Lead-Lag Live

Hal Lambert on Political Influence in Investments, CEO Dynamics, and Strategic Market Insights

• Michael A. Gayed, CFA

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Discover how political decisions can make or break your investment strategies in our thought-provoking episode with Hal Lambert from Point Bridge Capital. We'll uncover the hidden pitfalls that could be lurking in your mutual funds and 401(k)s due to the political stances of companies like Target, Nike, and Disney. With Lambert as our guide, we'll explore how you can align your portfolio with your ideological beliefs by investing in a politically-driven ETF designed to support conservative values.

Ever wondered what drives your favorite CEO's decisions? We'll discuss the fascinating dynamics of CEO motivations, comparing the unique position of Facebook's Mark Zuckerberg to other transient CEOs who are often influenced by financial incentives and board pressures. Plus, we'll delve into the merits of equal-weighted portfolios over market-cap-weighted ones, focusing on sectors like industrials, financials, and oil and gas. Lambert's insights offer a fresh perspective on screening companies based on their political leanings, providing a strategic edge to your investment approach.

Finally, we turn our attention to the broader geopolitical landscape and its ripple effects on the market, particularly in the semiconductor sector with a spotlight on NVIDIA. Lambert shares his spot-on predictions regarding Federal Reserve policies and interest rate changes over the past seven years, offering a historical lens to better understand current economic conditions. Don't miss this compelling episode that bridges the gap between politics and investment strategies, helping you navigate these turbulent times with confidence.

DISCLAIMER – PLEASE READ: This is a sponsored episode for which Lead-Lag Publishing, LLC has been paid a fee. Lead-Lag Publishing, LLC does not guarantee the accuracy or completeness of the information provided in the episode or make any representation as to its quality. All statements and expressions provided in this episode are the sole opinion of Point Bridge Capital, LLC. and Lead-Lag Publishing, LLC expressly disclaims any responsibility for action taken in connection with the information provided in the discussion. The content in this program is for informational purposes only. You should not construe any information or other material as investment, financial, tax, or other advice. The views expressed by the participants are solely their own. A participant may have taken or recommended any investment position discussed, but may close such position or alter its recommendation at any time without notice. Nothing contained in this program constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in any jurisdiction. Please consult your own investment or financial advisor for advice related to all investment decisions.

 Sign up to The Lead-Lag Report on Substack and get 30% off the annual subscription today by visiting http://theleadlag.report/leadlaglive.


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Speaker 1:

The news came out that Target was going to open up their restrooms and their dressing rooms to whatever gender you identified as, and I said, oh wow, that's not going to be good for the stock and I own Target and I sold Target that morning.

Speaker 1:

And then the controversy came out and people started boycotting Target. I don't know if people remember this, but the stock went down about 30% over the next six months and people were boycotting Target pretty heavily. This also, I think, happened around the time people started boycotting Nike and they're boycotting Disney and I started thinking you're boycotting these companies and yet you don't even realize you own those same companies in your mutual funds. So you're saying don't go to Target, don't shop at Target. I'm not going to shop at Target, but I'm going to own Target stock in my mutual fund because they didn't really even know that they did and they certainly didn't know you know, in their 401ks that they didn't really have an idea and there really wasn't any way to really invest politically, if you wanted to put your ideology around your investments. There just wasn't anything. There was. Everything was on the left.

Speaker 2:

This is actually going to be a really interesting conversation with Hal Lambert, who I've gotten to know a little bit over the last month and a half two months.

Speaker 2:

If any of you want to engage and ask questions during this roughly hour-long conversation, I can see your posts on X, on LinkedIn, on YouTube. Let's make this interactive and engaging as much as possible. This is a sponsored discussion from Point Bridge Capital, of which Al is in charge of. We're going to be talking about his background, talk about their ETF MAGA, which, by the way, is perhaps the greatest ETF ticker of all time. We'll touch on how that has been received right and since the fund's inception and just in general sort of the concept of politically focused investing, and we'll do it from both sides of the political aisle, but obviously this is much more tilted toward Republican. So, with all that said, my name is Michael Guyatt, publisher of the Lead Laguerre Pour. Joining me for the rough hour is Mr Al Lambert. Al, introduce yourself to the audience. Who are you, what's your background, what have you done throughout your career and what are you doing currently?

Speaker 1:

Yeah, thanks, Michael, Glad to be here. My name is Hal Lambert. I have a firm called Point Bridge Capital that I launched right about 11 years ago. Prior to that, I was at a couple of different Wall Street firms, the one being JP Morgan, where I was a portfolio manager and managed all the discretionary money for the Southwest part of the United States. The other I was at Credit Suisse, First Boston, where I was also a money manager, and then, prior to those two firms, I spent, I guess, on those two together about 15 years and then prior to that I was with a hedge fund doing convertible bond arbitrage.

