President Trump and Elon Musk's Billion-Dollar Breakup

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Speaker 1 Here's one piece of advice that I've given for years. Build an emergency fund.
Aim to stash away enough to cover at least three months of expenses in case your income suddenly drops.

Speaker 1 Sounds simple, right? But let's be honest, it's not. Saving even one month's worth of living costs can feel impossible.

Speaker 1 Just when you're making progress, that check engine light blinks on and derails your plans. Life already throws enough curveballs.
You don't need your bank adding to the chaos.

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Speaker 1 I'm Nicole Lapin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab.

Speaker 3 Of all the celebrity couples to break up this year, did we really think that Trump and Elon were going to be one of them?

Speaker 3 Today, I'm unpacking some of the headlines that have had the biggest impact on the stock market with Dan Nathan.

Speaker 3 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.

Speaker 3 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.

Speaker 4 I'm really excited to be here. Thanks for having me, Nicole.

Speaker 3 Oh, my God. We got to start with the Romeo and Juliet story of our lifetimes.
My God, it's all still unfolding right now. The Elon Trump drama.

Speaker 3 Have you been clinging on every tweet? I'm still going to say tweet about all of this.

Speaker 4 Yeah, no, it was interesting. 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.

Speaker 4 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.

Speaker 4 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.

Speaker 4 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.

Speaker 4 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.

Speaker 4 And then the president of the 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.

Speaker 4 And I'll just say this: for me, who cares about Tesla and who cares about the president's ego?

Speaker 4 But we're engaged in some really high-stakes negotiations as it relates to trade, as it relates domestically, right, to this tax plan that's getting some pushback from the president's own party.

Speaker 4 There's a bunch of geopolitical geopolitical hotspots going on. And if you are our adversaries, you're sitting back and you're watching us eat ourselves from within.

Speaker 4 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.

Speaker 4 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.

Speaker 3 He tried, right? He deleted that one, I think.

Speaker 4 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.

Speaker 4 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 that was a bunch of bullshit.

Speaker 3 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.

Speaker 3 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.

Speaker 3 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.

Speaker 3 So what do we make of what's going to happen with Tesla because of that?

Speaker 4 Yeah, just real quickly on SpaceX. So those were the ones that he was threatening.

Speaker 4 Obviously, one of the things that 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.

Speaker 4 So that was one thing.

Speaker 4 As it relates to SpaceX, the idea that they're 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?

Speaker 4 And it took a SpaceX rocket to go back up there and get them. That's not ending anytime soon as it relates to the SpaceX.

Speaker 4 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.

Speaker 4 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.

Speaker 4 They're in the midst of a massive price war, predominantly with Chinese EV makers. Half the cars that Tesla make are made out of Shanghai, where they have a factory.

Speaker 4 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.

Speaker 4 They have a company called BYD that Warren Buffett invested in. He didn't invest in Tesla.

Speaker 4 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 in China. So they have a real problem there.

Speaker 4 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 U.S.

Speaker 4 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.

Speaker 4 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.

Speaker 4 There's 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.

Speaker 4 And Elon kind of knows that, which is why they're pointing investors towards RoboTaxi to compete with Waymo. And ultimately, the idea is to put Uber out of business.

Speaker 4 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.

Speaker 4 So most of the value in Tesla's stock right now is about RoboTaxis and robots and not EVs.

Speaker 3 So what's the over? Five years?

Speaker 4 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.

Speaker 4 He's often over-promised and under-delivered, at least on timelines. I think a lot of the products that he's said he's going to develop, he does do that.

Speaker 4 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.

Speaker 4 Now, they're not so affordable anymore, and they're not going to be that affordable if they don't get those tax credits.

Speaker 4 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.

Speaker 4 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.

Speaker 4 So they're out there right now, but I'll take the over. The other thing is, as it relates to RoboTaxi, they're really way behind Waymo.
Waymo is owned by Google.

Speaker 4 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.

Speaker 4 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 RoboTaxi.

Speaker 4 And that to me is probably three to five years.

Speaker 3 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.

