able to bob, weave and alter their business and evolve over time.
30:52You know, I mean, for every, for every iPhone, God, there were how many other devices that people had at one point?
30:59Right?
31:00Yeah, and go back even further.
31:01And, you know, I mean, what are you going to have a Polaroid and IBM in your portfolio?
31:06You know, Todd, I don't know about you, but Polaroids are making their way back as a party favor.
31:11So you never know.
31:13You never know.
31:15All right.
31:15Let's, let's talk about some companies that are reporting later this week.
31:20We've got Molson Coors.
31:21You know, I'm watching this, Todd, not so much because of, you know, beer consumption, but I am very curious about what they have to say about tariffs.
31:29What do you think?
31:31I think that, well, I'm more worried about other places like Constellation because of Corona than I am domestic oriented.
31:44I think that everybody is going to have to be thinking about tariffs and thinking about how tariffs are going to impact their businesses.
31:52And one of the things that we always have to remember is that even when it comes to a pencil, there are so many pieces of a pencil that depend upon the foreign, you know, depend upon imports.
32:05It's funny.
32:06Elon Musk actually did like a whole video of it.
32:09Really?
32:10The fly chain and pencils.
32:12But yeah, you know, there are so many things that we may not, we may assume is just like, look at the U.S. auto industry, right?
32:18And I'm getting away from it.
32:19Oh, yeah, yeah.
32:20No, no.
32:20That's an important one.
32:21All of these things have inputs that are coming from all over the world.
32:27Correct.
32:27So all of these companies, cores included, is going to be thinking about, okay, what does this mean for my business?
32:34And how is this going to increase my supply, my supply costs?
32:38And then how much of that am I going to be able to pass along to my consumer?
32:43And because those are your two choices, right?
32:45No, China is not paying for the tariffs, right?
32:50The tariffs are either going to be paid through the consumer.
32:54Todd, you're throwing shade at the external revenue service?
33:00It's either going to be paid through inflation or it's going to be paid through a decline in profit margin.
33:07That's how tariffs get paid for.
33:09So, you know, that's why I think that, you know, all of these companies are going to have to really,
33:15they're either going to have to be able to squeeze their own suppliers to make up the difference to some extent.
33:20Or absorb some of it themselves or raise the prices.
33:24And we're starting to see more companies talk about price increases.
33:28We saw that the last two weeks, really from the CPG or consumer product companies.
33:32And I suspect we'll see more of that.
33:34That will be something to listen to.
33:36One other company that's reporting that I think is going to be kind of telling,
33:40not only about tariffs, but about the consumer is going to be tapestry.
33:43You know, I'm kind of curious to see, because we are seeing declines in international travelers to the U.S.
33:53What could that mean for, you know, some of the luxury good companies here?
33:57And I wouldn't put tapestry on the same banner as LVMH and some others.
34:04It's definitely a higher end product.
34:06So I'm going to be going to be very curious to what they say about demand.
34:10They're actually, I think they've got a slight problem on their hand because you get your Uber wealthy,
34:15who they don't care.
34:17They just spend the money.
34:18They want something, they'll just buy it, right?
34:20But then you have the aspirational wealthy.
34:23And that's where they're going to get hit.
34:25Yeah.
34:25So you look at Silicon Valley.
34:28What has happened to jobs in Silicon Valley over the last year?
34:32According to Challenger Gray and Christmas, they're down.
34:35I think it's like 35%.
34:36Layoffs are up 35% in technology over the last year.
34:40Right.
34:41What's another high income group of workers?
34:45Federal government.
34:47Well, federal government employees, six figure salaries.
34:51So you're not talking about unemployment at the service sector level yet.
34:56You know, you still need people to, you know, do those important jobs.
35:01That's not where the layoffs that are going to hurt the aspirational buyer of tapestry's products.
35:06Right.
35:07It's going to be your six figure incomes.
35:09So, so think about where those six figure incomes are and what's going on.
