TheStreet Pro's Live Quarterly Meeting: Investment Resolutions for 2025
Our team met on January 22nd to discuss finding the bull in 2025 plus our best ideas and strategies for becoming a better investor.
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Our Live Quarterly Meeting included three of our great contributors:
We discussed where to find the bull in 2025 as well as TheStreet Pro's best ideas and strategies for becoming a better investor.
You can watch a replay of the video below.
Transcript
JASON MESHNICK: Hello, everybody, and welcome to our third live quarterly meeting. Today, it's a new year. We have a new presidential administration. And we are going to be talking about our investment resolutions for 2025.
Now, I know everybody has resolutions. At the beginning of the year, we all think about resolutions for going to the gym, calling our mother, spending more time with our families, and eating more healthy, and whatever else. But by this time of the year, we've forgotten about all those things. But maybe the most important resolution is for your investments, for your finances so that someday you can retire and then have more time to do all those other things.
So that's what we're going to be talking about today. We're going to be talking about our investment resolutions. But we're also going to be talking about the markets, and investing, and the economy, and everything else. I am Jason Meshnick, the managing editor of TheStreet Pro. And I am joined by three of my favorite contributors.
One, who you are probably all familiar with, is James DePorre, Rev Shark, known better. And I'm excited to have him here because although I read most of what he writes, we actually don't get to talk much with one another. So, I'm excited to have this conversation today with him.
I'd like to introduce Louis Llanes next. I've actually known Louis for a number of years. Louis has joined us back in September, so he is still relatively new. Joined us back in September to write a weekly column geared more towards financial advisors because Louis is a successful financial advisor, former hedge fund manager, knows everything about the markets and money, et cetera. So we'll have a great conversation with him too.
And then finally, Kate Stalter, who is our newest and also not so new member contributor at TheStreet Pro. Kate was here up until about 2016. I think that's right. And then is now coming back to join us to write a new newsletter and a new letter that is focused towards newer investors. And so we're going to be launching that either towards the end of this month or in early February. So I'm excited.
So with that, let's get to it. I'm going to start the first question off. Since the topic is investment resolutions-- and the way that this will work, first of all, is you can all interrupt me at any time. You can ask questions of the other people on the panelists.
Regarding questions, also, for those of you in the audience who are tuned in today, if you scroll down the page a little bit below the video, you'll notice that there's a commenting place. And you can feel free to enter comments there. And we will get the comments so that I can ask those questions of our panelists.
Those are the only rules. We're here to have fun. We're here to learn more about investing and to talk about everything that we need to know about investing. So with that, let's start off with our investment resolutions. And I am going to put Rev on the spot first. What is your biggest investment resolution for 2025?
JAMES DEPORRE: Well, every year, I seem to make the same resolution. But isn't that always the case with resolutions? The thing that I always want to focus on is being more aggressive. I want to increase the size of my trades. And I want to make bigger trades. I want them to be more active.
And the reason for that is that I'm happy with the methodology that I have. I know that it works. And the only way to really grow is to take on more risk and to be more aggressive at what I do.
The problem with doing that is that it evokes emotion motion when you increase the size of your trades and start trading bigger. You have to battle your emotions to a much greater degree. So that's really what I have to focus on is managing emotions better. And that never seems to end.
JASON MESHNICK: I love it. And Rev, you wrote an article recently called-- I think the title was something about the investment greats all pay attention to this one concept, right? And so what was that concept that they used, which is in line with your resolution?
JAMES DEPORRE: That one concept that all of these great investors share is that they do not overly diversify. When they have a good idea, they go in big. They really try to press the situation when they have an advantage. Buffett, and O'Neil, and all those others say that diversification is just an excuse for ignorance, that you really need to know your stocks so that you can feel comfortable that you can take an outsized position.
You don't manage risk by just buying a lot of stocks. You manage risk by really knowing your stocks. And all of the greats have that same strategy, everyone. Soros, Munger, and so on, they all say the same thing about go big when you have an advantage.
JASON MESHNICK: Can I ask you about that? Because I think that's a really good topic. And I know that Louis, which we'll get to you in a minute, has written a lot about position sizing. And I know in TheStreet Pro portfolio sort of the average position size is somewhere around 3%. There's around 30 stocks in the portfolio.
How do you know, Rev, a position is too big? Like how do you press the size? You've talked also about trading around a position too. How do you decide how many shares to own of something?
JAMES DEPORRE: Well, I typically am very incremental in the way that I invest. I don't just make a single buy and a single sale. I'll start off with a small position. And then I'll start ramping it up or just watching it or whatever, depending.
The ultimate size-- well, the way I think about it is that I diversify by time frame rather than by security. I'm trading the same stocks in multiple time frames. So that's what protects my-- that's what manages my risk. If I'm only holding a stock for a few days, then my risk is much less than it would be if I'm just holding one big position over a very long period of time.
So my position size can vary from a few hundred shares to several 1,000 shares very fast. And that's how I manage the risk. And it really goes back to something that George Soros said. And I think this is really the key to all investing. And that is that it's not whether you're right or wrong, it's how much money you make when you're right and how much you lose when you're wrong.
So in other words, when you feel you're right, you got to press and be aggressive, maybe trade more in the short term. And when you're wrong, then you get out of the way fast and try to minimize that loss as much as possible.
