• Ken discusses three major market themes this week: the Federal Reserve’s uncertain path on interest rates, why investors should remain patient before buying into high-profile companies like SpaceX, and the striking parallels between today’s AI-driven market—led by Nvidia—and the dot-com era led by Cisco. Throughout the video, Ken emphasizes the importance of disciplined investing, proper diversification, and avoiding emotional investment decisions driven by market excitement.

• The Federal Reserve’s divided views on interest rates, the latest jobs report, inflation outlook, and why Fed decisions matter to investors.
• Geopolitical events, including renewed tensions with Iran, and why markets have largely ignored the news.
• Why Ken avoids predicting Federal Reserve policy and discusses the new Fed chairman’s reduced forward guidance.
• Ongoing investor interest in SpaceX and why patience may lead to better investment opportunities.
• Comparison of SpaceX’s early price performance to Facebook’s IPO and the dangers of chasing popular investments.
• Review of the dot-com bubble and why today’s AI boom shares many similarities with that period.
• Comparison between Nvidia and Cisco as the dominant infrastructure companies of their respective technology revolutions.
• Why profitable companies can still experience major stock price declines when valuations become excessive.
• Cisco’s 80% decline and 26-year recovery as a cautionary lesson for today’s AI investors.
• Growing concentration of AI stocks within major indexes and why index funds may not provide as much diversification as investors expect.
• The importance of diversification, the firm’s “Invest and Protect” strategy, and preparing for potential market corrections.
• Personal Fourth of July family story, closing thoughts, and encouragement to share the video

Transcript:

Ken Moraif   

Hello, everyone, and welcome back to our weekly market alert video for today, which is July 10, 2020-six And I want to say a special hi to all of our squippers out there in Squipper Nation. I hope you are enjoying your second childhood without parental supervision. And for those of you who are not retired yet, those of you who are still clients-I was about to say just clients-but there’s no such thing. You are beloved and most valued. But if you are still a client and not a squipper yet, we’re going to do everything we can to get you there as soon as you want to get there. So I hope you all are healthy, wealthy, and wise. We have a lot to talk about. Three stories this week. One is the Fed had a family fight. This is according to the new Fed chairman. He said that their meeting was a good family fight. I don’t know if there’s such a thing as a good family fight, but be that as it may, that’s what they had, and we’ll tell you what the bottom line of that was. The second story is we’re gonna, you know, talk about because we’re still getting questions from clients who want to invest in SpaceX, and what we said was be patient, grasshopper, and so far, being patient is a really good idea. So that’s why we are here to help you to not react impulsively. And then the third thing I want to talk about, which I kind of teased about last week when I was in Colorado, and that is the comparison of Nvidia and Cisco. Okay, they’re 26 years apart. But Cisco was the company, the most valuable company in the world. Today, Nvidia is the most valuable company in the world. Back then, Cisco was what the entire internet was going to get built on. Today, Nvidia is what AI is being built on amazing similarities, and well, you’re going to have to stay tuned. I’m going to tell you the rest of the story when we get to that. So, want to just tell you, had a wonderful Fourth of July. My daughter came to visit, and she brought my granddaughter Delphine with her, and Delphine is. I’ve learned not to get my feelings hurt by grandchildren, Alex, because you know when they’re little babies, they don’t like their grandfather. In fact, and I thought it was just me, but she doesn’t like her other grandfather either. So it’s a it’s a young babies don’t like big males, and so she has this thing where I go in to give her a kiss, and she goes. She’s like, “Nope, not happening. She gives me the so so she’s learning young how to keep the boys away. I like it. It’s good. It’s good. So anyway, let’s talk about story number one. So the Fed decided, and it was interesting because the committee was split almost down the middle. So the numbers are nine of 18 said that they thought there’s going to be one hike this year, eight expected no change, and one wants a cut. So you know why do we watch the Fed so carefully? It’s because the cost of money is what they basically control. And if the cost of money goes down, then companies have cheaper money, more profits, stock market tends to go up. If they raise interest rates, cost of money goes up. Companies have to spend more to get money, and profits go down. So the stock market tends to have an inverse relationship to what the Fed does. So that’s why we watch them so carefully. We want to know what those guys are going to do. So the jobs report in June came in. It was very weak, right? So they have two mandates: inflation and jobs. Who knows with inflation? You know what’s interesting to me, Alex? Nobody cares what’s going on in Iran anymore. I mean, we just started bombing them again, and they’re like they sent missiles to try to hit our bases, and so we’re back at war. Trump said, you know, the ceasefire’s over. Market didn’t even react. I mean, it’s like nobody cares. So, anyhow, inflation maybe looks like you know even with all that’s going on is not a problem. 

