What to Watch in the Markets This Week
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This episode is brought to you by OutSystems, the AI-powered application generation platform that combines the speed of Gen AI with the power and completeness of the market-leading low-code platform. Visit OutSystems.com to learn more. This is Barron's Live. Each week, we bring you live conversations from our newsrooms about what's moving the market right now.

On this podcast, we take you inside those conversations, the stories, the ideas and the stocks to watch so you can invest smarter. Now let's dial in. Hello, everyone, and welcome to Barron's Live, our weekly webcast and podcast.

Thanks for joining us this Thanksgiving week for a market update and a look at stocks in the news. My guests today are Barron's Deputy Editor Ben Levison and Associate Editor Andrew Barry. I call them the newsroom's dynamic duo, and they are certainly two market savants. Andrew is our resident Buffetologist, for those who don't know. He has studied Warren Buffett and Berkshire Hathaway for decades, and he probably knows as much about the company as Warren does himself.

More recently, Andrew has taken a deep dive into micro strategy, which has emerged as a mega buyer of Bitcoin and to me, one of the oddities of the current bull market. And I'm hoping he'll explain it to all of us today. There is almost nothing about markets that Andrew hasn't followed. And as you all know, the same goes for Ben. So let's welcome Andrew and Ben to Barron's Live. And thank you both for joining me today. Thanks, Lauren. Good to be here.

All right, Andrew, I think it's only appropriate to start with a discussion of Berkshire. For one thing, the stock hit an all-time high today of $686,000. That's a huge stock price. And for another, Buffett said in a press release today that he's donating about $1.2 billion in Berkshire Hathaway stock to four family foundations. His three children will be gradually distributing all of his Berkshire holdings.

So we'll talk about the estate plan first. What do you expect that the Buffett kids, who are no youngsters themselves, will do with that inheritance? And how do you think its eventual distribution will affect Berkshire's other holders and their shares? Well, I mean, there's a lot there in that question. I mean, the stock actually is around 720,000 now at a new high, the Class A shares.

Buffett's fortune is about $150 billion. He's 94 now. He will basically have his kids be responsible for giving away that entire fortune in Berkshire Hathaway stock after his death. It should be diminished maybe somewhat, assuming he dies in a couple of years.

The three kids, as you note, range in age from 66 to 71. There are three of them. And they all have philanthropies now. They've been getting money from their father every year for nearly 20 years now. They have different priorities.

Howard is one of the biggest benefactors of Ukraine. He's been recognized by the government for that. He gave over $300 million last year to Ukraine. He's also been involved in agricultural projects and giving in Africa. Susan, the daughter, has been very active in Nebraska with various charities and philanthropies there. And Peter, the youngest, has been

has been his focus that much of his attention the last couple of years on the area around Kingston, New York, which is a depressed area about 100 miles north of New York on the Hudson River. So I mean, those three will basically be in charge. Interestingly enough, Buffett has decreed that the three of them must in future philanthropic decisions after that be unanimous in what they agree to give money to. That's a tough that's a tough order for three grown kids like that.

But what do you think it means for the rest of Berkshire's stock to have this large chunk of stock distributed to various philanthropies and other causes? Well, what it's going to mean is that control of Berkshire Hathaway, which initially will essentially rest with the three kids, Buffett now owns about 14% of Berkshire Hathaway stock on an economic basis.

about double that on a voting basis because his ownership is concentrated in super voting A stock. So over time, the influence of the Buffett kids will diminish. But initially, they will effectively potentially be kingmakers at Berkshire, given their control of his control stake. It's going to be a fascinating situation to watch.

