Lead-Lag Live

Michael Kramer on Navigating Stock Market Paradoxes, Global Valuation Trends, and Strategic Investment Insights

• Michael A. Gayed, CFA

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Can stock market highs exist alongside falling earnings estimates? Join us as Michael Kramer, founder of Mott Capital, unravels this intricate paradox, offering his seasoned perspective on the unpredictable dance between stock trends and earnings. With a background transitioning from a buy-side trader to managing a long-only thematic growth portfolio, Michael shares insights that transcend typical stock predictions, shedding light on market mechanics, bond yields, and the impact of international equities. His unique approach to portfolio management blends bearish outlooks with strategic long-term positions, presenting a fascinating strategy for navigating today's financial landscape.

We journey through the global market's surprising behaviors, focusing on the DAX and S&P 500 indices defying conventional expectations by climbing despite declining earnings estimates. Michael guides us through the complexities of current market valuations, contrasting them with historical norms and questioning the sustainability of unprecedented profit margin forecasts across sectors, including small caps. Are these high valuations a symptom of optimism or a harbinger of challenges? As we dissect valuation trends, we consider whether economic revitalization under new leadership could balance the scales or exacerbate existing market tensions.

Cryptocurrencies, tariffs, and global economic dynamics form the crux of our final discussions, where Bitcoin's contested value and the yen's strengthening play pivotal roles. With the looming possibility of a Bank of Japan rate hike, we explore the ripple effects on global markets. Meanwhile, the strategic implications of tariffs and inflation create a complex tapestry of economic strategies, where liquidity becomes a central theme. Drawing on insights from financial luminary Druckenmiller, we ponder whether interest rates need a recalibration to align with GDP growth. Listen in as we navigate these multifaceted challenges, offering a rich tapestry of insights for investors seeking to understand and strategize in today's volatile financial climate.

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.

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Speaker 1:

If you look at the DAX and you look at the earnings estimates, they're actually been cratering and you would never think that the DAX actually just traded at an all-time high today when you saw how these estimates are looking. And that's to me really a surprising fact, right? Because typically stocks and indexes trade with the direction of earnings, or at least they trend that way. And that was the case. You know, if you go back in time you can see in this period of time that certainly was the case. But then it started to be the case again and into the fall of last year, then everything really just departed, right?

Speaker 2:

My name is Michael Guyatt, publisher of the Lead Laggard. Joining me here is Michael Kramer. Mike, I've known you for a bit of time here. We actually don't live too far away from each other, but introduce yourself to the audience. Who are you? What's your background? What have you done throughout?

Speaker 1:

your career. So I'm Michael Kramer. I'm the founder of Mott Capital. I started the business a little over 10 years ago now. Before that, I was a buy-side trader for about 10 years and I had the privilege of trading US equities, domestic US equities and international equities during that time. I've also, you know, prior to that, I had some junior roles as an analyst and an assistant trader, and I've been following the market since the mid 1990s and I traded my way through college, basically paying my tuition along the way, and so I've been obviously doing this a really long time and I decided about 10 years ago I went out on my own. Uh, I started with a long, only thematic growth portfolio. Uh sort of ran into issues raising capital without a track record. So I started writing and it seemed like people enjoyed my writing content and my views on the market, which at the time were much more bullish and that sort of formed into subscription services, youtube channels and followings on Twitter and Substack and things of that nature.

Speaker 2:

I always go back to the idea that content is the bridge to a relationship. You still have to walk it, and a lot of people use content to get their name out there, but also for not just brand building but hopefully business building right To hopefully find leads, and I think that's a perfectly natural and honest thing to say when it comes to anybody that's putting content out there, the types of people that gravitate towards your way of thinking about things. It seems to me that these are not sort of the traditional buy and hold vanguard acolytes. I mean, what's sort of the audience that tends to gravitate towards you?

