Transcription
The risk you should be concerned about right now is not recession, depression, interest rates going down. Owning bonds, having 40% of your portfolio in bonds does not hedge you against that risk. Okay, Kathy Woods are huge short. Well, money ain't going to be free no more. And so I think valuation is going to matter.
>> Very pleased to welcome to the show George Noble. He is a managing partner at Noble Capital Advisors. He's had a very long career on Wall Street, having worked at Fidelity in the 80s from 81 to 91. formerly a an assistant to Peter Lynch. He managed the Fidelity Overseas Fund. Um, and at the time it was a number one fund in the country in 1985, up 79% in this number two fund among all funds over six years. He managed two 1 billion plus hedge funds, uh, Tetan Partners and uh, Gal Falcon. Dave David, I still can't pronounce it. It's G Falcon. I hate that name.
>> Falcon. How did you come up with that name?
I'll get to that. But George, great to have you on the show. Can't wait to get your wisdom. We're going to talk about markets and the economy. Welcome.
>> Thanks for having me, David. I'm a huge fan. Long long time viewer, first time participant.
>> Thank you for uh thank you for your kind words, George. Uh you know, let's take today's market uh action and pair that with your experiences managing uh a bunch of um uh funds, especially in the overseas space. So international markets versus American markets, where would you lean towards right now in 2026?
>> So um you know the story of the last decade plus has been US exceptionalism and tech stocks in particular and the outperformance of US tech stocks is justified by an extraordinary uh record of sales revenues and earnings increases. Um I think we're going through regime change right now. R is not for recession. It's for reflation and rotation. As you know, David, the S&P 493 massively underperformed the S&P, the MAG 7 for a good number of years. That's now in the process of changing. Look at how the markets have started off year to date. Most of the MAG 7 are down. Um I don't know where we are exactly Mark to mark the last few days, but the non- US markets, the emerging markets, energy stocks, gold miners, etc., etc. reflationary plays broadly defined are massively outperforming technology and so that's really the story for me. I mean you want to make a big market call it's always sexy but you know it's a market of stocks and I think you got to get under the hood to look at the rotation and you know it doesn't really matter what you think or what I think it's what Mr. Market thinks and Mr. market gives you a scorecard every day whether you're right or you're wrong and the trends, you know, have already changing. I mean, last year, David, people don't realize this. EM, the emerging markets ETF, it was up twice as much as the S&P was up like 33% versus 16 for S&P, right? So, there's money to be made here and lost. Uh, but it's a market of stocks.
you have a uh best stock ideas online summit which we can talk a little bit more about uh towards the middle of the interview but just give us maybe a few best stock ideas. If you want to name specific names, you can, but if you don't, just give us themes.
>> Okay, I want to stay with themes because honestly, I don't even know the names to be quick to be fair. Um, but we have um, and this is really the varsity team. It's 15 guys, some of the best of the buy side.
>> Best of the sell side, independent research guys. Some of these folks actually been on your show. I think Tavi Costa has been on your show in the past.
>> Okay. Yes.
>> So, Tobiy's coming. Don Durant's coming. Okay. Those are two of the leading gold guys. Huge followings. you know, up over 100% last year. So, I'm sure they're going to recommend I don't if it's a gold stock or silver stock, something like that. So, that's a theme. Energy as well. Robert Mullen of MRA Advisors, you know, he can't say this because he he's running a hedge fund. I can say it, David. He was up 107% last year. All right. I know as of like two weeks ago, he was already up 35% this year. All right. These guys are money makers. All right. Tom Shenos runs a short selling boutique, brother of Jim. He had Fresh Pet as a short idea last year. It was a great idea. Uh Tom Thorne.
>> How did you pick these guys to be part of your lineup? I mean, what was
>> Well, these are guys I've known for in many cases for sometimes as much as 40 years. I mean, we were talking offline before the show started. You know, you've had Louis Gav on your show a number of times.
>> Um I've known Louisie and his father. I've known Charles Goff since the 1980s. So, this is my rolodex basically. And so, the theory behind this conference is bringing the varsity team, the best of the best. And what's amazing is you in seven hours of programming, no nonsense, no fluff, just ideas one after another, 15 guys, 15 speakers. $99. $99. And there'll be replays available in 24 48 hours. So this is we're trying to democratize finance. You know, that term's thrown around all the time. I hate that term, but back in the day, David, you know, there used to be like stock ideas. You go to stock dinner with some other hedge fund guys. Price of admission was an idea. you come away with 15, you know, with a bunch of ideas. We're trying to deliver that experience to the individual investor. And so I this is this conference has no peer. I this will be the best investment conference that the world has ever seen.
>> So we'll put the link down below. Follow the conference uh and uh sign up if you want more details. George, just give us a few themes that you expect these speakers to be talking about at this conference and generally just themes that you perhaps agree with.
>> Sure. So, um, is I I know David, you've had a lot of, um, folks on over the last year championing, um, precious metals and then and the debasement trade. I think that trade still works. In particular, I like the miners uh, enormously. Um, I know you know all this, but just for the benefit to repeat, um, you know, the most recent numbers we saw out of, um, the mining companies, they reflected, I think on average like $4,100 gold, $4,200 gold. Gold's 5200 today. All right. So, the earnings leverage is unbelievable with these companies. They're incredibly cash flow positive. And someone pointed out to me the other day, a good friend of mine. He said, "George, you know why the Max 7 do so well over so many years?" I said, "Well, cuz they had good earnings." He said, "Yeah, but there's another factor as they were so cash generator, so cash flow positive, they kept buying back stock. It was a constant bid for those stocks." Well, guess what the miners are doing? They're buying back stock. So, um, I really like the miners. I can throw a couple names out there. SSRM is one I really like. Equinox gold is one I really like. I think some of the copper plays are interesting. The silver plays are interesting. So, I think mining is an area where, you know, excuse me,
>> do you own those stocks?