JASON MESHNICK: Awesome. I love it. So for the first investment resolution, be more aggressive but with an eye towards risk management. Louis, since I called you out a second ago, let's go with you on that. What is your investing resolution for '25?
LOUIS LLANES: Well, it sounds a lot like what I just heard? I always want to just be clear thinking. So I always try to do less better when it comes to portfolio management because there's so much noise. So I have a bunch of little stickies in my office. I'm not in my office right now.
And I have a lot of like little sayings that I think about in terms of staying rational and not listening to the noise, focusing on the signal and not on the noise. And I agree 100% with the concept of position sizing being one of your biggest assets because it is the difference between a good strategy and a bad strategy.
Audience may not know this, but I'm also very quantitative in nature and how I go about what I do. And I've looked at and simulated lots of different trading styles, O'Neil styles, value styles, a lot of different types of investing strategies. And you could take the same strategy and adjust your position size in a way where you press your bets that are doing well. And you significantly increase the performance of those strategies.
So that is a big part of my New Year's resolution, ironically, because I have found that I still-- even after 30 years of being in the investment management business, I still underrepresent my best ideas. It's really hard sometimes-- for me personally, once I get past the position size of, say, 8%, 9%, I naturally tend to get nervous about the position even if everything is going right.
So that's really a big part of my New Year's resolution as well. But the other side of it has more to do with staying a little bit longer term. I've had my best results when I have been more longer term and where I've had a good idea and I've stuck with it because one of the biggest things that has, I would say, kept me from having better results has been the fact that I've sold too soon.
And that's something that is really, really something to think about, especially when you consider taxes and when you consider transaction costs, bid-ask spread, and things like that, and then not reinvesting appropriately. So I'm really trying to keep my capital always working and not letting things just be in cash as much and staying really focused on those best ideas and keeping my position size relative to the fundamental factors and the technical factors that move the needle the most and to stay focused on that rather than a lot of the noise that's happening in the market.
I have a background in technical analysis as well as fundamental analysis. But I have found that the technical part really is more about just the nuances for me personally about how to trade. But the driving force of providing value has been the quality, the valuation factors that move the needle. And the technical is more tactical for me personally.
JASON MESHNICK: Yeah. Louis, since you brought that up, it's one of my favorite things that you've done is you've boiled down investing to QVT, Pretty simple to remember, Quality, Value, Timing. Can you talk about that really briefly? What goes into each one of those factors?
LOUIS LLANES: Yeah. And it goes back to before dotcom bubble. So when I first got into this business, I was really a fundamental guy. Well, first, I looked at technicals. I'm like, I don't know about this technical stuff. Everybody seems to be into the CFA-ish stuff.
So I got a CFA. And I really got fundamental. And this was before the dotcom bubble. And then as the market started doing well, we were doing well before that big run up in tech. But then all of a sudden everybody just ignored the fundamentals. And the technicals were driving everything.
And in fact, we had great positions that were going down, much like Warren Buffett had that same experience. And we were losing assets to advisors or money managers that were just buying the growthy names. There was no way in heck the fundamentals could be justified. But it didn't matter.
And what I realized at that point is that you have to have a balance between the quality of the companies, which is the knowability of the cash flows and the understandability of that investment, the price that you're paying, which is the valuation of the investment. And that could be anything. Could be real estate. It could be bonds. It could be stocks. And then also the key element of technical. Because the supply and demand of the securities themselves matters.
A lot of people just ignore it and poo poo technical analysis. But there's a lot of great investors that look at it. You can mention George Soros. You can think about Stan Druckenmiller who also uses technical analysis. Doesn't talk about it too much, but it's part of the process. So I don't ignore the technicals. But I always start with the quality and the valuation.
JASON MESHNICK: Great. Yeah, I love it. OK, Kate, saved you for last. Let's talk about your investment resolution for 2025.
KATE STALTER: Yeah. And I want to kind of-- just following what Rev and Louis was saying there, I want to just kind of let everybody know where I'm coming from in terms of my investment strategy and my investment philosophy. It's been kind of a unique journey.
I actually started out working pretty closely with Bill O'Neil at IBD. I was pretty fortunate that I was one of the editors and one of the national speakers there. And that's how I got started learning the CAN SLIM system.
So I know that pretty well. And that's actually evolved over the years. It seems a little different today now that Bill has passed. And we've got some new ownership over there. But nonetheless, kind of to follow what Lewis was saying, the technicals, the fundamentals, I just was so fascinated in learning all of that. And so I kind of come from that perspective.
But then what happened was after that, I actually became a Series 65 licensed financial advisor, joined an RIA, started my own RIA, owned that for about five years. And that was retirement investing. We were not doing, for the most part, active trading. We did have some equity overlays for clients.
But really, I understand. Position sizing, completely agree. That is absolutely a necessity when it comes to your longer term retirement planning. And that is what I've really enjoyed working with people on in recent years.
And I think in 2025, the resolution, there's a lot going on obviously as we're starting the year here. I think the idea right now is to focus on tactical allocations. I know a lot of the advisors, maybe they get a rep of being kind of buy and hold. And I've never believed in that.
You at least have to rebalance. You have to see what tactical opportunities do exist in most cases. Looking at things, keeping an open mind to some of these thematic ETFs, for example, like AI. I mean, obviously, we're going into a very favorable time for crypto right now, might be the time to look at some undervalued small caps that would boost growth, along with sticking with the core longer term holdings and also just to talk about income.
