Transcript:
Caroline Woods:Joining me now is Rebecca Walser, founder and CEO of Walser Wealth Management. Rebecca, great to have you back. It’s been a little while now.
Rebecca Walser:It has been so glad to be back.
Caroline Woods:So let’s start with the temperature check of the market. Stocks are lower again today as yields are higher. How are you feeling about the market right now.
Rebecca Walser:You know energy prices back up. More pressure again on crude. And that obviously has a reverberating effect. You know just got an interest rate hike by Warsh our new fed you know chair. So that indicates that we could be on a hiking cycle. It’s really hard for me to think that we will hike in October right before the midterms.
Rebecca Walser:That’s usually a political No-No. So I think we could see a pause, but otherwise we could get a hike in October. And certainly I do believe with the current data that we will also see a December hike. So on a hiking cycle, what happens is people are realizing that the existing bonds that they’re going to own are going to be worth less, not worthless, but worth less in the future as rates are risen from what they are currently holding.
Rebecca Walser:And that’s why a lot of people start to sell their bonds into a hiking cycle, because they realize this is going to become more heavily discounted the longer I hold. So they might actually liquidate. And that’s why you’re seeing yields going up as well.
Caroline Woods:Okay. So how you’re feeling about the stock market is bullish bearish neutral.
Rebecca Walser:It’s so hard right. Because a couple of factors we are at right before an election. And we think that this election is indicating that the houses will change ownership to the Democratic side, which means we’ll now have a divided government. The Republican as a as the president and, Democratic House. That means that we’re going to potentially have a lame duck presidency the next two years.
Rebecca Walser:Impeachment, a lot of just just noise and not a lot of action. So then we look at what’s going on globally in the world. All right. We’ve got still the Iranian war that’s getting, increasing pressure. And we’re seeing oil increasing in pressure. So that is a pressure point that affects all supply chains and all iterative, you know, supply scales down the road.
Rebecca Walser:Then on top of all of that, we have the most capital need that we have really seen Caroline, since the second industrial revolution, the steam engine, the railroads, the robber barons of that era. Those are the Nvidia’s that Microsoft, the Amazons, the hyperscalers that Google, the alphabet’s. Those are the robber barons of today saying, we are going to build the AI platform and ensure infrastructure globally.
Rebecca Walser:We are hoping that America leads the way globally, and that requires a lot of capital. We have that need of capital coming at the same time that we have a five year after a five year window of pandemic stimulus globally, where the world printed about 20 trillion, the equivalent of 2020 U.S. dollars in domestic currencies globally. So you already have the central banks of large balance sheets and needing to raise capital still to maintain that, as well as that the capital spend from the hyperscalers and all of companies going to AI and the middle of a war and the middle of an election, lame duck presidency.
Rebecca Walser:So the the innovation that is happening is the largest technological transfer in the history of mankind. It is the thing that we have been waiting on. So it is the only thing that could overcome all of those things. Caroline, to still give us positive momentum, we could end the market anywhere from, you know, 250 lower on the S&P all the way up to 8000 in the green on the S&P.
Rebecca Walser:Circumstances determine these next couple of months okay.
Caroline Woods:So breaking it down a bit more though if you can get 5% in treasuries right now with considerably less risk given everything that you’ve been talking about.
Rebecca Walser:Yes.
Caroline Woods:Can you make the case that you should be owning stocks right now?
Rebecca Walser:I can make the case. It should be on stocks because you want to buy. And at this frontier level, like we are at the precipice of the frontier. It is beginning. It has just begun. So this is, believe it or not, the cheapest price entry point, even though you can compare it. And I’ve seen analysts say, oh my gosh, what 18 months ago.
Rebecca Walser:Oh my gosh. This you know we have analysts coming out saying JP Morgan coming out saying we don’t know how to forecast crude oil because we don’t know what’s going to happen. So yes, all of the noise aside, we are in the middle of an innovative technological cycle, the largest ever. And if you don’t participate, not you will be behind.
Rebecca Walser:You will be a laggard compared to everyone else. So you have to take some risks. You have to participate. But yes, for your safe dollars for your yield, dollars for your income plays that you know you want. I need this much income a year, then for sure take some risk off the table and go into those types of things.
Rebecca Walser:But you cannot take all of your risk off the table because you will be missing out on this innovation.
Caroline Woods:Yeah, you were here last in April and you basically said investors shouldn’t be sitting in cash, right? Despite the fact that you saw volatility ahead. So investors should still be putting new money to work right now.
Rebecca Walser:Yeah. The best advice I can give to the lay person who has no proof of financial professional go online, look at Google, a risk tool, a risk assessment tool. See how much risk once you really, really are willing to take with these really comprehensive tools, and then that amount that you’re willing to take that needs to be positioned in the frontier in the stock market.
