← Money Rehab with Nicole Lapin
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- [00:00]
Nicole Lapin
Imagine if you had a co host in your life. You know, someone who could help manage your every day and do the things that you don't have time for. Well, unfortunately, that's not something we can opt into in life, but it is something you can opt into as an Airbnb host. If you find yourself away for a while like I do, maybe for work, a long trip or a big life adventure, a local co host can help you manage everything from guest communications to check in to making sure your place stays in tip top shape. They have got you covered. These are trusted locals who know your area area inside and out, giving your guests a warm welcome while you focus on your own starring role, whatever that might be. You know that I love how hosting on Airbnb helps you monetize your home, an asset that you already have. That is the holy grail. And as a longtime fan of Airbnb, I have been telling everyone I know that they should be hosting, too. But some of my busiest friends have been overwhelmed by this whole idea of hosting. But thanks to the new co host offering, they have finally signed up. So if you've got a secondary property or an extended trip coming up and you need a little help hosting while you're away, you can hire a co host to do the work for you. Find a co host@airbnb.com Host, I'm Nicole Lapin, the only financial expert you don't need a dictionary to understand. It's time for some Money Rehab. Of all the celebrity couples to break up this year, did we really think that Trump and Elon were gonna be one of them? Today I'm unpacking some of the headlines that have had the biggest impact on the stock market with Dan Nathan. He is the principal of Risk Reversal Advisors, who you've seen a ton on CNBC and have heard on his podcasts, like on the tape. Today we talk about how the Trump Musk fallout will affect Musk's companies, the taco trade, of course, and what Dan is super bullish on right now. Dan Nathan, welcome to Money Rehab.
- [02:00]
Dan Nathan
I'm really excited to be here. Thanks for having me, Nicole.
- [02:03]
Nicole Lapin
Oh, my God. We gotta start with the Romeo and Juliet story of our lifetimes. My God, it's all still unfolding right now. The Elon Trump drama. Have you, like, have you been clinging on every tweet? I'm still going to say tweet about all of this.
- [02:22]
Dan Nathan
Yeah, no, it was. It was playing out, actually, right as we're starting fast money last week on Thursday and it was Pretty fascinating because there are market implications for this. There were like on a macro level, the way in which the President is presiding supposedly over this economy, the trade negotiations, right, the tax bill. And so when you see the market moving around and you see Elon Musk's main company that is publicly traded lose hundreds of billions of dollars in market cap, it's just fascinating to see. It felt a little surreal to have the wealthiest man, people throw that around. The wealthiest man in the world, he is worth hundreds of billions of dollars. He controls some of the most important companies on the face of the Earth with SpaceX and Starlink and the like. And then a trillion dollar market cap company, and then the President, United States, who until just a few weeks ago when he got into crypto was a fake billionaire, right? So this is all playing out and there's massive implications. And I'll just say this for me, who cares about Tesla and who cares President's ego? But we're engaged in some really high stakes negotiations as it relates to trade, as it relates domestically, right, to this, this tax plan that's getting some pull back from the President's own party. There's a bunch of geopolitical hotspots going on. And if you are our adversaries, you're sitting back and you're watching us eat ourselves from within. And so that's one of the takeaways that I had. I think that the thing has cooled down a little bit and so somebody must have flinched a little bit. But at the end of the day, I can't imagine that this is done. Musk went full Epstein, which at the end of the day, it's really hard to put that genie back in the bottle.
- [04:03]
Nicole Lapin
He tried, right? He deleted that one, I think.
- [04:06]
Dan Nathan
All right, I have a major bone to pick with that. So when Elon bought Twitter, he called himself a free speech absolutist, right? He is this free speech warrior. And then you go and you delete these tweets. What does that say about his positioning? I think most folks who actually have a beat on the guy realize that was a bunch of bullshit.
- [04:28]
Nicole Lapin
Let's talk about Musk's companies. You mentioned Starlink and SpaceX. Often Tesla is used as a proxy for those companies because those are not public. Are there any long term market implications for Tesla? Last year, Elon's companies were promised, what, 3 billion in nearly 100 contracts with 17 government agencies. He was really like, we saw him looking to get hooked up in a lot of ways for his involvement in the election. Now Trump is threatening to cancel all of them. So what do we make of what's going to happen with Tesla because of that?