For sure. You mentioned that Buffett is no youngster himself. He's 94. It's a reminder that he's not getting younger. And there's been a lot of speculation, including in the pages of Barron's, about what the company might look like in the post-Buffett era. Can you give us a preliminary tour based on your assessment? Yeah, well, I mean, what we do know is that his likely successor is Greg Abel, who's a Berkshire executive who heads their non-insurance operations. He's been

in the Berkshire family for more than for about 20 years or so. He's well regarded by Buffett. He's viewed as being a more hands-on manager than Buffett, who takes a very much hands-off approach to the operating business. There are like dozens of them right now, including Burlington Northern Railroad and Berkshire Hathaway Energy, which is a big utility. So you'll have Greg running the show, the head of the insurance operations, a guy named Greg Abel,

Excuse me, Ajit Jain, will probably may retire within the next few years. He may have a new head of insurance there. Excuse me. So there could be some changes both in the executive ranks and with the business itself. So what do you make of the stock now that it's gone up so much? Do you think it is overpriced at today's level? Do you think it's fairly priced? Buffett himself is not buying back stock, which should tell us something.

I'd say it's fairly priced right now at around 720 on the A shares. He's not been buying it back. I think that's an indication he thinks it's pretty fully priced now. What kind of return expectations would you have for it in coming years? I mean, I think it can match the S&P 500, which I think is pretty good, but I don't think it can do much better given where it's trading right now. It's around 1.6, 1.7 times book value right now, which is

It's near the high end of its range in recent years. It's pretty rich.

So let's deal with one more Berkshire question before we go on to some other topics. Berkshire has been selling its Apple shares. It's been selling shares in Bank of America. These are two of its larger holdings. It is raising even more cash, which it arguably doesn't need given the huge pile of cash it already has. So one of our most loyal listeners, Lee, has asked, why do you think Berkshire is selling down some of its winning positions in stocks and building that cash hoard?

I mean, I think I think Buffett is getting much more cautious now. I think the stocks are at record levels. I think he's been cautious for a couple of years and this is just a manifestation of that. He wants to build cash, which is over 300 billion dollars right now. And I think he feels maybe Apple has gotten richly priced. It's actually not been a good move. Apple's probably up about 10 or 15 percent, at least since he sold the stock.

So, I mean, I think rightly or wrongly, I think he's cautious, wants to build cash and is concerned about the market outlook, I think. And Andrew, what?

Sorry, go on. No, you go on. I was going to ask you a question because, you know, normally I think of like Apple has been kind of a growth stock, Bank of America being value. It's tech versus financials. And you would think that maybe you sell the tech because they've done so well and keep the keep the bank stock because that's going up. But he's selling both. So you can't even say that it's it's growth value or anything like that. It's just he's just selling.

Yeah, I mean, the Bank of America stake was a big stake. It was over 10%. He may want to get it under 10%, which has fewer regulatory issues with it. So that may be part of the reason for that. It's hard to really know. I mean, I think people try to analyze Buffett moves and attribute motives to value growth. It's not easy to get entirely into his head, but I do think he has gotten more cautious. Berkshire has not been buying

in businesses outright. It's the last major purchase of a company with Allegheny for about an insurer for about $12 billion a few years ago. So he's been pretty cautious overall in the last couple of years. So, Andrew, this leads me to ask what your market view is. I often wonder in the office, what do you think? We've established that Buffett is cautious. What about Barry?

Look, I think, you know, the trajectory of stocks generally is higher. I think next year could be a decent year. I think people might want to consider looking internationally where you've had another poor year for stocks relative to the U.S. I mean, international stocks are about 20 percentage points behind the U.S. this year. And maybe you might see, I mean, better opportunities in places like Germany, the U.K., Japan and France. Well, some of those places have certainly had their struggles.

So but we'll we'll watch that. Now, let's talk about MicroStrategy. I am not sure I understand what's happening here. And I hope you can explain it to us. It seems the company is has recently sold no yield debt. It is using the money to buy Bitcoin. Who would buy no yield debt? And what can you tell us about MicroStrategy and its Bitcoin? Well, I mean, MicroStrategy has become the largest company.

play on Bitcoin in the stock market. It's valued at around $100 billion. It's the creation of Michael Saylor, the controlling shareholder and chairman. His strategy is to buy as much Bitcoin as he can finance with equity

And debt. And they now own at MicroStrategy almost 2% of the Bitcoin outstanding, almost 400,000 coins. And so as long as the stock is trading richly, and it is right now at about two and a half to three times the value of its Bitcoin holdings, it makes sense for him to issue stock or issue lower no yield bonds to basically buy more Bitcoin. And that's essentially the strategy right now.

