Why I'm Buying the Dip BIGLY

Quick note, big expiration for the Meet Kevin membership and trade alerts, lifetime access to the alpha reports on Friday, but we are also removing the lifetime pricing for the homes reinvest AI. That's going to be pretty expensive on a monthly basis. So, if you want to lock in lifetime access, make sure you get that over at meetinvest.com or meet Kevin.com for the alpha membership. Says there are 10 reasons to be bullish and we're going to break those down in this segment. Now they are either trying to manipulate us so they can sell the rest of the Leopold position. Not that that they have any history of doing that like suggesting 2 days before Leopold got liquidated that rates needed to be hiked in a surprise move. So you know you got to take a little bit of the suit commentary with a grain of salt because after all they are the suits. >> Fetch me. With that said, we currently have a uh 72 and a half percent chance of a rate hike. And so I'm kind of starting with the bad news for this year. 72% priced in chance that we are going to get a rate hike this year. The market is only pricing in that in the September meeting, uh we have a 38.1% chance of a rate hike. So, in other words, more likely that we're not Jackson Hole could change this. Uh, as well as Nvidia earnings and Salesforce earnings later today, uh, and Crowdstrike, right, these these other companies that are going to give us insights into the market could say, "Hey, is the market overheating? Is it not?" All of that could sway Jackson Hole. It's obviously a big day. But let's look at the 10 reasons Citadel HAS FOR BEING BULLISH. UH, and I'm actually going to add number 11. This is uh the opposite what I'm going to say about Donald Trump as what the economist says. I I want to be very clear about the economist. They really dislike Donald Trump. Okay? Uh they really dislike Donald Trump and they say that as Donald Trump becomes a lame duck president uh in you know after midterms when in doubt lash out. And they basically think that as his dominance gets more threatened the world is going to find him more disruptive than ever. So, expect more problems with Canadian tariffs and problems with other countries. Those things are bearish. That's the opposite of what I'm about to mention. Uh, for example, The Economist also has another piece talking about how uh Mark Carney should uh uh or sorry, like basically Canada, let me put it this way, the Canadian government as a whole, Carney specifically, uh should essentially fold and they should try to get a little bit of a better deal, but they should fold to Donald Trump because he's going to lash out and make things harder. And so if they dig in, that could be bearish because Donald Trump ain't going to give up. And I think that's the whole chaos theory of it all. That's a little bearish because it'll add some more inflationary pressures if we end up having an expanding trade war with Canada. With that said, I actually put reason number zero out of 11 reasons here. Donald Trump wants to pump up the market before midterms. We're 69 days away from midterm. he uh tweeted or truth this morning that we want oil, you know, we we want oil prices down. We see oil prices are coming down. We want we want uh more flow through the straight of Hormuz. He argues that the straight of Hormuz is open. He argues that something good is going to come from the CIA visit to Moscow. That was some of the optimism that I talked about yesterday in my Russia video. uh that Radcliffe going to Russia is probably a good thing because you know what we saw with Radcliffe going to Cuba was more positive than what we saw with Iran uh or Venezuela. So uh that makes me optimistic that Donald Trump is going to pull everything in his power to pump this market over the next 69 days. Keeping in mind that uh Donald Trump is also now directing Marco Rubio to sort of accidentally leak that we're going to conduct fewer strikes, maybe no strikes on Iran unless they're defensive in nature. So that way we can reduce some of the oil volatility in markets. Last week before the economic D-Day that came from Scott Besset, we were looking at oil prices around $94. Now, oil prices are sitting at around $86 on Brent. And part of that is because SC, well, it's 87ish now. Part of that is because Scott's economic D-Day was a joke. Russia even made fun of the economic D-Day and called the economic D-Day a complete joke and that Iran shouldn't take it seriously. Is because Trump's got to pump it up before the market, you know, before before midterms. So, if you don't pump it up before midterms, you know, might not get what you want in midterms. You got to make people feel good. Get those gas prices to come down again. So, that's reason number zero I give for being bullish. Let's go through some of the others quickly here on Citadel talking about uh enthusiasm for markets. And what we'll do is we'll actually go in reverse order on this uh just because the last one I think is is uh one of the biggest points and we'll spend a little bit more time on the last one. Uh but going from uh the bottom up over here basically uh Citadel argues that uh people are starting to hedge the right tail. This is a fancy way of uh talking about a bell curve a normal distribution pattern and the right tail is over here which is that markets are actually going to perform much better than you expect whereas a left tail risk is markets are going to perform worse. This is a recession. this is a boom, right? And so, uh, they argue that right after Leo Fold got Leo, you know, liquidated, they argue that we saw the largest 5-day period of call volume history ever on the S&P 500. So, people are trying to hedge their upside, taking advantage of lower volatility that we're seeing in markets and therefore buying options. That's actually so that's 10. 