Reasons for investors to be bullish this earnings season, Netflix & Tesla earnings previews

Market Action and Sector Performance [00:09]

• The market experienced a bullish day with major indices surging, marking the best two days in about 4 months.
• The Dow was up over 500 points, while the NASDAQ 100 and S&P 500 also saw significant gains.
• Small caps, particularly the Russell 2000, outperformed, rising almost 2%.
• Bond yields decreased, with the 10-year yield back below 4% and the 30-year down to 4.58%.
• The VIX index fell back under 20, approaching pre-tariff scare levels.
• Industrials led sector performance, followed by financials, tech, and communication services.
• Defensive sectors like staples and utilities were slightly negative.
• Within the NASDAQ 100, chip stocks and software performed well, with only minor dips in Nvidia and Broadcom.
• Chinese stocks like Alibaba, JD, and Pinduo showed strength.
• Dow industrials and transports also exhibited bullish trends, with airlines doing particularly well.

"Stocks surging here."

US-Australia Critical Minerals Deal [03:03]

• A framework deal between the US and Australia aims to de-risk supply chains for critical rare earth minerals.
• The deal includes $1 billion in new government financing for rare earth projects, with potential to unlock an $8.5 billion pipeline.
• This initiative is framed against China's significant control over the critical minerals market, producing an estimated 90% of the world's processed supply.
• China has recently used its dominance as leverage through proposed export controls.
• The US is years away from achieving self-sufficiency in these minerals, even in a best-case scenario.
• This deal is viewed as a move aimed at China, ahead of a highly anticipated meeting between Presidents Trump and Xi Jinping.

"The centerpiece here is a promise of 1 billion in new government financing for rare earth projects in both mostly in Australia, but even processing in the United States."

Earnings Season and Economic Outlook [06:34]

• Earnings season is underway with about 85% of S&P companies beating profit estimates.
• Apple reported strong iPhone 17 sales, and bank earnings have been robust.
• The economy is seen as gaining momentum, supported by an accommodative Federal Reserve and significant capital expenditures from the "MAG seven" companies, exceeding half a trillion dollars.
• From an economist's perspective, earnings have generally been great, though some soft patches exist for firms catering to lower and middle-income consumers.
• Auto delinquencies and issues with regional banks with exposure to lower-end households are noted as concerns.
• October's seasonal performance is mixed, but there's optimism for a positive month, potentially leading into strong November and December with anticipated rate cuts.
• Recent negative Chinese economic data (retail sales, GDP deceleration, fixed investment contraction) may provide the US with leverage in trade negotiations.
• The AI capex boom is highlighted as a significant driver of US GDP.

"Um, it's hard to make a bearish case here."

Market Valuation and Investment Opportunities [10:50]

• The market is considered expensive and highly concentrated, with the top 10 stocks accounting for 40% of market cap.
• If the top 10 stocks are excluded, the market's Price-to-Earnings ratio becomes more rational.
• Historically, when market concentration exceeds 30% in the top 10 stocks, the remaining stocks outperform significantly over the next five years.
• Investors are advised against over-concentrating in top AI stocks, as leadership can change.
• Emerging markets and international stocks are showing outperformance after a decade of underperformance.
• Small-cap stocks, particularly those in higher quality indices like the S&P 600, are expected to benefit from an accommodative Fed and potential rate cuts.
• Smaller, more leveraged companies stand to benefit more from rate cuts.

"But listen, markets get expensive and they can get more expensive."

Gold and Central Bank Policy [13:17]

• Gold is performing strongly, shining again, which some interpret as a message from central banks that they are tolerating above-target inflation.
• Central banks like the Bank of England and potentially the Fed are cutting rates even with inflation above their 2% targets, prioritizing prosperity.
• The significant liquidity in the system post-pandemic, from both fiscal and central bank actions, alongside high valuations in real estate and stocks, is driving investors into gold.
• Gold is near all-time highs, with investors buying dips, despite some strategists considering it overbought.
• Central banks are significant buyers of gold, holding about 17% of the total supply and are not sellers.
• The fundamental story for gold remains strong, and significant declines are not expected as investors look for buying opportunities on dips.

"So folks are just running into gold."