Do you have any thoughts about Bitcoin itself? I mean, Bitcoin can trade anywhere. I mean, it's now close to 100,000 and it could be a million. It could be half of where it is. I mean, there's nothing really anchoring it right now.

So, Andrew, can I ask you, I got a letter from a reader when I wrote a little thing last week, you know, and I basically had a line in there that, you know, they MicroStrategy sells stock and they sell convertible bonds and they buy Bitcoin. And I got a long letter explaining how I was wrong, that what they're really doing is creating the first investment bank focused on Bitcoin.

And this explains the bull case, why it could trade it so much more than its Bitcoin holdings, et cetera, et cetera, et cetera. Had you heard that argument before? I've heard that's part of the bullish argument for Bitcoin. I mean, I don't quite understand that.

I mean, it's not really doing much at all with the Bitcoin. I mean, it's really more of just an accumulator of Bitcoin. And I think it's using a high price stock to buy more of it. I mean, I think a lot of that is gussied up. You look at the I mean, the analyst notes. I mean, they talk a little bit about this, but I've not really seen much evidence that they're I'm not quite sure what they're going to do with the Bitcoin that will be able to maximize the value of it any more than just holding it. So I'm not quite sure what that argument really is.

what happens if they decide to sell some of their bitcoin is that a terrible signal for bitcoin i mean i mean their views they don't have to i mean they have debt but i mean the the debt is way less than the bitcoin i mean michael saylor wants to be a long-term eternal bitcoin holder they have no plans to sell they want to keep buying and essentially you know and and continue to be the leading corporate bitcoin holder in the world they may be the largest

one of the largest Bitcoin holders in the world right now. They own almost 2% of the 20 million Bitcoin that are now outstanding. I mean, the bull case for Bitcoin is that it's not really been adopted by investors broadly around the world, that it has unique characteristics, and they aren't making much more of it. They're 20 million outstanding now. There will be a max of about 21 million, meaning only about 5% more will be created. And, you know, Bitcoin bulls say that it's a great underinvested asset class right now.

And with Donald Trump winning the presidency, he's Bitcoin friendly. There could be potentially a Bitcoin reserve set up in this country and other Bitcoin friendly moves.

It certainly is an interesting situation that is reflective of our times. This episode is brought to you by OutSystems, the AI-powered application generation platform for enterprises. Unlike simple GenAI code suggesters, OutSystems lets you generate modern, governable enterprise apps in minutes, then automates the whole DevSecOps lifecycle from a prompt.

The generative software cycle is here. Learn more at OutSystems.com. So I wanted to go on to Ben and talk about corporate earnings, typically a subject that seems a bit more concrete than Bitcoin and MicroStrategy. However, Ben, I want to start with Macy's. It was one of the companies that was supposed to report this week tomorrow, and the company has just postponed its quarterly earnings release.

to complete what it says is an investigation after discovering an employee had hit up to $154 million in expenses. This seems utterly baffling to me. I can imagine how it seemed to Macy's accountants when they finally discovered it. What is the takeaway here? What should we be looking at? You know, I mean, I guess the first takeaway when I look at it is I look at the stock reaction. And the stock is down, as you would expect, but it's down just about 3.5%.

And that's only a little bit more than half of its 6.6% of change gain on Friday. So the reaction really is not huge. So I think that's the first thing. The market is looking at this saying, okay, tell us more, but we're going to wait and see. And I think that's a fair reaction. It's a really odd case. You know, what we know is that they had an employee, that employee was responsible for the

for booking the small package delivery expenses. And for some reason tried to hide about, they have a number 132 million, 154 million in expenses from the fourth quarter of 2021 through the fiscal quarter that ended on November 2nd.

