Joey Loss 0:02
All right, welcome back to another episode of Market Chatter. My name is Joey Loss.

Adam Van Wie 0:07
And I'm Adam Van Wie.

Joey Loss 0:09
That means Adam is back. He's been in the Keys for a month with his family. His son just graduated high school and they had a pretty epic trip down there. Adam, how was it?

Adam Van Wie 0:17
It was amazing. It was so beautiful and we had some great fishing and just really good times. I think my son's ready to go off to college and my wife is not. Ready for him to go off to college, but, um, but I'm— I think he's there and I'm, I'm supportive. So I'm gonna miss him, but it's, uh, it's time.

Joey Loss 0:38
It sounds like that's how everything's supposed to go.

Adam Van Wie 0:40
Yeah, it's true. I remember how I felt at that age and he's definitely feeling exactly like I did.

Joey Loss 0:46
Yeah. Uh, well, I'm excited for him. I think you said he's going to Alabama, right? Yeah, that's awesome. I don't, I don't know of many testimonials that were negative from Anyone that went to Alabama, a lot of the negative just comes from the teams they beat in football. So, well, that's

Adam Van Wie 0:50
That's right.

Joey Loss 1:05
awesome. Well, looking at this quarter, I mean, this is technically, I guess, the best quarter since 2020. Is that right?

Adam Van Wie 1:13
I think that's right. It's been pretty astounding. Not everything was perfect, but it really— the bounce back from the drop that we saw at the end of the first quarter because of the Iran war and the price of oil

Adam Van Wie 1:29
it really has been a pretty stellar quarter.

Joey Loss 1:34
Yeah, I guess the foundation was lowered artificially because of the war that gave it kind of a good boost.

Adam Van Wie 1:41
Yeah, well, I don't know that it was artificial. I mean, we did see some— anytime you see geopolitical events like that, there's going to be some blowback almost always. We did see the price of oil jump well over $100 a barrel. That is cause for concern. We saw inflation creep back in. So that's cause for concern. So I wouldn't call it artificial, but it was a lower entry point than a lot of other quarters just because of the drop we did see.

Joey Loss 2:13
Yeah, sure. That's all I meant.

Joey Loss 2:17
Yeah. So today in this episode, it is July 2nd. It is 10 AM. The jobs report just came out. We've got a couple of things we can talk about. I thought we might walk through where we are now that it's halftime for the year. We could talk a little bit about the June rotation. It was the last few days and, you know, the first days of July, last few days of June, first few days of July have been interesting. A little bit of a shift is going on, rotation in the markets. I thought we could talk about that jobs report and the inflation picture.

Joey Loss 2:48
And then we have an interesting report from Bespoke that came out that we can talk about that. Talks about July, which is typically a pretty good month, and what we might expect if history holds. And then just broadly, I wanted to run through pros and cons for the year. I think you have a few favorites that you could call out. Maybe we can parse through. There's a lot that we could talk about, but I think we'll focus on a few.

Adam Van Wie 3:10
Yeah, a few favorite pros and a few not so favorite cons.

Joey Loss 3:14
Yeah, yeah. Probably a better way to put it than favorite cons.

Adam Van Wie 3:17
Yeah, I'm not really a big fan of the cons.

Joey Loss 3:22
All right, so looking at where we are halfway through the year, emerging markets remain the leader. I think the last few times I've run through performance year to date, that's been the case. Small caps are not far behind. Emerging markets, 22% year to date, small caps, 21% year to date. And the NASDAQ, unsurprisingly on the AI trade, is shortly behind that at 18% year to date.

Adam Van Wie 3:47
Yeah, that's all correct. It's nice to see small caps and emerging markets doing well for the first time in quite a while. Historically, they've outperformed even the S&P in many periods, but those periods have not been recently.

Joey Loss 4:05
Yeah, no, it's been quite a while. I mean, over 10 years since either of those really did anything that mattered.