Crypto Market Dynamics [15:06]

• Bitcoin has risen for a third consecutive session, climbing back above $110,000 after a recent mini-crash.
• Bitcoin had previously reached an all-time high of over $126,000 on October 6th.
• Month-to-date, Bitcoin is relatively flat, which is notable as this is typically a seasonally strong month for cryptocurrencies.
• Catalysts for the recent rise include Micro Strategy adding more Bitcoin to its balance sheet and Japanese regulators considering whether Japanese banks can hold Bitcoin.
• Crypto miners have diversified into AI and high-performance computing, repurposing their data centers to support AI workloads, leading to significant revenue generation for companies like Bit Digital, Riot, and Marathon Digital Holdings.

"And this is following a mini crash recently."

Tesla's AI Focus and Future [18:10]

• Tesla's upcoming third-quarter earnings report is of interest, with investors looking past the car business to the company's AI era.
• Elon Musk's pay package, worth up to $1 trillion, faces a vote at a critical shareholder meeting on November 6th.
• While some analysts see stable demand trends, others caution that recent strong sales may have been pulled forward due to the expiration of EV tax credits.
• Concerns exist regarding EV sales in China potentially declining year-over-year for the first time and slowing EV sales in the US.
• The focus is shifting to Tesla's AI capabilities, including robo-taxis and full self-driving software.
• Tesla's advantages in the robo-taxi market lie in its ability to manufacture millions of cars annually and its use of a cheaper sensor suite relying on cameras and AI, potentially offering a cost advantage over competitors using lidar.
• The potential for generalized autonomy with their system is a key bet for Elon Musk.
• The Musk pay package is expected to pass despite recommendations against it from proxy advisory firms like Glass Lewis and ISS, as shareholders have historically approved similar stock-based compensation.

"But Josh, the issue is what do we care about cars anymore? It's all AI."

Apple's Record High and iPhone Cycle [34:00]

• Apple shares reached a new record high, partly due to an upbeat note on iPhone 17 sales outperforming the iPhone 16 series in China and the US.
• Analysts have issued positive notes, with some upgrading Apple to a "buy" and setting a street-high target of $315.
• The current iPhone cycle is off to a good start, exceeding low expectations, with continued innovation in camera, video, and user experience.
• A healthy mix of Pro and Pro Max models is driving sales, alongside a growing installed base and a robust services business.
• While hardware improvements like better battery and processors are important, Apple's ability to integrate hardware, software, and services in an intuitive and secure way is key to driving growth.
• Apple Intelligence, though needing further development, is seen as a step towards enhancing user experience, with planned improvements to Siri and collaborations with entities like OpenAI and Google.
• Tim Cook is expected to remain with the company for several more years, with a focus on nurturing leaders and empowering developers.

"So you've got an installed base for Apple, iPhone that continues to grow, a good mix. uh you have a services business that remains very healthy."

Amazon AWS Outage and Cloud Market Share [39:24]

• An AWS outage did not negatively impact Amazon's stock, which finished up 1.6%, as investors shrugged it off.
• Outages have occurred at AWS and other cloud platforms, but the key is the platform's ability to recover and continue investing in innovation, particularly in generative AI.
• AWS is currently capacity-constrained, similar to other cloud providers.
• The market is concerned that Amazon may be losing cloud market share to Azure and Google Cloud Platform, which are growing faster.
• However, Amazon is seen as having a durable double-digit growth platform with healthy margins and aggressive investment in innovation.
• The company is laying the foundation for continued strong growth in the next 12 to 18 months.

"The the outage today doesn't change our view on the stock and and the longer term outlook for the company."

Netflix Earnings and Valuation Concerns [41:55]

• Netflix is set to report earnings, with the main question being its ability to sustain growth amidst high valuation risks, as the stock trades at 45 times forward earnings.
• Despite a 40% rise year-to-date, the stock has lagged recently due to valuation concerns.
• Advertising momentum, with recent deals like those with Amazon and Spotify, is a key driver, though some strategists believe this optimism is already priced in.
• Analysts anticipate revenue of $11.52 billion and EPS of $6.94, largely in line with Netflix's guidance.
• Double-digit revenue growth and 25% annual EPS gains through 2028 are projected, driven by pricing strength, disciplined content spend, and scaling ad economics.
• The high valuation leaves little room for error, and results that exceed expectations but not investor anticipation can lead to stock price declines.
• Strong results are expected, boosted by live events and the return of popular programming like "Stranger Things," which are key for engagement.
• The success of "K-pop Demon Hunters" as the most viewed movie in Netflix history highlights its ability to turn IP into hits.

"But in in the near term, those valuation concerns are still very real on Wall Street."