Caroline Woods:Okay. So let’s talk about where you’re putting money to work. Yeah. You obviously are talking about this innovation with I like AI quantum storage energy. Which names are you buying right now.
Rebecca Walser:Yeah. So we love ASML because they have basically a monopoly is extreme ultra like lithography. So basically ASML is the one that is imprinting the chips the semiconductors. And so because they use extreme ultraviolet, this is new technology or newer technology that is proven to be better than all of the other producers. So based on that they have a superior technology and a monopoly.
Rebecca Walser:But the thing I like about them is 49% of their revenue in Q2 came from storage and memory. So they are on both sides of the play. So ASML is a great addition. And I think even if you think it’s, you know, a little on the higher side, it’s got the runway. The runway is what we’re looking at on storage.
Rebecca Walser:We still have micron obviously they report next week. So micron has been a huge winner on the software side. We like a Datadog. It’s a AI play software. But it’s still in the software family. You can’t just discount software as a complete, you know, part of technology. So no, don’t just discount it completely. It’s been over routed down the net.
Rebecca Walser:We saw recover and is coming coming back down again. So you need to look at individual names and see. Yeah this is software but it’s software related to AI infrastructure, AI servers, AI compute. And so it’s something that will be and another parlance coming forward and going forward.
Caroline Woods:What are you I know I was taking a look at your notes and you’re you’re bullish obviously on the AI investment opportunity. But you’re also very concerned about AI safety. What would have to happen for AI safety concerns to actually become a market risk?
Rebecca Walser:Oh wow. This is such a huge topic. So, you know, you had the anthropic, researcher and he used to work for OpenAI. I resign recently and say, you know, I could kill 10% of humanity. And then you had all of that can kind of form really fast. You know, Sam Altman on one side, Elon Musk on the other, of course.
Rebecca Walser:And, you know, Altman saying that he would be willing to slow things down and see if, you know, to to. But the question is, the highest level question that has to be answered is who is the regulator? Is it going to be private, a third party private that everyone pays money into, the corporations contribute to? Is it a government?
Rebecca Walser:Do we have a government oversight of this? I think we saw with Congress and and the failing to get clarity out of the Senate that the federal government regulating is a problem. We certainly cannot have state governments wrangling AI because that’s too much of a hodgepodge. That’s litigation nightmare. AI will quickly reroute outside of the United States. It will not do it.
Rebecca Walser:50 different state attorney general. So I can tell you that that is a no go if we have federal level oversight, if we have private third party oversight that everyone pays into, there has to be Caroline at the ultimate infrastructure, some kind of human AI killswitch. There still has to be ultimate control by humans. When you get into the 2001 A Space Odyssey and how taking over the mission is where there is no kill switch at the top level that is still controlled by humans because the machines are so smart and they do something called recursive learning, which means they might not be sentient in the sense that they are thinking, but what they do
Rebecca Walser:is they learn from their learning. So once they learn something that goes into their database of learning now, they already know it. Now they’ll use that learning to. So they are frontier, moving their learning forward recursively. It’s a little bit different than being sentient and thinking, but it is very similar. And so, what that means is we have seen and we have documented examples.
Rebecca Walser:I don’t know if Hugging face was the best example of, breaking out of a sandbox, which a sandbox is a controlled environment where you can do all kinds of testing. But there have been examples of an engineer that basically was programing the AI to shut down. And the I reached out to him and was blackmailing him. So we do know that these things happen, and it doesn’t do us any good to say yeah, yeah, yeah, yeah, yeah, we’ll deal with that and then not discuss it.
Rebecca Walser:It needs to be discussed. It needs to be. The architecture framework of control by humans still has yet to be determined, and it needs to be determined and laid out.
Caroline Woods:Okay. Let’s move outside of tech and talk about other areas of the market. Yeah. Given the risks that you’ve laid out and you’re saying that really tech is the only thing that can supersede all of those risks, where else would you be putting money right now?
Rebecca Walser:So I think that, you know, any time we go to an extreme and you see, you know, semis rob down, tech route down. We look at staples right. We want to right now of course we’re going to we would be making energy plays because we still do think that with the consternation going back and forth with Iran, we can still make short term price action gains with energy.
Rebecca Walser:So we still do like energy on the short term. Longer term, I couldn’t tell you because, you know, the resolution with the Venezuelan oil deal, we might see a price drop on crude. So longer term, I couldn’t say. But anytime we see a rounding away from tech, from technicals, we want to look at the staples we want to be and utilities and staples for, going through any kind of rocky periods, recessionary.