Joey Loss 4:11
S&P 9%, developed international 9%, and the Dow 9%. So they're all kind of midway. As far as relative performance goes. And then gold and Bitcoin are not having the year that they've had in the past. It's not a fun time, particularly for Bitcoin.

Adam Van Wie 4:27
Bitcoin is tougher to explain because nobody can put a finger on exactly what drives that trade. There are a lot of things that people guess and say drive the trade, but honestly, it is, it's kind of nice. It's one of the true non-correlated assets today where you see international and the S&P up the exact same amount this year. And that's been a trend that's been going on for a while now. A little bit outperformance on either side. But, but, you know, when the up days around the world happen, the US tends to follow them up. So lots of correlation there. But Bitcoin, that is not correlated to anything as far as I can tell. Yeah.

Joey Loss 5:11
Last year, I remember we would shout back to each other looking at like the tickers throughout the year. We'd be like, okay, today Bitcoin's a growth stock. Today Bitcoin's a commodity. Today Bitcoin's a— and it was always on the up days. And now today it's like Bitcoin is not a commodity today. Bitcoin is not a growth stock today. Bitcoin is not a— so it truly is uncorrelated. This year, no matter what's doing well, it's doing bad. And last year it was no matter what's doing well, it was doing well.

Adam Van Wie 5:38
And gold, gold, I think it was just inevitable. We talked about it a few times in the run-up that we saw last year. It just— when things get that heated, it's almost inevitable that you're going to see some pullback. And I guess you could say the same thing with Bitcoin hitting $100,000.

Adam Van Wie 5:55
So, yeah, so I think sometimes when you just— you never know when it'll happen, but when you see something just get unreasonably bought at a rate and go up at a rate that just is unsustainable, that's what happens.

Joey Loss 6:11
Yeah. And beneath all that performance, I mean, you already pointed to small caps. Which is exciting. You've pointed to emerging markets, developed international. It feels good as an investor to see more than just 12, you know, 10, whatever, pick a number, low number US stocks leading the way, which historically has been the case for a lot of the rise that we've seen over the last few years. It's quite a bit different now. It's not just the stuff that everyone assumes is leading that's leading. It's not just big tech.

Joey Loss 6:42
You've got quite a bit of breadth. In fact, under the surface, the leaders got taken apart recently at the end of June. The 8 biggest stocks in the S&P were all down 7+% in June while the average stock in the S&P was up over 2%.

Adam Van Wie 6:57
Yeah, you know me, I love it. I'm a big fan of diversified portfolios for this reason. I don't like just buying Nvidia and and waiting for it to have another big leg up. I think that I'm excited when I see stuff like that. That to me is a sign of a more healthy economy that isn't just AI infrastructure spending driving the whole thing, which has been a lot of what people are— I don't know if they're pointing to it, complaining about it, maybe both. But if you turn on the news, you'll hear a lot of stories about, oh, this economy is just 7 AI companies trading money with each other and building data centers, but that is not the case. That, that is a big portion of the, of the new growth right now. But the other companies are doing really well. You're seeing it in corporate profits, which are up dramatically year over year. And that is a trend that is not predicted to, to stop anytime soon. So that's exciting. And, and like you said, I just, I really like seeing the breadth of performances. When you see a bunch of stocks in the S&P 500 go up of just 7, it makes me feel better about the overall picture and the future.

Joey Loss 8:13
Yeah, in a way, I'd rather see the bottom 400 go up together than the top 100 if I could. It's not quite what's happening. It's a little more extreme than that, but I mean, cool. I'm good with it, especially after the several years that preceded it where the opposite was happening.

Adam Van Wie 8:17
Agreed. Yeah, definitely.

Adam Van Wie 8:30
Not that those weren't great years. We'll take all good years.

Adam Van Wie 8:34
Yeah.

Joey Loss 8:35
Yeah. So leaning into the next topic, I thought maybe let's dig into jobs,

Joey Loss 8:42

inflation and the Fed. We had a, we had a new jobs report come out at 8:30 this morning and it was a bit softer than people expected. We only added 57,000 jobs, which is a fraction of what was expected. Unemployment held around 4.2%.