Speaker 1:

So basically my whole career has been in the investment field since getting out of school. So again launched my firm about 11 years ago and I was managing money. I moved a number of my clients and that kind of thing from those other firms. It's an RIA that I've registered with the SEC. I initially had been doing only public markets. I'm now doing some private investing as well, but as far as the public markets go, yeah, I launched this ETF. It was the first ever political ETF about seven years ago.

Speaker 2:

So we're going to touch on that, but first I want to just take a step back. You've been in the business for a while. Is it fair to say that most people in finance that deal with the business of money are much more focused on the Republican side than the Democrat side as far as their own beliefs?

Speaker 1:

You know, I would say that's probably the case. I mean, if you looked at the demographic data and you looked at the investor world, I would probably guess at least 60% of high net worth or ultra high net worth investors are Republican. Yeah, I'd say a significant portion of individual clients are Republican out there. I have Democrat clients as well. Of course, it'll depend on what part of the country they're into as to how political they are. But I'm down in the South, I'm in Texas.

Speaker 1:

Majority of the state here is Republican and has been for 25, 30 years, and so that's obviously different than if you're in Boston or if you're in California, but there's still plenty of Republicans across even the blue states out there. As we become more politicized, you're seeing that flow into the investment side of things and I think, quite frankly, firms like BlackRock are the ones that actually kind of forced that on us, because they're the ones that became political early on with a lot of the ESG movement and a lot of the things that they're doing through the proxy voting system to move corporations to the left. So I think it was really a movement of the left early on into corporate America and they've been doing it for a very long time and there's been nothing on the other side. There's been no pushback or no investment strategy on the other side, while the left was doing it for at least a decade prior.

Speaker 2:

Yeah, and I think the simplest answer is the right one. Right, simplest answer being about taxes.

Speaker 1:

Yeah, I mean you know it's about as far as corporations go. I mean I think it's two things. There's obviously a tax component to it. You've got two candidates running right now One who wants to raise the corporate tax rate and the other who wants to keep it lower or lower it even further. Obviously, if you raise corporate taxes, you know that either means there's less profits for the corporations or they're just going to pass that right on through to the consumer or to the buyer of their products. Either way it's a negative.

Speaker 1:

So you've got the tax component, but then you've also got the social component, which has really been pushed again for a long time now and known as ESG, which is adding massive regulations. I mean, the SEC has come out and you can go check this out. I mean it's an amazing number, literally this year alone, over a trillion dollars of new regulatory schemes that have been put out there by this administration. It's been like nothing that's ever happened before in a single year to put that many regulatory schemes out there. So the high regulations and the higher taxes are going to really cripple a lot of corporations in this country. And so again, there's not just the tax component, there's a regulatory component, and then the ESG side, which is part of the regulatory side, has this whole DEI component as well. So all of those things are a factor for corporations out there on it as well.

Speaker 2:

So all of those things are a factor for corporations out there. Originally, blackrock is not a stupid organization, right? Which means that if you end up having Trump back in office, some of these dynamics might change in terms of what they're pushing. Is there a sense that they're just going to go whichever way the administration goes, or is there a perception out there that, in general, they're much more left-leaning?

Speaker 1:

Well, larry Fink really believes in this stuff and he said it publicly many times. They've recently backed away because there's been so much pushback. I mean you know congressional pushback, state pushback. There's states like Florida and Texas that have said we're not going to do business with BlackRock anymore. So I mean this is not some sort of fiction, you know imagination thing that people are thinking about. I mean, it's real. Black Rock has been one of the leaders in it, so has Vanguard and so has State Street and, by the way, if you look at those three, those three are the largest shareholders. One of those three are the largest shareholder in every single S&P 500 company. So you know that's where we are and all three of them have been pushing it. But again they're backing away from it. But part of the thing you don't realize is well, are they just doing that publicly? And maybe they'll change the name and continue what they're doing?

