NVDA - How Investors Should Think About AI Micron Tesla And The Fed With Chaim Siegel

2023-04-27 08:00:00 ET

Summary

• Fed Trader's Chaim Siegel shares why broad market performance follows Micron's stock movements.
• Simplicity is king and the Fed needs more humility.
• Stocks trade on earnings.
• Tesla's problems, Nvidia's business and AI's inflection point.

Listen to the podcast embedded above or on the go via Apple Podcasts or Spotify .

• 4:15 - Simplicity is King in investing; stocks really driven by earnings.
• 6:50 - Fed doesn't realize how powerful it is - they're not humble enough, not listening enough.
• 21:20 - Finding stocks on a bottoms up basis.
• 26:24 - Why Micron (MU) is the most important stock in the world
• 28:00 - Bearish on Tesla ( TSLA )

Recorded on April 20, 2023

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Transcript

Rena Sherbill: Hi, and welcome to Investing Experts Podcast. Super happy to have you on the show.

Chaim Siegel: Oh, thank you, Rena.

RS: So share with the Seeking Alpha audience and those listening that aren't yet the Seeking Alpha audience about your approach to the markets. How long you've been looking at the markets, kind of contextualize what your role is in terms of investing analysis?

CS: Okay. So I'll let in -- let out some inside information. I just turned 50 recently so I've been following the markets, I think, since I was 15, literally. I remember doing AT&T Corporate Challenge, which I picked Ford ( F ) because they were buying Jaguar, and I knew nothing. And I didn't even -- and then I went to college with a finance degree. And I had no idea what I was going to do after that. But I really liked stocks. And my grandfather gave me some money early on. And I don't know what you say, centupled it over the course of a few years. And actually that portfolio helped me land my first really good job, which was on the 72nd floor in the World Trade Center for Morgan Stanley.

It was Dean Witter InterCapital at the time. It was like a multi-billion or multi-billion dollar fund, and Morgan Stanley bought it. And so I worked there for five years, and I was an analyst there and got really good training there. And that was kind of in the dotcom boom, 90s. So I learned a lot about the markets and tech stocks and how to build a model and what to look for in stocks, and really what drives stocks and markets.

And so I have a lot more gray hairs than then, but I really feel like having a chat on Seeking Alpha is pretty amazing, because I just don't know what I know. And when I'm constantly asked and tested and challenged or both basically just asked for direction and guidance, then I realized I have so much in my experience that just comes out. And it's really rewarding to me to share all of that. And I call it keeping it simple, which is, there's a lot of noise out there. And sometimes the market is just much more simple to look at than you think, and stocks are much more simple to look at than you think.

And I've had -- I've worked with some of the best traders out there, famous traders. I worked for Steve Cohen a couple of times of S.A.C., or this is Point72. I worked for a fund that was funded by George Soros. So I worked with some -- and the manager there was Jeff Feinberg. He was a superstar. And I worked with other guys. I had clients that I can't talk about, but they're famous guys that were in the press.

And so I think the thing I realized from all of them is simplicity is king that the guys do try to make things too complicated are basically – are not doing it. And the real leaders and the guys, managing billions are the guys that just say, the market's up. I think it's going up. The market's down. I think it's going down, and they have good reasoning behind it. But they end up knowing how to boil things down to simplicity. And even in stock analysis, where I'm just keyed in and my subscribers know it, and they learn a lot from me. And then I realized that sometimes they're coming back to me and say, hi, Chaim, it doesn't this look good, and they're just repeating back to me what -- something I've instilled in them over months and years.

And I think stocks are really driven just by earnings, EPS times PE, keeping it simple. PE times EPS gives you a stock price potential. And if you can map out a simple model, earnings model, you can see where stocks are going. So I would say my process is top down and bottoms up. And just trying to identify what the changes are, and what the major drivers are to the market. And like a recurring basis, meaning I'm looking for the same things all the time, earnings, technical trend, action, fundamentals, what the Fed's doing. And having a simple model, just keeping my arms around those same things all the time.

