Frank Curzio 00:00

How’s it going out there. It’s Thursday, October 1. I’m Frank Curzio. This is the Wall Street Unplugged podcast where I break down the headlines and tell you what’s really moving these markets. So I want to start off by saying thank you for attending this live event on X. Daniel Creech and I are here. How are you doing, Daniel? Daniel’s in the house.

Daniel Creech 00:23

Mr. Frank, doing well, sir.

Frank Curzio 00:24

So if you have any questions, we’re going to get through this little presentation here, which is very important. You should listen to it because it’s going to save you a lot of money. And just go on X account, ask your questions. Yesterday we got a lot of your questions through askcurzio.com as well. You can find more information at our CurzioResearch.com. But I want to start off by saying thank you so much for attending. If this is your first time tuning into Wall Street Unplugged, I’ve been hosting this podcast for 16 years. I know. Every single person in the world has a podcast, your kids have podcasts, but it’s 16 years. You break it down, the markets, the economy, share my favorite stock picks, ideas, and Curzio research. Do our Curzio Alpha newsletter where we had exceptional gains. If you don’t know me, I’ve been a stock analyst for 30 years. I worked under Jim Cramer for 5. I learned from my late dad, who was a stock analyst running his own shop for over 25 years, talking stocks at the kitchen table when I was 8, 9, 10 years old.

Frank Curzio 01:17

And over that time, you’ll see during this presentation, what I’m telling you is not this arrogant, “Hey, this is going to happen.” This is stuff that I’ve learned from mistakes in the past, right? That I don’t want you to make. Because as we all know with the markets, you have these perma bulls and perma bears or whatever it is. But the bottom line is, you want to go where the data is telling you where to go. And you want to really focus on that. There’s perma bears, perma bulls, people are going to be bullish all the time, bearish all the time. Again, that’s not us. We go wherever the market tells us to. And a lot of that is based on data, it’s based on information, it’s based on listening to a large network, which at Wall Street Unplugged, this podcast is downloaded in over 120 countries, which is humbling, right? It’s really cool. It’s awesome. But people send us ideas, things that are going on in real time, and so many investors come in and people listen to our podcast during COVID because we were getting information before anyone else from every place.

Frank Curzio 02:08

That’s why we got out of the markets pretty early during COVID. I think it was the second week of February when the market started crashing. And a month before that, China was closed, we interviewed people on lockdown in China and Italy two, three months before that, knowing it was going to come here. And the biggest growth engine in the world at the time was China. And they closed China two weeks before we had our lockdown. So we were able to save investors a lot of money. A lot of that is from our network. You know, I’m not a fearmonger. I’m not telling you the world’s going to end, like we’re hearing all the time in AI these days, or that’s going to lose its reserve currency status and then try to sell you a product that’s pretty meaningless if any of those predictions come to fruition, which I love that. That’s going to lose its reserve currency status. Buy my newsletter. Stocks are going to do well. No, you’re going to probably have your house burnt down if we get invaded. So when I say, and I want to take you serious, when I say that right now from a risk-reward perspective, that this is one of the most dangerous markets I’ve ever seen, I’m not bullshitting you.

Frank Curzio 03:01

I mean it. I took profits in many of my stocks in my Curzio Alpha newsletter from subscribers. I have cash on the sidelines, earning 3.5%, 4% money market accounts, which you could do now. That option wasn’t available decades ago, with rates being purposely lowered by our wonderful Fed and staying low. Because when the dust settles, which a lot of people don’t say, but when the dust settles, there’s going to be a huge buying opportunity, similar to what we saw after the credit crisis and COVID. And bear markets are good for people who are prepared. It allows you to buy stocks if you have dry powder on the sidelines for 20%, 30% cheaper. But now you need to play defense because the markets are in big trouble. And when I watch analysts and economists on TV, that’s why I want to do a lot of these things live. Because I watch CNBC, I watch Fox Business, every Wall Street Journal, Bloomberg, everything. Because that’s a status quo. That’s what they’re reporting out there. And if you could look at things that they’re reporting and say, “Hey, I see something different,” that’s how you make money in stocks, right?

Frank Curzio 03:57

Alongside the short side. And when I hear most people out there saying our economy is strong, earnings just grew 30% plus, you know what? Those are facts. I agree with that. But these are also lagging indicators that have pushed the major indices to new highs recently. And a lot of that has to do with what everybody knows is the AI capex spend, right? It’s really driving most of the profits. However, when you look under the hood, when you look at the data, it will result in this massive slowdown in consumer spending, business spending, sentiment, which is massive, right? Consumer confidence is massive. If people believe there’s a run on the bank, they’re going to take all their money out. They believe stock’s going to come down. There’s sentiment shifts. That’s really what drives the markets. It’s not so much valuation. It’s how people feel. If you look at a Nasdaq during a dot-com bubble, you could say, “Oh, well, the valuation’s got too high.” You know, F that. If you look at the valuations, those valuations were high in irrational exuberance speech from Alan Greenspan took place four years before the market crashed, right?

Frank Curzio 04:52

You saw massive, massive gains. The Nasdaq doubled from 1999 to 2000. It was expensive in ’96, ’97. But what really drove it down is the supply-demand imbalance and sentiment shifted. And you saw this three-year downturn, which we don’t really see anymore during downturns. It’s more like one-month, two-month downturns. For three years, recessionary conditions, it was terrible. But you look at these market conditions and the shifts in consumer confidence, which always come along with major pullbacks in the stock market when we look at history. And what worries me is I just don’t see a solution to the outcome in the short term over the next six months at least, which is going to result probably in a significant pullback for stocks. Now, let’s start with the obvious, which is the 10-year. It’s at, chop, Dejo, 5.3? 5.3%. Remember we were like, “Oh, let’s see 4.5.” That was a benchmark for economists believing, “Hey, you know, we might see some cracks in the market at 4.5%.” Then they were like, “Oh, we’ll approach 5%.” Then it came down.

Frank Curzio 05:51

We blew right by that. Now it’s not even 4.25. It’s 5.3. I mean, we’re going to be talking 6%, right? This rate keeps going higher and higher. But I feel when I listen to people, when I listen to subscribers, they don’t really know what that actually means. They’re like, “Okay, interest rates are higher and that’s not good, that 5% level.” We just blew past the 5% level. And to be honest with you, stocks are still holding up kind of well for now. But what does this actually mean? The 10-year, not the Fed funds rate, right, or the two-year is the most important gauge when it comes to the economy. It’s a rate that determines where consumers borrow at. If you’re looking at auto loans, you’re looking at credit cards, you’re looking at mortgage rates. It’s a rate that influences how much corporations pay to borrow money to grow their businesses. So it’s significant. And right now it’s trading at the highest level in 24 years. And it’s still going higher. And it’s not just the US 10-year that’s surging.

Frank Curzio 06:42

If you look at Japan, 10-year yield highest in 30 years. France, 10-year highest in 24 years. UK, highest in 30 years. Germany, also surging. This is a global event that’s taking place at a time where our deficits are at the highest that they’ve ever been. And that’s the problem here. Now, I’ve always said this because I speak at a lot of gold conferences and a lot of these people believe, you know, “Hey, gold, it’s gold only. Hold on to gold forever no matter what.” There’s times to own gold, there’s times not to own gold. We’ve got a couple of questions after this, which you could ask again on X, which I’ll cover in a second. But I’ve always said deficits don’t matter. And you have to see the gold box. I start twitching. What do you mean deficits don’t matter? They really don’t. Because I’ve been hearing that story since the ’80s, the market’s going to crash, that’s going to lose its reserve currency status. Deficits don’t matter as long as you’re paying the debt, which has been the case for decades.

Frank Curzio 07:31

But now we’re seeing a time where global deficits are out of control. The US alone, $40 trillion in debt. At a time when interest rates are surging. I mean, the government was paying, this is, I think, four months ago, five months ago, before we saw this huge rise. And look at that chart up there again. I mean, 5.3. Look at it since September. Since September, what, below almost 4.7%. That’s a massive, that’s the equivalent of a stock going down probably 40, 50% in a day. You do not see moves like this on a 10-year unless something’s wrong with the economy. You don’t see it. You don’t see a guy like Scott Bessent come out with stocks at all-time highs and triple the amount of bonds he’s buying, those long-term bonds he’s buying. He’s doing it to control the markets. You see this when something breaks, the government gets involved. Not when stocks are at all-time highs. Again, red flags all over the place. And now you look at these interest payments, a trillion dollars in interest payments on a 40 trillion in debt.

Frank Curzio 08:21

This was a couple of months ago. And look how much rates have gone up. This is why Trump’s tapping Scott Bessent on the shoulder saying, “Hey, dude, we got to do something.” Okay, we have to do something right away. And it’s why our Fed is doing everything in their power to lower the 10-year. Again, you have Scott Bessent out there, but also we have the Fed who is hiking short-term rates to give the perception that short-term rates, they take probably 12 to 15 months hike or decline to filter through the system. But it’s the perception, “Hey, we’re going to continue to raise rates.” And the Fed is going out there and giving that perception, “We’re going to continue to do this,” which in turn will slow the economy, which then hopefully pushes long-term yields lower. But we need a slowdown. We almost need bad news. And that’s going to be considered good news. We don’t want to see the unemployment rate, right? Which is coming out tomorrow. We want to see a bad number. That means the Fed’s not going to raise rates, right?

Frank Curzio 09:10

We want to see bad numbers. We don’t want to see our economy growing like gang busters because it means that we’re going to see the 10-year continue to go higher, which is weird, right? It’s kind of contrary to how we think. We want to see good news. We actually want to see bad news when it comes to the economy. We want to see a slowdown this way the Fed doesn’t have to continue to raise rates, which I think, Daniel, you came up with that stat that you saw during an election year. What was it year? They haven’t raised rates. We just raised rates for the first time last month, but we haven’t raised rates going into an election in October. And how long?

Daniel Creech 09:38

I believe it was from the ’90s.

Frank Curzio 09:40

From the ’90s.

Daniel Creech 09:40

Yeah, you guys put out a good note.

Frank Curzio 09:42

I think we are going to see, I think it’s around 50% now, but we’re likely to see a rate hike in October. If not, I think it’s 90% rate hike in December. And it’s going to be raw hikes going forward. But the funny thing, though, is it’s the first time I’ve seen our government, because they say, “Don’t fight the Fed,” which means don’t fight the government. And they’re right, right? You never want to fight it. I mean, during the credit crisis, they bailed everybody out, right, with the banks and everything. Everyone who was short was like, “Holy cow, we got to cover.” The biggest crisis in the world that almost destroyed our entire financial system lasted really nine months. I mean, it started breaking in 2007, but in terms of the stock market, after that, lowered rates incredibly, funded the banks and said, “Hey, you can lend this out to people whenever you want in businesses.” And they stabilized the system, stabilized consumer confidence, and the market went up ever since. Massive bull run since 2010. But this is the first time where you’re seeing them throw money at a problem and not being able to make it go away in the short term.