>> Uh, yes. Yes. Yes. Okay.
>> Um, but you know, but it's less about picking the right one, more about just do you want to be in that space or not? So, I like that area. I think energy, we were very lucky. We turned bullish on energy in December. um you know out of favor underone. There was a narrative running around that the world's a wash in oil. How'd that work out? Um inventories declining, production's robust. Um as you know, David, the depletion is such 5% a year where if we don't keep drilling, we're going to start to have a decline. And now you layer on top of it this whole geopolitical mess we have. So in other words, had we done this interview two weeks ago before the Iran situation um uh erupted, I would have told you the same story. As I said, I I I gave an interview in in January. In December, mid December, we got very lucky. We recommended Schlumbumber Valeris. I was more into the services companies than I were the producers because that's really where the operating leverage is. But, you know, we already had the gold stocks and the and the miners. And I was like, let's give the folks something new. And when you think about it, David, all right, the fact that energy even now is only 3% of the S&P. I mean, Nvidia is like seven. That's crazy. So, just if a little bit of money comes out of Mag 7 and goes into energy for $50 in double jeopardy, you tell me what these stocks are going to do. So, I'm very bullish on on energy, our good mutual friend uh friends David Haye and Louis Gav um we're all on the same page and the events of the last uh week or so only emphasize, re-emphasize, underscore the need to own energy. It's not it's not it's not the reason we were in energy. And if there's a sensation of activities in the M East, it's not a reason to sell energy. The fact you have oil prices going up and down 40% in one day, that's craziness. That tells us it's a broken market. But I'd like to point out to you, I was reading one of Louis pieces just the other day and he pointed out that, you know what, the market's remarkably complacent about this energy situation. And he points this specifically to the futures market. You know, whereas the spot price went way up to 110 or wherever it went up, the futures market for oil didn't really move very much. So that's telling you the market thinks this problem is going to get solved, which in turn to me indicates a lot of complacency. What if it doesn't get solved? And I think potentially could have a really disruptive impact on economies, accelerate the inevitable credit crisis that we were going to have. We can talk about that. And so this is just this just puts everything on tilt. Um and if someone says well George you know I mean imagine tomorrow peace breaks out and this well so much for energy stocks. No no Iran was never the reason I recommend energy stocks in the first place in December. So I think energy is good. I think metals are good. I think emerging markets are good. Basically just get away from the US and get away from the US bond market. Get away from US tech stocks. Hopefully that answers the question.
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Well, yeah, let's talk about US tech stocks right now. I have this article in front of me. Perfect segue. The great software stock route of 2026 may just be beginning, says Goldman Sachs analysts. Here's a paragraph here. One lesson from historical examples of industries facing disruption risk is that share price stability requires stability in the earnings outlook. Newspapers, for example, faced risk from technological disruption as the internet grew in the early 2000s. The share prices of the group declined by an average of 95% between O2 and 2009. Goldman Sach strategist Ben Snder said in a new note, "Our software stocks the new newspapers of 2026."
>> So, um, as Donald Trump famously once said about healthcare, it's complicated. Um, I think I think there going to be a lot of winners and losers out of software. I think it's a very good article. What it really points to is the enduring uncertainty. In other words, the things that are plaguing software stocks now, just how disruptive is AI going to be? And let me be let's be clear here. There are some stocks which are going to be relatively unscathed by AI and they're being sold and there are other stocks software stocks which are being sold and should still be sold. So for instance is Adobe is Adobe having its Kodak moment because a lot of people look at Photoshop and some of the other products and say there's no mode. What do I need this for when I can just go and check GPT and you know do it like that. So, and and it's really hilarious because you know this David some I I see all these articles written and people say well you know Adobee's really cheap it's only on 11 times earnings and blah blah blah used to be on 30 times earnings but that forgets that you know for first of all maybe the earnings estimate's wrong and also earnings estimates pees expand and contract along with perceived growth rates so the fact that Adobee's on you know 12 multiple down from 30 or whatever it was doesn't tell you anything really um and so going back to your article I think the problem is the uncertainty the afflicting the se sector that's not going to go away anytime soon. It's going to take a while to figure out who the winners and losers are. And again, markets do like like uncertainty.
So David, is it snowing where you are? Jesus.
>> It is. It's in Vancou I'm in Vancouver on the west coast and uh it was up until today 43 years without I think it was like 43 years. First in 43 years without snow and I guess I spoke too soon but um
>> there we go. Okay. So anyway, soft software is a is a dangerous area. I think um in the aggregate I would put in the do in the do in the too hard pile. I would not own it. They're winners and losers. If someone really knows software, well, fine, have at it. But uh buying software right now is um if you just look at the chart, you know, anything else, just the chart, you say, "Wait, what is this? Something something's not right here." You know what? Let's someone else catch the falling knife. Once it bottoms out, I'll be interested. Right. So, the chart looks terrible. The valuations in many cases are still ridiculous. I mean, there was one software stock, I can't remember what it was, Atlassian or one of these names. Some guy was pitching to me a week ago.
>> Yeah.
>> He's saying, "Oh, it's really cheap now. It's gone from, you know, 20 times sales and 200 times earnings to 12 time sales and, you know, 100 times earnings." I'm like, "Wait, wait, wait, wait, wait, wait." because it's really cheap compared to where it was the last 5 years. Hold on, hold on, zoom out. How is it how's it compared to where software stock sold in say 2011? And the fact of the matter is the the the valuations are much higher. So, I would just stay the hell away from software. Boy, this is a real good fin. This is good stuff.
>> I want to I want to get you uh get your opinion on this chart, please. Uh George, this is uh I mean these aren't exactly software stocks, but uh Apple and Salesforce have been spending a lot less on AI than some other peers.
