Buying Opportunity

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Buying Opportunity

In this episode, we will cover:

• Intro and Fed's Rate Decision
• Short-lived Buying Opportunity
• PCE Outlook and Market Direction
• Government Debt & Pressure to Cut Rates
• Meta & Microsoft Earnings Review
• Market Resilience & Valuations
• Solana's Bullish Outlook
• Tesla Robotaxi vs. Waymo
• Tesla Stock Setup & Valuation
• Alibaba, Enphase & Final Thoughts 

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salam@practicalislamicfinace.com

ABOUT OUR PODCAST
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.

Transcript

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As-salamu alaykum, everyone. I hope you are doing well. Today is Wednesday, July thirtieth, and we had a volatile trading day as the Fed, as expected, didn't cut rates. But the press conference that Powell gave essentially said that sort of that he was almost leaning towards not cutting rates in September, at least the market's reaction or market's interpretation of what Powell said suggest this, even though his exact words were kind of neutral, basically leaving his options open. As I mentioned yesterday, I thought he would basically no cut, leaving options open, let's say data dependent. And that's really what came out from the Fed. But the overall spirit of what he was saying, the overall tone was one of hey, I don't really see a need to cut at this particular point. We'll wait and see if that need arises and we'll keep our options open. So the market reacted to that kind of negatively, but then quickly bounced back and Was a buying opportunity that was extremely short lived. Now, we do get PCE numbers tomorrow. And if PCE is hotter than expected, then the buying opportunity will repeat and perhaps even more, even more so than expected. what we had today. So we'll see what happens. Obviously, I think that so long as we're in a regime where the next move is either no change or a cut, then I think you buy dips. I think you continue to do that so long as this is the most likely scenarios moving forward, either keeping things the same or a cut. Because if things are kept the same, what that sort of implies is that the economy is doing fine. And if the economy is doing fine, earnings are good, then the stocks have enough reason to continue to appreciate, obviously, the right names. And, you know, if they're not doing good, then we always have the cuts and that will give us a tailwind. So, so long as that's the case, that's the dynamic, then I think you buy dips and that's, um, You know, until further notice, that's the mode that we're in. So let's look at the major indices. The Russell is down point five percent. Dow Jones is down point three percent. S&P, that's what you see on the screen here. That was essentially flat. As I mentioned, it did see a dip, but quickly recovered. NASDAQ was up slightly, point one six percent. Mixed view here on the different individual movers, but nothing really dramatic. Corey was down five percent. Gold is flat. Bitcoin, let's call it flat. It's at one hundred and seventeen five. Doge is at twenty one cents and Pudgy Penguins is right around point zero three five. It's kind of getting tempting. Perhaps we buy a bit more. We did sell. in the forties, perhaps we buy back a bit of what we sold. We'll see. And with that being said, let's talk about Today's live and it does seem like after the comments made by the Fed chair, September cut is now essentially a coin toss. Yesterday, if you'll recall the probability for a rate cut, a twenty five base point rate cut was around sixty four percent. Today that has dropped to around forty five percent and the probability for a fifty base point cut has dropped to zero. Now, I wouldn't be surprised if this probability further favors a a hold of interest rates, if economic numbers turn out to be very strong, if inflation is still hotter than desired, then it's possible that these probabilities sway even more towards keeping interest rates where they are. Now, this may not even matter. And why it may not matter? is the fact that the treasury is in a or the federal government essentially is in a is in a tough spot so in the next twelve months it needs to refinance needs to refinance close to ten trillion dollars in debt in august alone it needs to refinance close to two trillion dollars and uh this is uh shorter term uh bills the majority of it is shorter term bills that it needs to refinance and so you have one point seven trillion in bills and notes are longer term but the treasury when it does cut or I'm sorry when the fed does cut it does impact the short end of the interest rate curve not the longer end and therefore it's really you know I um almost a need for the federal government for the Fed to cut interest rates. It would save the government hundreds of billions of dollars in interest because when it refinances, it has the option of refinancing at lower rates if a cut does come. So I think that there'll be a very strong inclination for the Fed to cut interest rates, considering how much that needs to be refinanced in the short term. And this also bodes well for liquidity picture generally, all of this refinancing that needs to be done. the federal government needs to essentially borrow another two trillion dollars within the next sixty days. And so More printing means asset prices are going to continue to go up. And so long as we're in this environment, I think the bias towards the market, the bias towards prices is always up, as I mentioned. That's why we continue to be in a buy-to-dip regime. So the lifetime buying opportunity was quickly gone. I say that tongue in cheek. That is today. This is the dip that I talked about, which is quickly, quickly bought up as, you know, retail investors, even institutional investors, which tend to lag retail investors nowadays in terms of their understanding. Even institutions understand that. what I'm saying is correct. It makes sense to buy the dip when a dip presents itself. And to add to that, the earnings that are coming out are, especially from the bigger names, Meta, for example, Really crushed earnings came out after hours. Beat on earnings per share, beat on revenue. Their beat on earnings per share was by twenty two percent, which is nothing to scoff at. EPS is up. Forty percent year over year. So Meta is crushing it. Even Microsoft, they beat by eight percent on bottom line. Top line, they beat by four percent. Earnings per share is up twenty four percent year over year. So so long as earnings continue to come in as robust and strong as they are, there is there is room for. for growth for the market and as the market continues to show its resilience I think the it's it makes sense for valuations to also start to swell because you know when you have an asset you're willing to pay more for an asset that has demonstrated resilience than you are for an asset that has not. And right now we've gone through many different crises and the stock market continues to show very strong resilience. If you look at geopolitical