I really have been looking a lot in the past year or so at income investing, which I think a lot a lot of investors and traders, in particular, tend to overlook in the favor of just growth, looking at short to medium term bonds for steady income and keeping an eye on inflation and interest rates to balance risk and opportunity. So that's a little bit of what I'm looking at right now, Jason.
JASON MESHNICK: Awesome. Yeah, so it seems like everyone has a sort of a similar idea around what they're thinking about for their investment resolutions. It really comes down to risk management, position sizing, making sure that you're pressing your bets, letting winners run, looking at the losers and trying to cut them as quickly as possible, watering the flowers and pulling the weeds.
Yeah, so let's jump into the economy. We'll spend just a couple of minutes on the economy. And then we'll get into bond market, crypto, and everything else.
So is the economy strong or weak right now? What is Donald Trump inheriting right now and then if you have any thoughts, too, on where it's going to go? You don't have to raise your hand, but feel free to start talking. We can sort it out.
JAMES DEPORRE: Well, I'll give you my view, which is that I don't try to predict the economy. It's impossible. Even the economists can't predict the economy. And, I mean, last year was a great example of that. None of the targets that any of the big analysts had were even close to where we ended up at.
What I do know is going to happen in 2025 is we're going to have a lot of ups and downs. We're going to have some very nice rallies. And we're probably going to have some panics at times. And I think just keeping an open mind about the circular nature of what's going to happen and then focusing on the price action is the best way to pursue the market.
I mean, right now, there's so much optimism about what's going to happen under Trump. But you know that that is going to change as the honeymoon period comes to an end and we start seeing how difficult it really is going to be to cut spending and cut taxes at the same time. And we're going to have a lot of volatility because of that.
JASON MESHNICK: Louis, you were about to say something also.
LOUIS LLANES: I totally agree with what Rev said. I wrote a little piece on that, a look into 2025, that we're probably going to have a lot of-- we're really prone to a potential volatility spike I think in the next 12 months. Right now, the VIX is below its longer term average. We're kind of set up for something like that.
So I think longer term investors should really look at those as being opportunities. And rather than try to time the market, keep your capital working, and then adjust your capital depending on the quality and the value, what looks the most attractive and staying that way. I've seen people not do well because they're afraid to keep their capital working than not actually. So that's one thing I would say.
As far as the economy goes, I do think it-- for me, I like to look at what's happening in the economy from the standpoint primarily for what it means for valuation. And also, secondly, what does it mean for various sectors and asset allocations decision that I help clients with?
So from my perspective, almost everything I look at says a little bit higher interest rates than people are thinking. And there's a lot of talk about that. And other people see the same things. It's pretty obvious, obviously, that tariffs can be inflationary.
But we don't really know to what degree we're really going to have tariffs. It could just be saber rattling and that we have some negotiations, which I think is probably mostly what's going to happen. So maybe the tariffs won't be so bad. But we'll probably have some negative impacts from an inflationary perspective there.
As far as the workforce changes and the growth in the workforce, based on the immigration policies, those lean towards higher inflation, a little bit more scarcity involved there. The energy policies, on the other hand, that leads to less inflation if Trump gets what he wants and most likely lower energy prices, which is less inflationary.
That's a big deal, by the way. That's bigger than probably all the other factors. What the Fed is doing right now-- I think the Fed is probably going to have to back away from the whole dropping rates.
My favorite indicators with the economy is just I talk to a lot of people every day and just seeing what smart people are doing and then hearing what smart clients are doing. And what that's pointing to to me is a freeing up, an increase in liquidity, and more animal spirits.
So for that reason, I think the economy is actually going to surprise people to the growth side. And like, for example, the private equity markets, we're seeing more money flowing into private equity. There was kind of a constraint. There was a lot of people waiting. Just yesterday, I was on calls all day. And it was all about I was waiting, I was waiting, now I'm not waiting.
And that even applies to real estate markets. The real estate market, there's a lot of overhead supply. A lot of people are thinking that they want to move. They haven't done it. They're worried about interest rates, that a lot of people will just pull the plug and just make the changes.
So I think 2025 is going to be a year of change. And it's going to be a year of moving towards higher required rate of return on equities, which means that people are going to be thinking about value over vanity. It's been vanity oriented towards liking what is sexy and what do I want to own. And people are going to start shifting more towards what am I paying for it, what is it worth, the things that we've been talking about.
And the reason why I think that's going to happen is because we will most likely see higher interest rates. I'm not talking about skyrocketing interest rates, but interest rates that just aren't going to go back down as much as people think. And that's going to lead people to say, hey, well, I have a higher risk-free rate of return.
And we're subject to volatility spikes, which means the equity risk premium could be affected, which basically means I'm going to have to look at what I want to own a little bit more clearly. And these high growth stocks are priced to perfection right now. And that means that that a lot of people are going to be rethinking that and shifting their allocations.
So there's going to be a lot of shifting here. And getting back to the economy, the biggest reason I look at the economy is more, like I said, towards sectors, individual securities, how's it going to affect asset allocation, as well as primarily just the overall interest rate environment, which affects everything. But I think it's higher rates.
JASON MESHNICK: I love value over vanity. And we'll come back to that in a little bit. Kate, you also had some thoughts.
