In this week's Stansberry Investor Hour, Dan welcomes George Noble to the show. George is the managing partner of Noble Capital Advisors. He's also the author of The Noble Update on Substack, which has more than 13,000 subscribers.

George kicks things off by expressing his skepticism about Tesla. He says that despite the company branching out into different areas, the majority of its revenue comes from car sales and should therefore be treated as a car company. He also believes that investors are improperly valuating the stock, ignoring the fundamentals in favor of "charts" and "the narrative." And his sentiment extends further out into SpaceX. Due to the Nasdaq Composite Index altering the rules for listing stocks, George thinks that the company's upcoming IPO is not going as well as people might think if it couldn't meet the previous requirements for entry...

[The Nasdaq] suspended the "alternate side of the street parking" rules for SpaceX so it can get in the index, even though it's going to have a tiny float. The public is getting wise to all this. They realize something is not right. They don't know exactly what's wrong, but something is not right... I think the car crash in progress, no pun intended, along with what I think is going to be a disastrous IPO [for] SpaceX, [will result in] the wheels starting to come off the AI story. I think you're really looking at a massive sea change here. You should run, not walk, from any of this stuff.

Next, George discusses semiconductor capital expenditures. He says that folks are too caught up in the current boom and aren't looking at whether a company has a price to earnings that warrants buying a company's stock. Then he shifts the conversation briefly to bonds, saying that the market is so focused on energy due to tension surrounding the Strait of Hormuz that it hasn't noticed that bond rates have gone up, which normally go down during war. And his concern with that is what happens when we face a deflation bust. Additionally, investors aren't even aware of how hyperscalers have been hurting their portfolios, thinking that they hold a diversified collection of stocks...

[We're coming into a time when people will] say, "Well, you have to index. [That's] the way to go. Indexing is going to be better than active managers because the costs are lower," and blah, blah, blah, blah, blah. If there was ever a time you should not be indexing, it is now... Could you imagine if you went to the average person... [and] said to them, "Do you know you have 2% of your money in Tesla?" "What? I don't want to do that." "OK. Do you know you have 7% of your money in Nvidia?" You just go down the list and be like, what the hell are you doing?

Finally, George shares how U.S. bonds are losing their worth due to the weakening dollar and warns that folks should "run, not walk" from their bonds. While bond coupons are enticing, the value of the money you receive is not worth it in the long term. George believes that the value of the dollar is currently pegged to U.S. expenses and payments, and just like when it was removed from the gold standard, he says that we need to cut it loose to end the continuing downward spiral. And he leaves listeners with a word of encouragement – and caution for newer investors...

Live in your integrity... You and I cannot be held accountable for being right all the time. The world doesn't work that way. All you can do is in the moment, knowing what you know, did you make the best decision possible?... You trust your gut, and you trust your instincts and your experience. And my word of advice to folks that have been in the market, if you haven't been in the market for that long, please understand the last five years are an exception, not the rule.

Click on the image below to watch the video interview with George right now. For the audio version, click "Listen" above.

(Additional past episodes are located here.)

This Week's Guest

George Noble is the managing partner of Noble Capital Advisors. He began his career at Fidelity Investments in 1981 and was chosen to run Fidelity's first international fund, the Fidelity Overseas Fund, in 1984. In its first year of operations, the fund was ranked the No. 1 mutual fund in the country. George launched Teton Partners, a global long/short equity hedge fund, in 1991. Teton was one of the earliest global hedge funds to exceed $1 billion in assets under management. In 2005, he launched Gryfalcon, a global long/short equity fund.

George holds a bachelor's degree from Yale University and a Master of Business Administration from the Wharton School of the University of Pennsylvania.

Dan Ferris:                 Do you own Tesla? Yeah, you probably do even if you don't know that you do. You're probably buying it every two weeks in your 401(k). It's a stock everybody really needs to understand. And we've got the guy to help us understand it today: George Noble, a multidecade Wall Street veteran. This guy was Peter Lynch's assistant. He's been around. He's seen crash after crash after crash. He's got as much gray hair as me, maybe a little more, and lots of experiences, lots of knowledge. So, let's tap into that mind of his, and we'll talk about Tesla and a bunch of other stuff. Get out your pens and pencils. There's a lot going on here. So, let's do it. Let's talk with our guest, George Noble. Let's do it right now.

George, welcome to the show. Thanks for being here.

George Noble:            Hey, thanks so much for having me. It's a real pleasure to be here.

Dan Ferris:                 Yeah, I've been wanting to get you on the show. The first thing we've got to talk about is Tesla. This stock has been – it's been years and years. People have tried to short it and just gotten run over. They've been talking about the value of the thing again and again and again. And now you're talking about that. You had a great bid on x.com. I love your feed there, by the way, where you put the value – I think it was you and – was it Gordon Johnson.

George Noble:            Yep. Yep.

Dan Ferris:                 You guys put the value somewhere between $54 and $25 per share and the thing is $374 as we speak, right? So, a touch, a skosh overvalued and it was hilarious. I laughed out loud in front of my computer because you said, "We're talking about Tesla and we're going to value it like an actual business," like anybody's doing that at a trillion and a half market cap, right?

George Noble:            Oh, God.

Dan Ferris:                 It's insane.

