More volatility ahead in this AI bull market

0:10Gary Vaughan:Gary Vaughan from Daily Stock Picks. Welcome back to Investing Experts. Welcome back to Seeking Alpha. Always fantastic to talk to you. You know what? You guys always call me an investing expert. And I had this thing on my podcast today where it's a dad holding up his son while he dunks the basketball and the dad is labeled the bull market. The son is labeled a stock genius. And I feel like that's what I am because the bull market will make you a genius. But we'll talk about the true genius of Steve Kress later in this podcast. But thank you for having me. I'm happy to be here. Yeah, it's always great to have you.

0:46Gary Vaughan:And to your point, I think certain markets can make geniuses of us. Certain markets can make fools of us. But even when it's quote unquote easier than other times, you still have to be smart. You still have to know your risk profile. You still have to understand what to get in and out of and when to. So here we are, the end of August. We had a big meeting from the Fed last week. Some pretty big announcements from Trump at the beginning of this week. Where is your head at? What are you focused on these days? So Powell basically, and I couldn't believe this, he basically told us the job market is breaking down and the stock market goes up.

1:28It's up based on him cutting. But if you look at last year when they cut, the market actually went down. But if you have a long term view, the market went up. So I think it depends on your time frame there. But to me, the rate cuts in September might trigger a sell the news type thing because perhaps the market is just too excited about those rate cuts. With Trump and the Fed, I mean, this morning we're recording this on Tuesday and he fired a Fed governor. Now, whether she deserves it or not is kind of meant to, you know, up to the thing. But it does call into question the individuality and the exclusiveness of the Fed.

2:12That, to me, the market just kind of yawned and moved on because the market's up today. So where we are in the market for me, I always say this, you're in a bull market until you're not. And specifically, I was listening to Howard Marks on a podcast called My First Millions, and he just did it last week. And he was kind of saying a lot about the market, but he made a great point, which is the market is up on average 10 % per year. But if you look at it, it's barely, you know, the number of times it's actually been up 10 % is next to nothing. So you've got these big moves in the markets with some downside years.

2:56So if you're really looking at the markets now, we're up 8%, 9%, 10 % in the market. I forget exactly what it is. But we're right at that average. So you kind of got to pick your battles here, whether we're going up or we're going down. I think Powell's telling us the jobs market is getting weak. They want to cut. I don't think it's a political thing that they want to cut. I think they're looking at the data and they want to cut. And that typically when they cut, it's into a weaker market. So all in all, I think, again, you're in a bull market until you're not. Now, am I buying at the top? I bought a bunch.

3:32I bought a bunch of, you know, VOO and QQQ the other week. I just rebalanced my dad's portfolio last week into it. And I'm probably one of those people that's a permable. But let me give you Howard Marks' view on this one. He kind of opened my eyes on this one. JP Morgan last year posted, or maybe it was the beginning of this year, I forget when, it's a chart. And at the bottom of the chart are the returns. And on the left-hand side of the chart is the PE value of the S &P. We're at currently 23. 23 PE would indicate that the markets from here have either a 2 % upside or a 2 % downside average yearly return for the next 10 years.

4:15If that's the case, you'd be better off buying bonds right now because they're paying about 4%. And if you're going to sit in the market and make 2 % per year versus the bonds that are paying 4%, it makes sense, the risk reward. Now, that's if you believe that 10 years from now, it's a 2 % average return. I would believe that we've still got some years here on this AI bull market. And specifically, it's an AI bull market. We've got NVIDIA earnings. Everything I say on this podcast, Rina, could be completely thrown out. This could be like the wide world of sports. If you, you know, the wide world of sports, if you tuned in to the wide world of sports as a kid, I'm 55 years old.