KATE STALTER: Oh yeah. I mean, the "Trump trade" as it's called, quote, unquote-- its catchy name. I mean, that's historically centered around policies like deregulation, infrastructure, energy independence. I think Louis mentioned energy just there.
And, obviously, that can influence interest rates, inflation expectations, looking at how all of that affects the asset allocation. And could this mean there might be some opportunities along with the volatility that I also expect to see happen here. But you know what, that's in any given year. Even these years that you have the markets going gangbusters, you do have some periods of volatility and times when you do have a little downturn and everybody tends to panic.
So I'm assuming we're going to see the same thing this year as well. I think somebody mentioned the specter of tariffs. And yeah, that may or may not turn out to be as frightening as some people think. We actually had Jamie Dimon this morning-- I read an interview with him. He said some interesting things. He said, get over it basically, that it could actually be a good thing for national security.
And we're not starting with zero on the tariffs, by the way. There are some already in place. And I think that's getting overlooked in this story. Now, we might see some bond yields rising. But when looking at how a portfolio should be positioned, potentially, the goal is to strike a balance between protecting capital, growing capital, and then identifying opportunities.
So it doesn't really change because defensive assets like high-quality bonds, dividend paying stocks, those are something to consider. There was, I think, some research from BlackRock the other day that said, there's still a lot of money on the sidelines in cash. And I find that pretty interesting. Even after a great year in the market like we had in 2024, there's still some room in here to put some more capital to work.
So investors may be waiting for an opportunity. They may have been waiting to kind of see what happens with this new administration. But there's certainly reason to believe that we will continue to see gains, that the economy will continue to perform well. Obviously, you have the questions about the labor market, about immigration, about tariffs.
But like was said already here, you don't know till it starts to happen. And even some of the best predictions, I believe it was Rev who said that, they just turn out to be completely wrong. And it's fun at the end of the year to go back and see, well, what was predicted that didn't happen? So kind of not so much stay the course, but look for the opportunities that could be out there depending on what the markets actually do.
JASON MESHNICK: I love it. Great. One question about inflation and what the markets are going to do. One thing, Trump has talked a lot about energy independence and trying to bring down the price of oil, gas prices at the pump.
Crude seems to have found a floor at around $66 for the last several years. Was resistance, became support, talking technically here. What's it going to take to get crude below that? Is it doable? What are your thoughts on crude?
LOUIS LLANES: I mean, that's a tough question, right? I mean, that's the crude-- I mean, from a technical perspective, I could see kind of the opposite happening, what people don't expect, and that maybe it doesn't go down as much as people are expecting.
It's really a tough, tough, tough thing. I mean, I've been focusing my investment on things that I think are kind of more knowable, like the LNG know, demand and infrastructure type investments that are, you know, working in that area. So it's a tough one. But it's potentially, we could potentially see it go down from here.
The technicals don't say that. Whenever I have a situation where the fundamentals that you would think, traditionally, would say a market should move in a certain direction, but the technicals aren't confirming that, that's a warning sign. And I think that's kind of what's happening in the energy field here.
But we're early in the game on that, and I don't think you necessarily have to time that. I agree with Kate that, you know, you want to look at things a little bit longer term in terms of how you do your positioning. So look for opportunities and just try to allocate capital, stay invested, but alter your allocation depending on where the opportunities arise, because there's a lot of unpredictability, I guess you could say, involved.
And you can look at these things from different perspectives. My view on how to handle or how to think about energy is to just really just follow the trend and try to find those things that are more knowable, like the LNG infrastructure.
KATE STALTER: Hey, Luis, I want to jump in too, because I agree with what you said. I'm just thinking about, like, how sometimes you get some of these geopolitical events that we're not anticipating right now. You know, like a few years ago when you had the start of the Ukraine War, and that was something that had not been anticipated really going into January of, whatever year, 2022, I guess that was, and how that might affect some of the energy commodities markets and so forth. So it's exactly right. I think that was a really tough one to predict.
JASON MESHNICK: OK, let's move on to crypto for a minute. So obviously, there's a lot of talk around crypto. Right now, Trump is making it a priority. Do any of you foresee the adoption of crypto as a store of value and also a payment system becoming mainstream under the Trump administration? Is crypto going to go mainstream?
JAMES DEPORRE: I think there's going to be some push towards that, but I don't see it happening. My view on Bitcoin has really changed over time. I mean, I totally rejected it because there's nothing intrinsic, you know. There's no intrinsic value, and it is not used for payment. It's not used in the commercial operations.
But I've become much more bullish about it, simply because it's being recognized as a new asset class. You're now at the point where institutional investors are going to start making allocation to Bitcoin just because everybody else is. And Bitcoin is-- I think the only way you can look at Bitcoin is supply and demand, and that's all it is. You have to use the charts to trade it, and there's no fundamentals there.
So looking at it in that way, I mean, if it does become a payment mechanism, then obviously, that demand is going to go even greater. But I'm bullish on Bitcoin simply because I think it's becoming more accepted, even if it's just a similarity to gold as an asset class.
JASON MESHNICK: Do you think Bitcoin is the best way to play crypto, or-- I know you've written about it, I think. Is it one of your best ideas for the year?