Frank Curzio 10:32

Bessent announced, “Hey, you know, we’re buying these long-term bonds. We’re going to triple the purchase of it.” And that did nothing. The Fed’s finally saying, “Hey, you know what? Inflation is going higher.” And yes, you could point to certain things that inflation’s coming low. And please don’t look at, what is it, the PCE index, which was yesterday, which came in at 3.4. We were cheering that, 3.4%. Like they were saying, “That’s a good number,” right? One is the number was only down because they decided to change the methodology and how they calculate it and date it back to 2021. I know probably the story that you didn’t read, which means the gain matched on a monthly basis, but on a yearly basis, it went down only because they changed the methodology. They changed the rules again, right, to make sure they’re doing things to lower inflation or have the appearance of lower inflation. And we’re not really seeing that. That’s what the 10-year is telling us by going higher. It’s that we don’t believe you, that inflation’s not going to go higher here, regardless of what everyone says or highlights or things that are going down.

Frank Curzio 11:24

So again, looking at the government that only throws stuff at the market when things are bad, credit crisis, COVID, Silicon Bank failed, they’re doing it with stocks at all-time highs. Say it again, red flag. Let’s turn to the housing market. Housing was dead at a 6% mortgage rate, which basically is double from what, four or five years ago? Close to that. I mean, my rate, I think in 2020 when I took it out, it was 3.2%. We’re at 7.3, 7.4%. Who the hell has taken out a mortgage at over 7%? They weren’t taking out at 6%. Now, one huge benefit that I would say, again, this is back and forth, it’s not totally, “Oh my God, you got to run to the exit.” It’s insane, but I think that’d be a really good idea. A huge benefit to consumers and spending for the overall economy is the equity in people’s homes risen substantially over the past five years. You could say 10 years, but especially over the past five years when they first took out that 3% mortgage. And they’ve been tapping that cash for years and years.

Frank Curzio 12:23

But with rates surging, they’re no longer doing that. Look at the data. Look how much refinancing has pulled back. It doesn’t make sense to refinance at these rates or pull money out of their homes, which usually flows through the economy where if they spend it on a vacation, remodeling a room in your house, new furniture, you know, all that filters through the economy. That’s a big source of equity in these homes that they’re not tapping because interest rates are higher. Again, something positive being removed from the market. Housing, as you know, is a massive driver of economic growth and it’s now completely stalled. And we haven’t really seen it so much as interest rates surge past 6% because we have this massive AI spend capex that’s incredible and so many companies are trying to get into it and trying to get a piece of the trillions and trillions of dollars being spent. And I get it. But housing is, again, a huge driver of economic growth and it’s frozen. Nobody’s taking out mortgages to buy a house.

Frank Curzio 13:12

They just can’t afford it. You can’t move sideways. You can’t have a mortgage in New York and say, “I want to move to Florida or whatever state you want to move to.” And you own a million-dollar house without a mortgage on 3%. If you move to Florida and you have to take out a mortgage, you’re almost going to double that payment, which is insane for doing nothing. It’s not like you’re getting anything in return just because interest rates are higher. People are not doing it. That’s why this is sitting on their hands. That’s why you’re not seeing a lot of houses being sold or on the market longer than ever. Let’s turn to energy prices. Another huge risk. WTI, want to throw that up there, Joe? So we have over $92. I mean, who had $100 or $92 a couple of months ago? It’s a big deal. Heating costs, you have gasoline up huge since Iran war, which was supposed to be temporary, right? Hey, Trump came out like a month later, a couple of weeks later. They have no army. They have no navy. They have no air force.

Frank Curzio 14:05

They’re done. They’re not done. They still have ways to control it. I mean, when you have drones where only one drone needs to make it through or one mine needs to make it through and you blow up a ship, now insurance costs go up tremendously. So you’re always going to have this overhang of, is it going to go back to normal? And you’re seeing more oil go through the straight now, but it’s not resulting in lower oil prices. Oil prices are still high because this is going to be longer than expected. We’re on six months now, guys. Six months, right? It was supposed to be a month, two months. But it’s not the WTI. I know you’re going to focus on it, gasoline prices. That’s not what scares me or has me worried. It’s diesel prices. Diesel prices are near record highs. They’re averaging about $6.40 right now. That’s 140% higher than a year ago. More importantly, over 20% higher in the past 60 days since companies last reported their earnings. This is a cost that impacts directly, impacts almost everyone.

Frank Curzio 14:57

I mean, everything you see in a big box store is shipped there. Every restaurant, article of clothing, any major infrastructure project, that includes data centers, buildings, steel plants. And these costs are going to be passed on to consumers. Also, we’re not talking about the manufacturing, all the manufacturing that Trump said coming back to the US. All these companies and trillions coming back to the US. Apple and Meta, $600 billion committed to new factories. And this is, what is it, the project Stargate. SoftBank, Oracle, OpenAI invested $500 billion to build AI infrastructure in the US. Listen to these companies. Amazon, AT&T, IBM, Taiwan Semi, J&J, AstraZeneca, Anthropic, Roche, Bristol Myers, GE, Renova, Vantage Data Centers, Hyundai, Eli Lilly, John Deere, 4GM Craft, dozens and dozens and more have all committed and said, “We’re going to be opening up new plants, new factories.” And yet a lot of this stuff is just starting to get built. And this is going to add, when you look at that cost, 20% on top of what they originally said that they were going to build, just because these costs have gone higher.

Frank Curzio 16:01

And I don’t know if you saw the news from today, which we’re going to see, I think a lot of this news coming. A lot of countries saying they’re going to build here. A lot of companies offshore saying, “Hey, you know, we’re going to build things in the US.” Well, South Korea came out today and they’re walking back how much they plan to spend in the US after agreeing to a deal with Trump. Why? Because the costs are starting to surge. They’re going much higher. And again, most people, if you listen to the financial media, believe our economy is doing great and the stock market is just off its all-time highs. True, but it’s being driven by a select few companies. And we’re talking about companies with trillion-dollar valuations. I mean, Apple, Nvidia, $5 trillion. To put that in perspective, I would say out of the S&P 500, don’t quote me on this, I mean, $5 trillion is probably enough to cover at least the last 100 companies in the index if you combine those market caps. And now you have six or seven of them, right, that are huge, maybe eight or nine now with trillion-dollar valuations, maybe 10.

Frank Curzio 16:58

But you’re looking at the Google’s, the Meta’s, the Amazon’s, I mean, incredible valuations where these are the companies that are generating lots of profits. And most of the profits you’re seeing in that huge growth in the S&P 500. But when we take a look under the hood and even strip out AI, listen to these stats. 75% of companies in the S&P 500 had a negative return in the month of September. In fact, over 40% of stocks in the S&P 500 are down 20% plus from their highs. That’s considered bear market territory, 40% of stocks. So if you’re looking at your portfolio going, “Everyone’s telling me the economy’s pretty good. I don’t have a ton of hyperscaler exposure,” you’re probably getting your ass kicked right now saying, “What’s going on? It looks like everything’s good. Even I’m getting questions. How come a stock will be down 10% or 15% when we had a lot of winners in AI, massive winners in AI over the past few years. Celestica, massive win. Blue Energy, 10X, right? We have massive wins.

Frank Curzio 17:54

But now you see some of these stocks, especially small caps, getting hammered. But listen to the list of stocks, big brand names that have gotten annihilated. And we have a chart up there, Nike, Lowe’s, Home Depot, Clorox, Comcast. You guys heard of all these companies. PG&E, ADT, Fair Isaac, which just got crushed. They changed it to FICO, of course, FICO. Penter, McDonald’s, Carnival, Goodyear Tire, Whirlpool, AppLovin, Corning, and Lennox, those last three are down 35% plus for the quarter. 35% plus. Imagine losing 35% of your market cap in a quarter and nobody’s really talking about it. All we hear in the media, “Oh, you know what? These profits are going to be strong. Things are great. You got nothing to worry about.” There’s times to worry and there’s times to get aggressive. Right now is not the time to get aggressive. It’s the time to play defense. Now, let’s look at October, which is here, which, by the way, is where our biggest crashes almost always take place. We’re heading, and this is the problem I have.

Frank Curzio 18:52

This is what worries me, right? This scares the shit out of me. We’re heading into Q3 earnings season in about two weeks. That’s when JPMorgan starts it off in their report. And when companies report earnings, of course, they’re going to provide numbers for the last three months. You can look at Micron, they just reported last night. But the numbers are really almost from four months ago because they closed the books two, three weeks before reporting. But more importantly, they also provide guidance on the call, which is the single most important data point for investors on the markets to pay attention to. Meaning, if Micron came out and said, “Wow, our numbers are up 30% higher than what the sell-side analysts had,” we pull out estimates. But if they go on that call and say, “Hey, you know what? The next three months are going to be shitty and we’re not seeing that huge demand that we’re seeing,” that stock’s going to get annihilated. It doesn’t matter what you did in the past. It matters what you do in the future.

Frank Curzio 19:38

That’s why we’re looking at earnings growing 30%. It’s in the past. We have to look what’s going into the future because these costs are starting to hit the businesses now. Last quarter was one of the best on record. Massive growth, over 30% year-over-year earnings on the S&P 500. I would say 50% of that, maybe a little bit more, is contributed to the data centers and AI and hyperscalers. Most CEOs across the board reported solid numbers, also provided strong guidance, which made a lot of sense a couple of months ago. But since then, diesel prices have surged over 20%, a cost that associates with almost every business. Barring costs have surged tremendously. In fact, quick stat here. The bond market crashed in September, had a 2.6% loss. That’s a massive, massive crash. To put it in perspective, in the past 30 years, there’ve only been five months with the worst performance in the bond market in the past 30 years. Four of those months occurred in 2022 when the S&P 500 fell 18% that year.

Frank Curzio 20:38

Higher rates are a very, very big deal. They’re a big deal that aren’t being factored into the markets, neither are diesel prices. So we have this massive increase in costs that just took place over the past 30 to 60 days. So not when these companies reported earnings, but in the middle, and they’re getting ready to report earnings in this quarter. So now when these companies report earnings, the S&P 500 earnings, the numbers for the past three months might be okay. But what do you think these CEOs are going to say about their guidance? What do you think they’re going to say about next quarter, which is Q4? What do you think they’re going to say about full-year results, which extend through March because that’s when the year ends, right? Because the quarter ends three months after. That’s when they’re reporting fourth quarter. But what do you think these CEOs are going to say now that all these costs have gone higher? Do you think they’re going to be overly optimistic given the uncertainties?

Frank Curzio 21:31

Given the massive increase in higher costs due to energy, surging interest rates, do you think they’re going to say, “Hey, things are great?” And please don’t discount this. What the CEOs say on that earnings call, how they communicate. Look at McDonald’s. I mean, I don’t want to call them names, but the CEO, the guy who bit a little piece of the sandwich and said, “This is the greatest sandwich ever,” right? And now he just had an investor day conference, investor day, all your investors are going to be there. He went on CNBC and basically said, “Look, we have lots of problems. I don’t expect them changing anytime soon.” And the stock was down 4% before he took the stage at the meeting. Be careful what you say as a CEO. But the CEOs, what are they going to say on these earnings call? Because if they say anything negative, in a blink of an eye, you could lose 30%, 25% in a day. And when you look at CEOs, their job is always to be optimistic, but they almost never overpromise and under-deliver because it’s a cardinal sin.