35:14Are those jobs growing?
35:15Are those people who are working in those jobs?
35:18Do they feel better or worse about their, whether they'll still have those jobs in one year?
35:23Yeah.
35:23And if you look at those consumer, going back to the consumer confidence data.
35:27So if you look at the consumer confidence data, they're more worried about their job security.
35:32And they think that inflation is going to go significantly higher.
35:36That's not a recipe for going out and buying a new luxury product.
35:41Right.
35:41So, I mean, at the margin that it sounds like you're a little concerned about discretionary spending, right?
35:46Whether it's certain retailers, certain restaurant companies, right?
35:51Absolutely.
35:52Absolutely.
35:53Now, does that mean that this is going to be an economic reckoning and we're destined to recession?
36:01No.
36:02Right.
36:03Economists have forecasted nine of the last five recessions or blah, blah, blah, blah, blah, right?
36:08So you can look at all this data and say, it's concerning.
36:13It's something that raises eyebrows.
36:16Not necessarily destiny, but something that should make you think.
36:21But I think it also gets back to something you said earlier when we were talking about certain pieces of economic data.
36:27It's the rate of change in spend, right?
36:30In this case, the rate of change is probably to the downside, right?
36:34The vector velocity.
36:35The vector is down.
36:36The velocity of it moving down is probably growing.
36:41So, you know, that gets back to what I said earlier, that I'm a little concerned that these companies, as they report in the coming weeks, retailers, restaurants, that, you know, their guidance is likely to be lower than expected.
36:52Yeah.
36:53I mean, this is, you know, the markets rely on confidence, right?
37:00And the confidence is dependent upon, do I believe revenue is going to grow more or less?
37:07Do I believe profit is going to grow more or less?
37:10And if you think revenues are going substantially higher, you think earnings are going significantly higher, then yeah, I am going to go out and I'm going to overweight stocks and my 60-40 portfolio is going to become an 80-20 or whatever.
37:24Right.
37:24But then when you get the opposite of that, then you look at your portfolio and say, huh, the 10-year treasury is yielding 4.35 or whatever that happens to be, you know, that's actually pretty competitive.
37:38Maybe I don't need to go out and take on the risk.
37:42And what was it, Doug Cass back in 2022 so accurately saying, treasuries are the alternative.
37:50And, you know, I'm not saying we're there again, but I think we always have to keep an eye on these things because, you know, this stuff doesn't happen in a vacuum, right?
37:58No, it doesn't.
37:59It doesn't.
38:00All right, Todd, let's move on.
38:02I want to answer some pro member questions.
38:05We've got a handful of them, kind of rapid fire if we can.
38:09Here we go.
38:09Todd, how do you balance fundamentals versus technicals in your investing?
38:15I want to own growth companies, but I also want to own companies that are above their 200-day moving average.
38:21That's probably the best way to describe it.
38:22So I want to see revenue growth forward or I want to see his, so the last four quarters, I want to see the revenue growth growing as a percentage terms.
38:31So think in terms of four quarters ago, up 10, up 15, up 20, and then up 20.
38:37So an uptrend in the trailing revenue.
38:39And I do the same thing with earnings.
38:41I want to see, it doesn't, I will buy a stock that doesn't have earnings yet as long as I can map out a pathway to profitability.
38:47But ideally, again, I want to see the change sequentially growing quarter after quarter, year over year.
38:53I want to see that growth.
38:54So I also want to buy stocks that, you know, have tailwinds behind them, where other people are also buying them.
39:00Now, some people will say, no, just buy them at their lows.
39:03Nobody can buy them at their lows.
39:04I mean, you know, lightning will strike.
39:07You're lucky.
39:08You're lucky if you do.
39:09It's the exception.
39:10Right.
39:11But when you say tailwinds, though, I just want to just call this out.
39:14Because for me, tailwinds are that kind of intersection of economics, demographics, you know, structural change type of tailwinds.
39:22You're defining it as something a little different.
