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Chapter 1: What is the main topic discussed in this episode?
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Welcome to Property Markets. Scott is still out. He's on spring break, but we have a very special episode for you today. Today, we are discussing the market's reaction to the 10-year ceasefire, and we are also looking at an update on big tech and also the halo stocks. with the man who actually invented the term halo. This has been all the rage on Wall Street recently.
It is the new investment trade, the new investment thesis in the world of AI. And the guy who created it is here. He's in the building. Josh Brown. Josh, thank you for joining us.
I am not in the building.
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Chapter 2: How have recent developments in Iran impacted the stock market?
Josh? stocks rose, people thought, okay, maybe the straight's open now. Maybe we have a deal. Maybe we have a ceasefire. Wasn't totally clear. What do you make of how the markets reacted? What do you make of the situation in Iran? What are we supposed to do about it as investors?
So paradoxically, you think about a professional hedge fund manager, someone who like as a stated premise tells their clients, I am going to specifically navigate all of these geopolitical macro issues. I'm going to be on top of currency movements, commodity movements, oil price spikes, volatility spells and stocks. I'll be involved in
the rates market, I'm going to have a view on global GDPs by country, et cetera, et cetera. That person is collecting a fee of two and 20, and they are professing to have the ability to do this on a consistent basis.
Putting aside the madness of how impossible that sounds, I suppose there are a handful of people who have demonstrated that they can make these calls repeatedly or not lose too much money when they make a call that goes wrong because they're not a hedge and it's their life's work. It's a 24-hour, seven-day-a-week profession. Most of your audience, Ed... are not sitting in that seat.
Most of the people listening to us right now do not have that responsibility. They haven't told a third party that they are managing money for and charging a lot of money for that privilege, that they can do that. So my answer to your question would be, why try? So the paradox of the individual investor is that
By not having that responsibility, they actually are in a pretty good position to ride this out and not react to everything that happens because no one's watching. No one's paying attention. You have a brokerage account. Maybe you have a joint account with your husband or your wife. Got an IRA. You've got your 401k. Maybe you have a portfolio somewhere where you're a little bit more active.
That's fine. You're not being graded. You're not being judged. No one is expecting you to know the next move that Trump will make, the next 15 points up or down in WTI crude. It's not part of your purview. You don't have to do it. You obviously can't do it, but it's not the type of thing where you need to act like you have any sort of edge.
And so I think this is the type of market where regular investors are in a much easier position than the type of investor who is claiming, I'm gonna get this stuff right all the time. I'm gonna be at the forefront of all these trends and changes and juxtapositions, and I'm gonna figure out the puzzle. Don't bother. So I know it sounds glib. So then like, what do you actually do?
I think there's a couple of things. The first is set the rules in advance. Now is not a good time, right? In the heat of the moment, now is maybe not the best time to decide like all of the things that you're going to do with your portfolio. But when things are calm, take that opportunity to say, okay, things are pretty good. Let's say January this year.
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Chapter 3: What strategies can regular investors use to navigate market volatility?
I think that's already being reflected in the fact that international stocks are now outperforming US stocks on a one-year basis. I know it sounds crazy, but it's been a really long time since we've been able to say that.
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Chapter 4: Why are the Magnificent 7 stocks struggling while HALO stocks are gaining?
I mean, you want to fix that in some way. I mean, it's not a good thing that people woke up after the financial crisis and said, this is rigged in a lot of ways, which was true.
Right. And if that becomes a very widespread sentiment, you could knock out a whole generation of investors who come to the conclusion that this whole thing is stacked against them. And I do think that that's a negative sentiment that we... We need law and order. We need securities regulation. We need cops. We need people who are keeping everyone honest. But you're not going to get everyone.
And not everything that looks like a scandal actually turns out to be one.
Yes. Yeah. I think one thing we can take away is this should not make you not want to invest anymore. If that's your takeaway, then you're getting into real trouble.
And expect more of it in the future. Yeah. Yeah.
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Chapter 5: How do geopolitical tensions influence investment strategies?
It is true that mega cap tech is not having a great year. But even within mega cap tech, there's a pretty big separation between, for example, Meta, and Apple. Apple is not having a great year, but Apple is more on the hardware side and significantly more Halo. They will benefit from all of this AI CapEx without having contributed to any of it. Their CapEx is actually negative versus last year.
Meanwhile, if you log into ChatGPT, log into Claude, Apple's getting paid the Apple tax. It's 30% in the first year, 15% thereafter of the revenue coming from the usage of these products in the iOS environment. So Apple is Halo. It's physical. It's the devices themselves. Phones, AirPods, iPads, watches, MacBooks. et cetera. So it's tricky, the technology market.
It's tricky to say it's all doing this or it's all doing that. There's an extreme bifurcation.
It's interesting because on the halo point, it does seem as though the momentum, so just so everyone knows, you create this term, heavy asset, low obsolescence. It describes these more physical conditions companies that you're describing here. And it describes a wave that was emerging and developing over the past several months.
And it has become a very, very popular and actually crowded trade, as you point out with those charts that look like the Empire State Building. Meanwhile, the software names, the application layers have been getting absolutely battered. Companies like Salesforce and ServiceNow and even some of the cybersecurity names, eventually CrowdStrike, those companies have been getting destroyed.
And so I guess the question becomes like, at what point does either of those trades become overplayed? And when does it get old? And it does seem, my view, I mean, you bought IGV. You're saying it was more of a trade play than a real long-term investment. Maybe you can elaborate.
Yeah, because you know why? Because these things in the short term get overdone. Like thematic trades that become popular and crowded in the short term. In the short term, you're right. Like they get carried away and then there's a correction.
That's what appears to be happening in the software market.
Yeah. So look, let's talk about those software companies that I mentioned. The Salesforce's, the Microsoft's. It's not like Anthropic is launching all these products and they're sitting at Salesforce eating crayons. Like they are very much aware. Exactly. They are very much aware of how much time, energy, and money they need to put into their response to this.
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