053 - How Q1 Earnings Results Could Alter Your 2024 Investing Strategy

Quarterly reports just came to an end so we’ve got some updates on macro trends and how that’ll impact the types of stocks you want to look at. 

Let’s dig into the Q1 data so you understand what patterns are unfolding. 

Inflation is still higher than they want which is pushing back interest rate cuts. People are starting to feel the heat and reducing their discretionary spending. 

AI and crypto are still growing which is causing more energy usage. 

We talked about the following stocks:

• KRP
• EPD
• ET
• EQNR
• INTC
• BITO
• YBIT
• ZIM
• NAT
• BMY
• PFE
• UHT

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**DISCLAIMER**
Ticker metrics change as markets and companies change, so always do your own research. The content in this podcast is based on personal experience and is for educational purposes, not financial advice. See full disclaimer here.

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Transcript

Welcome to Roaming Returns, a podcast about generating a passive income through investing, so that you don't have to wait till retirement to live your passions. It's been a hot minute since we talked stocks, and what better way to dive back in than to talk about market updates? Quarterly reports just came to an end, so we got some updates on macro trends, and how that'll impact the types of stocks you want to look at. Let's dig in to the Q1 data so you can understand what patterns are unfolding.
What up, players? Or if you don't prefer that, peeps and peepettes, whichever. I like players. I like players.
What up, players? So today is going to be identifying trends based on the earnings season, and then discussing the earnings season as a whole. It just concluded, or it's about to conclude. Almost 99% of the top 500 companies have reported their earnings for quarter one, and their earnings have been really, really good, with like 70% of the companies beating the estimates, which I don't put any stock into that, because the estimates are usually low on purpose, so that you have something good to talk about.
What I do look at, though, is I look at the year-over-year revenue growth, and the year-over-year EPS growth, and again, it's 61, 62% have actually had year-over-year EPS growth, and then over 70% have had year-over-year revenue growth, which is to be expected, because most of them get their money from the consumer, and with inflation being higher, they should have more revenue, so that's not to be a surprise, I don't think. But they all act like a surprise. If you look at the experts, they're all like, oh my God, everything's glorious in the markets, and that's fairly true.
I remember we discussed this a few months back, and I said REITs, and I said Utilities, and they both did really, really, really well this earnings season, so maybe I do know what I'm talking about, I don't know. Well, I would think the Utilities, for sure, because I keep seeing stuff come out now that everybody's pumping Utilities. Tim was ahead of the curve on that one.
So through the earnings, there was a couple really, really bad stinkers. One was Bristol-Myers, so if you're a contrarian investor, you probably should get into Bristol-Myers. It had a really, really, really shitty earnings report, and it stock-tanked, and its PE value is great, but all the big tech ones, the Magnificent Seven, as they call them, they're just remarkable.
We're talking 500% year-over-year growth, whereas the rest of the S&P 500 only had 2% growth, so the numbers are skewed because they're so dominant with seven companies and then the rest of the companies, so you have to read between the lines, and what I've identified reading between the lines is inflation is causing huge problems. It's more than what's reported. Which we kind of hinted at before.
Inflation's higher than what they're reporting. It's causing more problems than what they're discussing, but it's not causing problems for the companies, so you have to actually do a fourth-dimensional thinking. How do companies make money? Companies make money because people, consumers, spend money.
Inflation's hitting the consumers so bad that they are changing their spending habits. Instead of shopping at a regular grocery store, they're going to where we go, Grocery Outlet or Audi, or instead of shopping at Costco, they go to Walmart. They're starting to deviate from what they've been doing since the COVID because they all had a bunch of free money, and they're actually being wise with their money, and they're looking for value, so the fast food restaurants, for example, are actually bringing back the value menus.
Target and Walmart and all those are starting to have lots of sales, and they're going to have lots of online-only sales, that type of thing. They're going to try to wring all the money they can out of the consumer, but the point that they're missing is the consumer's actually feeling inflation really bad. It's about time.
We've been talking about it because we're like, how are the people not feeling this? We weren't sure if people were putting stuff on their credit cards. What they're looking at is they're looking at the wage growth is like 4%, so the wage growth is above, quote, the inflation rate that they're reporting, end quote, and everybody has a job because unemployment's so low. That was the kicker, right? That was the whole reason they weren't going to pull interest rates back, or one of the pieces? One of the pieces is they want the unemployment to be higher than it is.
Their objective, from what I'm gathering, this is just my opinion, is they want to have a soft recession before they start lowering the interest rates. We'll get to the interest rates in a moment because I'm actually composing a whole ... Yeah, that's going to be its own individual episode, but we'll touch on pieces here because it's relevant to the Q1 earnings play out. Right.
All the companies have more revenue. All the companies, for the most part, are beating the soft estimates for EPS and for sales and all that stuff, but again, I can't stress enough, you have to look beyond that and the different sectors. Healthcare is, if you look at it as a whole, is really bad.
It's the worst performing sector of the first three months of the year, but that's because Bristol-Myers was such shit that it pulled the whole sector down, so healthcare is not as bad as it's led to believe, but it's just one company. It's the same with the tech. Everyone's like the tech companies and the communications are so high, but that's because Apple and NVIDIA and Google are all doing so much better than all the other companies that are pulling the earnings up.
Yeah, I remember how we said, I think in a couple different episodes, where pretty much the top 10 growth stocks are what's actually pushing the market up while everybody else is only like 1%, 2% gainers. So overall, the economy is decent, but it looks better than it is because there's a certain number of companies that are really just pulling everything up. And the earnings reports are what are proving or signifying that.
