This Time It's Different

Summary

The speaker discusses the prevalence of hype in the investment community, particularly around AI stocks. They emphasize the importance of a defined strategy and caution against the 'This Time It's Different' mentality. The video critiques the misleading claims made by some financial outlets and highlights the need for critical thinking and understanding of the true value behind AI investments. The speaker also touches on the challenges of timing the market and the risks of speculative investing, advocating for a long-term, disciplined approach to wealth accumulation.

Takeaways

• 🌐 The speaker spends significant time working overseas, particularly with AI startups and learning from various experts.
• 🕵️‍♂️ Honeypots are a method used to catch hackers, and the speaker uses a similar concept to gauge public sentiment on investment topics.
• 💡 The importance of having a defined investment strategy and not changing it based on temporary market conditions is emphasized.
• 📉 The speaker criticizes the 'This Time It's Different' mentality, which often leads to poor investment decisions.
• 🚫 The efficient market hypothesis is mentioned, highlighting that value doesn't appear out of thin air and that hype can mislead investors.
• 📈 Nvidia's strong 5-year performance is highlighted, but the speaker warns against the hype surrounding AI stocks.
• 🔍 The speaker advises against trying to time the market and instead focuses on long-term investment strategies.
• 📊 The growth of companies like Nvidia is compared to the NASDAQ, showing that not all tech stocks perform equally.
• 📝 The speaker discusses the importance of understanding the context behind stock movements, such as Nvidia's investment in Nanox.
• 📉 The risks of hype in the AI sector are discussed, with examples of companies like SoundHound experiencing inflated stock prices due to hype.
• 📈 The speaker suggests that broad market exposure is a safer way to benefit from the AI boom rather than chasing individual AI stocks.

Q & A

What is the main reason the speaker spends a lot of time overseas?

The speaker spends a lot of time overseas primarily for work, meeting with artificial intelligence startups across the globe.

What did the speaker learn from the world's most elite cyber crime fighting unit in Moscow?

The speaker learned about how to catch hackers, specifically using a method called a 'honey pot'.

What does the speaker mean by 'This Time It's Different' in the context of investing?

The phrase 'This Time It's Different' is used to caution against changing one's investment strategy based on the belief that the current situation is unique, which can lead to losing one's way in investing.

What is the speaker's stance on trying to predict market tops for hype cycles?

The speaker believes that calling the top for any hype cycle is a guess at best and that they do not attempt to do so.

How does the speaker feel about a potential recession?

The speaker slightly prefers a massive recession because they have cash to allocate, and as Warren Buffett says, if you're a net buyer, you want stock prices to fall as low as possible.

The speaker criticizes the hype surrounding AI stocks, noting that people's integrity often goes out the window when there's hype around a technology, leading to irresponsible investment behavior.

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What is the speaker's view on the efficient market hypothesis in relation to AI stocks?

The speaker believes that value doesn't get created out of thin air due to hype, and that the efficient market hypothesis means that the true value of AI stocks should be considered carefully.

How does the speaker evaluate the performance of tech stocks like Nvidia?

The speaker evaluates the performance by comparing the five-year returns of tech stocks to the overall NASDAQ return, noting that Nvidia's 128% five-year performance is remarkable.

What is the speaker's advice for investors who are new to the market or have recently jumped on the AI stock bandwagon?

The speaker advises new investors to have a defined strategy, not to try and time the market, and to be prepared for potential drops in stock prices by asking themselves if they would be happy to buy more if the price drops.

What is the significance of the 13f form that Nvidia filed with the SEC?

The 13f form revealed Nvidia's publicly traded stock holdings, which caused a significant jump in the stock price of Nanox, a company Nvidia had a small investment in, due to the hype surrounding the disclosure.

How does the speaker suggest investors should approach the hype around AI stocks?

The speaker suggests that investors should be critical and not get caught up in the hype. They should have predefined rules for when to sell and not overpay for stocks based on irrational exuberance.