RS: Having an investing group called Fed Trader, I think that there's a lot to talk about now in terms of how you're looking at the market, combining the Fed picture with the more stock focused picture. And I think the point that you made about the community at Seeking Alpha and in terms of what that conversation brings is such an important point. And one of the things that has really helped me in my investing journey and also helped me understand the importance of sharing opinions about investing, and where that can come to. And I think, what's great about these conversations is it opens up the dialogue. And then I think it also includes a lot of people in the conversation that wouldn't otherwise be included.

So with that in mind, can you share with investors how you're looking at the market? We've had some analysts on talking about where they think the Fed is going to go and how they think that's going to affect the market? How are you looking at that?

CS: Well, I think my job of Fed following is basically Fed bashing, which is isn't so nice, but they forgive me. It's part of the business. But I think this recent fed is a little less humble than past feds, and like they're so sure of themselves and everything they say, but past feds have always said, our estimates are always wrong. And this is our -- what we think now, but it – and it can change, and we can be wrong, but this one, this fed is a little less humble, and they follow the markets less. In fact, Kashkari was saying, we're going to play a game of chicken with the market.

And that's not the way it's supposed to be. I think the fed and the market should work together. In fact, the fed's mechanism after following them for 20, 30 years is really just to try to move the market. And so if they can get -- if there's a recession, and they can get the market up, then business leaders will start to think, hey, maybe things are good out there. Maybe we should order more, hire more people, and then it cycles. And if the economy is too hot, then the Fed tries to slow the market, literally. I mean, their main got -- it’s the tail wagging the dog. Their main thing is to try to get the market up or they try to get the market down to sway business leader opinion and that cycles things both ways.

So I think it's this fed trying to go at odds with the market and not looking at the Fed Funds futures and not respecting that and not respecting what the main market calls are out there. They listen to economists. They have basically been wrong, but they won't listen to the market, which is very right. And I think any player in the market that tries to arm wrestle the market is going to end up getting run over.

You have to respect markets, you have to respect direction, you have to try to understand what the market is saying even if you disagree with it. The market can be wrong, quote wrong for much longer than people can remain solvent. So you want to try to figure out what the market's thinking. And I think the Fed's avoided to do that. So the Fed says they need to be tough, but the Fed Funds futures by the CME is saying that they expect one more rate hike, and then after that a couple of more rate cuts later in the year, which is a little bit strange.

So they're saying that the Fed's next hike is too much, basically, and they're going to need to start cutting after that. So -- but that's like what everybody looks at. I'll tell you what I look at. And I think this is so key. They're trying to quell inflation or slow it down. But really the stock market is also based on prices. And so inflation is also good for the stock market. So it's not just in isolation, is the fed going to raise or lower. It's what's inflation doing? And is the fed going to cause a recession?

If the Fed is not going to cause a hard recession, then the market can hold up. And so far, most of the bears, which has been both, most of the market have been wrong saying that there's going to be a deep recession. So far there hasn't. I mean, I was showing subscribers from the end of last year, and it was when I started getting bullish. I was bearish last year. I just pointed out to them that jobless claims are strong, GDP keeps printing positive numbers like a positive two and three, I said that's not a recession. Recession is negative numbers. So nobody can tell me that we're in a recession or we're going into a recession until you start seeing negative prints. Then maybe I buy into it.

So I just thought everybody was off base. And so if the Fed isn't going to cause a major recession, then the market's okay. And if the Fed allows inflation to run, that's not a bad thing for the market, the market’s prices. So if inflation and prices run, that really is good for stock market and Bitcoin and maybe oil or whatever it is. So I think everything needs to be in judged relatively, and not just in isolation, like the media wants you to focus on.

RS: So what do you think that means in terms of the rate cuts throughout the year? Do you feel like they're going to keep their word?

CS: So while the Fed has not admitted to wanting to pivot and wanting to cut rates, but if -- I mean, there was this period of two weeks where Fed Chair Powell went from like, expecting 25 basis points, expecting 50 basis points, expecting 0 basis points, expecting 25 basis points, and it just made the market nuts and it’s - it caused a couple of bank failures.

When he said he expected 50 basis point raise a couple of days later, you had some bank failures. So I don't think they have a really good grasp of how powerful they are right now, and how -- a little bit fragile the market is. So I think -- and they even are now talking aggressively even after we just had a mini bank crisis that they're talking about, no, it's passed and everything's fine, where Warren Buffett says, no, it's not fine. There's more risk, there's more bank risk out there.