Like when I was looking at the Magnificent Seven, they actually, like I said, 571% year over year growth. So if you can extrapolate that, if you extrapolate those seven companies and put them in their different sectors, you can see why certain sectors have like 22% growth. Well, that's because they have Google in it or they have Meta in it.
If you exclude Google or Meta, it's at its normal pace, but that's not what all the experts are looking at. So it is what it is. So the first part is inflation is, first macro trend, inflation is bad.
It's worse than they're reporting. I mean, that's just common sense. We've thought that all along.
It's just common sense. Because the numbers on the jobs reports and all the other things that they've been putting out and then, quote unquote, making their conclusions did not calculate the conclusion they came to. We think they weren't trying to get the public to panic, but now the public's realizing that it is actually bad or feeling it to a point.
The public's realizing that the prices are bad, so they're spending differently. Yeah. So they're actually feeling it before the actual, quote unquote, experts or the leaders are actually saying, hey, inflation's worse than we want it to be.
Okay. That's the first macro trend. Inflation.
Okay. So my macro trend 1B would be interest rates. Interest rates are killing the consumer because most consumers use credit cards for everything.
A credit card rate is 24% on average, which I think is a little bit low. But the average rate on your credit card, if you carry a balance from ... I was going to say, it's not about using credit cards. It's about carrying a balance on credit cards.
So if you had got your credit card statement in May and you carry a balance in the June, you're going to be paying at least 24% on what is left over. I think it's more than that now. My mom had one that actually has 30%.
They are slowly boosting them up. I saw a couple of mine go up, too. Literally just looked at this week.
The average. Oh, okay. The American average is 24%.
I forget. You always talk in averages. Well, yeah.
I don't want to ... It's just easier. The interest rates, I have a sneaking suspicion. I was wrong about that last when we discussed this previously that they're not going anywhere in 2024.
They're going to stay at 5.25 to 5.5 range. There's just so much good in the economy that's not allowing inflation to go down. All they're focused on is the inflation number.
But the whole picture. And all the earnings are transcripts. I mean, I didn't go through 500 companies.
I'm not crazy. But you find, if you Google it and you look at it, you find that more than three quarters of the companies discussed inflation and then they discussed interest rates. So how to use that going forward is you have to be selective with what investments you're going to put your money into that actually rely on interest rates, whether it be for borrowing or infrastructure building or anything like that.
What we've been preaching all along is actually the way you need to invest now. You have to do the contrarian thing where everyone's down. For example, everyone's down on Bristol-Myers.
Their valuation's good. So the interest rate's not really going to affect them too much because what they'll do is they'll actually will just sell more shares to raise money as opposed to borrowing money. But say you want a BDC or you want an REIT, you have to look under the hood and see do they have to borrow money.
If they have to borrow money, it's going to be at a super high rate and that's going to cut into their margins. It's going to cut into their revenue. It's going to cut into their profit.
So you have to be super selective on what you're actually going to invest in because you just have to now. This isn't an average bull market. This is a top few companies are dragging the whole market into a bull market.
It's not your normal bull market where every company's doing great. This is a different type of bull market and you actually have to adapt to that so you be selective. I did mention, and I'll bring it up, I mentioned again I was wrong about interest rates when we did this in November.
Was it November? I don't remember when it was, but we had the data we had and we made what we had with what we had and the numbers are coming in and we're slowly changing our prerogative as things come out. But if you look at, if you pay, in the next couple weeks we'll be going through the actual portfolios and you'll see that even though I had a suspicion that interest rates were going to go down, I at the same time had a defensive part of the portfolio just in case they didn't because I wasn't sure. I don't know if I ever conveyed that.
That part I don't think we did. Yeah, because I have a lot of utilities and a lot of energy and a lot of BDCs and financial stuff because if the interest rates didn't go down, those would overperform. Okay, the third macro trend is energy shit right now.
You mean they're getting hit on? No, they're just shit because there's so much manipulation going on with the politicians in power want to stay in power so they're doing whatever they can to make something lower in price and what they've settled on is the gas prices are the lowest hanging fruit so they can actually manipulate the gas prices and keep them small. They've actually used up over half of the strategic reserves that we keep in case the shit hits the fan so that Americans have oil. That's actually pretty troubling.
So they've used up more than half of that to keep gas prices down because OPEC, if you're not familiar with how it works, there's a cartel called OPEC. They basically manipulate everything to get whatever money they want. They're like, oh, we want more money so we'll lower our output.
So they'll send out fewer barrels per week, per day. Supply and demand. They control all the supply so then they can demand the price.
So they try doing that now because they're not getting the prices that they wanted but the American, the politicians in power said, well, no, no, no, we want to stay in power so we're going to tap into our strategic reserve. That's tough to say. They should do that more frequently, not just election years.
So energy prices have went from, they were like, the price of oil was just shit two months ago. It was like in the upper 80s, lower 90s and it's down to like 68 now per barrel. Yeah, that was funny.
We were talking in the last episode about how gas prices go up over the summer and Tim's like, this is the lowest gas prices have been and I was like, really? And I like looked and I was like, oh, I guess you're right. I do remember them being higher. So energy is locked in so you have to be selective with your energy or you have to be proactive in your thinking.