Speaker 1:

So that's where it gets a little confusing for people because I'm a long, lonely portfolio manager for my family and friends accounts that I run the thematic growth strategy, which I've been running for 10 years now, and it's done well, and basically, what I found, though, was that people were just more interested in reading about my experience that I have from being a trader, and so, while it's great that I've owned Microsoft and Apple and all those other names for years, they don't really mean much Right, and so, you know, it sort of became always to the mean or means to the end, right, meaning like you had to figure out a way to keep the lights on and keep the business running and keep the business growing so that you could keep the portfolio going and keep growing your job and keep your job Right, and so what I found really resonated with my readership was really more about market mechanics, how it works, bond yields, interest rates, stocks, how they interact with one another, and, having traded international equities for a really long time, and specifically during 2007, 2008, 2009, 10, and outside out of that GFC, I mean I saw things and I experienced things that I don't think many people did, and I also, because I was trading foreign, I had exposure to reading material that just made me realize that, you know, the world and trading is much more than just about what's happening in the US. The world and trading is much more than just about what's happening in the US and how things happening in Europe and things happening in Hong Kong and Japan can really have such an outsized impact on US markets and US stocks. And so what I started to do was I started writing about those topics on top of you know, adding in things about what I was seeing in the market here in the US on a daily basis, plus throwing in fundamental stuff and then throwing in option stuff. I mean, I had a master's degree and part of my master's degree program was learning about option, option pricing and understanding derivatives and, of course, being a trader as well. I got the experience to trade option derivatives as well, not on sophisticated levels, but on a basic enough level that I could begin to understand and know the importance of gamma and delta and all these things and how they play into the market.

Speaker 1:

And so that's what people really enjoy reading. For me they don't really. You know, read me for my thoughts on where I think Apple or Microsoft are going to go, things of that nature, and so that's where it's a little bit confusing, I think, for people, because even though I'm embarrassed on the market, I still run this long-term portfolio because I take these views that I have on the market, both short-term, and then I use them to decide when I should be a buyer and reallocating positions within my portfolio. So they all kind of go hand in hand. But it's just that people don't get to see that other side of what I do, which is the repositioning and reallocation and how I'm using this in my daily and all this information I'm gathering and presenting in my own investment process.

Speaker 2:

I'm glad you emphasize the long only point, because I myself make the same argument. You can be bearish and still long. In fact, actually, if you've been bearish and long defensive areas, particularly utilities, golds this year, you've actually done pretty damn well. Not if you've done long duration treasuries. Admittedly, it's just still not on cycle which we can touch on, but I think it's important for people to understand that you can be negative. You can be negative and incorrectly be termed a perma bear, but still make money.

Speaker 1:

Like again, I'm an RIA, I'm a registered investment advisor, so I have to be careful with how much information I give away.

Speaker 1:

But you know, last year, even though I was bearish on the market I was probably over allocated to cash but I beat the market despite my own bearishness, because and that was probably having too much of a even with too much of a cash position right Because I just happened to own the right things, because I picked the right stocks when the opportunities presented themselves in 2022. And this year I'm underperforming somewhat, but probably not as much as some would might think. Again, just because of the way I'm positioned right now, which is owning high quality names with still carrying a very large cash position, so that when the market if the market does reset and ultimately they always do reset valuations do always matter at some point down the line, because if we get a little bit of a rough patch, you may find that there's no support in this market until you get to 15 or 16 times earnings, which is typically what intend to happen, and that will create the buying opportunity I'm really waiting for.

Speaker 2:

Let's talk about earnings before we touch on Japan and yields, because a lot of people on social media have been noting yeah, we're kind of expensive here from a valuation perspective. Now, you and I both know that you can't use valuation to time right. It's more contextual in terms of sort of forward returns and that's why I think a lot of these large banks are saying you know, the next decade could have very subpar performance, which, by the way, can happen with the market going up, going up, going up and then very suddenly going down hard over the full 10-year period. Um, I love how these comments somebody's saying mike's always so bearish, or maybe it's just the algorithm showing you what you want to see. It could be that's a whole different question. But where are we in terms of just valuation from your perspective, not just in the US but also globally? What's the what's sort of the state of earnings here?