- [05:02]
Dan Nathan
Yeah, just real quickly on SpaceX. So those were the ones that he was threatening. Obviously, one of the things that supposedly sparked a lot of this kind of little feud was that they were in the tax bill going to get rid of the tax credits that go to buyers of Tesla. So that was one thing as it relates to SpaceX, the idea that they were going to pull contracts, astronauts that went up on a Boeing rocket, these are NASA astronauts last year, and they were stuck at the space station for what, six, nine months or something like that. And it took a space SpaceX rocket to go back up there and get them. That's not ending anytime soon as it relates to the SpaceX. And one of the things that after this feud supposedly died down, I don't know if it was Sunday or Monday, Elon, he tweeted something that we have the rockets, like, something like that. So basically they're a single source right here. So I think that's going to be okay. As far as Tesla is concerned, they have a big problem. They're in the midst of a massive price war, predominantly with ch. Chinese EV makers. Half the that Tesla make are made out of Shanghai, where they have a factory. There's supposed to be a lot of Chinese demand for their cars. They have a big problem, though. Their cars are too expensive. Over there in China, they have a company called BYD that Warren Buffett invested in. He didn't invest in Tesla, he invested in a Chinese EV maker. And they are basically bringing prices down so dramatically that they've taken a lot of market share from Tesla and in China. So they have a real problem there. Tesla's demand right now, even in the United States, they've gone from 85% market share to less than 50%. That is a huge problem because some of these other automakers here in the US are basically gaining some share. They're coming up with better products at cheaper or at least competitive sort of prices. And then you also have the Europeans, you have the Germans on the higher end coming out with a lot of really nice EVs that compete with Tesla on the high end. And then you have the Koreans and a whole host of other automakers that are making cheaper cars right now, probably better quality. So I think evs, at least as it relates to Tesla, their best days are behind them. And Elon kind of knows that, which is why they're pointing investors towards robo taxi to compete with Wh. And ultimately the idea is to put Uber out of business. And then you also have this situation where they're focused on robots, which is not something I take the over on when that's going to be. So most of the value in Tesla stock right now is about Robo taxis and robots and not EVs.
- [07:34]
Nicole Lapin
So what's the over five years?
- [07:37]
Dan Nathan
Yeah, one of the things, and I think you know this, Nicole, because you've probably been following him and his ascent over the last, call it, 15 years since Tesla went public, he's often over promised and underdelivered, at least on timelines. I think a lot of the products that he's said he's going to develop, he does do that. And with EVs, he's basically pushed forward the adoption of them by being first to market here in the US with an affordable car. Now they're not so affordable anymore and they're not going to be that affordable. They don't get those tax credits. So at some point where there'll be humanoid robots that are useful, probably first as it relates to manufacturing, they're going to be in factories and the like. And there are other companies out there who already have robots in factories. One of them I interviewed recently, the CFO of a company called Agility Robotics. So they're out there right now, but I'll take the over. The other thing is, as it relates to Robo Taxi, they're really way behind Waymo. Waymo is owned by Google. So at some point, or Alphabet, the parent of Google, at some point it makes some sense that they will play some catch up. Elon is a very innovative guy. He has some of the best engineers in the world working for him, but they're behind the eight ball right now. So I'll take the over on robots and I'll take the over on Robo Taxi. And that to me is probably three to five years.
- [08:51]
Nicole Lapin
Okay, so all of this drama with Elon and Trump, you said somebody flinched. And this is part of a bigger trend that we're seeing of who's going to chicken out in a big old game of chicken. Now we saw it with Elon. We're also seeing it on a global stage, which I think you're right to note out is the most important part of this. The rest of the countries are laughing at us doing all this Twitter drama. So can you explain what the taco trade is and how traders have been using it?