Outlines

00:00

🌍 Global AI Startups and Cyber Crime Insights

The speaker discusses their extensive experience with AI startups and a meeting with a top cyber crime fighting unit in Moscow. They explain how 'honey pots' are used to catch hackers and draw parallels to their own content strategy, using critical videos as a way to gauge audience reactions. The speaker emphasizes the importance of a consistent investment strategy, regardless of market conditions, and the fallacy of trying to find the next big company like Microsoft. They stress that wealth accumulation comes from a defined strategy followed through good and bad times, and that market timing is less important than being consistently invested.

05:01

📉 Investing in AI Stocks: Hype vs. Reality

The speaker addresses the hype surrounding AI stocks, particularly in relation to Nvidia. They criticize the media for promoting irresponsible investment behavior and highlight the importance of understanding the difference between AI stocks and AI companies. The speaker also discusses the efficient market hypothesis and the dangers of investing based on hype. They provide a detailed analysis of Nvidia's performance compared to other tech stocks and the broader market, emphasizing the significance of Nvidia's data center segment and the company's ability to adapt to market changes.

10:02

📈 AI Hype and Market Performance

The speaker delves into the phenomenon of AI hype in the stock market, using specific examples of companies like SoundHound and Nvidia. They discuss the growth rates of these companies and the disconnect between market hype and actual performance. The speaker also touches on the challenges of valuing AI companies and the importance of using benchmarks to assess stock performance. They caution against overpaying for stocks based on hype and emphasize the need for a disciplined approach to investing.

15:04

🚀 The AI Boom: Strategy and Community

The speaker reflects on the broader implications of the AI boom, advising investors to be critical and not to capitalize on paper gains during times of hype. They discuss the concept of 'This Time It's Different' and the historical overestimation of new technologies. The speaker suggests that a broad market exposure is a safer way to benefit from the AI boom and warns against the risks of trying to time the market or invest in momentum stocks. They conclude by inviting viewers to join their community focused on wealth accumulation and learning from investment mistakes.

Keywords

💡Honeypot

In the context of cybersecurity, a honeypot is a decoy system set up to attract and detect attackers. In the video, the speaker uses the term metaphorically to describe a strategy for identifying 'cheerleaders' or supporters who may be overly enthusiastic about certain stocks, like Nvidia, without critical analysis.

💡Cybercrime fighting unit

This refers to a specialized group or team within law enforcement or cybersecurity organizations that focuses on combating cybercrime. The speaker mentions meeting with such a unit in Moscow, indicating their interest in learning about cybersecurity and its relevance to investment strategies.

💡Efficient market hypothesis

This economic theory suggests that asset prices fully reflect all available information, making it difficult to achieve higher returns than the average market return on a consistent basis. The speaker criticizes the hype around AI stocks, implying that value doesn't appear out of thin air and that the market is efficient in the long run.

💡Dollar cost averaging

This is an investment strategy where an investor consistently buys a fixed dollar amount of a particular asset, regardless of its price. The goal is to reduce the impact of volatility on the overall purchase. The speaker mentions this strategy in relation to investing in Nvidia, suggesting it as a disciplined approach rather than trying to time the market.

💡FOMO (Fear of Missing Out)

FOMO is a psychological phenomenon where individuals feel an urge to join a trend or investment opportunity to avoid missing out on potential gains. The speaker warns against FOMO speculators who might jump into buying Nvidia stocks without a clear investment thesis.

💡13F form

The 13F form is a document that institutional investment managers in the United States must file with the SEC, disclosing their equity holdings. The speaker discusses how the filing of this form by Nvidia can cause significant market reactions, such as a 100% jump in Nanox's stock price.

💡Hype

In the context of the video, hype refers to the excessive enthusiasm and promotion of certain stocks or technologies, often without a solid foundation in reality or performance. The speaker criticizes the hype around AI stocks, warning investors to be cautious and not to lose their integrity in the face of such hype.

💡Simple valuation ratio

This is a basic financial metric used to compare the market value of a company to its annualized revenues. It's particularly useful for comparing companies that are not yet profitable. The speaker uses this ratio to evaluate the valuation of AI stocks like SoundHound compared to Nvidia.