Speaker 1:

And so I could share a screen with you, which I think is just fascinating. So this is a really fascinating. There's a couple of fascinating charts that I find really tell us a lot about where this market is right. If you look at the DAX and you look at the earnings estimates, they're actually been cratering, been cratering, and you would never think that the DAX actually just traded at an all-time high today when you saw how these estimates are looking. And that's to me really a surprising fact, right, because typically stocks and indexes trade with the direction of earnings, or at least they trend that way, and that was the case. You know, if you go back in time, you can see in this period of time that certainly was the case, but then it started to be the case again, and into the fall of last year, then everything really just departed, right. And you can do the same thing with the S&P 500, where, you know again, we were trading with earnings for the most part, and you can see where, you know, again, we were trading with earnings for the most part, and you can see everything has. You know, earnings in the S&P haven't really improved at all for 2024. And now for 25, they're starting to come down.

Speaker 1:

And so you know, my favorite chart that people like to see on Twitter is this S&P 500 equal weight. I know everyone goes, oh, the equal weight, the equal weight, the equal weight, the S&P 493. But you can clearly see the S&P 493 or the S&P equal weight certainly not going in a direction that would suggest that stock prices should be going higher. And again, when you look at price to earnings, again the way I look at price to earnings, people will look at price to earnings on a relative timescale, but I don't think that things should be looked at on a relative basis. The way I think about looking at these things are through where they are versus themselves on a historical basis, because I think that gives you a much more fair, objective view of the market and you can see that the 493 or the S&P equal weight isn't really that cheap.

Speaker 1:

When you take out this bubble here that was created post-COVID Because, basically, because earnings collapsed, I mean you can see that we're right now at the very upper end of that range since 2015. Again, I'm using I don't think the screen goes back much further, oh, it does. So you get the sense of where earnings, where the PE, is on an S&P 500 equal weight. We're quite expensive actually at this point in time, at least on a rolling 12-month forward basis, this point in time, at least on a rolling 12-month forward basis. When you look at the DAX, for example, which is another index, it's cheaper relatively speaking to the S&P, but again it's cheaper than the S&P, but it's certainly not cheap. I think it would have probably been a better buy at 10 times earnings than it is at 13.5. This is getting up towards the upper end of the historical range, an area that, again, post-bubble, dax typically hasn't seen, but it is probably one reason why the DAX is doing well. You know, seen, but it is probably one reason why the DAX is doing well.

Speaker 1:

So you know certain indexes. You know the Nikkei 225, we've seen earnings estimates actually improve there. But you know, at least when you look at, you know the PE ratio. Again, you know most stocks globally aren't, I would say, trading at 19. Here's a bubble in 2008, 2009. But again, not really super cheap. I would say that for the most part, most markets are fairly expensive. And we also have to remember too, we're comparing against a time where rates in Japan were negative and now you have a 10 year. In Japan that's over 1%, which doesn't sound like a lot, but for Japan that is. So it's really hard to say that markets anywhere are inexpensive. And then when you look at the S&P, of course you know 24 times or 21 times 12 month forward sales is certainly not a cheap value at 22.3. So again you're kind of going into that time frame where you have to start looking back into the late 1990s.

Speaker 2:

The counter argument to that is it's expensive for a reason, and Trump is going to reignite animal spirits like no president ever has before, including Trump before, when he was first president. Right, what's your response to that argument? That listen, the valuations are the valuations, but who cares? Because we're entering this golden era where businesses are going to be favored again.

Speaker 1:

Yeah, I mean, this is even the small caps, for example. I forgot to highlight this one. You can see the earnings are actually coming down. And again, you know, people talk about small caps and I don't really see what the love affair is, because they're very expensive at 27. Again, take out that bubble. So, yeah, I was pro-Trump in 2016.