Joey Loss 8:56
And April and May jobs reports were both revised down for a total of 74,000 fewer jobs than we thought.

Joey Loss 9:04
Bottom line there is just that this narrative of strong labor market has cooled off a bit.

Adam Van Wie 9:11
Yeah. And the labor market wasn't on fire before. And again, I don't like to make sweeping judgments on one monthly report. I like to look at a trend. If you look at the trend, the economy is still growing. It's creating jobs. Not on fire like it was after COVID, but there's nothing in this report that says, oh man, we're in serious trouble. It's just not as strong as people were expecting. But that happens from month to month. If this happens 3 more times, then I'm going to be concerned. But if next month comes in and hiring resumed at a robust pace, I'm not even going to think about this jobs report again. So I just— I want to— this one wasn't great. The last few have been pretty decent, not amazing, but pretty solid. And so let's kind of put it in context and see what the trend looks like in another couple of months.

Joey Loss 10:13
Yeah, I think that's the mature take on it because it tends to be the case nowadays that any negative news from one of these reports gets taken as gospel. This is the reality that we knew was coming. And then, and any good news that prolongs this gospel from arriving is just, oh, we're just, you know, the inevitable is coming. Michael Burry's on it every month. He's always on the job.

Adam Van Wie 10:40
Exactly. It's, yeah, you, you have to fill 24/7 news cycles with, with talk. And so people, and not just that, but what gets clicks, the most outrageous takes. So you're going to see a lot of doom and gloom around this headline, but in reality, it was just meh. It wasn't doom and gloom. It was like, oh, that's disappointing. But hey, at least job creation happened.

Adam Van Wie 11:06
So I just try not to get too worked up about one report that didn't meet expectations. If you do that, you're going to be stressed out a lot. Yeah.

Joey Loss 11:18
And separate but not completely independent of the market. This was kind of a bad news is good news situation as far as the pre-market was concerned. I mean, the market's open now, so those pre-markets were confirmed, but basically the market was kind of happy about it. Why would that be the case?

Adam Van Wie 11:38
Yeah, so it definitely is happy. I mean, the market's up about 0.6% and what I think is going on there is if job creation isn't happening and the price of oil comes down and inflation comes down, I think we're going to see a rate cut. And I think that's what the market is cheering for.

Joey Loss 12:00
Yeah. Yeah. And the government says inflation is running at 4.2% as of the last report, claiming it's the hottest since 2023. But Truflation, which is the other resource that we look at and trust more because it has live data, 30 million live touch data points every moment, pegs it at 1.8%.

Joey Loss 12:21
It did show a recent rise, but 1.8 is quite a bit different than 4.2. And it has a little bit different composition to how it comes to that number. But yeah, I agree. Those two factors suggest we're going from a neutral to potentially rate hike situation to a neutral to potentially rate cut situation, which the market always loves.

Adam Van Wie 12:42
Yeah, I really think the Truflation number is closer to reality. Outside of gas prices, which obviously are up substantially and now falling very slowly, unfortunately, outside of gas prices, I don't see things in my life going up at 4%.

Adam Van Wie 13:03
So feel free to disagree and point out some specific examples. But if you look at the price of everyday items right now, I'm just not seeing that that hot inflation.

Joey Loss 13:17
Yeah, food, housing, clothing, all are falling.

Adam Van Wie 13:20
Yeah, I mean, housing in particular, just not doing anything right now. Food, I feel like, has been fairly stable since the big price hikes in the early 2020s where we saw 9% inflation or so. And yeah, I just, I'm just not seeing it. So the government has their way of doing it, and as long as they're consistent across the long time periods, I'm okay with their, their read on it, but I think Truflation is probably more accurate here.