Ken Moraif   

So now there is a 50% which is down from 66% chance that the Fed is actually going to raise interest rates this year, so it’s kind of a 50/50 proposition, and we will keep you posted. But the bottom line is, the Fed is-they don’t know, and if they don’t know, we don’t know, right? We’re not going to predict what they’re going to do if they don’t-if they themselves don’t know what they’re going to do. So let’s talk about SpaceX. So you know, one of the things that we we’re we’re still getting from clients. Says I want to invest in SpaceX. I get it. It’s exciting. It’s a soup de jour. Everybody wanted in. The price went way up. But what we told you was be patient, and we gave you the example of Facebook, where you know it was the big darling IPO. Everybody wanted in on on Facebook, and what happened was it did have a massive initial public offering IPO. The price out of the gate went up dramatically, but then it proceeded to lose half its value over the next few months, and SpaceX is actually on track to do the exact same thing. It’s down 36 percent right now from the peak as I record this. So be patient. We are going to have SpaceX in our portfolio probably. I’m going to guess within the next three months because it you know it’s we do want to be invested in it, but at the same time we don’t want to jump the gun and you know just let things come to you as a good idea. So what I want to talk with you about is you know potentially what’s going on here, and we talk in our seminars a lot, and with prospective clients, and we’ve talked with you about the similarities that we’re seeing with the AI, the growth in the AI stocks, and that whole thing, as compared to what happened with the dot coms back in Y2K. Now in Y2K, what happened was the Nasdaq, which is the tech-heavy composite index, went up 78 percent. Right? I mean, it no, no, it didn’t go up 78 percent. It dropped 78 percent from peak to trough, but it first went way sky high, and then what happened was it fell, and a lot of people are saying, “Well, but this time is different because what we have is we have companies now that are making profits hand over fist. Microsoft, IBM, Nvidia, these companies are making so much money that therefore their stock prices insulated from a big drop. Well, I’m going to show you a chart here to to give you an example of why this is not necessarily so. Okay, so on the first chart, what I’m going to show you here is what Nvidia has done. So if you see the orange line here, it goes up, and that shows you where we sit today with Nvidia. Now let me overlay, superimpose Cisco. So Cisco, back in the dot-com era, was the most valuable company in the world. It was the company that was building the infrastructure that all the .com, the internet was built upon, just like Nvidia is doing with AI, and what you can see is they both rose amazingly, and then let me show you what happened next, and that is you can see that from its peak to the bottom, Cisco stock fell 80 percent, 80 percent. Now that 80 percent was in spite of the fact that during the entire Y2K dot com bubble, when the stock market was crashing and everything else, they were making tons of money, tons. They did not stop making profits; they were still selling. So the moral of that story is that yes, you can be profitable, but your stock price could be so high that the market sells off that stock price and makes it match what it should be based on the profits that you are producing, and that initial euphoria, well, that’s kind of like what’s going on with SpaceX as well. Is the media? Oh my gosh, everybody wants it. So let me show you this slide. Guess how many years it took for Cisco to get back to its peak? The answer is it took 26 years. It’s just recently that it got back to even. 

Ken Moraif   

Okay, so be very careful, Nvidia lovers, AI lovers, all of you out there that are in love with all these AI stocks and all that, be careful. Now, the other thing also is that if you look at the S and p5 100 index and if you look at indexes, they have become so concentrated in these AI stocks, just like they did back in Y 2k and that concentration represents a significant amount of risk because if they’re all overvalued, just like the dot-com stocks were, we could see a significant correction, a drop. Now the dot-com crash took two and a half years to play itself out. Two and a half years, the market went down and it didn’t get back to even for two and a half years, so don’t kid yourself thinking that it’s going to come. No, I’m sorry. Yeah, and so you have to be careful thinking that if you are diversified in an index fund, that you are actually diversified. Now, for purposes of what we’re talking about, we are diversified. If you’re a client or a squipper, we are diversified. Okay, so don’t worry about it. We’re on it. Okay, and so, but it’s a word of caution. Now, if this does turn out to be, you know, history repeating itself, and we do see a massive sell-off in these AI stocks, which are, you know, 2040-1% of the value of the stock market right now, then we have our invest and protect process in place, ready to get out and protect you from catastrophic losses. So I’m only telling you this because if you have any friends, any family, any business associates that are exposed to all this stuff, you don’t want to be sitting on Noah’s Ark when the flood comes and washes all your friends away? You want your friends to be on Noah’s Ark with you, and you know what that Noah’s Ark is called? It’s called Retirement Planners of America. So, so lots of stuff happening. The Fed had a little family fight. I hope that they all got over it, and they’re still all friends, and there’s no pouting and resentment left after that. the interesting thing about Warsh, who is the new Fed chairman, is that he has decided that he’s not going to tell us anything. There’s no guidance. You know, he he thinks that the Fed actually does harm by giving projections and telling you what they think is going to happen next, so now basically he’s just going to tell you what we decided with nothing else, and it’s up to you to figure it out. I will see if that’s better or not, but that’s his opinion, and he’s the boss, so he’s going to make that happen. So what does this all mean? Relax, we’re on it. You don’t have to worry about it. We’re the ones getting the gray hair here for you. You go out, enjoy your granddaughter who won’t kiss you and gives you the. She’ll come around. Actually, what’s going to happen? My friends tell me who have granddaughters is she’ll get over it, and not only that, but once she’s over it, she will make you fall in love with her. She will cute you to death, and then she will wrap you around her little finger, and you will be helpless. And I gotta admit, I’m looking forward to that. So I hope this video found you healthy, wealthy, and wise. Make sure you do share it with your friends and family, and we’ll talk soon. 

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