George Noble:            So, Dan, you opened up Pandora's box, so let me have at it. I could take up the entire show talking about Tesla. So, let's try to take the 30,000-foot view and let's go to the bull case, because – and I know with interest, that post – we had one post that got 3.5 million views. This one got 1.1 million views. I was blown away just because I try to keep it simple, stupid. And so, people like to say, "Well, it's not a car company." OK, let's not feel the same way. Some – if a company – if 87% of its revenue is from autos and autos sales, some might call it a car company, but let's not put labels on it.

Dan Ferris:                 I'm just saying –

George Noble:            Forget about that. Forget about that. OK, let's forget about that. All right? OK. So, all we did was go through the different segments and value them. Start with autos. Most auto companies, you're lucky if you can sell them 0.7, 0.8 times revenues. Tesla has, I think, about $80 billion in auto revenues, just round figures. You're talking about a $50 billion, $60 billion for the auto division. It's like $15, $18 a share. OK, check.

                                    We then go on to the robotaxis. And by the way, the title of that article – thanks for mentioning it – I think it was something along the lines of "Tesla Just Had Its Worst Night Ever in Its History," –

Dan Ferris:                 Right, that was it.

George Noble:            – because essentially Elon Musk came out and affirmed what many of us have been saying, which is robotaxis and cyber cabs are not coming anytime soon to a theater near you. And you go on X –

Dan Ferris:                 He's been talking about this for 10 years.

George Noble:            I know, I know, I know. And Dan, you and I come from a place where, if I promise you something 10 years in a row, you'd say I'm a liar.

Dan Ferris:                 Right. But George – I will say this, George. It's typical super entrepreneur bluster, which you and I both know they can keep it up for years. So, he gets this tiny bit of grace for that. But 10 years, come on. It's not working.

George Noble:            I know. I know. I try so hard to keep my personal feelings out of this whole thing. And by the way, I really roll with laughter when people say I'm a libtard and I've got EDS – Elon derangement syndrome – because people don't know my politics. I'm exactly the opposite of a libtard, but leave that aside. So, at any rate, you go through their vision – I'll just make it real fast. Robotaxis are not going to happen for years to come. They basically admitted they can't achieve Level 4 with what they have. Everyone else uses lidar, radar, and cameras. They only use cameras. It's going to take a few years to get there. So, this trillion dollar-plus, the value people are putting on the robotaxis? Not happening.

                                    You move to the make-believe, pretend robot thing. Optimus, we gave it, I think, Boston Robotics, that type of valuation. Best in the industry. It was only a few dollars a share.

                                    Then we go to the energy division. LG Energy is the No. 1 guy in the world. We gave it that benefit. Anyway, we added it all up, gave it the benefit of the doubt, and we can't get over $54 a share. So, you want to say, "George, you're being too generous." We were being generous. Do you want to say it's $24? Fine. Big-ass spread. Dan's at $24, I'm at $54. I'm a nice guy, believe it or not. As you said, the last sale was $374. What am I missing here?

                                    And the incredible thing, Dan, was that article had over a thousand replies. There was not one, not one credible valuation support. I said to people, "You want to not like me? You want to think I talk too much? I got a big mouth? That's fine. But don't tell me I'm a hater. Don't tell me I've got Elon derangement syndrome. Let's talk numbers." And Dan, there was not one credible reply out of a thousand. That tells me all I need to know.

Dan Ferris:                 And you went through the whole list. It was like nobody talked about the inventory gap and nobody talked about the valuation and – the whole list of stuff, nobody says a word about that. And you were right when you said people aren't doing a discounted cash flow on this. They're listening to a billionaire on social media. That's why they own it.

George Noble:            Dan, I'll tell you a funny story –

Dan Ferris:                 I think it's worse than that, actually, but go ahead.

George Noble:            Yeah. So, I've been active on Substack the last few months. I started writing in December, went to a paid Substack in February. Anyway, so I started to write up a couple stocks. And I hadn't really written a report in, I don't know, 30, 40 years, because I started my career back at Fidelity in the '80s. So, I went and I pulled out of my boxes in my basement what's known as an investment community report, ICR. It's the type of report you'd have to do for Peter Lynch or Bruce Johnstone at Fidelity. Three- or four-page thing. You didn't want this 30-page thing, TLDR. Also, one page is not enough. It's like how much do you need to know to make a decision? So, you have simple stuff: strengths, weaknesses, opportunities, risks, income statement, balance sheet, cash flow, drivers, short position, chart, catalyst, etc. In three or four pages, you go through the whole thing.

                                    So, I write this report. And the stock, by the way, was Southwest Airlines. I write the report and I show it to my shadow partner, and he looks at me and he goes, "George, nobody writes reports like this anymore. You're talking about valuations and fundamentals. All I want to know is chart, dude, and what's the narrative?" And I'm like, "You know what? There's nothing new under the sun. I'm going back to the future. My brand is Fidelity reports circa 1983, Peter Lynch-style." And for those that don't want to deal with fundamentals, I can't help you.

Dan Ferris:                 Yeah, it's funny because it's gotten to a point where when I – I talk to guests of all different types and I'm almost sheepish, I'm like, "Well, I'm kind of a bottom-up fundamentals guy myself." It's like –

George Noble:            Dan, they've got you dead to rights. Not even a fundamental guy. You're a Boomer. You're a Boomer. You get that one?