💡Irrational exuberance

This term, coined by former Federal Reserve Chairman Alan Greenspan, describes a state of the market where investors are overly optimistic and drive prices up to unsustainable levels. The speaker uses this term to describe the current state of the AI stock market, warning of potential overvaluation.

💡Value at risk

Value at risk (VaR) is a statistical technique used to measure and quantify the level of financial risk within a firm or investment portfolio over a specific time frame. The speaker mentions a potential 80% drop as a 'value at risk' scenario, suggesting a significant potential loss for investors.

Highlights

The speaker spends a lot of time overseas working and meeting with AI startups.

The speaker learned about catching hackers using a 'honey pot' strategy from a cyber crime fighting unit.

The speaker's company, Analyzed, uses a 'honey pot' strategy to understand market reactions to their content.

The speaker emphasizes the importance of having a defined strategy and not changing it based on market conditions.

The speaker criticizes the hype around AI stocks and the lack of integrity in some investment advice.

The speaker points out that the efficient market hypothesis means value doesn't appear out of thin air.

The speaker discusses the difference between AI stocks and AI companies, emphasizing the importance of understanding this distinction.

Nvidia's 5-year performance stands out among the largest companies in the United States.

The speaker advises against trying to time the market and instead focuses on long-term strategies.

The speaker mentions that Nvidia's data center segment is crucial for its revenue and stability.

The speaker warns against the hype around AI stocks and the potential for significant drops in value.

The speaker discusses the importance of context when analyzing investment news, such as Nvidia's 13f form with the SEC.

The speaker criticizes the lack of context and hype in investment articles, particularly those from the Motley Fool.

The speaker emphasizes the need for a predefined strategy and understanding one's limits when investing.

The speaker suggests that broad market exposure is a safer way to benefit from the AI boom than focusing on individual stocks.

The speaker concludes by advising investors to learn from their mistakes and focus on accumulating wealth rather than chasing paper gains.