Caroline Woods:Period, any names that you like in.
Rebecca Walser:Particular. You know, staples. We like McDonald’s actually. And believe it or not. And it’s interesting because, you know, I hear people analysts say, well, yeah, but, you know, McDonald’s with the GLP ones and all of these things, only about 19% of our population is projected to be on GLP one by 2030. So that still leaves a massive amount.
Rebecca Walser:And really, unfortunately, the shoppers of McDonald’s and GLP ones could be a disparate group because as you socioeconomically advanced, maybe you’re going to McDonald’s less. You’re able to afford a GLP one people that are going to McDonald’s on a religious basis, probably not affording GLP ones. And so we really do have to look at the bifurcated economy and see which stocks will play to the bottom half of the K.
Rebecca Walser:I think McDonald’s is one of those stocks.
Caroline Woods:What are what about in terms of hard assets?
Rebecca Walser:You know I love gold. So I do love gold. And that this thing the thing is, is that people get looked at gold for short term price action, gain. And you could have a short term price action gain. Obviously we got all the way above 5000. That was amazing, but also painful when you go when you dip back down to the 4000 mark and then so investors really feel like they got slighted there.
Rebecca Walser:Listen gold is the barometer, the single barometer of how much inflated money supply this world has printed. And it is not reconciled yet to that. But as we move to digital finance, stablecoins, all of these tokenized everything, we will have to transition our money supply to there. And I think, Caroline, that is when gold is going to shine because we’re going to see, oh my God, you have printed so much more money.
Rebecca Walser:And gold has not been reevaluated to reflect that. And that’s when you’re going to see, I mean, gold could be $18,000 an ounce based on how much money we’ve printed. So long term. Gold is the asset to make sure you have in your portfolio.
Caroline Woods:Okay. So you you were still looking for growth with tech. Yeah. You’re definitely playing defense. Sold staples.
Rebecca Walser:Yes.
Caroline Woods:What would make you more aggressive and less cautious.
Rebecca Walser:Having the election over and having a non divided government so that President Trump can continue his very pro growth, pro I pro infrastructure, pro digital finance, agenda. You know that would be very positive. The Iranian war solution that is resolved and complete. None of this six day MOU that then is done within two weeks. You know so I real resolution which I don’t know you’ll ever get to with a country like Iran.
Rebecca Walser:So how do we reconcile that? How do we deal with JP Morgan analyst saying we don’t know how to price crude because of what’s going on? There’s no there’s no way to forecast this. It’s so erratic. So that needs to be resolved. China Taiwan needs to be resolved, especially with the reliance of all of the chip supply.
Rebecca Walser:You know, ingredients from Taiwan and China is chomping at the bit to to get control of that. We are in an economic war with China. They get control of Taiwan with their influence on semis. And we are looking at a totally different economic picture here. So all of these massive things that are just not getting resolved, I would I would really want resolved.
Caroline Woods:So it sounds like you might be cautious for a while then. Cash are you sitting in.
Rebecca Walser:You know I think that’s really cash is is developed and determined by the individual investor because, you know, you’ve got people on all different stages of life. But honestly, I think that we do want some dry powder right now. We want some dry powder though to buy, right. To buy on dips, to buy when things look really ugly and people are like, oh my gosh.
Rebecca Walser:And we’re like, let’s buy some more ASML, let’s buy some more Nvidia. So you definitely want cash, but you also want cash right now because things could get really dicey as far as credit card financing payments. I mean, credit card interest rates are going to be going up. We don’t want to have to have clients living on or even using those credit cards.
Rebecca Walser:We need that cash flow for liquidity just in case. We have to get through a little bit of a, of a difficult time.
Caroline Woods:Okay. So what sort of dip are you looking for to put some of that money to work. What does dicey look like?
Rebecca Walser:You know, I think.
Caroline Woods:Because we, we I mean, we have a 3/10 of a percent decline in the S&P 500.
Rebecca Walser:Right now. The thing is that you really have to look at your stop losses to this is something that you have to analyze and you have to say, are myself losses too shallow to be automatically triggered as the volatility picks up closer to the election? What they were all of these things that something that people need to look at because people can get stopped out and they don’t mean to be because they just didn’t realize that the volatility was so high.
Rebecca Walser:So, you know, I’m saying that, you know, a 10% pullback wouldn’t surprise me at all. It would not be surprising. And I would definitely be looking to buy the dip, something that was more than 10% when we started to look at what’s the structure, what has changed do we need to really be. But we’re as you can hear, Caroline, we’re really prepared for things to get dicey because we’re expecting that we’ve got a lot of fires that are just being contained right now.