Speaker 1:

The market was very cheap when he became president in 2016. I thought he had all the right policies. But the difference obviously is in 2016, we were trading at 15 or 16 times earnings. Today we're up at 24. I mean, that's a big difference. Today we're up at 24. I mean, that's a big difference. You know, the market would have to fall. S&p would have to fall basically 30% to get back to that valuation, which would take us basically back to where we were in October of 23. So, you know, maybe you know, maybe he's able to do it, but I think that a lot of what?

Speaker 1:

Again, if I just share my screen again, a lot of what we're basically seeing here is this idea that next year, we're going to see profit margins expand to levels that have just never been really seen before. The last time, we had profit margins at 13.8%, which is what they're projected for next year was in 2021, when we had the inflation really sparking. But most of the time, margin estimates start high and then they come down, and right now, estimates are for margins to be 80, 90 basis points higher next year. So if you take this margin from 13.7, 13.8 and just drop it to 12.9 or 12.5 to 13 in that range, you're talking about estimates being next year instead of being around 270, being more in the 250s, and that would be a big, a big, a big issue, and so I don't know if Trump can deliver that much in tax cuts and that much in everything to boost margins 100 basis points next year. That's going back to your question A question from somebody on X watching.

Speaker 2:

I'll show it on screen here. A question from somebody on X watching. I'll show it on screen here how should we hedge? And, by the way, not financial advice. So how may you hedge, I think is the way to say it Bitcoin or gold post election? There's two issues there. Of course, one assumes that Bitcoin and gold are hedges. They are, I would argue, but they're hedges in very specific instances. Counterparty risk, obviously, but let's talk about Bitcoin and gold here. Post-election, there's been a lot of hype around Bitcoin and cryptocurrencies.

Speaker 1:

Yeah, and the other thing that we learned from Trump the first time around is that he says lots of things that just never happen. So over the weekend he wants the BRICS to commit to the dollar, but at the same time and not form another currency, but yet he wants to also form a Bitcoin reserve. So I mean, I don't really understand how that's supposed to work. Number two I don't know how to value Bitcoin. I know people come up with these crazy price targets for it. I've never actually seen someone be able to justify a price target for it in a way that actually makes some sort of fundamental sense. So I don't. I'm not a fan of Bitcoin. I don't really believe in a value of it. I don't see a use for it. When I can use it at the deli to buy something, I'll maybe begin to understand. You know, think about it in a way that makes sense.

Speaker 1:

But, for example, I was a very early adopter, I guess, to Visa and MasterCard, in the sense that I bought the stocks in 2013, 14, because I went to Dunkin' Donuts one day and I was able to buy a $2 charge. I was able to buy coffee for $2 or whatever it was, and use my credit debit card and debit credit card Because, if you remember, back in the day, there was a time that they wouldn't let you buy stuff with your credit card unless it was over a certain dollar amount. And then, once I started to see these guys in New York City starting to take credit card for everything, that was like when I was like, okay, I need to own these things because everything's going to go that way and sure enough it did. But I don't see that usage for Bitcoin yet. I don't see that that case yet made for it, so I'm not really a believer in that.

Speaker 1:

And gold I am actually sort of bearish on at these levels because I think that you have two big risks that aren't being accounted for. Number one stronger dollar, which plays into what we're seeing taking place in a lot of currencies outside of the end, which is the one currency I think that can actually strengthen right now is the end, and also rising real rates. I think real rates are probably too low, based off of where the economy is growing and what Trump wants it to grow at. So I tend to think that, based on where inflation expectations seem to be heading on two-year, three-year swaps, real rates probably have to go somewhat higher, and if you get rising real rates and a stronger dollar, I don't think it will be a positive thing for gold. So I think right now your best hedge may be the dollar, because I think the dollar is going to give you purchasing power over global currencies.

Speaker 2:

The dollar, or dollar gets everything except yen, or maybe yen itself. Right, I think it's the way.