Frank Curzio 22:25

If you do that, it’s the easiest way for investors and more importantly, the sell-side analysts, which is Goldman Sachs, Morgan Stanley. That’s what you see on TV when they say, “Oh, the analysts beat estimates.” It’s all these sell-side analysts, all the big firms, and they’re taking the average of the mean of that estimate. That’s the estimate they have to beat. But if you’re overpromising to all these analysts, they’re all putting buy ratings, they’re all putting a discounted cash flow model. This is great. This is awesome. And you come out the next quarter and lower those estimates, they hate you. They want to destroy you. And your stock not only gets annihilated, but you’re probably going to have a bad three to six-month stretch, which we see in many names like Nike and Target for a very long time because all the sell-side analysts downgrade the stock over the next couple of weeks because they’re pissed at management. They couldn’t communicate and now there’s uncertainty, which we saw last quarter with what companies? Corning fell 20% in a day.

Frank Curzio 23:10

So guidance wasn’t that good. ALA Corp, chip equipment specialists, reported great results, but warned of a softer backdrop due to the macro. Stock fell 40%. Reddit, same thing, dropped 20% after earnings. Dick’s Sporting Goods, 30% in one day. I mean, that CEO a quarter ago said, “We’re great. We’re awesome. Just buy us. Everything’s on fire. All the analysts will high-five at each other and cheer in and buy ratings.” Next quarter, they lowered estimates significantly. What happened? I saw at least five downgrades of that stock, and it fell 30% in a day. That’s what you’re risking going into this quarter because what do you think these CEOs are going to say about their guidance when they’re reporting in a few weeks where they have a Fed loud and clear, loud and clear, “Hey, we’re raising rates. We have inflation. We have to control inflation. It’s too high.” I mean, we cheered 3.4% on a PCE yesterday. 4%, 3.4%, when the mandate, which we all know for inflation, is 2%. They want to have 2%.

Frank Curzio 24:06

We cheered 3.4%. The only reason why it was lower than 3.7%, again, I told you, the PCE is they changed the methodology, how they calculate it, and then backdated to 2021. That’s the only reason why it was lower. And we cheered that. We actually cheered that for a day yesterday. But how are they going to say anything optimistic when they’re seeing the cost rise due to high diesel prices, which we were told three months ago, “Hey, it’s going to be temporary or transitory.” Remember that word, transitory. Inflation is going to be transitory with Powell. And transitory turned out to be 18 months, right? Inflation, three, four months, we’re good. It went all the way to 10% many months later. Went all the way through the roof. And that damages credibility, definitely damages the Fed’s credibility for Powell. It’s like, “Oh, okay, wait a minute. We were wrong. We’re on the wrong side of this.” Right now, the Fed is on the wrong side of this. Rates are too low. They got to go higher. People are saying, “Oh, they shouldn’t adjust it because oil’s temporary.” Is it temporary?

Frank Curzio 24:58

Is six months temporary? Is nine months? Because it doesn’t look like it’s temporary right now. It really doesn’t. It could be longer. So if you own stocks, especially in cyclical industries, restaurants, retail outlets, travel, airlines, cruises, be very careful being long into these earnings calls. Throw in the risk of higher mortgage rates, 7.5% now, and you have a frozen housing market. More importantly, it reduces those consumers’ ATM, which is refinancing, which I talked about, taking equity out of their homes. You saw those numbers come out drastically reduced as rates got higher. And all this is happening in between quarters, last 60 days. It’s not like something, “Oh, wow, we think energy prices are going to go up 5% over the next year.” They’re up 20%, diesel prices, in basically 40 days, 45 days. So what are CEOs going to do? They have two choices. Either take it on the chin and lower earnings because these costs, they weren’t factored in, a 20% increase and all this debt in the balance sheet, higher interest rate payments, taking out debt to grow their companies further.

Frank Curzio 25:53

They weren’t anticipating that, but what are they supposed to do? Either that or they need to raise prices, which I’m not sure if you’re going to be able to raise prices and pass them off to consumer because not all these businesses have pricing power anymore because they raised so much in terms of prices in the past couple of months. So look at real estate, look at industrials, look at utilities who have loads of debt in their balance sheet. Watch out if you own these companies going into the quarter because, again, especially the 52-week high, if their CEO says anything negative about the guidance, which I can’t see them being overly optimistic. Remember, you don’t want to overpromise. You can sound optimistic. You don’t want to overpromise and under-deliver. You’re Dick’s Sporting Goods. You get annihilated. So they’re probably going to temper it because there’s just so much uncertainty. And here’s another interesting stat, just to keep going here. Almost done. I’m going to get to tons of your questions because a lot of this stuff’s interesting.

Frank Curzio 26:39

Did you ever know the past five months, Daniel, I bet you didn’t know this, inflation has outpaced wage growth. That means costs have risen so much that the household income coming in is not enough to cover those expenses for five months. Meaning they’re going to have to dig into savings. So I look back and said, “Okay, does this happen often?” This is the first time we’ve seen a stretch like this for five straight months. It’s 2012. And what happened then? Well, back then, it wasn’t a big deal because a 10-year hit a record low rate of 1.4%, and that was due to the European debt crisis. So we didn’t see it that bad. But even since before 2012, you really don’t see something like this where inflation is outpacing wage growth, meaning the costs are getting higher than the money I’m generating to pay my bills. This is five months in the making. If it continues, what’s going to happen? Consumers mathematically have no choice but to pull back on their spending and spend less because they have to pay their bills.

Frank Curzio 27:28

And paying your bills doesn’t really filter into the economy. So last stat here, if that doesn’t worry you, is Bank of America came out two weeks ago and said, and a lot of people on the podcast said this, I think, a week and a half ago, came out and said, “Expects earnings to go 30% year over year.” Yay, that’s great. That’s awesome. But in that note, which I don’t think anybody reported, it’s target price in S&P 500 was just 1% from where it’s trading right now. This tells us the massive earnings growth that we’re seeing is already reflected in the markets, meaning any deviation from that 30% earnings growth, and that’s the whole entire S&P earnings. If you calculate all the earnings together, that’s what they’re talking about. That whole earnings grew 30% year over year as of this reported last quarter. And we’re expected to continue to grow very, very strong into this quarter and next quarter. But any deviation from that, because we’re already factoring in 30% earnings growth, to put that in perspective, dating back to the ’50s when S&P 500 became 500 companies, earnings were around 8% a year.

Frank Curzio 28:29

We’re growing 30% much more faster than that. Okay, so something has to retrace here. And they’re saying not only are the earnings growing, it’s amazing, but the S&P is basically at the level where it should be on 30% earning growth. So any deviation from that, if we see growth slow in any capacity, it’s going to be a result is going to be the substantial decline in stocks. And that’s why when you’re looking at risk-reward, it’s very, very, very dangerous right now, especially going into this earnings season where I don’t see a lot of these companies. And even if it’s 25% to 30% of these companies coming out and these CEOs coming out, I can’t see them being overly optimistic with all the massive uncertainties and a huge import cost when it comes to diesel fuel and energy up 20, 25% almost over the past two months or less than that, with interest rates rising, cost of debt. You can’t see, and the Fed, you have the Fed out there saying, “We’re going to raise rates. We’re going to raise rates.

Frank Curzio 29:20

We’re going to raise rates now and control inflation.” I can’t see them having a perception saying, “Hey, you know what? That’s not going to impact our business. No way. We’re going to be immune to that.” Because if they’re wrong and they won next quarter, the following quarter, they’re going to get annihilated. You don’t want to overpromise and under-deliver ever. So bringing this all together, we have the AI trend still intact. Yes, we’re going to see trillions in spending. But you’re looking at AI. It’s not just the only thing that’s driving profits within AI companies. And you’re looking at where they set up their businesses. And I think people discounted this within AI companies is every time you have someone using their large language models and whatever for agentic AI, now it’s going to be in robotics. It’s massive. We talked about the electricity. It’s not going to be enough electricity. We had all that stuff. That was our last live event. But every single customer they sign up with, regardless of how much the token price has come down, it leads to more or massive increase in their cloud exposure.

Frank Curzio 30:11

So it’s almost like this byproduct of AI that they see a massive—I mean, I don’t know if you saw between Meta, Google, Amazon. I don’t know if you saw the cloud revenue, but all of a sudden, it returned to this massive—it was growing, but now it’s growing. It accelerated this massive growth. And usually, the percentage goes down, right? You grow, the number grows, percentage grows. Percentages are going higher now because—so that’s going to—with those biggest companies, you could see the market stay at these levels, but underneath, you’re still going to see a lot of these companies get hit pretty hard because maybe 45, 50% of those earnings come from AI companies, but the rest come from everything else. So if you own consumer discretionary stocks, names trading near the highs have very high valuations that are setting up a lot of debt, or diesel is a huge input cost, which is any company that owns its own fleet. You look at Walmart, Target, Costco, food companies, restaurants, clothing stores.

Frank Curzio 31:03

Those companies, be careful owning into earnings season. Anything related to travel, I mean, I don’t know if you saw how much it costs to fly right now. I mean, it’s getting to the point where it’s like, “Holy shit.” I mean, I should drive to New York from Florida. I mean, that’s how much you’re going to save. It’s insane. Used to be $200, $300. They want to charge $900 to go to Florida. Are you kidding me? Two-hour flight. On JetBlue, no less. JetBlue, first airline ever. Anyway, utility companies that don’t have exposure to AI, be careful. Small caps got annihilated in September. People aren’t really talking about that. Be careful owning small caps that carry a lot of debt. Anything related to homes, it’s at a standstill. Nobody’s buying a home right now. There’s nothing going into homes. I know these home builders are building certain things, giving incentives away. I think it was a law just reported that said their average home price declined $20,000 to $475 on average, a house. I think that’s what the number, but I know when I look back, I said, “Well, how much was the average house price in 2021?” It was over 500,000.

Frank Curzio 31:56

So you’re looking at prices lower now than they were five years ago. So everyone thinks home prices keep going up and up and up. No. Even for the home builders and you’re getting new homes and maybe discounted prices and they’re working around the mortgage rates fee and stuff like that, but you’re seeing this massive slowdown. That’s why Home Depot, Lowe’s are getting their asses kicked as well. Manufacturing and infrastructure outside of AI, look out, high costs. I mean, diesel costs are huge. Everything, inflation. They have to take out a massive amount of debt, right? What kind of debt do they have? This is looking under the hood. Even looking under the hood, some of these travel companies or some of these companies with fleets, do they hedge? Are they hedged with their oil production? That’s great. If they’re hedged, they’re easily going to see their profits outpace their competitors, and you see these names are going to go much, much higher. That’s my job to find out those little picks inside all the nonsense that’s going on that are going to be immune to these higher costs and maybe CEOs coming out and saying, “We’re not going to see our estimates or lower their estimates this quarter.” But look out because I’m going to say it again.

