Speaker 1: Welcome to another episode of the Chicks on the Right
Speaker 1: podcast where we talk with our friend and sponsor of
Speaker 1: the show, Zach Abraham from Bulwart Capital Management. And as
Speaker 1: of the recording of this program, we saw some crazy
Speaker 1: swings in the stock market as a result of China's
Speaker 1: AI which is apparently very competitive and cheaper than the
Speaker 1: United States open AI, and that sent stocks like scrambling
Speaker 1: and then everything's sort of leveled out, which is why
Speaker 1: we wanted to talk to you today, Zach, about what, like,
Speaker 1: what should the reaction of a regular person be when
Speaker 1: it comes to their portfolio and they see these kinds
Speaker 1: of swings, Should they be fearful of tech stocks or not?
Speaker 2: Yes and no. So the issue with the issue with
Speaker 2: tech stocks we've been talking about so today today is
Speaker 2: a very good example of the dangers of owning some
Speaker 2: stocks that are extraordinarily expensive. Okay, so if you look
Speaker 2: at Nvidia, like a stock like in Vidio, it's getting
Speaker 2: hit one of the hardest today, great company, but it
Speaker 2: has so much optimism built into the price of that
Speaker 2: stock that even the smallest little adjustment to those forward
Speaker 2: looking earnings projections they change massively and the stock has
Speaker 2: to sell off, So generally speaking, I don't think there's
Speaker 2: a big thing. Here's the problem, though, the problem is
Speaker 2: because of the way people have been invested, they are
Speaker 2: more exposed to these kinds of stocks than they have
Speaker 2: ever been exposed to any kind of stock. So let's
Speaker 2: just say they have an SMP five hundred ETF for
Speaker 2: mutual fund. Okay, probably somewhere in theybor to forty to
Speaker 2: fifty percent of their holdings are companies like in Vidia
Speaker 2: and Marvel and you know, these tech based companies. And
Speaker 2: then what's scary in general about this market? You know,
Speaker 2: I look at a company like Apple, Apple's up over
Speaker 2: four percent. That's just as stupid to me as what
Speaker 2: you see going on the others. Meaning, this is what
Speaker 2: scares me about this market. This market, regardless of what's
Speaker 2: going on in the underlying economy, this market is just
Speaker 2: completely divorced from anything financial. Right, So, like, if you
Speaker 2: look at Apple today, it's up four percent, that's about
Speaker 2: one hundred and fifty or one hundred and sixty billion
Speaker 2: dollar increase of their market cap because AI chips that
Speaker 2: they don't sell are going to go for less what
Speaker 2: it and it's just one day, right, you can't take
Speaker 2: one day too seriously exactly. But these are examples of
Speaker 2: how ridiculous this entire market really is. And one of
Speaker 2: the things that we've been telling people is, look, whether
Speaker 2: you're going to get hit right now or whether it's
Speaker 2: coming later. The one thing I can tell you is
Speaker 2: you are the most loaded up in the most expensive
Speaker 2: and most overrepresented sector in history. So should you have
Speaker 2: exposure to it? Yes? Should you have as much as
Speaker 2: you probably do? No, not even close. And and it
Speaker 2: even gets exacerbated because not only people will own these
Speaker 2: ETFs and mutual funds that are way over represented by
Speaker 2: this kind of stuff. On top of it, a lot
Speaker 2: of them have bought these stocks along the way. So
Speaker 2: we'll take in, you know, we'll take in portfolios all
Speaker 2: the time that are sixty seventy percent in those companies, right,
Speaker 2: and it's just it's just way too much. Now on
Speaker 2: the flip side, you're going to see a bunch of
Speaker 2: things get hit today again, like some of the uranium
Speaker 2: companies that we own have sold off hard. How does
Speaker 2: that really correlate to AI chips? It doesn't. But again,
Speaker 2: in a stupid market that is working so and I
Speaker 2: you know, I don't know what else to call it.
Speaker 2: It's just detached from reality. We said, look, a lot
Speaker 2: of this stuff's gonna have to sell off. When it does,
Speaker 2: a lot of the really good, cheap, really solid, fundamental
Speaker 2: stuff will sell off too. Why because why not? Right?