And that is, you know, it's just odd. And it's not a huge number in regards to delivery expenses overall. During that time, it's been about $4.4 billion. But it's just strange. Like, we don't know anything about it, whether the employee, it looks like, did not pocket the money, but

that's unclear and they're calling them uncovered erroneous accounting entries. So it's just all very much a mystery at this point, what happened and how it went uncovered for quite as long as it went on. It's going to be very interesting to see how this story unfolds and what the motivation was and what happened. But as you say, it's not really rocking Macy's stock in a tremendous way.

But Macy's will report eventually and we'll keep you posted. Nordstrom is reporting tomorrow. And I wanted to talk about that for a moment. It's been a good stock this year. It's up about 26%. It's sort of a good vote for department stores. What's ahead for Nordstrom?

Well, I think what makes Nordstrom interesting and what is starting to get a little bit of attention, at least from the Cowan analyst I was reading through, the Cowan analyst was not very positive on Macy's or on Kohl's. But they are more positive on Nordstrom. And it's largely because they think that Nordstrom Rack is really benefiting from this environment. That's the competitor to TJX, Ross Stores, et cetera, where they offer kind of these

name brands at discounted prices, a little bit of that treasure hunt experience. And they also think that the company's guidance for 2024 has been conservative. The company beat expectations last quarter, but only raised the low end of the guidance. And so they think that

there's a room for beat there. But just going back, it's I think that differentiator for Nordstrom really is the is that Nordstrom rack business, which really sets it apart from a Macy's or other department stores that are out there.

yeah ben i mean what's going on at nordstrom wasn't there isn't there a buyout offer on the table from the family at 23 a share the stock's trading for 24. i mean is this deal gonna fly i mean it doesn't look like it at this point i mean what are your thoughts on whether or not this latest effort to take the company private will succeed i you know i i think it uh at this point i think that that deal does uh really sets kind of a floor for the stock more than anything

And if you look at it, it's actually been fairly range bound since that deal came into place. It's never dropped. There was one day where it actually did trade as low as 19, but bounced right back up over 20. And I think it's put a floor in on the stock around 2021 dollars for now.

So if Nordstrom starts really benefiting from RAC and the business is doing as well as some of these analysts think, it's going to have a hard time getting a deal. The family will have a hard time getting a deal done at 23.

I mean, to me, they may have to increase the bid pretty significantly. I mean, it looks like they may be trying to steal the company at these levels. I mean, I think the current price is only about 10 times earnings. You can check on that. So it doesn't look like they're paying a particularly high price for, I mean, what's been one of the survivors in the department store area, and as you point out, has had some success in the off-price channel as well. Absolutely.

all right here's a company that's had a ton of success in retail that's ever crombie and fitch the company had a great turnaround under its current ceo the stock is up more than 70 this year ben we're going to hear from them tomorrow with an earnings report what will you be listening for

Well, with with Abercrombie and Fitch, I mean, there's there's two things. One is the arrest of its former CEO, which is an overhang. You know, it's listed in the in the risks for the company. And it's just something people have to be aware of. But I think the bigger financial risk right now is just margins. That's what everyone is paying attention to. The stock has been a real outperformer. It gained money.

its gains about 72 percent through friday's close uh earnings are growing nicely it's expected to report a profit of two dollars and thirty nine cents that'd be up from a dollar eighty three um but there are high expectations when a stock has gone up that much and when you look at it um you know the i think what the analysts are worried about is are there and actually not just the analysts but the buy side as well is is there going to be margin compression and margins have been so important for stocks of all stripes you know if you've been able to grow margins your stock has gone up um

And so even though the stock isn't horribly expensive because of those gains, it really needs to keep those margins growing or at least not contracting. If they contract, that could be a problem. But once again, you know, you do have a stock that over the last three months, it hasn't it's actually dropped 11 percent. That's partially over these margin concerns, partially over the former CEO concerns.

