Jason Jacobi, CFP® (00:01)
It’s a holiday shortened week here on The Closing Bell. I got Marky Mark Boyer, Salt and Pepper here live. What’s up, Mark?
Mark Boyer (00:07)
What’s up, Jason? I’m good, bro. How are you?
Jason Jacobi, CFP® (00:10)
doing fantastic. Hey, so we got some good stuff today. Obviously, holiday shortened week, we had a good President’s Day. So not too much in the news in terms of newsworthy topics to discuss, but I think something that we do want to touch on this week and have a conversation about is just, you know, the AI euphoria. We’ve talked a lot about AI and chipmakers, semiconductors, tech service, communication services, tech companies.
you know, is that going to fuel further market rally? So, um, before we get into that, I think it’s very interesting, right, Mark. So as of yesterday, we had Nvidia to the moon, to the moon, right? 16 %
Mark Boyer (00:51)
Nvidia! Wow.
in this type of market, when you get big moves, it’s crazy to see.
how what we call a climax, climax top. And there’s some topping signals that are happening on some of these stocks that, you know, I’m saying that, I’m not saying that, you know, I can’t keep going up, but sometimes when they just, when they just gap up significantly many days in a row, it gets, it gets pretty concerning. And we’ve talked about this on the, I think even last week or maybe a couple of weeks ago, we talked about on the podcast just.
You know, is this like 99, 2000, 2001? And, you know, we said that no, uh, because the stocks today, these, these particular stocks, um, this is an industrial kind of revolution, the AI place and these companies like Nvidia. Okay. So. I mean, think about it. Their total revenue this week got it reported was up 265 % from a year ago. Okay. 265 % from a year ago. That’s like.
Jason Jacobi, CFP® (01:39)
Yes.
Yeah.
Mark Boyer (01:55)
I mean, that’s incredible, right? I don’t even know how a company can like even manage that kind of growth. It’s kind of amazing to see what’s even happening with Nvidia, but, but you know, their data center, you know, place in a building or all this AI technology are going into these buildings and all these things, right. To get ready for this, this next wave. And so it’s just, it’s crazy. So the earnings, the point is, is the earnings in these companies are
Uh, are not like they were. There was no earnings back in the .com area. They were just all speculative. These, these are serious companies with solid earnings. And so even at their current prices, some, some would say they’re looking pretty inexpensive. And even at, even after big moves like they have, when you, when you’ve grown, you know, uh, when you’ve grown revenue or, you know, revenues, 265%, you could, you know, it looks like you can hold a pretty big PE ratio. So, but all that to say is that, you know,
Jason Jacobi, CFP® (02:28)
Right.
Mark Boyer (02:53)
you’re always going to get ups and downs. And there’s times where people like, I get a little concerned when there’s a lot of giddiness and you see these types of moves. Again, for a short term, it can be times to take profits and kind of get to the sidelines a little bit, especially if you, yeah, it just makes a lot of sense. But anyway, that’s what’s going on. The AI space I think is significant. And I know…
You know, you and I have been talking a lot about that and we have so on these podcasts as well.
Jason Jacobi, CFP® (03:26)
Those are really good points. Uh, all stuff that I think investors and, and, uh, just in our duty is as fiduciaries as educators in this space, uh, just being able to kind of decipher what’s real and what’s not right. Because there might be a company out there that might have no revenue at this time. That’s, that’s a future play, right? That’s more speculative. So you gotta be careful of those. But like you said, Nvidia, uh, Microsoft, even Taiwan semi, which had some, you know, not red flags, but more geopolitical risk with.
Mark Boyer (03:41)
Yeah, yeah, yeah.
Jason Jacobi, CFP® (03:55)
exposure in Taiwan and the saber rattling of China, companies like that, you know, like that, that are starting to kind of get into the AI rally, AMD, Salesforce, companies like that, right? Google. So, so like you said, these are solid companies with great earnings, with great earnings and earnings per share and revenue growth potential and estimates. I mean, look at back in June, when do you think Nvidia hit $1 trillion in valuation?