39:25You just said if people are in buying.
39:27Yeah.
39:27I want more.
39:28I want more buyers than sellers.
39:30So you want rising.
39:31So you want.
39:31So if someone's tracking this, you're saying rising volume.
39:36Rising stock price on rising volume.
39:38Absolutely.
39:39100%.
39:40Okay.
39:41So that's how I balance the two.
39:42So then I'll do all sorts of other funky things.
39:45You know, I'll look to see, okay, the stock is the stock now 70 or 80% above its 200-day moving average.
39:50Well, that would scare me.
39:51Right.
39:52I would think that we're going to get a little bit of a pullback.
39:54And then, okay, did it get to the 50-day and bounce off the 50-day?
39:57If I still like it and I like the fundamentals, I like the macroeconomic backdrop, I think the stock market is heading in the right direction.
40:05Then, yeah, I'll buy it off the bounce.
40:07Right.
40:09Same thing with the 200-day.
40:10So that's how I balance the two.
40:13I want to have growth companies, but I want to buy them at the times where I think I have the best opportunity for upside.
40:21All right.
40:21So a nice mixture.
40:22There is no silver bullet.
40:24Correct.
40:25Okay.
40:25Todd, next question.
40:26Do you see, let's look at back to what we were talking about, some of the economic data.
40:30I'm going to tweak it just a little bit, give you an or in here.
40:34Todd, do you see a recession on the horizon or stagflation?
40:39I added the stagflation part.
40:41I think that we are entering stagflation.
40:45How deep does stagflation go?
40:50I don't know.
40:51Okay.
40:52Is the recession possible?
40:54I think yes.
40:55Is it likely?
40:56I don't know.
40:58I mean, now you're getting into the...
41:00So let's peel the onion on this just real quickly, right?
41:07So the way I think about it is you've always got to take a look at the various possibilities that are out there.
41:13And you weigh them, right?
41:15What's the probability of this versus this?
41:17And you refine that as you get more data.
41:21So I'm going to put words in your mouth, Todd Campbell.
41:23You're saying that based on the data that you're seeing now, that it looks like stagflation is where we might be.
41:32We might, might get into a recession.
41:35We're not seeing enough data to really say that yet.
41:38But at the same time, if we see the economic data pick up, we could simply be back to not stagflation, but, you know, decent growth, but suffering in the near term with higher inflation.
41:51Oh, that is fair.
41:52That's the reason I got 40% of my money in cash.
41:56All right.
41:56Fair enough.
41:57Fair enough.
41:58Oh, this is an interesting one.
41:59Okay.
41:59So one pro member wants to know, Todd Campbell, options.
42:04Do you use them?
42:06If so, how?
42:09Options.
42:10Oh, man.
42:12So the answer could be no.
42:14I danced with the beast in the early 2000s.
42:17I used options.
42:18I built up an options account from basically nothing to a very large sum that I probably then handed all back.
42:23And, you know, I think options, you really have to be careful and keep them to a very manageable part of your portfolio because I think you can lose a lot of money fast.
42:35You can make a lot of money fast and you can lose a lot of money fast.
42:38And I think that the best way to use options, and I know other guests will disagree, but maybe it's one of those things where you, you know, when you do get really, really, really, really oversold, you buy some leaps on some things.
42:51But, again, you're not doing, so you're going one year out.
42:54You're not going in the, out of the money ones that are going to make you the most money and they expire in three weeks.
42:59You know, I tried that.
43:02One of the biggest mistakes of my investing career was basically doing a Hail Mary pass.
43:07It didn't work out.
43:09All right.
43:09All right.
43:09Well, that transitions to our last question.
43:11Maybe you just answered it.
43:13Todd, what is the biggest investing mistake you've made?
43:16And what's the biggest learning that you walked away with?
43:20Well, you know, I used to think that leverage was my friend.
43:26And, and, and hang on, hang on.
43:27So leverage meaning using the margin.
43:30Yes.
