Einstein on Wall Street
0:03 ↗
Hey everybody, it's me Einstein on Wall Street out here in Experian Square outside the New York Stock Exchange. You know what? I'm just going to give you the download. I am completely confused what's going on in the market. Who better to explain it to me than my man Dan Ives, Einstein and Ives, Yorkville and Ives. I mean, oh my god, please explain it to me. Give me the download. I am completely confused. What's going on? I mean, I obviously know the infrastructure, but rarely do I come to a point where I'm trying to figure out what's the price action versus what's moving the market.
I think there's a lot of different dynamics. I mean, one clearly the 10-year. Yeah. As the 10-year continues to move up, it puts pressure in terms of like tech companies are going to have to raise capital, where a lot of that being debt, okay, in relative to fund data centers. So, I think that's something that puts overall pressure.
Einstein on Wall Street
0:52 ↗
Sorry to interrupt you, but where were they getting the money for that before? They were getting it from the federal government because the interest rates were lower.
Well, yeah, of course. Look, it's like that's shifting where they're getting their debt from. A lot of it was free cash flow. A lot of it was their balance sheet, right? But then obviously was taking on debt as well, right? I think the best way to think about it is like there's a tug-of-war going on because the reason the 10-year is going higher, right, is because of the robust growth in the market combined with obviously what's happened in terms of the Fed. Will they have to ultimately raise interest rates again? Right? But then on the other hand, tech earnings and just overall growth in capex are still strong, continues to accelerate. Which is why if I told you six months ago oil at 100, 10-years at 5.3, right, you'd say S&P is probably 6500, right, so maybe two, three percent down from here if not more.
Einstein on Wall Street
1:52 ↗
Well, I'd say by 10 to 15 percent relative.
But the reason is because the market is basically telling you that earnings are understated, right, and it's going to be led by tech as the second, third, fourth derivatives all start to play out. So, in my opinion, you know, we're almost in one of these like gut-check moments, right, for the tech trade, but I continue to think like this market goes higher rest of year.
Einstein on Wall Street
2:23 ↗
But I think you're standing alone with that opinion right now because they're really doing the... Look, I've been talking about it for a while and I'm just trying to understand it. You had tech max seven, right? Then you kind of broke that down into subsectors, which was just compute, software, hardware, memory, right? They broke it down into different sectors and what ended up happening was sometimes we saw that when they were getting out of software, they were getting into memory; when they were getting out of memory, they were getting into hardware chips, right? And so that changed a little bit of the dynamic of it. But now, can't you see I'm doing something? I'll be there in a minute, okay. So I'm trying to understand, with the bonds trading getting higher, wouldn't that be putting pressure on the market normally overall?
100%. And it is putting pressure, but basically the market is shrugging it off, basically saying that yields ultimately are going to come down, right? Like the market, I don't think the 10-year stays at 5.3. Like it feels like the market wants to go in terms of the 10-year to come down. And then I think the other thing is that if you look at overall growth in terms of what's happened in terms of tech stocks, the market's underestimating where earnings is going to be over the next six, twelve, eighteen months. So it's almost sort of a tug-of-war right now that's going on.
Einstein on Wall Street
3:47 ↗
Is there anyone agreeing with you on your take of the fact? I mean, nobody else knows. I mean, they hear it from you, they hear it from me that we're still in the third inning of this revolution, but they're kind of shrugging that off and just going, you know what, we don't see it that way. We kind of see that tech is going to bubble. But what happens if rates continue to go up? Does that put more pressure on the ability for tech companies to raise capital?
Yeah. I mean, like we've said, by 10 to 15 percent of data centers ultimately don't get done. But if you actually start to put it all together, I believe the second, third, fourth derivatives are just starting to play out.
Einstein on Wall Street
4:28 ↗
And explain that. So what are those stocks? Give us a couple of names on those. Looking obviously we've seen it in Palantir, you've seen it in Snowflake, you've seen it in the hyperscalers, you've seen it with chip companies, obviously Nvidia, AMD and others. And those are who you are designating as the secondary, tertiary stocks within the AI.
And then I think you can almost say Salesforce, ServiceNow, CyberArk, Palantir, CrowdStrike and others. And I think it's just a good example of like, look, for every dollar spent on an Nvidia chip, there's a ten-dollar multiplier. Correct. I get that point, and I think that continues to be the dynamic that's happened in this market despite the 10-year, oil and everything else going on.
Einstein on Wall Street
5:12 ↗
Because I mean, think about it, these are super powerful economic components, right, that are just being fluffed off by the market. Oil trading where it's trading, the effect it has on GDP, the fact that we got oil trading for the longest time over a hundred bucks, I mean, the inflationary part of that is huge. That was probably a bigger contributing factor to them raising interest rates, right? Are we going to continue doing that?
But I think if you look at some of the commentary from, you know, the Fed, right, you could argue that like they're kind of maybe getting a slightly pulling back from the view that they're going to continue, right? Because after the first raise, it felt like we were going to raise, right? Again, 85, 90 percent. Right. And now, let's say, come down. We're back to 50-50 almost, right?
Einstein on Wall Street
5:59 ↗
But why is that happening? Have we been staying in this trade longer than they thought they would? I mean, because we're not seeing a lot of movement. We are trading what, one and a half, two percent from record highs, but we're not seeing a lot of volatility in individual names.
Yes, we are. I think also it's hard to get conviction in a trade right now between like the 10-year and oil, geopolitical, combined with what's happening in tech, it's almost like putting a little bit of a ceiling to some extent. But how I ultimately see it playing out is like the 10-year will come down. Okay. We're going to have a robust earnings season. Right. And I think that's the next leg on tech stocks going and overall market going into year-end.
Einstein on Wall Street
6:53 ↗
Okay. Well, I love that explanation because that's what it feels like. It feels a little bit different. It's almost like time stopped for a minute and we're just trying to understand all those components because as you described, we've got so many different moving parts on this thing. And for some reason, you know, we are comfortable with what the Fed chair is doing, right? And it's not like, I mean, it feels like, well, you know what, the right guy is in the right job here. And look, I think we were big fans of Jay Powell, right? So it's not like we're not dissing any situation, but his positioning, his posture, the way he is running his job seems to be just perfect for the way this market is acting. Fourth quarter, I mean, we're up. What are we up? We're up more than 10 percent for the year across the board.
Einstein on Wall Street
7:37 ↗
Okay. Small cap, midcap, Russell also strong.
Yeah, strong. I mean, look, but I think what's happening is that large-cap tech stocks are really establishing their presence again because as this all plays out, and I think we go into a very important tech earnings season, okay, but look, if you go back to like the White House meeting in terms of tech and sort of coming together, they're not going to slow down because if they slow down, China accelerates and China wins.
Einstein on Wall Street
8:10 ↗
Okay. So how do we now, looking back a little bit on that whole situation with, you know, AI chatbot and those two players who will remain nameless from my point of view, okay, the ones that we talked about are looking back and pulling up the ladder. How is that going to now continue to affect the trade?