It was back in June.
Mark Boyer (04:25)
June of last year. What now? We’re over two or almost close to two. Yeah, right. Yeah. Yeah.
Jason Jacobi, CFP® (04:28)
Now over two as of today. Yeah. Isn’t that crazy? I doubling in less than a year. I mean, so that CEO, um, for Nvidia, he actually came out with saying, like, we’re strapped at this point in terms of, um, like supply chain, like supply that they just can’t keep up with the demand that’s going that crazy. So they’re trying to allocate to companies that are ready to use the technology rather than like, Oh, we’re building the infrastructure to utilize the technology, but we still need your chips to do it.
Mark Boyer (04:43)
Yeah.
Jason Jacobi, CFP® (04:57)
Like they’re just trying to figure out who and where these shifts are going to go to. So it’s quite interesting, but good points there.
Mark Boyer (05:04)
Yeah. Uh, yeah, it’s, it’s great. It’s crazy. But then Nvidia’s move, I mean, we talked longterm about it, but this move since really January, I mean, it’s only been, I mean, it was at $500 in, uh, which is still high and it had moved up, but it was, it, it has some resistance at about five Oh five, you know, uh, right up until, you know, January one. I mean, and then, you know, all of a sudden, you know, it broke out on the
8th of January and from 500, 520 to now you’re looking at just barely today as of this, we’re right at just below 800. So I mean, that’s a pretty significant move. And there’s even other stocks like you said that have done even more. So anyway,
You know, it’s, it’s a, it’s a unique time. This is a unique kind of rally. And we’ve talked about this in the past. This is a, you know, this is revolutionary. I don’t know where it goes long -term. There’s a lot of concerns about AI. You got to, you know, and I think, um, you know, there’s a lot of concerns, you know, out of control where that ends up going. Cause there’s a lot of, you know, we don’t really know. And the government’s trying to figure out how to get control of it. Even some of the big players, you know, uh, Musk and, you know, these different people, right. I’ve talked about.
Jason Jacobi, CFP® (06:03)
Yeah. Mm -hmm.
Mark Boyer (06:23)
You know, how do we control this whole thing? So I think there’s a lot of concern there, but you can’t argue with the fact that there’s, you know, it’s sort of a rebel, you know, it’s, it’s an, it’s a new industry that’s sort of revolutionizes, you know, tech in a new way. So see, there’ll be a lot of winners and there’ll be a lot of losers. It’ll be real important, um, for people, you know, exposed in the growth, these types of names, I just think diversification is really key. And just so our clients, you know, so people know is like, Hey,
You may not have Nvidia stock in your portfolio or Microsoft or AMD, like specifically that stock. But I know for us, a lot of the portfolio, especially in the growth side for us, we have them. You do own as an investor, more of those companies than you realize just with a good management behind that too. So anyway, make that point as well.
Jason Jacobi, CFP® (07:08)
built in.
And I think what I’m looking at and concerned about, so, you know, obviously year to date, the major indices are, are, are all up here. You know, we’ve except for small caps, the small caps, you know, lagging behind. We’re about half a percentage point down for the year. Now as Degan S and P up over six and a half respectively. And the Dow Jones is, is up almost 4 % for the year. Right. So we’ve been hitting new highs this year. What’s that? Yeah. Yeah.
Mark Boyer (07:44)
Dow and S &P are both hitting new highs. And we showed that. We hit new highs again this week. Some are saying, hey, 60 ,000, where’s the Dow going? So that’s been good. I mean, those things, NASDAQ, again, part of the tech stock, it’s interesting. We haven’t even hit a high from back a couple of years ago. NASDAQ is still actually fighting for its high, which let me see.
goes back to 16 to 12, which was in November of 21. So it’s been over two years, and the NASDAQ’s actually gotten that. So that’s interesting, you know, tech is the big name, everybody’s talking about tech, but the tech NASDAQ itself has not even hit a new high since in the last couple years.