5:01I remember watching a dwarf tossing on wide world of sports on ABC. That no longer is a thing right now. You know, what I say right now may no longer be a thing next week, just based on NVIDIA earnings. But I think the options market is posting a 6 % up or down. And 6 % is like$240 billion of market cap. So do I think we're going to be in an up? I predict volatility. I think you're going to be able to trade this market. And I think that's exactly the market that we're in, is you can buy for the long term, because I think the averages point towards buying and holding for the long term is the way to go.

5:43But if you're doing that, just buy now. And the averages tell you that. But if you're looking at the short term, I'm kind of a buy the dip kind of guy.

5:50Gary Vaughan:I was going to ask regarding the short term, getting in and out of, let's say, bonds in the short term and reacting to monetary policy announcements and perhaps even actual decisions. How much time would you say in terms of looking at the bond market? Let's say, are you waiting until the September meeting? Are you waiting until the next Fed announcement? How do you figure that? Well, I kind of Trump just bought$100 million worth of bonds. Do you think rates are going to go up? I mean, that's, you know, follow the lead on that one. I'm not a bond guy. I've never owned a bond in my life. I don't plan on getting in bonds.

6:29But if I had the view that in 10 years, I'm only going to get 2 % per year, then I'd be better going off into bonds. And I'd be better following the present. Now,$100 million to him is probably a drop in the bucket based on his net worth. But let's put that net worth into perspective. This is a man who also owns a crypto exchange. And so, you know, for me, Bitcoin just hit its 2024 highs. I have been clear in my podcast. I buy IBIT and I buy ETHA. And I'm buying those for the long haul because back in 2022 and 2023 when I sold, that was a mistake. So I buy and hold for the long term. And for me, I don't think it's a risk asset anymore.

7:13You've got the president of the United States. You've got people opening up Ethereum treasuries. And so for me, what's going to outperform over the next 10 to 15 years is probably Bitcoin and Ethereum and other cryptos. Now, for me, you brought it up perfectly. It's risk versus reward. I tell people on my podcast, I particularly like to have five to 10 % of my net worth in crypto. I have lost on down days more than 5 % of my net worth on extreme down days. Think about liberation, the liberation day time. We were seeing five and 10 % downturns a week. So my risk tolerance is I don't mind if crypto goes to zero because then I'm out five to 10%.

8:03So the risk reward for me is perfectly fine in that sense. Now, bonds, if you have a lower sense of risk tolerance, I think bonds would make sense for you right now because while the Fed is going to cut rates, we know that, but the Fed isn't in charge of the bond market. And again, I'm not a bond expert. I wear that hat on my podcast every now and then. But the reality is the bond market will rule whatever goes on. So if the bond market throws a tantrum like it did when the Fed reduced rates last time, that may be an opportunity to buy bonds at the spike. But again, I think a 4 % treasury bond, which I think is what Trump bought.

8:47If you've got the president of the United States who isn't in control of rates, but kind of has been very clear rates should go down. Bonds might be a once in a lifetime kind of buy.

8:58Gary Vaughan:And you mentioned crypto. Is the dollar, is gold, are precious metals? Is that something you dabble in during these times specifically or in general? I never have, although in February, I saw gold going up. So I had kind of alerted my newsletter readers to, hey, Newmont mining, It's not gold specifically, but it seemed to have a very good uptrend in a downtrend kind of recovery. And so it was trading under its 200-day. And again, I'm not a technical and I'm not a fundamental expert. I'm just a guy that mixes the two and sometimes gets lucky on these things. But I think the best predictor of the future is the past.

9:43And if you can find a strategy or a pattern that makes sense to you, then the best predictor is that. And just Newmont Mining just seemed to be one of those things. And I think we made like 30, 40 % on that trade. Now, I've since gotten rid of it, and it's continued to go up. But I'm not a guy that loves metals. I mean, I'm a guy that makes fun of when you turn on CNBC and you see Tom Selleck or somebody selling you gold. I mean, that's kind of my thing. I'm just not in that realm of, okay, my risk tolerance is a little higher than that. So while you can trade these things and make a good amount of gains on them, I'm just not that expertise.