Transcripts

people often tell me Joe you sure spend

a lot of time on vacation and the truth

of the matter is that I do spend a lot

of time overseas but it's mostly working

so over the past years I've spent a

great deal of time meeting with

artificial intelligence startups across

the globe and when I was in Moscow a

couple years back I met with the world's

most elite cyber crime fighting unit and

they taught me all about how you catch

hackers and one of the ways you do that

is with a honey pot and that's pretty

much what it says on the 10 so here at

analyzed when we post a video that's

critical of his stock and people come

around and deride us for that uh that's

sort of a Honeypot to see how many

cheerleaders are out there and uh we

recently did a piece on Nvidia and we're

critical of the other segments aside

from Data Center and we started that

presentation out by saying uh the four

worst words in investing are This Time

It's Different so John Templeton said

that and somebody commented and said

well this time it's literally different

so I wanted to talk a little bit about

that today so let's start with some

ground truths you're not going to get

rich finding the next Microsoft that's a

fallacy you're only going to start

accumulating wealth when you have a

defined strategy that you follow in good

times or bad and if you start changing

your strategy and saying well this time

it's different then you've already lost

your way as we always say it's about

time in the market not timing the market

so calling the top for any hype cycle is

a guess at best we don't try to do that

now we often say here that we're either

on the cusp of the greatest bull market

known to mankind or going into one of

the most shocking recessions ever seen

and that's kind of taking the piss right

it's like saying well we're cautiously

optimistic it tells you nothing the

truth of the matter is we really don't

care what happens because our strategy

doesn't change now we slightly prefer a

massive recession as we have some cash

to allocate and as Warren Buffett says

if you're a net buyer then you want

stock prices to fall as low as possible

so our recent video on Nvidia post

questions about their Direction post

hype and we had a tsunami of cheerleader

backlash and what these individuals need

to realize is the efficient market

hypothesis means value doesn't suddenly

get created out of thin air that's hype

and these people are starting to invest

in AI stocks not AI compan compies we've

been covering this for um well over a

decade now so we understand the

difference between those two so today we

want to talk to you about what hype

looks like and here's a classic example

from the mly fool and it seems like

whenever there's hype around a

technology people's Integrity goes out

the window and everything becomes an AI

stock this one here notice the the

choice of words This Magnificent AI

stock is a screaming by before it

skyrockets I I don't know um what would

cause somebody to uh completely throw

their integrity out the window and post

something like this when they know full

well should know that this is an

irresponsible thing to say and what

they're doing is taking the Broken Clock

approach right so if they're correct

they'll come back and rub it in your

face and if they're wrong they'll sweep

it under the carpet um I saw somebody on

YouTube refer to for example Nvidia

saying it's only just begun so whether

or not that's true they'll certainly

remind you of it if they are but what

they're doing is um promoting

irresponsible Behavior you see this

common here buying this stock is a

no-brainer they're talking about meta I

didn't know meta was an AI stock um meta

uses AI you wouldn't classify them as an

AI stock unless you would also throw in

most the companies on the page that you

see here so here are the largest

companies in the United States what you

need to notice here and people often get

this wrong they say well I returned 150%

on my portfolio in The Last 5 Years in

investing in tech stocks sounds Grand

right but um they actually sucked

because if you invested simply in the

NASDAQ you would have returned more at

160% so when you look at these uh

returns here these are the fiveyear

returns for the the largest companies in

the United States subtract 160% from

each one to see what their True

Performance is and look at how Nvidia

stands out so 5year performance of, 128%

so that's rather remarkable so if Nvidia

increases 32% more it's going to be the

largest company in the world and our

recent piece looked at the difference

between Nvidia and Microsoft mainly

being that Nvidia has a dominant data

center segment accounting for 83% of

revenues they need to shore up those

other segments so that if the demand for

data center equipment should ever fall

through that they have um supplemented

the rest of their business to deal with

that now if you're a fomo Speculator who

recently jumped on board you're thinking

about him buying Nvidia um dollar cost

average don't try and time the market

articulate your thesis Beyond two

sentences that seems like um all the

comment people that came around

commenting on our last video were

capable of um if it drops 50% because

they missed analyst's lofty expectations

are you going to be sad or happy ask

yourself that you better say happy

because then you're really excited about

the prospects of the company and you're

going to back up the truck or if you're

dollar cost averaging you're just going

to maybe a little more you're not going

to try to time the market cuz maybe

it'll fall even more people seem to

forget that when the crash happened that

names like Cisco were down 80% imagine

that right imagine Nvidia drops 80% boy

you better you better be buying right if

that happens so whatever Nvidia happens

to be looking at gets the spotlight and

I think a great example of that would be

the 13f form that Nvidia filed with the

SEC this was on February 14th of this

year and it caused this company uh nanox