Dan Ferris:                 Yeah, the cardinal sin.

George Noble:            Old man grandpa, go back to the retirement home. I get that one all the time.

Dan Ferris:                 Oh, yeah. Where everybody born in a certain period of time is just – has ruined the world. We've ruined the world, George.

George Noble:            Anyway. Anyway, so, Tesla, actually, to me, as a serious point about Tesla – I don't want to talk all day about Tesla, but there's some serious takeaways. I'm struck seriously by the lack of knowledge that so many participants have. And if you're talking about changing market structure, you're old enough to remember when, Dan, fundamentals accounted for something. You had active managers, hedge-fund, smart guys looking at valuation and so forth. Now, between the passive bid and the ALCOs and the retail bro and the momentum bro who are just following charts and narratives, it's really frightening. There's no – in so many cases there's no price discovery taking place. It's just pure – it's all these nonfundamental factors. And it's great. It can be intoxicating when the tide's coming in, but eventually the tide will go out.

                                    I actually happen to think that this is the year Tesla will bite the dust. And again, just for your viewers, I like to point out this to people who want to hate on me, despite all the hopium and hoopla, Tesla stock is flat over the better part of the last four years. It has not done anything. And now it's starting to materially underperform coinciding with the collapse of the fundamentals – earnings estimates have gone down by 80% for Tesla. So, I actually think this is the year it all comes unstuck.

                                    And I want to weave this into a bigger narrative. It's not just about Tesla. It's also coinciding with we have one of the biggest IPOs, if not the biggest IPO of all time, SpaceX coming soon. A lot of the "sex, drugs, and rock and roll" in the Elon Musk story has gone from Tesla over to SpaceX, the dream factory down at SpaceX. To me – and watch this space. You're going to see in the coming days my thoughts about SpaceX – with $15 billion in revenues and they're a targeting market cap of $1.7 trillion, Dan, I don't know – I mean, this is insanity. And you have the bulge bracket firms – there's a bigger story here – the bulge bracket firms pushing this stuff in cahoots with mainstream media, like CNBC. Yes, I will name names. And you probably saw, Dan, where the Nasdaq, they changed the listing rules where it used to be float-based calculation. Now they suspended the alternate side of street parking rules for SpaceX so it can get in the index, even though it's going to have a tiny float.

                                    The public is getting wise to all this. They realize something is not right. They don't know exactly what's wrong, but something is not right. I actually think you put together, I think, the car crash in progress, no pun intended, along with what I think is going to be a disastrous IPO, SpaceX, and the wheels starting to come off the AI story, I think you're really looking at a massive sea change here. You should run, not walk, from any of this stuff.

                                    And I think the service you provide, you always putting truth to power – it's what I try to do as well – you get it right, you get it wrong. We're in a business, Dan, where if you're wrong 40% of the time, you're a superstar, just like in baseball. If you're only – if you make it only 70% of the time, you get paid a gazillion dollars. But something's not right here. Something's very much not right. And too much hype, too much momentum, too much liquidity, I think this is going to end very badly. It already is starting to end very badly.

                                    When I look at semis – you didn't ask the question but I'm going to anticipate we're going to go there. So, you saw this, what was it, a record 48% increase in the semis in 18 – it was, like, 18 days in a row, something completely insane. Multiple standard deviations above moving averages. People are extrapolating this stuff to the sky. You and I both know markets are cyclical, industries are cyclical. This is not a good entry point for semiconductors. I actually will go out on a limb and say right here, right now that if you shorted semis on anything but a very short term, if you check back on me, say, at the end of the year, I think a short will have worked out incredibly well.

                                    You look at something like Micron Technology, 10 times revenues where historically sells on three times revenues, or you look at Sandisk now, which I think is on 18 times sales – look, it can keep going up. So, I know the haters are going to watch this and say, "Oh, the two Boomers were going at it. They don't get it. Semis are now structural. It's a secular story. It's not cyclical." As the saying goes, Dan, on – tell me you haven't seen a DRAM cycle without telling me you haven't seen a DRAM cycle.

                                    But this is insanity. This is total insanity. It's sort of like this is a game, a basketball game where it's gone into quadruple overtime. And again, I don't know where the top is. We may have seen the top just two days ago. But on anything but a short-term view, I think these stocks are going to be a disaster. Running money, Dan, if you remember Michael Chang, the tennis player, he was such an annoying fellow. He would never hit a winner but he would never hit a – sorry, he would never hit a winner but he would not hit a loser. He'd make you beat yourself, right? And investing, you probably remember the Charlie Ellis School of Investing, which is the loser's game –

Dan Ferris:                 Absolutely.

George Noble:            – which is – this is contrary to what most people think, but to remind your viewers, just identify what you don't want to own and index everything else. Sometimes just avoiding mistakes is the way to win, the way to outperform.

                                    And I think right now, you look at parts of the a lot of the tech sector, there's no margin of safety. I think we're taping this today on the eve of a lot of the hyperscalers coming out with their earnings – Meta, Microsoft, etc. It would be really nice to hear what they have to say about capex spending, because if they cut back on capex or if they just keep it where it is, I think it's a problem. But I digress.

                                    Anyway, I want to address what's on your mind. I'm reliably informed I talk too much, but have at it, Dan.

