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In this podcast episode, George Noble discusses the potential impact of a recession and inflation on the stock market. He emphasizes the need for investors to understand the companies they invest in and not get caught up in the momentum or trends of the moment. He cautions against blindly buying high-growth stocks and highlights the risks associated with companies that have high valuations and limited growth potential. Additionally, Noble predicts that liquidity-driven assets like speculative stocks, cryptocurrencies, and NFTs will be hit the hardest as central banks withdraw liquidity from the market.
Noble argues that the current investment landscape is witnessing a shift from long-duration assets to short-duration assets, from virtual to real investments, and from growth-focused strategies to quality and value investments. He predicts that growth stocks with high price-to-earnings ratios, such as Tesla and Netflix, will face significant challenges due to increased competition and a lack of profitability. Conversely, Noble identifies energy stocks as attractive opportunities for growth and earnings potential. He urges investors to reevaluate their portfolios and be cautious of expensive stocks that may not be able to deliver future returns.
Noble challenges some popular narratives in the market, particularly in relation to heavily valued companies like Amazon, Facebook, and Apple. He argues that these companies, though successful in the past, are now facing headwinds and have limited growth potential. Noble questions the sustainability of companies like Tesla and Netflix, highlighting their lack of profitability and vulnerability to increasing competition. He urges investors to consider the fundamentals and valuations of these companies rather than relying on the narratives that have driven their growth in the past.
Interest rates and the macro environment have a significant impact on the stock market. When interest rates are low, like during the COVID crisis, stocks that benefit from long-duration growth, such as companies in the NASDAQ, tend to perform well. However, as interest rates rise and the macro environment changes, these stocks may face difficulties. The key is to understand the correlation between beta and stock performance. If interest rates continue to rise and earnings estimates fall, it could have a detrimental effect on the overall stock market, leading to a potential recession or earnings recession.
The world is heading towards an energy crisis due to underinvestment in the oil industry. While there may be a low growth in oil demand in certain regions, emerging markets like China and India continue to experience increasing energy consumption. However, the real problem lies in the supply side, as capital spending in the energy industry has declined, leading to decreasing reserves. This shortage of supply, coupled with the pressure from the ESG movement, creates a concerning situation. Additionally, the controversial tether scheme in the crypto world, along with the potential collapse of margins for companies like Coinbase, adds to the uncertainties surrounding the market.
George Noble has seen many bubbles in his storied career: the 2008 Great Financial Crisis, the Dotcom Bubble of 2000, and the Japanese mega-bubble which he rode on the way up and down. But no prior period of speculation compares to what Noble sees now: a mega bubble of epic proportions, fueled primarily by a wave of central bank liquidity that has taken non-profitable technology stocks to previously unimaginable heights.
Noble argues that inflation has been popping this bubble and that equities are “toast” and that goldilocks is “dead.” Noble sees overvaluation problems not only in the “ARKK” stocks but also darlings of the S&P 500 such as Amazon, Apple, and Netflix.
As a warning to viewers, Noble shares words from the legendary investor Peter Lynch (his mentor): “know what you own.”
George Noble on Twitter https://twitter.com/gnoble79
Jack Farley on Twitter https://twitter.com/JackFarley96
Blockworks on Twitter https://twitter.com/Blockworks_
Subscribe To The Blockworks Newsletter: https://blockworks.co/newsletter/
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BCB is Europe’s leading provider of business accounts and trading services for the digital asset economy. With a dedicated focus on institutional payment services, BCB Group provides business banking, cryptocurrency and foreign exchange market liquidity for some of the world’s largest crypto-engaged financial institutions.
For more information, please visit https://bcbgroup.com/jack
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Timestamps
(00:00) Introduction
(00:51) Background
(06:55) The Everything Bubble
(13:36) The Powell Pivot
(20:58) ARKK
(25:43) BCB Ad
(26:32) Inflation Is Popping The Bubble In Long-Duration Assets
(39:50) Are Bonds A Hedge For Stock Sell-offs? (Answer: No)
(41:12) How Low Can Stocks Go?
(43:22) Netflix and Amazon
(50:10) "Peter Lynch Would Not Be Buying Apple Right Now"
(52:50) Energy
(59:30) Crypto
(1:02:50) Noble's Twitter Spaces
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Disclaimer: Nothing discussed on Forward Guidance should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets.
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