JAMES DEPORRE: Right, yeah. I'm using the ETFs I get and so on. I'm more comfortable using the ETFs. I don't see any advantage really to buying Bitcoin directly in a wallet and all that. Plus, I don't plan on being a buy-and-hold investor. I'm going to trade it, so the ETF makes it pretty simple to do that. And that's the mechanism that I would use.
OK. Kate or Louis any thoughts on crypto right now?
KATE STALTER: Yeah, I like ETFs also. Oh, sorry.
JASON MESHNICK: No, no, go ahead.
KATE STALTER: Same same. You know, it's interesting because I actually wrote something not long ago about financial advisors being-- it's interesting-- reluctant to "recommend" crypto to their clients. But a lot of them are actually invested in some of these ETFs themselves, or even directly, in many cases, to learn more about the market.
So I think that's a good thing, that as you have more of the professional investor class kind of familiarizing themselves becoming more comfortable, and especially now with, you know-- we're going to just see a very supportive regulatory environment when it comes to crypto. You may see it becoming much more mainstream, and that may be one of these opportunities to look at in 2025.
JASON MESHNICK: Yeah.
LOUIS LLANES: I agree with everything said, in particular that you have to look at this purely technical. So if you break it down by fundamental versus technical, like how do you think about it, at least how I've been looking at it was, OK, I can't value it from cash flow. It's more like a commodity. It's supply and demand.
Well, what are the determinants of supply and demand? Well, it has to do with the acceptability. Well, acceptability or adoption rate is increasing, so the price will go up. But when you start breaking into the idea or the concept of a store of value, then you're not looking for volatility. You're looking for stability. So if that does happen, then to me, that means it's going to be more stable.
It's that process of going from, or that potential process of going from, maybe becoming a store of value to becoming a store of value. That's the trade. So I've always said this. It's a trade. It's always a trade to me, and I've been in and out of Bitcoin for a long time, you know, many times. I'm currently in it, and I did write about that not too long ago, that it had made a little bit of a drop. And everybody came out and said, this thing's going down. But the technicals were like, yeah, that's just a return move. We're likely going to go higher. We had a massive saucer pattern on that thing from a technical perspective.
So I think, I think there's a lot of room for it to just go higher, just based on the chatter about doing more. And you know, we have all sorts of structures being built around it. And frankly, a lot of advisors are not like-- to Kate's point, they're just kind of getting familiar. They're not even fully invested yet. I actually showed the flows in the different funds to show that they're just getting started.
So I think it's a great trade, you know, and your position sizing and your risk management is really important. If you look at the volatility of that instrument, you want to you want to look at your contribution to risk and say, well, how much am I willing to contribute the risk of my portfolio to this asset class.
It is highly correlated to equities, so you know, look at it in that. I tend to look at it more in that bucket in terms of asset allocation. So it's a tougher trade, and there's a lot of hypothetical things going on, discussions about it. I would try to keep it more towards think like a technician, not like a fundamental analyst. Sorry, I've got some noise back here.
JASON MESHNICK: Let's maybe go on mute. When you're--
LOUIS LLANES: I'm going to mute.
JASON MESHNICK: Yeah, OK. Thank you. All right, let's move into the world of equities. Let's talk stocks. We can still talk about other things while we're doing that, though, because I think that all the markets are interrelated, right. One of the things I was thinking about was looking at the spread on high-yield bonds, right, it's incredibly narrow right now, maybe at-- I don't know if it's at all time narrow spreads, but certainly in the realm of historic narrow spreads.
So that gets to a little bit about speculation, right. So we also see so not only high-yield bonds but also crypto and all these crazy meme coins that people are buying. I was looking this morning at the S&P put call ratio was around 0.39, right, like incredibly low numbers.
And we know obviously valuations, right. Louis, you mentioned the equity risk premium. That's something big that Doug Kass likes to talk about, one of the reasons why he's pretty bearish. So has speculation run amok? Where are we right now in that? Or do you think do you think we have further to run?
JAMES DEPORRE: I think one of the issues that you really have to get into when you're looking at that is the disparity between the mega-caps and the rest of the market. You know, the vast majority of the market is not overvalued. It isn't extended and so on. I mean, the indexes are deceptive.
And I mean, I was reading somewhere that only about, I think it was 30% or so of the S&P 500, is actually outperforming. And I mean, it's a very small amount, and small caps have never really had a rally in the last two years. So I don't see this-- I mean, what's happened is that the Magnificent Seven has become a safe harbor for people who want to park money somewhere, and that maybe is what's causing all of this talk about, you know, how overvalued the market is and so on.
I think you can correct that, and we can see some rotation into the rest of the market. And I keep looking for it to happen, and we get signs every once in a while. But I don't think the market is crazy expensive, or that there's, you know, too much speculation. I don't see it at all.
JASON MESHNICK: Anyone else?
KATE STALTER: I mean, you've got some kind of-- you know, you could say that some of the pieces of the S&P 500 itself and, as Rev was talking about, some of these large-cap techs that have just been so dominant in the last few years. But you know, one of the things, just again, to kind of come back to the my early market training, you got to take these high pes with a grain of salt, because like NVIDIA's P has been high for how long? And it just keeps rising, you know, just to take the most obvious example out there.
So that doesn't mean that there's not some more room to run here. Obviously the dominance of some of these big techs, that's really skewed the valuations and portfolio composition. I mean, to Rev's point about only about 30% or so, I believe I read that as well, are outperforming right now.