And that actually could lower the bar a bit heading into the number or into the release. But it's going to be an interesting one just because you're not used to seeing Abercrombie. We were talking about it as, you know, at one point as outperforming NVIDIA, which you don't normally see from a retailer.

Never. So a most unusual situation. Let's switch to tech for a moment. We're going to hear from CrowdStrike tomorrow. This is the company whose tech outage caused a lot of problems for other companies, including Delta Airlines earlier this year. Yet it hasn't been lasting damage for CrowdStrike stock, which is up almost 50% this year.

what are going to be the highlights of quarterly earnings? Well, this is the quarter where the analyst community is really expecting the problems, any hit that it takes from the outages that it had to show up. And so you are expecting, you know, it's not a great quarter. Earnings of 81 cents, that'd be down a little bit from 82 cents the same quarter one year ago. But it does seem like people are pretty confident that the hit from these outages

have not been as bad as people thought. They are listening to see what CrowdStrike says about customers making their commitments, basically signing up for their subscription kind of package and how much has the company having to give customers to keep them around, keep them from going to competitors.

So that's going to be the real big focus here, but also on whether this is indeed the worst case. Like, is this the quarter where it's been hit the hardest? And is it going to bounce back from here? And JP Morgan is actually pretty optimistic.

pretty excited about it. They've raised their price target to $369 from $330, that they think that there's actually going to be some multiple expansion as people start looking past this, and that they think the company is just going to be fine in the long term. You know, and the stock, you know, it has been bouncing back quite a bit, and that's going to be your big risk, because it bounced back too much given the problems that it still faces.

You know, Ben, I mean, this stock looks like it's very, very richly priced. Isn't it trading for like over 100 times this year's earnings? And I think the earnings they reported non-GAAP that include, that don't include stock comp. I mean, it just seems like these cloud names just trade for really, really high valuations. I wonder if they can maintain it. I mean, you're absolutely right there, Andrew. The stock trades for 87 times 12 month forward, which is, you know, nosebleed, right?

And that's the risk. I mean, the thing about this stock is it's traded even higher than that for quite a while. You know, it's sort of nearing the peak valuation.

for at least this year, but you could go back to 2022 in like January and the stock was at 238 times. So yes, they're very expensive. And I think it's partially just on, you know, this hope that the growth ends up being, you know, better than expected in the future, that they're just going to keep getting bigger and bigger. But those valuations are hard to stomach, especially as you said, that they don't include the stock comp that they pay out.

the more you're talking ben and andrew the more i'm thinking buffett may be on to something and getting cautious about the market but that's a whole different subject let's talk about dell for a moment the company reports tomorrow it has benefited from the problems of super micro and

and it is benefiting from the AI boom. What do you see ahead there, Ben? - Oh, this is, I mean, again, another one that's kind of, I don't know if I want to say nutty, but it's up 89% this year, you know, and it's growing. It's up, you know, earnings are supposed to come in around $2.07. That'd be up from $1.88, sales at 24.7 billion, up from 22.3 billion. So there's growth there.

What's interesting, so most of the growth is supposed to come from what's called the infrastructure solutions group. That's the data centers, cloud computing, et cetera. That's where the NVIDIA chips are going to go. And then they have a client solutions group, which is businesses, and they're providing services and computers and things like that. And that's not supposed to do great. And so that AI really has to come through.

and they are do expect uh ai um server um shipments to come in over three billion dollars over actually 3.1 billion at least evercore's analysts do um they're pretty excited about that um

But the stock, again, it's gained a lot. It's depending a lot on that Nvidia strength to keep the stock going. So it'll be interesting to see. I know that Andrew has always had thoughts about Dell just because, you know, when you talked about Nordstrom stealing, wanting to steal, the Nordstrom family wanted to steal Nordstrom, the company. It's almost what Michael Dell did with Dell stock, isn't it?