0.9 is that volatility is low which potentially leads people to take on more risk as volatility has declined especially over the last 30 or so so days. So they see that as an upside opportunity. Reason number eight they give is that uh breath is up and correlation is down. Basically we're becoming less sector specific uh in solely what's driving the market and we're seeing a lot more of a rising tide lifts all ships. I have a thesis for this and it has to do with enterprise artificial intelligence which we're going to talk about in just a moment. But if you look at the RSP and we've been talking about this in our course member live streams for a while now RSP every single day even though the cues can be volatile they go down they go up all this nonsense RSP which is the S&P 500 equal weight which reduces some of that technology exposure is basically hitting all-time high after all-time high after all-time high. I mean, we've been on straight all-time high hits since April here, and it just hasn't stopped, I think. I mean, there was like a little moment there during the LEO fold, and these are these are on the the weekly bar charts. So, RSP has been crushing it, and that's basically a reiteration of what you have here. More than 70% of the S&P 500 sits above its 200 day moving average. It is worth noting that some stocks are under their 200 day moving average. I actually think that creates a little bit of an opportunity. Meta Stock for example, Netflix, Service Now, Salesforce are close to their 200 day moving average. Apploving is under their 200 day moving average. Each of these three, by the way, here in the advertising space, which I think is a sector that we're going to see rotation to. So, I think it's just a matter of time before the 200 day moving average uh gets exceeded for for those particular plays. Uh something to note though about uh concentration and uh the S&P 500 is that the S&P 500 is and this is not the equal weight the normal S&P 500 is seeing more concentration into uh technology. So that is in my opinion near-term fine but long-term does create some more risk. Uh, so I wrote that nobody wants to believe that in a recession or depression the S&P 500 can meaningfully rotate down. You know, like, oh my gosh, there's no way the S&P 500 is ever going to go down 80%. Well, if we had a 5-year long depression, it absolutely could, especially if you don't have somebody who wants to V-shape recovery money print us out like Kevin Worsh, because I don't think he will. I think he will leave us suffering. The free MARKET'S GOING TO TAKE over while you're suffering at the bottom. It's fine. Arguments for a different video. But uh in my opinion, this increasing concentration here to it where you've got 37% exposed to information technology, if you add in tech uh if you add in financials, the S&P 500 is 49% tech and financials. Now, people argue like, "Oh, but Kevin, why would you lump financials into that?" Well, because financials include investment banking, funding for IPOs, debt financing, trading, crypto revenues, brokerage revenues. All of those revenues collapse if tech collapses. So, literally half of the S&P 500 is really exposed to a collapse in tech should there be a collapse in tech. Notice that the S&P 500 is only 6% exposed to materials, utilities, and real estate. Look at how much materials, utilities, and real estate have collapsed over here. I just posted a video yesterday where I talked about our sector allocation. So, I put sort of a pie chart out and I'm like, you know, this is where we sit with cash, this is where we sit with stocks, this is where we sit with real estate. And the vast majority is real estate. It's actually very interesting if you think about that. That means that my company Reinvest is literally a substantially more substantially and more massively exposed to real estate. Whereas the S&P 500 is literally the least exposed to real estate. Like I wonder if you break down the material materials, utilities, and real estate, how little is actually left for real estate? It actually You know what? That that that's an easy one we could probably look up. Uh I I'll look that up as we keep talking about this. Uh let's see here. How much uh S&P 500 is exposed to real estate uh materials and utilities but divided out. Uh so we we'll figure that out. Okay. So while we wait for that, let's take a look at the next argument here. Buybacks. So we sit right here in the buyback authorization window. the buyback window closes again when we get to the next earning sector over here. So my thesis and could be wrong about this because it's just going to depend depend on uh Nvidia and some of the software plays today but after Nvidia uh we get bullish Trump plus 10 reasons from Citadel uh plus buyback window well buyback window including buyback window I should say buyback window it makes for a bullish potential six weeks, you know, leading up to the anthropic suck sucking anthropic suckening because the anthropic S1 is probably going to be oopsie dupsies. Somebody says, "Rotating to ads. Would you ever consider a trade desk again?" You know, it's funny you say that. I I actually was asked exactly that in our uh course member live stream. Somebody's like, "Kevin, you like Meta, you like Netflix? I even like the advertising part of Google even though I'm not exposed to Google, right?" like Kevin, what about Tradeesk? Isn't that an opportunity? So, we got rid of Tradeesk at like $120 a share, and it's because we saw a red flag coming from Netflix. Unfortunately, uh my stock Algo has even more downside ahead for Tradeesk. I have this at like a $4 fair value estimate, which is really bad. Like really, really low. And you might be wondering like, Kevin, why? Like, that's terrible. Why is it so low? Well, I I'll just give you the answer right