NVIDIA Mania and Market Valuations: A Deep Dive - The Cents of Things

Welcome to the Cents of things podcast, where your money talks and we listen, join host Jeff Kickel and Ron Lang as they explore the economy, financial planning, and the stock market, adding a splash of fun to make your financial journey engaging. Each episode, they break down complex topics to give you the clear edge in your financial decisions. Stay tuned and let's make Cents of things together. Good morning to the Cents of things. It's Ron and Jeff here once again, and we are kicking off another couple of episodes of the Cents of things, talking a little bit about what's going on in the world, what's going on in the economy, and maybe a few funny things to get us kicked off. Ron, how you doing, brother?

Good morning. So basically we're just going to spend the next two hours talking about NVIDIA. Is that right?

Yeah. And it's comparisons to other things in history.

Yeah. All right. We'll have to set up a separate episode for that, but I think the mania is getting a little out of control.

I'm with you. I'm with you. I just, once again I look at it and, now we're down to basically the, we were the magnificent seven. Now we're down to the magnificent three at this point. And you've got, you've now got Nvidia Apple and Microsoft in the 3 trillion range, which is just insane.

And yeah, that's another episode we should do compare one of those stocks. Compared to the European market, the Asian market, one, one company's market cap is larger than all of that.

Yeah. Yeah. And they were saying, and I think I forget what the number was. It's 35 billion. NVIDIA is, close to eclipsing Microsoft within 35 billion. And here's the crazy thing. I

hear some people coming out and they're like, Oh, you could justify that. And then everybody's got their own FACAC then I'm telling you, I got, I'm literally, I got PTSD of 97, eight, nine. Listening to people talking about valuation of nvidia and not that it's a bad company and it's not like it's not making money, right? microsoft and intel we're making money in the mid to late 90s, but The pe and the valuations were absurd. I don't know where nvidia's pe is now I know it was like 60 or 70 and then I hear people that are valuation people talking about Yeah, you could make a case for it. I just know that two things one They don't want to say it's too high or the valuation's out of control because if it doubles from here, they look like a schmuck Yeah, and or they're in bed with fund companies or other people that Have a big share of nvidia stock and they would basically be like, what are you killing the golden goose for?

Yeah, the golden goose. That's

why I don't trust some of these analysts coming out.

I don't trust most of them, quite frankly. I think they're, it's a cartel and they just all kind of work together in collusion a lot of times. Yeah I just I'm sorry. I don't buy most of the analyst research. I don't use the analyst research at all in my practice. I do my own research because I just don't trust anybody.

I actually we talked about it. I was originally one of the beta testers of a website that holds the Analysts feet to the fire and they rate them based on their price targets within a Within a calendar period of time, maybe i'll share it with you Maybe i'll share with the audience at some point. I don't want to make it look like i'm advertising, but I will tell you It's a damn good Bible for for not only information, but following analysts that are truly worth their salt. Sure. Yeah. And there's not a

whole lot of them.

Yeah no. So we retired the bad business decisions for a little bit. And so for the next, I think four or five podcasts that I'm going to focus in on are just some fun facts. And these are some interesting ones because I will tell you i'm a history guy I love nostalgia And every now and then you come up with something. I remember that i'm like really so here is here is something interesting So everybody who hasn't seen the titanic? Actually the original necklace that was on You know in that movie was actually worth 10 million dollars Obviously back in the day with the titanic people, people were like, look at this. I don't know how much they, I don't know if they even said how much, how valuable it was back then. If you look over the next hundred years, but I thought this was interesting. It's 171 carat 171 carat Sapphire necklace. It was a beautiful necklace and everybody probably thought it was a stage prop. Yeah. I thought it was interesting.

I didn't realize it was actually real. That's nuts. That's my point.

And at the end of the movie, she threw it into the ocean. I know. I don't think that's a spoiler alert for anybody that's listening. That's a good one. Okay. That was it. the Godfather, right? Yeah. Or at least the first two movies, the third was pretty poor. But then it was eventually changed. But if you think about it, the book was called The Godfather, so why would they have called the movie The Godfather? Yeah, why would you have changed it? But yeah. Thought that was interesting. And my last fun fact. The matrix code, when you see the movie, and I only saw the first one, I fell asleep in the second one, but the matrix code is actually sushi recipes. Okay. It's not a code at all. It's a series of sushi recipes, cleverly disguised to create the illusion of a complex code in the digital world of thought that I'll be very blunt with you, I like to cook. I don't follow any recipes. I got my things that I like to do when I cook. And I'm thinking to myself, when you're making sushi, is there really a recipe?