Speaker 1:

Well, that could be another option as well, but I don't know many people that are sophisticated enough to do that.

Speaker 2:

So you're telling me that, so that x fin twit is not sophisticated. Come on now. Um, let's talk. Let's talk about the end. Um, yeah, I have been saying and people of course troll when I say uh, because I think I'm always bearish, which is just not true, because factually my signals have been risk on, you know, the last several weeks here um, I've been saying I have a bad feeling about December, and I'm saying that because my own signals, I think, are likely to flip this month back to risk off mode Could be a false signal. But it's also coinciding with Japan's next monetary potential move. And the last time we were at this point at the end was when we had a panic, when we had that reverse carry trade, when everyone was high-fiving me, because I've been nonstop on this since October. Here let's outline what your thoughts are here as far as potential for a repeat, I mean it's already starting.

Speaker 1:

When you look at Aussie dollar, japanese yen, euro, Japanese yen, canadian dollar, japanese yen, mexican peso, japanese yen, I mean they're all just. I mean the yen is just strengthening materially today. I mean look at the AUD JPY I think it was it's down 1% today, or strengthening 1%. Cad JPY another 50 basis points today. Mexican peso down 20 today. And you look at the euro, it's getting absolutely crushed in every currency term, down 1%. So I mean you're already seeing it right.

Speaker 1:

Dollar yen's even had a pretty big move. So the market's already pricing in a 65% chance of a BOJ rate hike come December. And you're getting a data point, I think later this week in Japan for wage data there, and he already made some comments last week, I think, about wanting to look at wage data a little bit more and he was looking towards the spring numbers. But clearly you get like hot wage data this week and that could certainly be a reason to give the BOJ another reason to hike on top of inflation. And let's just face it, a weak yen is not in their best interest at this point for trying to calm inflation and so they're already kind of he's already. And then when he did it. He had an opportunity to take December off the table, but he basically didn't take it off the table, which is another reason to think that there's a good chance that they do raise in December. And markets are pricing in 65 percent is chance that that happens the day after the Fed meeting.

Speaker 2:

So the argument should be the market is prepared for that because you know it already happened and it was a scare. And then who cares? Right, it's like well, it's like the market was just like.

Speaker 1:

The market was prepared for QE tapering, just like the market was prepared for, you know, a Fed rate hikes. And the market was prepared for QT. The market was prepared. The market is always prepared until it isn't. We've seen this many times in the past Market's always prepared and then it's not always prepared and then it's not.

Speaker 2:

What about the, the, the, the seasonality argument? I don't know how closely you track seasonality, but yeah, obviously December tends to be, in general, a decent month. They're not always. Again, I go back to 2018. You had the Christmas Eve massacre, where the that was down like a thousand points. 2022 was fifth worst September in history, when I was very bearish that particular month.

Speaker 1:

So the way, look, I understand that this time of the year is supposed to be a bullish time of the year November, december. In fact, when I was bullish the market, you know, throughout 2016 or 2015 through 2020, I used to tell my readers November December, seasonally is very strong and this is another reason why the market could go up into year end. But the thing is is like it's managing those expectations right, because it used to be that, you know, the market would rally to one, two, 3%. You know, november December, not seven, eight, nine, 10% like we saw last year. So I mean, if we have, like, a normal sort of seasonality, which is one, two, 3%, then no, if we do get a big sell-off and I agree with you, actually for different reasons, partially because of what we're seeing taking place in liquidity that December could be a rough month, because of which, again, I can show you the chart, because we're seeing some similarities actually taking shape that are to that of 2018. And I named it the ghost of 2018 on my saved charts because it looks a lot.

Speaker 1:

Basically, the liquidity setup in the market looks a lot like 2018.