Frank Curzio 32:53

CEOs right now, I can’t see them being optimistic, offering super strong guidance because if they overpromise, under-deliver, this stock is toast. We have lots of examples of that. Every institutional analyst goes running to the hills when that happens because they all update their discounted cash flow models. They’re all happy. They have buy ratings on the stock. Most of them have buy ratings on stocks, 80% of them, because they get investment fees. And if I own a company and I have 10 analysts covering it and a guy has a sell rating saying my stock’s going to go down 70%, I’m not going to say, “Hey, you want to raise some money for us in the debt markets and earn fees?” No, you’re not going to use that guy. You’re going to use the guys who have the buy ratings on you, right? So 80% are usually buy ratings on these stocks on average. And a lot of those guys are going to just turn on you if you miss estimates and because you’re too optimistic. Also, when it comes to earnings, since we’ve been seeing cost rise dramatically in the past 60 days for energy and debt, I talked about this briefly earlier.

Frank Curzio 33:46

These companies either have to incur these costs themselves, which means they’re going to lower earnings, or they’re going to have to find ways to pass on these costs to consumers. And we saw Nestlé come out and get hammered because of this and in the middle of the quarter, lower their estimates and say, “Look, we’re going to rebrand. We’re going to do different packaging, and it’s all because of higher energy costs,” which is crushing a lot of these companies. So that’s one that came out early. Look at Nestlé. Look what they said. That stock got hammered. But I don’t know how they’re going to find ways to pass costs on to consumers because they’ve been doing this for five straight years, and many I don’t think will be able to. Some will and have that pricing power. So when I look at industries, even companies who have pricing power, I would say Coke does, Walmart does, very cheap. Chipotle, I would say no. Restaurants or all that competition, likely no. It’s going to get to a point where I’m like, “You know what?

Frank Curzio 34:31

I could just make my tacos myself or go someplace else.” Healthcare companies tied to insurance with the government. The government doesn’t care. They don’t know how to run a business. They can increase prices how much they want. So yes, they have pricing power. You’ll see money flow into healthcare. Same with defense companies. We’re going to increase our defense budget since we’re running out of inventory on everything. And we realize that we’re shooting down $10 drones with million-dollar missiles, and that has to change. So defense companies are going to be great. M&A could take a hit with some of the banks, with financials. However, if you’re looking at banks, when rates rise, it’s a great sector. And people are saying, “Well, why did they fall after the Fed announced their rate hike?” It’s because financials went up tremendously into that event. One of the best-performing sectors into that event. Higher rates are good because they generate net interest income, which is a difference between their money and how much people are going to borrow it from.

Frank Curzio 35:24

So much so that JP Morgan last quarter, I believe, said that their net interest income is going to be $100 billion. I mean, pure profits due to interest rates to these companies that they expected rates. Everybody expected rates to be much lower. Even a year ago, a year and a half ago, nobody had rates going 5%, even 4.5%. No one had this, right, going higher and higher and higher. To the point, if anyone said this two years ago, that the 10-year is going to go 10.3%, we’re going to have $90 to $100 oil prices, you would have told me the market’s going to be down 25%. 20, 25%. There’s no way that could happen. And yet, stocks are near all-time highs. What does that tell you? Forget about the numbers and all the shit I’m telling you. Just use your common sense, right? You’re increasing costs dramatically in the short term of the past couple of months. What’s going to happen? A lot of these companies are going to come out and say, “You know what? Maybe we don’t earn $2 a share. Maybe $1.80 is more like it.” Or we’re starting to see some weakness, which some of them are going to start to see weakness in a lot of these companies, right, with higher energy prices.

Frank Curzio 36:20

If you’re looking at oil, offshore looks great. It’s one of the biggest trends in the world offshore, even West Africa. It’s cheaper to drill offshore than it is in the Permian. I know it’s crazy looking up. It’s true now. Oil service companies are all saying how big this trend is. The biggest majors, all the majors are spending. If it wasn’t for AI, this would be the biggest trend in the world right now, offshore drilling, especially off the Western Coast of Africa and just massive, all the majors, right? They have to replenish their reserves. And this is one of the most unexplored areas where they could find multi-billion-dollar barrel fines, right? So that’s what they’re looking to do. That’s a great trend. But just be careful heading into earnings season, especially if you own stocks with lots of debt, names outside the hyperscalers trading at 52-week highs. They have super high expectations. What do I mean by that? It means that most of the firms covering them have buy ratings from sell-side analysts.

Frank Curzio 37:10

Because what we learned last quarter from companies that reported weak guidance, you could see some of these names fall 20 to 30% in a day if the CEO comes out and lowers guidance. That’s what has me scared. It’s why I reduce my holdings, even personally, even in our Alpha. We have some stocks. If we’re wrong, the market goes higher. We have exposure as well, right? We always look at that and say, “Okay, what happens if everything does go okay? What happens if they finally solve oil crisis? What happens if they’re not fighting what I ran? Will rates come down a little bit? Will the markets do good?” It’s going to be very tough for that to happen over the next three to six months, just because Trump promised us about seven times already that this war was over and that they signed a deal. So even when they sign a deal, no one’s really going to believe it until they see the numbers, until they really see those numbers going much higher in terms of the barrels going through the straight, which we’re not seeing. So we’re looking at this.

Frank Curzio 37:56

I don’t see the trend of higher interest rates and higher energy prices going higher. I don’t see this subsiding over the next six months. And that’s why you really, really have to be careful because when you have dry powder, you’re going to see lots of more names get hit. When they do, it’s going to give you an opportunity to go in there and buy stocks at a huge discount, which is what the best investors in the world always do. They love bear markets. Bear markets are great if you’re prepared. If you’re not prepared, you just close your eyes, whatever, you get annihilated. It’s different. Prepare. I’m not a fearmonger, but I’m telling you, the risk-reward right now when it comes to stocks is absolutely insane. Not to mention, for the first time in decades, you could put money in another vehicle, which is risk-free and earn a 3.5%, 4% return, which is a great return, right? And we’re talking about money market accounts at Interactive Brokers, Robinhood, especially if you have more money there, over $100,000 in some of these accounts.

Frank Curzio 38:46

3.5 to 4% to earn on the sideline is great. You couldn’t do that, right? It’s like, “Hey, it’s the market, inflation. We got to keep throwing money into the market, throwing into the market. There’s nowhere else to park your money.” Now there’s places to park your money, which you have that option to wait this out. Even if you’re wrong, so what? You generate 3.5, 4% returns. Risk-free. You don’t have to worry about it. Go to sleep. It’s fine. You don’t have to worry about your stock. We have a stock in our portfolio now. It’s down 15% in a day. I’m looking at there’s no news on it. That’s what you’re going to see in this market today. That’s what you’re going to see in this market. We’re up like 80% of that stock still, but still, that’s what you’re going to see in this market right now. So if you want to learn more, you can follow us at CurzioResearch.com. For now, I’m going to be answering your questions. You can also listen to my Wall Street Unplugged podcast. It’s on Spotify, iTunes, YouTube, absolutely for free. And you can listen anytime, Wednesdays, Thursdays, when we publish our podcast, which is really cool, videos and everything.

Frank Curzio 39:36

So it’s awesome. There’s no bias to our research. We don’t mess around. We tell it how it is. No one above us telling you, “You got to say this, you got to say this.” F that. I don’t care who you are, whatever. I see you hurting investors or doing something stupid. If you’re a company or CEO, we call you out. We also interview tons and tons of great people. We just did an interview with Ian Telfer. You don’t know Ian Telfer. He’s a legend in the mining industry. It’s coming out on Monday. We’re going to publish that. It gets published earlier to our shareholders, investors, and clients at Curzio Research. Ian Telfer, former president, CEO of Gold Corp, started the streaming model, Silver Wheaton. And that’s an interview that’s coming out Monday if you listen. But for now, I’m sure you guys have tons and tons and tons and tons of questions. So let’s get to them. Daniel, turn it over to you, buddy. All right. First question is from Sam. He says, “Are we buying oil stocks now or waiting for a pullback?”

Daniel Creech 40:25

Oil stocks, I would focus on, like I just said, is I would say offshore. Offshore is the most important because that’s where all the money’s going to. Look at Petrobras, look at Total, look at BP. All sovereign oil companies are buying up blocks like crazy, and that’s where I would go. So there’s a company called Blue Energy that we own. It’s a pure place, small company, one of the first in the market called the Harper Basin. We work with them. We work with a few companies in terms of consulting and marketing. I own big positions. It’s the only companies that we work with in this part of our business. And Ian Telfer is a co-founder, actually, along with Craig Stenke. And these guys bought property in the Harper Basin off coast Liberia. And now Liberia is opening up where Total bought six blocks right next to it. They’re going to spend literally right next to it. They’re going to spend $200 million on each block, $800 million total. I think it’s four blocks, $800 million total. And they love the Harper Basin project so much that they took a 65% stake, which reduces your risk, right, tremendously.

Daniel Creech 41:25

They’re risks Blue Energy’s. And this is a company that I love. If you look to the right of it, which is the Ivory Coast, Petrobras. This all happened in the past couple of weeks. Petrobras bought all the blocks right up to them on the Ivory Coast. So there’s a lot of oil there. If any of these guys find oil around them, it’s going to be massive. They’re going to be coming out with news probably in the next three, four months, five months to really look and see how much oil that they have. But apparently, they have the Manhattan of the real estate. This is small to pure play because you have midstream, upstream, downstream for some of the biggest players. But I like Blue Energy’s and also I like a lot of the service companies. So Somberjay, Baker Hughes, Halliburton. I mean, these are really, really good names that you could own as well that are going to see. And they’re all talking about it now. Listen to their calls. They’re all talking about offshore. No one’s really talking about it.

Daniel Creech 42:13

This is massive, massive, massive spending. I know you think like with Petrobras, whatever it is, spending hundreds of millions of dollars. That’s not a lot because we’re used to seeing trillions from AI. But this is massive trend. If AI didn’t exist, this would be the biggest trend in the world, and you still have plenty of time to get in. Those are some of the plays I would definitely go into.

Frank Curzio 42:30

You mentioned it in the last question, but Daniel, not me, but a different Daniel, asked, “What is your price target for Blue Energy’s and approximate timeframe?” Thank you very much.

Daniel Creech 42:40

For Blue Energy’s, I would put a couple thousand dollars in it, whatever. I don’t know your level. Maybe 10,000 moves the needle for you. I know people that a million dollars barely moves the needle. But put money in it and just forget about it for two years or 18 months. And you’re going to see all the drilling results come out. You’re going to see actually what they have there. This is a high-risk, super high-reward play. So could you lose your money? Absolutely. In any stock, you could lose money. But this one, and I see people make this mistake all the time, and Daniel says this as well, is you want to make sure the risk you’re taking is worth the reward or that reward is worth the risk that you’re taking, right? Because if you look at if you’re spending $5,000 and you’re going to make $12,000, that might not be the best return since you’re risking all of your capital. But if you’re going to spend a few thousand dollars, this could easily be a 15, 20, 25x, something that never comes out of my mouth because you’re looking around the area, not too far away.

Daniel Creech 43:34

There’s multi-billion barrel fines all over the place out there. And it’s cheap to drill. That’s why they’re all going out there. That’s their focus on their capex. And they were able to get into Liberia. I know you say Liberia is crazy. You got Total there. You got Petrobras right there. You got all these companies just right around them. And these companies don’t make mistakes when it comes to geography anymore. I mean, they’ve been doing this for 100 years and got effed by so many countries and so many deals that they sign. They don’t go into these areas unless they’re 100% sure. And now with these big fines, the governments around those African nations are saying, “It’s much better. Let’s open it up to them. We take up percent of profits. Everybody works out.” And it’s not like they can come over and take over the operations like a gold mine or something like that that’s on land. This is offshore, right? It’s a specialty. You can’t, right? So this is getting a constant check, a free check.