Well, energy is not always going to be down. So if you find an investment that you like, say, for example, you really like EPD, well, EPD is going to not good. Price isn't going to go up because there's their revenue is not going to be as much because of price of oil is lower so you can stock up on shares of EPD while energy prices are being manipulated before the November election because I have fully anticipate after November it's like whatever.
Let them do what they're going to do. Prices might go up, they might go down. Didn't you just say something to me though about you notice that utilities for good, but it's mainly the utilities that have the electric component? I'm going to get to that.
It's another macro. Sorry. So when it comes to energy, you want, I hate to say it because that's not how I normally do it, but like you want the companies that you know best, you're probably going to want to stay to American energy companies, whether that's Exxon Mobil, whether that's Chevron whether it's EPD, whether it's ET and you more likely than not, you're going to want the upstream ones, the littler ones that actually maneuver, they transport the oil down to the big wigs because they get paid regardless.
It's the big wigs that have to use the price of oil to make money off it, whereas the people that actually pump the oil down to them make money regardless of what the price of oil is. So you want to be upstream. A good one that we have in our portfolio is KRP.
It's a little tiny one, but it's good. We have EPD. That's another good one.
A foreign one that I found recently that's pretty good is EQNR. They do the similar thing that EPD does. They just accumulated so much.
The reason EPD is so good, I never mentioned it, is they accumulated so much land. They have just, they're like huge, but you don't know it looking at their share price or reading about them because it's not something that comes out. They're just huge.
They're not sexy. They're not flashy. Nobody talks about that kind of stuff.
Then they've raised their dividend, I think, 20 some years, maybe 30 years now. I don't know. They've raised their dividend year after year after year.
Yeah, they're pretty good. So the energy is kind of a wait till after November before you can really digest what's going on, but in the meantime, you can pick up shares of whatever you want so long as you look at the valuations. Make sure, because this is one where the PEG and the PE ratios are really important because you can get deals.
We got Exxon Mobil at a steal. We got EPD at a steal because we just waited and waited and waited until the price was in the right area. So you can be selective.
In the meantime, keep your eyes peeled on what energy stocks you're interested in. Make a short list. Put your money in bullet shares so you get that whatever 5.05 or whatever per month that you're getting from bullet shares, but your money is still making money while you're waiting for the perfect entry price.
And say the entry price happens, you sell your bullet shares off and then just pop into it real quick. It's nothing. But make sure that you have the cash available because energy prices move so rapidly that it's going to be like a one or two day window for you to get what you want at the price you want.
Yeah, okay. So you can't have it outside the stock market. You need to have it inside and you need to make sure that ... How long does it take for stocks to clear? Three days if you don't have the margin trading? It's one day now.
It's one day now. Even without margin trading? Yeah. Oh, wow.
The SEC literally just did that a couple weeks ago where it's one day now. Wow, that's huge. I don't know if you guys realize that is freaking huge.
Yeah, so have your money set aside for what you want to invest in. And this pertains to anything, not just energy stocks. If you have a short list of what you want, if you get ideas from what we pump out or if you read the email and you're like, oh, I like that, I like the ideas he presented last week in this chart.
Have your money in bullet shares ready to go so that you just sell your bullet share, take your proceeds and put it into whatever you want whenever it hits the price that you want. That's what I do and that's how I've done it for, damn, almost two years now. I don't take money out.
I just put it in something else that makes money that has a high liquidity so I can just sell it real quick and then put it in something else. And you'll see in the next two episodes how our portfolios are finally starting to actually reap the benefits during that mass pullback that we had with all our stinker stocks. Stinkers.
Okay. So we are set up quite nice. The next macro trend is the same macro trend that we discussed previously.
It's just grown damn near exponentially. It's AI. AI is just, I think 300 and some of the top 500 companies have like a portion of their earnings transcripts and their earnings calls whenever they talk to their shareholders.
Portion of that was devoted to just like what they're doing with AI. Not just tech stocks. So like it was, when it first happened it was tech stocks and that's where all the money was being made but now we're starting to see what we discussed previously where it's starting to gradually seep into other areas.
It's starting to move everywhere. Like retail is a big one that talk about AI. You wouldn't think AI and retail would go together this quickly but they are.
So retail is one that was big on it. Another one is utilities. A lot of utility companies were discussing AI and I think that is important because utilities are still vastly undervalued and we'll get to them in a few minutes why they're undervalued.
So AI is everywhere. It's growing. The big companies are putting billions and billions upon billions of dollars into AI to expand their moat if you remember the economic moat thing.
Every big company has like a moat of their use of AI that other companies don't have. It's pretty much going to be just like it was when the internet like the real retailers that didn't get online with internet shopping kind of went away or the dinosaur. If people are not going to jump on board with this AI movement they're going to be left in the dust too.
I don't know if we discussed it previously. I think we did but like you can't be afraid of it. Like I understand there's a lot of fear tactics out there saying well AI is going to take your job.
Well if your job is a job where AI takes your job you have to adapt to something else. Become someone that can actually I don't know figure out how to integrate the AI into the job so that you can boss the AI around. Be the person like I know when I worked at the Turnpike it wasn't AI but it was automated.
They basically got rid of toll collectors with computers. And then everyone was like freaking out because you know there was like a I don't know sixty seventy thousand dollar a year job that they were losing. But what they didn't do is why they were freaking out the entire time was oh I'm going to lose my job to computer.
They didn't take the time to like educate themselves on how the computers worked which I worked overnight so I did. So I could have actually easily slid into a position where I actually updated the computers or fix the computers or how to answer customer questions about the computers. Like there's still one or two toll collectors at every interchange.