>> And um I've been reading about some people's opinions on this and some analyst on some analyst opinions on this and one consensus view is that Apple is quietly winning the AI war because they're spending so much less and they're just they're not creating their own investing their own in their own AI. They're just using other AI, pairing it with their own hardware and creating the best hardware software ecosystem on the planet without spending a lot. And that's just one perspective. But if you look at a chart like this, you've got a lot of experience analyzing charts exactly like this. When somebody spends significantly less on capex in a competitive area than their peers, what are the some of the first questions that you have to ask yourself as an investor?
>> That's a fabulous chart you have there, David. Um, you know, let's just I happen to be negative on AI. Okay, sure. Let me be very clear here.
>> I'm not negative on I mean, I use it, but when I say I'm negative, I'm negative on the stocks because I think there's a huge huge mismatch between the monetization opportunity, how much money they're going to earn, and what's implied in the valuation. So, let's go back to 2000. History doesn't History rhymes. It doesn't repeat. So if you had said to me, gee, I think internet's going to be a big deal, you know, buy all the buy all the internet plays, AOL and you know, MySpace and SGEs and all that nonsense. Yahoo. Well, you would have been right and you would have been wrong. The internet turned out to be a big thing. The only problem is all those stocks that you could have bought in 2020 when they went down 90% or bust. So, you know, Amazon didn't become a thing and you know, Amazon went from like 100 to 9 and that's gone up 200x since then or whatever. Okay. So, there are the companies and there are the stocks and often is the case. In fact, your alma mo bank credit analyst has a chart of this. I saw it the other day. It's a general proposition. Had a graph of across all industries, the companies that spend the most on capex and the companies that spend the least.
>> Yeah. And the ones that spend the most are the worst performers because that's the answer. So, so, so and I'll give you one other one. I got other topics.
>> I don't mean to interrupt you, but just to illustrate your point, this is a 5year chart of Apple and Amazon. Amazon spent $80 billion this year on capex and Amazon has lagged behind Apple in the last 5 years. But maybe they're preparing for the future. Maybe the next 5 years is going to be the other way around. I'll let you
>> Yeah. D Let me give another example people can understand. Look at Toyota. All right. Okay,
>> the world's largest automaker, whatever. Okay,
>> Toyota is not one to be on the cutting edge of innovation. They're very good at executing and producing, right? So, when a new thing comes out, they let somebody else go first. So, like look at EVs for instance. Okay, Toyota was a late adopter. They went the hybrid route as opposed to all EVs.
>> So, but what Toyota is very good is let somebody else go first. We'll have David Lyn, George Noble Motor Company. Let them go first. Let them blow themselves up. see what mistakes they made and learn from that and then go approach the market. Okay? And that served them incredibly well. So there's something to be said for not being for and not and we're not talking about network effect here. So there's not so the idea of first mover advantage does not apply. Better let somebody else go first, see how they lose and then learn from that experience. And I think that's what Toyota does. I think that's probably what Amazon's to Apple. You know, you know what Tim Cook is a good steward of capital. He's probably looking at the trillions, hundreds of billions and trillions of dollars being spent and forget about the excitement and the narrative. He's probably saying to myself, saying to himself, where's the cash on cash return? Where's my payoff on this? He's very good at numbers. He's like, this doesn't make any sense. But, you know, the flip side of it is these other companies, it's like an arms race. It's ex. It's been viewed as edge of successful crisis. It's like mutually assured destruction. You know, you and I are both doing uh AI, right? So, you're spending tens of billions. I'm spending tens of billions. I'm afraid to stop spending because if I stop spending, David's going to keep spending.
>> Yeah.
>> And if he keeps spending, he's going to win. So, I got to keep spending. So, what happens? We all keep spending together and we just drive the car off the cliff. In my view, that's what's happening.
>> Maybe semiconductors are the play. Some people are saying semiconductors are the new oil. And it doesn't matter if you're Long Apple or Long Amazon. Everybody needs semis. What do you think?
>> You ask really good questions. That's what I think.
>> I have a really good team. Help me with questions. Just put that out there.
>> All right. Good. There you go. There you go. Um, semis are a tough one.
>> Yeah.
>> Um, I I think I think semis are beyond their past due date. And the reason is I mean the company's doing spectacularly well. I have one friend I speak to every day. He's like, "Oh, Morgan selling one they raise their micron estimate to $40, $50, $6 like enough already, right?" He's like, "But George, the stock's only four times earnings, whatever the number is. And if it goes to a market multiple, it will be 1,500. It's like 400 now." Like, "No, no, no, no, no, no. The problem with Micron is not the PE. The problem with Micron is their business is so far above trend and the margins are so far above trend. If you look at the history of semiconductors, I know people say, "Well, it's different this time." We'll get to that. This is a bad time to be buying semis. Forward returns from this point in the cycle are horrendous. Now, right here, right now, nothing wrong has happened. However, you already see the capacity announcements for more capacity from, you know, the industry become like a igopoly. But the profitability is so high, you're seeing new capacity announcements. That capacity is not going to hit anytime soon. It's going to be like 2028 before it shows up. But what it's what that implies is that the window of excess profits for the semiconductor companies is is relatively finite. It's limited. So the way I look at the semi stocks rather than looking at the PE on current earnings like shipping stocks, you know, earnings go to the moon cuz day rates go up and they collapse. So to value shipping stocks on on insane insanely high temporary earnings makes no sense. That's that's my push back on semis. And so um I think what you got to worry about I mean look you buy semis here you may make money but there's no margin of safety. And when you're buying micron at six times book value and you look where it tends to peak and trough, this is like I don't know if you're much of a basketball fan. Raptors are kind of doing okay this year. Uh but you know, you may take take a shot from 35 40 ft out. It may go in once, but try that shot 10 times and tell me what happens, right? So to me, buying semis here is a low is a bad play. May still go up. It's just not for me. And I think on anything but a short-term view, I think forward returns looking at 12 months, 24 months are going to be pretty poor for some.