Dan Ferris:                 No, that – you're in a good area here. You also mentioned the passive bid. I was going to go there too, but let's stick with this capex thing because you and I both know – and semiconductors is the perfect entry. It's massively capital-intensive. They make huge – you can't even build a typical fab today for less than about $10 billion or something. It's a massive, massive expenditure. And the technology lasts, what, three years or something? I don't know. On the other end of it, though, the capex for the data centers is a real problem, right?

George Noble:            Yeah.

Dan Ferris:                 They're spending hundreds of billions of dollars. And –

George Noble:            And there's no – show me the cash-on-cash return. Peter Berezin is a bank credit analyst. Great guy. You should have him on your show. He had a tremendous graph. I interviewed him a couple months ago. It showed going back over a long period of time that the companies that tend to invest the most are the worst investments actually. And –

Dan Ferris:                 Right. Yeah. I've been looking for capital-efficient businesses for 20 years.

George Noble:            Exactly. And what happens is people get sucked into the story. They chase the narrative. And first – take semiconductors. Take fabs. I haven't done the numbers, but imagine this, Dan. So, say a fab costs $5 billion, $10 billion, whatever it costs. If you were to plug in spot prices that are out there – now the bull story is, of course, some of these spot prices are being extended to two- and three-year contracts. But if you were to – but if manufacturers had any assurance that these prices would stick indefinitely, you go calculate the [return on equity], the [return on investment] on a new fab right now, it would break your calculator.

                                    To me – I'm going to keep it much simpler. I like to use a shipping analogy. It's a simpler industry. It's an industry I know well and most people understand. You take your typical vessel, be it a bulker or a tanker, and your day rates are fixed more or less: $12,000, $15,000, $20,000. It depends on the vessel. They don't really change very much. They go up and down a little bit with cost of labor, maybe the fuel costs go up a bunch, but they don't change very much. OK.

                                    So, let's use a bulk – let's say it's $12,000 a day. And what can happen is when you get into a boom/bust scenario, and let's say the day rate's $15,000, $20,000. Keep it real simple. Let's say the day rate's $20,000 and your cost is $12,000. You're making $8,000. And then a shortage breaks out. I don't know, the Chinese are importing tons of coal, tons of grain, or maybe the Strait of Hormuz gets blocked up, so the demand goes through the roof. So, all of a sudden the day rates go from $20,000 a day to $100,000 a day. Your profit margin goes from $8,000 to $88,000. So, a 5X increase in rates is giving you an 11X increase in profitability. All right?

                                    Now, everyone's going to say, "Well, those rates aren't going to last." Of course, they're not going to last. It's temporary. It's a commodity business. Supply will expand to meet demand. So, no one would ever say, "Oh, buy a MarketWise tanker. It's only on a P/E of two." No, this is like one-off earnings. Think about, Dan, what a price-to-earnings ratio is. It's really a shorthand for discounted cash flow. So, the right way to value a MarketWise tanker would be to say, "OK, what are normalized earnings? Capitalize that. OK, it's one or two years of excess earnings, a few dollars a share because it's a windfall. Add that on." That's the way you should do it.

                                    But what do people do? Micron earnings go from $10 to $80. People say, "Well it's only done five times, $80." Are you out of your freaking mind? But this is this is what people do? And Dan, what frustrates me so much about this – you can tell I have opinions. As Senator [Patrick] Moynihan once said –

Dan Ferris:                 Right. This is a good thing to have an opinion about. It really is.

George Noble:            As Senator Moynihan famously said, "You're entitled to your own opinion. You're not entitled to your own facts." The people doing this sort of thing, the degree of financial illiteracy – I mean, you'd be laughed out of the joint. You couldn't get your foot in the door at Fidelity. It'd be like "Are you crazy?" These people have no idea what they're doing. And the problem is we've been in this tidal wave of liquidity post-COVID – it actually goes back even further, if you want to go back to the GFC, but particularly since post-COVID, and that covers up for a lot of sins. And so, guys with experience who pay attention to valuation – you Boomer, you – we've actually been at a disadvantage. But I think this is all coming –

Dan Ferris:                 For a while.

George Noble:            This is coming full circle and I'll tell you why because it's an important thing I want to talk about, and that's cost of capital, the rising cost of capital. Look, we don't know what's going to happen in the Strait of Hormuz. My own personal opinion is there's no quick resolution to this, even though it seems like every week for the last six, we've had – peace has been declared and we have a truce, whatever. It doesn't make sense logically for the Iranians to give in. Maybe they will eventually because all the oil is going to back up and they've got nowhere to put it. But right here right now, they're in the driver's seat. So, I don't know what's going to happen.

                                    So, anyway – look, I'm telling you I don't know. But the thing is for those who think they do know, no, they don't know either. But as you know, Dan, the market often has an inability to focus on more than one thing at a time, and the last few weeks, it's all been Strait of Hormuz and the price of oil and blah, blah, blah. OK, so the capex spending on the hyperscalers' account got pushed aside a little bit. The private credit and private equity, kind of pushed aside a little bit. It's been all about energy.

                                    But I think what's really going on – bigger picture, step back, go back to where we were pre-February 28. I think you're looking at a rising cost of capital – i.e., war is inflationary, increasing fractionals and geopolitical risk is inflationary, running the monetary policy that we have with the possibility that they're going to even further cut rates is further inflationary. And so, I find it interesting that usually when you have war, rates go down. Well, guess what? Bond yields went up. And I don't know where we are right now. I looked this morning. We were at 4.30% in the 10-year.