Joey Loss 13:53
I agree. And, and just tying in what we just discussed with the last Fed meeting, which was June 17th, it was Kevin Warsh, the new Fed chair's first meeting. He held rates. Everybody was kind of looking to see what would happen. We all kind of suspected that was the right thing to do. It's what he did. And he was also pretty hushed about what to expect going forward. But the sense on the ground is that the rest of the committee is leaning towards hiking rates, or at least was until this jobs report. And he just wants to hold fast and believes that we should look through the oil shock because it's not as permanent or serious a thing as it may seem like to the rest of the committee.

Adam Van Wie 14:34
Well, I mean, I tend to agree with Warsh on this one. I think the— I think it's kind of insane that the committee was thinking about a hike that it just doesn't feel right to me right now. I can't wrap my mind around the justification for it. And so I think holding steady was the right move. I'm glad they did that. And I just can't imagine— I saw one publication saying that they were expecting 2 to 4 rate hikes this year. That seems insane to me.

Joey Loss 15:07
That does seem insane. And the reality is, even without the hikes, the rates in some areas of the curve have been going up anyway, and it hasn't really stopped, slowed anything down as far as the economy is concerned. So I don't see the benefit of just artificially, let's pump it up higher because we're concerned about one part of a huge inflation calculation.

Adam Van Wie 15:21
No, no.

Adam Van Wie 15:30
Yeah. And I'm not anti-higher rates. I mean, it makes my job easier when investments are paying 6% versus 3%, it's easier to make money. And so I'm not anti-hiking. I just, I don't feel like right now is, is there's justification for doing a hike. And you're right. We are, we did see higher rates specifically on the 10-year. We saw it kind of spike during the, during the quarter. And that was a reaction to the war. And then it's since come back down a bit, but it's still not— it's not low. Uh, it's, it's kind of right now I feel like interest rates are in that sort of sweet spot where they're not too low and they're not too high. And so I'm, I'm okay with any movement that's market-induced between, um, in this general area of interest rates. I, I'm okay with that. I don't like them being artificially low and I don't like them being super high. Um, so I, I really think this is not a bad place to be.

Joey Loss 16:29
Yeah. I mean, historically, this is a pretty good spot to be.

Adam Van Wie 16:33
Yeah. Call it neutral or whatever. I mean, it's a good balance between lenders and borrowers.

Joey Loss 16:40
Yeah.

Joey Loss 16:43
Okay. So moving on to what July usually does.

Joey Loss 16:49
So July is historically interesting. This is— it's actually the Dow's best month. Long history, second best over the last 20 years, and it's up 85% of the time. So it's a— that's a pretty good month.

Adam Van Wie 17:02
I like those odds.

Joey Loss 17:04
Bespoke, our research tool, has data that says the next month, just the context leading into the month, should have it in the 97th percentile for the S&P, which is interesting.

Joey Loss 17:19
The catch is July is the bright spot inside a weak stretch. Q3 is usually the weakest quarter and September is the only month that's of the entire year that's usually negative.

Adam Van Wie 17:32
Yeah, I mean, that's a lot of usuallys in there. And so don't rely on it. I mean, 85% positive is pretty remarkable. If you're a gambler, you're taking those odds all day. So I expect there's even more context. I want to talk a little bit about presidential cycles. And we're in the middle of year 2 of a presidential cycle. And year 2, regardless of party in power, tends to be a pretty bad year for the market. So year 2 of a presidency, you can look at under Biden, we had 2022, which was the big inflation year where the market was just tanked. And And even under Trump 1, kind of the same thing. The market did very poorly in year 2 despite doing well in year 1, 3, and 4. And so this is not related to politics. It just happens that the 4-year presidential cycle is what we're talking about. But we're inside of that year 2 and the market's up pretty, pretty solidly this year. So that, that concerns me a bit, even on top of like that September seasonality effect. So something to keep an eye on.

Joey Loss 18:53
Yeah, that's a, that's an interesting observation. I mean, that thing is historically very powerful, that trend.

Adam Van Wie 18:59
And, uh, and it's not just the last two presidents. Go back and look at the last six and you'll see the same trend.

Joey Loss 19:05
Yeah. Um, and the trend is that it, it's up on average 9%, the S&P, over the first year, the third year, and the fourth year, and the average is flat for the second year. And that's a pretty stark difference.