>> Let me just ask you this from an investor standpoint. Why do valuations matter if you know something is going to be in demand for the foreseeable future? Pretty much like a consumer staple at some point.
>> Valuation in the short run is useless as an indicator.
>> Yeah.
>> Okay. But let's say I'm going to take a ridiculous example. Okay. Let's say Beanie Babies are in are in fashion. They were once upon time. And you and I decide I decide myself, I'm going to open up a Beanie Baby factory. And you decide you're going to do a Beanie Baby factory. And your producer is going to do one as well. Okay. So, it may take a while for the Beanie Baby factories to to come excess capacity to come along. But the bribe that entrepreneurs are being offered to produce Beanie Babies is so high. You know, it's the moral obligation of capitalism to arbitrage away these excess returns. So, it's only a question of time before David Lynn Beanie Baby Company comes along or George Emble Beanie Baby comes along, right? So, in the short run, this is irrelevant because it could take two years for for Lyn to get his factory going, right? So, valuations don't matter in the short run, but the longer you go out, the more they matter. And you know, listen, if you're a trader and you say, "Hey, I'm good with the charts. I have a lot of good technicians and charts on and I'm good. I don't care about fundamentals or fundamentals as they call them. I'm just a chart guy and number go up and I use I use stops and discipline. The minute it rolls over, I'm I'm out. Okay, have at it. Okay, that's not the way I roll. Okay, I'm burdened by my training at Fidelity. Okay, being a fundamental investor. I'll tell you one last story on this point. So, I just I started up my Substack recently. I just went to put a pay wall up a few weeks ago. So, um aside from having a portfolio, we also recommend individual stocks. So, I had to write a report. You're going to laugh at this story. I had to write a report. I hadn't written a report in like 35, 40 years. All right. So, I go dust off one of my old fidelity reports I have to write for Peter Lynch called investment committee report ICR. So, the first pick was Southwest Airlines. I had heard Southwest Airlines pitched at a conference two three months ago. cost cutting Elliot Management valuations the third of Delta United Airlines based on price of sales blah blah blah blah blah and then I saw in January Jamie Baker who is the the leading uh airline analyst on the street JP Morgan he upgrade he did double upgrade he upgraded Southwest Airlines from a sell to a buy not sell the whole sell to buy so I'm like hm something must be going on so I go and I looked at the numbers and I went back and dust off my notes from the conference yeah I like this story so I wrote it ICR, elevator pitch, the drivers, positives, negatives, strengths, weaknesses, risk, rewards, income statement, cash flow, balance sheet, catalyst, chart. That's it. Three, four pages. You got you got to give more than just number go up. But you also don't want to do one of these TLDDR specials, 30-page report, which nobody reads. So three, four. So, so, so it's the way I was trained to look at stocks. So, I write the report. I show it to my friend. He's like, "George, nobody writes reports like this. What are you talking about?" He goes, "Well, you're talking about fundamentals and valuation. Nobody cares about that. It's all about narrative and chart. It's all I want to know." So, what I'm telling you, David, is I think um we're past the point of peak narrative. Um I think valuation fundamentals now do matter. Look, in a world of free money where cost of capital is negligible, pigs fly. That's that's what happened. Well, money ain't going to be free no more. And so I think valuation is going to matter.
So um
>> money ain't going to be free no more. Let's talk about that. So before we talk about the next 40 years, I want to look back the last 40 years, George. So like I mentioned in the beginning, uh you were incredibly successful at Fidelity, your uh overseas fund in ' 85 was the number fund number one fund in the country up 79% on the year. If you had to run that same fund today, how would you do it differently? Where would you invest differently? Let's put it that way.
>> Yeah, I just want to get this straight. So basically, I'm teasing you now. So basically what in other in different words you basically just said I'm a hasband if I heard you right.
>> That's not playing with you.
>> You you were a legend. You still are.
>> All right. People say he's a boomer. He's got gray hair. He's you know whatever. Okay. He doesn't own Ethereum. We can talk about crypto too if you want. That'll really piss off people. Whack that piñata. So um I would pro I would be underweight. Check. But here's the problem. Here's the problem. As we know, active managers have been losing the battle against passive for good reason because passive costs less and passive has had better returns. But it's not always going to be that way. And I want to I want to regail you with one story about the Japanese stock market. So I cut my teeth on foreign stocks. I was initial manager overseas fund. Thank you for mentioning that in 1984. And I made a big for in the Japanese market in the in the 80s. And initially it was it was a fundamentally based decision but then a mania took over. You know the market went to 60 times earnings and you had Japanese bank stocks on 10 times book 100 PE all this kind of stuff. So all the fundamentally based investors like Templeton Jeremy Granto Scott Stevens they were all like ah no just say no to Japan it's ridiculous right? But I was the young guy with the hot hand. The the Japanese term is Shinjzhin Rui, the young hot guys, you know, right? I went for it and I won. So what happened though, Japan, my my my charge was to invest outside the US. This the EA index or Europe, Australia, Far East, the non US S&P if you will. And Japan went up so much that um it got up to the point was 65% of that index. I think today it's 11. And so if you're competing against that index, you had to own Japanese stocks otherwise you couldn't keep up. In the same way
>> real estate at one point, Tokyo real estate was more expensive collectively than all of California or something.
