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Veteran Investor: 6 stocks to BUY for 2027! — Transcript

by Phil Rosen · 6,340 words · 974 segments · language en · Watch on YouTube

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0:00Eddie, where do you see stocks going if
0:02we get another rate hike before the end
0:04of the year?
0:05>> Oh gosh, you're not going to like the
0:06answer to this. If we If we get a rate
0:08hike, I think we're going to see
0:09similarities to fourth quarter 2018.
0:13So, fourth quarter 2018,
0:15the S&P dropped by approximately 10%,
0:18the Nasdaq dropped by 20 because our Fed
0:21ignored the signals that the capital
0:23markets were telling them, which was
0:26we cannot tighten when things are
0:27starting to slow down. And there's some
0:29brief There's some similarities right
0:31now in that scenario. When you look at
0:32high yield spreads, when you look at
0:35some of the things the bond market is
0:36telling us, and then you look at
0:39possible slowdown with some consumer
0:41spending cuz of diesel costs,
0:44when things are doing that, if a Fed
0:46comes in and tightens monetary policy on
0:49top of that, that's when things break.
0:51Uh and really, the Fed can't control
0:53fuel costs. So, they can raise rates 100
0:56times, it's not going to make a
0:58difference. The fuel costs aren't going
0:59to come down until the war ends. So, in
1:01our opinion, the bond market is telling
1:03the Fed to hey, respect what's happening
1:06right now on the margins. Let the market
1:08do its work because I would argue the
1:10bond market's already done the
1:12tightening for the Fed.
1:13So, to me, a rate hike will just uh it
1:16will probably cause us to make a major
1:18shift in portfolios and go full on
1:20defense.
1:21I I think that I think they made a big
1:23mistake raising rates in September.
1:25>> Do you think that the Fed is trying to
1:27remedy what's happening in the Middle
1:29East because that's
1:30it's not like they have a control on
1:32anything geopolitical, but a lot of
1:35their policy communication does seem to
1:38be almost like parlaying what's going on
1:41in the Middle East as an excuse to
1:43tighten policy here.
1:45>> Yeah, they continue to stick to this 2%
1:47inflation number. I don't know why it's
1:502%. Why isn't it 2.8? That's an To me,
1:52it's an arbitrary number. And I It's to
1:55me, the only way you're going to get
1:56inflation down to 2% in this type of
2:00environment that we're in right now is
2:02to cause a recession which does more
2:04damage than having the inflation. So, I
2:08don't understand what what they're
2:10looking at um in the sense of not being
2:13forward-looking when they make their
2:14policy. And I'm hopeful that with this
2:16new regime at the Fed and the groups
2:19that they're putting together that they
2:21will take a more modernized approach to
2:23Fed policy cuz looking at a rearview
2:25mirror just doesn't work.
2:27>> Okay, so you said something there I find
2:29interesting. In this current
2:30environment, 2% may not make sense. Is
2:32that because of all the AI CapEx that
2:34we're seeing and that's sort of running
2:36the economy hot? Is that what you're
2:37looking at?
2:38>> Yeah, the economy is going to run hot
2:40and then AI with the productivity it's
2:42going to provide then inflation will
2:44start to come back down.
2:46Uh and so AI is inflationary at first
2:49because of all the build-outs that has
2:51to be done. It's fantastic for the
2:53economy. I mean, we are seeing a a very
2:56in the face of all these challenges
2:59this may be one of the most resilient
3:01economies we've seen in a very long
3:03time. So, when you remove the
3:05geopolitical issues which I believe
3:07ultimately they will go away
3:10it could be off to the races uh an
3:12industrial boom that's going to come
3:14from all of this. But the only thing
3:16that could really the the biggest threat
3:19to this bull market in my opinion is the
3:21debt markets and if they tighten when
3:23debt markets are starting to show some
3:25signs of stress
3:27uh
3:27that's a big problem.
3:29>> What type of stress are you looking at
3:32in the debt market? And also, can you
3:34give us a high-level overview of why
3:37that is the thing you're paying
3:38attention to?
3:39>> So, I've always said the bond market is
3:41smarter than the stock market. The bond
3:43market always sees things before the
3:45equity markets price it in. Uh we shared
3:48with our clients on our last webinar
3:49that we had a few months ago that our
3:51biggest concern was [snorts] if the
3:54credit market started to get a little
3:56bit tight that would cause a slowdown in
4:00potential investments of CapEx spending
4:03for next year cuz as cost of capital
4:04goes up, naturally mathematically you
4:07can't put the same amount of capital to
4:08work. So, looking at individual bonds
4:11for these companies. So, for example,
4:13Core Weave is getting a lot of attention
4:15right now.