Jason Jacobi, CFP® (08:33)
So that’s what I was saying is, is my concern and looking at this, this, the rally, especially the AI rally in the euphoria behind it is, okay, so we’ve talked about narrow market, you know, participation. Is it, is it broadening out? You know, if you look at this rally as of yesterday, both the NASDAQ and the S and P less than 60 % of the stocks in those indexes participated. There was a somewhat muted celebration among.
those companies in that index. So as an investor, as an advisor and a fiduciary to our clients, we’re looking at it saying, okay, like, you know, economy still chugging along, unemployment’s low, jobless claims, again, barely over 200 ,000 for the week, continuing claims at about 1 .8 million. So we’re still chugging along resiliently here in the consumer sector and the worker and the labor sector. So.
For me, it’s like, I’d like to see that kind of broaden out still among the indexes. We’ve got laggards, you know, obviously oil, healthcare, utilities, energy specifically, you know, which is a larger portion of oil, midstream, upstream, you know, different sectors within oil. But wouldn’t you say, you’d like to see it kind of broaden out from here?
Mark Boyer (09:47)
Yeah. Yeah.
Absolutely. Yeah. I mean, I think a lot of those other areas, you got sort of a specific tech group that’s really, you know, running the show right now. But, you know, interest rates, you know, where the feds doing those things. And we’ve talked about ad nauseum, but, you know, basically, you know, that’s what everybody’s watching as the overall economy and how those, how that, you know, how they spread out. So for a healthy market, like you just said, you know, we need to see small caps participate, which are doing better.
Um, and, uh, but they’re, you still not in the same, you know, they’re not playing this, the, the extreme positive game that some of these other areas are right now. So, you know, that’ll be a big deal. Cause really that’s the bread and I think small caps and mid caps too, you know, kind of the bread and butter of the economy. You know, it’s like where the, it kind of gives you a view of like the, the smaller consumer out there, the small businesses, all those things, how they’re doing, um, you know, so.
That’s real important to your points. Really important to see you broadening out.
Jason Jacobi, CFP® (10:54)
And can you talk a little bit? So we’ve talked about equities. Can you talk a little bit about fixed income? Can you bring up the, uh, the 10 year yield chart for us here so we can have a discussion? I think, I think it’s really key for our listeners and viewers here to, to understand a little bit more about fixed income. Obviously it’s, they call them boring bonds, right? But they’re very important in a diversified all weather portfolio, especially with, with the, the.
You know, the equity risk premium at such small margins at this point, in terms of looking at complete indexes, I mean, you could take a lot less risk with fixed income, but get equity like returns over the next few years with, with where the fed rate cuts could go. So can you speak a little bit to that, uh, Mark and, and tell us what we were seeing on this chart.
Mark Boyer (11:35)
Yeah. So, yeah, yeah. So this is a chart of the 10 year treasury yield. So basically this chart shows interest rates right now in the market. Okay. So, and specifically to the 10 year bonds. Okay. So that’s a 10 year yacht, this yield. So it’s today’s, you know, where that’s trading right now is on the, you know, 10 years out. So again, remember if you buy a bond, it’s, you’re not an
owner of, you’re not an owner like you are when you buy stocks. When you buy stocks, you’re an owner of a company or whatever you’re invested in, right? In bonds, you’re a loner. So if you buy bonds or if you invest in bonds, you’re actually loaning your money to some entity that’s guaranteed to, uh, you know, based on the parameters of that bond, they’re going to, you know, par bond is the, you know, say it’s a thousand bucks. You’re, you’re loaning.