                                    One of the big concerns I have is I think you're finally going to be seeing bond yields break out to the upside in a meaningful way in the coming months. The – what the economy is going to do? You can pick your poison. Is this a good number, bad number, or whatever? But to me, the real risk is not a deflationary bust, which is why you would want to own bonds. We can talk about a 60/40 portfolio. But inflation has been sticky and it had nothing to do with oil and then you put oil on top of it. And Dan, if I came to you and I said, "Hey, you know what, Dan, I'm making $5 trillion a year, I'm spending $7 trillion, I owe the banks $40 trillion, I have off-balance liabilities of $125 trillion – hey, Dan, would you lend me money for 10 years at 4.3%?" You'd be like, "Dude, what?"

                                    So, people aren't thinking about the bond market right now. But I think go back a few months ago; it was like – it was a bidding contest. How many rate cuts are we going to have in 2026? Where'd that go? So, a lot of volatility, a lot of uncertainty, inflation is sticky and going up. I think bond yields going up. I think we're on borrowed time on the hyperscaler trade. A lot of moving parts here. And most importantly – I'll stop and let you get a word in edgewise – we can kibitz about the market, "The market's going to do this. The market's going to do that." I'm always reminded it's a market of stocks and trying to call the index is a fool's errand. And if you own gold and gold stocks, you've been positive and then you killed it. We've been in a sort of intermission right now, taking a rest. We got very lucky with energy stocks at the turn of the year. So, energy looks great to me. I think the metals – the gold stocks are going to go again, because I think they're going to have to ease – whatever.

                                    So, meanwhile, I think a lot of the tech stocks, I think a lot of the highly speculative stocks look disastrous. Those that are most dependent on excess liquidity, which have gone up the most right now – there's always – you can give people a day, give people a price, but never the two together. I think right here, right now, a lot of this garbage is levitated to such an extent, it's actually a pretty good entry point on the short side. It's not just Tesla. I can go down the list. It's Kaba. It's Freshpet. It's Robinhood. It's just – and forget about the big-picture macro stuff. If I just do it from a purely bottom-up basis, how many things can I find? How many things can you find, Dan, that you really like? Because the opportunity set is never linear. Sometimes there's a lot to do. Sometimes there's not a lot to do. Sometimes "Oh, my God, I've got a lot of good sell ideas but no good long ideas."

                                    Right here, right now, I think to the extent to which a lot of this stuff is levitated is presenting a great point, entry point on the short side. Keep in mind, the hyperscalers, they'd all done terribly for the prior four or five months. They peaked back in the fall and then all of a sudden in 30 days, they basically regained everything that they had lost over four or five months. And now we'll see. And a lot of a lot of the garbage stocks as well.

                                    So, I guess what I would say to people, there's a lot to do here. There are a lot of things – I think energy and the resources and the metals, that all looks great to me, not necessarily today, not necessarily this week, but looking at it over the next six to 12 months. And I think a lot of the speculative stuff and a lot of this tech stuff looks disastrous. So, it really – and again, and I'll say this last point and we can take the conversation where you want to go. Coming at a time when people say, "Well, you have to index, that's the way to go, it's – of course indexation is going to do better than active managers because the costs are lower and blah, blah, blah, blah, blah," if there was ever a time you should not be indexing, it is now. Run from your Vanguard index fund. And it's perfect because the active pickers, stock pickers have been taking the – had the ball taken away from them. They've gotten the redeemed – yin/yang out of them. And so, no, I think there's a lot – what a great time to be alive, Dan, as they would say.

Dan Ferris:                 Oh, yeah. It's the curse, right? Interesting times. "May you live in interesting times." Yeah. The only the thing I wonder about with the index, of course, is just the persistence of that passive bid. It's relentless. And it's mindless. People buy Tesla because they heard a billionaire telling them on social media. They buy the index without knowing they own it. I bet most people don't know they own it.

George Noble:            Yes.

Dan Ferris:                 It just goes in every two weeks.

George Noble:            Yes.

Dan Ferris:                 And for no reason at all, except that somebody said that was the thing to buy 10 years ago.

George Noble:            Dan, to your point, could you imagine – I don't remember the weight of Tesla in the S&P. I don't know if it's 2% or whatever it is. Could you imagine you went to the average person – because when you look at an ETF or index, it's one thing, but if you said to them, "Do you know you have 2% of your money in Tesla?" "What? I don't want to do that." "Do you know you have 7% of your money in Nvidia?" You just go down the list and people are like, "What the hell are you doing?"

Dan Ferris:                 And you've got 40% in 10 stocks and you think you're well diversified. And they're not.

George Noble:            They're thinking, "Am I diversified?" Exactly.

Dan Ferris:                 No, that's not diversified.

George Noble:            No.

Dan Ferris:                 Yeah. There is a case to be made, well, maybe the top 10 do poorly, but maybe the other 490 – there are 490 other companies that might be – there might be some good opportunities in there that would take over. But 40% is a lot.