Daniel Creech 44:19

Basically, if you’re a government, they’re all opening up their blocks now. And Blue Energy’s was first to the market. And if this is right, which I think it is, look, I have a very big position in it. I think it’s going to do very, very well. It could be one of the biggest gainers I’ve had in a very, very long time.

Frank Curzio 44:35

All right. Moving on.

Daniel Creech 44:36

Moving on.

Frank Curzio 44:37

Leonard asks, “Do you think interest rates will come down if energy comes down?”

Daniel Creech 44:42

It’s a good question. I think interest rates come down a little bit, but the 10-year is telling us that we believe inflation is going higher. And I know there’s a lot of figures out there where you could say, “Okay, Frank, we see egg prices have dropped.” What was it? Calmaine? Is egg produced? This stock got hammered because egg prices dropped tremendously, right? You’re saying, “Wow, that’s not inflation. It’s deflationary.” Just know that the companies that are generating the biggest profits in the world, which is the AI companies, and plan to spend $7 billion, a lot of it over the next five years, right? That’s what they’re saying. A lot of their costs, if you look at memory, I mean, look at the inflation you’re seeing in memory. Look at inflation you’re seeing in some of these parts in energy, right? All these costs. So maybe 10%, 15% of that may what input cost. Now it’s 20, 25% of that. So we’re looking at a place where the biggest profits come from, where that’s where I believe the inflation.

Daniel Creech 45:37

And you could say, “Well, token prices are coming down.” Still, the memory, the cost for these businesses to build these data centers is going up. Electricity prices are surging, absolutely surging. They’re going to continue to surge to build these projects. So we’re looking at the best part of the market responsible for 50% of the profits are seeing inflation, the highest inflation within their industry compared to other industries. So yes, we could see if oil prices do come down, we could see rates subside a little bit, but look where they are now. 5.3. It’s crazy because even if they come down to 4.7, 4.8, I mean, these things, it should be 4.2, 4%. At this level, and it’s keeping the mortgage rate extremely high at over 6% mortgage, it’s very difficult. We saw the numbers. You look at statistics where nobody, very few people, I want to say nobody, but you know what I mean. It’s just the housing market is incredibly, incredibly weak right now. No one’s buying houses. It’s very difficult.

Daniel Creech 46:26

If you have cash, go into if you have cash and you’re looking to buy a house, just offer 30% less. I guarantee you if you go to six, seven houses, you’re going to get somebody to say, “Okay.” Because nobody can take out a mortgage. Nobody can. It’s just those rates are way, way too high to borrow. So if you have cash and you look up a homes and stuff like that, man, you’re in a prime position right now and you need rates to go lower. I don’t see them lowering substantially enough. Even if we do see a decline in oil, which what’s a decline in oil? 70, 75? Are they going to go into the 60s again? I mean, given that it takes one drone, that’s it. One drone from some rogue person in Iran or any of the Middle East countries or one mine being dropped into a water to blow up where all this stuff goes, “Holy cow, the US is going to go after them. They’re going to bomb them again.” That’s where we are. It’s like the Tesla cars are self-driving. You need one to crash and everyone thinks Tesla’s going to crash.

Daniel Creech 47:14

It’s the worst company in the world. Again, when you have news flow where that matters, I just don’t see rates coming down substantially. If we see oil prices come down, they will come down, but I don’t think they’re going to come down enough to really change my thesis, especially over the next six months if we solve the Iran crisis.

Frank Curzio 47:31

Lisa.

Daniel Creech 47:31

Next question.

Frank Curzio 47:32

Lisa doesn’t have a question, but you can comment on it. She just says, “Nvidia, Avago, and CoreWeave. I’m not a short-term trader. I’m a long-term investor.” If you want to comment on those.

Daniel Creech 47:44

Avago, a little bit less. CoreWeave is down tremendously off its highs. They’re a NeoCloud player, right? That’s GPU as a service, mostly rental and stuff. And I just read a note. $2 billion in, I think it’s EBITDA, is more than all the NeoCloud companies combined. So they’re the company that all the hyperscalers go to. Yes, they’re in competition a little bit with hyperscalers, but these are the guys that are signing massive deals and you’re getting a huge discount. That’s where you want to look at this market, where maybe the market, the index, the actual index doesn’t sell off 20%, 25% from here because you have the biggest companies, 7, 8, 9, if I’m doing well. But a lot of companies under the hood could really sell off tremendously. But I like Nvidia. Nvidia’s numbers are very, very solid. It’s a cheap stock. Micron’s numbers are solid. Micron’s trading at seven, eight times forward earnings. You’re looking at, what is Nvidia? 70% earnings growth trading at what’s Nvidia trading at, Joe?

Daniel Creech 48:39

The PE, what is it? 22, 23? I mean, a little bit higher than a market multiple growing more than twice as fast. They said growth in earnings would have been 100% if they had the capacity. That’s how much demand was, but they just didn’t have the capacity. So they said they’re growing 70%. That’s how much demand is. What does it say? 19 times forward earnings. NTN is next 12 months. That’s forward earnings. That’s all you should pay attention about. Don’t look at trailing 12 months. That’s the past. It really doesn’t mean anything. But what you want to see when you look at this on Ayahu Finance or CNBC, forward PE, you always want to see lower than the trailing 12-month PE. That means that they’re growing earnings. They’re growing earnings tremendously. So if you see that the opposite, that means you’re paying for a company. And even if it’s at 10 times earnings and those numbers are reversed, that means even at 10 times earnings, your company is not cheap. It’s cheaper than the S&P, but if they’re not growing their earnings, that’s an expensive stock.

Daniel Creech 49:26

So just to let you know as a little example, if you see this, a lot of people look at PEs, but definitely focus on the forward PE. That’s what matters. That’s the guidance. That’s what everybody’s pricing in. That’s the future of where they believe the stock will be trading.

Frank Curzio 49:37

All right. One of the most talked about stocks on X is Vivo Power. You’ve talked about that a lot. It’s down big today. Lots of comments. Any updates? Lack of tenet news. It’s on pace to get crushed today. You can imagine how much fun the internet’s having with this.

Daniel Creech 49:54

Yeah, I’m going to go in.

Frank Curzio 49:55

So what’s your comments there?

Daniel Creech 49:57

Where it is right now, I’m probably going to go in and buy about $50,000 here. I just got off the phone with the Chief Investment Officer, Alex Cuppage. He’s speaking at my conference in three weeks, the Curzio one. And man, holy cow, what those guys are doing are incredible. Look, there’s a lot of selling coming in and a lot of small caps. We recommend the stock at two. Yes, it was a lot higher and it came down, but that’s why it’s very important to get it at the right price because yes, of course, you care, but when you’re in at a low price around $2.315, you’re okay. This just recently four and just took a dive. That’s what I’ve been doing with this one. Another one is DGXX, buying these on pullbacks. I talked to those CEOs and what these guys are doing with Vivo Power. They create the shell. They’re in the Nordics. There’s no energy. You can’t build data centers in Europe at all. Right now, we’re having trouble with all the politics in the US. And you could say, “Okay, that’s because of the midterm elections and whatever.” And that’s going to change with red states going forward.

Daniel Creech 50:48

They just do it at hopefully they outperform the election because they’re set to lose the Republicans, to lose the House and the Senate. But when you’re looking at the Nordics, they almost have unlimited power because a lot of it’s hydro and they’re not using it. So it’s incredibly cheap power. And now you see the Microsoft, look at the news, Google it. You see Microsoft, you see a lot of these companies going to the Nordics. These guys are huge there. And there’s not a lot of pure plays for Nordics. And what these guys are doing, the people that they’re talking to outside of the US, that’s where their business is. And this thing’s absolutely going to take off. Do they have a communication problem? Yes, I mentioned it to them. I said, “You shouldn’t say that you signed a deal with someone without providing the details,” but they did sign a deal. And I believe that deal is going to be more than a billion dollars, that deal, which is huge for this company and its market cap. But overall, when you see something like this where there’s not a lot of news and just you might have a seller going out, this just whatever it is, but this is a stock they shouldn’t be trading at three.

Daniel Creech 51:41

This stock should be trading much, much higher. And by the way, the amount of power that they have access in their colocation deal is you’re talking about a massive, massive, massive amount. So more than a gig and a half, right? We used to measure in megawatts. If you have a 40-megawatt project, it’s huge. You can get a billion-dollar contract off of that. 80 megawatts, 100 megawatts, 200 megawatts. These guys are sitting gigawatts of power, right? That’s what they’ve done. And everyone’s knocking on the door. You need power. No matter what you do within AI and all that spending, none of that spending matters at 7 trillion unless you have power. And we don’t have the power right now to secure it. I have no idea. I think we’re going to see blackouts coming soon in Texas especially. We just don’t have the power. If you’re looking at, again, I look at all the markets that govern this power and how they have to double capacity. And they plan on doing it three years when infrastructure takes five, six years to build.

Daniel Creech 52:35

I don’t know how they’re going to do it. So anyone that can lock up power when you’re sitting, a lot of these and a lot of those crypto miners that are now colocators, they’re called, that have transferred from Bitcoin into, which is tier one into tier three, which is mining, mining from tier one into tier three, which is AI. The companies that switched where DGXX is generating revenue from AI. You look at this company to be generating revenue from AI. Some of them say they’re going to do it, but they’re sitting on power. The dire need for power, the hyperscalers, they have the deepest balance sheets. Those companies are really coming into play right now. Iron’s another one that’s really good. I like Digital Power here. It’s also getting hit a little bit. And I’m going to buy more. I’m hoping by the time I get off of this that you’re seeing don’t front run anyone, but with Vivo. I hope it’s down 15% by the time I get off of that. I’m going to go right into my account and buy some right away.

Frank Curzio 53:24

All right. Jackson asks, “Would you suggest selling off partial positions on everything today or setting up stop losses around 25% as you’ve previously noted from current levels?”

Daniel Creech 53:35

I would not 25% because you could see a lot of these stocks get hammered. And if they get hammered and all your stocks at 25%, you just lost 25% of your money. There’s other questions that ask like how to hedge. You could hedge by buying a one-time inverse ETF for the Nasdaq. Maybe not the Nasdaq, but maybe the S&P 500 would be better because the Nasdaq, I think, has more leverage to the biggest companies and the ones that are driving a lot of the growth within AI. And that would help protect you a little bit. Put some cash in money market accounts, which your money market account, if it’s not paying 3.5% at least, definitely over 3%, get the hell out of that brokerage firm. They’re robbing you. I don’t know who it would be. But that’s a good place to just park cash. Maybe sell off a little bit of your positions because if they go down, you could add more, which is cool. But again, I’m a big believer of stop losses because it takes the emotions out of it, right? And things change. And from my experience in 30 years when I’ve owned stocks and kept them longer than that, your whole focus is on this freaking dog that you just focus on, “Oh my gosh, should I buy more?

