Joel Litman: We Are NOT in an AI Bubble

In this week's Stansberry Investor Hour, Dan welcomes Rob Spivey back to the show. Rob is the director of research at our corporate affiliate Altimetry. He and his team utilize their proprietary Uniform Accounting strategy to dig through the as-reported numbers in company reports to find their true value.   Rob kicks things off by providing a deep dive into Altimetry's Defense Gold Rush webinar. In short, the Association of the United States Army ("AUSA") is hosting its annual confab in October. And it's not just the U.S. Army meeting up with the defense companies – other countries from around the world also attend with the goal of striking a deal with some of our nation's weapons manufacturers. So this is the best place to learn where the contracts are being made and where the money is flowing. But Rob says that it's not the big businesses you should be paying attention to, but the smaller ones. (0:00)   Next, Rob explains why microcaps are some of the best businesses that provide growth opportunities. The majority of stocks in the S&P 500 and S&P 100 indexes were once microcaps, and if you can find a company that has the same potential and value, your investment could soar. But Rob understands why folks are cautious of microcaps – there are some bad apples out there. That's why he and Altimetry Chief Investment Officer Joel Litman created a "Do Not Buy" list of stocks that investors should avoid unless they make tremendous improvements. And Rob says that we haven't seen such a great opportunity in defense stocks since the 1980s. (19:25)   Finally, Rob discusses the U.S. government's $40 trillion debt and why it's not as bad as people believe. The U.S.'s revenue is able to offset its debt, so it can afford to take on that amount. Additionally, Rob says that every American should want the government to run a reasonable deficit every year. That creates value for us as citizens by growing our economy. And Rob says that folks are mistaken for selling off the hyperscalers just because they've become net debtors. (34:03)

In this week's Stansberry Investor Hour, Dan welcomes Joel Litman back to the show. Joel is the founder and chief investment officer of our corporate affiliate Altimetry, where his team uses their Uniform Accounting system to look beyond the as-reported numbers in financial reports to see how companies are really performing.   Joel kicks things off by discussing the increases in the U.S. military budget and says that investors should be wary of which stocks they decide to buy. While overall military spending has gone up, certain branches like the Army have seen a decrease in spending, so it's vital to put your money to work in the right sector. Joel then shares that despite concerns over America's munitions being down and our supply-chain reliance on China, many companies are innovating to either break away completely by manufacturing what they need or substitute materials or products to achieve similar results. And Joel says that AI woes are overblown because of a few questionable stocks. (0:00)   Next, Joel explains why Altimetry uses Uniform Accounting and why serious accountants don't rely on generally accepted accounting principles ("GAAP") data alone. In short, GAAP accounting has become increasingly unreliable due to its many changes that misrepresent how a company is truly performing. Uniform Accounting cuts through the noise and creates a set standard to determine how well a business did during earnings season. And while the cyclically adjusted price-to-earnings ratio says the market is expensive, Joel says that metric is flawed and that the market is actually cheap. (17:54)   Finally, Joel shares the dynamics and problems with buying IPOs. The greatest issue is not having enough financial data and having to wait months before you know enough details to judge if a company is worth investing in. Joel then mentions one major defense business that he's interested in and believes will do well. But he says the better opportunities are in the smaller companies. These are cheaper stocks that have more room to grow and, therefore, have potential for better returns. And while these are the kind of businesses that Warren Buffett would own, investors don't have to compete with him to buy them. (40:08)