They just had they adapted to themselves and they educated themselves to change their job to computer processor, computer programmer, computer processor. Yeah figure out where the gaps are in your job that the AI either can't do or the things that are going to create additional problems and things that need solved. I can tell you right now an area where AI can't like in retail we just discussed retail an area where AI can't do the job in retail is Instacart.
So if you're like someone that has a job let's say you work at the grocery store and the grocery store is going to go the way of the AI like you work in the deli they're going to have a computer that chops the meat up. Well then become an Instacart person because the AI can't deliver groceries. So you're still in retail you're still basically working for the same company for the most part you're just delivering groceries or you're going to or become.
I wouldn't think they'd even be good at stock shelving. Or you can pick the groceries and put them in the little boxes so when people come to pick them up that was you that did that. So just embrace that it's happening it's here in the next five years shit is going to change so much like everything's going to transform so much in pretty much every industry.
So if you are I don't know I don't want to say a boomer but if you're like a boomer who can't like appreciate or understand technology and you're unwilling to like learn how to deal with it you're going to be a boomer that has a social security check only because you have no other purpose. It's hard to say that because I know a lot of boomers and I like I like really like and respect old people but they are so resistant to technology that they are putting themselves out of jobs and they're just going to be reliant upon social security because they have no other skills. So AI is huge when you're investing for AI don't invest in the same companies everyone else invest in like Nvidia like Meta like Google.
Those are tapped out because they were so far ahead of everyone else that you're just getting into like you're going to get minimal growth maybe 5% as opposed to like the 100% or 200% people got Nvidia now don't do that you have to think outside the box and get in so like do what we do like I don't want to get into Nvidia because Nvidia is so high priced so I go into Nvidia's yield max because that's when we got into it was $20. But what's like another company that would be an up-and-coming AR like a second gen or third gen kind of like the altcoin situation? Didn't you say Intel last time? I do like Intel that one did that one popped off a little bit and that's okay they actually if you recall Intel used to literally just be a computer maker. Didn't you say the health care industry has kind of gotten suppressed maybe health care adopting will actually push the AI.
Intel's still good you just have to make sure the valuations are good and Intel I think pays a 4% dividend so you're not getting like that 10% dividend but you have a lot of room for it to grow because people haven't caught on to it yet that Intel actually they went from making computers to they only have a small portion now making computers whereas they're doing the cloud stuff and AI stuff like with the rest of it. That's going to be big. So Intel's a good one but like I do believe the health care like health care is going to be probably in my opinion the first or second most transformed sector with AI because the fact that you can have someone come into your office say I have this ailment you plug it into your little AI thing your AI thing says we'll give him this pill people never thought to give them that pill before for that ailment because it's just not how they were trained or it's not what they were taught to do.
Yeah that's the amazing part with AI you can put in like the universe of data and it can synthesize it in seconds where a human would take years to go through all that. I was reading somewhere and it's like before AI for humans to actually create what are they called not medicines but like their prescriptions whatever for different ailments for them to create the remedy for whatever ailment it took like 30 years and like umpteen billions of dollars to come up with like five solutions say for like arthritis. They plugged in like they went through probably I don't know five or 10,000 different possible scenarios in their head and they played them out in the lab and they came up with five solutions.
AI can do 10,000 in like six months not 10 years so you're getting it's going to be probably the most like I said most transformed industry. I think doctors are actually going to be hurting if you can actually have an at-home AI that you can ask questions instead of going in. Well like what I would do is if I had the money to have an at-home AI I'd be like look here's what I have wrong with me I have this like this going on with my knuckles or whatever and the computer be like you need this and so you call your doctor and say look I want this medication give it to me and they'd be like well we have to test you.
I'd be like my computer robot already tested me and this is what it said AI is the way of the future bitch get on board. They'd have to be part of a network or something that that was like a qualified AI program that could diagnose properly or be hooked in with a specific set of doctors that would do like a secondary glance over or something and then but it's coming. A part of the AI thing that I think they're overlooking for now like the medical field is by far the one that they they talk about the most but they're overlooking just like But it's suppressed right now so I think that would be a good one to look into.
The second one would be office real estate industrial real estate because they're going they're not going to need as many factories they're not going to need as many warehouses because they literally they have something that is so brilliant when it comes to organization. I was going to say warehouse organization and utilization space if they can actually innovate the way that things are stored picked and delivered and shipped and all that stuff that's going to be huge. It's going to cut it's going to cut like the cut down on waste cut down cut down on waste but at the same time it's going to affect like the so you have to be selective again if you want to get into REITs be selective be like think about what the future is going to have robots and all these industrial real estate places they're not going to need as much space as they do because robots are more organized and efficient than humans so they can take a tenth of the space so what might end up happening I don't know I'm not saying I've read this anywhere but an idea that I had is like I just think different companies will all go in like together and buy like a huge warehouse and just have like the Amazon portion and you'll have the Costco portion and stuff like this so like the warehouses will still be there it just won't be as many of them because they don't need them.
So they'll be like mini cities and then they'll be like robots that go out and they put stuff in different trucks to ship out I could totally see that happening. Okay the fifth going also that would be like I don't know four and five I don't know the next macro trend is basically macro trend AI part B and that's utilities and it took me fucking forever to put this together why electrical companies are so much better performing than water and solar and wind and all that it's because AI requires so much computing that it's taking so much electricity to power the AI so electrical companies are going to have huge margins going forward because they're the only ones in town if they say like you're in Florida we're knees at NEE only pays 3% whatever but if you're in Florida we're knees at and there's only and there's a big factory or a big building building AI they're the only ones supplying electricity to that AI plant. Yep so the only game in town so that's a huge moat.