So this all goes into my thinking that the Fed’s not humble enough. They're not listening enough. And so - and I've called this out. Last year, I said, when the Fed was talking, inflation was transitory and they weren't raising rates. And they said, no way, no, how, we're not thinking about, thinking about, thinking about, thinking about raising rates. And I said they're going to raise rates hard, I told subscribers, and sure enough, they did in a very fast way.

Now I think it could be the opposite. But whatever it is, I mean, that's one side is called predict the other side is react. So whatever it is, I think, they're too chicken to do anything too strong. And if they're too chicken to do anything too strong, which has been the case, then meaning like to - they have no problem to cause growth. They don't mind being aggressive for that. But to close a recession, I don't think they're confident enough or willing enough to close a recession. They're too tied in with the government and Biden, and even though they're supposed to be independent.

And I think that they'll let inflation run, which is -- meaning it'll be always a little too high. But that's fine for markets. And so as long as they're not being aggressive, I think, the market is showing very soft action. The economy's holding up. There's still a ton of bears out there. And when you have that combination, it's good. And I think there's also a chance of disinflation that they're just not catching on to, just didn't show up in the numbers fully yet. But if you look at the ISM survey -- services, which they claimed they were so keyed in on. Services ISM has started to slow and they didn't say anything about that. And that's two-thirds of the economy is services.

So I mean, I've been telling subscribers that there could be a potential Goldilocks, which was a term in the 90s, when you had growth and low inflation and productivity. I said there's a shot at that. And the data points slowly, slowly, slowly are leading to that, where growth is holding up. Inflation is slowly coming down. And if the Fed is not going to get in the way, which I think -- so I don't think they are, then, I’m - I've been bullish this year. I continue to be bullish.

RS: And what would you say, what would you have tweaked about how the Fed responded to the banks imploding?

CS: I think they should have let banks implode and the banks took up - took on way too much risk. They were under margin. And they were borrowing and everything was -- they were just losing money. And I can't believe that bank examiners didn't even see it. But these were small banks. They were not systemic. I don't think they had the web of loans and complex instruments that we had in 2008. I don't think these banks were systemic.

Nonetheless, if you see -- so I think they could have let them fail, and it would have been healthy for the economy. You have normal cycles. There's nothing wrong with letting the economy have normal cycles and the bad players fail. And then money's, economy slows down by itself. And then they don't have to worry about inflation. But what did they do? Just like the pension crisis that happened a few months ago in the UK, the government and the Fed, they can't take any pain. So they can't let the economy be a normal cycle. It’s just they don't let it happen.

And so what that means is the Fed and central banks around the world are a huge backstop for anything that could possibly go wrong, which is just an incredibly bullish building story if you think about it. I mean, I think all these central banks are way over micromanaging everything and let the economy run, and they're not. And they just, they don't want to let it go down. So if you think about it that removes a lot of risk for the market. I don't know why everybody is being so bearish.

RS: Yeah, it's interesting. I mean, what you're describing is in disagreement with many of the market observers who are like the Fed had to do that, they had to reassure the markets. The markets would have capitulated. But you don't feel that way. You think that that's a myth?

CS: Let them capitulate. Let the markets do what they're going to do. Who cares? I mean, seriously, it's a no what -- the unemployment rate is at like 3%. I mean, the economy is fine. And even if the economy was down, so what that's normal what the economy always needs to be up? No. They're creating their own problem by being so involved, the pandemic reaction created so much liquidity into the market, they themselves caused inflation. Inflation, if you think about it, is just prices of goods are going up, meaning the currency value to buy those goods is going down.

So when they pump and they produce so much currency, it's Economics 101. When you have too much supply of something, the value of it goes down. So the value of it to buy in relation goods was going down. So the price of those goods went up. So the fed -- and it's a known thing. I mean, I've been following the fed for a few decades and it's a known thing. They cause the booms and they cause the busts. And this fed after the 2008, this rediscovery of quantitative easing and tightening has just exponentialized -- that's a word, exponentialized all of this, fed micromanaging the economy.