Speaker 1:

But as far as if there's a new administration in there, I think one of the things that will happen and a lot of people don't know this part of what's happened in the last six months but there was a Supreme Court case that overturned what's called Chevron deference, and Chevron deference was the 1980 case that really gave the administrative state in Washington the power to implement regulatory schemes without any kind of oversight or any kind of approval from Congress. So effectively, what would happen is Congress would pass a law let's say health care or finance, or whatever law they pass, they would leave it very open so that the directives weren't very clear, and they deliberately did that and they would then turn it over to whatever regulatory body within the government was in charge of those areas, whether it's FDA or whether it's HHS or whether it's SEC, and then those bodies would write the rules. So, as you can imagine, they became very powerful and they had the rule of law behind them, because Chevron Deference said if a company wanted to sue because of a regulatory problem, that the courts would give deference to the administrative body that wrote the rules. Well, that's been overturned. That was overturned earlier this year, which means now the rules. Well, that's been overturned. That was overturned earlier this year, which means now, unless it's written into the law, you cannot enforce some just arbitrary regulation.

Speaker 1:

So as an example you can see, for instance, investment firms were fined this all happened in the last couple of years millions of dollars because they had employees using their cell phone to communicate with clients. That's an example of a regulatory body coming in and going we're going to fine you for this. Well, nowhere does it say in the law that they can't do that. Okay, that's just the regulatory body saying we don't like it, therefore, you were going to fine you for it.

Speaker 1:

Those kinds of things, I think, are going to come unraveling, going forward because they're going to go after. You know it's going to take some time in the courts, but firms are going to push back and go no, we're not paying this fine, we're going to go to court over it. And now the courts can look at it and go actually, there is no law that says this. You've overstepped your bounds. Therefore, you cannot do what you're doing. So we're going to move in that direction, I think, regardless of which administration gets elected this time. But it'll move faster if Trump's elected, because they'll immediately start trying to undo a lot of the.

Speaker 2:

Is there anything to suggest that certain segments of the economy tend to perform better under a Republican administration versus a Democrat administration? I mean, I've seen things that would suggest, for example, that tech does much better under Democrats. That might be skewed by the late 90s, but let's talk about that dynamic a little bit.

Speaker 1:

Well, you know mega tech. You know, if you look at the obviously the Magnificent Seven or whatever you want to call it I mean those large companies. They're effectively monopolies in their field. They're going to perform well probably under either administration, but they particularly will perform well probably with Democrat administrations, because if you're a big monopoly, you love high regulations that will stifle innovation down below you. You can afford the regulatory schemes, you can pay for the lawyers, you can pay for all the additional costs. The smaller companies are the ones that get hit by this.

Speaker 1:

So if you're trying to go up and create something that's going to compete with a Google or Microsoft or a Oracle or an Apple, or any of the giant companies NVIDIA you're going to have a much harder time if there's a lot of regulations around trying to get set up to do those things. So big companies tend to like regulation. The smaller companies don't. But I'd say if you looked out and said, hey, where would there be opportunity over the next four years if regulations, really costs, come down? I think financials are a big winner. There's massive costs for banks, massive regulatory costs and a lot of them are really just kind of unnecessary regulations that are simply there for bureaucrats to feel good about things and move paperwork around. They don't necessarily really reduce the risk of these banks.

Speaker 1:

So I think that's one area that would do better under a Republican administration. You would tend to think also probably oil and gas as well, although oil and gas they've got the two factors right. You've got higher regulations under Democrats and it stifles drilling, but then oil costs, oil prices go up, which is good for them. If you have less regulation you could do more drilling. Oil prices tend to come down, but you can drill more and produce more oil. So it's kind of a catch-22 for oil and gas. Historically, oil and gas companies support Republicans, so you have to assume that, underneath that, they feel they do better under Republican administrations, even though the price of oil may be lower for those companies.

Speaker 2:

I love that point. It's a function of which sectors industries benefit or don't benefit from the regulatory standpoint and controlling their position of power. I want to talk about your ETF, the MAG ETF, which, again, I always say to others, is a phenomenal ticker and might be a trigger for some people, but at the same time, that's kind of what you want from a marketing perspective. Anyway, first of all, what got you even thinking about getting into the industry? I mean, you and I both know it is really not easy to have a fund out there.

Speaker 1:

Well, certainly not. And, by the way, just on that point, it did win ticker of the year in 2017 when I launched it, and that was run by a group out of New York which I didn't think I would win because of that, but they did give it to me. And, of course, 2017 was maybe a little before it became so controversial as far as just the MAGA that was associated with Trump so heavily, but I think one of the things that really got me into it was I'm managing money. One morning I'm sitting at my desk and the news came out that Target was going to open up their restrooms and their dressing rooms to whatever gender you identified as, and I said, oh wow, that's not going to be good for the stock and I own Target and I sold Target that morning and then the controversy came out and people started boycotting Target. I don't know if people remember this, but the stock went down about 30% over the next six months and people were boycotting Target pretty heavily. This also, I think, happened around the time people started boycotting Nike and they're boycotting Disney and I started thinking you're boycotting these companies and yet you don't even realize you own those same companies in your mutual funds. So you're saying don't go to Target, don't shop at Target. I'm not going to shop at Target, but I'm going to own Target stock in my mutual fund because they didn't really even know that they did, and they certainly didn't know in their 401ks that they didn't really have an idea and there really wasn't any way to really invest politically If you wanted to put your ideology around your investments, there just wasn't anything.

