going to cash...

is it time to go to cash in this video

we are going to talk multiple reasons

why there could actually be a case for

building a cash position despite stocks

continuously hitting all-time highs or

maybe I should say in spite of anyway

let's get right into it first take a

peek at this this is a piece from

marketer.com this is not sponsored but

what we see in this particular chart is

a tech rally that begins here at the end

of 2022 mostly because we're in what I

call an EPS hole this is when earnings

per share at companies like Nvidia AMD

Microsoft you name it have all gone

negative you're actually in what we call

an earnings recession Tech was in its

earnings recession at the end of 2022

and that's fantastic because it gave a

lot of people the opportunity to buy the

dip the question is has that dip now

rallied and is is it time to move on to

potentially cash or do you move on to

interest rate sensitive stocks well

that's what we're going to analyze and

price out in this video one of the

particular stocks that I'm paying

attention to heavily is of course Nvidia

because if you look at nvidia's forward

growth and I really want to warn folks

uh about at least what the Wall Street

expectations are on a forward Peg basis

I briefly touched on this in a Tesla

video yesterday but I want wanted to be

clear where this is coming from January

2024 the earnings per share for NVIDIA

were expected to be

1208 January of 2025 so basically the

end of 2024 right we're expecting

earnings to be 2450 that's fantastic

that's a double why would we not love

that Nvidia is doubling its earnings per

share well because the stock market

pulls this crap forward and the growth

after this is expected to be 18. 5 for

the year uh ending January 26 9.6

thereafter -21 thereafter 7.9 thereafter

and if you add these numbers together

divide them by four you get a growth

rate of between four to

5% well if I take today's price and I

divide it by those forward earnings I

get a PE ratio of

34.8% for NVIDIA and if I divide that by

just a measly 4% growth I getting uh

well 4 to 5% I'm getting a 7 to8 PEG

ratio on this company that's a sign of

what happens basically when stocks moon

on this kind of activity but then you

end up getting stuck with some flatness

this is likely to happen across the

board in fact it already is take a peek

at this this blue chart is the spread

between year on-year quarterly growth so

looking at let's say Q4 to Q4 22 Q 423

right comparing those quarters for that

magnificent 7 versus the other 493

stocks in the S&P 500 what you're going

to find is the outperformance of The

Magnificent 7 was remarkable at the

beginning of

2023 but it's almost non-existent now if

anything it's actually trending back to

the hell that we were in in

2022 that's a red flag now here's an

example of Apple having its third

consecutive weekly close below its 200

day moving average and its lowest price

since early November despite everything

else seemingly Skyrocket or at least

that's what it feels like when we're

looking at indices see remember Michael

bur's warning that indexation can lead

to a bizarre allocation of stocks and

boy that allocation is moving rapidly

now Michael bur suggested that would

lead to a valuation in underlying stocks

and an eventual crash and I think we

have to be balanced here and say that

didn't happen we didn't end up getting

some broad Market collapse because of

indexation so maybe Michael bur's just

wrong then or was wrong then and still

is now but I will tell you these inflows

into semiconductor indices if you

haven't heard of them the uh shake my

head and the socks shake my shocks and

I'm just making those up these are uh

semiconductor indices these right here

are showing you inflows in millions of

dollars and you can see that our inflow

level here on the right matches where we

were at the end of

2021 that's when we were in the massive

boom in November of 2021 the top

basically somewhat concerning something

to pay attention to but don't just pay

attention to that consider that the PE

premium so price to earnings what what

is the price to earnings ratio of growth

stocks divided by value stocks and when

you divide those you usually get an

average of a 57% premium for growth that

means if a value stock has a 15 PE ratio

you would end up having a growth stock

at a 23 PE or if the value is at 10 then

the growth would be at

15.7 right okay the average is 57 right

now folks we're sitting at

89% we have not sat at 89% actually 89%

was over here we've actually come down a

little bit we've come down to 89% but we

did just tick for a brief period of time

before Q4 earnings came out we were

actually at a premium of about

120% which the only time we've seen that

was back in the dotc bubble now In

fairness the reason it came back down to

89% is because earnings did actually

outperform so we have to be careful this

is not a guaranteed hard and fast oh

just because these charts don't look

that great you know the Market's going

to collapse you have to be careful about

running for the exits just because of

this but I'll tell you it does feel like

we've been facing Panic buying look at

this chart Tech funds on track for

nearly 99 billion in inflows in 2024

they write this cannot continue unless

of course this time is different uh

Nvidia is now worth more than a bunch of

these different companies combined the

tree that reached the sky Nvidia reached

a $2 trillion market cap in October 22

it was worth $280 billion cycles are

much faster this time around compared to

the tech bubble you do not need a fancy

detailed Excel spreadsheet to conclude

that a lot is priced into that $2

trillion and sometimes momentum bites

you in the back in the US exposure to

momentum is elevated and lately there

has been even more buying particularly

in late February a two Sigma event oh

that sounds a lot like our friend Vlad

oh the Impaler of stocks High net flows

have often coincided with the peaks in

momentum performance and yes this factor

is filled with all the hottest Tech

things okay so let's consider this for a

moment there is a lot of cash on the

sidelines yes a lot of folks say Kevin

there are $3 trillion dollar of cash in

money markets on the sidelines and maybe

that money is moving into Tech true

after all if you're going to move to

cash what you're kind of thinking of is

going you're kind of like eh I don't

need another day or two of nvidia's

performance to get my 3 to 5% I'll wait

all year to get my

5% then of course the cash doesn't have

the downside risk that potentially a

stock does but you have to be real

nvidia's earnings as an example are

really good Nvidia makes about as much

cash flow in a single business day as

Square makes in an entire year that's

$100 million per business day it's

absolutely insane in order for that to

stop you really need margins to collapse

and that's only going to happen when

competition finally catches up and even

when competition catches up you have to

catch up with

Supply so there's a lot of work to do

here now of course some folks argue well

maybe it's time to move from these

stocks over into interest rate

sensitives but the problem with that

expectation is you are making a bet that

interest rate cuts are coming sooner

rather than later and as we talked about

in yesterday's video and in yesterday's

eack on the fed I'm not convinced that

the FED is actually ready to price in

sooner rate Cuts if anything it seems

like they're expecting or trying to

plant the seeds for later rate Cuts

consider what Rafael Bostic said

yesterday he suggested that after a

third quarter rate cut it would be time

to pause in other words rather than

saying yes we're going to cut cut cut

cut cut cut cut cut or rather than even

saying yes we'll cut three times he's

like hey maybe after we cut in the third

quarter we'll pause now we didn't say

how many times but this idea of a pause

is yet another frustrating indicator of

our interest rate sensitive stocks just

way too early is it better to take some

tendies on some of the techs sit in cash

and be ready to pull the trigger on

interest rate sensitives as the time

gets closer I don't know the answers

here Goldman Sachs says this is all

justified by valuations and this time is

different JP Morgan says there's a lot

of froth in the market and you should be

careful I'm curious to see what you

think personally I never think it's unpr

to increase your allocation to cash

slightly especially if you could do so

in an ETF structure hopefully in the

future many more people have access to

that because then you can take profits

pay no taxes and move to cash it's a

crazy tax hack anyway if you want more

kind of real functional practical hacks

make sure to join us at our millionaire

Symposium June 21 to 23rd it is an event

we're holding in Vegas it's expected to

be the greatest biggest hugest Finance

event of the year and it's inspired by

just that wanting to put on the best

possible event for the YouTube community

so check it out at Meek kevin.com thanks

for watching goodbye