>> Correct. Exactly. The Emperor's Palace, you got a good memory. The Emperor's Palace in in the middle of Tokyo was worth more than the state of California. It's complete insanity. By the way, Japan's incredibly cheap right now. If you're looking for a place to go on vacation, go to Japan. So anyway, um so it was a tyranny of the benchmark. You had to own Japanese stocks. Otherwise, you couldn't keep up. In the same way, the last few years, if you didn't know US tech stocks, you couldn't keep up. So, but here's the problem. Back then, they didn't the style guys, they didn't put you in these boxes where, oh, Dave George, you know, tech's 35% in the in the indust. Oo, you can't do that, right? They would they would they would define risk not just as the risk of losing money, but more importantly from institutional standpoint, the risk of underperforming the benchmark index. That's a much different thing. So most real money guys, like if I was back at Fidelity now, I'd want to be underweight tech, but they limit you as to how underweight you could be because they don't want you drifting too far away from the benchmark. But my my overall view wouldn't change. I still think you'd want to be away from expensive US tech stocks. And I think you'd want to be away from companies with bad balance sheets and away from codes, you know, selling on 30 time sales. Another coin phrase I coined recently is the death of speculation. By that I mean all the companies have benefited from free money. The tide is coming. The tide is now going out.
>> Which jurisdiction or country you would be more overweight now if you were to run the overseas fund again? You mentioned Japanese cheap right now. You mentioned American exceptionalism may be coming to an end. So where would you go?
>> Yeah, very good question. You forced me to bring my a note to self. I'm going back on Lynn's show next time. Be more prepared. Um so um countries are one thing but it's also sectors and industries. So for instance, okay, why has Korea done so well? Why is Taiwan done so well? It's got, you know, highinex and TSMC and all these things, right? So you can break down each of these indices into factor bets and sector bets. So for instance, all things being equal, which they never are, Europe has no tech to speak of. So in a world where tech's doing well, if that's all you knew, Europe is going to underperform. All right. In a world where commodities and reflation are name of the game, I think our good friend Louie G, who I believe had on the show last week, would tell you emerging markets because these these countries have uh higher real interest rates, therefore greater scope for rates to decline. They have, believe it or not, better fiscal situations, better budget situations than we do. I mean the US right now and Europe for that matter, we have almost no flexibility when it comes to monetary policy and fiscal policy. Okay? You know, we're going to have a list trust moment one of these days where the market's going to say, "No, Moss, US bonds are going to get sold." Um, real rates are going up in my opinion. Real rates are bad for for equities. Um, so I I get away from the US. I'd be in um selected emerging market countries. Um, I own the resource plays. that own the energy stocks and those could be in any countries. So it's less about countries and more about sectors and factors.
>> I want to come back I want to come back to the list trust moment coming. Why would the US experience that? By the way, you have a podcast that I want people to be aware of as well. This is the market talk with George Noble show
>> and correct and thank you. Thank you for mentioning that.
>> You had a guest on recently that told you about this, right? I think it was uh Albert uh
>> Alberta. Great. you should you should have Albert on. He's a great guy. He's not he's not really that widely followed. Great guy. Um so thank you for highlighting this. So my podcast basically what that is every Sunday at 11:00 a.m. I do a space which is great. Even though I don't like X, the one good thing about X is the Twitter space. In fact, I should have you on as a guest. It allows for interaction. It's like a giant Zoom call as you know. So you can get a lot of really smart people in there at once. It's the only platform that offers that. So what I do is I have the space, excuse me, every Sunday at 11:00 and then the replay gets put up on Substack, Apple, Spotify, YouTube. Aside from that, during the week, I usually do one podcast where I interview somebody. Um, you know, I I I had Louis G on had him on recently, but just the other day I had Russell Clark on. You should have Russell on. Really smart guy based in the UK. And so it's all about investor education. I'm trying to help people just as you're trying to help people. It just so happens I've been at this longer than you than you. Well, I don't have your hair. I have a bigger rolodex. So, that's how that's how I get all these people.
>> I believe Albert told you that the US is 75% of the global market cap.
>> Correct.
>> But only about 25% of global GDP.
>> Correct.
>> I mean, one will look at that stat and think maybe that's not sustainable.
>> Or maybe it is. You Well, you think, well, you assuming that American hedge money would sustain and if so, maybe that probably will get even bigger. Uh, we have to make a bunch of different here's something for you. Okay. All right. I'm I'm not going to predict this, but let's just hallucinate for a second a bit. Like our favorite LLM, they hallucinate. Basically, they lie. Don't you love these the these chat GPT things? They give you the wrong answer and then when you push back, they say, "Oh, sorry. Sorry. We didn't mean it." Okay. So, imagine for a second that I'm right about tech. Just imagine, right? Let's say, let's say tech underperforms. This is not bad president. BCA by the way your alma mo would have you believe that tech is going to underperform. So let's say tech goes into a protective bare market in the same way that it's been a protected bull market and let's say all you need to do is underweight tech and index everything else you outperform. Okay. So I think um that's the first thing that one should do. Um and you know it's kind of like it's kind of like in medicine socratic it was a hypocratic oath first rule is do no harm right um so don't own losers avoid the losers it's like Michael Chang remember Michael Chang tennis player okay he would never he was annoying as hell to play against cuz he wouldn't hit winners but it's like playing against the machine he'd always hit the ball back you would wind up losing cuz you would commit an unforced error Okay. So, if we just say, "Hey, Dave, you know what? We're not going to try to find the better stock to buy, we're just going to identify the ones we shouldn't own and avoid the losers." It sounds bizarre, but that's another way you can beat you can be you could beat the index. So, I think it's a great time, going back to what I said a few minutes ago, to be an active manager. There are a lot of there, you know, what it is, David, more than any one particular idea, there's what one would refer to as dispersion. Some stocks are doing are very expensive and going one way. Other stocks are very cheap and going the other way. Like you know, healthcare has been a disaster for years. Tech's been on fire for years, right? Okay. There's a lot to do here, you know, and just buying the index. I think it's a very easy thing to to outperform right now.
>> Passive funding. Oh, sorry. Passive funds have dominated the markets for years. But you're saying that era is coming to an end. Knowing the index itself isn't gonna isn't going to be enough.