4:16Um and they're small compared to the
4:17other companies from a capex
4:19perspective. But to think about a
4:21company that on the secondary market
4:23their bonds are being priced at a 15%,
4:26that's like distressed level debt. Um
4:30So, it's okay if it's an isolated
4:32incident. Our concern is if the Fed
4:36tightens even further that then it
4:38starts to spread into other companies
4:39like Oracle. And then then you start to
4:42become guilty by association and you
4:44have your high yield spreads really
4:46widen out. And they're starting to widen
4:48out right now. So, to us keeping an eye
4:51on this if that area of the market gets
4:53worse,
4:54that's going to be a risk off sign for
4:56us because the bonds again will will
4:58front run what the stock market will
5:00price in.
5:01>> Okay, so help me understand this. If we
5:03see Core Weave bonds for example and
5:06they're getting 12, 13, 14%
5:09and then other tech names see a similar
5:12repercussion in their bonds,
5:14what is is there a direct line you can
5:16draw between bond yields on these
5:18companies going up and their stock
5:21prices?
5:23>> Their stock prices will do what Core
5:24Weave stock did because again the market
5:27will start to recognize that you know,
5:30for example, if you're financing, if you
5:31did your capex numbers in January of
5:34this year
5:35and your numbers were based on financing
5:37at 6% or 7%
5:40and now fast forward 10 months later
5:42it's at 12, 13, 14%.
5:45It's simple math. There's no
5:47very low probability they're going to be
5:49able to meet the street's expectation.
5:51And we've already seen when our earnings
5:54report comes out and the number one
5:56thing the market wants to know is future
5:59guidance.
6:00Well, when your guidance starts to come
6:02down in regards to what the market was
6:04pricing in,
6:06uh that's when you run into a real
6:08problems and you have some more severe
6:10corrections in that space.
6:13>> Yeah, I I think that makes sense and the
6:16earnings calls for these hyperscalers,
6:19the second they come out and say
6:22"We're going to stop spending in this or
6:24that category of CapEx."
6:26There's going to be a lot of pain in the
6:28market and that's what I've been looking
6:29for every quarter when I tune into these
6:31earnings calls.
6:32What do you make of the concerns around
6:35debt financing in the AI buildout right
6:37now?
6:38>> So, you're starting to see some more,
6:40I'll call it creative financing that's
6:41being done.
6:43Um and anytime
6:44>> dot com.
6:45>> Yeah, it's I you know, I was managing
6:47money during the dot com bust. And look,
6:49I am an I am a bull on AI. I think it's
6:52going to be transformational. I think
6:54this next decade is going to be one of
6:56the best decades of our lifetime from an
6:58investment perspective. But I also
7:00haven't sugarcoated the fact that
7:01there's going to be some booms and busts
7:03along the way. Just like the dot com
7:05bust. There will be companies right now
7:07that cease to exist. And that's not to
7:09scare anyone, that's just a reality of
7:12what happens when you have so many
7:14people chasing the AI race. There's
7:16going to be winners and there's going to
7:18be losers. And if the debt market gets
7:20worse, the companies that don't have the
7:22capital like the large companies are
7:25going to be the ones that either get
7:26gobbled up or go bankrupt and cease to
7:29exist. And it will happen. It's just a
7:31matter of, you know, unders knowing
7:33which company it's going to be and how
7:35severe that would be. We obviously hope
7:37it's not too severe, but I think the the
7:39dot com
7:41time period is a it is a very similar
7:43setup.
7:44>> This episode is sponsored by Bloomberg.
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8:09evolved benchmarks for today's equity
8:11markets. Now, let's get back to this
8:13episode.
8:16>> I I've seen companies like Amazon and
8:19Google, for example, they make a
8:21gazillion dollars, but they are also
8:23starting to turn to
8:26debt markets for funding their AI
8:28projects. And before they could use
8:30their free cash flow, and they had these
8:32massive balance sheets, they weren't
8:33worried about it. But now we're seeing
8:35even the richest companies in the world
8:37go to debt markets. So,
8:39that to me says even if you have
8:41unlimited capital, in theory unlimited,
8:43right?