10:24And I tell people, you need to know where your expertise is. And my expertise is typically large cap tech.

10:30Gary Vaughan:You weren't one of those people who got convinced by Tom Brady to get into crypto. You were on the side of Rob Gronkowski on the sidelines being like, dude. You know, SBF kind of, he may have reached out to me in my emails based on my podcast, but I kind of didn't get the, what was it, Kevin Leary,$500 million or something. I mean, again, I think that time has passed with crypto. I think as we get more regulation in that space, I'm not a meme coin kind of trader, but I know a bunch of people who are. I'm just more Bitcoin and Ethereum. And I think those are two fairly stable and fairly established cryptos.

11:11One that I will tell you that I just got into as far as a single stock with a thesis, and I'll give you the full thesis. I bought IREN. It was based on my four-hour algorithm in TrendSpider, which I have, which is a technical trading strategy. But the reason that that one specifically got to me was NBIS, Nebius. Great company, reported earnings popped by 50%. I've got a watch list of stocks that if they pull back 5 % or 10%, no questions asked, these are stocks that I want to buy. Nebius was one. It popped on earnings. I said, damn, I missed it. So I wanted to find a similar company. Well, I-R-E-N is just got into, it's a crypto miner that got into the power business.

11:58And I said, you know what? Let me take a look at this. I use Seeking Alpha. I researched what the companies were. IREN is a third of the market cap. It's actually making money versus NBS is not making money. It's got twice the margin versus Nebius. And I said, let's take a shot on it based on the technical trade of my four hour algorithm into earnings. So far, I'm up 30 % on this one. I think I was down at the beginning at 10%, but I kind of waited and I didn't make the perfect entry. But if I hit 50 % before earnings, I'm pulling that money out. But the reality of that one is it was a thesis.

12:38It worked out. It's based on research. It's based on technicals. It's based on fundamentals. And again, I think it's heavily crypto, but I think that's where you're seeing some big moves. I mean, look at Tom Lee with his BMNR or something, Bitminer. That one, huge, huge moves. So I think in this market where you're seeing high volatility, you're going to see these move even higher. And we've got leveraged ETFs now. So if you're bearish on crypto, I mean, I'm a guy that doesn't do options. I'm too dumb to do options. Why I'm on investing experts, I have no idea. But the reality is you've got inverse ETFs where if you want to play the downside on crypto, you can absolutely do it.

13:22So I think it's about picking sides and which side are you on? Have your thesis. If it works out, great. If it doesn't, you've always got the indexes to kind of fall back on.

13:33Gary Vaughan:I appreciate that update. I think that's good for understanding kind of where to pick your place in the crypto space. And then you mentioned NVIDIA towards the beginning. They're reporting tomorrow on Wednesday. We've seen a slew of tech companies report so far. How are you understanding the tech space in context? What are your thoughts about NVIDIA? Happy to hear your thoughts on that side of the market. In video, I love. I do love it. I'm just$4 trillion. And the last time I was on this, this investing experts, I think I brought it up as well. $4 trillion market cap scares the hell out of me.

14:15Can it go to an$8 trillion company? Is that the best opportunity in the market? I would say no. But the amount of capital spending that we saw out of these MAG 7s and the hyperscalers, It's incredible. I mean, again, kudos to Steve Kress. He picked Credo. Credo is actually outperforming, and that was his number one pick going into the year. It's outperforming NVIDIA by a large margin. Again, risk-reward, which one do you really want? A smaller semiconductor company or a large, huge behemoth of a semiconductor company? My belief is that NVIDIA continues to get the lion's share, but we've seen AMD with their stock price, because let's be honest, the people that listen to this specific podcast, you don't care about anything but the price of the stock and the gains of that stock.