Yeah. Is there, theoretically, yeah, because they're, they have, similar things that they put into it, but I, nothing that you really have to follow

the Sriracha mayo or, whatever. But my thing is okay, you take a picture of it. That's how you make it. Yeah. Huh? What you're not cooking the fish. You're not sauteing the fish. You got rice, you got seaweed, you got fish, and then you got a couple of other things. I'm thinking to myself, how complex are there recipes? Apparently it's more complex than you thought. Obviously, obviously if you watch the movie, you're not going to be able to stare at that code long enough to figure out what the hell those recipes are. I,

I couldn't get past it. I started watching it, and I like Keanu Reeves, and I like, Lawrence Fishburne, but I just couldn't get past the movie.

The crazy thing is, and I did enjoy the first movie, but like that movie, like many other similar type of movies. At some point you just get tired of a 10 minute drawn out fight. What else is exciting with him running through the air, 20 feet kicking and punching? How many times can you watch that in a two and a half hour movie? Anyway, I got a little tired of that. Okay. On to some serious stuff. So I thought this was interesting every now and then I'm able to get some interesting charts that, and I know we've been talking about this for a while, but this is the the Chicago business barometer. It's also part, you don't include some of their PMI information, but I thought this was interesting because this isn't going back the last 10, 20 or 30 years. This is going back over 55 years,

70. Yeah.

Looking at all this. And we talk about this all the time. We're not making this up, right? These are actual facts and figures now. I know we joke around quite a bit Especially that one time when we chastised the atlanta fed for coming out with an outrageous gdp number But everybody else was half of that amount or a negative amount and they were almost dead on Yeah, Look again, I don't know how they even come up with that, but these are actual numbers with their charts And I don't know what is this telling us? We know we all know that the computer is strong a computer the consumer is strong Spending money they got jobs. It's flowing into their 401ks They're out spending money whether it's money they have or they don't and it's on credit. But

yeah

All the other economic numbers have been trending down. And this chart is telling you a lot. Other than in 1990, everything came down to this 35 ish level telling you that a recession was pending.

Yeah.

Thoughts.

I, once again I think our next episode, I'm going to have some stuff on this, but I totally agree with you. I think it is. To me is starting to show and it's in the cracks are widening in a lot of different areas, And we've been saying this for a year now and I think a lot of people have been saying it for a year that when do we start to see a recession? And, you and I both have the same feeling about this whole soft landing, hard landing recession, whatever it is it's going to happen, it's going to happen and it's starting to show signs across multiple different areas, not just. Okay inflation's higher. Okay, this is high. It's just starting to show in a lot of different areas. And I, once again, I think it's you've got to be sure that you protect in those cases. Unfortunately, you also have to you can't just sit back and go I'm just going to I think it's coming. I'm just going to stop. Stop investing because it'll just beat you down and the market will keep running at this point. And, I think what you're seeing in the market is when it was looking like. Okay, we're not really, we're not slowing the market started to get a little bit soft because, okay, it doesn't look like the feds going to lower rates and now all of a sudden, we've seen some soft numbers and now the market's rocketing up because obviously the feds going to reduce rates. If you look at history, that is probably not true. They're going to wait and then it's going to go there for longer. Yeah, higher for longer. They keep saying it. They're going to keep it higher for longer. That just means that they're probably going to do what they've always done in history, which is to massively overshoot the wrong way, because they waited for way too long to let inflation get out of hand. And they're probably going to wait too long and it's going to cause the the market to go the other way.

Always behind the curve, but I think it was Warren Buffett's, infamous quote, the market could stay irrational longer than you can stay solvent.

Yeah. Then

you

have

money. Yes, absolutely.

Totally agree

with

him on that

too. Absolutely. All right. My next chart is taking their the Chicago business barometer and their ISM manufacturing. And for the most part, it's almost stayed lockstep and converged. And look what happened starting literally January 1st, 2024. It diverged. Yeah. What is this telling us now? It's not necessarily the divergence. It's the depth of the divergence to the downside. Now, again, and I don't know if you know the answer to this or not. I do not because there, I know that different feds have different ISM numbers. I actually never paid attention to the quote unquote Chicago I accept the Chicago PMI numbers. No, we've been talking

about

Philly

fed, New York fed, Richmond, all that I've really had

the New York ISM index, manufacturing or PMI. So I thought this was interesting. And I'd like to maybe overlay this at some time, if we could ever get a chart of all the different feds and their ISM to see if they're actually following

along together or 100%. Is it something unique to that region around Chicago that's having issues? But honestly, I don't think so. And most of the ones we follow have the negative, so I would say they're probably along the same lines. It's interesting to watch how it shot up there for the end of 2023. And then 2024, it's just Freaking going straight down.