8:44You are still needing to tap debt
8:46markets because the AI build-out is so
8:48expensive. Is that something that is a
8:51red flag to you?
8:52>> It is a red flag. And And again, it just
8:54kind of adds you start to put all these
8:56blocks together, and they all start to
8:58point to the same conclusion. That at
9:00some point in time, probably within the
9:02next 12 months, we're going to have that
9:05moment where, you know, you can no
9:07longer get the capital that you need,
9:09and you're going to have to slow it down
9:11just from a business perspective. You
9:12know, look at Microsoft, for example.
9:14They just announced that they want to
9:17give a buyout package to like 25,000
9:20employees.
9:21>> I think it was 60,000.
9:22>> 60,000. Sorry, 25% of their Yeah, that's
9:24a huge number. And why are they doing
9:27that? There's a couple of reasons why
9:29that I believe. Number one is, you know,
9:31AI productivity. You don't need as many
9:33employees. You can get a lot more done.
9:35But if they're going to meet their CapEx
9:38numbers, they have to rein in their
9:39expenses.
9:41You can't put in the tremendous amount
9:43of money in the CapEx that you're
9:45projecting out and continue to have a
9:47full workforce.
9:49Mathematically, you know, as when you're
9:51running a company, you have to keep your
9:52eye on expenses. And so that's another
9:54sign that, hey,
9:56they see in order to meet future expense
9:58needs and to be prudent financially,
10:01they have to cut some expenses, and
10:02that's going to come at a cost to
10:04employees.
10:05>> So, let's say before we get to the point
10:08where things start to crack in the AI
10:10trade,
10:12you're still expecting let's say the
10:14tech trade to continue for however many
10:17months, right? How do you position for
10:20that? Or maybe it's just you're just
10:21holding your positions you've been in
10:23for the last couple years.
10:24>> Yeah, so right now we're still holding
10:26on to our tech positions that we have.
10:29We actually increased we're we're pretty
10:31tactical in how we manage things
10:33and we did incrementally start
10:35increasing in July during the the brutal
10:38sell-off that semis and chips had in
10:40July.
10:41We did buy some names and some ETFs
10:43there. We also started rotating a little
10:45bit out of equal weight S&P that we had
10:48in September and started [snorts]
10:50increasing tech looked really good in
10:52September and then the last couple of
10:53weeks of October that trade has not been
10:55so good. But the sentiment is still
10:58really bearish right now short-term
11:01because of the whole core weave news. We
11:03do believe that there's one more big
11:06potential move up between now and the
11:08end of the year and at that point in
11:10time is probably when we start to take a
11:12little bit less of a bet on the
11:14concentrated tech bet that we have right
11:16now and start the 2027 playbook.
11:20>> So when you were adding positions a
11:22couple months ago in the sell-off, were
11:24those semiconductors chips like what
11:27what kind of stuff were you buying?
11:29>> So we bought
11:30Micron, we bought Marvell,
11:33we bought SMH, SOXX, we bought XLK. So
11:37we started again more broad-based but
11:40some individual names that we wanted to
11:42make a bet on that we thought had some
11:44really nice upside on a recovery and
11:46then to kind of round it out we use the
11:48ETFs. And based on clients risk
11:50tolerances, some don't want the
11:52individual equities, some prefer the
11:54ETFs so we customize our strategies for
11:56our clients and families.
11:58>> You know, I was
12:00presenting at a conference for our
12:01company Silvia
12:03few weeks ago now and
12:06Anthony Pompliano was on stage with me.
12:08He asked me what my favorite holding was
12:10at the time and I said one of my
12:12favorite ETFs was EWY, which was South
12:15Korea ETF, and it's gotten absolutely
12:17crushed in the last month or so. I've
12:20had it for 2 years, so it's been on
12:21amazing run, but uh
12:24since I called that out, the market has
12:26completely reversed on that holding and
12:29obviously tech in general. I've gotten
12:31so many emails and DMs about me calling
12:34out EWY, and people have been like,
12:36"That's a such a terrible call.
12:38That's, you know, how could you be
12:40making that call at this point in the
12:41market?" But it sounds like
12:44maybe if I go by what you're saying,
12:47this could come back. EWY cuz all uh
12:49it's like a Micron-related play.