>> They may keep putting money into index funds. Okay, I'll remind but I can remind you I we learned from and we know this from my experience at Fidelity flows always follow performance. Everyone has FOMO. So as long as something is working, the money keeps going into that area. So it could be an index fund for instance, right? Like you know index funds have been killing it. David, why would you invest in another fund which has much higher expense ratios and underperformance? Doesn't make sense. It's irrational. Be okay. But if we get into a protracted period where you know like like okay last year emerging markets killed the US. This year the same thing is happening. So eventually it's going to get to a point it's going to say well wait a second the S&P was flatter or only up 8% but my emerging markets was up 20. Like why am I still in the US? Oh they're good companies. The world leaders in technology blah blah blah blah blah. But remember we're investing in stocks not the companies. two different things. You know, a great company at the wrong price can be a bad investment. Mediocre company at a good price can be a great investment, right? But the po the key point question to answer your question is flows follow performance. So if we get into a situation, let's just say, you know, hypothetically tech underperforms. Eventually people can say, well, wait a second, why do I have all my money in this index fund? You know, I put my index fund. Yeah, it's 4% that's going to tech, right? or bonds. Bonds are a disaster. We haven't spoken about bonds, right? Some have said recently, I mean Louis God would tell you, I agree completely. Bonds do not hedge you against the risk that you should be concerned about. The risk you should be concerned about right now is not recession, depression, interest rates going down. It's the opposite. It's more we're going to keep printing money, recording possible inflation, higher interest rates. Owning bonds, having 40% of your portfolio in bonds does not hedge you against that risk. Okay? So Louie would say, and I agree with him, and by the way, if I sound smart for all you viewers out there, it's not that I'm that bright. I listen well. I watch David's show. I've read Gavcow research for years and guys like that, David Haye. And I'm pretty good at remembering what they said. No, I'm teasing. I'm not stupid. I work hard. But they're totally they totally they're completely right. Completely right. So rather than owning bonds, you should take that money and put it into energy and gold. If you want to hedge it against this is again this is 6040 portfolio. I know you didn't ask the question, but I'm asking it anyway. 6040 portfolio was we were we're worried about hedging against the risk which in the past was recession, depression, interest rates go down. That's not the risk right now. The risk is we keep spending money like drunken sailors and we get inflation. So, that goes back to valuations.
You've just listed two assets that have skyrocketed in recent times. Oil's gone up to $119 at its peak uh just two nights ago. Now, it's back down to about $90 a barrel, WTI. Uh gold's gone up 200% since basically a year and a half ago. Even now, you would say put money in gold and oil. How would you answer the question if someone askked you, hey, it's already gone up a lot, George. Maybe let's go to something else.
>> That's
>> okay. So let's start let's start with the energy first. Okay.
>> So again the shiny object
>> and I think I said this but I'll mention again
>> avoid the hot takes everyone. You know it's a volatility the hot potato everyone's watching every day. Ignore that. Okay. Yes. Had you bought oil yesterday at 119 or whatever the price was or 109. I confused with silver and now it's 85. You lost 40% in 12 hours. Haha. We told you that's not investing. Here's what's investing. oil today at wherever WTI is. Bren, I lose track of all the numbers. Um, you look at Bren or WTI, it's lower now than it was precoid in nominal terms and it's and it's and it's down significantly in real terms. So, oil is extremely cheap and oil stocks are also extremely cheap. So the reason the reason I like the service companies is we're going to have to drill for more oil offshore perian is not the answer anymore. It's you know whatever there got to be more drilling activity. You know even if even if oil prices don't go up I I think I think I think these stocks can do very well even in an environment of flat oil prices. But I think there's a good chance oil prices go up from here. So they're cheap relative to history. They're cheap relative to everything else. That's how I would defend energy stocks. Gold, gold's a funny one. There is no intrinsic value. Gold is what people as a store of value decide it's going to be worth. And as you know, Dave, you had many guests on talking about this. Ever since the Ukraine situation arose in 2022 and you know, we confiscated billions uh from the oligarchs. Everyone around the world is looking at the US and say, "Wait a second. We thought the US dollar was sacrosanked. It was a safe place to park money, blah blah blah." Well, now we see the US is not so nice all the time. Maybe we should think about diversifying away out of US dollars. So, most notably, the Chinese have sold off huge swaths of their bond holdings in recent years. Um, you see foreign central bank holdings of of of dollars of bonds going down and money's looking for a home. is looking elsewhere. Problem is there's no other um candidate to take over the world the role of the world's reserve currency. And so gold is um frequent protocol for um a lot of those funds. And keep in mind gold really has been driven not by US investors. It's been foreign central banks that have been buying gold trying to diversify their way out of US dollars. I believe that's going to continue regardless of what the price of gold is doing. And a lot of Asian demand. It's funny if you look in the US total holdings of gold by ETFs has actually gone down for the last few years, not up. These are things you don't see at the top. So, um, in the gold stocks, I had a great interview with Zachary Remarks just yesterday. It's on my uh it's on my Substack on my my my YouTube. Um, he made the point, he's right. He said, "You know what, George? I think the price of gold will
"Go down 20% from here and we're still going to make 50% in the gold stocks." What?
He goes, "George, look at the valuations. Look at the cash flow. They're doing this at 4,100. Gold's 5200 right now." And by the way, sidebar, David, gold's 5200. We're just within a few percent of the all-time closing high on gold despite everything that's happened. All the volatility, the gold price of gold's hanging in there. The gold stocks are hanging in there. Okay.
Yeah, silver the worst silver. Okay. That's the redheaded stepchild of the precious metals. Silver was doing just fine. It's the high beta poor man's gold. We know that. You know what? You know what's the worst thing you can say about silver is it overachieved. Silver was doing just fine. Thank you very much. Until Twitter, until Crypto Bro, Growth Bro, and Momentum Bro discovered SLV is their new favorite meme stock, the silver ETF. Um, they piled in and you know, silver just went completely vertical.