So what they're going to do is they're going to build more infrastructure so they're going to take on more debts you have to be careful because you have to make sure they're getting debt at the right price they're going to take on more debt to build more electrical plants like pretty much right next to these AI places because right now they don't have those and it's it's taking so much electrical from everywhere I think it's like ten times as much electric that we're using than we did like five years ago. And I think that's why there's this push towards alternative energy sources with solar I've actually read because my dad was trying to do that whole solar panel thing with the those free cheapies that are totally scam things but they're pushing because the wave of the future is needing all the energy we can possibly get for these innovations of tech. So the problem is though the infrastructure that we currently have with the way electric is set up is AC oriented whereas solar is DC and you're actually losing energy every time it converts from DC to AC to DC because appliances like your computers and stuff those big transformer boxes that are on some of your plugs that's going back to DC.
So if it's coming in through a different means and you're losing it twice I think new construction actually is going to have to start putting in DC wiring DC appliances to utilize the difference of the power or somebody's going to have to innovate how to actually minimize that loss during the transition especially with this need and demand. I'm trying not to be like a conspiracy theorist or a doomsday person but I could see a point where they reach the point where they say look you seem like fine people but the robots more important so we're going to ration your electrical or you're going to have to pay a shit ton for the electrical. The peasants will have their electric.
I'm saying like it's going to come to the point where like they're going to raise prices so much that people are actually conscious about their electrical bills that they're using less electric so that the robots can get their electric until they can fix the But that's going to force people to go to solar on their own. So they're going to have to. So like.
Something. Something. That's what I think is going to happen in the short term until they get the infrastructure in place where they can power these humongous.
Well you know what on that whole thought the whole EV movement electric vehicle I think that's actually going to hit inhibit the stuff that was a sham. But I'm saying that's actually going to inhibit it because if we're we if we have gas available for vehicles and they need electric to power the AI but the vehicles don't actually have like the necessity of AI except for maybe trucks for deliveries in future. I think they might actually revert back to gasoline.
Do you know what I'm saying. It's possible. Because of the demand situation.
They might have to cap and cut certain things or defund incentive for the electric. These are macro trends like 10 years down the road we're discussing right now like in the short term AI is the bomb and utilities actually have to generate the electrical to power the AI. So utility electrical utilities in particular are going to be really good.
So if you've had your eye on electrical companies like electric it doesn't matter. They get the point. Okay.
Electric companies electric companies that you've been holding off on you need to get into them whenever the valuations right because they're just yeah they're going to just keep going up because they're going to have to start investing in the alternative sources to be able to power the demand that's coming that they're already struggling. Well, what they're probably going to do is they're probably going to … I hate using knee again, but knee has NEP, which is basically their alternative energy portion in Florida, and I assume that they're going to put money into that so they can power more homes in Florida with the alternative energy so they can use the real energy for the robots. Like I said, it's like, here, peasants, here's your wind power.
We're using the real power for the robots. It's going to be fascinating to see because once we get in the van, we have solar and I could give a shit what happens, but it's going to be fascinating to see. The next macro trend I wanted to bring up before I forget is if you're in BDCs or bank stocks, you want to stay in them because the interest rates aren't going anywhere.
They're not going down anytime soon, I don't believe. Again, I was wrong. My bad about the interest rates, but they're not going down anytime soon.
I don't think they're going to … I don't see a cut in 2024. If there's one in 2024, I'd be absolutely shocked and that probably would happen right before November just because … Election. The last hurrah potentially.
Yeah. I could see that maybe. Manipulation of voters, but for actual data points and economic trends, there's no point for them to actually reduce the interest rates.
Why would they do that other than to get votes? The interest rates aren't going anywhere. Interest rates are not going anywhere. It's super good for BDCs that actually lend money out and they don't have to borrow money to pay off their dividends or their preferred shares.
You want to make sure whenever you look at a BDC, it has a good balance sheet. Hercules Capital, again, the bomb. Main Street Capital, again, the bomb.
Both of those should be in your portfolio to begin with. I've mentioned numerous times now. They don't really have to borrow any money to pay off their dividend and to loan their money out.
They're in a really good place. There's other ones that … They're kind of suspect, but the last few emails have literally just been seven BDCs that are undervalued with their valuations with PE or PEG. You could pick up any of them.
You can make money on BDCs for the rest of 2024 because the rates being as high as they are, they can lend their money out like 9%, 10% to these companies that can't get money from anywhere else. They have to take on debt to run their business. Otherwise, they're going to go under.
It's like a lot of businesses are in that tricky spot where you kind of need the debt to make the earnings. Otherwise, then your share and your quarterly reports are going to be worse than they would be. That goes for banks, too.
Banks are just throwing in money right now. There's so much money in banks. Yet the CDs they offer are piddling.
It's ridiculous. If you are in a CD, I feel for you. I'm sorry.
You should have listened to us or found us before you got into a CD because CDs are pointless. Hopefully, you learned from the mistake. They're paying you 4.75% for them taking your money and lending it out at least 7%.
You're losing like 3% of your potential by doing it. It's locked up. It is locked up for the minimum of six months.
They might have a month CD, but I think for the most part, it's six months. They probably aren't even worth it. I think it's mainly six months and 12 months.