wars, if you look at tariffs, if you look at going back a few years, the hike in interest rates in a very short period of time. And then before that, you know, COVID, so many different crises, the Russian invasion of Ukraine, different crises, and the market seems to weather all of that. And so if you're an investor, you're looking at you're weighing different assets, and you see this asset that is resilient regardless of anything, then you can start to make a stronger and stronger argument for paying a higher and higher multiple for that asset. And I think this is sort of bearing out with the stock market. That said, this is, we're still not talking about in terms of PE ratios for the S&P. If you're looking at a median PE, not that is, you know, you're looking at, you're equally weighting the different components of the S&P. Then the median PE is quite modest. The big, the growth in the S&P has really come from only the I mean, the top names, the top ten names in terms of market cap, they have led the growth and the rest of the S&P remains very attractively, modestly valued, historically speaking. And in other news or in other asset news, in terms of crypto, I'm really starting to build stronger conviction in Solana. I mean, I saw Ethereum do its thing, but really when it comes to adoption, a number of transactions per day, a number of users per day. Solana really takes the cake and it's only one fourth the value of Ethereum. And yet the returns are quite similar between Solana and Ethereum in the recent period. And so I think that Solana, I mean, in store for it is probably a pretty robust run here. I saw some analysts talking about five hundred dollars for solana perhaps by the end of this year and you know given how much other much lesser chains have run I I don't think that's too far-fetched uh if you look at the etf news obviously there's a lot of movement on the solana etfs especially the staking solana etfs and that's very encouraging and um Today, it was reported the first US Solana staking ETF saw some pretty robust growth and inflows reaching one hundred and thirty five million in assets under management, a new all time high in a very short period of time. So I expect a lot more of that to come, which should bode well for the price of this asset. And in Tesla news. Tesla's main competitor as it relates to Robotaxi didn't have that great of a day. Waymo, two Waymos were were filmed actually, two Waymos collided with each other in Phoenix. So despite the LiDAR, despite the, you know, more than five X as expensive as Tesla, despite all the bells and whistles that are attached to each Waymo, it appears that Tesla is still safer, even though, as I mentioned, it's only a fraction of the cost. And very, I think, encouraging is this user, Tesla Chan, he's a good follow. He is reporting that he took a robotaxi to an event in Austin and reports that the robotaxi fee which in this case was only three dollars was more than twice as cheap as the uber which was closer to eight dollars and oh by the way we're still not talking about cybercap which is you know something that is tesla's product that is built for robotexy we're talking about you know a model y that's functioning as a robo taxi so likely there is some efficiencies gained from a cybercap once those hit the road and perhaps those are even more And oh, by the way, you don't have to pay a tip when you're in a robo taxi or a cyber cab compared to Uber where you have to tip the driver. So it's even more than twice as cheap as an Uber. So if I was an Uber investor, I would be pretty darn nervous right now. And certainly if I was sitting on a bunch of profits, I would consider taking some, not investment advice, but it does seem like the writing is on the walls here. And it's just a matter of time before enough people get it. And when you look at the chart for Tesla, I mean, this is the most perfect, beautiful wedge I have ever seen. As I mentioned, I'm not too much into technical analysis, but I mean, this is spot on in terms of what you wanna see with a stock that's about to pop. Now it could pop upwards or downwards, that we know, but certainly the fundamentals suggest the next move should be upwards. And so really excited about this stock. As I mentioned, I do think that We are entering the parabolic phase of this stock. I don't know when it's going to trigger, when it's going to start clicking with enough investors, when it's going to start clocking with them to use a Justin Bieber term, but eventually it'll start clocking. And they'll start standing on business. At least the stock will. All right. With that being said, make sure to join PIF if you haven't become a member yet. And with that, let's go to questions for Was. Assalamualaikum, Erkan. Okay. I hope your day is going well. I hope your day is going great. Just want to see your thoughts on Alibaba with its earnings coming out soon. Well, Alibaba, I was kind of turned off by Alibaba ever since they had that scandal about helping the Chinese government with facial recognition technology that pointed out Uyghurs and whatnot. So not a company that I'm necessarily that comfortable with, especially considering its close ties with the Chinese Communist Party, as far as I can tell. Taskeen says, Salam alaikum, Erkan. Is Enphase comfortable still? It's at a fifty two week low today and looks attractive. Last time I looked, it did not pass our interest expense. uh criteria but uh I'll take another look malik says salam alaikum to add to what the brother above said my dad works in the solar field and he says mphase makes the best inverters and voice combination their boxes and have a nice app to go along the reviews on mphase are fantastic by the way and in fact if you look at their net promoter score for their for their products I think they bested out Tesla's product for their like home batteries and so very compelling very compelling but it is cyclical certainly very interest rate sensitive because a lot of their purchases are financed but it's a top notch company and I think And now that you guys mentioned it, it may make sense to take another look at it. The first thing to look at is whether or not it passes our interest criteria. And because that was the initial reason why we sold it in the first place. We sold it close to, it was at a hundred, I believe, when we sold it. So a while ago. But now it's at thirty-three, maybe it's time to jump back in. As I mentioned, it's a really quality company, quality product, very high customer satisfaction and very competent management. I have a lot of good things to say about it. And I also believe that solar is the future. I do believe that solar makes the most sense as a renewable energy source. Obviously, the planet already runs on solar. So it makes sense for humanity to run on solar as well. So perhaps we'll take a look at it and let you guys know, inshallah. Do leave a like on this live if you enjoyed it. Make sure to become a PIF member if you haven't already. Until next time, make sure to take care of yourself. As-salamu alaykum and peace be upon you all.