The Practical Islamic Finance Podcast

🌟 The Best Market Recap: 12-12-2024 🌟

• Rakaan Kayali

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🌟 The Best Market Recap: 12-12-2024 🌟

In this episode, we will cover:

  • Intro
  • Market Pullback Analysis
  • Tesla’s All-Time High and Long-Term Value
  • Bitdeer’s $1 Billion Raise
  • Adobe’s Weak AI Guidance
  • Investing Tips: Aligning Incentives with Stocks
  • Thoughts on Crypto and Gold
  • Closing Remarks


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Our podcast is about helping people ethically build wealth. We cover a broad range of topics including stock and crypto investing, product reviews, and general financial well-being.

DISCLAIMER
Anything you hear in this video is an opinion. It is not personalized financial advice. Make sure you do your due diligence before making any investment decisions.

Assalamu alaikum, everyone. I hope you are doing well. We got a bit of a pullback today in the markets. Today, by the way, is Thursday, December twelfth. And this is to be expected. We were at all time highs yesterday. You can see the Dow Jones pulled back. point five three percent and as that point six eight percent S&P pulled back point five four percent and Russell pulled back one point three percent now we did get hotter than inflation hotter than expected inflation numbers for for the producer price index so the producer price index came in at I can find it. Increased point four percent last month, economists polled by Dow Jones expected a point two percent increase on a monthly basis. However, I don't think that this really impacted the markets too negatively. I don't think this is the reason why the Dow is down to under points today, because if you look at the Fed probability, CME probability for the rate cut next week, it's still at ninety five percent, which is where it was. So I just think that the market was taking a bit of a breather after the a very strong run. And if you look globally, and this has been our thesis for months now, that globally, the part of the cycle that we're in involves a lot of monetary easing. This is not just in the United States, this is everywhere. Because the debt that the major economies of the world have accumulated over time has to be refinanced. So if you look at the European Central Bank, it cut interest rates by twenty five basis points in warm up act to the Fed. If you look at The Swiss central bank cut key interest rates by fifty basis points, lowest since September twenty twenty two. And if you look at China, China's to cut reserve requirement ratios, interest rates at appropriate times. So China's flailing economy needs a bit of a jolt and they need stimulus in order to induce that. And we mentioned that a Trump win, a Trump election win would mean that the incentive for China to stimulate their economy is going to be a lot stronger in anticipation of what Trump has promised many times will be some pretty tough tariffs imposed on products imported from China. And we know that this is a very big part of their economy. So Wherever you look in the world, especially as it relates to the major economies, there is a robust stimulatory effort that is going on. And that's why this is the underlying thesis, the most important factor in the macro picture and why we remain bullish at this particular point in time. of the market cycle so looking at the micro here in some individual positions so Tesla after hours yesterday hit uh four thirty which was uh quite remarkable an all-time high for this stock I still think it has a lot of runway if you were to ask me hey if I wanted to buy you know one asset and just set it and forget it for the long term which asset would that be I would tell you Tesla stock So this is a common question that I get. So there you have it. That's your answer. And Bitdeer announced a one billion dollar raise. And instead of falling in price, one billion dollars at the time was close to a third of its market value. And by the way, Bitdeer exceeded CleanSpark in terms of its market cap, which is quite remarkable. But it was up today. And I think the reason is that they're going to be using convertible notes, which may decrease the amount of dilution that shareholders experience. And because they are increasingly proving, as I expected, that the various businesses that they're in The Bitcoin mining, I think, is the least important business that they're in. They're also in AI and high performance computing, much better margins. And they're also in the ASIC and mining rig business, much higher margins there. And their technology is amazing. competing in terms of efficiency with the number one name out there in terms of mining rigs, which is Bitmain. So this is, I think, you know, we added it initially to our Tenex stock portfolio, and it has exceeded our expectations in terms of the quickness in which it has multiplied. But I do think that this stock has a lot of room to run still and probably a good idea to buy this one on dips. It's quickly becoming one of my highest conviction picks. And congratulations to all PIF members who made some money there. If you want to be a PIF member, do become a PIF member. Link to do so is in the description. And leave a like before I forget. Leave a like. I'd really appreciate that. Another chart I wanted to show you guys was the comparison of Iris Energy and CleanSpark. So as the chart goes down, and the way I've set it up, as the chart goes down, that means CLSK is appreciating more than Iris Energy is. And as it goes up, Iris Energy is appreciating more than