In this week's Stansberry Investor Hour, Dan welcomes Bryan Beach back to the show. Bryan is the senior analyst for Whitney Tilson's Ultimate Upside and a senior analyst on Stansberry's Investment Advisory.   Bryan kicks things off by discussing what's new in the Whitney Tilson's Ultimate Upside newsletter (previously Venture Value). Both Bryan and Whitney have teamed up to develop a new system built upon the proprietary Stansberry Score that further helps subscribers find overlooked, high-value stocks that have room to grow. The three newest recommendations that their new system discovered are already performing well. And  Bryan warns of the belief that a stock is cheaply valued when it returns so little. (0:00)    Next, Bryan shares how peer groups aren't as easy to identify as many folks believe, especially in technology or consulting companies. While a business might offer a product that competes with another company, its other services might not be related at all. And with small caps, it's even harder to find a true peer due to differing business practices. So Bryan and Whitney look at historical valuations to compare them instead. Bryan then shares how his views on the utilization of technology, such as the Stansberry Score, in investing have changed after finding one company he wouldn't have considered without it. (23:29)   Finally, Bryan mentions how Whitney's connections help provide an edge in learning more about a company and to gain wisdom that has been built up over decades of experience. One lesson that Bryan learned is that you don't need to be completely rigid in your philosophies. Near the beginning of the Russia-Ukraine conflict, he thought it might be best to recommend energy stocks in Venture Value to hedge against that , despite the fact that they weren't value stocks. And Bryan expanded upon Whitney's idea for the Ultimate Upside. (38:41)

In this week's Stansberry Investor Hour, Dan welcomes Ramin Nakisa to the show. Ramin is the co-founder of PensionCraft, a service that's geared toward providing members with the tools and information needed to make their own informed investing decisions.   Ramin kicks things off by explaining his reason for switching from a global equity portfolio to a fixed equity 60/40 portfolio. He says that after spending years investing and building up to his retirement goal, he wanted to take as much risk and volatility off the table as possible and just coast off the fixed income. And while folks tend to paint fixed income with a broad stroke, he says that it's actually nuanced. With multiple facets and sectors within fixed equity, there are noteworthy investments to consider. Ramin also gives a deep dive on the purpose of PensionCraft and what he wants members to take away from his service. (0:00)   Next, Ramin details why folks should get the "big picture" of the financial news and reports rather than try to delve into every nitty-gritty detail. Then he has a deep discussion on the Federal Reserve. While the speeches might be technical, he thinks investors can glean some insight. He also finds it interesting from a British perspective that American investors are more willing to lend money to "dot-com businesses" than to the U.S. government (by buying government bonds). While at the moment they might have moats, eventually competitors will undercut them and take their positions. And he gives his take on "passive" investing, saying that while more passive investors are emerging, there's no need to be concerned about that hurting the market in the long term. (21:44)   Finally, Ramin shares his thoughts on the hypothetical scenario of the S&P 500 Index crashing 50%. He says that despite the massive fear that it would bring, he sees that as a great buying opportunity. The markets will eventually correct, and anyone who bought during the discount will have made substantial returns. Then Ramin details why he formed his 90/10 core fund asset and his logic behind it. (40:01)

In this week's Stansberry Investor Hour, Dan welcomes Jason Shapiro back to the show. Jason is the founder of Crowded Market Report and a seasoned futures trader with a proven approach built on exploiting crowd behavior. He has more than 10,000 subscribers on his Substack.   Jason kicks things off by detailing three signals he focuses on when he wants to make a contrarian play against what the market's doing. He executes this strategy by looking for extremes in a bearish position and waits for the market to start heading in the opposite direction before making a short-term trade. But Jason emphasizes that being a contrarian isn't just about betting against the market. To be successful, you have to understand market tone, which is the sentiment that confirms your thesis is correct, and a position has reached its lowest point before it starts improving. But he only makes trades if he likes the potential risk to reward. (0:00)   Next, Jason explains the difference in focus between professional traders and novice traders. The professionals like to focus on risk to mitigate losses, while the novices focus on maximizing profits that they might not even make. And even if they are successful a few times, over the long term, they're going to lose most of the time. And that's why Jason says that you need to know why you're trading. If you know that, you become more disciplined in making trades. Jason then describes how Crowded Market Report has encouraged him to become a better trader. (19:11)   Finally, Jason shares the story of the time he spent living with monks, which gave him some perspective on life. It didn't fully resonate with him at the time, but over the years, he has learned to emphasize happiness over money, and that has given him personal satisfaction in life. He then explains why he decided to run Crowded Market Report by himself and expresses the freedom that brings. He ends things by giving listeners a dire warning about believing that they can outsmart the market. (38:46)