Speaker 3 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.

Speaker 3 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?

Speaker 4 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.

Speaker 4 If you think the taco trade is ridiculous, think about that Trump named this Liberation Day, April 2nd, right?

Speaker 4 This is where we threw huge tariffs first on our biggest trading partners, which are our allies, that's Canada, Mexico, and the EU. And then they got to China and they threw 145% tariffs on there.

Speaker 4 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?

Speaker 4 So mortgage rates were going higher. And the U.S.
dollar was being sold, right? So you had this crazy market dislocation sort of situation. And then Trump flinched, right?

Speaker 4 So they basically started carving out different products that wouldn't have these crazy tariffs. They took a bunch of them off, right?

Speaker 4 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.

Speaker 4 Then he started making some exemptions for automakers here and a whole host of other things.

Speaker 4 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.

Speaker 4 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.

Speaker 4 some really important rooms with some really important people and you have a choice. You can ask the tough question, right?

Speaker 4 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 tell 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 and 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 has and i think elon did that.

Speaker 4 Now, Elon 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.

Speaker 4 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?

Speaker 4 And so you have this guy who's got this huge platform.

Speaker 4 He's got all these really important companies, and he is suggesting that the president of the United States is a pedophile and he got the receipts for it, right?

Speaker 4 At some point, we know what happened with the Epstein and all this other stuff. You remember Pizzagate? They had guys showing up, some pizza shops with guns and stuff like that.

Speaker 4 I wonder if the Secret Service said, you better tone this down because the potential, my view, words can be violent.

Speaker 4 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 fervent.

Speaker 4 So I think it could have been a combination of a whole host of things.

Speaker 4 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.

Speaker 4 So at the end of the day, he had a lot of incentives to push back to or pull back.

Speaker 3 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.

Speaker 3 So he couldn't just say, Psych, just kidding, I'm going to come down and we're going to meet in the middle.

Speaker 3 So this taco trade, which he also came out and tweeted, like, don't call me taco man, orange man. I don't remember the whole thing.
In the backdrop of the Chinese U.S.

Speaker 3 Sino discussions going on right now, clearly Trump hates this perception of backing off.

Speaker 3 Do you think that because because of all this taco trade talk, say that 10 times fast, is he going to negotiate harder?

Speaker 4 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.

Speaker 4 He doesn't always think about things particularly rationally. He's very transactional.
He thinks about himself.

Speaker 4 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.

Speaker 4 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?

Speaker 4 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 bolden his views.

Speaker 4 But again, prove people wrong. Yeah.
But he hasn't demonstrated that that has actually worked for him in the past. You know what I mean? So we'll see.

Speaker 4 This is a little different now because we're talking about a trade war.

Speaker 4 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.

Speaker 4 If we're putting tariffs on all imports here, then sooner or later, somebody has to eat that higher tax, right?

Speaker 4 Whether it's the importer or whether it's the end market, whether it's a consumer or a business, right?

Speaker 4 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 ⁇ D, a whole host of things.

Speaker 4 So again, I think the risk here is that we have a protracted trade war and the U.S.

Speaker 4 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 that's something that the Fed is very worried about, the U.S.

Speaker 4 Federal Reserve, who sets interest rate policy. And I just think we're in a dicey situation.

Speaker 4 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.

Speaker 4 And I think that's something that the stock market has been pretty good at sniffing out in the past.

Speaker 4 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.

Speaker 4 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.

Speaker 4 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.

Speaker 3 We'll find out soon enough. The 90-day pause on the reciprocal tariff is supposed to expire in early July.
What do you think is going to happen?

Speaker 4 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 LA in your hometown right now.
Okay.

Speaker 4 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 there's no reason ever for like violent protest.

Speaker 4 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.

Speaker 4 Hopefully there's not too many injury or fatalities on either side of those sorts of situations.

Speaker 4 The idea 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.

Speaker 4 He's tweeting about him and calling him rather than Newsome, new scum. Who does this?

Speaker 4 If this was one of your children, you'd take away their cell phone, you put them up in the room, and you wouldn't let them come out until you changed their behavior.