Adam Van Wie 19:20
It's pretty remarkable, honestly.

Joey Loss 19:24
Yeah. Yeah. So that was honestly, that was— I had two parts to my catch, my sexy catch phrasing there. And you just nailed the second one, which was just the mid-year. So.

Adam Van Wie 19:35
But yeah, great minds think alike.

Joey Loss 19:37
Yeah. Perfect.

Joey Loss 19:40
And so that kind of takes us into pros and cons for the rest of the year. So I've got a list here, but I'm curious, you know, bull and bear cases, what stands out to you? From where we stand.

Adam Van Wie 19:50
Let's start with the pros. I think that we're in a bull market. And so, the thing about bull markets is that they build on themselves until something changes and they don't. So, when you're in a bull market, they say don't fight the tape. When the tape's going up, stay invested. And right now, that's what's happening. And could that reverse itself? Of course, it could. And Could we see that, that, that flat year that I was just talking about? Absolutely. But right now that's not the case. And so there isn't a whole lot telling you to get out of the market right now. Not that we market time anyway. But if, if you are looking for a reason to get out now, it does not appear to be the right time. I think that the AI boom is a, is a pretty good pro that's still going on. And like I mentioned earlier that some people say that that's the entire economy right now. That is not true, but it is quite the tailwind for the economy because there is a ton of money being spent and all of that money being spent has, you know, different— it trickles down through a bunch of other industries. So you've got construction benefiting from that. You've got financing and private credit benefiting from that. So you've got all these different inputs into that process. And so it's a great tailwind for the economy. I think strong earnings is probably the best pro right now. If earnings keep going up at, you know, between 5% and 10%, I mean, how could the market not go up when you're seeing earnings growth like that? It's really hard to make an argument against strong earnings growth. Uh, you've got, uh, on the other side— oh, one more. The three-headed monster. This is what our research company Bespoke calls, um, interest rates, the price of oil, and, uh, the dollar. And so when those three things are high, the market has a hard time going up. So high interest rates, strong dollar, and high oil prices are bad for the economy. Well, right now you've got oil prices coming down, you've got interest rates coming down, and then you've got the dollar kind of at a peak right now. Could go either way, but if that starts to come down, that's going to be another tailwind for the economy and the market.

Joey Loss 22:23
Definitely. Yeah, I like that. I mean, honestly, those 3 of those that you went through were things that I chose too. And that research report had a big list. So it's interesting to see we chose 3 the same. I don't, I don't know if you touched on this one, but the last bullish item that I chose was the fact that sentiment in general is still fearful. I went on CNBC's Fear Greed Index this morning. Street is still running on fear. Yeah, it's like, man, what a, what an awesome market to be running on fear. I love it. And the reason we love that is because it's a, it's an, it's a pretty awesome contrarian indicator. When people are afraid, it's usually not a terrible time to buy historically.

Adam Van Wie 23:01
It does seem a little bit like it defies logic, but that is how the market tends to work. They say the market climbs a wall of worry and that, that, that sort of bearish behavior is exactly what that phrase is referencing.

Joey Loss 23:21
Yeah, definitely. So I think, I think that makes the bull case. Did you have separate items you want to run through for the bear?

Adam Van Wie 23:27
For the cons? Yeah. I think that,

Joey Loss 23:28
Yeah.

Adam Van Wie 23:32
I think that the, I think some of the cons I agree with, but I'm not super concerned about them. I think that inflation is one that, that is worth mentioning. If for some reason inflation is sticky at 4.2% and the price of oil coming down does not have the effect that I think it will on inflation, that would be concerning to me. I don't believe that that will be the case, but that would definitely cause me some worry. I think the fact that it's year 2 of the presidential cycle, that worries me. I mean, I know it's kind of just an arbitrary trend, but it's just so strong that

Adam Van Wie 24:16
it is on my mind for sure. I think that delinquencies rising is something to keep an eye on too. And it's across all kinds of debt. The biggest area that we're seeing it is in student loans, which makes sense because people recently had to start paying them after a long hiatus. But something like 20% of all student loans are in default right now. That's, that's concerning. Um, you don't want to see massive defaults across any type of debt. And I'm not saying that that could bring down the economy like the, the housing crisis did in '08, but it is concerning.