So here -- I mean, there was one period of time where a few months ago, I saw Powell come out of a press conference. And he was just so happy that he didn't have to put people out of work, like he didn't have to be tough. And you saw his emotion were there. And that's the way the government is. I mean, they don't get reelected by causing people to get out to lose their jobs. And so if you're running the country, you're Joe Biden, you want to have a talk with the fed.

And the Fed is more powerful as quantitative easing than they've ever been before, quantitative tightening more. I think quantitative easing and tightening is more powerful than the rate moves themselves, way more powerful, because it controls the long end of the curve, which is really the market driver, because it drives -- when you do discounted cash flows, you're not basing it on the Fed funds rate, you're basing it on a little bit longer-term rate. And that quantitative easing, controlling the long end of the curve is controlling future cash flows, which is really controlling stock prices the most, much more than the short end of the curve.

So if you're the government and you want to get reelected, you tell the fed look, we don't want to cause the harsh recession. So please, if you're going to do things, do things slowly. And that's what central banks around the world are doing. They have a lot of debt. They want to allow inflation to run, which lowers the value of the debt a little bit. So I just think it's a very strange cycle that we're in, but it's also a very bullish cycle, because as long as the fed has their back and as long as inflation doesn't get out of control, like hyperinflation, then and we're in this, 4% to even 7%, 8% inflation, I think, it's fine for the markets.

And I think that's where we're -- I think there's -- if that's the case, the markets can do fine. It might be a little more volatile. But the numbers show that there's a better chance of disinflation right now, which, based on mostly people bearish out there, I think, would -- and the economy holding up would cause a continued rally. And actually, I'm more bullish on the back half of this year. Because I think that when - if you get disinflation and these rate cuts that the CME is projecting, and the economy already holding up, then the economy can -- and you have also, I think earnings will start to grow in the back half when they start lapping the easy, the bad numbers last year.

You have a lot of things working for you in the back half. So I just think the government and the fed, and the central banks around the world that are all doing things in unison, I mean, it's crazy and so powerful, but they're not going to let things fail. And if they're not going to let things fail, that removes a lot of risk.

RS: Yeah. And it's something -- I mean, speaking to 2008, something that we've seen before. So given that macro backdrop, and I know that you're mostly looking at the large-cap stocks, how does this affect how you're looking at the stocks that you're looking at?

CS: Well, I'd say the market and the stocks I'm looking at in two different ways. I mean, I'm trying to find stocks on a bottoms-up basis, which is basically what can they earn in the next year and what's the market paid for a PE? So basically, the median PE that the market’s paid over the last few years’ times, whatever earnings, I think that trajectory of the trends of recent trends can get me to for earnings for the future, then, that's my bottoms up way to analyze stocks in a nutshell.

I mean, if you're a subscriber, you'd see I have a little bit more detailed model showing you revenues, gross margins, et cetera. And you can see the flow yourself. So you can buy in to say, wow, NVIDIA ( NVDA ) is going to be a $400 stock, if it just trade -- if it continues the current trend. And if it just trades at the PE range that it's traded at, I have a lot of conviction that it can trade it for $400. In fact, I think a few months ago, or maybe five, six months ago, I said, if Tesla breaks $200, it's going to $100, and my valuation was below it. And sure enough, it broke $200, went almost straight. So I think $100 and change. And so that's all based on valuation, based on earnings, trends based on the income statement.

So how I'm looking at the market is one overlay. And then if I can find good stocks that are going to give me on their own bottoms up, call it, 40% 12 months upside, and then I like, I would like those stocks.

RS: And we were talking to Kirk Spano a couple of weeks ago, and he was talking about the different sectors that he looks at and some of the different metrics that he uses for different sectors. Is there - are there unique things that you look at, depending on what sector you're looking at?

CS: Well, there is -- the answer would be no. And I've been doing this for a long time. And I followed consumer stocks for a long time, retail stocks for a long time, industrial stocks for a long time, and tech stocks for a long time, in different periods of time. And each group I did nothing different. I just - whatever the key data point is for the individual company you have to pay attention to it, because sometimes that could be more important than their earnings, like Netflix ( NFLX ). Membership growth is more important than the earnings. And Tesla ( TSLA ), I think, more important than anything there is auto gross margins. So that's what I'm focused on there.