George Noble:            Yeah, which is why among other things – I'm sure you agree with this, based on what you're saying – it's great you and I are celebrating our Boomer status and going on about the market indices or whatever. What should what should the average investor do? So, for instance, I think the equal-weighted S&P is a simple trade, not anything complicated. Short Tesla. But own the RSP instead of the SPY. The last few weeks, the SPY has kicked back up again, but as of a month ago, that trade was working swimmingly.

                                    So, for the average investor out there, if they – a couple of simple steps they can take. One, switch from SPY to RSP. You don't have to be predicting the end of the world and go short, but just do that simple trade. That's No. 1. No. 2, bonds. And I want to know your thoughts on this. The 60/40 portfolio is dead. Long live the 60/40 portfolio. Bonds have been a disaster – I think they've gone down four consecutive years. I expect this is going to be the fifth consecutive year. Bonds historically, the 60/40 portfolio was designed to hedge yourself against what was perceived to be the risk, which was recession and declining earnings and all that sort of stuff. So, if the economy did poorly and stocks went down, your bonds would do well.

                                    Well, given the fiscal dominance that we have – and they're basically practicing [Modern Monetary Theory ("MMT")]. It's like – and I want to shoot myself. But, Dan, it's like they're spending money with reckless abandon. They're going to keep doing it. They will keep doing it until the market stops them.

Dan Ferris:                 That's right.

George Noble:            Which is one of the reasons –

Dan Ferris:                 And that 60/40, that idea of hedging the stocks with the bonds, it's based on a few decades of data where the two correlate positively.

                                    Or negatively, sorry.

George Noble:            Then they flip around. And so now –

Dan Ferris:                 Yeah, but they normally are positive, right?

George Noble:            Correct.

Dan Ferris:                 They're not –

George Noble:            And so, great minds think alike. You and I should drink some wine together. It's like if you want something to hedge yourself against, you're better off owning oil or gold. Even Mike Wilson – he's a good guy, the Morgan Stanley guy – he even came out last fall and said you should take half of your bonds, half of the 40%, 20%, and put it into gold. I think that's right.

Dan Ferris:                 It is.

George Noble:            And so, I gave a – I made a presentation. I don't know if you saw it last fall. I was at the Porter conference and I played – I had a little fun with the audience. I put a chart up of the bond market, the TLT. It was like a 10-year chart of the TLT. And I asked the folks in the room, I said, "If all you know about this item was the chart, what would you do with it?" It crashed sharply from when – the 10-year was at 60 basis point back in '21. The TLT crashed and it bounced a little, but it's basically been sideways for the last year or two. It's done nothing. So, the inability to rally after a crash, all things being equal, is not a good sign. So, most people said, "Eh, doesn't look particularly exciting."

OK. I then took the TLT and I divided it by the Turkish lira, one of the worst currencies in the world.

Dan Ferris:                 I've seen this chart. I've seen this.

George Noble:            OK, because I own – I took the TLT and divided it by the Turkish lira and it goes from the lower left to the upper right relentlessly. People were like, "Oh, what is that? I want to own that." All the momentum guys. OK, fine. Fine. By the way, I didn't tell people what they were. I just showed them the graphs. And then I put the third one up. I took the TLT – you're going to laugh. You know where I'm going with this one – I divided it by GLD, by gold. And it went steadily from the upper left to the lower right. Everyone was like "Oh, that's terrible. What is that? I would short that." I said, "Ladies and gentlemen, boys and girls, it's the same item. It's the same item. There's only – the only difference is the unit of account. The first one is in American pesos. The second one is in Turkish lira. The third one is in real money: gold."

                                    And so, people might say, "Well, George –" or "Dan, why are you worried about the bonds? It's OK. I'm getting my coupon.  Blah, blah, blah, blah, blah." Yeah, you're getting your coupon. But meanwhile, your principal is in American pesos and it's going down every year. So, that's why –

Dan Ferris:                 American pesos. I love that.

George Noble:            Yeah, so that's why you should run, not walk, from your bonds. People are suffering from money illusion. And so – and by the way, the S&P, I know you know this, but given the performance of gold over the last year – I know you know this – over the last 25 years, Dan, gold has outperformed the S&P. And particularly in the last few years, it's killed the S&P. So, this reminds me of a famous like from Alan Greenspan. I think it was in the late '90s, like '98 or something like that. And it was at a congressional hearing and they asked him, they said, "Well, Mr. Greenspan, are you worried that we're going to run out of money and we won't be able to pay Social Security, Medicare, whatever?" And he said, "No. We will not run out of money. I can guarantee you we will make the payments. What I can't guarantee you is what the value of that money will be." And that's exactly what we're dealing with here now.

Dan Ferris:                 Yeah, I guarantee you it'll be lower. I mean –

George Noble:            There you go.

Dan Ferris:                 And the unfunded liabilities that people rely on, the Social Security and all the rest of it, it'll be there. People say, "Well, it's going to run out of money." No, it'll be there. But what you think is going to be $4,000 a month or whatever it is, $3,000 a month, is going to feel like $800 a month or something, or $1,000 a month. It ain't going to feel like $4,000.

George Noble:            A hundred percent. Dan, think of it this way. I was reading something the other day. I can't remember where I read it, but it's a really interesting point. It was talking about the history of the gold standard. Gold was $35 an ounce for – from the time it was – it was pegged at $35 an ounce until Nixon took us off the gold standard in the early '70s. And basically because the U.S. could not run enough of a – a balance of payments problem, we could not sustain having the dollar tied to gold. So, we let the dollar go. So, it fell sharply against gold. In other words, gold went up. It went up enormously. It was $35. It's now $5,000 or whatever it is. OK.