Joey Loss 24:52
Um, so I have a footnote on that. I don't want to stop your list, but Okay.

Adam Van Wie 24:57
Yeah, go ahead. I just had one more, but we'll get to it after you, after your point.

Joey Loss 25:03
I don't think that one's as bad as it looks in reality because there's the administrative burden of being a student loan bearer right now sucks. There's just no other way to put it. I mean, it's impossible. You could be trying your butt off. You could be on 5 newsletters telling you about the changes every day, which are genuinely like more than a weekly event. At this point, some administrative change. And it's not like the presidential administration has changed the rules. It's like everybody downstream trying to figure out logistically how to make active whatever changes happened 6 months ago and turn it into a process that then millions of borrowers are supposed to know how to follow. It's like they get it wrong 9 times and then they get it right the 10th time, and then they for some reason decide an 11th iteration is appropriate to break it again. And that's the system under which all these student loans are operating. And so a lot of those defaults, like just thinking about conversations I've had with clients, like I know what I'm doing to a certain degree, you know, as much as one can with how much it changes. And I've got these newsletters that help me help people navigate it. But even still, we have to dig around a bit and like kind of guess and check and make sure that a payment went. Yeah, I got to check with people. And so there's a good percentage of those, I bet, that have to do with a lot of the changes that just happened.

Adam Van Wie 26:16
That is a very fair point that I had not considered. But I have seen you jumping through some hoops recently. And so I think that you might be on to something there. But that doesn't change the fact that delinquencies across all types of debt are rising. And so that is concerning if it's a trend that continues, because that speaks to an unhealthy consumer. And that would be that would be a big, big worry for me. The last thing is just that the,

Adam Van Wie 26:48
so I said I like the fact that 7 mega cap stocks aren't driving the market, but I also don't want to see them get into a prolonged downtrend because it's really hard for the market to go up when the trillion dollar companies are going down for over a long period of time. So, so I would like to see that reverse at some point. I'm okay with a period of consolidation or weakening with the mega caps. But if it turns into a mega cap bear market, that would be very concerning.

Joey Loss 27:18
Yeah. And that's an interesting one. That could be its own episode. Like, why is that happening? Because at the beginning, the fact that these mega cap companies are spending all the money on the infrastructure buildout for AI was the buy case. At least it's what happened. Like, people bought on the news of all this spending. All that spending represented the eating up of free cash flow. And now I kind of wonder, I'm curious for your take on this, just the relative success of like all these other small caps or the other 493 or, you know, whatever it is in the S&P 500 that are up while the mega, the Mag 7 are down.

Joey Loss 27:54
Is suddenly are people caring about this change in free cash flow that all these mega-cap companies have participated in? Like, what is driving that? Is that a real fundamental change or is it like a late reaction or what is it?

Adam Van Wie 28:07
I think it's just the market trying to sort it out in real time because the fact is they're spending the money that's happening and it's not slowing down. What is the return on that invested capital going to be and how quickly will those things become outdated? So if you're spending, you know, $100 billion on a new data center, How long, what is the useful life, life of that data center with the semiconductor chips in place that you just paid for? Are they obsolete in a year, 3 years, 5 years, 7 years? And what's your return on that? And so I think there are legitimate questions and investors are trying to figure out how this is going to play out. And if these, if this massive spend is worth it. And, and I think it's a legit question.

Joey Loss 29:03
Yeah, I think that's right.

Joey Loss 29:06
Yeah, it's interesting. It's going to be really interesting to watch. I mean, it has been thus far. Uh, and it's interesting to see like their investment benefiting everybody else before it benefits them. Like there's a part of each of these companies that's operating like the railroads who are the last people to make money from the railroads. Uh, everybody else benefited first because they could just use them. Suddenly they could transport to more customers with more efficiency. Um, Anyhow, yeah, that's interesting. Um, anything else on your list?