Speaker 1:

There was, everything was on the left, there were plenty of ESG firms, plenty of other things. So I started thinking about it. I've been involved in politics since about 2005, pretty heavily and supporting candidates trying to get Republicans elected, and so I started thinking well, what really matters in politics, and what really matters actually is how much money the politicians can raise, and you see it now reported. I mean, we're talking about how much you know Harrison and how much Trump has raised, and that's a big topic of discussion because it is important. It's really important for elected officials. And so if you really wanted to make a difference in the country you know and your ideology was Republican, you'd want Republicans in charge in DC.

Speaker 1:

And so I said, well, why don't I look at how these companies are spending their money. Where are their PACs? Where are their PACs giving money to? Where are their employees giving money to? Because it wasn't I didn't want it to be me deciding who's conservative and not conservative. I just think that's too difficult, and especially when most of them put out things publicly that are pretty left. So I'm like you know, I'm not going to really listen to what they say, I'd rather listen to where, or look at where, they're putting their money.

Speaker 1:

And so I decided to screen the S&P 500 for the top Republican supporting companies in the S&P 500. And that data is public. So I was able to go in and scrape that data and look at okay, what are their PACs doing, how much are they giving, how much are their employees getting? Because, again, it's public. When you give money to a federal politician and, by the way, it's all federal, I'm not doing any of the state level you give money to a federal politician, you put your where you work, you put your employment, so that data is available and it's pretty fascinating to look at. And so what I did was I looked at those and I said, okay, well, I'm going to screen for the total dollar, net dollar. You know cause most companies give the both, but there's big differences in dollar amounts that they give to one party or the other. And also I looked at the net percentage differences and I created a rules-based methodology and created the ETF.

Speaker 1:

The other thing I've more recently added is I kind of wanted to make it an America First ETF as well, and so it's technically called the Point Bridge Capital America First ETF. And I added I wanted to initially look at where their employees were hired. Are they mostly in the US or outside the US? That data is not really there. You can report it, but it's not required reporting. So some had it and some didn't. So I just looked at their assets and I wanted the majority of the assets to be in the United States. So this is a screening for Republican contributors with assets in the United States.

Speaker 1:

And I capped it at 150 names I do equally weighted. As a portfolio manager I really wanted to control for risk, so I felt equally weighted, did that the best. And also with the number of names, I wanted it pretty diversified and that way I didn't want to blow anybody's portfolio up with this. This is not a portfolio where I'm looking to try to massively do things and have a really concentrated portfolio of a handful of stocks. I wanted this to be pretty diversified and I think I've accomplished that, and you know the performance I've had. I know I have seven years under it and so I'm really proud of the performance. I think it's done well and so, you know, I certainly invite people to take a look at it.

Speaker 1:

The website for the ETF is investpoliticallycom, so if you want to go to it now while we're on the call, you can or later, but it's got all the information there. It's got the fact sheet, it's got all the performance, it's got the holdings. I'm set up with a US trust for the custodian. I've got Biden as the sub-advisor, so I've got all the compliance and all the regulatory side of things that we had to do. There were different things back then. They've actually reduced some of the regulations around it to launch an ETF now, but it's still quite expensive and a long process.

Speaker 2:

As we were chatting, I was looking at the chart on Target in 2016, just to show it for the audience here. But this is around the time when that hit and you can tell. Yeah, there was some nasty weeks right when they were aggressive selling off in 2016 to 2017. Are there other examples aside from Target more recently that show similar sort of price reactions? I think this is where it gets to be interesting as a way of filtering things out, even beyond political belief just the idea that if a company is taking a political stand or a stand that is seen as political, it can hurt them fundamentally.

Speaker 1:

Well, I think Disney's had some problems with this, right, I think if you look at Disney's dog, if you pull that up, I mean they're kind of continually kicking on themselves. So you know, it's hard to know what specific you know thing is hurting Disney. You know, look at that chart right there. I mean, they start to do well and then they just they come out with crazy stuff and they, you know their theme parks, they, you know, trying to push the needle on social agenda that has nothing to do with their company. And, of course, the most famous part of it was when they went after the state of Florida. Effectively, governor Ron DeSantis and Ron DeSantis took away their special tax treatment that they had that no one else in the country had, and it's really hurt him and they went to court over it. They've lost. Desantis ended up winning that whole thing.