Speaker 4 And this is going on on a national sort of scale.

Speaker 4 So for me, I think the likelihood of it being tamped down may be between him and Musk until Musk loses his shit again, because we know that he often throws hissy fits on Twitter on his own platform.

Speaker 4 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.

Speaker 4 I just don't see how you can clean up this relationship, especially after the first buddy stuff, the 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.

Speaker 4 I'd just be really shocked if this thing just dies down anytime soon.

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Speaker 3 You mentioned the Fed. What do you think is going to happen next week? Do you think we're going to see a recut?

Speaker 4 Let's be clear. Jerome Powell, he served this country.

Speaker 4 President Trump nominated him and he got approved. You know what I mean? This was the first time around.
This is back in 17, 18. He was Trump's pick, right, for a Federal Reserve.
So here we are.

Speaker 4 He's got one year left in his term. He's 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.

Speaker 4 Trump wants a good economy. He also thinks it's going to juice the stock market.
So June 18th, a week from tomorrow, Wednesday,

Speaker 4 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.

Speaker 4 It's basically a 0% 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.

Speaker 4 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 4.5%.

Speaker 4 It doesn't mean anything. It'll be symbolic, right? They say this about Fed policy, the long and variable lags of the policy, right?

Speaker 4 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.

Speaker 4 They're worried about inflationary pressures that might come from a protracted trade war, and they want to sit by, especially when you have an economy that's doing okay right now.

Speaker 4 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.

Speaker 4 But on the flip side 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.

Speaker 4 into the meeting and definitely out of the meeting mid-next week.

Speaker 3 One story you say that isn't getting a lot of love right now is is what's going on in Japan. You think that is a big deal.
They're at a risk of a recession.

Speaker 3 Can you explain what you're seeing and what we should be watching more so than we are?

Speaker 4 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.

Speaker 4 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.

Speaker 4 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.

Speaker 4 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.

Speaker 4 Then you look at the debt levels that they had for the last few decades, as I suggested, it just kind of leads to slower growth. And so bring it back to here in the U.S.

Speaker 4 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.

Speaker 4 And you say to yourself, we don't want to become Japan because if you think about just, again, the slower growth.

Speaker 4 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.

Speaker 4 And one of the reasons why we had this disconnect between the dollar being sold and treasuries being sold during this trade war is that this idea of U.S.

Speaker 4 exceptionalism, 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.

Speaker 4 And so Japan, the potential for them to continue to sell our treasuries, our dollars, and they're big holders of our treasuries, the interrelation of that is not particularly good.

Speaker 4 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 of growth.

Speaker 3 I don't know, Dan, we've been talking about this Japan population situation for the last 10 years, though.

Speaker 4 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.

Speaker 4 Ours is much less.

Speaker 4 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.

Speaker 4 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.

Speaker 4 And this is one of the reasons why I don't think 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?

Speaker 4 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?

Speaker 4 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 the long game.

Speaker 4 And I think that is the Chinese.

Speaker 4 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.

Speaker 4 And then we continue to have this situation where what are some of the pressure points they have?

Speaker 4 Well, we have the Japanese, like we just mentioned, some of the largest holders of our treasury, some of the Europeans, right?

Speaker 4 So I think there's just like broader implications than just the way we think about the interrelations between our economies.

Speaker 4 And this is something that I think is, again, is going to play out over many, many decades. But the Chinese are thinking out 50 years.
We're thinking about every two years with the midterms.

Speaker 3 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.

Speaker 4 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.

Speaker 4 So you give me each $1,000, you're talking about $4 billion, right?

Speaker 4 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.

Speaker 4 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.

Speaker 4 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.

Speaker 4 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.

Speaker 4 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.

Speaker 4 And so that's one of the things you could say Trump accounts, this and that, or whatever, MAGA accounts. It doesn't really matter at the end of the day.
They're just rounding errors.

Speaker 4 And to me, they're more political than they are policy.

Speaker 3 Yes, but they don't have to be because savings is not political and we should get that up regardless.