- [09:21]
Dan Nathan
Yeah, so it was an FT reporter or I think an opinion writer just about two weeks ago. And they were talking about the way this tit for tat has been going with this trade war that really started with Trump, obviously, back on April 2nd. And the ridiculousness. If you think the taco trade is ridiculous, think about that. Trump named, named this Liberation Day, April 2, right. This is where we threw huge tariffs, first on our biggest trading partners, which are our allies. That's Canada, Mexico in the EU and then they got to China and they threw 145 tariffs on there. Well, the stock market started selling off dramatically, right? The treasury market started selling off, meaning yields are going higher, which a lot of things like mortgages are based off of. Right. So mortgage rates were going higher and the US Dollar being sold, Right. So you had this crazy market dislocation sort of situation. And then Trump flinched, right? So they basically started carving out different products that wouldn't have these crazy tariffs. They took a bunch of them off, right? The Chinese, actually, they put other tariffs on our goods, but at the end of the day were much lower than ours. So he chickened out there. Then he started making some exemptions for automakers here and a whole host of other things. So at the end of the day, I think investors at least have gotten conditioned to. The markets can push him around, the markets can make him change his view. And that's really what the Trump always chickens out trade was. And Megan Casella from cnbc sitting in the Oval Office. And I know you've been in some really important rooms with some really important people, and you have a choice. You can ask the tough question, right? That person is going to get really pissed off at you about. Or you can sit there and be an access journalist and not ask the tough question. And she asked him if he had heard of that. And you could just. It incensed. So I thought that was really interesting. And again, it set the stage for him to figure out, how bold does he want to be, how hard does he want to push, whether it's President Xi, whether it's Elon Musk, these sorts of things. And at the end of the day, I just think he's like a big bully. He's one of those sorts of guys. What do you do with a bully in the schoolyard? You go and you smack him right in the face and you see really what sort of fortitude he is. And I think Elon did that. Now, Elon Musk pulled back a little bit. Better senses, probably. We started thinking about what this meant for his companies, which was your original question. But at the end of the day, somebody flinched And I wonder, and I know this sounds kind of silly, if the Secret Service got involved. Because if you have the richest man in the world, and I say this all the time on CNBC and people don't love it so much, if you took every Bond villain over the last 50 years and you smashed them together, that's what you get with Elon Musk, right? And so you have this guy who's got this huge platform, he's got all these really companies, and he is suggesting that the President of the United States is a pedophile. And he got the receipts for it, right? At some point, we know what happened with the Epstein and all this other stuff. You remember Pizza Gate, they had guys showing up some pizza shop with guns and stuff like that. I wonder if the Secret Service said, you better tone this down because the potential, my view, words can be violent. And I think that that's the sort of thing in the place that we live in right now where you have a guy like him with a platform, like he has, with some followers that are pretty fer. So I think it could have been a combination of a whole host of things. But at the end of the day, President Trump also realizes that without Elon's support, he might have had a much tougher chance of getting elected and getting the House and all that sort of stuff in the majority, a deeper majority in the Senate. So at the end of the day, he had a lot of incentives to push back to or pull back.
- [13:01]
Nicole Lapin
I've long thought that Liberation Day was a big negotiation playing out on a global stage. Where he went, he overshot, and he was always going to come back. But you're seeing this negotiation play out. So he couldn't just say, psych, just kidding. I'm going to come down and we're going to meet in the middle. So this taco trade, which he also came out and tweeted, like, don't call me Taco Man, Orange Man. I don't even remember the whole thing. In the backdrop of the Chinese US Sino discussions going on right now, clearly Trump hates this perception of backing off. Do you think that because of all this taco trade talk, say that 10 times fast, is he going to negotiate harder?
- [13:44]
Dan Nathan
Yeah, no, that's a great point. I've actually been in that camp. He's one of the guys, and we saw this in the first administration, he's one of those guys that can easily get emboldened. He doesn't always think about things particularly rationally. He's very transactional. He thinks about Himself, he doesn't think about the interest of his constituents and certainly not of both sides of this country. And obviously we're very divided. So to your point, if he's being ridiculed in the press, if he's being ridiculed by the stock market or investors suggesting that they know how to play him right. As it relates to the markets, and then he's being ridiculed by a guy that he thought was his partner in crime. I'll just use that expression right there because there was a lot of bromance. Yeah. The bromance I think was born out of self interest. Right. And so I think you're 100% correct or at least the kind of thing that you're suggesting could be the case is that the more he gets ridiculed, the more likely he is to kind of hunker down and bold in his, his views. But again, prove people wrong. Wrong. Yeah, but he hasn't demonstrated that that is actually worked for him in the past. You know what I mean? So we'll see. This is a little different now because we're talking about a trade war. The last thing we really want to be is in a protracted trade war because our growth is likely to be slower than that of the rest of the world. Because think about this, if we're putting tariffs on all imports here, then sooner or later somebody has to eat that higher tax. Right. Whether it's the importer or whether it's the end market, whether it's a consumer or a business. Right. You either have to decide whether you want to raise prices and put that on the basically you want to make your consumers or your buyers eat that or you do it, which it starts eating into your margins, which makes you possibly fire workers less capex, less R and D, a whole host of things. So again, I think the risk here is that we have a protracted trade war and the US Suffers first and they suffer in slower growth at its time where unemployment is something that is very much on the, on the table or at least the something that the Fed is very worried about, the US Federal Reserve who sets interest rate policy. And I just think we're in a dicey situation and the longer we play chicken with the global economy, the more likely is some sort of economic accident that puts us into some sort of recession both here and abroad. And I think that's something that the stock market has been pretty good at sniffing out in the past. And I suspect we're probably pretty close to a point where we've made back all of the losses from April that seem self inflicted. So at some point something's got to give here. We're either going to back down totally and the stock market can keep going, or we're going to get back to a really adversarial sort of stance and then the stock market is going to tell us that things are not okay and the potential for a recession is much higher than some folks think.
