Today on the Joseph Carlson Show, you can ignore this sell
off. You don't have to worry about it
because apparently, according to the Yardeni Research president,
this bull market's just getting started.
That's right. He didn't just say that we're in
a bull market. That would be obvious because
we've had two years now of huge gains.
He said that the bull market is just getting started.
And I want to listen to his reasoning why.
Anytime someone has some type of outside view where they believe
that things are going to be overly optimistic in the market,
I want to at least listen why? And the Yardeni Research
president is someone that has a lot of data behind what he says.
He runs this analysis firm that releases tons of economic data.
So we're going to jump into this interview, dive into why he
thinks this is just getting started.
Of course, we also have some other big headlines.
The New York Stock Exchange experienced a technical issue
that caused Berkshire Hathaway to be displayed as down 99%.
So investors in Berkshire woke up and their brokerage said that
they lost all of their money, all of their money except for 1%
of their Berkshire Hathaway holding.
We'll be looking at the air. What caused this, what the
market does in these situations. We have news that Gamestop's
roaring Kitty is back at it. And this time, he's not just
posting memes. He's not just posting gifts.
He has a $116 million position in GameStop.
This is pretty big news and it's received a lot of criticism once
again from various people suggesting that this should be
illegal. Something he's doing is wrong
here. We'll be going over this as
well. And then finally, we also have
news that Paramount Global and Skydance have agreed to terms of
a merger. It's not official yet, but we
have news that they have agreed. We're going to be going over the
details of this, seeing if it's good for Paramount shareholders
and seeing how this could affect companies like Netflix or Disney
Plus. Now, on top of that, we'll be
looking at My Portfolio. I'll cue you in on what I'm
doing with my holdings, what companies I'm actively buying
and how I see things right now. So we have a lot to get to in
this episode. So before we jump in, just a
quick mention. qualtrim.com, the stock analysis tool that I've
built, is now available for a free trial.
If you're a first time user, you can join the Patreon today and
you get the entire month for free.
So try it out, I think you'll love it.
Now let's first start off with the news of the day.
We know that we've been in a bull market for at least a year.
In 2022, the market went down 18%, so the S&P 500 dropped 18%.
That was really painful. It was a difficult time for
investors. Nobody wanted to pay attention
to the market. A lot of people lost all
enthusiasm in the market. And that was the best time to be
buying because the year after, in 2023, the market went up 23%,
an enormous gain in the S&P 500, even more in the QQQ.
And then in 2024, this year, the market's up around 10%.
So we're well into a bull market at this point.
Things have been going good. And anytime that happens,
there's lots of people that believe that it can't go on
forever, that inevitably we have to enter into another bear
market. So there's a lot of people now
saying that is it time? Is it time for the bear market
to finally arrive? But Ed Yardini, the president of
Yardini Research, believes just the opposite.
He believes the data shows that we're not about to enter into a
bear market, but in fact, we're entering into a new bull market.
The bull market is just getting started now.
Who is Ed Yardini again? He's the president of Yardini
Research. This is a research firm that he
started. You can go online and just
access these charts, but he has tons of data and tons of charts
about the economy, about the stock market, about valuations,
and it's actually pretty cool. You can go through this website.
You can just browse through anything, all the different
sectors and get broad information.
I'm not sponsored by them. I have no affiliation with them,
but this is a website that I reference from time to time.
So you can go to like the fundamentals here of the the US
stock market. You could go to quarterly
metrics, write offs, earnings and the economy, revenue in the
economy. You could go to dividend and
buybacks. That's a chart that I like.
So you can see all these different things.
For example, you could go to valuation and look at the S&P
500's earnings and dividend yield.
We open this up. It has a lot of figures and
breakdowns of historic valuations of the stock market
and future. So this is a pretty extensive
research website. A lot of this is just publicly
available. And the the president of this
wants to make the data more available to people.
Then of course, from that research, he tries to draw
conclusions. He tries to draw forecasts of
the future. And in this interview, he lays
out his thesis. Let's go ahead and take a
listen. Well.
All in all, I'd say that the results were better than
expected. The coming into the earnings
season, the analysts were looking at something like a one
to 2% increase in earnings, S&P 500 earnings on a year over year
basis and it came in more like 6 to 7%.
There's still a few more companies to report, but clearly
a much better result. And we definitely are seeing
that in analysts estimates of earnings for this year, next
year and in the following year. They've been raising their
numbers. So All in all, this certainly
justifies the bull market. So this is true.
Analysts are raising their price targets on companies left and
right because the companies are still growing their earnings at
a healthy pace. Not the one to 2% GDP growth.
They're growing at 6 to 7%. As long as these companies
continue to grow earnings, the stock market is justifying its
increasing value. Yeah, you've got year end
targets, 5400 for the S&P 500 by the end of this year, 6000 by
the end of next year and I think it's 6500 by the end of 2026.