Well, I mean, Michael Dell, I mean, and Silverlake, his partner, I mean, effectively stole the company 10 years ago, and they've made tens of billions of dollars. Interestingly, Michael Dell has been sold some stock in Dell during the fall. So it's interesting. He sold apparently about a billion dollars of stock. I mean, if you're looking for AI plays, I mean, this is one of the cheaper ones based on PE. I think it's trading for close to around 15 times earnings. So and that's one thing to be said for it.

Yeah, I know you're absolutely right there. And it's actually pulled back from its highs earlier this year. So, you know, if it can come through with a good AI number and really show that it's taking a maybe market share from Supermicro, it could be good things. All right. HP has conspicuously not been an AI winner. The stock is up 27% this year. It's not one of those high flyers like some others we've talked about. The company reports on Tuesday. Ben, what's the outlook?

No one's really excited about HP. It doesn't really get that AI server business. And so it's depending on what they call the PC refresh cycle. Everybody going out and getting new computers so they can take advantage of all these AI tools.

that's not really happening a ton yet and at the same time hp has that printer business where people just don't print as much as they have in the past so that's kind of shrinking um the one thing that stands out according to b of a is that the subscription printing business um is doing pretty well um i don't know why people sign up for that but they

they do, where you get the ink sent to you. And that's showing signs of strength, but it's too small to really offset everything else. So B of A is not very excited about it. The company is expected to report a profit of $0.93. B of A sees that coming in at $0.91. And they basically think the only thing that keeps the earnings growing for the company is share buybacks.

And that's not the best, you know, you'd like to see more than that, I will say. For sure. And I point out, Ben and Lauren, this was a stock that Berkshire Hathaway owned over 10% of a few years ago, and they sold completely out of it. That wasn't a great move by Warren Buffett, given the fact that stock is higher than when they sold it.

Interesting. Glad you pointed that out. Andrew, I want to spend just about five minutes going through a couple of sectors of the market, kind of, you know, round robin. I love asking you about any kind of stock. You always seem to have some great insights. We'll just go through a couple of categories. Drug stocks, they are not doing well. The incoming administration is going to bring many changes. Some may not be so favorable for the industry.

What do you see ahead? Some may be favorable. We'll find out. I mean, there could be some opportunity in drug stocks. They've been among the weakest major areas of the market this year. You've got stocks like Pfizer, Merck, and J&J flat to down on the year with the S&P 500 returning almost 30%. You've got PE ratios on some of these stocks.

under 10 or around 10. Pfizer yields above 6% right now. Might be worth a look at that sector going into 2025. Admittedly, given some of the headwinds, some of that may be now discounted on the stocks.

Let's talk about commodities, an area that you've been favorable on. Tell us what's to like there. Energy is now out of favor. You had a couple notes the last couple of days from analysts about major firms being bearish on oil or cautious on oil, which is now around $70 a barrel. So that's, I mean, worth noting. But the stocks also have been lagging this year, and there could be some opportunity there in 2025.

if the bearish scenario doesn't pan out. What would you stay away from in this market? Look, I mean, I think I would say that I'd be cautious on maybe some of the high-flying industrials. I'd be careful about, I'd be careful, I think some of the banks have had a nice run. They may take a breather. But I mean, even with the market trading for over 20 times earnings, they're not

a huge amount of overvaluation, I think, outside some of the really hot areas. All right. You mentioned banks. So you have been a student of Goldman Sachs. What's going on at Goldman lately that investors should know about? I mean, Goldman's benefiting from expectations of a strong investment banking cycle.

under the new Trump administration. The hope is that restrictions on M&A and regulation in terms of antitrust will ease up and you'll see a M&A boom or at least a better environment for mergers and acquisition transactions next year than you've had in the last couple of years with less aggressive antitrust policies. And Goldman is one of the top, if not the top,

merger advisor. So I think that's one of the reasons it's been driving that stock. Plus, just a general revaluation of the company after it traded, I think, way too cheaply for too long. So every year you put together your top ten list of stocks that you expect to excel in the new year. Most years you do okay. Some years are not as strong as others. But I've always been curious about your methodology.