- [16:34]
Nicole Lapin
We'll find out soon enough. The 90 day pause on the reciprocal tariffs are supposed to expire in early July. What do you think is going to happen?
- [16:43]
Dan Nathan
I mean, listen, Trump did this for four and a half years last time around. And when you think of just some of the things like look at what's going on in that la, in your hometown right now. Okay, so we're having these. And you could say the reasons in which we're having these protests, maybe they're legitimate on some level. Right. But the. There's no reason ever for like violent protest. And normally in the history of our country, or at least recent history, you have the local police force, they deal with this sort of stuff. They don't last for particularly too long. Hopefully there's not too many injury or fatalities on either side of those sorts of situations. The idea that, that he's sitting there tweeting and taking some sort of joy, that this is happening in a blue state, it's happening in a state where he does not like the governor. He's tweeting about him and calling him rather than Newsom News scum who does this. If this was one of your children, you take away their cell phone, you put them up in the room and you wouldn't let them come out until you change their behavior. And this is going on on a national sort of scale. So for me, I think the likelihood of it being tamped down maybe between him and Musk until Musk lose again. Because we know that he often throws hissy fits on Twitter on his own platform. So I think that if it's not between the two of them, it probably manifests itself in the form of like surrogates for them one way or another. I just don't see how you can clean up this relationship, especially after the first buddy stuff, the bromance stuff, the hundreds of millions of dollars that Elon has spent and also committed. Right. To the Republican cause or the MAGA cause. I'd just be really shocked if this thing just dies down anytime soon. Soon.
- [18:23]
Nicole Lapin
Hold onto your wallets, money Rehab will be right back. And now for some more Money rehab. You mentioned the Fed. What do you think is going to happen next week? Do you think we're going to see rate cuts?
- [18:42]
Dan Nathan
Let's be clear, Jerome Power, how he served this country. President Trump nominated him and he got approved. You know what I mean? This was the first time around. This is back in 1718. He was Trump's pick, right, for Federal Reserve. So here we are. He's got one year left in his term. He's been putting a lot of pressure on him to lower interest rates. Trump thinks that that's going to be some sort of stimulus for the economy. Trump wants a good economy. He also thinks it's going to juice the stock market. So June 18, a week from tomorrow, Wednesday, when whenever this thing drops, you know the Federal Reserve is going to basically set policy. If you look at CME Fed funds futures, that's suggesting what's going to happen right when the Fed meets, it's basically a zero percent chance that they're going to lower interest rates. And then you have to look at the July meeting. There's not a meeting in August. And then you look at September and the probabilities there are that you're going to get a 25 basis point, a quarter point cut to the fed funds rate, which right now is sitting at four and a half percent. It doesn't mean anything. It'll be symbolic. Right. They say this about Fed policy, the long and be variable lags of the policy. Right. So if you cut interest rates now, you're not going to see the benefits of that in the economy for months to come, maybe quarters to come. Right. So I think the Fed doesn't appear to be in any rush. They're worried about inflationary pressures that might come from a protracted trade war and they want to sit by, especially when you have economy that's doing okay right now and you have growth, you have inflation that's coming down. That was one of the main reasons why the fed back in 2022 started raising interest rates. So I don't think the Fed is in any rush right now. But on the FL of that, President Trump is certainly in a rush and is going to continue to put a lot of pressure on him. I would expect that to get really tamped up into the meeting and definitely out of the meeting mid next week.
- [20:26]
Nicole Lapin
One story you say that isn't getting a lot of love right now is what's going on in Japan. You think that is a big deal. They're at a risk of a recession. Can you explain what you're seeing and what we should be watching more so than we are.