Adam Van Wie 29:34
No doubt about it.

Adam Van Wie 29:38
No, I think, I think everything else I was, I was kind of, um, just not, not too, uh, I didn't think was, was extremely scary or, or, uh, or, um, relevant.

Joey Loss 29:51
I've one to add that Bespoke called out, and I'm curious for your thoughts on it. Um, the SpaceX IPO pulled money out of the mega caps. Which is a claim, but they kind of substantiated it in their report. And Anthropic and OpenAI are IPOs allegedly coming also this year. The concern is lots of new stock, same pool of buyers. What's the impact on the mega caps from here?

Adam Van Wie 30:17
So I have a theory about this. I do think that that happened. So I think that they're, they're spot on with their analysis about that. However, I actually think that it could work in the, in the reverse too. So when you start seeing all the— so right now there's a very low percentage of shares of SpaceX that are actually trading on the market because there's a lockup period for, um, for people that have shares, uh, who, who weren't given them during the IPO, who had them from pre-IPO. And so as those shares come on the market, What do you think people are going to want to do with those? I think they're going to want to diversify. And what does that mean? That means buying Nvidia and buying all— buying Google and Apple and all those other companies and selling some SpaceX. So I think that the early move is to sell Nvidia and buy SpaceX. But I think the later on, you're going to see people actually selling SpaceX and buying Nvidia.

Joey Loss 31:19
That's interesting.

Joey Loss 31:22
Yeah, well, and I, and I did this whole— if anyone wants to know all the details of how SpaceX is going to end up in pretty much every listener I can imagine's portfolio, whether you buy it directly or not, listen to the episode just before this because I talk about the whole timeline of, uh, you know, you'll hear some primer for the SpaceX IPO, which has now passed, but you'll also hear the timeline for when it'll get into the QQQ fund, when it'll get into SPY, VOO, things like that.

Joey Loss 31:51
And yeah, those moments will be significant because it's just such a— we're talking such high dollar values now. I mean, it's amazing. Saudi Aramco was the biggest ever a couple of years ago at like $18 billion was the float for the IPO. And SpaceX was $75 billion. It was oversubscribed like crazy.

Adam Van Wie 32:04
Yeah.

Adam Van Wie 32:10
I mean, like vastly, like more than double, I believe.

Joey Loss 32:14
Yeah, we— I mean, just as an example, we have one client, very wealthy, request a very large number of shares. And I think if we were to turn into a percentage the number of shares that they actually got, it was like 0.4%

Joey Loss 32:29
or something. It was like way less. Um, and that was a typical story.

Adam Van Wie 32:31
Very disappointing.

Adam Van Wie 32:34
But that was better than some of my other advisor friends said. They're very wealthy clients got even smaller fractions of what they requested. So yeah, it was just so oversubscribed, there was nothing that you could do. You had to be an insider to get any decent amount of shares, and that insider group is very, very small.

Joey Loss 32:53
Yes, for sure. Um, so yeah, those IPOs will be interesting to watch. Uh, they're spooking people for sure. I mean, like, it's, it's feeding into the fact that they're trading even at the price they IPO'd at. At this point, I don't think— I think SpaceX probably was like $150, $160, somewhere around there right now.

Adam Van Wie 33:14
Yeah, it was around $160 this morning and it IPO'd at $135.

Joey Loss 33:20
And then once it started trading, it was at $150. So the fact that these companies don't have profits to show yet as a whole and they're trading high, that's feeding some of the people who are spooked by feeling like there's not a ground underneath this. We're not in that camp. We don't think that speaks to the whole market, but that's where some of that fear is coming from for people.

Adam Van Wie 33:42
Amazon didn't have profits for a long time after their IPO either. So I mean, there is not— it's not like this is unprecedented. Maybe the scale of it is, but the, but the actual— the fact that you can IPO without profits is not unprecedented.