Dan Ferris:                 Yeah, man.

George Noble:            Well, fast forward to today. The dollar is actually tethered to something. It's a different standard. I'm winging this as we speak, so if it doesn't make sense, please, please correct me. But I actually think I'm onto something here. We're tied to another standard. We're tied – the dollar is tied to the standard of all these payments, the Social Security, the Medicare, all this sort of stuff. And we're unable to – increasingly unable to service all that. We're having to borrow more and more and more. On top of it, they want to do what, three and five on defense?

Dan Ferris:                 Defense.

George Noble:            And the interest expense line is going to the moon. OK, fine. So, we're tethered to that. We can't afford that. So, in a way, the only – we have to let it go, just like the dollar was let go against gold. It's like we're going to have to let go against those commitments. We have to print a lot more money to service those commitments. Therefore, the value of that money is going to go down sharply. And so, I look at financial assets. I look at the S&P, for instance. Gold – it's not so much the price of gold is going up, Dan. It's that the value of those little green pieces of paper in your pocket is going down.

Dan Ferris:                 Right. The way I like to frame this is basically the financialization that has taken – that has gone on for decades is colliding with physics. It's colliding with gold. It's colliding with oil. It's colliding with – I found some really great chemical stocks recently that I probably shouldn't mention because my readers just got them. But those chemical stocks and other things that are in the physical world that you can't print. You can't print a refinery. And we're shutting them down. You can't print hydrogen. You can't print sulfuric acid. You can't print any of this stuff. You can't print what Tidewater owns. You can't print what Valaris owns. I know you mentioned both of those in your feed, the offshore rigs.

George Noble:            Dude, I love the way you frame that financials – hyper financialization colliding with physics. I am going to steal that, but I am going to give you a credit for it when I use it.

Dan Ferris:                 I stole it, too, so who knows where it –

George Noble:            There you go. It's all good. It's all good. It's all good.

Dan Ferris:                 Yeah, I stole it, too.

George Noble:            It's all good.

Dan Ferris:                 But – yeah. But I'm trying to figure out – I still – that's all – that's as far as I am with that. I'm not able to explain it any better. But we know that that's the direction we're going in. And that's part of the higher rates and higher inflation, too. If you want to bring everything back on shore and all this shit you want to bring back on shore costs billions and billions of dollars and it's – you can't print it. You've got to build it and buy it and make it. You're talking about huge demand for capital. So, yeah.

George Noble:            Yeah. So, coming back to stocks, I was brought up at a – Fidelity was famous for stock-picking, and Peter Lynch would always say, "If you spend 15 minutes a year worrying about the economy, it's a total waste of time" or whatever. And it's largely true. But we're also in a time when I think the macro uncertainties are far greater than they were, say, 40 years ago.

Dan Ferris:                 Yeah, we just printed 20% of the whole money supply. It's a little different than when Peter said that. I'm just saying.

George Noble:            Exactly. Exactly. Exactly. So, yes, we have to focus on the micro, but you've also got to look at the macro. And the way I like to approach things is to take sort of a three-legged approach to it: the micro, the macro, and also the charts. I look at charts a lot because as Stan Druckenmiller has famously said, "The best economic forecast out there is the internals of the stock market." And you look at – I look at housing stocks, for instance. In my world, the way I look at the world, where we're going to have higher rates, Home Depot acts like garbage. Lennar, the housing stock, acts like garbage. It's confirming it.

                                    Now, to be fair – it runs against what I just said – the tech stocks are doing well because of this tsunami of money, this sort of existential imperative that we have to do AI and hyperscale and all that sort of stuff. Well, I think we're going to get to a point where – the market's already started to question this. It started last fall with Oracle when they had a bogus announcement. They announced hundreds of billions of backlog. You remember that crazy day?

Dan Ferris:                 Oh, yeah.

George Noble:            The stock is materially lower down than it was then. The Oracle credit default swaps are through the roof. As Louis Gave of Gavekal famousely says – and he's so right; one of my favorite thinkers – in a bull market companies are rewarded for ever-increasing spending. More, more, more. My capex, Dan, is bigger than your capex. Size matters. We'll keep this a family program. But you eventually get to the point where the market starts to question that. And we've seen that with Oracle. And yeah, it's all well and good that Micron's selling all these chips and Nvidia's doing all this great stuff, but you've also seen the stories where I think, what, over half of the projects announced have been put on hold or delayed because they can't get adequate energy or this or that.

                                    And so, inventory is piling up. I think it's only a question of time. We'll see what happens this week, but all it's going to take is one hyperscale to announce a cutback in capex. That whole chip trade is going to go south so fast it's going to make your head spin.