$1 ,000 to the US government in a 10 year. And currently they’re saying that you’re going to get almost 4 .3 % where the current yield is. You get a 4 .3 % annual yield and then your $1 ,000 back at the end of 10 years. Does that make sense? Does that hear that? Okay. So that’s what’s great about bonds. Okay. Whether they’re, you know,
And this is a 10 year, you could be 30 year, you could have two year, five year, 10 year, 30 year. You could actually have, you know, T -bills that are three months. Okay, so they’re actually going to guarantee you a specific interest to a future maturity date. They’re guaranteed, okay, unless your risks associated with bonds are always the issuers risk. So the most supposedly in our…
in investing bonds, the most secure bond is what? What is it? Treasuries, right? It is US government backed by the US government. So we track the US government tenure yield or as an example to kind of get an idea of what those yields are doing. And you’ll see this one, again,
Jason Jacobi, CFP® (13:31)
Treasuries.
Mark Boyer (13:48)
Really important, let me before I move forward, really important to realize that if you buy a bond and you hold it to maturity, you get that yield, annual yield until such time as then you get your money back. Any questions on that? Does that make sense? Okay. So the question is, and what happens when during the course of that period, how come like my bond, like I bought bond or bond fund and I’m getting, you know, I like the yield on it. It gives me monthly income or quarterly income, whatever.
Jason Jacobi, CFP® (13:59)
makes sense.
Mark Boyer (14:15)
And I like that part, but how come, like when I get my statements, do my statements show that I’ve lost money in the value of the bond? You ever hear that? I’ve heard that some before, right? So that’s kind of like the big question. And here’s the answer. The answer is that bonds, there’s a massive secondary market for bonds. So as interest rates move on a daily basis, the value of your bond could either be, can move up or down based on what interest rates are doing.
Jason Jacobi, CFP® (14:27)
Oh yeah. Yep.
Mark Boyer (14:44)
And it’s always, and we talked about this before, but it’s just simply there’s an inverse relationships to the value of bonds and interest rates. So if this side represents interest rates, okay. And this side represents, so you buy a bond, par bond, you’ve got, you know, let’s just say it’s 4 % interest rate now. And, you know, here’s the value of your bonds, a thousand dollars, right? If the interest rates go down, okay. What happens to this side? Well, the price of your bond actually goes up.
Jason Jacobi, CFP® (14:54)
I don’t
price is good.
Mark Boyer (15:14)
Okay. Why is that? Well, the reason is, is because in the market, as the interest rate goes down, if you locked in a 4 % interest rate on a 10 year T -bill, right? And now interest rates go to 3 % down. Okay. And I’m an investor now in the secondary market looking for income. Your bond looks really attractive because now bonds are 3 % and you’re holding a 4 % bond. I want your bond, Jason.
Jason Jacobi, CFP® (15:34)
No.
Yeah. Yep.
Mark Boyer (15:43)
But you’ll say, okay, well, gosh, why would I sell you my bond if I’m getting 4 % and I can only get 3 % now? Well, you might sell it because you’re going to sell it to that investor at a premium. So you might get $1 ,100 for your $1 bond, your $100 more. You know I’m saying? So you get a premium because the more that moves, the more the value of your bond goes down.
Jason Jacobi, CFP® (15:50)
Yeah.
Mark Boyer (16:09)
What we’ve seen the last few years as interest rates actually you’ll see in this chart. You see this like from here. You see here all the way from here to here we see as it’s going up. This is again T or 10 year Treasury bonds have the yield has been going up. So in that case same same scenario we’ve had interest rates that started off at 3 percent. OK 3 .2 is on the screen is the low bottom left corners 3 .2 percent.
And then over the course of that period of time, interest rates have gone up. Okay. So what happened to the bond yields? Bond yields then, okay, have gone down. Well, why is that? Well, because as interest rates gone up, you’re holding a bond if you invested at 3 % and now bonds went to 5%, you can see at the top of this market and you’re a set, you got your bond out in a secondary market. Um,
Jason Jacobi, CFP® (16:41)
Five.