to jump 100% why well uh so nanox

develops a a new sort of X-ray we've

covered them you can search our website

we've written multiple pieces about

their technology and the company but

this 13f simply was a a form and video

filed that showed publicly traded stocks

they held for whatever reason they

decided to file it in Bloomberg C

directly stated we got a lot of

questions on YouTube and from

subscribers asking who Nano X you know

Nvidia is investing in them not true so

you need to put this stuff into context

Bloomberg did a good job here the

disclosure of the stake caused the stock

to double but um this stake stems from

nanox purchasing an Nvidia backed firm

and when we actually look at the details

it's so important Nobody Does that

anymore cuz it's a lot of hype you see

Nano X Imaging here this is the form

$379,000 investment by Nvidia I think a

lot of the people on this channel have

bigger portfolios than that so it was

absolutely meaningless it was something

that simply existed it hasn't been

cleaned up you can tell nvidia's job is

not managing a portfolio of stocks this

just happens to be uh Holdings they have

a publicly traded stocks for whatever

reason and we can go down this list and

describe remember they were going to

purchase arm that's why they happened to

have arm shares but I wanted to touch on

the sound hound holding look at this

article from the mly fool is just it's

embarrassing these days and they do have

some gems we'll look at one but most of

what they put out is tripe could

SoundHound AI stock be a better buy than

Nvidia in 2024 forget about context they

just vomit out whatever they um what's

ever on the top of their heads now if

you want to read the some of the pieces

that we're putting out about the

companies that you see here just follow

us on Twitter at naly tweets please

there's a link in the upper right and

we'll uh be putting out articles and

information on the companies we're

talking about today so Sound Hound again

we've written about this uh company

before you can see that it's was up 177%

when I was putting together this chart

and the nvidia's Legacy investment was

actually from 2017 so that's old news

the stock is now up

179% giving them a simple valuation

ratio of 27 versus Nvidia 26 so they're

actually more richly priced than Nvidia

now so it doesn't make sense this simple

valuation ratio we're going to touch on

that later is simply market cap divided

by annualized revenues because most

these companies aren't profitable you

need an Apples to Apples comparison

here's the article SoundHound raises $75

million from Nvidia Samsung to scale

voice enabled AI tools sounds really

cool right and then there's the date

January 2017 so this is old news yet the

stock is up what 170% that's called hype

and this isn't our first hype Rodeo look

at here this is from uh just over a year

ago a piece we wrote SoundHound stock

rides the a hype train you could search

our website for that and look here the

one month returns for select quote

unquote AI stocks cuz some of these

aren't you have sound hound they're 200%

Big Bear 549 C3 112 and and the list

goes on and you look at the news item so

I just pulled what eight or nine news

articles that had uh AI stock in them

and just look at this stuff no-brainer

AI stock I didn't know Cloud flare was

an AI stock we've covered that it

certainly we wouldn't consider that

Goldman's pointing to Micron being an

underappreciated AI beneficiary well

everybody should be an AI beneficiary

these days five AI stocks you missed

it's just the the investing Community

now is full of hype around Ai and look

no further than these five names that we

see here when you think about

performance

you always need to use a benchmark so we

use the NASDAQ year-to-date return of 8%

so you would expect most technology

stocks to be returning within that range

but look at the range that we're seeing

here from 200% 166% 87% so um these are

stocks and you can tell by the charts

that are seeing a lot of AI hype

recently and here's the names look at

going diagonal there Airship AI

SoundHound AI Big Bear AI this is AI

hype and look at those returns now the

other two names here that don't have ai

have some legitimacy to them so you have

paler and Nvidia of course we need to

put into context the reasons why these

stocks are moving that the way that they

are so let's go ahead and do that and

what we can do is look at

the growth over the past four quarters

so uh for aisp and and SoundHound and

bbii those are the ones that moved D

most dramatically over 100% we would

expect to see very strong growth and for

um two of them there is no growth so

that doesn't make any sense for Sound

Hound there is some growth but we need

to put that into perspective and let's

do that so when we look at paler sound

hound and Nvidia we can say all right

the last quarter of revenues versus four

quarters ago what sort of growth are

they seeing and what sort of um monetary

value is that so paler saw 16% growth

not the sort of growth that the um

instant analysts out there are screaming

about uh that's yet to be seen but

certainly they're growing $83 million

difference there between the last

quarter and four quarters before that

and then look at Nvidia in the upper

right so $14 billion 207% growth it's

incredibly difficult for a company that

size to grow that quickly and that's why

Nvidia has enjoyed such an appreciation

in share price we actually covered that

in a video that you C you can uh always

torture the data and make it say

whatever you want but you can point to

analysts midpoint expectations and

forward priced earnings and justify

their valuation of course but in hype

you can always justify what's happening

right maybe this time it's really

different and we'll talk about that but

um when you're going to invest in any of

these companies and some of you are

inevitably going to uh know your limit

and here what I've done is looked at

their simple valuation ratios over time