That is part of your Roaring 20s analysis.
We're not talking 1920s, we're talking the twenty 20s this
time. So you still see a long way to
go with this bull market. I do, I think it's actually
fairly early on. It's some people are talking
about it being mid cycle a bull market or or getting near the
end of the story. But I don't think that's the
case. I think we're going to continue
to see surprisingly strong productivity.
We're not seeing that obviously in the first quarter numbers,
but last year we had very strong productivity and I think that's
going to continue into this year and beyond.
So yes, I I think there are similarities between the twenty
20s and the 19 and the 1920s and that's technology LED
productivity that increased standards of living, which I
think we're seeing now. I think it's very refreshing to
see someone with this positive viewpoint because we know by the
data that the media has an overall very negative bias.
The media likes to highlight negative news, doomerish news,
things that are going to be bad for the future.
And they do that because it draws more attention, more
clicks, more eyeballs. People love it when they talk
about the end of the world, the end of the stock market, how we
should be super cautious, how we should be super concerned.
Those people get a lot of media attention.
So it's refreshing to see someone that's saying, no,
things aren't so bad. No, the market's going to
continue to go up. In fact, I believe we're early
in the cycle. You haven't missed the train.
You can still be part of this. And he justifies this viewpoint
with a good amount of data. For many years prior to the
maybe past 10 years, everybody thought that the profit margin
was just a very cyclical variable, this one sideways, but
the trend's actually been to the upside, and we're thinking that
we could be seeing something like a 13 to 14% profit margin
for the S&P 500 in the next couple of years.
I mean, that's pretty amazing for the short, maybe even the
medium term, but we know how the 1920s ended.
You see a similar sort of crash coming.
And and if So, what? What would cause it?
No, I, I, I, I mean at this point it's, it's hard to see
that that far ahead. But if we use that analogy, that
the problem that we had in in the 1920s with the reason it
ended so badly is because Congress and the and the
president at that time, Hoover, signed the Smoot Hawley Tariff
in June of 1930. If you look at a chart of the
Dow Jones industrials average, you'll see that, yeah, the great
crash started in October of 1929.
But then in early 1930, we actually reversed that and
regained about half of what we lost.
So it was no big deal until the the June 3rd, 1930 passage of
Smoot Hawley and that caused the Great Crash and I think it was a
big contributor to the depression.
Other factors were important too, but that one was a big one.
So he accurately points out that a policy change was a major
contributor to the crash in the 1920s.
And then of course, that's unlikely to be repeated in this
circumstance. So the data we have right now,
everything that we know right now does not point to a bear
market. Now, of course, there's no
guaranteed of a continued bull market.
That's not the case that he's making.
The case that he's making is that a lot of data supports the
idea that the bull market can continue.
And in fact, we're in the early stages of it.
In terms of My Portfolio, I look at this the same way.
I think the market could go down, but I'm not concerned
about that because the companies I'm invested in can weather
through a recession or a correction or a downturn.
These are very strong companies with very strong financials.
If you invest this way or if you buy broad market ETFs, you don't
have to concern yourself with sell offs.
And I would treat every day as though it's the new day of a new
bull market. I'm buying different companies
that I think are at good valuations and I'm investing in
companies that I believe are high quality companies that have
sold off. The company that I bought the
most recently is Salesforce. Of course, with the 20% dip, I
had to buy some of it. I bought another $4000 of
Salesforce during this dip. I now have a $43,000 position.
It's now $9500 in the red and I believe it's only a matter of
time until I flip this one back into the green.
I'm going to continue to hold it and buy more of it if it trades
down. Now let's go to move on to some
news. This headline was a bit
interesting. I woke up this morning, checked
the stock market and saw that Berkshire Hathaway had dropped
99% in price. I thought it may have just been
like like the website I was checking.
Then I check other websites and it says the same thing
everywhere. Across every financial website.
It says Berkshire Hathaway had dropped 99% in stock price.
So obviously something was wrong.
They say a technical issue on Monday caused a class shares of
Warren Buffett's Berkshire Hathaway to appear to be down
nearly 100%. The New York Stock Exchange said
the problem stem from the price bands published by the
Consolidated Tape Association, the organization used by major
exchanges to jointly provide real time stock quotes.
The New York Stock Exchange said at roughly 11:45 that the issue
had been resolved and trading was back to normal.
The CTA said that there was an issue with the limit up and
limit down price bands, a mechanism meant to combat market
volatility. The issue may have been caused
by the new software release, and the organization will revert
back to prior software programs and primary data Centers for
Tuesday's trading session. So this was just a bug, a
technical issue. The Consolidated Tape
Association released this new software update and it caused
Berkshire stock to go down 99%. I think that would be a
stressful Monday. I can't imagine the developers
working on this. Whatever developer was
responsible for releasing this update and testing it, They they
come out with an update, they release it, and then all of a
sudden they caused a stock, a Fortune 10 stock to drop 99%.