12:51>> It is, and we're they're all correlated
12:53together. When you start to see you like
12:55South Korea was up 4% last night uh over
12:58So I I text my I sent a message to my
13:00team. I said, "We should see a pretty
13:01good morning uh in technology cuz we're
13:04all related." And look, I believe one of
13:06the problems I think today with the
13:0824-hour media that we're in and that
13:10people look at things so short-term,
13:12right? So you made that call, but you
13:15you made a lot of money on that trade
13:17even with the sell-off. Yeah, so, you
13:20know,
13:21you get these oversold conditions like
13:23this, which a lot of times when
13:25everyone's on one side of the trade,
13:27which now everyone is so bearish, it
13:29probably be something that bounces back
13:31faster than all the other areas between
13:34now um and December the 1st.
13:36>> I really hope you're right. Um Eddie, I
13:38want to ask you about some of these
13:40themes that you're watching for the year
13:43ahead. Cybersecurity is one that you
13:45called out. What's the thesis here?
13:47>> So when we're looking at tech as we go
13:50into 2027, we want to be very selective,
13:53and we want companies that are going to
13:54be able to really benefit from AI. Maybe
13:58not like your chip companies. So when we
14:00look at cybersecurity, one of the
14:02biggest things that are keeping CEOs at
14:04up at night right now because of how
14:06fast AI is being adopted is some type of
14:09cyber attack.
14:10So whether the debt markets get worse or
14:13not, companies are going to invest in
14:15cybersecurity. I think that's one area
14:18in tech you can expect double-digit
14:19CapEx growth expectations from
14:22businesses. They're going to have to
14:24allot a tremendous amount of money and
14:25dedication to cybersecurity. So,
14:28that's an area that's not so the debt
14:30market looks fine on there and I think
14:33that the demand is going to be very very
14:36strong in that space.
14:38>> And you think what CrowdStrike is the
14:40way to get into this?
14:41>> That and BUG as an ETF, FBUG. Uh we've
14:44used both. We have some clients that own
14:46the individual stock and a lot of
14:48clients that own BUG. BUG gives you more
14:50of a a broad-based of some of the top
14:52players like CrowdStrike, like
14:54CrowdStrike, like Palo Alto. It's it's
14:57done fantastic.
14:58>> So, I I have it I made a note of this.
15:01BUG, which is the Global X Cybersecurity
15:03ETF. It's up 75% this year. Which is
15:06pretty insane. CrowdStrike is up 130%
15:09and this reminds me there's another ETF
15:11that I published in my Best Ideas Club,
15:14which is CIBR, which is the First Trust
15:17Nasdaq Cybersecurity ETF.
15:19BUG has outperformed that by about 20%.
15:22So, that's a pretty good call. I like
15:23that a lot. Um
15:24increasingly also as more and more
15:27people get into AI agents
15:29and then the AI agents start to have AI
15:31agents
15:33all of these swarms of potential risks
15:35and attackers to web-based anything,
15:38which is literally every business today.
15:41That is a massive cybersecurity threat
15:43and I've been seeing so many headlines
15:44on X the last few days about various
15:47governments around the world essentially
15:49saying they were bolstering their
15:52web defenses, cybersecurity defenses. If
15:55governments are doing it you can be damn
15:57sure companies will be doing it and
15:59companies will not skimp on something
16:00like cybersecurity because if it's their
16:03customers, their bank accounts, whatever
16:05it might be
16:06this seems like kind of a shoe-in bet to
16:09be in a portfolio for next year. I'm
16:11very bullish on this.
16:12Uh did I miss anything?
16:13>> No, uh the one thing I'll add to that is
16:15the biggest concern we have in tech is
16:17capex spending decelerating next year
16:21when you're looking at the investments.
16:23It will not impact cybersecurity.
16:25>> Wow.
16:26That's really good.
16:28Um I I didn't even think about that
16:29angle if
16:31if there's a capex slowdown
16:33of all the places to cut you would not
16:35cut this vertical. That makes a lot of
16:37sense. Um Eddie, this next theme here
16:40you call out healthcare. Why do you like
16:42this?
16:43>> So, healthcare I think checks off
16:45multiple boxes. You know, again, I think
16:46we we need to be looking at areas that
16:48are going to be able to monetize AI and
16:51things areas that maybe some people
16:52wouldn't look at. And to me healthcare
16:53is also a defensive position.
16:56Traditionally, healthcare will do well
16:58in an environment that is choppy or I
17:00mean just look at the last couple of
17:02months with the sell-off in tech.
17:04Healthcare has has held up quite well.