here. Their revenue is up 3% and their costs of goods sold increased 22%. Growth has collapsed and costs are exploding. Now, uh Meta is still growing like crazy. Now, their costs in fairness in the last quarter have expanded uh more than they have in prior quarters. And so, it makes you wonder like is that a trend? Is it one time? You know, so there are things to pay attention to fundamentally at these various different companies, but the tradeus numbers are bad. And maybe maybe they could turn it around. I hope they could turn it around. I'm like jealous. Uh or or I I shouldn't say I was jealous. I'm not jealous. Trade. I am uh well, okay, let me figure out how I'm trying to word this. Trades is the biggest company in the city that I live in, Ventura, California. I would love for them to boom because it helps the city, right? So, like I want to see them win, but they need to turn it around because right now their margin trajectory justifies a very low price target. Uh, and so they need to turn that margin trajectory around. Anyway, thanks for asking the question. Uh, okay. So, buybacks was reason number six. Then we've got the bid never left. This has to do with uh inflows. Okay. 7.5 billion dollars of money every single day flowing into the stock market, which is crazy. The house households are becoming ridiculously exposed to the stock market, mind you. Oh, I got the data. It says here, real estate makes up 1.7% of the S&P 500. Holy moly. I mean, think about that for a moment. Uh that means like if if you invest if you would have exposure to to like reinvest or you know previously house hack and then you have investments into the S&P 500 you're actually now diversified into stocks and real estate because the S&P 500 basically gives you no stock exposure or no real estate exposure. It's very interesting. Uh okay. So portfolio allocation. So we saw the uh the inflows. Then what we have over here is this is retail buying again. Basically becoming a net buyer when we were not. Apparently the last week of March I was buying the geopolitical dip. We're buying the LEO dip. I even made a YouTube video saying buy in the title on like July 26th. Looks like the day the the day before the liquidation. It's like it seemed like somebody was getting liquidated. uh leverage has reset says uh you know the liquidations have occurred says Citadel and now forward price to earnings ratios are really sitting in the bottom half of valuations. Some of this could be nervousness because like you know is the boom gonna keep going? That's the big question. And then this is where we get to the most bullish reason. Uh you know in fairness it has to be hedged, right? We have to hedge by them saying oh this time is different. It might not be. It probably won't be like at some time point it's all going to come collapsing down. You kind of have to be prepared for that. But between now and then I think a lot of money is still going into what I call enterprise artificial intelligence. And so that becomes the number one point. This is uh valuations. Earnings are doing the work. That was the number two point. We just talked about valuations being on the lower half. But this is the interesting part right here. Earnings are better than feared. Uh earnings are driving the steepest revisions uh since 2000. And my opinion as to why earnings and the RSP are broadening the wealth effect, the equal weight, is because the cycle of artificial intelligence spending is lifting all ships. That's my thesis around it. Uh and so a lot of people have asked, including this commenter, like Kevin, you know, like you keep talking about enterprise AI and you talk about buying uh your own chips. Like why does Reinvest buy its own chips? Why do we have Blackwell chips? Why do we use small chips, big chips, whatever. Why do we use them all? Uh and there are many reasons for this and I think structurally it's really important to know them as an investor. So, uh here uh we've got let's do work. The work says I would love a video on why you need to buy your own chips versus just buying compute. It's obvious it makes no sense for you to run your own chips and mini data center. So, first of all, between you and me, this guy's probably overallocated to compute companies because the statement, the question, the way it was written is so loaded. He's basically saying like I mean, you could see where the emphasis is. It's obvious it makes no sense. Is it? That's a loaded statement because it does make sense. You're just not aware of why it makes sense. So, it's not obvious. This is actually unconscious incompetence, right? You don't even know that you don't know. And I'm not trying to bag on the person. I'm just saying the way they wrote it is condescending. Uh makes no sense for you to run your own chips and then chips in quotes as if like, well, your Blackwell chips aren't as good as Meta's chips. Well, no SH9T. That doesn't change the facts, though, homie. Okay, so let's get real here. So, um, first of all, why would it make no sense? They've doubled in value. They've paid for themselves. We keep our own data, and we're able to be much more flexible. So, let's break this down. This is exactly the same argument that every enterprise in America can make. We don't all need to spend money on a GB300 or Rivera Rubin $4 million rack, but we could spend, you know, 200,000, $300,000, 4005, whatever on on chips and infrastructure and it could actually be a profitable investment. Why? Well, for various different reasons. Uh, number one, if you buy compute or lease it, oh, let's we'll come back to this one. This is an accounting piece. We'll talk about that one in just a moment. Um, keeping your own data. Let's let's go in sort of reverse order here. Keeping your own data is critical when especially when you're a startup or a healthcare company like a