Speaker 1:

So, if we just zoom in here and we look, you can see the black line are reserve balances, the green line is margin balances, and margin balances were basically, you know, during a period of time where reserves were falling, margin balances stopped rising, the equity market just went on rising and then eventually margin balances began to fall and the equity market just fell with it. Now, if you fast forward to today very similar you're seeing reserve balances just declining, margin balances have been risen and you're seeing the equity market just continuing to chug along, and so what this kind of tells me is that market's going up, but not going up on increased actual liquidity, and it's probably just going up on some form of leverage. And you know, all of a sudden, you know you get this Japanese yen thing going on as well, which we may, which may or may not, be properly hedged for, and you could have that sort of same condition in place for anything to happen. I mean anything can happen. I mean we've been through that before, so it's entirely possible.

Speaker 2:

So more sort of obvious threats that are in the media and I'll relate this to a LinkedIn question we're getting live here. What do you think of the BRICS currency threat that Trump put out there and tariffs in general, because, yeah, he is a tariff man apparently.

Speaker 1:

I mean tariffs, obviously, you know I think people forget you know Mark had loved Trump the first 12 months of his presidency or thereabout, but then they didn't like him so much in 2018 or most of 2019. It was a lot of volatility. Volatility and tariffs will certainly have a major impact on earnings, depending upon how they're. You know. Whether or not it's inflationary doesn't matter. I guess how are we going to get you know almost 14% margins next year? If we're going to have tariffs in place, he's gonna have to cut a lot of taxes.

Speaker 1:

I mean, semis certainly did not do well the first time around. You saw a lot of these consumer staples not do very well the first time around, and I would imagine that you would see similar sort of problems this time around. Whether or not it causes inflation. I'm not sold that it doesn't cause inflation. I think it causes a temporary bump in inflation which tends to go away, which supposedly the Fed's not worried about. But I'm assuming that if inflation were to go from 2.8% or 2.9% back to 4%, the Fed might have a problem on its hands, and so the tariffs, I think, could have a one-time negative impact on earnings next year and they could have a one-time negative impact on inflation next year. They could have a one time negative impact on inflation next year and, based off of where those gross margins are, I don't think that's really priced in at this point.

Speaker 1:

And in terms of these tariff or these brick currency threats, again, it's sort of. It's sort of interesting, I guess, that at one point he wants the dollar to be strong and he wants the dollar to be supportive. He wants the dollar to be a world reserve currency. Well then, why are we starting this Bitcoin reserve thing? Like I'm not. It's contradictory to what you know what we're doing, so I'm kind of just looking through that completely right now.

Speaker 2:

Mention liquidity, let's talk about that, and let's talk about yields completely right now. Mention liquidity, let's talk about that, and let's talk about yields. I am still blown away that the Fed seems to insist on a rate cutting cycle when liquidity is as elevated as it is now. Yes, some of that has been shenanigans, obviously with the Treasury, but it seems like we're still in this period of extraordinary liquidity and that's all that's mattered. At what point does that not matter anymore?

Speaker 1:

Well, it's not a point of when it doesn't matter anymore, it's when it's not ample enough to matter. And that's a real question because if you go back to you know yields. For example, I mean, scott Bessett was is a global, global macro trader, basically Right, he worked for Soros and he worked with. From what I understand, he worked with Druckenmiller. If you listen to what Druckenmiller says on TV is he thinks that interest rates are too low and they should go higher. They should be sick, whatever. I think he said 6%. I happen to agree with that view that rates should be 6%. So while the bond market went out and celebrated this guy's nomination I guess because he wasn't like some of the other crazy picks that Trump has made so far you know who's to say that he's not sitting there going wow, I can issue all this 10,. You know all these 10 year treasuries. Right now, on the 10 year, less than four and a quarter, like the market's giving me like a great yield right now, I'm going to go out and do it. Maybe he thinks that yield should be 6% too. So you know, all of a sudden, if you went from an environment where Janet Yellen was flooding the system with treasury bills to now someone who's like looking at the long end of the curve as an opportunity to kind of get rates at a lower level. I mean that would be a tremendous shift in liquidity because all that liquidity would go from being in the front end of the curve to the back end of the curve and right now there's no repo facility to drain from anymore. So that money would have to come out of the. That money would have to come from somewhere else. Money would probably come from the stock market, because people would say, oh, I can get you know, four and a quarter, 4.75, 5%. If it keeps going up, that becomes a source of liquidity, especially if that's what their goal.