Speaker 4 Right. But let's just think about it this way.

Speaker 4 The people that, you know, $1,000 would most benefit as it's compounding, hopefully tax-free over a long period of time, are not people that are likely to invest.

Speaker 4 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.

Speaker 4 And we have a lot of jobs that are not particularly interesting to most citizens here, right?

Speaker 4 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.

Speaker 4 It's not $1,000 per kid is going to change a whole heck of a lot of that.

Speaker 3 How do you think the tariffs are going to shake out before we get to some of your picks for the year and how they're doing so far?

Speaker 4 So let's start out with what what happened in the first Trump administration, right? Their first economic legislative agenda was to get tax cuts for corporates and hire earning consumers, right?

Speaker 4 And so they basically borrowed a trillion and a half dollars from the future. They gave it to corporations.
You know what corporations did?

Speaker 4 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 China with tariffs.
This is 2018.

Speaker 4 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.

Speaker 4 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.

Speaker 4 So the idea right now that we are going to have some sort of grand deal after two or three months just doesn't seem particularly likely.

Speaker 4 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.

Speaker 4 It goes back to the fact that they are one of the largest holders of our treasuries, that they could sell that.

Speaker 4 It comes back to the leverage that they have with us over rare earth materials that, again, go into our defense apparatus.

Speaker 4 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.

Speaker 4 So the idea that we're going to have some resolution on the trade war anytime soon is not something I would be be holding my breath on because they screwed up.

Speaker 4 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.

Speaker 4 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.

Speaker 3 So it was wrong order of operations.

Speaker 4 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.

Speaker 4 The Canadians and the Mexicans, our two biggest trading partners, 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.

Speaker 4 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 adversaries?

Speaker 3 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.

Speaker 4 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.

Speaker 4 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, which is made up of the first.

Speaker 4 letter of a handful of stocks and they 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.

Speaker 4 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?

Speaker 4 And that stock has had a massive run over the last three years. It's gone from a $300 billion market cap to $3.5 trillion.
That is unheard of in my lifetime to see that sort of gains.

Speaker 4 Microsoft, Google, Amazon. So they call those guys the hyperscalers, Meta had all benefited.

Speaker 4 So all of those stocks, they called them the Mag 7, had benefited over the last three years as this generative AI trade became very much in vogue, trillions of dollars in market cap.

Speaker 4 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 Foundries, okay, they make chips.

Speaker 4 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.

Speaker 4 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.

Speaker 4 They make chips that go into other electronics and other devices that will benefit from like co-pilot PCs and stuff like that. So NXPI, that was the gen.
So generative.

Speaker 4 The AI was AMD, which is supposedly a competitor to NVIDIA. And the I was an Intel at some point that Intel is going to get their act together from a manufacturing standpoint, a design standpoint.

Speaker 4 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.

Speaker 4 And I know that sounds like making an excuse. I said it on the air.

Speaker 4 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.

Speaker 4 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.

Speaker 3 Okay. So you had your acronym, Gen AI.
You didn't buy any of these stocks?

Speaker 4 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's thematic in a way. I got it.

Speaker 3 Adorable. Such a fun game.

Speaker 4 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 ⁇ A after, and they often ask us about the final trade.

Speaker 4 They leave one minute for each one of us to say something about a stock. They asked us about this

Speaker 4 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.

Speaker 4 That's not how they trade stocks. So, hopefully,

Speaker 4 the other 59 minutes that were 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.

Speaker 3 Okay, just so

Speaker 3 to check the stocks within the game, Global Foundries down

Speaker 3 almost 8%

Speaker 3 year to date ea basically flat and xp up six percent amd up five percent and intel is scooching up three percent i own a little bit of intel

Speaker 4 because it's up eight percent today nicole so oh excuse me Look at you up eight percent on the day.

Speaker 3 So excited.

Speaker 4 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.

Speaker 4 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.

Speaker 4 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 of why you bought them, why you own it.
Right.

Speaker 4 And that, so to me, that's how I think about picking stocks.

Speaker 3 Did you come up with the acronym before you came up with the stocks?