17:07So, as we start to look at areas that
17:09can handle a lot of the crosscurrents,
17:11you healthcare to us checks off that
17:14box. And then, you know, you look at
17:16names like Lilly that are you these
17:19companies are using AI in the medical
17:21field. You talk to anyone in the medical
17:23field, one could argue that it might be
17:25the one of the area that makes the
17:26biggest AI makes the biggest impact
17:29uh in healthcare. So,
17:31uh we like that space because it covers
17:33the defensive side of the playbook, but
17:36there's also
17:37really nice upside in some of these
17:39names.
17:40>> And Lilly Eli Lilly is your favorite
17:42stock in this vertical?
17:44>> It is. That's our best of breed name uh
17:47GLP-1 side. They they own that market.
17:49They're investing globally
17:52um and their stock has done really
17:54really well.
17:56>> One quick note, everyone. YouTube is
17:58telling us that 80% of you are not
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18:09it. Now, let's get back to the episode.
18:13I personally own Eli Lilly. I know
18:16uh some other colleagues who have been
18:17on the show. Jordy Visser owns Eli
18:19Lilly. Lou Basenese owns Eli Lilly, you
18:21obviously own it, I own it. Uh you guys
18:24are all pretty smart. I'm following you
18:26guys. I I like my odds here. Um do you
18:30group healthcare in as far as the
18:33tailwinds for healthcare with biotech
18:35and pharma as well?
18:37>> Yeah, so biotech is obviously going to
18:39have a lot more volatility than pharma.
18:42Uh and so we'll use an XLV ETF to pair
18:46with some individual stock names like
18:47Lilly just to try to level out the
18:50volatility uh when especially when we
18:52think we're going to be heading into a
18:53volatile time period and I think we're
18:55going to have some volatility as we go
18:57into 2027.
18:58>> So since this is a defensive more
19:01defensive play but still an AI
19:03beneficiary, do you see this as a sector
19:06that still wins even if there's a capex
19:08slowdown?
19:09>> I do. I do. I think you're going to
19:11naturally see money flow into more
19:13defensive areas
19:15uh when there is a pullback in tech.
19:19And naturally I think healthcare will be
19:21a beneficiary of inflows in that
19:23environment.
19:25>> So when you say defensive rotation, I
19:28think of consumer staples. Is that
19:30something you also see outperforming?
19:33>> So staples are interesting. It's you
19:34know, staples are boring. We know that
19:36but uh they're if we are moving a lot of
19:39money in the staples, that means that
19:41the market is really under a tremendous
19:43amount of stress. So I'm not ready to
19:45make that call yet uh but hey, you look
19:47at a company like Coca-Cola. I think
19:49they're up 38%, 39% this year. So
19:52sometimes boring is good. Uh now 2022
19:55for example, which was the last time we
19:57really had a really tough broad market,
20:01you know, the staples were areas that
20:03you wanted to be in from a defensive
20:05standpoint.
20:06>> Hm. I I think that makes sense. Um
20:09housing sector. This is interesting to
20:12me. I haven't really talked to any money
20:14managers who like housing. So maybe
20:17that's a contrarian bull signal here.
20:19Tell me about this.
20:20>> So that's a real contrarian call for
20:23next year and the reason why is is we
20:25again as I said earlier, we think the
20:26Fed made a mistake by raising rates in
20:28September.
20:30If they raise rates again in December,
20:31which right now there's a high
20:32probability they will,
20:34we think that's going to really slow
20:36growth from an economic perspective next
20:39year.
20:40And if it does, you could see a scenario
20:42when growth starts to slow obviously,
20:45bond market the long term long end of
20:47the curve starts to trend down.
20:50We believe next year we're going to be
20:51in an environment
20:53where rates are going down on the long
20:55end of the curve. And [snorts] so
20:56anything that's interest rate sensitive
20:58does really well in that environment.
21:01And the other thing is housing really I
21:02mean they've been left for dead the last
21:04few years. Not been the best place to
21:06be. So, if we get an environment where
21:08we're not in a recession
21:09and yields are trending down, and again
21:12folks have made a lot of money in stock
21:13market, real estate is another area that
21:16sometimes money flows will go into.
21:19>> So, to play housing uh you have
21:23construction, right? You have home
21:24builders. You also have like REITs.
21:27How would you get exposure to this?
21:30>> So, I would look at home builders
21:32uh because I think they'll be the ones
21:34that probably outperform in that
21:36scenario. I think there is a place for
21:39REITs as well, too, but these those can
21:41get you have to make sure you understand
21:43what sectors of real estate they're in.