Daniel Creech 54:34

How is it still down? How is it going crazy? I don’t get it.” And instead, if you just have that stop loss and automatically you’re like, “All right, I’m out of it.” Now you get to look at the rest of the market. So there might be other stocks down 20, 25% that you’re missing because you’re focusing on this one dog. You’re emotionally tied to it. You don’t want to lose. And once you lose your money, you’re gone, right? It’s okay. You’re going to have losses. We have losses, right? Everybody has losses. Buffett has losses. Appaloosa, David Tepper has losses. Everybody has losses, right? But the best investors limit those losses because just like if you’re playing cards and you’re playing against a professional, if I’m playing Texas Hold’em and I have a pair of Kings and I go all in, I would say 9 out of 10 times, probably 95% of the time, the pro’s not going to go all in because I could have pocket aces. And they just know the more they play, the better chance they have of beating you and crushing you because they’re just smarter than you.

Daniel Creech 55:22

So for me, doing this for 30 years, I don’t want to lose all my money on one thing because I know overall my performance over the past 30 years, I’ve made money in the markets for many decades is, yes, I’m going to have losers, but limiting those losses is key to preserving that wealth and being able to go move on and buy even better stocks. And that’s how I played stop losses.

Frank Curzio 55:43

All right. Moving on to Marco ask, “Will precious metals and Bitcoin get dragged down too? Or have they already discounted enough this year?”

Daniel Creech 55:52

I don’t know. Where’s Bitcoin at, Joe? God, Vivo’s down 12%. I shouldn’t have said anything. Sell Vivo, guys. It’s going to two this way. I can buy more. No, I’m kidding. So Bitcoin, 85,000. I mean, put a five-year chart in that if you can. I’m going to say something about this because I have to say something. Look at this five-year chart. So anytime over the past five years, you’re higher now than ever, right, if you bought the stock. And yes, you’re looking at it came down from 120. When this thing crashed from 120 to whatever it was, 55 recently, you had every gold bug just destroying Michael Saylor. He’s an asshole. This method doesn’t work. The leveraging of Bitcoin and dividend yield and all the shit. And now look at the reverse because if you look at gold, pull up a chart of gold, you could just compare it to gold over the last put up gold if you can and compare it maybe over the last like six months if you can. Just put a six-month on gold. I mean, you look at this chart with gold.

Daniel Creech 56:48

I mean, gold’s been getting annihilated, right? It’s got it was 5,500, it’s down to 20, 25%. And I don’t see Michael Saylor coming out of oil like destroying all the people that destroyed him, which shows credibility. I love that. I love when people do that. It’s easy to be everybody. Everybody in your blood wants to say, “I told you so. I’m right. I told you so.” Everybody’s like that. Here’s a guy that could go out there and say, “I told you so,” and he’s not saying, “I told you so,” even though everyone destroyed him because they’re like, “Look at gold,” and gold bugs will pull like a figure from the pricing point right there from like 2020 and tell you, “It outperformed the S&P 500 from 2020.” It was like two years you outperformed the S&P 500, maybe three years. There’s times to own gold and there’s times not to own gold. When you park your money in gold, you don’t earn interest. But right now, it just rates, if you park it in money market accounts, you’re going to earn 3.5% interest, 4% interest. So that’s not an opportunity. That’s why gold’s getting crushed right now. Gold is not the safe haven that you think.

Daniel Creech 57:35

It’s not this crazy safe haven. It goes up where you see strong buying from, yes, deficits matter, but with interest rates higher, there’s really, for me, why am I leaving money in gold that doesn’t pay interest when I can get risk-free 3, 4%? So I’m not looking at gold. I love copper here. Copper’s still a big part of the AI story, even though people say, “We’re going to reduce the amount of copper.” They’re not. I have great sources, people who help build these data centers. They give me great information. They help me build. Celestico is one of the ones they said, “Hey, there’s no switches, and we need switches.” And Cisco’s not doing it. So I looked at all these companies. This is a company that counted switches. We recommended, I think, with no better 40, and it went to 300, right? We took big profits on that. But getting back to the precious metal part, I like copper. I think Bitcoin’s a great play, but look at gold selling off tremendously. So I don’t know if these are great plays if the market comes down, but as long as we have these high deficits and we’re going to have the government come out, if we see a 15, 20% drop, maybe Besant says, “Hey, we’re going to purchase even more long-term bonds,” which the market didn’t care about.

Daniel Creech 58:35

It wasn’t really that big in terms of the bottom market of how much they’re buying. But overall, gold, 4100, 5500 is down a lot. I don’t like gold as a commodity. I realize that when you’re looking at gold really quick, I don’t want to spend too much time on this. When you’re looking at gold stocks, there’s some that are great, some different from others. But when it comes to gold and even the producers, when you’re seeing inflation rise and you’re supposed to see, “Okay, I’m buying these gold stocks as inflation’s rising,” the inflation costs for gold companies are much higher than anyone else when it comes to tires, when it comes to labor, when it comes to energy, right? I mean, so when you see these inflation-heavy markets and people are like, “Oh my God, you should just buy gold stocks,” no, because I mean, all insustaining costs they call ASIC costs are the outright way over 900 a couple of years ago. And it’s like 2,000 for some of these companies. That’s great with 4100, but you could see how much those costs have gone up tremendously where 5,500 is a big deal compared to 4,000 or 4,100.

Daniel Creech 59:30

But I don’t know how much gold goes up from here. I don’t know if you want to have so much exposure to a lot of gold stocks right now. Maybe some junior miners, some really good plays in good areas. But I do like copper out of all these, and Bitcoin looks very, very strong here. Just be careful owning anything outside of that and outside the big ones because a lot of those, they don’t have rules, regulations, nothing. I mean, they are securities, but they’re deemed not securities, right? I mean, people buy them and make money on them. It’s a definition of a security, but you don’t know what kind of regulation is going to come down the line for a lot of these others. So just be careful because there’s no rules, no regulations. You don’t know. I mean, it’s not shares, but the token counts on a lot of these things. And those are altcoins, dubbed shitcoins. Be very, very careful with those. But Bitcoin looks like it’s holding up very well. And congratulations to Michael Saylor. No one wants to give that guy credit anymore, but what he’s done since 2020 is absolutely amazing.

Daniel Creech 01:00:16

And he could go out there and say, “I told you so,” F you to everyone who’s he didn’t. He’s taking a high road and good for him. I really I like that. I like credibility. That gives him credibility. I like that.

Frank Curzio 01:00:25

All right. John asks, “Forecast for Palantir and what to expect with AI stocks?”

Daniel Creech 01:00:32

I think Palantir, we did very, very well in Palantir. Of course, if you look at where it is now, I mean, where we sell it, 100, 1 something, but where did you recommend that? That was your recommendation, Daniel, of Palantir?

Frank Curzio 01:00:43

Around 25.

Daniel Creech 01:00:44

And we had amazing gains on it. And then we sold it. It went higher, pulled back, and now it’s going higher again. But you have to realize when you have something that works and these guys have AI that can come in on day one and change your entire operations, which is incredible. Now you see more companies like that, right? But this is a company that it’s wired to the defense industry. Now it’s wired to other clients. But CEOs sit down with Alex Karp, who’s again, I think he’s entertaining as hell. He’s brilliant as hell, but I could see why if anyone doesn’t really like the guy sometimes. But this is a company that can get into so many other sectors. So I think when I look at companies and I make mistakes on them like this and you look at, well, this trading 100-times sales, you’re crazy. All right. Netflix was trading at that too. So was Apple. So was Microsoft back in the day. And the mistake I made is looking at the total addressable market. And when I look at Palantir, we’re looking at defense industry, infrastructure companies, oil companies, their total addressable market is the S&P 500.

Daniel Creech 01:01:38

It’s everybody. And what these guys are capable of doing are incredible. They’re incredible. Their management team, just the staff, people are happy there. They love it. They love Alex Karp. I mean, he’s kind of like this Elon Musk personality that people get behind. They love him. Yes, it’s at highs right now, but the fact that it went through an up-and-down cycle, they know how to deal with this and how to cut employees when needed. But their total addressable market is much, much bigger. Just like Netflix. When I first analyzed Netflix, like 15 years ago, I looked at it and I said, “All right, this is like 10 times more expensive than cable companies.” I didn’t realize they weren’t competing with cable companies. Every cable company in the world was competing with Netflix. So Netflix’ total addressable market was really, I don’t know if you could see it on the camera, but massive. And everyone was saying it was this big. And that leads to more profit, more revenue, huge growth. And that’s why the stock, again, you don’t want to look at it the last year.

Daniel Creech 01:02:24

Obviously, it’s come down a lot. But if you look at the last 15 years, one of the best-performing stocks ever, I always look back at the mistakes I made. How come I missed this? How come I’m just looking at a P/E ratio? And it’s all about growth. The bigger total addressable market, the bigger growth opportunity. And then you could see a company trading at 20, 30 times sales, which again, this is I don’t know where it’s trading at now, but I know at 90, it was trading at probably 100 times sales. I don’t know if they have that there just in this. So it’s trading even more than that, but everybody avoided it because valuation, forget about valuation. If you have the growth, you need the growth. If you have the growth, stop looking at the valuation because if you look at valuation, you’ll never own a strong growth company because they all trade at a high premium into the market. There’s a reason why. There’s a reason why you buy a Mercedes compared to a Hyundai, right? There’s a reason why you like that car and why you’re paying more, even though they both have the same metal, same thing.

Daniel Creech 01:03:11

It’s a much better brand and it deserves a premium. It’s a much better car. So Palantir is just, it’s a great company. I don’t know if I’d tell you to buy it at 188 here. I like it. If you do, don’t go all in. Scale into it. This way, if it comes down to 170, you could buy a little bit more. You’re almost happy if it comes down because you improve your cost basis. If it goes higher, you’re happy because you’re owning it. If you want to buy it, scale in if these stocks are at highs that you really like, but just got to be careful going into next quarter. Not so much for Palantir. I think they’ll have a great quarter, but kind of like Micron and Nvidia had a great quarter and stock might pull back a little bit, but that can give you a buying opportunity. But I like Palantir.

Frank Curzio 01:03:47

Bogdan says, “Hi Frank and Daniel. Thank you for consistently practical market commentary. Has been a longtime listener, enjoys newsletter, podcast, interviews.” He says he likes your common sense, down-to-earth approach, especially the way you take complex market themes, make them accessible for individual investors across different asset cycles. You have a lot of experience. So he wants to talk about the high-yield environment. He says, “After several months of persistently high yields, how long do you expect them to remain at these levels? And more importantly, what signals would tell you that the environment is beginning to improve for rate-sensitive areas in the market?” He has several questions there, financials, consumer discretionary. You’ve covered a lot of that, but how long do you expect this high-yield persistency to last? And then what signals are you looking at?