Speaker 1:

Disney walked away a big loser on that and there was no reason for it. There was no reason for them to get involved in a social issue. You know it had nothing to do with their company, with what they were doing, and that's the bigger problem. Look, companies are going to get involved politically and they all do, and that's part of what they're giving money to politicians for. They want legislation that benefits them. But when you get involved in legislation that has nothing to do you look at, for instance, they moved the World Series out of Atlanta because of some voting stuff. That was kind of a phony deal. Now, obviously, major League Baseball is not a professional or not a publicly traded stock, but that whole thing was ridiculous. But that's what's going on.

Speaker 1:

I don't mind companies getting involved, obviously, politically. They give money, they're lobbyists, they're trying to get contracts, they're trying to make sure the tax law favors them. Those are all legitimate things. But when you get into things that really are not a part of what you're trying to do as a company, that's where I think it really can hurt companies and bite them. And the conservatives have become much more active in this area. You know they're really looking for it and with social media, the way it is, you can really. You know people can really find out much more easily than they could in the past.

Speaker 2:

When did this becoming a thing, become a kid saying where companies take a social stance like that? I mean, it just seems like an odd concept that we're in this era where companies can be tagged as left or right.

Speaker 1:

Well, it really has been pushed for a long time. So it's it's happening for a number of reasons. So what you have is you have HR departments and you have corporate executives and boards that are coming out of the universities, where they've you know there's a lot of social justice stuff going on in the universities got a lot of pressure internationally. So, you know, it starts with things like climate and it moves right on through, and DEI really became a huge thing within corporate America and a lot of it again is pushed by, you know, hr departments saying, hey, we want to do this, we want to do that, we need to give money here, we need to give money there, we need to support this cause, and I think a lot of it too.

Speaker 1:

If you want to be frank about it, most CEOs in this country they're not large shareholders of their companies, they're not the founders. Most of the CEOs are there. They own less than 1% of the publicly traded stock of the company. They're there to make as much money as they can. Part of that is, hey, don't rock the boat. If this is where the political winds are blowing right now, let's do it. I'm getting pressure here. The board wants this, I'll do it, just make sure I get my bonus.

Speaker 1:

A lot of these companies are not owned by their founders anymore. Mark Zuckerberg he still controls Facebook because of the supermajority shares, and look what he's doing. He's backing away as fast as he can over the last year because he stepped away out there on the political left and I think he's learned that it's not helping him and he's really started to backtrack. But again he's a different deal. He still owns a huge amount of shares and he still has all the voting majority. So that's again an example of someone who actually has material ownership, versus a lot of these CEOs that are just, you know, they're hired guns. They're in there for a few years and then they move on.

Speaker 1:

Yeah, basically that MAGA is equal weighted and I've been all like, yeah, it is equally weighted. Again, that was for risk controls as well. You know, the largest percentage in the portfolio is industrials, and then you've got financials, you've got oil and gas, so those are the three largest. You know very little tech, so this is great, for to me, this is great for investors that maybe they're heavily already invested in the Magnetism 7 or have a high tech weighting. This will complement it well, in my opinion, because there's very little tech in this and you know, michael, as you and I've talked about this, the interesting thing about it.

Speaker 1:

So, just on a pure stock selection basis, if you took the S&P 500 and equally weighted it versus cap weighted, this is outperformed as significantly and meaning that the stocks are obviously doing better than their stocks. Now, on a cap weighted basis, the S&P has outperformed, but in different periods of time it's underperformed. So you know, when you get the top four or five stocks in there that make up you know almost you now I guess the top tech stocks make up 30 plus percent of the S&P. You're making a big bet there and so people obviously are looking at that. But you have multiple trillion dollar companies that make up that deal. And so how much faster are trillion dollar companies going to grow than the overall economy? It'll be interesting to see. But again, I think most people have weightings in those stocks like Nvidia, like Microsoft, like Google.

Speaker 2:

I think most people have weightings in those stocks like NVIDIA, like Microsoft, like Google, they don't have a weighting in a lot of these companies, which is again, I think, where it gets to be interesting. I like that focus on the risk control because I agree with you the concentration I call it concentration bubble, right, that's gone out of the market cap weighted averages. So, in general, equal weighting makes sense. You've done something well against the equal weight S&P. Let's talk about the reason for that, and it has to do with the exclusions, right? So what are some companies that are in the S&P 500, in the S&P 500 equal weight that, aside from Target, aside from Disney, are not a part of mega? And let's drill down in terms of that methodology Because you know, I'm sure maybe I'm wrong it's kind of a blend of quantitative reasoning and qualitative reasoning as far as what gets taken out.