In this week's Stansberry Investor Hour, Dan welcomes Jim Bianco to the show. Jim is the president of Bianco Research. Since 1990, Jim's commentaries have offered a unique perspective on the global economy and financial markets.   Jim kicks things off by explaining a post he made on social media platform X, where he stated that bond traders could stop panicking once the Federal Reserve starts to panic. In short, over the past two years, when the Fed was cutting rates to curb inflation, yields on bonds have risen. So Jim believes that bond investors don't need to be worried if the Fed decides to cut rates later this year. He then discusses the dollar's position as the global reserve currency and says that regardless of anyone's plans, it cannot be toppled until another currency exists that can sufficiently replace it. (0:00)   Next, Jim shares why the bond market is the most important market – even if it isn't the most profitable one. He says that it sets the price of money, and every other investment is dependent on that basis for determining value. However, money needs to be priced properly. It cannot be too high or too low, or you'll encounter economic problems. And while Jim doesn't believe that we're currently close to a credit crisis, one could emerge without warning. (20:49)   Finally, Jim reveals his fears about persistent 3% to 4% inflation. He says that the Fed will eventually respond by raising interest rates, which will make money more expensive. Additionally, he believes that economic expansions are "murdered," which is succeeded by a recession and a fundamental change in the economy (a recent example being remote work being a common practice following the COVID-19 pandemic). And Jim says that a lot of folks aren't measuring inflation properly. He says the prices of services should be measured, not goods – and those have been rising rapidly. (36:51)

In this week's Stansberry Investor Hour, Dan welcomes Harvey Sawikin to the show. Harvey is the co-founder and principal of Firebird Management, a fund that focuses on investing in emerging markets, primarily in Eastern Europe.   Harvey kicks things off by stating that emerging market investors don't pay enough attention to politics compared with macroeconomics. He says that you can glean insight into how a country could develop if you understand its politics, especially in cases where there's new leadership. But it's still important to understand the macroeconomics, as those have been red flags for otherwise promising markets. And he shares why folks would want to invest in emerging markets despite strong growth in American companies. (0:00)   Next, Harvey explains how emerging markets view the dollar. If a country exports commodities, it might not care about the strength of the dollar. Additionally, some exporting countries might prefer to have a slightly weaker currency to look more appealing compared with U.S. companies, so traders use the local currency to invest in these markets. Harvey then gives his background with investing in AI companies (with one that went from $8 a share to $240 a share) and his thoughts on the technology. (22:38)   Finally, Harvey informs listeners that it's OK to be cautious during the AI frenzy. No one knows where the peak of the hype will be, but it might be beneficial to avoid throwing all your money at AI (especially AI companies where you can't even tell what their product is). Harvey believes that patience is the key to successfully navigating the markets, and when everyone is bullish, it's even more crucial. But at the end of the day, it's up to the individual investor – not someone pushing a stock or fund – to determine when they want to get into a position. (40:01)

In this week's Stansberry Investor Hour, Dan welcomes Brent Johnson back to the show. Brent is the CEO of Puerto Rico-based Santiago Capital and creator of the famous "dollar milkshake theory." He has more than 13,000 subscribers on the Santiago Capital Substack.   Brent kicks things off by expressing his optimism for the U.S. and believes that, despite the supply-chain issues the country is facing, it will make the changes needed to come out of the crisis. That's not to say that there won't be pain along the way, but Brent says it will be better than most people expect. Additionally, he says that criticisms of the U.S. and the dollar are valid, but relative to other countries, they're in a much better position than their peers. And he tells listeners that you can still buy gold without being bearish on the dollar. (0:00)   Next, Brent says that there's no need to be worried about gold overtaking the dollar as a reserve asset in central banks. A key contributor to that has been gold going up while Treasurys have gone down. But Brent's research shows that on a global scale, government bonds have been falling across the board. (The exception is China, due to companies not wanting to buy Chinese stocks or real estate and getting tax breaks from buying Chinese bonds). Brent then explains how the dollar will become broken the stronger it becomes, which would create more pressure on countries that have debt in dollars and could lead to a currency crisis and a great credit reset. And he shows how the U.S. could weaponize the dollar against companies that are indebted to it. (15:08)   Finally, Brent criticizes the mentality that it doesn't matter which fiat currency you're holding, because they're all going to crash. He says that folks who work, own businesses, or have exposure to the geopolitical landscape should care about fiat levels. A sharp rise in one currency compared with another has been a key component in every global financial crisis over the past 50 years. And Brent states that the order of the currency declines matters. Folks who retreat from the market out of fear could be missing out on all the opportunities that happen before a major crash occurs. (34:04)