Joey Loss 33:57
Yeah, and people were vicious about it at the time. On their S-1, which is the form you file to say, I want to go public with the SEC, they said, we're an online bookstore. That was the description of Amazon when they IPO'd at a couple hundred million dollars, which was also huge, you know, pretty big at the time,

Joey Loss 34:17
1998. And now what are they? I mean, the bookstore is like a distant memory.

Adam Van Wie 34:22
Yeah, I do. I do buy Kindle books. Yeah, but it's, uh, but that's a small fraction of my annual spend at Amazon, right?

Joey Loss 34:33
Uh, I think probably 90% of all baby products we've bought, which has got to be in the tens of thousands at this point, has come from Amazon.

Joey Loss 34:42
So, um, the other two things, uh, are really the main thing. Just Semis, or they've done so well. I, I just get maybe this is irrational, but they're up 88% for the quarter. Like, that's, that's just so high. And the first quarter was really good too. I just get nervous when I see anything doing that well, even the corporate profits like justify it. It's just hard to watch for me.

Adam Van Wie 34:55
Yeah.

Adam Van Wie 35:05
It is. It's, it feels like gold last year or silver and it just feels like it's too much too fast. And I would not be surprised to see some sort of pullback there. But that doesn't mean it'll happen either. They could keep going. It's been, I mean, their profits are ridiculous right now. Their profit margins are ridiculous right now.

Joey Loss 35:26
They are absurd. Every quarter when those numbers come out, I'm like, yep, that was justified. I mean, what am I worried about?

Adam Van Wie 35:31
You know, it's funny because you occasionally get Congress talking about like crazy profits in oil companies. Oil companies have never had a margin anywhere near what semiconductor companies make on an annual basis. And that's just their business model is so much better and more profitable than an oil company. It's just insane that we even talk about the oil company profits when you've got a whole other class of companies making so much more money and at such a higher profit margin.

Joey Loss 36:06
Yeah. Yeah. Semis. I mean, Nvidia's profit margin looks a lot more like Visa than it does any oil company. Yeah, Visa is what, like 50%?

Adam Van Wie 36:16
Yeah. And I think Nvidia tops that. So it's just, it's crazy.

Joey Loss 36:22
But anyhow, I guess, I mean, we've covered a lot. It's good to have you back. And I guess to wrap it up, everything that we talked about today and everything we're feeling, it kind of just comes down to the tug of war between potentially cooling jobs. Again, we want to watch that trend, make sure it's really something that's happening, not just something that happened briefly. We want to see, is real inflation pulling us towards cuts when combined with that, with the jobs? And or are we potentially going back toward a hike? I mean, I think the Fed will have a lot to do with kind of the tone for the rest of the year. And that will be largely driven by what jobs and inflation end up looking like, corporate profits, everything else. I mean, that story really hasn't changed that much throughout the course of the year, in my opinion. Has it changed for you?

Adam Van Wie 37:08
No, not at all. I mean, I think it's just as strong as it was early in the year or a year ago. So yeah, I think it is nice having a Fed that isn't, where we're not hearing about the Fed chair and the president having beef. Like it feels a little bit better and less political. So hopefully that trend continues also because that was, it had just gotten pretty ridiculous with the last chair. I don't know how that happened. I actually really liked him for most of the time he was in there, but the last year where he was having words with the president just seemed so ridiculous for two people who are supposed to be in these high-powered positions. So I'm just happy that's over.

Joey Loss 37:53
Yeah, well, I'm with you. I hope that the candor remains good. And also just watching what we've seen over the last several years, the day is young. There's still time for them to find a fight. It would be early for them to get into it yet.

Adam Van Wie 38:07
Nothing surprises me anymore. So we'll see. Yes.

Joey Loss 38:12
Cool. Well, Adam, thanks for your time, and we'll circle up in a couple of weeks, see where things are going.

Adam Van Wie 38:17
Sounds good. Thanks, Joey.