Mark Boyer (17:03)
Your 3 % bond doesn’t look very attractive in the current, you know, up here at 3 % at 5%, correct? So you’re like, well, dang, I got this. I’m getting 3%. I can get 5 % now. That’s kind of, that’s kind of, that’s not great. So what do I do? Well, you could, you could sell your bond, but your bond, because the interest rates have gone down, the value of your bond actually went down. So you might get 90 cents on a dollar. You know, you might get 900 bucks for your thousand. So you lost.
Jason Jacobi, CFP® (17:10)
Yep, correct.
Yeah.
Mark Boyer (17:33)
Now, again, you don’t worry about that. You’re still getting the income. You still get that 3 % and at the end of your 10 -year period, you’ll still get your money back if it’s held in the portfolio to the length of it. But in the meantime, day to day, it can fluctuate in price. So does that make sense?
Jason Jacobi, CFP® (17:34)
Principle, yeah.
Makes complete sense. And the way I like to describe that, what exactly you said to, to, to me and to our listeners and viewers here is I like to describe it as, as you know, Hey, so let’s, you know, let’s say, especially right now, right? Like feds paused, we’re waiting for the first cut, you know, at some point this year, we think we’ll get the first cut with, especially with the most recent fed meeting minutes that came out here in February. You know, so let’s say, you know, you’re, you’re, you’re extending duration. You’re buying 10 year treasury notes or, you know,
two and five year, your average duration somewhere in the three to six year range. And you see you’re, you’re, you’re loading more into those intermediate term bond funds or those ETFs that we’d like to use. Cause we think active management in this type of environment is really key, especially in the fixed income market. Right. Amen. Right, Mark. So, so with that being said is we’re, we’re basically early to the party, right? Cause we’re, we’re before rate, rate cuts start happening, which is where you want to be.
Mark Boyer (18:36)
Yeah. Amen to that. I truly agree. Yeah.
Jason Jacobi, CFP® (18:48)
You know, because that, that gap between the last rate hike and the first rate cut is, is the time to kind of add duration to your bond portfolio. If you’re, you know, if you’re able to, again, not for immediate cash needs, but again, for, for just in terms of total return in terms of, I know, taking advantage of, of where we’re at with rates. You’re early to the party, you know, so you’re being early, you know, nobody’s there. It’s not the most fun time to be at a party is before everyone gets there, but you’re able to get your food, your drink.
and you’re able to get satiated and full. And then when people start showing up, all you have to do is enjoy the good time, baby. Get on that dance floor, start dancing your booty off and let the good times roll. So that’s the way I like to describe it to clients is because once those rate cuts start happening, then you’re already holding the type of duration and the type of fixed income that your portfolio suggests or your advisor suggests.
Mark Boyer (19:27)
I agree with you.
Jason Jacobi, CFP® (19:45)
It’s good times for the next few years after that.
Mark Boyer (19:46)
And so, yeah, and we’ve talked about that in past some past podcasts too. You see that, you know, the 10 year hit a high in, in October, basically October of 2023, right at, right at 5%. Okay. And you see now this portion here, as we’ve moved down, we’ve actually, you know, rates started to come down. So why did rates come down in there? Jay, you remember what the news was? You just mentioned it.
Jason Jacobi, CFP® (19:56)
Mm -hmm.
The yeah, the rate cuts weren’t happening as of yet, or they were going to, they were going to start though in 2024, basically. Yeah.
Mark Boyer (20:15)
Correct. Yeah. Yeah. So, so they basically, Powell came out, the Fed came out and said, look, we’re probably done raising rates anymore. It’s kind of funny because if you look at this chart and that, that peak of interest rates is actually the low of the stock market at the same time. Right. So again, you’ve got to look at this inversely and as the bonds actually stocks and bonds from this point, actually started to really take off. Why? Because interest rates were coming down.
Jason Jacobi, CFP® (20:32)
Mm -hmm. Yep.