In this week's Stansberry Investor Hour, Dan welcomes Rick Rule back to the show. Rick is the president and CEO of Rule Investment Media, which boasts more than 28,000 subscribers on Substack. With nearly 50 years of experience managing investments, primarily in the natural resources sector, Rick is an authority in the field.   Rick kicks things off by providing his long-term view on oil and gas as commodities, as well as his view on oil and gas stocks. He says that while the price of oil could temporarily decline if the conflict in the Middle East reaches a permanent resolution, current prices could be a glimpse of what's in store within the next four years. And according to Rick, many oil and gas companies are "cannibalizing" themselves by directing money away from reinvesting in their businesses and into dividends and share buybacks, which will impact production in the long term. (0:00)   Next, Rick shares his disdain for how government spending and interference have impacted both taxpayers and investors. He personally wrote an e-mail to President Donald Trump to inform him about one of the largest copper deposits in the world just sitting around. It sits on U.S. soil, but we have done nothing to begin production due to regulations. Rick then shares advice for listeners who want to invest during the oil shortage. (22:00)   Finally, Rick explains why "stingy" dividends are beneficial to investors. He goes further and reveals why capital-intensive companies should reinvest in their projects and illustrates why one Brazilian company is set up to disappoint investors who bought shares due to absurdly high dividends. Rick then states that institutional investors have been wrong about oil and gas. Many activists have predicted that fossil fuels will no longer be desired and will soon die out. On the contrary, with the growing need for energy, demand will continue to endure. (37:20)

In this week's Stansberry Investor Hour, Dan welcomes Matt Franz back to the show. Matt is the founder of Eagle Point Capital, an advisory firm focused on long-term investing. Eagle Point Capital has more than 5,000 subscribers on Substack.   Matt kicks things off by sharing the kinds of companies that he likes to search for. He says that these are "simple, predictable, and profitable" businesses that he can look at over a period of five-plus years and know where they're heading. But even though Matt's firm likes to have a long holding period for its stock picks, the team is constantly assessing and investigating what's occurring with the companies to ensure that they're still worthwhile buys. Matt then begins discussing a vertical market software ("VMS") company he likes. Despite the stock starting to decline following the "SaaSpocalypse" and more recent concerns of AI harming the business, Matt says there's no reason to be afraid. (0:00)   Next, Matt explains why decentralization is one of the biggest strengths for the company. It has about 1,500 business units that operate independently. Management looks at what works and what doesn't and shares the data throughout the rest of the business. But the individual units are still free to evaluate the practices and decide if they're beneficial for that particular unit and can implement them as needed. This allows the company as a whole to constantly innovate and improve itself. Matt then discusses the process this company goes through to make acquisitions. It's able to find bargain deals on smaller, overlooked businesses that can have a dominant role in their respective fields. And with the success that it has had with this strategy, it's leaning more into this method. (20:33)   Finally, Matt presents another company he's fond of. Its focus is mainly on coal royalties, though it also owns soda-ash assets as well. It had suffered from years of debt after investing in multiple businesses before making coal its primary business. Today, it's nearly debt-free, and while coal prices are low today, with the many mines that it owns, if the prices start soaring, the value of those mines (and the company) will also go up. And Matt leaves listeners with advice on deciding to stay long in positions in the face of potential downturns. (35:58)