21:45Uh understand their leverage, how
21:48they're being able to pay those yields.
21:50Is it coming from cash flow or is it
21:51coming from investors as they're
21:53bringing more money in? So, I do think
21:55that from an income play perspective,
21:57there's going to be some nice
21:58opportunities in the real estate space.
22:01You just have to make sure you
22:01understand what you own.
22:03>> So, here I have iShares US Home
22:05Construction ETF. The ticker is ITB.
22:08It's down about 8% this year. This is
22:11one you would get into for 27?
22:13>> Yes, if uh if it if especially if the
22:15Fed raises rates again in December. Um
22:18what that will be something that I'm
22:20sure that we will have in our portfolios
22:23sometime next year.
22:25>> What's your read the housing market
22:27itself? If we zoom out a bit from
22:29equities, do you think
22:31that can loosen up anytime soon?
22:33>> Yes, so right now we are seeing, you
22:35know, housing has definitely slowed
22:37down. You're starting to see prices come
22:38down, which again, hate to keep coming
22:40back to that. If the Fed's
22:41forward-looking, that's going to be good
22:43for inflation. So, just leave it alone
22:44and let the market work its way through.
22:47Uh but, I do think that the housing
22:49market just needs interest rates to come
22:52down
22:53to get buyers to really come back into
22:55its space. And next year,
22:58I think that's going to be a high
23:00probability play that we see yields peak
23:02and start to trend down.
23:04>> It's pretty good news for young people
23:07who can't get into the housing market.
23:09I'm asked all the time if
23:11I'm planning to buy a house anytime soon
23:14or the friends I grew up with are
23:15planning to buy a house. And my answer
23:18is consistently, "No, you it doesn't
23:20make sense with mortgage rates and home
23:22prices both being at historic highs."
23:25I would say I'm less optimistic than
23:26what you're saying about
23:28if we get, let's say, some movement on
23:31the macro, the housing market can ease
23:33up.
23:34It's very hard for me to even
23:35conceptualize that cuz I think I haven't
23:38I almost haven't been an an adult in the
23:41period where there's a good housing
23:42market. So, to me, I'm a little more
23:44bearish on that. Uh
23:46I digress though. Let's talk utilities.
23:49Um this is another sector that you
23:51called out ahead of this recording here
23:53at XLU, which is a utilities ETF. Why do
23:57you like this?
23:58>> So, again, it goes to our 2027 theme of
24:01starting to put a defensive playbook on.
24:03Uh we continue to see a high probability
24:06of the tech trade
24:08taking a breather next year. And when we
24:10look at places that we want to be, if
24:12we're going to have the tech trade
24:13struggle and we're going to have
24:15interest rates decelerating next year,
24:19>> [snorts]
24:19>> utilities, again, interest rate
24:21sensitive many times, can be a really
24:24great defensive play. Uh we put that
24:26playbook on in 2022.
24:29It had some periods of successes, had
24:30periods, you know, sometimes when you
24:32have these huge broad-based sell-offs,
24:34it doesn't matter what you own,
24:36everything goes down, but some things
24:38just go down less than others.
24:40Uh
24:41the other thing too is I'll say is which
24:43we're not afraid to do is just go to
24:44cash. Sometimes that's the answer. Uh
24:46so, we have to have the humility to be
24:49open to all potential outcomes in
24:51regards to what happens. And that's
24:53really going to all come down We keep
24:55talking about tech, but we've never seen
24:57a time period where tech has has such a
24:59big impact on overall GDP for this
25:01country.
25:02I believe it's 1.2 trillion dollars of
25:05expected CapEx spending for next year.
25:08If you start if that does not hit the
25:10goal or starts coming down, that's not
25:12just the tech sector it impacts. That
25:14impacts the entire US economy. Um and
25:17so, that's when those real defensive
25:19sides of the equation start to pay
25:22dividends for investors.
25:24>> So, my understanding of utilities is
25:26that
25:27there's also been pockets of
25:29pretty good outperformance in utilities
25:31because of AI. So, all the power and
25:33electricity you need to fuel AI, you can
25:37get exposure through utilities. Does
25:39that come into your thesis at all?
25:41>> It does. There's absolutely no doubt
25:43that there's going to be natural demand
25:44there. Uh I think the biggest question
25:46is is how aggressive these data centers
25:49get built out.