What do you think about as you prepare to put together the 2025 list of top 10? Well, I'm interested in growth. I look at valuation and also sentiment. I'm trying to anticipate some trends that may play out next year. So if you could identify one trend that you think will be important, what do you think it is?

Well, I mean, I think you may see a greater appreciation for the energy sector next year. And also, I think some of the fears about healthcare, which has depressed that sector, healthcare stocks are among the worst performers this year in the stock market, may ease up a little bit. Certainly, it's been a disappointing year for them.

All right. One more topic for Ben, then we'll go on to some listener questions. Ben, it may be a holiday week for most of America, but it is a blockbuster week for economic news. We've got the Fed minutes from its last meeting coming out Tuesday. Consumer confidence Tuesday, third quarter GDP. The second estimate is Wednesday and PCE, the Fed's preferred inflation measure, will be out on Wednesday as well. What are you focused on this week? What do you think the Fed will be watching?

Well, I mean, the Fed has to be watching the strength of this economy. They'll be really watching that PCE when it comes out. You know, they are fairly committed to to rate cuts, but we've already seen that the odds of a December cut have come down quite a bit. So that PCE number, that's the Fed's favorite inflation reading.

So for October, it's expected to rise 2.3% year over year. That would be up from 2.1%. So a little bit of an acceleration, but these are volatile numbers. And the Fed's not making any decision based on one month's number. They want to see the trend.

But that's going to be, I think, the real market moving number. We're going to get third quarter GDP. It's going to be the second estimate came in at two point two percent. No one's expecting much of a change. The other thing I'd like to highlight is that consumer confidence is expected to get quite a bit better, supposed to jump from one eight point seven to one twelve point nine. And that's I think that's partially a reflection of, you know, inflation has slowed down. I think it's

because we're past the election, consumers are feeling good. And that brings us to the Fed minutes. I mean, it's one of these things that always gets a lot of attention. And even in the community market moving, you know, we'll get to see how the Fed was thinking about their rate cuts at the last meeting, et cetera, et cetera.

But, you know, I always find it kind of, you know, it's a reflection of something that happened a month ago. And a lot has changed. You've got a lot of new information. And so people will try to get a read through from it to what may happen in December when the Fed meets. But I wouldn't expect there to be too much of a reaction.

No, it's just interesting to see if there's been big dissension to Fed decisions. And normally there is not. But that consumer confidence number bodes well for holiday sales. Our colleague Sabrina Escobar wrote a lot about that this weekend. Yeah, it really is a big deal that, you know, consumers are starting to feel better. They've been miserable for a long time. We'll have to see if it sticks around. But yeah, it's a good thing.

- Well, given the economy strength and given the stock market strength, you would think eventually sentiment would improve and at last it has. So we'll go to some listener questions. I have one for you, Amy, excuse me, Andrew from Amy. Amy has asked if you could talk about locking up fixed income now for longer, if you're approaching retirement in a year or two. And I'm just going to take the liberty of broadening her question to ask you to talk about the fixed income market, which you write about often.

Well, I think you're seeing a rally in the bond market today. I would say one of the better areas now is treasuries. I mean, they yield in the 4% to 4.5% area. Treasuries look pretty good compared to corporate bonds where yields are historically tight versus treasuries right now. So I think simple may be better. Treasury ETFs and others may be a good place to look ahead as we approach 2025.

All right. I have a question for Ben. Not sure you'll like this one, but Stu asks, where do you see NVIDIA by the end of next year? Talk about putting you on the spot.