All right, so it's pulled back. The trend. I think I I'd be buying silver stocks right here, right now. Um, it's funny and I I want to say I I want to put in a bad word for Bitcoin just so I just so I can offend everybody. Um, so in this space a few weeks ago I was talking about why I'm negative on Bitcoin. I have no position, by the way, on Bitcoin. No position. People say, "Well, why are you negative?" Well, you can you can have your beliefs and your portfolio, two different things. You don't have to invest in whatever your belief you have. But I I think Bitcoin is is very uninteresting. I think Bitcoin is done post-IPO. Um, Bitcoin was the speculative asset with all its liquidity and the institutionalization of Bitcoin is actually a huge negative, not a positive factor because I mean, those that that's where the marginal dollar came in and as we've observed the volatility of Bitcoin has gone down. That's a negative, not a positive. In most cases, most other asset classes when volatility goes down, it's a positive. Not in the case of Bitcoin. Why? Because momentum bro and crypto bro, they like the high V, like you know, get rich quick. I put it in, you know, we can we can make 40% in one month, right? Bitcoin has lost its mojo. V's come out of it.
All right. Um, allied to that, you see the proliferation of other highly more other other more volatile asset classes. So the precious metals volatility has increased. Prediction markets, sports betting, by the way, I guarantee sports betting is making it top. You know why? Cuz I opened up a FanDuel account. Even I'm using it now. All right. Bad joke. So, um, there's a whole investor class out there, the sort of so-called D-gens. They want the juice and Bitcoin's lost the juice. Last story I tell you in this regard. I had I was looking at space a few weeks ago. So this young fellow comes in. He's like, "Oh yeah, George, I agree that gold and silver. I'm all in, but you know, I think you're wrong about the volatility on Bitcoin." I was like, he goes, he goes, "Really?" I says, "Tell me something. Why did you sell all your Bitcoin to buy gold and silver?" He goes, "Well, cuz they're going up. Bitcoin wasn't." I said, "Thank you very much. You just proved my point."
All right. So I made the incendiary comment a few weeks ago. You'll get where this is coming from. Talk about whacking the piñata. I said Bitcoin, Bitcoin is the Facebook of speculative assets. In other words, you know, I said Facebook's for old people, for boomers like me, right? Like like Bitcoin is so yesterday.
"Does it have a place in your portfolio? Let's talk about allocation now. Let's say you've got you're managing a billion-dollar fund. Uh, again, so you've got..."
"Wait, you give me your cat? You're giving me your cat to manage. Thank you. Uh, I'll give you a billion uh Zimbabwe dollars to manage. There we go."
"There you go."
"George. Uh, how would you divide that? Uh, 60/40 or would you do something differently? Alternative assets, uh, hard assets, digital assets, for example, Bitcoin versus stock."
"So, for normies, for normies,"
"Yeah."
"no crypto, no Bitcoin. But, one last word on that. Um, Michael How, who I think you've had on your show, another good friend of mine. Um, he's written extensively of late as to why Bitcoin is doing poorly and gold is doing much better. First of all, he's a bit more cautious on markets globally just because the liquidity picture is deteriorating. This is before the oil thing with the Iran. Um, he has a bonafide to have an opinion because Michael, I can recall in the fall of '21, he was bearish. I was bearish and then he correctly turned bullish in the fall of '22. You know, David, you have many people on this show. Some guys, they got the crash right, but then they don't get the up, they don't get the recovery right. There are other people who are permabulls, they always miss the crash. There are few people who get both right. Michael How is one of them. So he has a license to speak on this. He points out how one of the big differences between Bitcoin and gold. They're both stores of value. However, gold is being bought by the PBOC and foreign central banks. Bitcoin, not so much. Bitcoin depends on US liquidity. PBOC depends on global liquidity. Sorry, gold depends more on foreign central banks, global liquidity. It's a big difference."
Going back to your question, I have zero, zero in bonds, zero in crypto. Uh, if you're going to be in equities, you want to overweight the things that are going to benefit from the trends that are in place from the reflation and the inflation. So energy, gold miners, metal stocks, copper stocks, emerging markets. Um, underweight the US, underweight US technology, underweight long duration, expensive, high PE stocks. Those would be the broad brush strokes that I would give to someone in portfolio construction. So you you your portfolio would not look like the S&P at all. Look very different. Um, and again, I think the returns as I always say, David, you know, past past results are no guarantee of future performance. Well, I think that's what we're who would have thought? I mean, as as absurd as this sounds, 'cause we all suffer from recency bias, we're all human. Who in their right mind? No, I don't know anybody who in 2015 predicted the tech stocks were going to do what they did. Imagine you had today's Wall Street Journal in 2015 and you came on my show and you said, "Okay, I think tech stock talks go up 20x, 20 years." You're going to laugh you out of the joint. So we have recency bias. I'm telling you right here, right now, again, valuation is no use in the short run. Right here, right now, I think you look back, look back at this period in time, if you a simple decision, avoiding US exceptionalism, avoiding expensive tech stocks, if you in avoiding US bonds, if you just did that, you don't have to get too clever. No short Nvidia, which by the way, I think is a short. I'm not telling you to short stocks, but you know, if you're a pro, there's a lot of stocks to short. I short Tesla. I think Tesla's worth $20. I think all the codes, the meme stocks talking about down 90% from here. Kathy Woods are huge short. I mean, I got so many shorts, but I don't advise it for individual investors.
"Why not for individual investors?"
"Shorting is risky. I mean, shorting the problem. It's for the Here's here's the problem, D. One of the biggest problems with shorts. It's not just, you know, people say, well, you know, when you buy a stock, it can go up 10x. When you short a stock, it could only go down 99%. So it's asymmetrical. There's a worse problem, Matt, and that is if you find a good company whose sales earnings go up year after year, odds are the stock's going to do pretty well."