Speaker 4 Don't lie. Yeah, that's why the game is dumb.
Okay, very good.

Speaker 4 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.

Speaker 4 They're full up on Google. So you might want to look at some of the second tier names that have the ability to play catch up.
And if any one of those, let's say AMD came out.

Speaker 4 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?

Speaker 4 If you have the same product, you have to compete on price. You have to make your product cheaper than the market share leader.

Speaker 4 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 catch up with those names relative to some of the outperformers over the last couple of years.

Speaker 3 I see. So if you didn't have this acronym business, what did you buy in the beginning of the year?

Speaker 4 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?

Speaker 4 The kind of X's and O's as it relates to, I say this all the time to folks. If you are a dentist, you are a teacher, you just have some career, right?

Speaker 4 And you can't sit there and watch CNBC all day long and you don't have a faxat 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?

Speaker 4 So, that would be the S P 500 or the NASDAQ. And so, what are you doing there? You're setting and forgetting it.

Speaker 4 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.

Speaker 4 You're not trying to pick who the big outperformers are, and you're setting it and forgetting it. Maybe it's 50 bucks a month if you're a young person.
Maybe it's more.

Speaker 4 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.

Speaker 4 Because a lot of folks say, 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.

Speaker 4 And they buy the stock at 30 and then it goes to 25 and then it goes to 20, right? That sort of thing.

Speaker 4 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?

Speaker 4 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.

Speaker 4 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.

Speaker 4 And so the idea of dollar cost averaging in really low cost, whether it's 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.

Speaker 3 Yeah, I totally agree. But what about within that? So could there be opportunities within the ETF world, like

Speaker 3 international?

Speaker 4 One thing I'll say is this. I meet lots of retail investors, everyday people, right?

Speaker 4 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.

Speaker 4 Or I bought Microsoft before Satya Nadella took over as CEO because Steve Bommer was such a disaster, you know what I mean?

Speaker 4 Or I bought Nvidia because I used ChatGPT 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.

Speaker 4 So that's the way I think some folks, when they get confidence on a theme or whatever, like that makes sense.

Speaker 4 But the idea of outperforming the market over a long term is a really hard thing for most people to do.

Speaker 3 100%. 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?

Speaker 3 And what was the tip that helped you?

Speaker 4 Yeah.

Speaker 4 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.

Speaker 4 Figure out how much money you need to live. Figure out how much capital you need to set aside, rainy day fund, this and that or whatever.

Speaker 4 And then figure out how much you can put away in like a 401k coming out of your paycheck, tax free. Amazing, right?

Speaker 4 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.

Speaker 4 And so that's something I wish I did more of outside, let's say, the 401k world.

Speaker 4 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.

Speaker 4 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, 10 years from now.

Speaker 4 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.

Speaker 4 And so I think that if you were able to sock a bunch of money away in tax deferred counts 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.

Speaker 3 So that's when you needed money rehab, but you weren't broke then. You just didn't know the things you know now.

Speaker 4 You know what?

Speaker 4 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.

Speaker 4 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.

Speaker 4 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?

Speaker 4 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?

Speaker 4 And so the idea of compounding interest or compounding returns over a long period of 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.

Speaker 4 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.

Speaker 3 Yeah, we're trying, man. I can't even imagine, my daughter's five months old, what college is going to be, or if that's going to even exist when she's ready.
Yes, it's true.

Speaker 3 I'm glad I didn't invest earlier, said no, whenever.

Speaker 1 Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin.
Money Rehab's executive producer is Morgan Lavoie. Our researcher is Emily Holmes.
Do you need some money rehab?

Speaker 1 And let's be honest, we all do.

Speaker 1 So email us your money questions, moneyrehab at moneynewsnetwork.com, to potentially have your questions answered on the show or even have a one-on-one intervention with me.

Speaker 1 And follow us on Instagram at MoneyNews and TikTok at MoneyNews Network for exclusive video content. And lastly, thank you.
No, seriously, thank you.

Speaker 1 Thank you for listening and for investing in yourself, which is the most important investment you can make.