CLSK is. And you'll see around the March, CLSK was outperforming Iris Energy till around March or April of this year. And that's when, alhamdulillah, we sold. We had a sizable position in CleanSpark. We made a lot of money there, alhamdulillah. And then we sold and we reallocated to Iris Energy. And since then, Iris Energy has been outperforming CLSK to the tune of almost a hundred percent. And the reason for this, and this is why, and you can consider this sort of an investing lesson or some helpful tip when you're choosing stocks for yourself. management incentives need to be aligned with shareholder incentives the reason why clsk is now lagging after it was once sort of the darling of bitcoin mining stocks in my assessment is because clsk's management incentives are tied to hashing power they're not tied to stock price therefore clsk has been really dumb with regards to the way it raises money just diluting shareholders And not using other mechanisms that would be more advantageous to their company's share price, because after all, that's not what they need. And by the way, in there, and I went over this in a previous live in their management's incentive, you know, fine print. when the shareholders get diluted, management doesn't get diluted. So to the extent that they do have shareholder or are compensated in shares, those shares will increase, the number of shares will increase to compensate for the dilution that they cause. So this is a direct sort of conflict of interest between management and shareholders. And also because they've tied their compensation to hashing power and the hashing power that the company gets to, they have completely neglected the opportunities out there that relate to AI and high-performance computing because management isn't incentivized to think in that way. So this is very important. You have to look at management incentives and the structures for it. You also have to look really closely at insider ownership and how much management is holding up each stock. their own stock. And that will tell you a lot about the level of conviction and the level of alignment and interest between management and shareholders. So that's just sort of a tidbit of investing lessons that I've gained from a lot of years of experience. I hope you find it useful. And also today we had a big move from adobe sorry this shouldn't be here should be here we had a big move in adobe it was down uh fourteen percent and I mentioned when I talked about adobe a few months ago on this live I said that be very wary of companies or enterprise software companies. Be very wary of them because in a lot of cases, their business is going to be either replaced or at least eaten. There's going to be some nibbling on the sides from AI applications, new AI applications that do what these companies what these enterprise software applications used to offer and do them at a fraction of the cost and probably better. And so you saw very weak guidance from Adobe in twenty twenty five. Now, they may be able to use this AI wave in there and play it in their favor, in which case it will be accretive to shareholder value, but unless they do so and they really take a long, hard look at their business model, they stand to lose a lot from AI and the new startups that keep popping up everywhere. Gold was down, silver was down, oil was down, Bitcoin just under a hundred thousand Doja, forty cents and Solana at two twenty five. So we're still holding on. our gains that we've experienced in crypto for the most part. We're not at all time highs, but we're darn near close. I do expect there will be volatility, obviously, in crypto, but I do expect us to go higher generally from here. All right. So with that, let's take some questions. Salam Abdullah. Salam Rashad. Sorry, Abdullah, I can't give you personalized advice. I did cover SMCI in a previous live, and there are just a lot of question marks on that company. I decided not to put money there. And really, it's important to remember the number one priority in investing is capital preservation. When there's a lot of ambiguity, especially ambiguity relating to the ethics of a particular company, I just stay away. Let's hope so. Rashad says, looks like a short breather. Do you think we might have a longer one soon if I need to buy the dip? It's very hard to predict these things. Obviously, the Fed's decision tomorrow, I'm sorry, next week will be very influential. I actually think the market is getting it wrong here with regards to a ninety five percent probability of a Fed rate cut. I think that's way too high. I think the probability of a rate cut is much less than this. but we'll see what happens when the Fed meets next week. If a rate cut does happen, then I think, you know, at least closing out the year, we may have, as they call a Santa rally. So we'll see. But as I've been saying, I do think that there will be a pullback start of January, first two, three weeks of January. I expect them to be softer. So maybe there's an opportunity to buy the dip then. I'm not sure what you... Oh, a Coinbase stock versus other mining companies. So I think Coinbase is involved in a lot of derivative activities and perhaps interest-bearing debt activities. So I stayed away from it just from a comfort perspective. Dr. Boss, I want to thank you. Well, it's my pleasure. I am considerably... I am up considerably in my portfolio. That's awesome. Thanks for sharing that. One hundred fifty percent just in one stock and short time frame. Well, thank you so much, doctor. I really appreciate that. I'm a Brooke. Enjoy. Our