I'm actually going to, let's say it's going to be right where it is now. I think it's going to be a bumpy ride, though. There will be lots of ups and downs as people try to make sense of all these cross currents in the stock. You have to worry about China. There are some reports of, you know, NVIDIA discussions with China today as President Trump takes office. Also, the Blackwell transition for competition from others and just, you know, valuation and things like

that. So I think there's going to be a it's just gonna be a volatile stock this coming year. The easy money has been made in it. It is dominant, so maybe it will end up a little higher, but they're just going to be it's going to swing around based on things that that call into question any of the AI winning side of things. So it's going to be a bumpy ride. Daring answer. Still come back next November and we'll grade Ben on that. Yeah, you can call me on that. I'm always here to admit that I'm wrong.

You may be right this time. So, all right, Andrew, we have a question from Pat who notes that you had a very good piece that explained how income is generated on MSTY. That is the yield max micro strategy option income strategy ETF. Talk about a mouthful.

And Pat asks whether there is a good hedge for MSTY that would cost less than the income generated by MSTI. Perhaps you can explain first how this ETF works and then address whether there's a good hedge for it. Well, I mean, MSTY is basically an option

option overlay strategy where basically the managers of MSTY sell call options to generate income on the micro strategy holding. And because the option prices are so high,

in microstrategy given the stock's volatility they can generate a huge amount of income right now the the distribution rate or the effective yields over a hundred percent right now stocks in the mid 30s they distributed over four dollars in a monthly uh distribution in november i don't think the um

option volatility will stay so high, but you still could generate a lot of income from MSTY over the next six months. And so the risk though, is that MSTY has, has micro strategy exposure and a micro strategy stock falls. I mean, you wouldn't get hit if you want to hedge it, you could buy a put option on micro strategy, but I mean, those are very expensive right now, given how volatile stock is. Good question. Good answer.

So, Ben, a question for you from Susan, who notes that the stock market typically outperforms in the first year after a presidential election. And do you think that will be the case again next year? Or do you think it will be an atypical year? That's a good question. What worries me about the stock market right now is simply, you know, the valuation. It has this

feel to it and we'll have to see how it plays out over the last month of the year um that actually feels a lot like 2020 uh i think it was 2021 to me where you know the the year finished with just a huge run-up um started off with a big run-up and then it was a bear market from there and it wasn't one that lasted very long and lasted you know i think uh nine or ten months

um and then we started this you know next leg higher and um had a couple incredible years after it um so you know i like to think that this time isn't different that uh you know the market usually works through its worries but what uh does worry me is just the the high valuation and some of the frothy sentiment that i see out there and there is froth um we had a question from tj andrew i'm not sure what the buffett indicator is

But TJ mentions the Buffett indicator. Do you know what it is? I think he's referring to the valuation of the stock market relative to the economy. And I think it's at a record level right now. It's a warning sign. Basically take...

The US market cap, I mean, the S&P 500 is over 50 trillion. You probably add in everything else. It could be 60, 70 trillion. You divide it by the size of the economy. And then you look at that ratio. That ratio is at a record level now. And then he asked, do you see it as a bubble or as a result of structural shifts like globalization, low interest rates and so forth?

I mean, U.S. stocks dominate the world now. They're 65-ish percent of the global market value right now. The world loves America right now. Even outside the United States, all they want to talk about is the S&P 500. NVIDIA, for instance, is now about a $3.5 trillion company. It's worth more than many major markets in the world. It's bigger than the DAX index in Germany, bigger than the major French index, bigger than the major U.K. index.

It just shows how dominant the U.S. market has become. That's why I'm a little bit more cautious on the U.S. relative to overseas where sentiment is not and money is not flowing there. All right. I think we're going to leave it at there today. Words of wisdom from Andrew and from Ben. Thank you both for joining me.

I want to thank our listeners as well. Thanksgiving is a good time to thank you for your continued support of Barron's Live and Barron's. It has been a delight to prepare these calls each week, and Ben and I are grateful for your engagement. I'll be off next week, and Ben will be moderating next week's call with more great in-house talent. Al Root and Nick Jasinski should be a great call. You will not want to miss it. In the meantime, everyone have a wonderful holiday and a good week. Stay well, everybody.

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