Joining US now is Chris Alman, chief investment officer over at Cawsts.
Hey, Chris, it is in Vida's world.
We're just living in it, and we just keep saying that every time we seem to talk.
Does that make you nervous or does that make you feel good?
Oh, it always makes you nervous.
Think of the fact that it's grown the size of Microsoft. That's crazy. And you know, I have to say, Alex, it reminds me a lot of Intel in the nineties, where you had Intel millionaires. My neighbor had Intel, and you know, suddenly it was going to retire rich. It is amazing, but the story can't grow forever. Right now, it's just pure optimism. And that's okay. It is the new future. But let's remember there are two nine and ninety nine other stocks in the US market, and those
are the ones that matter. The economy is what matters. We don't eat in Nvidia for dinner. We don't fly on Nvidia airplanes. So there are other things that matter a ton when you're a long term investor and you own the USA.
I mean, we don't fly in Vida airplanes. Yet. Let's just keep that in mind.
So if we wind up coming off the boil here when it comes to say chips and tech, do you feel like that money just drains out of the market all together or is it a rotation play.
I think right now we're due for the summer doldrums. Frankly, you know tech can continue. But look at what we're seeing today, a record new high, but by a centimeter or a millimeter, I mean just tiny fractions higher.
I think that we'll still see that.
I want this market to continue on for a little bit period of time, But look at the consumer. Boy, we're seeing signs of cracks in the average consumer, especially middle and low income. We're getting those warning signs months ago from Dollar General and Walmart, different stores like that. Now we're seeing numbers in terms of auto loans and just credit cards. Not the sign of a recession, but
the sign the consumer is tapped out. And boy, consumer optimism, as we've seen, is close to turning to pessimism.
And that's a concern. So I'm worried about this market having legs.
But I think you and I love bonds, and I think people really need to pay attention to bonds. That auction was a good sign people have an interest in our debt.
That's important because.
We're going to be borrowing a lot more money the USA next year whoever is president and at all time records, so those auctions are really something to watch.
Yeah, and we keep waiting for, you know, investors to drop out.
We get the tick data later.
On today, and that's sort of what overseas investors are doing here with US investments, and it hasn't happened, Like the demand is still there. Do you like duration? Do you like short duration? Do you like the belly? What's the best way to capitalize?
You know, I'm a thirty year investor, Alex, so I like the curve. I'm going to extend out When the curve is is inverted and almost flat as it is, a lot of people I've been talking to are using short term CDs.
Well that's okay, but this.
The rates will drop eventually, and so you do want to extend out a little bit in duration. I would make a duration bet. I don't think the long bond's coming down dramatically. I think the Fed's proven the US economy can do okay with rates in the four to five.
Range, And so yeah, go ahead, Chris, Sorry.
No, the pressures off them to make this cut. They want a job, own the market, to be optimistic, but they don't have to make a cut right here.
Well, and then to that point, we had I think seven FED officials that blackout period is no longer all talking today, and the general message was not yet, not yet, like be patient, it might be even quarters, not months, until we get confident on inflation data. What kind of cycle do you think we're going to see a shallow cutting cycle?
What do you think?
Oh, very shallow.
There should not be a reason for them to cut dramatically. If it is, then the economy's in bad shape and we're heading for a recession. They should be able to ease off a quarter of a point at a time, very slowly. And then for long term investors back to fixed income, I think they should extend out into the curve. I think you should look at credit, look at how well high yield has done in the last couple of years.
It's remarkable. All of that points alex to diversification. And when you know every mutual fund now owns in Nvidia, almost always in the top five.
Some of the value.
Mutual funds are even creeping into in Vidia because it's driving everything that tells you you need to diversify because it's not going to grow to the moon and you need to be in bonds in your portfolio.
Where else within the market you mentioned credit was also interesting.
Where else provides that diversification.
Well, For a long term institutional investor like us, we can be in real estate, and obviously there are very different segments in real estate. I've got the office background on. You don't want to be in office right now. But data centers another tech play, are huge, but as well as the warehouses, So there are opportunities and just good old stable real estate. Remember real estate pays a nice, steady operating income. Don't investor capital gains investor operating income.
That's where most of your return comes as an institutional investor. And there's value in the private markets infrastructure. There's a lot of money in the Chips Act that they really want to see go to work, and especially in the IRA that is going to be pushed out in the next six months for long term projects and those are long term, stable returns. If you're a retirement investor in your four oh one K, you're looking for long term patient capital and I hate to say it, but in
Nvidia is not long term patient. Nvidia is a short term flare rocket. It's fun to write it, but what are you going to do next year, in the year after and the year after that. So I think you need to diversify and have a balanced portfolio.
Hey, Chris, we love getting you on. It's a good perspective to have Chris Ahman Cio over at Caulsors