There are some 18-month CDs, but they're not the way to go. The bank stock, they are rolling in money. We keep hearing about the impending financial disaster or more banks are going to go under.
I really feel like that's going to be overshadowed or undershadowed by the AI bubble that's going to take off. Well, I don't see like they all have so much money. How would they go under? Yeah.
I don't understand. I think in the first quarter of 2024, deposits were up like 30% over the first quarter of 2023. People are making more money.
They're depositing more money in the banks. A lot of people obviously don't listen to us because your checking account should never be more than like $500. It should be in something else that makes more than the .05 or whatever.
It's not the 500. It should be at least a month's worth for that rotating bill coming in and out and that depends on how much you spend. If you're someone that has $25,000, like her brother has $25,000 or something like that.
$31,000, I think. Or her dad has like $200,000-something. $200,000-something.
Like if you're someone that has that many thousands of dollars in the checking account, you are losing so much money. Oh, he's actually getting to the FDIC insurance freaking cap off. I should probably say that to him.
I learned something about that, which I find absolutely fascinating. This is a complete sidebar, so we might cut this out. We might not.
FDIC, $250,000 only applies to your dad. So if he has $230,000 in his business and he has like $25,000 in his checking, he's actually they're not going to cover all of it because it's $250,000. You can have like six accounts.
And it's across. Yeah. It's across all accounts.
It's cumulative. Yeah. I figured it would be cumulative per person.
That's crazy. That's something that they never taught us. They don't really talk about that fine print.
So if you have multiple bank accounts, you try to like get around that. And I'm assuming that applies to like if you have $250,000 in a brokerage account that's in like a CD or something like that. Yeah, it has to be same deal.
If you have like two or three different like so you have a 401k and you have a regular brokerage account and you have more than $250,000 in CDs, you're only going to be like if shit hits the fan, you're only going to have $250,000 back. That's crazy that I like I didn't know that until recently. I was like, wow, those sneaky bastards.
It's all in the hidden details. People think FDIC insurance is so good. That's why I said the way Worthy does it with those collateral back loans.
I just think that that's the way more secure way to go. The next one will be that consumers are going to spend less. I know we've kind of touched on it, but I actually just haven't came out and said it like.
So this is where they'll backtrack to the consumer necessities, right? Toilet paper, those kinds of things. But they're not going to get toilet paper at Target anymore. They're going to get toilet paper at Walmart.
Walmart, Costco, big and bulk. They're either going to go where they can go to Costco or Sam's Club and get like a shit ton of toilet paper or they're going to go to Walmart where they can get toilet paper like a third of the price at Target. So now they're going to start doing budgets.
They're going to cut out the discretionaries. So I know we danced around it, but like the consumers actually really, really, really the consumer staples sector. They're really they're really feeling the effects of everything.
Like there's no more savings from COVID. There's checking accounts are lower. Credit card is getting higher.
So they are actually being they're hyper selecting what they need. So like restaurants, I'm sorry, could be like have a really shitty twenty, twenty five. So if you're in like a restaurant stock, you might want to get out of it before twenty, twenty five, because once these numbers start coming in about how little people are actually spending, retail is going to kind of get hammered.
I think the Uber eats and stuff's going to go down, too. Do you think people are going to cut that out? I would hope so. I would assume because there's like that's like the first 30 percent tariff, like 30 percent tariff tax on that.
I've literally cut out Uber Eats and I cut out like all my streaming services before I cut out like going to the grocery store. I would think streaming services would stay up and cut back on travel and other things. But they are like that's one of the things I was just just reading before we started the podcast was in the summer of twenty, twenty four, there was like people had started changing their vacation plans drastically because they originally wanted to go like, say, to Disney World, to Italy or to Disney World.
And because of their wallets, they're going to like, I don't know, local state park. What's what's around here? Hershey Park or like what's that one up north? Dorney Park. Dorney Park.
Dorney Park's like if you don't know, Dorney Park's like the rip off of Hershey Park. It's like it's like the Hershey Park light. They're probably like, come on, kids, we're going camping, going camping, and they'll go out in the front yard with a tent or the backyard with a tent like that, like they're drastically changing their vacation plans.
And if you think about what that actually the ramifications of that, that's going to go across like all the airlines. They're all living. They're all living on the hog right now.
They go, oh, everything's great. After Covid happened, all the people came back. So they have really high revenues.
Airlines are going to get smashed here soon. Cruise liners. I like I honestly hope they get put out of business.
I know the YouTubers that I talked to and help with their with their portfolio, they were super heavy into all the the cruise liners. And I was like, why are you heavy in those? They don't pay shit. And like you're just you're hoping that they're growing.
And then Covid happened and they stayed in them. And I was like, why are you in them? Even when they come back, they're not going to be worth very much. So I got them out of them.
And they're like this. She's like she's been like Norwegians doing really good this year. I'm like, well, just give it time.
Just give it time. Yeah. Cruise ships like cruise liners like so you got Royal Caribbean and you got Norwegian in your portfolio.
You need to get rid of them the next time there's a bump because they're going to get slammed. And I don't know if it's going to be before the end of twenty twenty four. But within the next twelve months, they're not going to be at the prices there.
That's a that's a pretty bold statement because you look at it. They're like really high prices right now. I don't think that's always the highest rate before they drop off.
Everybody gets optimistic about it. That's what happens. And yeah, if nobody's spending money, why would you spend on the all inclusive crazy cruise packages? That makes no sense because you got to fly a plane to even get to them half the time.