Speaker 2: So we actually see this over the short term, if
Speaker 2: you own a lot of that stuff, I think that
Speaker 2: you know who knows. I mean these stocks are still
Speaker 2: so expensive that you know, you look at companyike in video,
Speaker 2: in Vidia could drop fifty percent and still be historically expensive, right,
Speaker 2: I mean it's down sixteen percent today, So yeah, I
Speaker 2: think people need to be careful. But this just gets
Speaker 2: to the risks that we're seeing out there, which we
Speaker 2: see so many great opportunities. But the problem is is
Speaker 2: tech is dominated for so long that it has become
Speaker 2: the vast majority of everybody's portfolio. Should you have exposure
Speaker 2: to it? Yes, But diversity is a good thing. Right now?
Speaker 1: What's the percentage then? Like what what what would you
Speaker 1: recommend as a percentage of your entire portfolio?
Speaker 3: The diversification percentage?
Speaker 2: Yeah? I mean long term, you know, we don't ever
Speaker 2: like to exceed twenty five or thirty percent in a sector,
Speaker 2: but for us to be that involved in a sector
Speaker 2: we have to see extraordinarily low prices. Right Again, this
Speaker 2: is what's so pernicious about that. Not only are you
Speaker 2: so overloaded by like forty percent in this sector, it's
Speaker 2: also the most expensive sector in the market, and it's
Speaker 2: the most expensive sector in the history of the market. Right.
Speaker 2: So again, not saying the whole bottom is gonna fall
Speaker 2: out tomorrow, but there's two things that are gonna happen.
Speaker 2: Those stocks have made the majority of the gains that
Speaker 2: they're gonna make over the next five decent, meaning those
Speaker 2: stocks are not going to continue their performance over the
Speaker 2: next five to seven that they have over the previous ten.
Speaker 2: They're just not okay either well they either they won't
Speaker 2: or those companies will all be larger than the size
Speaker 2: of the entire US economy. I'm gonna bet that's not
Speaker 2: gonna happen, okay. And so the other big issue, though,
Speaker 2: like we've said before, it's not so much well it is.
Speaker 2: It's not just a problem what you're exposed to, it's
Speaker 2: what you're not, right, that's the other problem. Not only
Speaker 2: are you forty percent exposed to this sector, but what
Speaker 2: else are you not exposed to?
Speaker 1: Right?
Speaker 2: And that to us is the biggest danger because we're
Speaker 2: looking around a bunch of different sectors and a bunch
Speaker 2: of different places, and we're seeing you know, I was
Speaker 2: talking on our own show about a wonderful, growing, well run,
Speaker 2: beautiful balance sheet, solidly cash flowing natural gas company that
Speaker 2: we own that's going to be right in the middle
Speaker 2: of shipping this whole surge of shipping liquid natural gas
Speaker 2: to Europe. And oh, by the way, they're also paying
Speaker 2: a twelve percent annual dividend, right, And so you're looking
Speaker 2: at stuff like that, You're like, man, why am I
Speaker 2: going to mess with something like Nvidia twenty five or
Speaker 2: thirty times revenue when I'm sitting here buying these wonderful
Speaker 2: companies that are paying me twelve percent. You know, there's
Speaker 2: there's just so much better.
Speaker 1: Stuff to own out there, and go ahead, No, no, too, Bay,
Speaker 1: go ahead. Oh I was gonna say. So, Like when
Speaker 1: there's these giant you know, when you read the headlines
Speaker 1: first thing in the morning and you see, oh my god,
Speaker 1: like the futures are saying the world is ending and
Speaker 1: everything is going south, it's so tempting, I know, for
Speaker 1: people who are risk averse to be like Oh my god,
Speaker 1: I gotta get rid of all my tech stalks. Yeah,
Speaker 1: but you're you're not suggesting like when you see a
Speaker 1: headline like that, dump everything and run for the hills,
Speaker 1: you still should be exposed. Maybe, just not a crazy amount,
Speaker 1: is what I'm understanding.
Speaker 2: Yeah, and this is what's so important. Right Today is
Speaker 2: an annoying day for us because some of our stuff
Speaker 2: is getting hit right along. But why are we not concerned?