You know, there could be some opportunities in undervalued small caps. I mean, I think the much ballyhooed small-cap premium, haven't seen that exist in quite some time despite all the research that showed it existed in the 1960s or something. We haven't seen that in quite a while. But you know, could it come back? Sure, it could.
In the past week, I mean, this isn't a trend or anything, it's just something I noticed that in the past week or so. The Russell 2000 actually has been outperforming the S&P. You know, we'll see. That could be something to keep an eye on. It just depends out there. I think if investors are ready to put the risk on in some other categories that may be undervalued, or if they just say, hey, you know, these big-tech trades have been working, let's just let the winners run.
JASON MESHNICK: Yeah. You know, Rev and Kate, you both touched on something that I was reading about in Barron's over the weekend, and I think it is actually a really good commercial for TheStreet Pro. One of the things that someone said is, small caps may be ready to run, right. They've been undervalued for a long time. And the fact is, there just aren't a lot of small-cap analysts out there.
And guess what? We have several small-cap analysts on TheStreet Pro, including one person who is on this call today. Rev, you frequently write about small caps. I know Sarge does, right. So that's coverage that we definitely have that we'll have to make sure people are seeing. OK, so--
LOUIS LLANES: I have a few thoughts about small cap. Can I?
JASON MESHNICK: Yeah.
LOUIS LLANES: Yeah, so did a study just looking at the profitability and just the metrics, fundamental metrics in the small-cap space. There's really not a lot of companies that are making money there, and I think there's just a big bifurcation between those quality companies and those that are not. So indexing to me in small cap for me personally doesn't make sense.
And I think the index fascination thing goes up and down. It ebbs and flows. I mean, I remember, and it almost seems like every time everybody says just buy the index, and it's just universal, everybody believes that, that's when you shouldn't index. And you know, I saw that that same sentiment was happening before the dot-com bubble. I've seen it several times in my career.
And I've always been a believer that, you know, indexes are great. When we have a great bull market, they're tough to beat because it's market-cap-weighted, and the efficiency of that, very difficult to beat. So for investors who are looking at how they're going to structure their portfolios, maybe a core plus type strategy, where you have some indexing but you also have some active management. Don't just ignore active management.
To me, that doesn't make sense, because it doesn't make sense to me just philosophically, as well as in practice, that you should weight your portfolio purely on market cap, because by definition, you're always going to have most of your weight in the most expensive securities at the wrong time. So at extremes, it's not a great place to be.
So I would just say that, and as far as the small caps, I don't think it's a good idea to index the small caps. For me personally, I'm not doing that with clients much. You know, maybe with a portion of it, we might have some in a core plus type strategy. But the small cap area does have a lot of opportunities here and there.
I did write a piece on that. Some of the best performing stocks that I've had in our portfolios were smaller companies that a lot of people are not talking about, unloved tech stocks, unloved industrials. And I do think that we're going to see this trend of more domestic of manufacturing increase as we have a little bit of deglobalization, and that's going to be bode well for some of our industrial companies, our smaller industrial companies.
JAMES DEPORRE: Let me add something about small caps. The reason that I like small caps is because they move the most. They move big. As an aggressive trader, what you want is movement. That's where you make your money. I mean, right now, today I keep on my screen a list of all stocks that are up more than 10%.
They're all small caps except for Netflix, and those are the stocks that because I trade these, you don't buy and hold these volatile small caps. You trade them. And if you want to be an active trader, then that's your inventory. And that's always been the case and always will, you know regardless of what the Russell 2000 is doing.
JASON MESHNICK: Do you mind sharing a couple of those names with us?
JAMES DEPORRE: Well, I'll say it. Sure. You know, what I try to focus on in the small caps are themes. I mean, what are the hot themes? You've got quantum computing. I mentioned yesterday, I wrote about the space stocks. I think the space race is going to be an enduring theme during the Trump administration. And one stock I wrote about yesterday was RDW, Redwire, and it made a real big move. It's pulling back a little bit today, but I think that's one that I'm going to continue to trade aggressively.
I mean, there's a number of other themes that are playing. You know, in the AI sector, I think you have to break it down between AI hardware, the DaVitas and so on, and then the AI applications. And we're starting to move more towards the AI applications where, you know, like PLTR is one that has really been the leader in that, the AI applications.
Anyway, let's see. Another theme is robotics. There's a there's a couple of small-cap cap robotics stocks that I've been watching lately. I don't have the symbols in front of me, but I'll be writing about all these different themes that are coming up.
Cybersecurity I think, is going to be a enduring one. Quantum computing, you got IONQ, RGTI. Those are the leaders in that sector. And all of those I think those themes always tend to last longer than you think they will. But right now, I think space is the favorite sector that I have in mind, and I'll be actively training. They're a little bit extended now, but they'll be coming back in.
JASON MESHNICK: Great. And yes, that article that you wrote was called the sector most likely to benefit from the Trump administration. Yeah, and it also includes a few other space stocks that you've talked about, Rocket Lab. I forget the name, but the ticker symbol is LUNR, and then SPIR also. Yeah, awesome. Great.