- [20:40]
Dan Nathan
Yeah. So going back maybe 40 years or so, you might be a student of history as it relates to markets and global economy and the like. A lot of folks have suggested that our situation with our national debt and deficit spending is not too different than what happened 40 years ago in Japan. And so this has been a country that has been defined by low growth. They have a big demographic problem, they're not having much enough kids in that country. And you look out when you have those sorts of situations over the history, when you have declining demographics, that really puts a lot of strain on your economy. Then you look at the debt levels that they had for the last few decades. As I suggested, it just kind of leads towards slower growth and so bring it back to here in the U.S. well, what does that mean for us? It's like we have this massive debt, we have this massive deficit spending. We look at Japan as some sort of analog here. And you say to yourself, we don't want to become Japan because if you think about just again, the slower growth. So in the Japanese markets, for instance, there's a lot of investors who've been selling their debt, taking the money and buying higher yielding debt. And one of the reasons why we had this disconnect between the dollar being sold and Treasuries being sold during this trade is that you this idea of US exceptionalism that whether it's our democracy, whether it's our economy. Right. A lot of folks were starting to question that, selling dollars, selling Treasuries, that sort of thing. And so Japan, the potential for them to continue to sell our Treasuries, our dollars, and they're big holders of our Treasuries, the inner relation of that is not particularly good. So at the end of the day, a lot of countries want a weak currency. If they're selling ours, that means theirs is getting stronger. And that's something that can be a headwind to, to growth.
- [22:22]
Nicole Lapin
I don't know, Dan. We've been talking about this Japan population situation for the last 10 years though.
- [22:28]
Dan Nathan
Yeah. These are the sorts of things that take some time. Right. We all grow old slowly. Right. And so at the end of the day, it's not just Japan. China has a huge problem. There's some estimates that suggest that their 1.3 billion population in 50 years is going to be 800 million. And if you think about this kind of aging sort of population and you think about the lack of children that are being born, and this is one of the reasons why China went from this one child policy, and now they're basically giving folks money to have more children. And so Germany's got a very similar problem. Ours is much less so. And when I look out and I think of just the Chinese as our major adversary, the Germans as a major economic power in Europe, Japan, one of our closest allies in the Pacific, and they all have this demographic problem, if we're looking out the way the Chinese are out, 30, 40, 50 years, we should say to ourselves, we're in a better position. And this is one of the reasons why I don't think any, any American on either side of the aisle thinks that we should not be standing up to the Chinese the way that we are hoping to with this trade war, because there's lots of geopolitical ramifications of this. Right. The buildup of their military versus ours and our capabilities. And we are 100% reliant on rare earth materials that go into a lot of defense apparatus here. Right. And that's at the heart of this trade war. So when I think about demographics, I think about the strength of these economies, I think about who's willing to play, play the long game, and I think that is the Chinese. And we have to start rethinking some of these alliances that we have, because at the end of the day, if we're going to pull back from our commitment to NATO, if we're going to pull back from our commitment, let's say, to Taiwan, from Ukraine, a lot of our allies are going to start thinking differently about us. And then we continue to have this situation where what are some of the pressure points they have? Well, we have the Japanese, like we just mentioned, some of the largest holders of our Treasuries, some of the Europeans. Right. So I think there's just like, broader implications than just the way we think about the interrelations between our economies. And this is something that I think is, again, it's going to play out over many decades, but the Chinese are thinking out 50 years. We're thinking about every two years with the midterms.
- [24:41]
Nicole Lapin
Yeah, maybe. But also, isn't the president going to give $1,000 to new babies born? We're not cranking out the babies either, Dan. I just did. I missed the savings account by two weeks.
- [24:54]
Dan Nathan
Yeah. Let's say we basically have a 330 million population. We have basically 4 million babies born a year here in the U.S. just think about that. So you give me $1,000, you're talking about $4 billion. Right. And if you think about what that might be by the time they're 18, because I think that's what they're suggesting, that you might have access to that money. It's just not material. Now, if you tell me that it's going to stimulate a younger generation investing and learning how to grow our savings rate, well, then that's great, because one of the issues that our country has, especially relative to China, they have a 40% savings rate. Okay. We have a 5% savings rate. So we're arguing with them about increasing their consumption for our goods. This is a big part of this whole trade deficit that we have with them. But they have a 40% savings rate and we have a 4%. Just to say that again. So it's really going to be hard to kind of reorient the way our different populations consume. And so that's one of the things you could say Trump accounts this and that or MAGA account, it doesn't really matter. At the end of the day, they're just rounding errors and they're, to me, they're more political than they are policy.
- [26:05]
Nicole Lapin
Yes, but they don't have to be because savings is not political and we should get that up regardless.