"Tesla's worth $20. You don't believe?"
"No. No. I said I said I said if you find a stock..."
"...which sales earnings go up year after year, the odds are the stock will do pretty well."
"Right."
"Conversely, shorts most of the time, unless it's something terminal like it's a scam, it's a fraud like Enron."
"Yeah."
"So, you have David Enterprise is a good company."
"Yeah. Maybe Magic's a little sleepy, but you know, so they they miss a quarter because they were budgeting for high sales. The sales didn't come in so great. Fine."
"So they have a bad quarter. Stock sells off, but Lynn's smarter than you think. He gets He says, 'All right, you know what? We're going to cut back our budgets. So we're going to get our expenses in line with our revenues next quarter. Back to our regularly scheduled programming. Earnings are okay.'"
"So the problem with shorting, it's a very labor-intensive process. So it's you make 20%, 30% on a short and that's it. And all the hours you spend trying to figure out the short goes out the window. Suppose if you have a long, you have a compounder, like if you could if you could have figured out the Amazon or Nvidia or whatever it is was going to be a good idea, McDonald's, you just ride that puppy. You just stay with it."
"Let me finish off on one final question. The future, what is the AI play of the next 10 years? Is it still AI or is it something else? Robotics is something that's been coming on my own my own radar. I've been following uh robotics news and just how advanced the tech has gotten just since last year. I mean, the advancements they're making day by day is extraordinary. But uh, I I want to get your take."
"So, um, candidly, I'm probably the wrong guy to be the tech guru here. I'll make a general statement which is I'm sure there are going to be winners out of AI. It'll be the guys using the AI, the customers of the AI. So, for instance, take a stock like McKesson. It's a big drug distributor. They got zillions of SKUs. You know, if you could use AI to make it more efficient, cut some costs. Not that the sales are going to go up, but the costs will go down. It's a big winner. Or, for instance, David, you go to a doctor's office, right? Think how primitive that is. What do they do? You go in, they hand you a clipboard, fill out this, fill out that, fill out this, right? You go to the doctor, then he refers you to a specialist. You go to the other doctor, fill out this, fill out this, fill out this. Right, dude? We got AI. We're in the 21st century. Isn't there a better way to do this? Right? So, whoever figures out how to make their processes more efficient, they'll be the winners. Well, the one last bad joke I'll leave you with summed it up perfectly. AI. And people say, 'Oh, you know, there could be a lot of winners from this. You want to sell the companies. You want to buy the companies that are selling the picks and shovels. You know, the picks and shovels. Picks and shovels. Right. The best comeback on that line was everyone's coming to the hardware store to buy the picks and shovels 'cause they hear this gold in them hills. David, what? Turns out there was no gold. Everyone bought the picks and shovels, but there was no gold. And so I I think yet AI will be of some help, but right now more than anything in my opinion, it's essentially a glorified Google search and we're spending trillions of dollars to do this. And oh, by the way, it's causing everyone's electricity bill bill to double. And oh, by the way, the Chinese have figured this out and they're they're doing it in a way which is not cost 90% less. As I say, David, what could possibly go wrong?"
"Maybe China is the next play. Maybe Shenzhen's the next play."
"I like China. Louis Gabs likes China. China, by the way, China, by the way. It outperformed the US not just in 2025, but did in 2024. Louis got to call your office. Hey, Louis, this is going to be the third year in a row that China's outperformed. They say, 'Oh, you know, you can't invest in China because they're commies and this.' Please. I'm interested in making money. I don't want to hear about this other stuff."
"How do American investors even get exposed to China?"
"Um, you can there are enough ETFs out there. There are enough ETFs out there. Yeah. And and the other thing too, China as opposed to the US are going to channel minor. Louis Goff, as opposed to here we have inflationary concerns and there's questions about just how much liquidity can we uh put in the system and how much more fiscal spending can we engage in given the burgeoning budget deficits. In China, given how much inflation there's no inflation in China, they can put as much money as they want, it's not going to matter. And also they've got their budgets under control, so they have much greater scope for fiscal and monetary large, not to mention better valuations and a better secular macroeconomic story. So like, why would you buy the US? And again, for all the haters out there who who say, 'Oh, it's China or George is now a shield for the CCP.' Nothing could be further from the truth. I just want to help people make money."
"Yeah. All right. Well, speaking of helping people make money, where can we go to learn from you? I mentioned you have a podcast. You've got uh the show coming up too, which people should look into, right? It's the uh Best Stock Ideas uh Best Stock Ideas online summit March 11th. Yeah. Where else can..."
"Tomorrow? It's tomorrow, 10 to 5. $99. Dude, you can't buy a dinner for $99. And I say to people like, if you're not willing to pay $99 for this, then you're not serious about then you know, you don't know what you're doing. You're not serious about your money. You know what? I'll make this promise to you folks. Trust me on this one. Anyone comes to this conference, they don't like what they heard, but explicitly tell me what they didn't like about what they heard. Not just they didn't like it, I'll refund your money. Conferences like this cost thousands of dollars to go to. This is unbel I mean, you know, I'll I'll send you the link. I just I just did a little testimonial for the conference yesterday. I can't believe what we've created. But this is the high-tech world we live in. So to answer your question, I'm on Twitter, Monx, Gobble79, Substack, YouTube. This se this conference tomorrow is going to be phenomenal. If you can't make it, don't worry. Replays will be provided within 24, 48 hours. Try or like, and if you don't like, I'll give you your money back. So..."
"All right. Good. Thanks very much. We'll put the links down below. Follow George, follow his podcast, sign up to his conference, all that jazz. Thank you so much, George. Great to meet you and uh looking forward to having you back again in the future."
"Thanks, Dave. It's a pleasure."
"Thank you for watching. And don't forget to like, subscribe."