43:30So I used to think that leverage in any format.
43:33So, okay, using margin, borrowing, basically borrowing money from my broker to buy stocks, right?
43:39So that'd be, you know, going to your margin account.
43:41And I used to think the options, which is another form of leverage in my view, were, so I used to like leverage until I did.
43:48All right.
43:48And I, the, the, the biggest mistake that I, I ever made was I built up that options account to a fairly large sum.
43:56I was, I was taking it on the chin left and right during the, the, I want to say it was pullback at early 2000s.
44:04Um, and there were names like Lycos and anyways, there was, I remember a former search engine company, wasn't it?
44:15Yeah.
44:16Yeah.
44:16Yeah.
44:16So there are all these, these, these things that you're making money on that, that soon I became losing money on.
44:21And, and, um, I got down to a certain number and I was just like, I hit a, uh, I hit a, I don't know.
44:28I give up stage.
44:29And you hit the Kenny Rogers moment.
44:32Yeah.
44:32And I just said, you know, I'm putting all my chips in on these options on a company called Transwitch that went to zero and wiped that account fully out.
44:42And it was just, you know, in a way, I'm glad that I did it relatively early on in my career so that, you know, those numbers really, I mean, they were big numbers to me at the time, but now I look at those numbers and I think of it as a nice tuition to a school and that tuition, you know, that tuition.
45:03Yeah, no, I understand.
45:04Oh, I'm sorry.
45:05I'm sorry.
45:06You're not saying it was the size of a tuition payment.
45:09You're saying that it was, it was what you paid to learn.
45:13Both.
45:14Yeah.
45:15And I think that, you know, we have to remember that, you know, you're, what's the definition of insanity is failing to learn from mistakes, right?
45:23And continue to do the thing over and over and over again, expecting a different outcome.
45:26So, you know, I don't use margin anymore.
45:28I don't use options anymore.
45:30Why?
45:31It didn't, it's just not, my brain doesn't work that way.
45:35And in the pain that I felt wasn't worth, what it has to say, the juice wasn't worth the squeeze for me.
45:40Right, right, right.
45:42Oh, excellent.
45:43That, that is a great way to finish that, Todd.
45:45And thank you for taking those member questions.
45:48And folks, remember, if you want to have your question asked and answered on the podcast, you have to be a Street Pro member.
45:55All right, Todd, final thoughts before we get out of here.
45:58Anything you'd like to share?
45:59No, I think that, you know, find, find the way of investing that works for you and for your mindset.
46:07Don't allow your emotions to dictate your choices.
46:11Right.
46:13And, you know, it's okay to not feel like, it's okay to feel like you're missing something.
46:19Don't be afraid, oh, I'm going to miss out on something.
46:22Right.
46:23So, you know, I just, like I said, I'm at 40% cash.
46:27Right.
46:27I would have made more money if I hadn't been at 40% cash after the last week and a half.
46:32Right.
46:33But at the same time, the 60% that I have, I'm still up 9% for the quarter.
46:38So am I going to complain about being 9% up at the quarter?
46:41I'm up 6% in the last month.
46:43You know, market's up flat.
46:45You know, so am I going to complain about having a 40% cash?
46:48No, no.
46:48So I just, I think that, you know, just manage the, manage your money wisely.
46:53Try not to get too whipsawed around by your emotions and try to find an investment style
46:59that matches your mindset.
47:01All very sound advice, Todd.
47:06Why am I not surprised?
47:09So, Todd, thank you for catching up with us today.
47:11I look forward to having you back on.
47:13And I also look forward to sharing our conversations when we bring a third-party guest in, whether
47:18it's, you know, someone else to talk about the market.
47:21We can both kind of, you know, Q&A them, so to speak, or whether it's a management team
47:25or something like that.
47:27So thank you for joining.
47:28And folks, that is a wrap on this week's Stocks and Markets podcast.
47:32Thanks for tuning in.
47:34Pro members, comment and like in the comment section below.
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