Meta, it's daily active users, DAUs. So I mean, if you need to know what the key for NVIDIA, it's data center growth. So if you're -- because this feeds into the rest of the model, and that's like a quick and dirty way for people to have a quick snapshot, especially once the print, once data prints or earnings print, they can have a quick reaction to say, oh that's the core business that's going to drive the business for the next year or two. And so if that key data point goes up or down, then I have confidence or don't have confidence based on that.

So you have to know what the key data point is for each company. Apple ( AAPL ), it used to be iPhones, but now I guess iPhone is a little - is more mature now. So it's less iPhones, but it still matters. So every company does have a key data point. And I guess I'm really focused on the market driver stocks right now in this service. So I'm following Apple, Microsoft ( MSFT ), Amazon ( AMZN ), Google ( GOOG ) ( GOOGL ), Tesla, Meta ( META ), NVIDIA as the my main stocks because I feel like you have two ways to look at it. The market is going to drive them or they're going to drive the market. And so when you see things line up either way, it gives you conviction.

So basically, I touched on it that these are market mover stocks, meaning, they're the biggest in the S&P 500 or the NASDAQ. And that's why I'm following them because they think if you can nail those and understand if there's a trend in one of them, or more than one of them, then you have some bottoms up conviction on which way they're going to drive the market.

And when Apple and Microsoft make up 10%, 15% of the key indexes, and you can figure out where they're going and net it and Google add another 5%, 10%, suddenly you have your arms around, even if everybody is bearish and you're bullish on those stocks, then you have a different -- you have a more well-rounded call.

So that's why I'm focused on it. I'm also following Micron ( MU ), because I think that's the most important stock in the world, I’ll tell you for markets, and people just don't even think about that.

Micron makes DRAM memory. And memory is in everything tech. I mean, if NVIDIA or Arista or Cisco, or any of these companies, when they sell something, they sell it along -- they have to sell things with memory, because memory is in everything. So if you can figure out how Micron is doing, how everything else is doing. And if you know how everything else is doing, and these are the main drivers in the market, then you know how the market is going to do.

So a little Micron, if you can figure out how that's doing, then you can kind of figure out how the market is doing. And it's just been an amazing guy that -- and nobody's, I mean, I'm one guy out of how many players in the market, and I don't think -- I don't hear anybody talking about that. So I just gave you - gave away one secret.

Micron is really the center of the investing unit or universe because of what they say about how DRAM is selling. And if DRAM prices are moving up or flat, demand is good. If DRAM prices are moving down, demand is weak. And so you can learn a lot.

And if you see the stock going down, it's probably a sign for tech. If you see the stock holding or going up, it's probably a sign for tech. So you just have a great hint right there with -- it's real stuff, because DRAM is selling, like I said, it's something very important to the tech world and the tech world is very important to the stock market.

RS: So what else are you focused on in the tech world and the tech stocks? What else are you looking about - looking at, or what should investors be thinking about?

CS: Okay. Well, look, Tesla is topical. They just reported last night, and I was bearish. I wasn't bullish, that's for sure. I said that they missed numbers. I said that there's been risk for the stock all year, and last year. I think there was one small period where I was bullish for like a week, and then I stopped being. But Tesla -- so I think there's a lot of Tesla bulls that don't have -- that aren't really focused on the earnings. They are focused on the robo taxi story. And I think that autonomy or FSD is constantly getting pushed out.

So I'm a believer that they can do it. But timeframe is important to the stock market. And so if it keeps getting pushed out, you can't discount it into the current value as much as people want to. So you're having this big shift and their margins were just really a big miss. We had them going down and we had earnings below The Street. But the implication of yesterday's last night's earnings means that earnings needs to be way below where The Street is sitting right now.

And one major change I noticed from last night is in their Analyst Day, they said they were cutting costs 50%. And so that's going to drive -- they'll be able to lower prices of the cars, but last night they told a different story. They said it was more demand that forced them to lower the prices for the car. So that's a big change in story. And so Elon Musk, he wants people to focus on long-term and I respect that. He's a genius and very successful. But the market focus is, in my experience, one year out. And so if you're not going to get that conviction in one year out, there's more players than not that are - that can sell this thing, then people that are going to buy into the autonomy story.