Speaker 1:

If they're I don't, I'm speculating, obviously, but if you listen to what some of the, if you listen to Druck and Miller, and then you put the dot together and say maybe these guys are interrelated somehow, maybe they think in a similar manner, you could be looking at it and saying the same thing and I could argue that if you're growing GDP at 5%, you should probably have a 5% 10-year rate.

Speaker 1:

If the market is pricing in a 3% to 3.5% neutral rate, which is what it appears they're doing on a Fed fund's future and typically 10-year trades 300 basis points higher than Fed funds, I mean I could get to a 6% rate really quickly and really easily. If the 10-year typically trades 250 to 300 basis points higher than a two-year and neutral rate is 3% to 3.5% into two years, 3. Three and a quarter to three and a half percent, you get to six percent very quickly. So I can get to six percent in a lot of different ways. And you know, it seems to me that if, I guess, if I were the Treasury secretary, I would be trying to issue a lot more debt at the long end of the curve at this point because it seems, you know, seems like an opportunity at the long end of the curve at this point because it seems like an opportunity.

Speaker 2:

Give her what you wish for, I guess. On that scenario let's talk about again, you mentioned being long only and still on the bearish side. When you think about being bearish while being long only equities do you typically have sort of like a target weight that you're going after? Are you underweighting relative to the target weight? How much are you underweighting? Talk about how you put that sort of for your actual clients together.

Speaker 1:

So right now, like the way I do it, I own high quality names and I don't because I don't short, because I don't use options, I don't even use leverage. Everything that I do is just purely based on cash right. Because I lived through too many times that I've seen these things work against you and because I want to take a three to five to 10 year time horizon on any individual stock that I buy. I need to be able to weather all the storms that come in between that sort of mess up with valuations, even though the business hasn't fundamentally changed. So all I do when I'm bearish the market is raise more cash.

Speaker 1:

And the way I look at it, if you're getting a 4.5% money market rate for all I know that could be doing better than some stock that I picked that I could be losing money on. And so you know, right now, for example, my portfolio is about 30 to 35 percent cash. That's actually down a little bit because I had an opportunity in June by Illumina and the valuation made too much sense to me that I just did it, and so I brought my cash position down some because I saw an opportunity there. But typically when I go in and I buy a new position in my portfolio. I have a mindset of buying a 5% holding and then letting it run, and I just let them run until they become extremely overweighted, so like for Tesla, for example, I had bought that in 2014. And by 2021, it was well over 25% of my portfolio. So I started pairing it back very, very slowly until I just got rid of it by January of 22, when I saw the games that were being played from it from a gamma and option perspective.

Speaker 2:

Yeah, no, very interesting, mike, for those who want to track more of your thoughts, more of your work and maybe learn more about your RIA kind of services that you provide. Where would you point them to?

Speaker 1:

So you know I do a lot of stuff on X. I've been trying to get a little bit more involved on LinkedIn lately. I have a new newsletter there that I'm, you know, redistributing my content through Also YouTube channel Market Chronicles, obviously something I've been building up more recently. I think I'm up to about 25,000 subscribers there and Substack. I also write on Seeking Alpha under Mock Capital. I have a website, mockcapitalmanagementcom, and I'm all over social media, so I think it's pretty easy to find me.

Speaker 2:

Everybody. Please make sure you follow Michael Kramer, learn more about what he does and appreciate those that watch this live. I'll see you all next episode of Lead Lag Live. Thank you, Mike, Appreciate it. Thank you, Cheers everybody.

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Michael A. Gayed, CFA

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