Daniel Creech 01:04:32

It’s a good question. I’m expecting it to last, like I said earlier, with oil prices are going to 10 years telling us that inflation’s too high. It’s telling the Fed that you need to raise rates. It had the perception like, just say, we could raise by 50 basis points. I know a lot of economists are going to say that’s crazy. And again, economists don’t ever listen to economists when it comes to stocks. Please don’t. Please don’t. These guys are great at historical data and looking at stuff. That’s why they didn’t understand transitory. They didn’t understand that this was different than the credit crisis where they didn’t see massive inflation when they flooded the market because they gave it directly to banks. They didn’t understand that if you give checks directly to people, directly to businesses, and tell them you don’t have to pay back, it’s going to flood the market with cash. It’s going to result in massive inflation. And they didn’t get it because there’s no textbook that says that. And you have to realize, going forward, we don’t have anything in textbooks that we read where we have a playbook of $40 trillion in debt where a government does not allow us to fucking ever go into a recession, ever.

Daniel Creech 01:05:23

We’re not allowed to have a recession when they usually happen every five or six years, right? So it’s a different playbook from almost anything you ever read. So that’s why you have to be really, really careful. As far as interest rates coming down, I would say this is more of a six-month problem. I’d say, “Hey, let me just hold it through this.” It could be longer. I mean, we were saying, “All right, it’s not going to go to 5%. It’s fine. We’ll be okay.” We blew by that. And now it’s 5.5 on the table. I mean, it’s 6% on the table. I mean, when does it come to the point where no one’s going to be buying houses? The costs, which are massive for AI and that spend, and they’re spending more than what they’re generating in cash flow right now, right? They have commitments for, I think, $1.2 trillion. Going forward, they know the numbers. They know for every dollar they spend, they’re going to generate $3.2 in profits. But that profit comes later on. And we saw that with Oracle, right? With Oracle, we realized, “Wow, they have 600 billion,” it’s called RPOs, remaining performance obligations, which is like a backlog.

Daniel Creech 01:06:17

And you’re going, “Holy cow. I mean, there’s this massive backlog, but they’re no longer a software company. They have to build these data centers. They have to take out debt in order to generate that revenue.” So that’s where this company got hit pretty hard. And you saw the credit default swaps get hit and people worry that’s basically insurance on if the company defaults or whatever. And that’s why some of these companies got hit. So my point is, we need to see a slowdown in the economy. And nobody wants that, but we need to see the economy slowing down. If the economy slows down, we’re going to see rates come down because it’s just too overheated right now. I feel like that’s what nobody’s talking about, where we want bad news on the unemployment front. We want unemployment to skyrocket, right? We want to see a slowdown in the economy because adding more jobs, that means pedal to the metal and something’s going to break because eventually you’re not going to pay $50 for a freaking Snickers bar.

Daniel Creech 01:07:03

You’re not going to do it. You’re going to pay, okay, $3 now? Okay, but eventually, I maybe I’ll pay $4, $5. I’m really hungry, but it gets to a point where people are going to say, “I’m not paying those prices anymore.” And we’re pretty much near that point where we’re seeing inflation outpace wage growth for five straight months, something we haven’t seen since 2012. That’s a big deal. What happens if it continues over 12 months? So a lot of these companies aren’t going to have the pricing power they believe. We need to see a slowdown in the economy. So either we see the slowdown in the economy, which is going to hurt the stock market, or rates are going to continue to go higher. And we have a government and a Fed that usually when they say something, they can control this market. This is the first time in a very long time where the market’s saying, “F you. You want to buy a long-term? That’s not working this time. Oh, you’re going to raise rates by 25 basis points and play like little coy and easy because we have the election coming up.” No, the market doesn’t want to see that.

Daniel Creech 01:07:51

They want to see, “All right, we’re going to quadruple the event. We’re going to increase it by 10X.” I mean, that’s how many in terms of buying long-term bonds. We’re going to raise rates five times instead of once and maybe twice, twice this year, but into next year. That’s signaling to the market that we want to pull back the reins. And we need to pull back the reins. And when we pull back the reins, it’s not going to be pretty. And you’re going to see a lot of these names. A lot of them have been getting hit, get hit even harder. But I would say the next six months, it’s either we need to see a slowdown in the economy, which hurts stocks, or rates are going to go higher. And I’m betting that we’re going to see a slowdown in the economy, which is why my forecast is to be very, very careful, especially going into earnings season because I can’t see CEOs being that optimistic on that guidance when they report. And this is coming in two, three weeks.

Frank Curzio 01:08:35

Jack asks, “Your thoughts on US Gold Corp?”

Daniel Creech 01:08:39

Jack asks.

Frank Curzio 01:08:39

Yeah.

Daniel Creech 01:08:39

Jack asks.

Frank Curzio 01:08:40

Asks. Your thoughts on the chances of US Gold Corp, USAU, might be purchased by one of the bigger gold companies?

Daniel Creech 01:08:49

I mean, look, big copper project I visit personally. I know those guys very, very well. They’re good friends. I went to Wyoming. I went to Wyoming when they were building this project and talking to the politics. And I won’t tell you who went with me because he’s our senator now, and he was in the Trump cabinet that, again, it was very, very important to get all the details done, making sure the land, the permitting, and everything. And that’s what they did. So this is a company that’s sitting on a very, very big project. It’s to risk tremendously because it also has a lot of aggregate that they could sell off, which big companies around there want to buy their aggregate. This is a name we did very, very well on. And I do like it. I really like it. It’s $15. We were in at I think we first recommended this at 9, and it fell tremendously. It fell to like 4, 5 bucks. It was in our 50% stop. We had a 50% stop on this, and we stayed in the stock, and then it went a lot higher. Then we sold it, I believe, even higher than this, which we’re really happy about.

Daniel Creech 01:09:47

But this is a really, really good name, and this is a name that could easily get bought because it is really focused on copper, and also it’s a gold project as well. But I like this name a lot. I know who runs. They’re very good. I went to Wyoming just to see this project, and it’s incredible. I mean, you’re not going to see huge mining costs. And I think that where copper is right now in prices, and they’re going to stay elevated for a while, I could see this company getting taken over. Absolutely.

Frank Curzio 01:10:08

All right. Bill’s switching things up to AI and says, “My son works to make other companies more efficient utilizing AI tools, thus eliminating white-collar jobs. This, plus robotics, eliminating blue-collar jobs, will put our country and world in massive unemployment, causing economic havoc to household.” Boy, Bill’s a real half-full kind of glass guy. “Causing economic havoc to households and our society. Most families will not be able to save or invest their way out of this dilemma, particularly younger family units. So what is your financial advice to minimize the impact and stay employed and sane?” I like that. He’s got a sense here.

Daniel Creech 01:10:46

I disagree with a lot there. I think there’s going to be a different economy going forward where AI is going to help companies tremendously. I mean, you have to learn AI. You got to be smart about it. It’s not that difficult. I just stop playing around. I ask questions. You go to Claude. You go to a lot of these services. They’re not too expensive to do it personally. But I see a world where we do have 6, 7% unemployment, but the people who are employed are going to be making more money. So it’s not going to hurt the economy that much. I know nobody really says that or believes that, but that’s my theory as someone that really loves analyzing the economy all my life. Because the economy, if I was a teacher in Tauri, I’d teach it the right way, not with bell curves and stuff like that, because the economy is everything around us. It’s who’s the idiot that just bought the Mercedes next door that, and you know he’s on a salary of $75,000 a year, and he’s buying like two new cars. How much you pay for milk?

Daniel Creech 01:11:34

How many people have their houses for sale outside your neighborhood? All this stuff is the economy. It’s fun. It’s all around us. Talking to cab drivers and everything, business, different states. That’s how I teach it. But looking at the economy, I see an economy that generates higher profits and maybe has an employment rate that’s a little bit higher. But we saw the same thing. You can go back to the horse and buggy, right? And they said, “All these cars, and look at all this stuff. It’s going to take away so many.” Every single major, if you look at industrial revolution that we’ve seen, there was a lot of fears on this taking jobs. And it is going to take jobs. It’s going to take jobs. You’re seeing massive layoffs, right? You’re seeing massive layoffs from the biggest companies in the world, especially AI companies. But yet their profits and sales are going much, much higher. So they’re cutting costs, not because they need to cut costs. It’s because they really don’t need a lot of these people. But if you’re looking for jobs, especially blue-collar like Trizity and stuff like that, I mean, they’re going to be making $100,000, $200,000.

Daniel Creech 01:12:24

Look at working in different oil fields. There’s just so many jobs out there that you can make a lot of money. You could start your own business where even for us as a competitor, we couldn’t really compete because these guys had 20, 30 people marketing teams that spent millions and millions of dollars a month generating traffic. Now with our X account, we generated, and I’m not kidding here, pretty close for this month, 15 million impressions on our X account, which is insane. If we look at that 18 months ago, we were generating a couple hundred thousand. Even three months ago, it was 5 million. That’s 15 million. That’s how much traffic we’re generating. And that traffic, now we don’t have to pay for it as much. And now you got people running your HR department, running customer service where those are huge, where AI and bots that you could build. And we’re doing that. We have AI all over our systems, and everyone says they have AI, but when you see the amount of traffic that we’ve generated, it’s not so much how many followers you have because we’re generating more traffic than people who have 2, 3 million followers right now.

Daniel Creech 01:13:18

And everyone’s asking us why. It’s because we know how to use AI the proper way. And we figured that out. So we want to be ahead of our competitors, and we feel like we are right now. And that’s why a lot of competitors are coming to us instead of us coming to them. So I don’t think this is an end-of-world scenario. I think it’s just how do you make yourself more efficient, your employees more efficient, and be aware if you’re a consultant, and I think Accenture actually reported good numbers, so hopefully they figured out AI, understand that a lot of that work could be done through automated systems right now and be prepared. Just don’t sit there with your head down and wait to get fired. So I’m not a doomsday scenario. I don’t think the world’s going to end because of this. I think that new generation, including my daughter and kids who are going to college and stuff like that, have the greatest opportunity they’ve had in their lives. We’ve never had that opportunity. And yes, colleges destroy these kids because they got to pay, and a lot of them are going to be sitting in a massive amount of debt, and some of them just don’t understand that and become teachers, and they’re going to be paying off their debt for 25 years.

Daniel Creech 01:14:13

But you have an opportunity to use AI to help yourself tremendously. Not write papers for you, but research and help you and become more productive. These are the opportunities you have, and these kids are very computer-savvy and are going to be able to use these tools going forward. But we just, real quick, last thing here, we just invested in a company. You say where AI could go. I think healthcare is going to be the biggest thing within AI and just the costs are coming down so much, more drugs to market, great humanity, great for stocks. We just invested in a company that’s using AI for cows, for farms, and basically increasing the yields on those cows, running the whole entire farm. We’re talking about big farms. Their revenue went from 400,000 to 10 million in nine months. And all them using it because all the farmers have to do is just walk outside the house and look at a computer screen and know exactly when to feed them, exactly know when they’re going to get pregnant, how to get the most out of it in terms of milking them, what time they milk.

Daniel Creech 01:15:09

It’s amazing. The whole entire thing is run through AI systems, and these guys generate a fortune. That was one of our private placements we got into through our KerseyOne membership, which is only accredited investors. And we hold a conference every year. We’re holding it next month, which is really exciting. But people pay a membership fee, and they get access to all my private placements, which are deals that I invest in personally and get in the same exact terms. And when you’re in that group, you don’t have to invest in anything. You could say, “I don’t like this one. I’m going to sit out. There’s no high pressure. I just let people know what I’m doing. I vet these companies tremendously. I look at them. We fill out all the paperwork. We help you guys fill out the paperwork, put in DocuSign.” And if you’re an accredited investor and interested in that, that’s where that’s really exciting because for me, I’m investing my own money in it. So if these things don’t work out, I lose my own money. But I wouldn’t look at AI like that. I know it’s easy to look like that.

