Dive into the complexities of managing investor capital in today's dynamic market. David Nelson, a seasoned portfolio manager and host of the Money Runner Podcast shares his insights on navigating the high-stakes world of finance.
Market Realities: Understand the pressures and responsibilities of managing money, with a focus on maximizing returns and identifying risks.
AI and Investment: Explore the evolving role of artificial intelligence in investment decisions and how it transforms the industry.
Geopolitical and Economic Insights: Learn about the impact of global events, inflation, and energy trends on financial markets and investment strategies.
Hit subscribe and stay informed with expert analysis and strategies for successful portfolio management!
Disclosure: "At the time of this article I currently hold shares in some of the companies mentioned as part of investment portfolios in funds I manage for Belpointe. Additionally, I may discuss other securities that are under consideration for future investment; however, discussing these securities is not a recommendation to buy, sell, or hold. My mention of these securities reflects my personal opinion and analysis at this moment and may change without notice. Please remember that all investments involve risks, including the possible loss of principal."
Dive into the complexities of managing investor capital in today's dynamic market. David Nelson, a seasoned portfolio manager and host of the Money Runner Podcast shares his insights on navigating the high-stakes world of finance.
Market Realities: Understand the pressures and responsibilities of managing money, with a focus on maximizing returns and identifying risks.
AI and Investment: Explore the evolving role of artificial intelligence in investment decisions and how it transforms the industry.
Geopolitical and Economic Insights: Learn about the impact of global events, inflation, and energy trends on financial markets and investment strategies.
Hit subscribe and stay informed with expert analysis and strategies for successful portfolio management!
Disclosure: "At the time of this article I currently hold shares in some of the companies mentioned as part of investment portfolios in funds I manage for Belpointe. Additionally, I may discuss other securities that are under consideration for future investment; however, discussing these securities is not a recommendation to buy, sell, or hold. My mention of these securities reflects my personal opinion and analysis at this moment and may change without notice. Please remember that all investments involve risks, including the possible loss of principal."
The Money Runner podcast is for everyone. But today's show I'm talking to those of you who run money for a living like I do. Let's be honest. As portfolio managers, we are always one big quarter away from being fired. That's the harsh reality, and it underscores the pressure and responsibility that comes with managing investor capital. As a portfolio manager and steward of investor funds. We wear several hats. The primary objective is to maximize returns when market conditions are favorable. Understanding that ultimately the price is truth and the definitive measure of success. The bull markets are reality, not a debate. Valuation as a timing mechanism is unreliable. If it were the only factor, Apple would be trading at 100. Are there risks to this bull market? You bet. Let's open up the playbook. Welcome to The Money Runner. I'm David Nelson. When it comes to running other people's money, failure is not an option. Maintaining a balanced outlook is key to meeting investor goals. Investment trends are finite, and that, along with each opportunity, brings with it risks that, if ignored, can quickly destroy capital. Investor behavior and market pricing respond to a continuous stream of data that extends beyond the obvious. Yes, we analyze revenue, earnings, debt and growth, but these metrics are meaningless without understanding the broader economic context. Geopolitics, secular trends, and the needs and desires of nearly a billion people all influence financial markets. In the past, the role of a portfolio manager like myself was considered as much an art as a science. However, with A.I. advancing towards AGI, machines will soon outperform humans in speed, accuracy and efficiency. Evolution is natural, and history has shown this progression repeatedly. Most of you know I'm a commercial pilot. I'm also an aviation enthusiast. Modern pilots are now systems engineers with advanced aircraft requiring minimal human input. Some aircraft can even land in zero visibility conditions. In fact, even the aircraft I fly have installed with the right avionics could land itself at the nearest field. The future is obvious. Investment decisions will increasingly be made using artificial intelligence. Transforming my role into that of an executive silicon portfolio systems engineer. Financial professionals that fail to adapt. Ignoring these new tools do so at their own peril. Quantitative multifactor models were just the beginning. And today already that looks dated. Models that develop or change existing code capable of sifting through the chaos of endless streams of data while developing new rules of engagement are probably just the tip of the iceberg. Like I said, every opportunity comes with its own set of challenges. Yes, we're in the middle of what might be the biggest investment theme of my career. But as stewards of invested capital, we have to balance out our enthusiasm with a process that can identify threats to our thesis before they cause too much damage. Here are a few risks even humans can identify. We are engaged, even if by proxy, in multiple geopolitical conflicts that could easily escalate. Ukraine and Gaza are front and center. Two. Still, our biggest risk is elevated rates and a higher for longer backdrop that continues to pose a risk for the economy. Three. Inflation. The last mile of inflation has proven stubborn, delaying anticipated rate cuts to late 2024 or early 2025. So far, these issues haven't significantly impacted labor markets. Layoffs remain low, but hiring has slowed to 2019 levels. Watch Weekly unemployment claims for early signs of labor market weakness. A.I. continues to be a dominant investment theme, offering opportunities both within and outside the tech sector. Here are two. While I typically recommend nuclear energy, utilities like Constellation NRG is a unique opportunity. 48% of its generation comes from natural gas, the cleanest fossil fuel. The administration's energy transition plan has failed, making fossil fuels essential for meeting energy needs. Continuing to force a transition beyond its natural evolution or ability to handle the expanding power requirements of the most dynamic economy on the planet could prove fatal. Any rational view of our energy needs has to include an all of the above approach. Oil and natural gas peak demand is likely a decade away. NRG owns 21 power plant sites with approximately 21,000 available acres. And that's the kicker. The real estate could be highly lucrative, especially as AI driven data centers require significant power. Instead of power, going to the data center. How about the data center? Goes to the power? NRG is exploring how to best monetize this land, making it a compelling investment. At just 14 times forward earnings. You can't talk about AI without talking about Nvidia. With the stock again at all time highs. Why would anyone suggest buying instead of taking profits. With a market cap of 2.6 trillion second only to Microsoft and Apple. Nvidia is more than a chip company. It's a systems company. Data center growth exceeded 400% year on year and video provides essential tools and software services that AI engineers would find difficult to replace. During the latest earnings call. Management highlighted a multibillion dollar opportunity in Ethernet offerings that unsettled investors and companies like Arista Networks and Cisco Systems. This expansion, beyond core products will make Nvidia’s business model more durable and was key to my decision to add to the position. With a PEG ratio of just 1, Nvidia offers 30% growth at 30 times next year's earnings. Positioning it for long term success. You saw this kind of thinking from Apple when they move beyond the iPhone into services and other products. Today, Apple even makes their own chips. While growth from video may slow in the future, its valuation multiple will likely increase as it becomes less cyclical. You know, it isn't often technology and utilities are discussed within the same investment theme. A.I. is still an infrastructure build out story, and until we meet the power demands of this exciting new technology, the success and failure of both are joined at the hip. That's it for this week. If any of the above made sense or moved the needle in your thinking, give this podcast a try. Do us both a favor. Hit subscribe and please check out my substack site. DCNELSON123@SUBSTACK.COM. Lots of charts and commentary there too. Thanks for joining. I'm David Nelson.