15:06Whether they beat earnings, whether they do or not, the market will determine the reaction. But the price of the stock is what matters. And the price of AMD has done better than the price of NVIDIA. Is AMD a better product than NVIDIA? No. But the reality is that the stock has just done better. So in that space, I think the market cap prohibits me currently from loading in as the risk reward, because the risk to me is probably on the downside for that company coming below $4 trillion. Because if they don't show the growth, and I think it was like 89 % revenue growth year over year, but it's huge growth.

15:44If they don't continue that growth, the market I think is going to pull them back a little bit. But you can't argue. They are the best opportunity in AI. Now, what I'm looking at specifically tomorrow is China, because if they can't make inroads in China, that kind of caps it a little bit because we've seen most recent talk about Meta stopping their hiring for AI. We've seen Google actually outpace some of the NVIDIA stuff because their chips, their Tensor chips are actually better. So I'm not an expert in this whatsoever. I read all of the research on Seeking Alpha, but I've kind of made my picks and I believe that Google probably has more upside than NVIDIA.

16:28Now, if you want to talk risk reward, I'm still thinking that Apple is not a bad risk reward as far as the major players. Apple for me, I think it's put in a nice floor at$220. If you can get it under$220, I think that's a good long-term price. because I think as far as them with AI, they will get it right at some point. And that's the only thing that's holding them back right now. We saw when Tim Cook went into the White House, tariffs were pulled off on India. So he pulled that off the table, off the risk. They're now friends. What else do we have? We have the AI fear. And I don't think that the iPhone 17 is going to be the big push, but I do think that AI, if they were to buy perplexity or to make a huge AI push, or even to partner with Google and put Google as its Siri kind of backfill.

17:23I think that would make a big kind of plus to the market. Oh, and as far as Tesla, let me address this since this is a big one too. My thesis coming into the year was Tesla was going to do great. Elon was with Doge. Elon was sleeping in the White House. It's been a political train wreck for this guy. Every move that he makes is the absolute wrong political move. I'm still a big believer in Elon, but Bill Gurley put out a tweet the other day about Baidu's Apollo Go. So it's a Chinese company. It's neck and neck with Waymo right now, but the car price is staggering. The car price for an Apollo self-driving vehicle with LiDAR is$30 ,000 per vehicle.

18:09Waymo is paying $175 ,000 per vehicle. Scale those up on an international basis, you've got a major cost difference. But the Apollo stuff has a real headwind getting here in the US because who's going to approve a Chinese company coming in here for autonomous driving where you can monitor drivers and behavior and blah, blah, blah. So I think you have some problems there. But I do think Tesla with Elon going full vision, I think it gets there. But I don't think the full self-driving is the story. I think that AI and robotics are the story. So if he can make his AI vision a great AI, I think that takes on a new world where he's actually able to manufacture and create humanoid robots with AI features.

18:59And I think that's what takes the company from a$300 stock up to a$400 or$500 stock.

19:05Gary Vaughan:That's interesting because Tesla bulls usually point to the FSD as one of the big factors in their decision making. So what are you looking for along the way, just announcements and how they're coming out with things and iterations, et cetera? The market's still trading it like a car company. I mean, I say like a car company because every time the damn deliveries are done, the market takes it down. So what I do is I trade Tesla on my four hour algorithm with batch back tests much better than buy and hold. I still have a small position of buy and hold on Tesla, but I trade it in and out of there.

19:43And I think it, you know, until a point where he comes out with some type of validity, because the full self driving that's in Austin and stuff, they still need drivers. They still don't trust it. And I've got it in my car. I still don't trust it on city streets. I think it does a lot. It's it's leaps and bounds better than it was. And every freaking month, every update that I get, it's leaps and bounds better. So I can see it getting better. But is it there and is it ready? And is it better than a human driver? I think that's going to be the announcement that may push it up. But for me, it's a sell the news situation until the news becomes the reality.