So those consumers are really tight in their wallets because of inflation is not going anywhere. I think they were all optimistic or reading the news or being fed a load of bullshit about how all inflation will be under two percent before like May or something like that. It's not not even close.
It's not going to be. I don't think it'll be under two. Even if like I don't buy.
I'm not saying if you vote for Biden, you're evil. Your vote for Trump, you're evil. But even if you're a Trump person and he's elected, it won't be under two for like probably the first half of twenty twenty five, regardless who wins.
Like it's been so sticky. There's supplies. There's still supply problems.
There's still a demand problem because people want, want, want, want, but they can't get anything because people can't build it because they have no workers or there's no way to bring it because there's war where like they normally would pull it through the water down there in the Red Sea. They can't do that. They have to go a whole way around Africa to come up.
So like it costs a lot more and you're not getting as much stuff. So there's still supply problems. The demand problems, I think, might dissipate a little bit when people start tightening their walls.
But you still are going to have people that regardless of how little money they have, they're going to buy stuff. I'm learning so much this episode. I didn't know any of this because you know how I am so anti news, blind news.
Yeah, it's crazy. What's the next one I was going to discuss? Oh, cryptocurrency. I'm still super high on cryptocurrency for the rest of 2024.
Now, do you still think that's going to follow through with the original projection, thinking they'd have a lot of money from the crypto surging, even though people are cutting their money back now? That seems a conflict with that. But it is a different mindset of a different kind of people that get optimistic about that. Crypto people like there's a lot of like a lot of small individual investors in cryptocurrency, but they're not going to have as much as they thought they were going to have, because I don't think like the Shibainus and the Dogecoins and those aren't going to they're not going to get as high as they thought they might.
So you don't think this actually bull run of crypto is going to go as high as I think it is. But it's going to be it's going to eerily mirror what's going on with the actual stocks. There's going to be 10 or 12 cryptocurrencies that go up a shit ton.
So it's everything else is going to be. OK, so the ones I listed, I still believe in and I'm not getting out of them like the graph and Filecoin, like at some point those are going to be worth like thousands, like not hundreds of dollars. I don't know the time frame.
I don't know how long it'll take, but like just what they do. So like if you're if you're a crypto crypto fiend like we are, you have to do your research and find like programs that are awesome. I would look for programs that are going to integrate the AI component.
I did mention that with the blockchain. Yeah. Fetch AI is a big one.
So they're going to merge. But like what I've noticed in the last, I'd say, four weeks is there's a lot of meme trading on the stock market with like the hell's the one the Roaring Kitty is always in GameStop and AMC. Roaring Kitty.
He's back, BTW. GameStop and AMC, like when they start doing the crazy like 20 percent up one day, 30 percent down the next day. That means there's a lot of meme trading going on.
If you're not familiar with meme trading, it's basically a company that has like no value that they're just betting that they can make money on. Well, the same time that's going on, you'll see like crypto programs you've never even heard of. They'll shoot up like five thousand percent.
And you're like, what the hell's going on here? It's because somebody people people made money from the GameStop meme craze. They dumped it into a crypto meme token thinking, hoping they could duplicate it. So like there's a lot of that going on.
But ultimately, you're going to look at maybe 20 cryptocurrencies that are blue chippers. And Ethereum ETF is going to is going to happen in 2024. Yep.
Trump just came out. Yes. Yesterday, the day before, said he is a crypto president.
So if he is elected, I'm assuming there'll be some legislation or there'll be some it is going to blast off if that happens. Easing of the regulations on the cryptocurrency. So like crypto.
Maybe we can get KuCoin back. Crypto is going to be big for at least another eight, nine to 12 months, maybe beyond that. But like for in the meantime, if you don't want to get into crypto, but you want to reap the rewards of it, a yield max literally just came out two weeks ago with a Bitcoin yield max where they basically they trade options on the bit of stock, which is basically trading options on the futures of Bitcoin.
So funny. Tim was like, I'm torn. He's like, this concept is very strange.
That's a bit like what BITO does. BITO doesn't actually even own the Bitcoin. They don't.
They just trade futures on Bitcoin. Like if Bitcoin is going to go up to this today or it's going to go down to this. That's what they're doing with the future trading.
What the yield max does is they actually buy the stock. They actually they buy options on the BITO stock. So those are two ways that you can have exposure to Bitcoin without actually owning any Bitcoin.
And it's it's it's a crazy ride. But like BITO has been really good for us all year. I was thinking about dumping it and putting it into the yield max.
Yeah. Dumping the BITO and putting it into the yield max. It's a YBIT or some shit like that.
I forget what it's called. I think it's YBIT. But that's a way to actually get the reap the rewards of crypto without actually owning crypto.
If you're interested in that. I know my email for the fourth of July week is probably going to be about yield maxes and we'll probably have a podcast at some point around that time about yield maxes. Not like we did before.
Like, I'm actually going to pick like probably the. We came up with the strategy. The 10 or 15 best ones.
And then I'm going to actually walk you through how like I've mitigated the risks pretty much as much as you can and something like that. And that'll be a way to accelerate your earnings so that you can actually invest in more like blue chip dividend earners. Well, what it does, if you like, if you want me to boil it down to like math, if you can get into a good yield max, it's giving you 40 or 50 percent for the year.
You can then afford to get into these five and six, seven percent yield dividend growers that without having to put any money into like the 10 or 12 or 14 percent high yield. Sometimes they're good. Sometimes they're bad investments.