Mark Boyer (20:43)
And so we had a point here where interest rates had to come down from October down to right here at three, seven, five up until right at the end of the year. And then the, and since then now yields have sort of kind of recovered back to like four point, you know, you see this movement in here. We’ve kind of come, we’ve kind of come back up right in this direction kind of, and I wouldn’t be surprised to see actually the tenure go to 4 .5. Um, and so again, so you’re getting your yields.
As it came down here, the price of those bonds were actually going up. And now bonds, again, it depends on you, just your point, it depends on duration, but you may have lost some principal value in the near term on a fixed income if you bought them down this lower interest rates. But point is, we really, you know, again, like you said, might be early to the party. And we told it, we, you know, a lot of people were thinking seven cuts this year. And we were thinking that from the get go. And we’re not, you know, we made a point about bonds that
Jason Jacobi, CFP® (21:37)
Yeah.
Mark Boyer (21:42)
We’re very positive on bonds, very bullish on bonds, especially like longer term now, but we may not get rate cuts until the end of this year towards the second half. And if that’s the case, then we’ll be in this kind of, let’s call it a purgatory or whatever. You’re still getting the yield, but again, and to your point, really important to not throw the baby out with the bath water. You have to have a reason why you have fixed income in your portfolio. Hang in there.
Jason Jacobi, CFP® (21:59)
Limbo!
Mark Boyer (22:13)
The beauty is you have yield now and you’re still getting that. And we think that down the road, we’re going get some good price appreciation as well, like you said. So good stuff. Yeah.
Jason Jacobi, CFP® (22:21)
Excellent. Excellent. Excellent. All right. Well, that’s all we had for you this week in the closing bell. Mark and I’ll be back next week with some, um, some more, uh, show stopping entertainment and intriguing news.
Mark Boyer (22:34)
Hey Jason, before you leave, what about we opened our newsletter with a new thing. Make sure you cover that as far as we go.
Jason Jacobi, CFP® (22:39)
That’s right.
Yes. Thank you for reminding me. So Mark and I obviously have been talking and, uh, you know, there’s been some great opportunity come coming forth. Um, and we’re actually able to take on, um, a few new households this year, right? Obviously we’ve been super busy growth has been, uh, been exponential this last year and a half or two. Um, but we’re ready to take on a few more new families. So we’re offering what’s called a second opinion service. So.
Basically how that works is if you like what we do, if you’re clients of ours and you appreciate the insight and the relationships, which we value very highly here on our side of board of financial. I know Mark would echo that sentiment, but we’re basically offering a second opinion service to referrals. So let’s say, Mark, if you are a client of ours and you had a friend, a family that had an advisor that maybe.
Mark Boyer (23:25)
for sure.
Jason Jacobi, CFP® (23:38)
You know, things didn’t work out right, or they’re looking for a second opinion on their portfolios or their financial plans. Um, we’ll give them a free consultation and a free opinion on their portfolios and their plans and seeing, you know, if that’s something that, uh, that we can help them with. So, you know, if you have anybody, please feel free to reach out to us via email info at boyerfs .com. Um, you can, you know, comment on our Instagrams or Facebooks, YouTube, social media.
Um, there’s plenty of ways to get ahold of us. Boyerfs .com as well as our website and we have a contact form on there. So please, uh, you know, we have a few, few spots available where we’re busy as it is, but, uh, but would love to help anyone out that needs it.
Mark Boyer (24:23)
Absolutely love people love I want to help as many people as we can so You know what? Jay? We’re not very we’re not great sales. We’re not super salesy. So it’s it’s all it’s referrals is a big part of our business. So Yeah, if somebody needs help that, you know, send them our way. I’d love to love to at least give them our some of our insight and wisdom on that So, all right, bro. Thank you, man. Good stuff
Jason Jacobi, CFP® (24:43)
I’m so, all right, thanks, thanks Mark. We’ll see you next week. Empowering futures, nurturing legacies. That’s Boyer Financial. See you next time.