- [26:11]
Dan Nathan
Right. But let's just think about it this way. The people that, you know, $1,000 would most benefit, as it's compounding hopefully tax free over a long period of time, are now not people that are likely to invest. They live paycheck to paycheck. Right. And this is one of the reasons why we have this massive income inequality in this country, because we haven't seen wages keep up with inflation and the like. And we have a lot of jobs that are not particularly interesting to most citizens here. Right. So the idea of increasing the savings rate or the investment rate from lower income parts of our population, it just doesn't bear out. It's just not something that's likely to happen. It's not $1,000 per kid is going to change a whole heck of a lot of that.
- [26:51]
Nicole Lapin
How do you think the tariffs are to shake out before we get to some of your picks for the year and how they're doing so far?
- [26:57]
Dan Nathan
So let's start out with what happened in the first Trump administration. Right. Their first economic legislative agenda was to get tax cuts for corporates and higher earning consumers. Right. And so they basically borrowed a trillion $5 from the future. They gave it to corporations. You know what corporations did? They bought back a trillion and a half dollars worth of stock over the next two years after the tax was. And Then they went after, after China with tariffs. This is 2018. They put their first, the first tariffs on Chinese imports. And then what happened is they kept negotiating just like they're doing right now in London. They did not have an agreement on a phase one deal until January of 2020. And then we had Covid and then they stopped talking. So it took nearly two years to have a phase one deal. So the idea right now that we are going to have some sort of grand deal deal after two or three months just doesn't seem particularly likely. And it goes back to what we were talking about before, that the Chinese are taking a long sort of view of all of this. Right. And they know this goes back to the taco trade. It goes back to the fact that they are one of the largest holders of our Treasuries that they could sell. That it comes back to the leverage that they have with us over rare earth materials that again go into our defense apparatus. They go into our auto industry manufacturing, electronics, a whole host of other things. 90% of the rare earth materials that go into those industries come from China. So the idea that we're going to have some resolution on the trade war anytime soon is not something I would be holding my breath on because they screwed up. They thought that they could go after a trade situation before they could do taxes. And the last time around, the tax cuts gave the markets a tailwind and they gave the economy a tailwind. And then they could deal with tariffs, which actually, you know, they were blunted to some degree because of the tax cuts and the like.
- [28:49]
Nicole Lapin
So it was the wrong order of operations.
- [28:52]
Dan Nathan
Yeah, I'd like to think that they were confident about each, but right now with the tariffs, it seems like that there's not likely to be some sort of resolution. The Canadians and the Mexicans are two biggest trading parts have not even come to the table to negotiate. The EU is supposedly negotiating, but they don't even know what they're negotiating for. So if we can't get this right with our allies, then why would we be able to do it in short order with one of our biggest assets, a series?
- [29:18]
Nicole Lapin
Okay, let's check your confidence on your picks for the year. We're halfway into the year. Cuckoo crazy. You came up with an acronym. I'm not sure how I feel about it, honestly.
- [29:29]
Dan Nathan
Gen AI. Let me take a step back here. So this is fast money, right? So we have five traders, and I'm doing that in air quotes, who are on this panel over the course of a week. And we have A host. And so this is like this little game that we've been playing I think for five or six years where each trader at the start of the year they come up with an acronym. Acronym which is made up of the first letter of a handful of stocks and have somewhat thematic. Right. So my view coming into the year was that the generative AI trade has been very narrow in the stock market. Some of the earliest beneficiaries were Nvidia, that makes the high end GPUs that go into the servers, that go into the data centers, that train the models. Right. And that stock has had a massive run over the last three years. It's gone from a $300 billion market cap cap to three and a half trillion dollars that is unheard of in I my lifetime to see that sort of gains. Microsoft, Google, Amazon, so they call those guys the hyperscalers. Meta had all benefited. So all of those stocks, they called them the MAG7 had benefited over the last three years as this generative AI trade became very much in vogue. Trillions of dollars in market cap. So my view coming in that you would see a broadening out of this theme to other stocks, other companies that have been left by the wayside. So Gen AI Global found, okay, they make chips. They're very similar to Taiwan semiconductor that makes 85% of the high end GPUs that Nvidia makes. Right. The next one was Electronic Arts. This is a gaming company. There's a whole host of things that generative AI can help them as far as designing games and make it much cheaper. Right. The next one was nxpi, they make chips that go into other electronics and other devices that will benefit from like co pilot PCs and stuff like that. So NPI, that was the gen. So generative, the AI was AMD, which is supposedly a competitor to Nvidia, Nvidia and the I was in intel at some point that intel is going to get their act together from a manufacturing standpoint, a design standpoint. So that was the idea. I also said with this caveat and we're goofy on the show, that's my theme. But I wouldn't buy those stocks. Okay, so it was more of a game. And I know that sounds like making excuse I said it on the air. Whenever we get questions about it from viewers, I just say I just can't. Because there's no way that you could pick a bunch of stocks on the first of a year and not have the ability to change them in and out. Maybe one rallies a lot, you Want to take profits, Maybe one is going down a lot. You want to cut your losses. That's how I think about trading stocks.