I want to talk portfolios for a little bit. So this is maybe getting back a little bit to more portfolio strategy and our investing resolutions for the year. I want to talk about tax efficiency in an asset allocation portfolio. Kate, do you have thoughts on what are some strategies that you can use to become more tax efficient, and how important is it? What does being tax efficient really do for your wealth growing?
KATE STALTER: Yeah, I mean, this is something that-- you know, working with clients, actually, when I first moved into becoming an advisor, kind of away from trading education, it kind of surprised me how important-- this was years ago-- how important the tax management is to clients.
And that's understandable, because in retirement, that can actually be one of your biggest expenses. And I think people tend to forget about that, and especially sometimes, investors who have been throughout their lives more trading-oriented and kind of have to shift gears a little bit and think about, you know, in what accounts am I trading, in a qualified account, and a taxable account?
So it's hard to tell right now if we're going into a more tax-friendly environment. I mean, some people would say yes, but kind of what we've said a few minutes ago here, hard to make predictions. I always tell clients, when you plan, just assume that taxes are going up. Just assume that. And if it goes down, that's great.
You know, every dollar you save on taxes can be reinvested to grow your wealth. So it's kind of where the investments are located. Is it in a Roth? Is it in a traditional IRA? Like I said a minute ago, are you in a taxable account? I mean, using tax-advantaged accounts, Roth conversions can sometimes, not always, but in many cases, be a great idea.
Holding tax-efficient funds like indexed ETFs, I mean, we've had a good discussion here about the pros and cons of indexes, but they can be very tax efficient. So it might be worth considering for that reason, in many cases. And putting some of these income-generating assets, maybe like some of the smaller caps, some of the ones that do grow pretty quickly, put those in qualified accounts to reduce your tax burden.
And you know, when you're rebalancing, to consider the tax implications of what you're selling. and you know, this is good. This is going to sound like what you kind of always read in a lot of these articles, but that is where it's a great idea to consult a planner, even more so than a CPA, I've got to say, because a planner can kind of help you understand what levers to pull when it comes to your investment strategy and location of how to save on some taxes.
JASON MESHNICK: Yeah, that's great. I'll say one thing too as far as consulting planners. Probably not a huge issue for most of the people listening in on our call who are more self-directed, but I've got a friend who wanted to be self-directed. He consulted with a fee-only planner to develop the plan, and then he's going to implement it on his own. So that's always a possibility too. Let me see. Louis, I have a good question for you, since you are writing our advisor-focused newsletters. How do advisors add value? Is there a value to having an advisor?
LOUIS LLANES: Maybe yes, maybe no. So it's really important to know what you're trying to accomplish. So I have a lot of thoughts about this. I actually wrote about this topic in my book, The Financial Freedom Blueprint, because it's such an obvious question, like, should I even pay somebody to help me with this? And it has a lot to do with your situation.
So my thought is that the more complicated your situation is, the more you need advisors. And, you know, the wealthiest people use advisors. And you really have to, because there's so much complexity that can come your way. And I think when you're initially starting off, and you are just starting to build wealth, you could go to a planner just to help you figure out how to get started and how to get things going.
And then you could do things really simple. You know, you could index or you could do maybe some indexes and active management. You could do a simple plan between how you're saving in your 401(k) and all of that. But once you build more wealth and you get closer to retirement, and what I tend to see the trend is, people in their late 40s, or if you come into a lot of wealth or you or inheritance or something like that, some big liquidity event, then an advisor really can make some sense.
You could have the smartest people in the world that they're going to use advisors. You know, we have clients that are like really, really smart doctors, really smart engineers, really smart entrepreneurs. And you need an advisor, and not only just for the advice to get a second opinion, but also from the standpoint of having that time constraint freed up for yourself.
So what is your time worth? You know, there's a lot of things that you could consider, but not all advisors are considered the same, right. They don't all have the same qualifications. So really, it's important to know what type of advisor you're working with. One that's a fiduciary that has to work in your best interest, one that's not like incentivized to sell on commission is generally better as a rule of thumb. So working with fee-only advisors or with registered investment advisors that have some qualifications, qualifications are helpful.
But I know a lot of people who have the qualifications that don't really know what they're-- maybe not the best advisor. So you also need experience, and referrals, and a proven track record of actually helping people in good times and bad times. So picking your advisor is really important. Do you get along with them? Do you have the same philosophy? Is this advisor somebody that I can see myself talking to a lot?
Because a good advisor is going to talk to you a lot. And it's not like if you're buying a house, you talk to your real estate agent, then you don't talk to them for seven years or 10 years, whatever. You're talking to these people on a regular basis, this person on a regular basis.
So it's really important. Now, getting back to the value of an advisor, the taxes is a huge deal. Probably, it's always a topic of conversation every day in my in my world. So there's a lot of different strategies you can do. Kate mentioned a bunch of a bunch of them, and I think in this year, that a lot of people are going to be making some changes because of changes in the whole outlook, and that is going to lead to tax issues.
So there's a lot of things you can do. You could do tax loss harvesting while you're making these adjustments. You know, the asset location, where you have your assets is really important. But also tax deferral is important. So for me, it's important to first start off with what is the expected return, and what is the expected risk of this investment and its role in my plan, right.
And then you work about taxes, because the goal is to maximize your after-tax rate of return in a way that's going to make sense for you. And if you don't have an idea about what the expected return is, how can you make a tax decision? So there are some securities that people need to sell if it's concentrated, that maybe the outlook is not so good for that particular investment and they should be doing other things to diversify.