Oops, something's wrong. Roll it back to the previous
update. No big deal.
It's, it's OK everyone. That would be a a rough start to
your Monday. Hopefully those developers are
doing OK Now. The next big news we have is
that Gamestop's roaring Kitty, Keith Gill is back.
And this time he's not just posting memes.
He's not just doing the little GIF video thing.
The post on Reddit revealed a $116 million position in
GameStop. This is a big option bet.
If you look at the post on Reddit, it's nothing
spectacular. It's literally just a post of
his position. This is it.
The post title is GME Yolo. Update with the date.
There's no other context other than the screenshot of his
position. This post on social media has
caused GameStop to go up 35% on the day.
So obviously he's made a lot of money on this trade and this
raises the question of the legalities behind this.
We know that his post is causing the stock to go up, so this is
like a self fulfilling money circle.
He posted, he has a position, it causes a stock to go up and he
makes money on the position that he posted.
This is something that obviously anyone would love to have.
Everyone would love to have the influence to just be able to
post a position. It causes a stock to up 35% and
you make a fortune. And there's not many people in
that position. There's only a few, only a few
with big enough influence. Warren Buffett's one of them.
Major hedge funds and Roaring Kitty or Keith Gill with
GameStop. The difficulty in arguing of
whether or not this is illegal is answering the question of how
this is any different than what people do on CNBC Every single
day. Every single day on CNBC, people
go on and talk their book. They talk about their stocks,
they talk about their thesisis. They want their stocks to go up.
It's just the case that most of them don't have the influence of
Keith Gill. If they had the influence of
Keith Gill, does that make it illegal suddenly?
Those are important questions. But when I look at this, I don't
see any problem. From what I can tell, he's not
trading with any insider data or exclusive knowledge.
He's just posting his positions, which is what professional
investors do every three months. Now, finally, we get to the news
of the Paramount Global and Skydance merger.
We know that Paramount has been struggling.
It's a stock that I have considered a value trap for a
while because they have assets that are not at scale.
It's a company that's weighed down by a lot of legacy assets.
They have some great studio content, but they don't have the
subscribers, they don't have the eyes on them, they don't have
the scale. When companies lack scale, they
need to merge. They need to try to buy scale or
at least dilute and merge with scale, they say.
The agreement term comes after weeks of discussion and recent
competing offers from Apollo Global Management and Sony
Pictures. Now they've had multiple people
they're talking to, talking about different agreements,
different arrangements. But one thing that has been
important to Paramount is to try to keep what they've created
together. They don't want to just sell it
off for parts. A lot of it is kind of like
their pride and history of creating this company.
And if you have a family that you've created a company like
Paramount, you don't want to have it stripped down and sold
for parts to something like Apollo Global Management or Sony
Pictures. You want to try to keep what
you've created together so that your legacy lives on.
But in many cases, that's not what's best for the shareholder.
The shareholder may have done better by selling Paramount to
Sony Pictures or Apollo Global Management, but part of this
deal is motivated by the family wanting to keep what they've
created together. So that creates a little bit of
a a difference in interest. But we see the deal working out
with Skydance. They say that Skydance would buy
out nearly 50% of the Class B Paramount shares at $15 a piece,
or $4.5 billion, leaving the holders with equity in the new
company. Skydance and Redbird would also
contribute 1.5 billion in cash to Paramount's balance sheet to
help reduce debt. The deal is valued at $8
billion, an increase from the 5 billion offer on the table
earlier. Under those earlier terms, the
Redstone family, which is the ones that own Viacom, they're
the ones that own the majority stake in this.
And again, they're wanting to like, keep things together.
They want to keep a legacy. They would have received less
than $2 billion for her stake in the Class B shares would have
been bought out at nearly a 30% premium at $11.00 per share.
So they actually upped the bid on this transaction.
The family's making more money and they're keeping the company
together. I think they have to be happy
with this deal. I look at Paramount now and I
think it's going to be a great studio.
Paramount with Skydance, I think is going to make some awesome
content. But they still have the trouble
of scale and lots of content still can't buy you scale.
That's something you have to earn over a long period of time.
So I think Paramount Global and Skydance, after this merger, I
think they'll continue to be a bit of an arms dealer.
They'll make content, they'll produce really good stuff.
It'll go to the theaters and then it will end up on Netflix.
And I know I'm a shareholder of Netflix, so this is coming from
a buy standpoint, but if I had to choose at this point, I'd
still rather own Netflix. That's all for this time.
I hope you enjoyed. See you in the next one.