20:22And I think it was Rivian just came out. RJ was on a, their CEO was on a podcast and he said, full self-driving, we're going to have it in 2026, where you can go point to point without any intervention. Rivian has just caught up to Tesla if that's the case. And so I think the full self-driving stuff, I think it's less likely that Tesla wins on the full self-driving, I think it's much more likely that Tesla wins on the robotics and the manufacturing because that's what they've done better than anybody else. Rivian is still in manufacturing hell. They can't push these cars out fast enough. Tesla, they're having delivery problems.

21:02So again, I think that the manufacturing and the expertise there is more in the manufacturing. And I think robots is probably the next leap for that one, because I think you're going to see some people catch up to Elon. And it's happening pretty quickly, specifically with Rivian.

21:18Gary Vaughan:You know, I feel like that conversation blends in nicely with your point about you not being an expert. And yet we get so much good feedback on your appearances here and your takes on the market in general. I remember driving through Maine a few years ago and stopping at this master basket maker. And he was saying that everybody considers themselves an expert now, but nobody is. And I think to your point about Rivian and Tesla and who's an expert in the market and who isn't, and this is your background. And in terms of understanding what you're looking at, relying on expert opinion and voices, relying on people that have more experience than you do, and then, you know, kind of funneling all that through your own brain and your own experience and your own risk profile, I think is such a huge part.

22:10Gary Vaughan:And there is work involved in becoming better or more expert than you may have started. To anyone wanting to become better, I think there are so many tools at our disposal. And something you and I have talked a lot about is Steve Kress's approach to the markets and using that as a tool, using that as part of our arsenal of tools in terms of approaching the markets. We've had Steve on the podcast in terms of releasing his top stocks for the year. You have been a big fan of that. How are you looking at those stocks? Is that something that is a big part of your, you know, in terms of how you approach stock picking in general?

22:50Gary Vaughan:Is that something that you utilize? Kind of happy to hear your thoughts in general about your favorite stocks these days. Well, I'll tell you, Steve Crest is my hero. First off, I know I'm an affiliate of Seeking Alpha, but I would absolutely become a paying customer just for the top 20, 25 and second half stocks that he has done. And he's killed it. I mean, it's three years or four years in a row. He has outpaced the market with those picks. So you can't argue. And honestly, I tell my audience all the time, and I'm sorry to Seeking Alpha for this. But the reality is get the free seven day trial and get those picks at the beginning of the year, in the middle of the year.

23:27And if you like Seeking Alpha, continue on after the seven-day trial because it's that good, really. I'll give you a great for instance. At the beginning of the year, I was putting together a portfolio for my listeners, which by the way, I was live on YouTube today and I mentioned that we were recording this and like 10 people piped up. Oh, I started listening to you after that Investing Experts podcast. So thank you for the reach. It was really, really positive. But I'll give you, for instance, at the beginning of the year, I wanted a portfolio with no more than 10 positions that would likely outpace the market.

24:04So I knew one of the positions that I wanted. I took a look at the S &P leader last year, which was VST, Vistra Energy. We all know that AI is going to be powered by power. So Vistra Energy was up last year, 77 % last year. And I went to Seeking Alpha and I went to the quant ratings. And I said, you know, Vistra looks a little bit expensive, but there was one little one underneath the surface that was ranked number one in the quant. That was Talon Energy, TLN. So I decided, OK, of my top 10 picks that I think are going to beat the S &P, I like this company. It was in January. Again, it was looking forward.

24:50I put a 1 % position in the company. So it's similar to your AlphaPix portfolio, where you put 1 % of the portfolio into kind of these on the 1st and the 15th. And Steve and the team do such a great job with that. So I put 1 % in there. It's up 77 % this year. Oh, I'm sorry. VST was up 262%. I read my notes long. It's TLN is up 77 % this year. VST was up 262 % last year. It has outpaced VST. So I'm fine with it. But again, using the tools that you have, I made mention the past few days in my newsletter. You don't go to war without your weapons. And my weapons, you know, Seeking Alpha Premium, Alpha Picks, and then TrendSpider for my charting.