for three of these stocks Nvidia and

Palante here across the top our cut off

is 18 we would never pay more than three

times our catalog average so set a cut

off and you can use price to sales we

use Simple valuation ratio and then you

know you can take the average of that

over a year and say that's your Target

and remember they always revert to the

mean you can see that here so know your

limits and don't overpay and this

article by the mle fool I came across is

actually half way decent and this

gentleman Sean Williams should be

commended for writing something that's

somewhat sane and says investors have

overestimated the adoption Andor utility

of every Next Big Thing investment for

the past 30 years I thought that was

really interesting and he lists some out

the Advent of the internet okay.com

that's the easy one to point to but what

about genomics housing China stocks 3D

printing everybody remember that one

that was about uh the time that we

started kicking off and analyze research

uh cannabis stocks we all know that

electric vehicles mainly in spax

blockchain the meters and then we asked

around the office we came up with some

more Gene editing graphing carbon nanot

tubes solar LEDs Nano sin valou so

here's a question for the audience and

put this in the comment section can you

name a technology that didn't initially

overestimate adoption and utility if you

can think of one we couldn't think of

one put it in the comments section below

so the problem problem with the fool is

that you have to search really hard to

find good content like this because what

you'll inevitably end up seeing is a

bunch of content that looks like this it

says this artificial intelligence stock

could double and it's way cheaper than

Nvidia and then they say Opera I mean

this is the sort of misleading dribble

that only a fool could conjure up and

when you look at the comments on this

piece people say well no Nvidia gpus are

leading EDG or it's not growing as fast

as Nvidia completely Miss the point you

have a browser company with a planned

generative AI plugin and the leading

provider of AI chips this is an apples

to Orange comparison and now you know I

know what'll happen so as a result of

this article Opera will go up 30% on AI

hype and people will come by and leave

the ultimate showstopper comment this

didn't age well so to the this didn't

age well people if a stock price goes up

30 50 100% they'll they'll come by and

leave a lazy comment we see more and

more of these in times of hype it

exhibits bog standard intellectual

laziness now the more bullish you are

the more critical you should be and what

the truth of the matter is most

investors don't capitalize on paper

gains in times of height we see this

over and over and over and often times

they'll be members of some Community

stock cult or just cheerleaders in

general and U when you're in a bull

market everyone's a BSD everyone's a

winner but ask yourself this all right

what bet would you make here so you have

to bet in two different directions

history repeats itself meaning that this

the technology is is hyped like any any

other technology certainly not trying to

call it top but it's hyped at the moment

and This Time It's Different that the

hype is Justified and that Sir John

Templeton was full of it now the better

way to look at this is not a binary but

to say if we were going to give you

money if you were correct what

percentage would you give each of these

things to be correct so let's say

there's going to be a hype adjustment

characteristic of other Technologies we

might say well there's a 75% chance that

will happen in other words uh history

repeats itself okay let's say that

there's going to be a dotom sort of 80%

drop of the type I described earlier

with Cisco okay something that pushes

you into what Finance people call Value

at risk it's it's a Black Swan H let's

give that a 15% chance right or This

Time It's Different and that um

everything keeps shooting to the moon

and stays there so um don't say when you

think about this what you wish to happen

say what you think the data tells us and

uh what we see is what Greenspan calls

irrational exuberance so uh no fomo AI

stands to benefit all companies and all

Industries if you're somebody with a

safe strategy or one that makes sense in

Bull markets or bare markets you're

going to benefit either way broad Market

exposure frankly is the safest way to

get exposure to the AI boom um there is

no next Nvidia there's a next something

else so what a lot of these people who

jump onto the hype train will do is um

get some paper gains and then end up

writing those into losses figuring out

when to sell a stock is the hardest part

you need to have predefined rules that's

the best way to approach this and don't

think you're going to play musical

chairs with momentum stocks or options I

can promise you that won't end well and

and if you do make money it's easy come

easy go and when you finally have your

ass handed to you Uncle Joe's going to

be there for you you can come join our

community where people are focused on

accumulating wealth and don't worry

we've all done this get the lessons out

of the way as quick as possible make

those mistakes and I like this quote

here once it works nobody calls it AI

anymore and um you need to think about

that when you look at these companies

talking about all their big plans for AI

and the ones that have been silently

utilizing AI for a long time the likes

of Amazon or Google or Nvidia that's

been working on this and for a very long

time synopsis as well there's a lot of

names that um have have the ogs of AI

but what we won't try to do is call a

top here because nobody can now if

you're interested in our piece on how we

went about justifying nvidia's Loft

valuation something for the bows out

there you want to watch this piece next

please make sure to follow us on Twitter

subscribe to our Channel thanks so much

for taking the time to watch this today