So I think Tesla -- I've been calling out that it has risk and I think it continues to have risk. So happy to talk about that, or other stocks, whatever you want.

RS: Yeah, happy for you to get into Tesla. Just curious if you're looking at Twitter at all, given a lot -- given your Elon Musk insight, is that a stock that you follow also?

CS: Well, Twitter, they went private. He brought them private, I was following it. But I'll tell you, and like a year-and-a-half, two years ago, I stopped following it, because they were just so inconsistent. I mean I think I've had like three blow ups in the four or five years of this service, and one of them was Twitter. And I don't like to lose. And so they just weren't monetizing. And so I see why he was able to come in and scoop it up without having to pay a big premium. People might -- and I think he could turn it around. But I think it's also a distraction, obviously.

I mean, he's human. He's above the normal human level, but he's human. And so - and he's very excited about Twitter, and he's on there all the time. So you can pretty much gauge how much he's doing -- how much he's working at Tesla, by looking at the inverse of number of tweets he's doing. And so if he's tweeting all day, inversely, he's not really… the Twitter inverse mechanism.

RS: But yeah, I'd love to hear and I'm sure investors would as well hear more about your thoughts about Tesla.

CS: So here I'm just going to open my model. But - and we were big bulls for a few years going until we got off that train in, I think, November of 2021. So which was really around the peak of the stock. I don't know, I'm not looking at the chart right this second, but it was around the peak. We were on CNBC, and we called that out actually saying that we're stepping off. And the reason was -- is because the stock hit our price target. Everybody was raising to our numbers.

But we thought it was fully valued, and I couldn't push my numbers to -- I'm just – I’m not raising my target price because the stock goes up. I'm raising my target price if my earnings go up, because I think the market generally wants to pay, what it's paid in the past. So I don't want to make a guess on what it's going to pay more if the stocks up, I want to try to stay disciplined on that.

So -- but -- and my earnings times the PE, got me to the stock price and my subscribers know, I mean, I had crazy figures for stock prices when it was way down, when it was much lower. I forgot the numbers, but like, my numbers were insane. Higher target prices, two, three years ago, and I mean, I had subscribers, oh, making bets if it's going to make it there and he kept doing it.

And just because of simple PE times EPS, running a simple model to tell you, if revenue -- if deliveries flow this way, the SPs flow this way, gross margins keep flowing the same trajectory, and you figure out the OpEx, and you can simply figure out where the earnings are going to go before the company even knows earnings are going to go just by seeing the trajectory. And I do that for all my companies.

But right now -- and I've been saying this all year, and for the first time, since I've been following it this year, my EPS numbers below The Street. And before this earnings, I was like a $1 below The Street, and now I’m like $2, $3 below The Street. And that's just doing the same thing. I mean, last quarter, people were trying to make excuses why to like the company, but you have to look at the -- you have to be unbiased a little bit and say, what's driving the company.

What's driving the company before this quarter? 90% of their margins were from cars. And so that 90%, that margin dropped 800 basis points this quarter. So there's no way to sugarcoat that. And if you ever drop like that this quarter and the company saying because of demand, then you don't have any visibility for that trend to change. And so you have to model it out. And I don't have as bad of a gross margin drop next quarter, because if you do, in two, three quarters, they're going to be break-even, which I don't think they're going to get to that.

But - so if you think about it, they said that their orders were higher than production. But I think their orders are higher than production because they had to drop prices so much. And if they didn't drop prices, so much, then they'd be inefficiency problem. They'd be inefficient, because they have so much new production, they have to fill it otherwise, you have fixed costs that start building up and start really hurting the cost of goods sold per car.

So they were sort of forced, and that's why Musk has been complaining so much about the Fed why raising rates is because he's getting hurt, and his business is getting hurt. I think they have a lot of amazing things. I think they created an amazing vehicle. I think they do have potential in the energy business, and they do have potential with batteries. And hopefully autonomy, I mean, the visions there. They just haven't crossed that final mile yet.

But in the meantime, stocks trade on earnings. And so I'm just disciplined to that. And so I think that there's still much more risks here for the stock.