For the most part, and look, this has been for in history 50, 5 0. 0 has always been like the demarcation line of expansion or contraction. And the interesting thing is, it's ISM number since late 2022. Has been contracting. The PMI had a spike in late 23, but holy crap. This is, if you just take a look at, at the historical numbers in the last 25 years, this is. Parabolic move to the upside. This is just falling down an elevator shaft to the downside. Sure Yeah,

Like I said the weird divergence though between pmi And ism where ism's been creeping its way back up, you know I mean in the end it's the pmi that's going to drive stuff because they're the people that buy things From the manufacturer.

And my last one was the the job openings and labor turnover summary, this kind of came right from their press release on June 4th. And I'm not going to read all this, you and I have talked about this just tad dozy and probably got revisions. So I highlighted the mar this is the april and why it's a month behind. I don't know because it came out in june for april don't understand that but the march revisions were revised down to 133 thousand I just find that this is just crazy Because down here what's also not calculated. I didn't highlight it is the number of quote unquote quits

Yeah,

so there's a difference and I don't know how they're able to decipher and differentiate The people that are let go the people that are hired Versus the people that just i'm done. I'm quitting.

Yeah,

I don't know and here's the other one the total separations This is my other point the total separations were revised by 130 000. So what the hell is the difference between? quits Separations fire. I don't know. All I know is it keeps getting revised the wrong way. Whether it's the quits and the revisions are quits and the separations to the upside and then the other stuff

goes down. And yeah, and I, in our next show, I've actually got a chart on this that I'll go over to look at the consistency of it. And the jolts number hit a high point up around 11. 11, 000, 000 12, 000, 000 right after the pandemic, and it's been on a continual downward spike, which, meant, okay, part of that was people getting back into the workforce. And, of course, reducing those open positions, but. I think what's happening now from my perspective on the jolts number is, those jobs are starting to get pulled back, companies are looking at. Okay. We don't want to fire people right now, but we're just going to pull back the job openings, where there's not as many job openings at this point.

Yeah, and actually one quick thing I wanted to bring up here and I didn't highlight it I meant to bring it up was we talked about this a couple of times that when the employment number and actually we'll know tomorrow the unemployment for may and You know the interesting thing we always talk about if you look into the details of the numbers not just the headline But the details that half to two thirds of the new hires were government jobs Yeah, I thought this was interesting in april Federal government jobs went down. 8000.

Yeah. Yeah. It was interesting. It was medical, medical and governmental jobs, which I mean, I would argue the point that a lot of those I would still categorize a lot of those medical jobs as, Government jobs in some way, shape, or form, at that point, but yeah, those, it was really dramatic. And I think we, we covered that in a couple episodes ago when that number came out of, this was just like a really weird aberration where, we had seen this huge growth in government and all of a sudden there was a massive pullback in government hiring.

The whole point is they keep hiring, but here they let go. So are these people that retired are these people that decided to go into the private sector again We don't know the reasons behind all this and unfortunately You know financial media economists. I mean Are looking at the headline number because that's the number they're plugging into their models. Yeah Again, I don't know what they're doing with all these other details as far as How the sausage is made. But

and if we look at, although it's sometimes not the best indicator of it, if you look at ADP unemployment this week, it was a pretty big of a shock. I know I'm just looking at briefing. com. The forecast was 165, 000 jobs and it came in at one 52 on the ADP. So it's interesting, but I just, what I've seen from the federal numbers is it's they're budgie at the, when they come out as a headline and then they revise them back, you, you've got to really pay attention to what they're doing, back three, four months, because they're constantly revising them. And those things have been going down pretty dramatically on the revision. Don't know. I just, if you look at the jolts number, you look at that and we'll, like I said, in the next episode, we'll cover this a little bit more in detail. I just see that slowing and that's just, that's the last kind of do that I see to fall potentially. So make sure you stay tuned for the next episode. Where we actually get into this a little bit more.

Never a dull moment and there's always something to chat about. So absolutely. The good thing is

there's always news and plenty of stuff for us to talk about. Folks, thank you for joining us. Once again, we do these shows for you. Make sure that you take the time to subscribe to the channel and make sure that you take the time to give us a little upvote. Let us know that you're around. We've gotten a lot of those lately and it's been nice to know that you're out there and that you're liking what we're doing. So thanks a lot and we'll see you back here the very next time.