- [31:56]
Nicole Lapin
Okay, so you had your acronym gen AI. You didn't buy any of these stocks?
- [32:01]
Dan Nathan
No, and we're very clear of it. It's not. That's not what the game is. The game is like something to come up with that. That's thematic in a way.
- [32:08]
Nicole Lapin
I got it. Adorable. Such a fun game.
- [32:12]
Dan Nathan
Actually not. The game sucks. We had a live event a couple months ago where 125 viewers paid to come see the show. Then we had Q and A after. And they often ask final trade. They leave one minute for each one of us to say something about a stock. They asked us about this acronym acronym game, that sort of thing. And I'm always like, but they're dumb. You know what I mean? I grew up on trading floors. That's not how people look at the stock market. That's not how they trade stocks. So hopefully the other 59 minutes that we're focused on breaking down the news of the day and what might happen tomorrow or next week or something like that, hopefully that's a lot more useful than the final trade or acronym game.
- [32:49]
Nicole Lapin
Okay, just so to check the stocks within the game, Global foundries down almost 8% year to date. EA basically flat NXP up 6%, AMD up 5% and intel is scooching up 3%. I own a little bit of intel.
- [33:12]
Dan Nathan
Percent because it's up 8% today, Nicole, so.
- [33:15]
Nicole Lapin
Oh, excuse me, excuse me.
- [33:17]
Dan Nathan
Look at you, up 8% on the day.
- [33:19]
Nicole Lapin
So excited.
- [33:19]
Dan Nathan
Well, and then you have a NASDAQ that is up three and a half percent and you have an S P 500, which is up two and a half percent. So again, the idea. And when you think about a portfolio of stocks, you know, the idea that you're going to have some hopefully outperform the broader market. That's how you add alpha to a portfolio. And then most of them are going to be in line with the market. And the ones that are underperforming the market, you probably want to recheck your thesis. Thesis of why you bought them, why you own. Right. And that. So to me, that's how I think about picking stocks.
- [33:48]
Nicole Lapin
Did you come up with the acronym before you came up with the stocks don't lie?
- [33:51]
Dan Nathan
Yeah. That's why the game is done.
- [33:52]
Nicole Lapin
Okay.
- [33:53]
Dan Nathan
Like, so. So to me, I'd much rather say, yeah, I think there's going to be a broadening out of the generative AI Trade. Because people are full up on Nvidia, they're full up on Microsoft, they're full up on Google. So you might want to look at some of the second tier names that have the ability, ability to play catch up. And if any one of those, let's say AMD came out tomorrow and they had a chip that performs as well as Nvidia's chip and is much cheaper. If you're a company that's trying to take market share from the market leader, how do you compete with them? If you have the same product, you have to compete on price, you have to make your product cheaper than the market share leader. And that's why the bet would be okay, if AMD can do that, if intel can do that, then you're going to have a massive cash catch up with those names relative to some of the outperformers over the last couple years.
- [34:41]
Nicole Lapin
I see. So if you didn't have this acronym business, what did you buy in the beginning of the year?
- [34:46]
Dan Nathan
I tend to be a little bit contrarian. I also trade options a lot. That's a big part of my background. And I know that you guys do, on the show, you do a lot of the nuts and bolts, right? The kind of X, the no's as it relates to. I say this all the time to find folks. If you are a dentist, you are a teacher, you just have some career, right? And you can't sit there and watch CNBC all day long and you don't have a FactSet machine in front of you and you don't have time to read the Wall Street Journal for three hours a day and stuff like that. Then the best way to get exposure to the stock market is dollar cost average, let's say the major indices, right? So that would be the s and P500 or the NASDAQ. And so what are you doing there? You're setting and forgetting it. Every, every month you figure out how much you're comfortable with putting in the market. Thinking long term, you're not trading an individual stock, you're not trying to pick who the big outperformers are and you're setting it, forgetting it. Maybe it's 50 bucks a month if you're a young person, maybe it's more. And the whole idea of just automating that process, I think you're going to look back, whether it's 10, 20 years from now and you're going to say that was the right way to do it. Because a lot of folks say, you know, you know what I Love intel here. Intel is going to do this, that and the other thing. I think they're going to be the next Nvidia and they buy the stock at 30 and then it goes to 25 and then it goes to 20. Right. That sort of thing. And then they end up owning something that is just the thesis change and they're not even that close to the thesis, you know, so that's the way I think about individuals who are not focused on the stock market every day. Outperforming the stock market by picking stocks is a really hard thing to do. And it's hard for professionals often because if you look at a lot of these mutual funds, you look at a lot of these hedge funds that charge big fees, they are not even massively outperforming the major indices. And so the idea of dollar cost averaging in really low cost, whether like Vanguard ETFs, or they're just these ETFs, the SPY or QQQ, that's the best way probably for 90% of the investing public out there.