RS: Any other stocks in that sector, or stocks that you would encourage investors to be looking at, or the opposite, encourage investors to maybe take another look at?

CS: So well, I always say the Tesla is the best in the car industry. I don't think anybody would disagree with me, maybe they would, but not many. Most would agree with me. And if the leader in the industry is dropping prices, big time than the rest of the industry as a problem. So I mean, they were asked on the call, and I actually said it in chat before that question came out. But I said, I bet they're trying to put companies out of business, but they can't say that because they'd have a monopoly issue or FTC issue that you're not allowed to drop prices to finish your competition. And they were asked that question, they were like, oh, no, we want to help our competition. Of course, you want to help your competition, of course. Altruistic, in a way, whatever. I don't buy it fully. It's a nice idea.

But I think there's something to it. I think it was a good question on the call that they have a shot. Well, I think they're really, really reacting to demand, which is a tougher story. But if I think as this as a side effect, I think, they are going to wipe out competition, especially some of these newer players that just don't have production up yet. And people aren't going to be able to get funding. And so that - but that's not a good story for Tesla in the next 6 to 12 months or 6 to 9 months, but maybe longer-term, definitely if, they wipe out competition.

I don't think anybody can compete with them. I think, they really had the right focus on the production and making production efficient. But right now, based on demand, they have too much production, otherwise their margins wouldn't be dropping off a cliff right now.

RS: And what about stocks in the tech sector? Anything else that investors would be wise to be looking at or thinking about there?

CS: So, I just upgraded NVIDIA. And I really -- I was thinking out loud to subscribers. The day before I upgraded, I was like this AI story. It might be some hype. But I don't think the hype is really in the market yet. And I said, if can really be like the Internet story of the 90s, a dotcom story of the 90s.

So - and then beginning of that story, it really helped the idea of productivity, and there was benefits in productivity, meaning you could get more labor at a cheaper cost and you can produce more at cheaper cost and that helps inflation. It's really - productivity is part of the Goldilocks that drove the markets in the 90s. And so AI is one of those potential game changers. Right now, I don't think anybody really knows the potential of it or the dangers of it, or maybe they do know, but I don't think it's really in its early, early innings.

And so I think if there's an AI productivity stock market boom story, like, you had in dotcom, and I very easily can see how that can materialize over the next 6 to 9, 12 months. And it could be more - it could be a broader base. Everybody is saying we're doing AI, right, and we're not there yet. And NVIDIA is at the center of that. And they said, and it's one of my favorite words in the industry for 20, 30 years is when you hear a company say inflection point, and companies are a little odd to me on that. They know that's my favorite word. So they try to say it, right?

Chaim's going to like it if I say inflection. So the CEO said it, AI is at an inflection for them. So he knew he’d gets to me and be like he would like that, but that's I believe him that AI is obviously at an inflection. And I think it's not so big in a lot of companies numbers, but it will be bigger. So NVIDIA has, I think, been an AI leader. They've been talking about AI for years. And they had a trip up with their gaming business in last quarter. But they've said very good things about their new main business used to be gaming, but their new main businesses is data center, and data center they said, is going to accelerate next quarter and accelerate all year. And when you model acceleration on acceleration, you start to get big numbers.

And so I listen to what companies say, and I try to model what they're saying. And my model gets me to much higher numbers than The Street has. For next year, when you take their biggest business that's accelerating, I mean, look at that in relation to and look at the stock price, it's going up, Tesla is going down. Their main business is decelerating and NVIDIA's main business is accelerating.

And so I try to gear -- I don't try to, I think it's my nature, but my service is geared for beginners and pros, because pros will respect what I just said, and beginners will learn a lot to see. Wait it's not so difficult to try to pick good stocks, because you just have to say, what's their main business or what's the main business or two? And what percentage of it is set up the company's revenues and margins? And is it accelerating or decelerating?

And my customers and subscribers have seen that when I catch a company that's slowing their revenue growth, then I say, even though stocks going up. I say, you got to watch out and sure enough, because they're slowing, then there's a problem next quarter with earnings or something wasn't quite right, and the stock starts trending down.

So NVIDIA is the opposite of that, that AI I think, is early on and data center, I think was already accelerating for them. And AI is going to just be like added growth, growth points on that main business.