Well, then there are strategies to deal with that. It's a pretty complicated topic, and we could literally talk for two hours about just that. But I will say that having a good expert, you need both. You need a financial advisor that really knows tax, but you also need a good CPA or even more than one CPA to run scenarios, because tax scenarios can be different, especially if you have like stock options and things like that.
You really got to actually run a scenario. A financial planner may not have everything in their system to actually run that analysis. Some will. So typically, it could be a combination of-- it could even involve legal or tax CPAs as well as a financial advisor. But a good financial advisor will coordinate that for you and help you understand when you actually need to look at something. You know, and that's a big part of it. It's like making you aware of what you don't know.
JASON MESHNICK: Awesome. Yeah, I love it. It's having a partner, which we all need. Let me see. We have about three minutes left. Let's call it. So I think I think what we should do is-- we've talked a lot. I've asked a lot of questions, but my guess is-- I mean, the reason why I had you all on is because you're three of my favorite contributors here.
And so I know that I did not ask all the questions that I should ask, and I'd like to go through each one of you quickly. If you have under a minute, let's call it 35 to 45 seconds, is there one thing that you would like people to know either about for their own investing or about your work? Let's start. I've just been going alphabetically, so let's start with Rev.
JAMES DEPORRE: Well, I think one thing I like to say to people about the stock market is that the fact that it is extremely hard is why you can get very wealthy at it. It's not easy. You really have to put in some effort, but there's no other business opportunity where you have the potential every day to be able to make money. I mean, if you come up with a methodology, you can control your emotions, and you keep plugging away day after day, you can have the stock market as a second income for the rest of your life. And that's what I want people to know about it.
JASON MESHNICK: Love it. Yeah, Louis?
LOUIS LLANES: Well, I don't know why all of a sudden, that's a hard question for me, because there's so many things going through my mind. I think the first thing, the one thing that I want to discuss that we haven't really touched on, is this whole valuation thing one more time. You know, is the market overvalued? I didn't really touch on that.
I really think that if you look at the general trends, that we are on the frothier side of things. Yes, you can go down the market spectrum, market cap spectrum, to see valuations are maybe better. But overall, we're on the upper end of the scale. So I think it's important to focus your attention on how much I'm paying for something. How much do I know about that cash flow? And am I diversified enough, or am I not diversified?
I think if you can if you can work with people-- if you're not doing it yourself-- that can help you figure that out, or if you're really a hands-on person rolling up your sleeve getting into it, ask yourself those three basic questions that I mentioned before. How much am I paying for it? How knowable are the cash flows? Is this real? And are the supply-and-demand dynamics for this investment positive or negative?
JASON MESHNICK: So that's a new word for me, "diversified," and I love it.
LOUIS LLANES: Well, that's Peter Lynch. I didn't come up with that word.
JASON MESHNICK: OK. Got to go back and read the classics. So Kate, a question just came in. "I'm going to read this. I'm on the fence about hiring an advisor. I do my own research and investing. I have one portfolio run by AI. AI makes the decisions, trades, et cetera." You and I have talked about AI and investing. And so before you get to your one thing, I'd love for you to answer this question.
KATE STALTER: Yeah, it's actually popped that into the chat there. A planner can help with a lot more than the investing. I think that's a huge misconception is, you know, a lot of people say, well, I'm not going to pay somebody 1% to invest my money. That's fine. That's not the only thing that planners do. Estate planning, we talked a lot about taxes today. You know, the retirement, withdrawal strategies. There's a lot of this.
And really, what kind of income do you need in retirement. How do you generate that? I mean, I've seen a lot of people as new clients or prospective clients. They've got their spreadsheets and, they've often overlooked many things, factored inflation incorrectly, or just underestimated the income they need. Or you know, if you're married, plan for yourself and your spouse in retirement for the longer living, for one person in the couple to live longer than the other. And what are you going to need? So there's a whole lot more than just the investing that goes into it.
JASON MESHNICK: Great.
KATE STALTER: And the one thing--
JASON MESHNICK: Do you have one thing?
KATE STALTER: I do. Oh, yeah. It's also something that I've seen come up quite a bit, and I think it's very relevant right now. People tend to either become panicked if they don't like the party that's in the White House, or overexuberant if they do. And I've seen investors make mistakes both ways. So it's just kind of, yes, we've talked a lot today about possibly some of the economic implications that we might be looking at in 2025.
And yes, keep an eye on it. But you know, I've seen people going as far back as the Obama administration. And I've seen it in every administration. People will stampede into cash and then live to regret it. So just want to say, don't panic. Don't become too exuberant either way.
JASON MESHNICK: Don't panic. Don't be exuberant. I think that's an overall theme of wealth investing, of course. But in all of the live quarterly meetings that we've done, it really comes down to risk management, right, and being invested, because it's risky to be in cash, because you are falling behind, then.
With that, we're at time. So I just want to say thank you to our great panel. I learned a lot today. And thank you also to all of the people who tuned in to watch, and those who will be tuning in to watch, because we're going to be putting this video up on the website later today or tomorrow, hopefully with a transcript, or I'll write some stuff about it too. So thank you to everyone, and I look forward to having another conversation in three months.
LOUIS LLANES: Awesome.
KATE STALTER: Thanks.