Dan Ferris:                 Yeah, the one thing I've heard on the macro side – one of our guests, David Cervantes, is a macro guy. He said as long as they're – and as long as they're spending these deficits like this, it's kind of a reason to stay bullish. I was like, "Yeah, OK, that does make sense to me." But we all know it doesn't go on forever. It's gone into the stratosphere. And it can go higher into the stratosphere than anybody would ever guess, but it has –

George Noble:            And to his point, I did study the dismal science. The public sector deficit, the big deficits, is equal to the other private sector surplus. It's an identity. One is the mirror image of the other. But this gets back to the bond market. We were talking earlier about the bond market. They will keep spending this money as long as they can. You and I both know there's no constituency for cutting spending and raising taxes. And, Dan, it's almost enough to make you think that the MMT people were right. "Oh, deficit? Who cares?" Liz Truss, Donald Trump would like to have a word with you. We're gonna get to a point where the market's going to say, "No mas." And when it's gonna happen, I don't know, but no one should be surprised by that. And he said something else, like trees grow to the sky: "There's no mean reversion." Listen, yeah, if we have no mean reversion in anything, then the whole economic cycle is busted. I can't help you. But that just happening with so many stocks right now.

Dan Ferris:                 Yeah, the universe is broken at that point.

George Noble:            Yeah.

Dan Ferris:                 Yeah. So, we've actually come to time for our final question, believe it or not. Yeah, that's all right. I'm going to have you back on as soon as they'll let me.

George Noble:            I would love to do it again because you and I are just getting started, my friend.

Dan Ferris:                 We are. But I want to get your advice on this question because – it's the identical question for every guest. I've been doing this for years with every single guest. And even if it's a nonfinancial topic every now and then we have, same question. So, if you've already said it, you can feel free to repeat it. If not, you can take a minute, think about it, whatever you need to do. It's for our listeners' sake. If you could leave them with one takeaway, one thought today, what would it be?

George Noble:            About markets or about anything?

Dan Ferris:                 Anything you want, George. Anything.

George Noble:            Live in your integrity. Live in your integrity. The best you could – look, you and I cannot be held accountable for being right all the time. The world doesn't work that way. All you can do is in the moment, knowing what you know, did you make the best decision possible. That if we look at the video replay later on, it's like, "Oh, gee, you should have done that or whatnot." No. No. Did you make the best decision you possibly could knowing what you know.

                                    And so, if we're applying to markets right now – let's just stay with markets; we'll think about other things next time – look, maybe some of these keep going up from here. I don't know. But for all you basketball fans out there, and I've used this analogy a bunch of times, to expect semis to generate decent return from here is so out of history, it would be unprecedented. It would be like you take a three-point shot from five feet behind the three-point line. It goes in. OK, good. Fine. And then it's like, you come down the court next time, "I'll do it again." Oh, you feel lucky? Fine. Dan, if you take that shot 10 times in a row, how many times is it going to go in?

                                    So, people like to result on the fact that "Oh, see, it went in. Dan can shoot from 30. No problem." And the thing is, if you haven't studied basketball, you don't know the way the game works. You'd be like "Oh, yeah, it's no problem. That's a normal –" no, it's not a normal shot. Usually, you're lucky if you make one out of five. He just happened to hit it and now you're telling him to take it 10 times in a row.  That's what's going on with a lot of this stuff.

                                    And so, you've gotten to where – you've gotten to trust your gut and you trust your instincts and your experience. And my word of advice to folks who've been in the market, if you haven't been in the market for that long, please understand the last five years are an exception, not the rule. History doesn't repeat itself, but it rhymes. This is going to end extremely badly. Mark my words.

Dan Ferris:                 All right. Thanks for that, George. That was a great answer. And thanks for being here. I'm definitely going to have you back as soon as I can, man.

George Noble:            We have to do this –

Dan Ferris:                 This was a lot of fun.

George Noble:            Yeah, this has been great. Thanks so much.

Dan Ferris:                 It was a lot of fun. And I feel like it was the tiny tip of an iceberg of a massive conversation that's going to take hours and hours. So, I definitely need to have George back as soon as possible because he and I – it's – obviously, we're birds of a feather and we've got a lot to talk about, a lot in common. And he's right. It's interesting times and there's a lot to talk about. It's not – we mentioned Peter Lynch and he said, "If you're thinking about the macro and the economy and stuff 15 minutes a year, you're wasting 15 minutes a year." I don't know if that applies anymore. And George obviously agreed. We both agreed on that. So, there's a lot to talk about. And George is the guy that you want to talk about with it a lot.

                                    He did mention – what did we talk about? We talked about Tesla. Really bearish on that, like 900% overvalued. And we did mention Oracle as well. He thinks Oracle's in bankruptcy, by the way. And we talked about the economy and the way people invest without thinking. They mindlessly buy index funds. And he said, "Don't buy SPY anymore. Buy the equal-weighted fund, RSP." I think that's great advice. I've mentioned the same thing in some of my Stansberry Digest. I've talked about having 40% of your money in 10 stocks is what you're doing in your 10k when you buy the S&P 500, versus an equal amount in 500 different companies, that's what you're doing when you buy the RSP. That's why we're talking about this, because we don't want you to think you're diversified and put 40% of every dollar you invest into 10 companies. That's not diversification.

                                    So, that is one of many, many topics that we talked about and that we will talk about with George when we have him back. Man, I like that guy obviously. We're going to have a lot of fun talking to him in the future. Another great interview. Another great episode of the Stansberry Investor Hour. Hope you enjoyed it as much as we really, truly did. And remember, hit like, hit subscribe, and sign up for our free daily e-mail.

Announcer:                 Opinions expressed on this program are solely those of the contributor and do not necessarily reflect the opinions of Stansberry Research, its parent company, or affiliates.

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