You can actually stick more into the, you know, the four to eight percent range with like good companies that have a history of dividend growth. And you're still making the same, if not more, by using yield max. You get your yield max check every month and you dump the yield max check into these other companies.
And everything's glorious. It's like the compound machine on crack. It's amazing.
As for the other macro trends I'm seeing, shipping, marine shipping is going to be huge until they settle all the conflicts in the world. So like Zim and Nat and I forget, there's another one. They're all up like 100 percent for the year, because like I said, there's a war going on around the Red Sea area.
And these companies have to literally go the whole way around Africa and come up. I literally did not know that. So their costs are a lot more to transport stuff.
So there's a supply problem because there's not as many ships that can do that. But the companies that can do that are reaping all sorts of money with their revenues super high because they're charging so much more. They're the only game that can do it, right? But they're kind of risky.
So like those are ones like I'm just saying the shipping companies are going to have a pretty good 2020, rest of 2024, as is I think the rest of the economy, because I was looking at the estimates by the quote experts and they are projecting damn near 10 percent growth for the rest of 2024 with sales, with revenue, with profit margins, like it's pretty much across the board. They expect everything to go up 10 percent. They expect 2025 to be even better than 2024 when it comes to profits and revenues and EPS and all the metrics that people like.
Even with spending down. Interesting. Well, you've got to think that the spending's down, right? And it's going to be down in June.
And they actually won't see that until like the first part of 2025 before they actually see how far it goes. It's a ways out. And I've even read some reports that I think the next three years are going to be ridiculously high growth.
It's very possible. We're in a very odd economic climate where there's things that are not playing out the same way they've done in history. So it's kind of like the Wild West.
Well, what they're what my biggest bitch with the experts is that make all these claims is they're only looking at like, oh, the best performing sectors should have like really good, like two or three years. Well, like they don't break it down. They don't peel the top layer of the onion off and look under like, well, the reason that telecommunications is so good is because there's a bit meta and there's Google in it.
Like, so, yes, the telecommunications sector might grow for the next three years, but it's only going to be like three companies. Yeah. So unless you're in the right companies at the right price and then get out at the right time, you're actually losing money.
But like the PE on the market as a whole is the highest like it's been after the first quarter in like 10 years or more than 10 years. So that's why I said you have to be very cognizant on your value investing. You have to come up with a metric that you're comfortable with.
What I use, which I found has worked out pretty well, is I literally will look up the PE of a company. I'll look up the current PE and I'll look up the future, the next 12 months PE, and I'll compare it to its sector to see where it stands in the sector. If it's like 40 or 50 percent undervalued compared to the sector.
Well, that's OK. That's something I'll look into further. We're actually going to have an episode where I literally just pick five random stocks and I'll like walk through exactly what I look at to see if they're worthy of a future research or if they're one that I would invest in right away or one that I would just sell right away.
That's going to be a fun one, I think. But PE is like right now you need to use your valuation metrics super, super, super, super important because everything is so elevated. Yeah.
You have to buy in at the right price. That's where you hedge the most risk. Yeah, I was reading somewhere like any moron can buy a stock, but only a select few can buy a stock at the right price.
Yeah, it really is down to those metrics. And that will save your butt so much. So a way to like start my research, if I was just starting out or if I had money laying around, I would look at the sectors like health care is one, energy is another.
Like they were the two worst performing sectors in the first quarter, according to earnings reports. And I would dive into those and I'd look, OK, well, health care, which one, health care here and energy like health care ones off the pop off the pop would be Bristol-Myers, would be Pfizer, maybe United Health, the REIT that does UNH or whatever, or UHT, I forget which one it is. Energy, I really like KRP.
I really like EPD and ET sometimes. ET falling home. I hated that movie.
It was so creepy. But I would find the sectors that have been depressed because no one's investing in them. So I would look, I would use my contrarian.
My contrarian had to actually pick up stocks to look at. Then I put my value investing hat on to make sure that the valuations are historically good, future good before I invest in them. But you have to be really picky, as picky as people are when it comes to spending their money now in this environment.
That's how picky you have to be when you're coming in, invest like when you're thinking to invest in something. You have to be super picky because there is a chance if you're not, you'll overpay and then you're fucked. Yep.
You want that margin of safety. We'll do this poll. We'll probably do another one.
I don't know. And I'm thinking maybe every quarter we'll just do like an update. It's not brief, but we'll do a podcast, a brief snippet.
Well, this one's probably long because we haven't been doing it quarterly. And I think we've had a quarter in between. So you had a lot to catch up on.
Because every quarter that there's an earnings report, there are things to take away from it for the future macro trends. Yes. So we'll start doing that in the future.
What it basically is, is the earnings season is micro trends. Like this is this company's getting this much money. This is why they're getting this much money.
This is how often they talked about AI. Those are all micro trends. But if you have enough of the companies discussing AI, that becomes a macro trend.
You have enough of the companies having year over year growth in the electrical field. Well, that's becomes a macro trend because if they're all making money on it, then the electric companies are actually a good macro trend to look at. Indeed you do.
So we'll do another one of these probably in quarter two. We'll see. Maybe three.
I don't know yet. All right, guys. Next week, we're going to break down the updates for the portfolio and you'll get to see we're actually beating the market.
The retirement one is conservative portfolio. That's next week. And it is a little bit above the market.
The following week is our living in a van down by the river portfolio. And that one's significantly outperforming both the retirement and the market. Holler.
That's that. Have a good night, week, whatever. See you next time.