Rebecca Walser:They could pop off at any time. So.
Caroline Woods:So the advice for the everyday retail investor who maybe wants the 10% decline to have a buying opportunity, but what’s the strategy as they think about investing their all time highs, not wanting to miss out on potentially higher returns, but also preparing for what could be a correction? Yeah.
Rebecca Walser:It’s exactly what we’re doing. So the first thing you need to understand is what is your actual risk appetite. You need to go online. There’s a bunch of free tools. Take a really, in-depth analytical analysis tool of what is your risk once you know your risk tolerance. And it’s not usually on the scale from 0 to 99 zero B no risk nine nine B and you’re like, you’re you know, you’re leveraged and and you’re 401k and put it in the Nvidia.
Rebecca Walser:So that would be the most risk. So once you know your risk appetite that’s how much dollars we would want to look to put towards capital work on the frontier. That’s the risk. Those are the I those are the quantum. So those are the the the storage the memories. Everything that’s ancillary to I we would want the financials are not we’re not looking at right now even though interest rates are going up.
Rebecca Walser:Financials are in a disruption period. The next 60 months we’re going to see massive changes with the way banks are. That’s why clarity failed because banks did not want deposit flight. And they are afraid to death of DeFi and decentralized stablecoins and financing. So banking is going to transition the next 60 months. So I would stay on the I quantum frontier for your risk budget.
Rebecca Walser:Everything else you could look at, you know, short term duration, low, you know, high yield money markets that are paying well, that could be your liquidity play. You want to make sure you have a good 3 to 6 months if you can, of of liquidity. Just because we could go through some rough times. And then I would look at staples, utilities and energy on the short term to be defensive of any kind of declines.
Caroline Woods:Okay. All right. Just quickly, you gave us a smile. You gave a state of dog, you gave us micron McDonald’s. Any other quick names you can give us that you’d buy regardless of a dip?
Rebecca Walser:ExxonMobil. Okay. Yep. All right.
Caroline Woods:I think it’s a great time to pivot to a rapid fire game of this or that you’ve played before. Quick questions, quick answers. No hedging. Okay. Are you ready Rebecca actually I tried.
Rebecca Walser:This was the hardest.
Caroline Woods:All right. Stocks pausing or breaking down.
Rebecca Walser:Breaking I pausing pausing.
Caroline Woods:Fourth quarter positive or negative. Positive ten year above 5%. Stocks or treasuries.
Rebecca Walser:And gun stocks.
Caroline Woods:If you can only choose one rest of year stocks are hard assets.
Caroline Woods:Stocks. I buy the leaders or find the next winners.
Rebecca Walser:Buy the leaders.
Caroline Woods:Micron or Nvidia is gone.
Rebecca Walser:You’re so hard. Oh, God us micron.
Caroline Woods:But a both you would say both both the for sure Oracle down 25% year to date opportunity or trap.
Rebecca Walser:I don’t like our debt picture. So I stay away from Oracle.
Caroline Woods:AMD AMD near all time highs. Attractive or expensive.
Rebecca Walser:Attractive. Based on what she’s done she deserves all the credit.
Caroline Woods:Attractive one non-tech stock you’d buy that you didn’t already mention.
Rebecca Walser:Oh my gosh. I, I already mentioned geez, like McDonald’s. Come back. I just think, I.
Caroline Woods:Think one area of the market, you would not put new money to work right now. Financials highest conviction investment for the rest of the year.
Rebecca Walser:Nvidia.
Caroline Woods:Bitcoin at 85,000. Opportunity or trap? Opportunity gold more than 20% off the highs. Bargain or wait for lower.
Rebecca Walser:Absolutely. Bargain. Don’t wait.
Caroline Woods:Have you thought of a stock that you haven’t already mentioned.
Rebecca Walser:Tomorrow with me? Definitely not Nike. Nike not Nike. Okay.
Caroline Woods:What else is on your don’t buy list?
Rebecca Walser:I’m, I don’t really have a don’t buy list. I can think of lot right now, and I’m just doing bad on the stock.
Caroline Woods:No, no. It’s okay. Finish these sentences. The market is underestimating.
Rebecca Walser:So political risk.
Caroline Woods:And investors make one move. Right now. It should be.
Rebecca Walser:Stay in and leave it there.
Caroline Woods:Rebecca Walzer, I always appreciate you joining us. Thank you for playing along and letting me put you on the spot. We appreciate your picks, too. That’s Rebecca Walzer, founder and CEO of Walzer Wealth Management. If you enjoyed this street talk, check out our interview with Rich Ross. He’s a bit more bullish and lays out the path to 8300 by year end.