Speaker 1:

Well, again, it's rules-based, so the companies that are not going to be in there. There's some very left companies in the country run by very left people. So Netflix is an example. Reed Hastings, who ran Netflix for years, was very far left. I mean, in fact it was publicly known he got into a big dispute on the Facebook board because there were people on that board Peter Thiel was on that board and he wanted Peter Thiel kicked off that board and he was demanding that Mark Zuckerberg do that. So you know, that's kind of the way he looks at the world and so obviously they're not giving any money to Republicans, or very little, you know. The same thing goes for, you know, companies like Facebook, amazon's very heavily Republican or, excuse me, democrat giving. So most of the big tech companies give much more to Democrats than Republicans and that's a big. That's a factor of you know, the leadership there and the employee base there, and most of them are in California.

Speaker 1:

As we've seen from the state of California. You know it's run exclusively by Democrats the governor all the way down and super majorities in both houses of California. But, by the way, so many people are leaving California as well, so there's plenty of people that don't agree with that political ideology. Think how bad it has to be for you to leave such a beautiful state like California. I mean, you're there, the weather's beautiful, especially in Southern California. The cities, historically, were great, but they've just been taxed away and destroyed to many people and so they've left.

Speaker 1:

And I think there's a similar view in the investment world. I mean, I think people are like look, I don't want to invest in companies that are actively trying to keep Nancy Pelosi as Speaker of the House or that are actively trying to keep Bernie Sanders as a Senator in Vermont. So I just think that there's a big market out there and the track record on this has been it's now been seven years, so this isn't something that you can have to guess on. You can look back and see well, how has this performed, and I think it did very well during the sell-off. We had the sell-off I believe it was in 2023. No 2022, excuse me, 2022. This held up extremely well.

Speaker 1:

So you know, if we end up with big pullbacks in the market, you know that means that the tech companies are going to have to pull back and probably they will sell off more than the other companies and that'll affect the S&P in a bigger way than it would otherwise because, obviously, market cap weighted within the S&P. So I think these companies that are not in there, it's again heavily tech, because if you look at my weightings from the fact sheets that are on the website, I believe I'm about 2% tech versus the S&P 500, it's like 30 plus percent technology. So that's where you're going to see the biggest difference. So, again, I think for two types of investors those that are already heavily weighted in tech and those that are really politically inclined to invest this way. Those are two, I think, types of clients that would be interested in this.

Speaker 2:

Has there been an example of a company in the last seven years that was excluded but then got back into the fund? I mean, you actually read AC, let's say someone. Someone else comes in who's very Republican right and it's a very different flip. Unlikely I get it, but any examples like that.

Speaker 1:

No, not that come to my mind. I know some examples of companies that were in and then were out. So, like Goldman Sachs, a lot of people in Goldman has historically been pretty left. Goldman's not in now because they kind of moved back to the left, but they were in initially and part of that, quite frankly, was a lot of the banks, surprisingly, were pretty heavily Republican donors, and a lot of that is because I think many of them got very upset after 2008 and the regulations that came along after that market problem. That was obviously caused by a lot by the banks and the financials. They created a whole new regulatory regime over them. It's been pretty painful. So I think there was a lot of movement from Democrats to Republicans within the financials at that time, and Goldman initially was and has now moved back the other way. So I think right now it'll be interesting and again, you know, since I launched this, we went from Trump to Biden, so it'd be more likely, and we also went from Republican majorities to Democrat majorities, and so a lot of companies will kind of move along with that, because you've got certain power structures within the Congress that you know are now heading committees, so you're going to give money to those particular politicians because they're now heading committees. So I think you could see that if we get a new administration in here, michael, it'll be interesting to see.

Speaker 1:

I'll do a reconstitution here after this election cycle and it'll be interesting to see what changes are there. And one thing I haven't mentioned is I do a rebalance every quarter. So every quarter this goes back to completely equally weighted and I also look at any additions or withdrawals to the index and anything that goes out of the index I pull out of my ETF. Anything that goes in, I screen it for the political contributions and if it makes sense to go in, then it goes in. So that's another thing that goes on throughout the year. So this will rebalance every quarter and the next year I will look at this election cycle, this 2024 election cycle, and do a reconstitution this election cycle, this 2024 election cycle, and do a reconstitution.