Speaker 2: We're not concerned because our stuff is at ridiculously priced, right, meaning,
Speaker 2: you know, if I've got you know, let's say you know,
Speaker 2: let's say I'm buying a I don't know. Let's say
Speaker 2: I'm buying a house right now in or let's say
Speaker 2: I bought a house five years back and it only
Speaker 2: it had only rallied fifteen percent since the eight or
Speaker 2: nine lows. Right, I might not be the best price
Speaker 2: out there, but I'm sitting there going, Man, if this
Speaker 2: thing's only fifteen percent off the O nine lows, I'm
Speaker 2: probably safe. Right, There's probably not a lot of fluff
Speaker 2: in it. For instance, if you're buying these kinds of stocks,
Speaker 2: these AI and tech type stocks right now, it's like
Speaker 2: buying a house in two thousand and seven, right, I mean,
Speaker 2: you're just buying these things priced to perfection. It doesn't
Speaker 2: guarantee a collapse. These things have been expensive for a
Speaker 2: long time. But what it does say is again today
Speaker 2: should be a good reminder to people, this is why
Speaker 2: you need to make sure you have a portfolio. And guys,
Speaker 2: this cycle has gone on so long that it's to
Speaker 2: the point when we get clients that bring portfolios in,
Speaker 2: it is a rare event that you have a portfolio
Speaker 2: that is properly diversified. It's shocking even people that have
Speaker 2: somebody else managing their money. Right. So, then, to get
Speaker 2: to your point, all of this is about. This is
Speaker 2: not about the failure of AI. This is not about
Speaker 2: America losing pace in the AI. This is about a
Speaker 2: Chinese firm used several lower quality or not the most
Speaker 2: expensive chips that in Vidia makes. They used stuff that
Speaker 2: was two or three generations old, so way cheaper, and
Speaker 2: they got outstanding results, which calls into question all of
Speaker 2: the tens and hundreds of billions of dollars that we
Speaker 2: thought so many of these tech companies were going to
Speaker 2: have to spend on these chips. Now, personally, I think
Speaker 2: the market is overreacting. What's hard about it, though, is
Speaker 2: the market has already way over reacted to the upside
Speaker 2: of AI sow reality in here. I don't really know,
Speaker 2: but for the majority of these companies, today is a
Speaker 2: perfect example of why we've just said, we don't buy
Speaker 2: stuff that that's insane, that's that insanely expensive, because it's
Speaker 2: impossible to know what it's really worth.
Speaker 1: Oh my gosh. Well, and when we say today, by
Speaker 1: the time this podcast airs, will have been talking about
Speaker 1: Monday the twenty seventh, which is when everything was so
Speaker 1: crazy with the market. And by the time this podcast airs,
Speaker 1: you will have done another webinar, which I know our
Speaker 1: listeners are huge fans of. So what can people expect
Speaker 1: out of your webinars and where can they sign up?
Speaker 2: Well, so we're going to walk through our general you know,
Speaker 2: our process and show you how we do things and
Speaker 2: you know how it's all about trying to minimize risk
Speaker 2: but maximize upside potential. And in this one we're going
Speaker 2: to show some specific charts. They don't necessarily, you know,
Speaker 2: tell you exactly what's going to happen, but people need
Speaker 2: to understand where we are and how how far out
Speaker 2: there we are in terms of historical norms, and it's
Speaker 2: not just about fear and risk, but it's also about opportunity. Right,
Speaker 2: if we're buying things that are overpriced, it means that
Speaker 2: we're not buying things that aren't right. There's opportunity costs
Speaker 2: to investments. So we just want to show them some
Speaker 2: of that stuff, show them what we think the risks
Speaker 2: are out there, and then also show them what we
Speaker 2: think there's some unbelievable potential investments that people are ignoring
Speaker 2: the best way to do that is go to Know
Speaker 2: your Risk radio dot com, Bulworkapitalmanagement dot com. Sign up there.
Speaker 1: Awesome, Thank you so much, Zach. We appreciate it as always.
Speaker 2: All right, thank you, ladies, thanks for having me.
Speaker 3: Thanks Sach. Reservices offered through Trek Financial loc and SEC
Speaker 3: Registered Investment advisor. The opinions expressed in this programmer for
Speaker 3: general informational purposes only, and are not intended to provide
Speaker 3: specific advice or recommendations for any individual or on any
Speaker 3: specific security. Any references to performance of security so are
Speaker 3: thought to be materially accurate, and actual performance may different
Speaker 3: investments involved risk and are not guaranteed past performance doesn't
Speaker 3: guarantee future results. Track twenty fourth Throe zero