friend Ahmed says, Sam, brother, just like the hair where you come for all the advice. I'm all the YouTube subscriber and lately became a new member. Well, that's awesome. And welcome to our community. Salam alaikum, PIFM. Hopefully pullback will open up opportunities to get back at better value. Yeah, absolutely. I think all pullbacks are opportunities for us, especially because we don't deal with derivatives. We don't deal with margins. So we have time. So unless our thesis changes, pullbacks are basically sales. They're promotions. So take advantage. Ahmed says, salam alaikum. Don't you think tariff import taxes will increase costs of manufacturing for Tesla cars and therefore less profit may impact the stock unless all Tesla parts are made in the US? So Tesla is basically the most US company of all car manufacturers because it is the company that is least reliant on importing parts. That being said, I also think that Elon Musk's proximity to Trump will afford him some advantages there. And perhaps this is one of the reasons for the strength in Tesla stock. And if you'll recall in Trump's first administration, his first term, Apple wanted an exception on import tariffs and they got it. So Tim Cook, Trump likes to call him Tim Apple. Tim Cook met with Donald Trump and asked for an exception on import tariffs for Apple and he was granted it. So I think something similar could happen for Tesla. And perhaps this type of advantage is working in Tesla stock's favor. um you can check our um reasoning for our crypto uh comfort levels on our site and they're basically free to check so and I encourage people who have uh input on our comfort levels either stocks or cryptos to leave a comment or and vote or whether they agree or disagree Well, so Wilson, we do look at the interest rate used and typically with these convertible notes, the interest rate is very, very small. So it's not debt that is necessarily harm, it's interest on debt. So long as the interest rate is very low compared to the overall business of the company. company, specifically below two point five percent, then we remain comfortable. I don't see any I don't think that that's going to change. I'm sorry. I'm sorry. I'm talking to myself as if I wasn't like Karim Salah says someone I can bother. I can't. It's my pleasure. I'm glad you're enjoying the recaps. So I think I answered that. I think probably the first few weeks of January is when we see a dip. Nice to see you, Amin. Perhaps I'll take a look at it. The question is about Algo cryptocurrency. By the way, if you have any crypto or stock that you'd like me to take a look at, please leave them in the comments of this live and I'll take a look at them. Yeah, I don't like Hive. I think, you know, Iris and Bitdeer are much better. And I generally don't like miners that are holding Bitcoin. I hold Bitcoin for myself. I don't need someone to hold it for me. Yeah. And I'm not going to pay someone to hold it for me. Thanks, Abdullah. Abdullah says, the more I watch your content and absorb your way of thinking, the more I realize what you are saying about this way of thinking being the most important thing about membership. Yeah, I think that the models that you use in your mind are by far more important than necessarily the conclusions that you arrive at, because the models will You know, even if a bad model sometimes comes out with the right conclusion, over time, you're going to pay the price of that error in thinking. But a good model, even if it sometimes makes an error, over time, that good model will pay off in terms of accuracy of the thoughts that it produces. It's tough to say. So the question from Nightwicked is, is it too late to switch from CLSK to Iron or Bitdeer? Now, as I've mentioned before, I thought that in many cases, miners were a trade and not a long-term investment. And so I think that... the time we're at right now, you should really be thinking, is this miner that I'm holding? There's a few exceptions, and I would say Bitdeer is one of those exceptions. And I really, I mean, I really like this company, in case you couldn't tell. So I'm actually thinking about buying back whatever profits I've taken. But So most of these Bitcoin miners, you want to sell before the peak because they're going to be going in cycles. Bitcoin mining is a tough business. Margins are terrible. And there's a very short period of time where the business makes sense. And then it becomes a terrible business. all over again and for an extended period of time. With CLSK, they seem like they're just sort of a one-track mind on Bitcoin mining and with their management incentives the way they are. I don't see that changing anytime soon. So make of that what you will. I can't really give you personalized financial advice, but that's kind of how I think about it. Usama with the jokes. Usama says, bit deer becoming big deer. You get a thumbs up for that, Usama. Morris says, can I trade and sell multiple times within a day within the cash balance? Yeah, I think that's fine. Additional comedy from Abdelaziz says, we should say deer run instead of bull run. We might have to do that, actually. So Morris, you can take a look at the links in the description. So we have a link to our PIF membership. We have a link to a consultation if you want to do a consultation. And with that, leave a like, subscribe for more alpha, free alpha. We're giving it out to the public. Hit the notification bell so you know when we go live next. And until next time, make sure to take care of yourself. As-salamu alaykum and peace be upon you all.