Speaker 2:

What I find interesting is that the fund's done well even though you've had the Biden administration right. So it's not one of those things where it's dependent upon the party that's in power at the executive branch. Is there anything that suggests that if you have a Republican controlled Congress or Republican controlled Republican Republican president, that you would maybe do better? It's already done well right as a standalone, but could it do better, you know? If that's the case, I think it could.

Speaker 1:

Obviously, we're just kind of projecting forward, but one of the things that would be beneficial would be, again, a reduction in regulations.

Speaker 1:

If that happens which it should if there were to be a Trump administration I think that's going to benefit a lot of these companies because they are highly regulated, especially the financials and the energy, and the EPA has just gone crazy on energy companies.

Speaker 1:

I mean, the regulatory side of that has really been difficult for a lot of the energy companies, so I think that would change things.

Speaker 1:

And so, yeah, I think you're right, it hasn't mattered who's in office, and I suggest I don't know this but I think that possibly the reason for that is that companies that are politically active tend to get things done that they want done. I mean, we talk about Congress and these companies are not up there lobbying and spending money without getting some sort of return on that, and that return could be, hey, they save themselves from costly regulations, or it could be that, hey, they get something put into a bill that helps their industry, and so I would suggest that perhaps one of the reasons this is done decently well is because these companies are more politically active than maybe other companies, and so companies that are not politically active as far as contributing to Congress are not in this ETF, and there are those. There are companies that simply aren't giving. They don't have PACs, they're not giving to Congress and perhaps that's not helpful for them. So that could be another reason that this has performed well, regardless of who's in office.

Speaker 2:

So you've got the fund and you've got SMAs you'd mentioned. You're doing some private market stuff. I'm curious, outside of MAGA, your own sort of tilts that might be taking place with some of your clients, kind of like ESG, in the sense that if you're going to be ESG, you can't just have one fund, that's ESG, the entire portfolio S-B-S-G. Otherwise, why are you doing ESG for a portion? You can argue the same thing as a philosophy for more conservative type values in a portfolio. But to get a step back, what else are you doing separately outside of MAGA?

Speaker 1:

as far as allocations, yeah, so away from MAGA. When I make decisions on an individual stock portfolio for a client, an SMA that I'm running for a client, I'm not going to not buy a stock because it's a quote Democrat stock. So away from MAGA. I'm heavily invested, and have been for a long time, in NVIDIA. As an example, jensen Wang had an interview yesterday I just saw it. He was very clever, very smart, obviously a very smart guy. They were desperately trying to get him to endorse a candidate CNBC was and he just wouldn't do it. He said look, I'm going to get along with whoever's in the administration, whoever wins, I'm fine with whatever tax policy they want, I'm fine with whatever regulations they want, I'm fine with. He was just fine with whatever. He wasn't going to say one thing that was going to disrupt the growth of NVIDIA, which is smart. But yet he was on Capitol Hill with, in fact, at the White House, with other tech executives. So he's there, he's just smart enough to not come out publicly and make statements one way or the other, and I think that's a smart way to operate.

Speaker 1:

But yeah, I mean, I've been a big fan of NVIDIA, for I've owned NVIDIA, just to be frank, at least 10 years. So that's probably the best performing stock, although KLA 10 cores actually, in certain areas, has outperformed NVIDIA. A lot of people don't realize that, but I've been heavy in the semiconductor space for quite a while and I, you know, and I continue to remain heavily invested in semiconductors and I think, with AI coming, you know, the semiconductor space is going to continue to do well in that. You know you get so much more performance for the cost. You know they just keep scaling our performance in that space and so, yeah, I've been a big fan of the semiconductor space.

Speaker 2:

Ten years with Nvidia. I didn't know I was talking to somebody who's a billionaire.

Speaker 1:

This is for clients that I've had for 10 years. But yeah, if you saw some of the cost basis, you would be like, wow, it is pretty surprising.

Speaker 2:

So what's how geopolitical risk can factor into how things perform in general? There is the impression that Republicans, conservatives, are more the in quotes war party. I think they're both war parties. I think it's just the truth. As the world gets more volatile and as risks rise, whether it's Russia, ukraine, china, taiwan, so on and so forth. Any thoughts on how any of that could impact MAGA in particular and maybe impact in general sort of, since risk is a big part of this market cap weighting?

Speaker 1:

versus. Yeah, you know, geopolitical is very difficult to invest around. We're all sitting around going well, is there, you know? Is China going to invade Taiwan? What would that do to an NVIDIA? What would that do to the chip sector? Obviously it would be a negative. And yet I don't think you can just sit back and go well, I'm just not going to own those stocks because that could happen, that could have happened over the last three years and it hasn't. It may or may not happen in the next three years. I think it's really difficult to play geopolitics.