- [36:48]
Nicole Lapin
Yeah, I totally agree. But what about within that? So could there be opportunities within the ETF world, like international?
- [36:56]
Dan Nathan
One thing I'll say is this. I meet lots of retail investors everyday people, right? And they come up to me and they say, hey, listen, I bought Apple 20 years ago, right before they introduced the iPhone or something like that. Or I bought Microsoft before Satya Nadella took over as CEO because Steve Ballmer was such a disaster, you know, Or I bought Nvidia because I used chat GPT in January of 2023 and I did a little research and they make all the chips that go in there, they're going to be a huge beneficiary of that. So that's the way I think some folks, when they get confidence on a theme or whatever like that makes sense. But the idea of outperforming the market over a long term is a really hard thing for most people to do.
- [37:40]
Nicole Lapin
100% agree. All right, Dan. We end by asking all of our guests for a tip that listeners can take straight to the bank. What is the time that you needed money rehab and what was the tip that helped you?
- [37:52]
Dan Nathan
Yeah, you know, I had folks telling me when I was in my 20s and I was working at a hedge fund that if there's some sort of tax deferred profit sharing sort of situation, whether it's a 401k or something similar to that, that take advantage of it, figure out out how much money you need to live, figure out how much capital you need to set aside rainy day, fund this and that, whatever, and then figure out how much you can put away in like a 401k coming out of your paycheck tax free. Amazing, right? But then what I didn't do is think about all the other ways in which I could do that, like an ira, an individual retirement account that can compound tax free over the course of time. And so that's something I wish I did more of outside, let's say the 401k world. And part of it was for folks that are in the financial services industry. Sometimes you get a bit clouded because how close you are to the markets and you think that, well, this is a career where I'm going to make a lot of money every day being in the markets. And sometimes you don't think about what it looks like five, ten years from now. A lot of folks that I started with in the business in the late 90s are no longer in the business. They're doing other things. And so I think that if you were able to sock a bunch of money away in tax deferred CAT accounts in any which way you can do it. I think that is your sort of money rehab, especially for folks who are early in their careers and early, let's say, in their professional lives.
- [39:14]
Nicole Lapin
So that's when you needed money rehab. But you weren't broke then. You just didn't know the things you know now you know what?
- [39:20]
Dan Nathan
I knew the things. But sometimes when you're in your 20s or whatever it is, you're just dumb and you're just arrogant and you just think that this is going to be something that you're not going to have to worry about. And it wasn't too long after that period I got married and then a few years later I had kids. And then all of a sudden you start thinking about, oh, IRAs, 529s, all that sort of stuff. And the earlier you do, all of that is going to be obviously better. Like long term, it takes pressure off of you as you start aging into your career, right? And then all of a sudden you figure out you want to send your kids to college and it costs $90,000 a year to do that, right? And so the idea of compounding interest are compounding returns over a long period of time. Time, that's something that, if I could shout it from the rooftops to 20 something year old people, that's what you have to do. And so hopefully there's enough financial literacy out there or increased financial literacy or podcasts like yours where you're really trying to drill this stuff into people every day.
- [40:13]
Nicole Lapin
Yeah, we're trying, man. I can't even imagine my daughter's 5 months old, what college is going to be or if that's going to even exist when she's ready. Yes, it's true. I'm glad I didn't invest earlier. So said no one ever. Money Rehab is a production of Money News Network. I'm your host, Nicole Lapin. Money Rehab's executive producer is Morgan Lavoy. Our researcher is Emily Holmes. Do you need some Money Rehab? And let's be honest, we all do. So email us your money questions money rehab@moneynewsnetwork.com to potentially have your questions answered on the show or even have a webinar one on one intervention with me. And follow us on Instagram @moneynews and tiktokoneynewsnetwork for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.