Daniel Creech 01:15:54

It’s going to take jobs, it’s going to crush people, we’re in trouble. But just if you see the risks ahead of you, you know how to deal with them. You see the risks ahead, deal with them. Because the problem is when you have these risks like in this market where things usually break when we have interest rates this high. It’s a private equity, which was already a dead market. These guys are sitting in and people ask for redemptions because they bought all these companies. They want dry powder. They don’t have dry powder. They can’t get rid of these companies off their balance sheet. They can’t have them come public. And these are companies where interest rates were much lower, and they still market these things to market. They’re going to have to take big losses. That’s why they halt the redemptions. And now you’re looking at rates a percentage point higher than when these guys were in big trouble. What do you think kind of trouble they’re in right now? Because they use leverage to purchase these companies, again, then leverage those assets even more, and then come out and go public and make a fortune, right?

Daniel Creech 01:16:40

That’s what they do, these private equity firms. Those guys are in trouble. Is that going to break? Because when something breaks and you can’t see it, that’s when you see the credit crisis. No one really knew GE and AIG is holding this share. What’s going on with AIG and GE? How are they involved in this? You see the risks in AI come in, you could adjust. And I think the people who adjust are going to do perfectly fine and generate more money than they’ve ever generated in their entire lives.

Frank Curzio 01:17:03

Well said. You want to take a couple more or?

Daniel Creech 01:17:06

A couple more. We’ll do a couple more. Yeah.

Frank Curzio 01:17:07

All right. We got.

Daniel Creech 01:17:08

Yeah, we still got some people on here.

Frank Curzio 01:17:09

Dean says, “What is your Bitcoin prediction for next year?”

Daniel Creech 01:17:15

I mean, Daniel, give me a crystal ball. Where’s the crystal ball?

Frank Curzio 01:17:19

Right here.

Daniel Creech 01:17:19

There is Daniel’s a crystal ball. 92,000. I don’t know where it’s going to be next year. I just know that you need laws around this. The Clarity Act, I know got pushed out now to next year, but you need laws around it for really, really, really big money to come in because a lot of these guys have a fiduciary responsibility. And even when it came to gambling and gambling sites and stuff, you didn’t really see that take off until a lot of states starting to approve it because now you remove that risk. Because if you’re taking it, and I’m not talking about big money, I’m talking about pension funds, hedge funds, people that are managing other people’s money. If you get into an industry like this or Bitcoin and it gets heavily regulated or the US just comes out, again, it could be a new administration. The last administration hated Bitcoin. They tried to end it, right? That’s why they banked everyone and they closed all the banks and said all the banks cannot do business. There’s three major ones, and they all went under because they said if anyone deals with Bitcoin or anything else or crypto, that we’re going to audit you.

Daniel Creech 01:18:14

And so all of them said, “We can’t do it.” I got the bank because we made an investment in a company, right? It’s an investment in a company that went through Bank of America. Bank of America said, “You can’t do business with us anymore.” And we’re running all of our payroll and everything out of it. I’m like, “This is 0% of our business. It’s just an investment for the future that whatever.” And they gave us a number to call, and we called, and it was the answering machine said basically, “No matter what you do, just make sure that you have 30 days to remove all your money from your account,” right? That’s the other administration. So what happens if Newsom gets elected? We know that they don’t like crypto, especially now since Trump pretty much won the election because of donations from crypto. And you could debate that, but you’re probably not going to win. That’s where a ton of money came in from these crypto companies. So if that changes, then what happens to Bitcoin? Oh, you can’t own Bitcoin in certain accounts. I don’t know. So you need laws around it, and I wish we had more laws around it, but I do still think with Bitcoin, most people, Daniel gave me the stat the other day.

Daniel Creech 01:19:05

What is the percentage of people that are up on Bitcoin?

Frank Curzio 01:19:08

82%. I think that was Bitcoin Magazine.

Daniel Creech 01:19:10

82% of people who bought Bitcoin are up on that asset at this level, which is cool. That means and people who’ve held it, people are going to hold it for a long freaking time. So if you can get more and more new people in this at this level, it’s going to go higher because there’s a limited supply, right? And every four years, you see the half income, which, again, limits profits. That’s why all these Bitcoin miners, it’s an unscalable model. Their margins get cut by 50% every four years. Not to mention you can’t scale it because you’re electricity. You got to pay more for electricity. You got to pay more for the chips. You got to pay more for everything in order to generate more money. That’s why they’re switching to tier three now. But everyone who’s in it, I think, is going to stay in it because, man, it’s been some rocky road there in the past 12 months. So I think it’s definitely going to be higher. I just don’t know what price, but I could see it going to over 100,000.

Frank Curzio 01:19:53

Over 100,000. All right. We’ll wrap up with one. What are your thoughts? This is from Rob. He says, “What are your thoughts on remaining in index funds?” He throws out IVV, which is an iShares S&P 500 ETF.

Daniel Creech 01:20:06

I like it. I mean, look, if you own individual stocks, it’s very hard to beat this market. Very, very hard to beat this market because you need to have Amazon. You need to have Meta on that. Meta’s up, what, 30% in the past month and a half or something. You need to own some of these guys. And having the S&P has access to everything, right? So you’re looking at the S&P rocking and rolling and doing very, very well. So owning something like that is definitely worth it. You want to have access to individual stocks. You want to have access to small caps, to stocks that can give you a Grand Slam. You always want that. I don’t care if you’re 90 years old. It’s just a percentage of assets. I mean, my dad was managing someone 90 years old, and we put them into old bonds and stuff like that back then. This is like 25 years ago, 30 years ago. And the guy got pissed. He’s like, “What am I going to do? You’re going to make me all this money, and I want something that’s going to generate money right now.” Now I’m dead.

Daniel Creech 01:20:56

So I was like, “All right.” So everyone has different, again, different investment philosophies, but the older you are, the less percentage you put in risky stocks. But especially if you’re young and you have working power, meaning you have many, many years of working, you want to be able to buy something that if you’re right, it could be life-changing for you. You always want to give yourself a shot. That’s what the markets offer for you. If the company does well, if they get taken over, right? So you should have some risk, which I never mind having, and that’s done very well for me. But also own the index funds as well, especially in your 401(k)s. You just want to sit there and have it grow. Again, the dividends on the S&P 500, I think the percentage is the lowest percentage in the history of the market’s S&P. So don’t buy them because of a dividend. Only buy dividend stocks. Buy the company that’s growing. Don’t buy it because it pays a high dividend. I see people make a mistake like that all the time.

Daniel Creech 01:21:44

If you’re looking for dividends, you don’t need to. You get 3.5, 4% risk-free. Why buy the stock paying 4% interest when a million things could go wrong with the company? Because if it goes down 20%, your 4% yield really means shit, right? So with interest rates at that high, I think it’s really cool with 4%, 4.5%, whatever you can get. But index funds are definitely good. I would definitely suggest them. Definitely suggest them. By the way, last point here. I’m telling you guys that the market’s going to come down. It’s contrary to my business needs. I recommend stocks here. So if you want to buy my newsletter and focus on that, and again, we’ll result in more listeners because Fias sells or whatever. But for me, it’s contrary to tell you this. For me, I should say, “Okay, don’t worry about it. Put your head down. We’re looking at 60 years, 70 years of the markets, and they always go higher and higher eventually and come back.” It’s true. But what I’m telling you right now is, for me, this is why I’ve been doing it for 30 years.

Daniel Creech 01:22:33

I’m no strikes on my license, and people follow me for decades because I don’t bullshit you. Right now, it’s a very, very, very risky market, man. I’ve never seen costs for businesses rise so much in such a short period from quarter to quarter where you have to worry because we saw the playbook. When companies are warning or they lower their guidance, they get hammered, they get annihilated. And there’s a shot for a lot of these companies, especially these consumer discretionary places where things were good just three months ago. They were much better than they are now. You can’t tell energy prices, diesel prices. Now you want to take on more debt to build your business, which is much, much more expensive. It’s not easy. Everyone’s competing for this money now. I mean, you got Anthropic going public at a 2 trillion valuation next month, which is insane. Again, that’s money that’s being pulled from other places. So just be careful right now. We could see a pullback. And again, it’s not for me to tell you that.

Daniel Creech 01:23:22

It’s not the best interest of my business where people are going to sign up for a newsletter because I’m telling it’s come down. But I think there’s going to be unbelievable opportunities for you over the next six months as we look at this because there’s going to be a lot of stocks that come down, and some don’t deserve to come down as much as others. And that’s where the opportunity is. That’s where the analyst comes in, and that’s what we’re going to be looking at going forward for all Alpha members. We see a lot more names make their way into the portfolio if we do see this pullback that I’m expecting over the next pretty much three months and six months.

Frank Curzio 01:23:50

All right.

Daniel Creech 01:23:50

Wow. A lot of questions there. What is it? Hour and a half in. Not too bad. Not too bad for free. Not too bad. So really cool. I guess we’ll end on this. Questions, comments are free to email me always. You can go to frank@curzioresearch.com. Any information on Alpha newsletter, go to curzioresearch.com. Our podcast is Wall Street Unplugged. We have great guests. I’ve interviewed pretty much all the analysts that you’ve seen on TV: Stephanie Ling, Charles Payne, again, Kramer, interviewed heads of state, just analysts, economists. So everyone loves coming to this podcast. They love it because I let them talk, right? And when they go on these financial programs, it’s like, “What do you think we’re going to have, inflation or deflation?” And you got one minute. And we have a lot of people that like to talk more than listen. And I like to listen to a lot of these guys because they’re brilliant and they’re smart, and you learn from them. So that’s why our interviews and we break down the markets all the time on Wall Street Unplugged absolutely free.

Daniel Creech 01:24:47

And I feel like everyone who sees this and finds this and listens to it usually tends to stay because the ideas and the analysis that you’re getting is I haven’t seen you being able to get that on many podcasts in our industry. So it’s really cool. And again, doing it for 16 years, I love it. We put a lot into it. We never have a bullshit podcast. And if you want to listen, Wall Street Unplugged, Spotify, iTunes, and YouTube. So any questions, again, feel free to email us at frank@curzioresearch.com or go to Askcurzio.com because every Thursday, our Thursday podcast is strictly a Q&A. So we do Wednesday podcast. We break down the markets, go over everything, ideas. Thursday is a Q&A. You get to ask me any question you want, and that’s really building up. But in order to ask me questions on that, go to askkerseyer.com. Put your question in, and you never know. Your name might be the one that we pull out of a hat and answer your questions. So other than that, have a great weekend and see you on the other side.

Daniel Creech 01:25:36

Take care.

Announcer 01:25:37

Wall Street Unplugged is produced by Curzio Research, one of the most respected financial media companies in the industry. The information presented on Wall Street Unplugged is the opinion of its host and guests. You should not base your investment decisions solely on this broadcast. Remember, it’s your money, and your responsibility.