RS: I really appreciate your point how the fact that it's for newbies and more veteran investors, because I think that really speaks to really solid analysis that it can speak to people that are just starting out, and people that also have a lot more experience. Anything else that you would guide investors towards at this point?

CS: Well, I think that I said it before. And I think people just need to be honest with themselves and say are we -- not do we think we're going into recession but are we going in a recession? That's a difference. So - and is it going to be a hard recession? And I think, if you're honest with yourself, you would have seen that all the time, they've been worried about a recession, it hasn't materialized. And when the data keeps holding up, then it's tough to say how we're going into a recession.

And then even if you start to hit negative numbers, the Fed's going to do a big reversal, because they can't take any pain. So I think that it's a little bit of a balancing act. But - and I would also point out something amazing that I care about market action, which means how do stocks react to news?

So if it's bad news, does it go down? If it's good news, does it go up? And I would say that there's been much more bearishness or bearishness is - there has been a lot of bearishness. It's picked up lately and the market is not budging. And I think that's an incredible, incredible call out for market action, which people may or may not look at. But what it means is the market should be going down on all of this concern, and it's not, what am I missing? That's what people need to ask themselves? Why is the market holding up? What am I missing?

And I think what I think most people are missing is that we just had a once in a generation -- once in a lifetime pandemic. And we're now in a once in a lifetime back to normal from that pandemic, and that back to normal is an incredibly huge force in the economy. So as much as you would normally think we should be in a recession, or whatever data points would drive a recession, you have people just kind of getting back out of their homes and everybody getting back out of their homes around the world.

And so that is a big push or a big support that whatever recession you're worried about, I think, will be much less and, layer on top of that a fed and a government that can't take any pain, we will definitely support that.

RS: Yeah, absolutely. Well, the investing group that you run is called Fed Trader on Seeking Alpha. If investors like what they heard here, check out Fed Trader. Anything -- and Chaim, I really appreciate this conversation. I think it was a really nice deep dive into how you're looking and thinking about the market. And I think a lot of sage advice for the investing community. Anything that you would like to share before we leave today and begin and look forward to the next conversation?

CS: Sure. Well, I do - you called my service Fed Trader. So I guess I should talk about that. We – fed, I call it Fed Trader, because I think the Fed with their humongous balance sheet right now is like the most important thing. And so if earnings are bad, or earnings are good, or the economy is bad, or the economy is good, is a little bit secondary to what the Fed's going to do. And because the Fed is either providing liquidity or taking it away liquidity and because they're so big now with their balance sheet, that it's become more important than anything.

So I've kind of narrowed down the focus to the main market mover stocks, and the fed in the service. And I'm trying to tell you what the markets going to do tomorrow, and the next week and the next month. And we didn't talk about Bitcoin, but we're also -- Bitcoin, I'm telling you is she has --they don't do anything. Bitcoin, there's no benefit to Bitcoin. But if you're a trader and you follow the fed, the Bitcoin trades exactly on the fed’s moves to a tee. When they were cutting rates, Bitcoin was flying. When there was raising rates, Bitcoin was dropping. When the Fed stalls, Bitcoin gets a little breather.

And I think everybody, most of the people even trading Bitcoin or being in Bitcoin don't even know that the main driver is the fed. And so if you can - so that's like a big edge. So if you can start following the edge -- and sorry, if you can start following the Fed when you're trading Bitcoin, and say, well, the fed's the main drivers in Bitcoin besides technicals, but the fed's driving those technicals, then, wow, you have a big edge over the market, and everybody else trading it.

So we're following also gold, which I have been bullish on. Oil, which has been a little bit tough, because it's just been sideways, sideways, sideways. What else we follow? Bonds, I think, those are the main instruments we're following. And everything is -- the main driver is the fed. And the other stuff, even though it's so important is a little bit more secondary. So that's why I decided to call this Fed Trader.

RS: Like it, I like it. Well, I think there's so much good advice to be gained here. And I think especially in volatile markets and volatile times that we're seeing in the world right now, I think it very much pays to have a plan. So I think that's what we're speaking to here and it could afford investors a lot of benefit. So I really appreciate it.

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