Speaker 1:

People have always asked one of the big geopolitical things to look at is oil prices. A lot of tension in the Middle East has been for decades. And I tell people look, I'm in the oil country. Half of my friends are probably the oil and gas business. I know the oil and gas business pretty well. What I know is this I don't know anybody that can predict oil and gas prices no one, I mean. If you look at some of the smartest people that were out there and a couple of them are longer with us I'll talk about Boone Pickens. Because Boone Pickens? Because Boone was obviously a very intelligent oil and gas guy. He ran a hedge fund that blew up because he bet the wrong way. Aubrey McClendon same thing. Aubrey McClendon from Chesapeake. He ran a hedge fund to predict trading on oil and gas and it blew up. So if those guys can't predict oil and gas prices, I don't know who can. And so the geopolitical around okay.

Speaker 1:

Well, what's going to happen in the Middle East? Will oil go up or down? I just think that's really tough. I think that prices are going to be driven more by GDP growth, global GDP growth, and so that's the way I look at it. And I think the United States I'm not a believer in international investing, I'm a big believer in the US.

Speaker 1:

That's where I put my client money, that's where MAGA is invested, and I think the data support it. So anybody out there that's looking at the data, international has underperformed for, I guess, 30 years now. I don't think you can just say, well, it's secular or hey, it's cheaper. International is always cheaper, it's always been cheaper. But to me, if I look at Europe, it's a very slow growth model. It's very highly regulated, it's a socialist economy for the most part. If you look at other parts of the world, there's no SEC, there's no FINRA. How do you know whether there's insider trading going on in parts of the world, whether it's Latin America or Asia.

Speaker 1:

I think it's very difficult to try to predict those things. So I think being in the US reduces that risk of geopolitical risk. And, as we saw with other times where all the correlations went to one, all the money rushed into the US. So the dollar would typically rally, all the money would come here, treasuries would rally. So the US is still. If there's any geopolitical, major geopolitical problems, the money's all going to flow here. So why not just be here before it has to?

Speaker 2:

If somebody's watching, listening, hears you and is much more on the Democrat side, what would be your pitch for why they should consider MAGA? Because, let's face it, at the end of the day, everybody wants to make money. And if there's a compelling argument for MAGA, independent of the political beliefs, that just in general, these companies tend to perform better, even if you're a Democrat, you should consider it. But what's the pitch there?

Speaker 1:

Well, I think a couple of things. If they can get past the ticker, they can get past the ticker which and it depends also how polarized they are I mean, you're not going to convince somebody that absolutely could never even watch Donald Trump on a television set to buy a MAGA ETF. I just wouldn't even try. But for those that are like, yeah, look, I'm kind of middle of the road, I'm looking at both sides, I think that what I said earlier, which is, hey, you're probably already heavily weighted in tech and if you're in the S&P 500 and you've got a lot of it, you have huge bets on five or six stocks. You have big bets there.

Speaker 1:

So to reduce risk, I think it does reduce risk from those more concentrated S&P 500 ETFs. And then again, if you're running a bunch of different types of accounts, I prefer the US. I think the US outperforms. Go back and look at the data, compare anything you've done versus MSCI or any of the international indexes, and you'll see that you've left money on the table internationally. So I would reallocate from international to a MAGA and I would reallocate to reduce risk if you're heavily weighted in specific tech areas or if you want to just add, but you don't want to add any more tech. This is another way to do it as well. So I think those are the kind of the three key selling points. This is, in my view, this I plays well to people that are already too heavily weighted in specific sectors.

Speaker 2:

And Hal for those who want to track more of your thoughts, more of your work, learn more about Mago. Where would you point them to?

Speaker 1:

Yeah. So I'd go to investpoliticallycom and some of you may recognize I do a lot of television. So I go on CNBC, I go on Fox Business, I go on Fox News and I talk about the markets a lot. So there's a lot of video clips of me out there. I think I've been right in many cases. They talked to me a lot about what the Fed's been doing, what the Fed did historically. I was calling for Powell to raise rates much sooner than he did because inflation was going to be out of control. And when he was the other way, when he was raising too early, I said look, he doesn't need to be raising interest rates. So those video clips are out there and I've got plenty of content online for people to see what my views have been over the past. I've been going on really about seven years.

Speaker 2:

Everybody. Please make sure you follow Hal Lambert Again, this conversation is a sponsored podcast with Hal Lambert Point Bridge Capital ticker MAGA. Make sure you check that out and appreciate those that watch this live and are watching this edited version. Appreciate it, al, thank you. Thank you, michael, cheers everybody.

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Michael A. Gayed, CFA

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