25:51Do we have the grid? Do we have enough
25:53resources to really be able to supply
25:55all this electricity need and energy
25:58need in that space? So, utilities is is
26:01going to be it strange in a scenario
26:03where you can tie it to an AI trade, but
26:06also have a defensive playbook tied to
26:08it as well, too, very similar to health
26:10care.
26:11>> That's almost like it it's like a hedge
26:13on itself.
26:15You can hedge AI with utilities, but
26:17then you can also play AI with
26:19utilities. That's pretty interesting. If
26:21you're expecting a
26:23slowdown or some type of tech pullback
26:26in the year ahead,
26:28does that mean getting out of tech
26:29itself?
26:31>> Yes.
26:33It does. Uh at least for us, we will
26:35absolutely reduce our exposure. I can't
26:37say we'll go to zero.
26:39Uh there was a point in time that we did
26:40do that a few years ago because it was
26:42just so brutal.
26:44When it comes to risk management, one of
26:45the the biggest things we try to do is
26:47mathematically just don't have big
26:49drawdowns. If you don't have big
26:51drawdowns, then the recovery is not as
26:54painful.
26:55And so, unfortunately, I think a lot of
26:58investors haven't navigated through any
27:01type of bear market in a while. We've
27:03been pretty spoiled. And so, I I guess
27:06you could say I've been blessed in a
27:07sense that I've been doing this for 28
27:10years. So, I've seen some pretty ugly
27:11markets. So, as a risk manager, I'm
27:13always looking at what the dark clouds,
27:17what the implications can be. And
27:18sometimes they're mild corrections in a
27:20bullish trend, and you can just ride
27:22those out. And then there's others where
27:24it looks like it could be a real nasty
27:26sell-off. And in that scenario, we want
27:29to get out because we know the way you
27:30really compound wealth is put yourself
27:33in a position to buy areas after they've
27:35crashed. If you can do that, then you
27:37will compound your wealth at a much
27:40faster pace versus riding a 30% drawdown
27:43all the way down and then needing 40 to
27:4550% just to break even.
27:47So, everything we do, we try to look at
27:49the math behind it.
27:50>> It makes sense why you call yourself a
27:52more tactical manager. Most of your
27:55peers in the industry, I'd say, are more
27:57buy and hold and they pick a handful of
28:00ETFs that could feasibly work for 10
28:02years and then they kind of
28:04sit there and forget about it. You are
28:07taking more of a
28:09not a short-term, but tactical approach.
28:11So, can you explain a bit maybe the
28:14philosophy there behind what your
28:17competitors are doing?
28:18>> So,
28:20we believe strongly that since COVID,
28:23the market structure has changed and it
28:25has changed forever. So, just like
28:27technology modernized things and people
28:29are using AI to modernize their
28:31approach,
28:33for some reason in our industry
28:36some people will why don't you modernize
28:37the way you're managing portfolios?
28:39Because this is a new financial markets.
28:41I mean, when you look at the volatility
28:43that we have to live through today where
28:44you have large companies, we talked
28:46about Micron earlier. I believe Micron
28:49was down lost approximately 40 to 50% in
28:521 month.
28:53Now, that was a sell-off in a bullish
28:55trend, so it didn't concern us. But
28:57we've seen that scenario when things are
28:59bearish where that 40% loss can go to 60
29:03and stay there for a while. So,
29:05modernizing I believe over the next
29:08decade retirees that have accumulated
29:10wealth that risk management's going to
29:12be one of number one things that's going
29:14to be a goal for them.
29:16And that means having tactical
29:19approaches where you're not day trading,
29:21but when trends change, you have to
29:23change with it so that way you keep your
29:26clients retired. Now, you don't have to
29:28do that for your whole portfolio.
29:30There's a place for a buy and hold
29:32strategy, but I firmly believe that if
29:35you want to be able to take advantage of
29:36the market swings and protect your
29:37capital, a percentage of your portfolio
29:40should have some type of tactical nature
29:42behind it that can protect you when
29:44you're going into a downturn.
29:46>> When you say tactical, how does that
29:49differ from trying to time the market
29:52which
29:53is a very impossible
29:55and challenging strategy?
29:57>> Timing the market obviously is very
29:59difficult to do. But, you know, I would
30:01make the argument time economic cycles
30:04and trends when they're happening. For
30:05example, we talked about the bond
30:07market.