Mona for example because we already know that Claude and Open AAI want to replace the very software companies they're pretending to partner with. There was a really big uh argument that uh Figma partnered with Claude and then Claude potentially used some Figma IP and then came out with Claude Design. Now Claude obviously denies that. They're like, "Oh, we were going to come out with Claw Design anyway." But now companies like Figma are like, "Wow, we're getting basically replaced by the very company we were partnering with." So there's a very big hesitance towards sending your healthcare data or your proprietary weights and algorithms to the big cloud services the clouds or the open AIs. In addition to that it's very expensive to use these models cla open AI you know there I mean there was just a deepseek article we could pull that one up really quick open AAI cost a fortune more than uh some of the openweight models. Here you go. Look at this. So, if you look at this, Moonshot charges $15 per output. Claude Opus 5 costs $25 per output. And uh you've got uh DeepSeek that is at $4 per output. And then on top of that, which they don't mention in this article, but you've got models from Baba, like Quen, that are even cheaper per output. So, do you want to send your data to the cloud and lose your proprietary protections? No. Most enterprises don't. What does that mean? Well, it means a lot of companies are probably going to buy their own enterprise hardware. That might be why Dell is doing well. Super Micro could benefit from that as well. But these are lower margin businesses. So, it makes it a little harder to to want to lean on those. Although Dell's been doing phenomenally, so obviously, you know, people are interested in in in that trade idea. Uh so uh utilizing openw weightight models not only protects your data, you protect your own uh weights, but it also reiterates why you would buy your own chips. In addition to that, you get more flexibility with your own chips. Why am I going to rent a 256 GB VRAM chip if a 32 GB or 96 GB VRAM chip will do? 32 GB is a 5090 uh Blackwell uh uh you know, Nvidia gaming chip. The 96 GB version is your RTX 6000, which costs like three times as much money because it's got three times the the RAM, you know, uh if you don't need it, you're wasting that utilization. Why are you going to go rent bigger chips from companies that scale with the bigger chips, the H100s or whatever, if you don't need them, right? Mona doesn't need to run their mutation algorithm for cancer drugs on a GB300. They could literally run it on a 32 GB VRAM chip. You don't need You don't need it. So why are you going to pay for it? So more cost-effective to have your own. Not only is it more cost- effective to have your own, but you keep your own data secure. You're able to use openw rate models the way you want to tune them. So you get the flexibility. All of that leads to more spending at enterprises for having their own basically data centers, right? You take the 5090s, RTX 6000s, you plug them into a 240 volt 30 amp circuit. Boom. You could run twice the machinery you can on 120 volt circuit. Yeah, you're still using the same wattage, but your amperage is in half, so you're not popping your breakers. Uh, the other thing, the other reason bigger companies care about this, and this is a difference between bigger companies, like I we don't really this this our our spend on chips is relatively nominal compared to, you know, some of the larger largest multi-billion dollar enterprises, right? But the multi-billion dollar enterprises, they would rather invest in their own chips because that's a balance sheet investment, right? you go from cash turns into a balance sheet asset rather than cash turning into an expense which shows up on the P&L as a money loser. So if you rent compute, think about this. This is probably one of one of the the big lessons because then it helps you think about where to invest. Uh if you rent compute, okay, you spend $100 in rent, uh that $100 in rent goes straight into uh negative $100 for your net income, right? So that actually hurts the company's bottom line, their earnings per share or whatever. If I now come in uh and say, "Oh, well, no, we're actually gonna spend, you know, uh 80 on an asset and -20 on let's say power. Okay, just as an example here, oversimplifying this. Well, now I put the $80 over here as an asset on the balance sheet and the net income only shows $20 to the net because the power expense flows to the bottom line. The asset investment flows to the balance sheet and so EPS the effect of this is EPS looks higher uh for you know bigger companies who are actually spending a lot of money on on this enterprise. it makes sense to own your own hardware for many many reasons and that's another reason in my opinion to be bullish. I think that's why a lot of companies are investing in their own hardware as opposed to only relying on the cloud. Uh endless reasons for that. Uh so all of this together uh puts a very strong bullish potential on markets once we get through some of these negative catalysts or like concerning catalysts. They're not necessarily negative, but uh Jackson Hole, you know, we got Jhole on Friday. Uh remember, join uh meet Kevin and and the courses over there on building your wealth. If you get all the trade alerts and everything, join that before Friday. Uh so that is uh the J-Hole coupon expiration. Get that over at me.com. Uh, and uh, yeah, it's a good segment on Citadel. >> Why not advertise these things that you told us here? I feel like nobody else knows about this. >> We'll we'll try a little advertising and see how it goes. >> Congratulations, man. You have done so much. People love you. People look up to you. >> Kevin Praath there, financial analyst and YouTuber. Meet Kevin. Always great to get your take.