30:09If the bond market continues to
30:11incrementally get worse,
30:14it's a high probability that the equity
30:17market is going to see that and really
30:19sell off aggressively. So, when you make
30:21those trend changes a lot of times that
30:23can be 6 to 18 month change. You're not
30:26buying on 1 month and selling the next.
30:29So, there are certain things that have
30:31been proven over time
30:33that work. You know, we rely on uh
30:35research independent research uh that we
30:38look at and read every day that have a
30:40high probability of success. And you're
30:42never [snorts] going to be right all the
30:44time. We know that, which is why having
30:46tactical with a passive approach
30:48together
30:50can be a real winning equation.
30:52>> I love it. Um
30:54the last thing I want to ask you about
30:55here, Eddie, uh gold. I know this is
30:58a big call for the year ahead. Why is
31:01that?
31:02>> So, if we go into the environment that
31:03we think we're going to be in next year,
31:05I think gold will be a very sizable
31:07position for us. Uh when we have a
31:09strong conviction in something, we will
31:11put size on.
31:13And the reason why is so we work with a
31:14lot of retirees, and
31:17>> [snorts]
31:17>> you know, in the past, talking about
31:18modernizing your approach, people will
31:21have a retiree may have a 60/40
31:22portfolio of 40% in bonds. Bonds have
31:25been one of the worst places to have
31:26capital over the last few years. So,
31:29three approximately three years ago, we
31:31made a big change, and we
31:34changed our fixed income holdings to
31:37gold. Not 100%, but we've had as high as
31:41a 20% position in gold for clients. And
31:45we're much less right now just because
31:48it's been very, very weak, but I see a
31:50scenario where we could get it for
31:51certain clients that we could get as
31:53high as 20 to 25% position in gold.
31:56You've got central banks around the
31:57world
31:58piling in gold at the highest rate that
32:01we've seen in a long time. And if we're
32:04going to go into an environment where
32:06yields and dollar get weak next year,
32:09that could be a real winning equation
32:10for gold. So, it could generate a
32:12tremendous amount of alpha in our
32:13opinion in 2027.
32:16>> You know, there's two macro investors
32:18who have also been on Full Signal.
32:19Darius Dale is big on gold, and Jared
32:22Dillian is very big on gold.
32:24I think, if my memory's not mistaken,
32:27both of them have talked about 20%
32:29positions in gold as well.
32:31Which is means you're in pretty good
32:32company.
32:33>> Darius is I know Darius well. He's
32:35brilliant. So, if he's saying it, then
32:37uh that holds a lot of weight.
32:39>> I agree. Um
32:41does Bitcoin fit into this anywhere or
32:43you think that is a separate thesis from
32:45gold?
32:46>> I think it's a separate thesis from
32:47gold. You know, your permabulls on
32:49Bitcoin will probably push back on that,
32:52but until Bitcoin proves to me that it's
32:54not correlated to the more speculative
32:58trade, I can't look at that as a safe
33:01haven right now. We We have Bitcoin ETF
33:04in our portfolios right now because
33:05again, we still think we're in a risk-on
33:08environment, but the minute that risk-on
33:11environment
33:12turns to risk-off,
33:14Bitcoin has proven to take a even bigger
33:16hit than some of the technology area.
33:18So, I would love a day and time when
33:20that correlation changes and when it
33:22does, I'll be open to change my opinion
33:23on it, but the math needs to support
33:25that first.
33:26>> So, you would see Bitcoin as almost an
33:29extension of the tech bull market. If
33:32tech's not working, then you're also
33:33going to get out of Bitcoin.
33:34>> That is correct. Unless Bitcoin starts
33:37to show a different correlation to it.
33:39If Bitcoin's going up while tech is
33:41selling off,
33:42then we'll get confirmation that the the
33:44permabulls on crypto are correct and
33:46we'll be happy to join the party.
33:48>> I will say I've held Bitcoin through
33:51very severe drawdowns. Doesn't feel very
33:54good, but I've also never sold. So,
33:56maybe we disagree a little bit there.
33:58Eddie, where can we send people to find
34:00more of your work?
34:01>> So, my Twitter handle or X handle is
34:04@commonsensebull.
34:06And our website is keywealthmgmt.com.
34:11It's a great place to get some resources
34:13and get any type of information on our
34:14firm.
34:15>> You do very good work and I appreciate
34:17your time for coming on the show. I
34:19learned a lot. Thank you very very much,
34:21Eddie.
34:21>> Thank you. It's an honor to be here
34:22today with you.

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