Powell Tanks Markets!

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Powell Tanks Markets!

In this episode, we will cover:

• Intro & Market Volatility
• Indices Recap: Nasdaq, Tesla, NVIDIA
• Bitcoin, Ethereum, Solana & Crypto Shakeout
• Powell’s “Fairly High” Valuation Comment
• Money Supply, Inflation & Rate Cuts Outlook
• AI’s Impact on Jobs & Productivity
• U.S. Government Stake in Lithium America
• Gold at All-Time Highs & Bitcoin Seasonality
• CRMD, Stablecoins & Value Traps (Q&A)
• 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.

Transcript

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As-salamu alaykum, everyone. I hope you are doing well. Today is Tuesday, September the twenty third, coming to you at a later than usual hour. But since we had a lot of volatility in the markets today, I figured I'd go live and let people know what I thought about current conditions. First, we'll start with the indices. Major indices were all in the red, but not by a lot. Nasdaq was the most in the red by three quarters of one percentage point. If we are looking at some of the positions we'd like to follow, MicroStrategy was down. Bitcoin has had a pretty flat, really three months now. Tesla is down close to two percent, but it's been on a pretty good, pretty good run now at four twenty five. I expect it to be in the five hundreds sooner rather than later. Bitdeer is at sixteen dollars. My conviction in Bitdeer has actually increased. And I'm really bullish on that name. NVIDIA is down close to three percent. Enphase is down. We covered Enphase in an Elite session and its valuation. down seven percent close to eight percent at thirty seven dollars uh still i'm thinking this is a company that has some good prospects ahead of it core reeves at a hundred thirty dollars down close to two percent looking at gold we continue to hit new all-time high after new all-time high right now it's pulled back a bit uh we're at uh thirty seven hundred and oil is at sixty three dollars uh basically flat bitcoin's at a hundred and twelve thousand again hasn't really done much of anything in the last three months let's say ethereum's at forty one hundred solana's at two thirteen big pullback for solana as of late although i do think that uh This thing is going to see at least three hundreds in this calendar year. And a, I guess, Solana derivative, Pudgy Penguins pulled back substantially. It's now less than point zero three. Doge is back at right around twenty four cents. So what what the heck is going on? Why did the markets pull back as they did? Well, the Fed chair decided to open his mouth and the market didn't like what he said. He mentioned that he thought stock prices appear fairly highly valued. Now, I believe the market took that and said to itself, let's fairly highly panic. And stocks took it on the chin today in many sectors, especially the risk on stocks. assets, stocks and cryptos, I will say. Cryptos are still reeling from what I believe was basically headhunting for levered traders that started probably on Binance. CZ is known for doing these stunts. And he was recently talking about establishing a floor before going on to newer highs. And to establish the floor, you want to make sure that you're liquidating, forcing to liquidate all of the levered positions so that when the price makes new highs, you are on the right side of the trade. And as a brokerage, this is not going to impact you negatively. And since crypto is kind of the wild west, these types of manipulations happen. That being said, I do think that the next leg up for crypto will likely be higher, not lower. And I also think that if you look at what the Fed chair actually said, he said, we do look at overall financial conditions and we ask ourselves whether our policies are affecting financial conditions in a way that is what we're trying to achieve. But you're right. By many measures, for example, equity prices are fairly highly valued. Now, it's noteworthy that the Fed chair has never said that equity prices were trading at a bargain, for instance. And really, equity prices, asset prices are not part of the Fed's mandate. And if we are to look at equity prices and say that they're fairly highly valued and To draw conclusions from that, what we need to ask is, are they fairly highly valued for good reason or not? Is there, you know, irrational exuberance, to quote a previous Fed chair? And the fact of the matter is, what is also fairly highly high is the money supply. And so if you look at U.S. M-II money supply, it has jumped to new all-time highs of twenty two point two trillion. And the asset prices tend to follow the money supply. The higher the money supply, the higher asset prices go. There's a very direct correlation between the two. And so to expect that money supply is going to reach all-time highs in asset prices, not similarly be a value that above average valuations, would be erroneous. It would be a very unreasonable expectation. I think the much more expected behavior for asset prices is for them to follow money supply. And that's exactly what we're doing. And therefore, when you're looking ahead and trying to see, okay, where asset prices are going to go, one needs to ask themselves primarily the fundamental question, where is money supply going to go? And I think money supply is going to go up. We are talking about one or two more rate cuts this year and perhaps two or three rate cuts next year. And therefore, with rate cuts comes cheaper money, comes more or an increased money supply. And therefore, I do believe that assets are set to continue to climb in value, especially the more scarce the asset is. Now, the more likely it is to attract the non scarce fiat. And so I don't really think the concern around what Jerome Powell said is necessarily justified. I think that in a lot of ways, a lot of companies are actually still very attractively valued if one looks at their expected future cash flows. And that's really how you should value any cash producing asset. And as it relates to non-cash producing assets, their correlation with money supply, obviously the scarce non-cash producing assets, their correlation with money supply should be self-explanatory. And it's very likely that the largest of those or most well-known assets with scarce supply will benefit from the increased money supply. And if you look at inflation through trueflation, which has been a pretty reliable measure for inflation. I've been using it for the last year to predict what the next, you know, PCE and CPI reports are going to be. If you look at inflation since the start of September, kind of fell off a cliff with regards to inflation measure. So we went from two point nine percent to around two point five percent. So that bodes well for inflation. my expectations for the next inflation reading. If you look at versus a month ago, we're down, versus a week ago down versus yesterday, we're down. So that's all good. And so, so long as inflation is moving in the right direction and the economy, as Powell said, is kind of slowing down, especially as it relates to jobs, creation of new jobs. By the way, something that Paul did not mention, and I hope he's aware of, is the impact of AI on the economy, the impact of AI on jobs. And you should understand that this presents a very unique challenge that perhaps we have not faced before, but also the impact on productivity. that AI brings and the positive impact that that brings. I don't think he said the word AI once in his comments today. But that being said, I do think that AI productivity improvements will bring about positive results as they have been for many companies in their earnings. And this may surprise some when they look at perhaps unemployment and what they glean from that in terms of, you know, traditionally unemployment being a very reliable metric for the health of the economy. But increasingly, I think that with AI and the productivity increases that it brings, there's going to be a disconnect there. So you may have a situation where company earnings remain very healthy. But unemployment is high. I didn't hear anything from Powell with regards to AI and him actually understanding this dynamic moving forward, how he thinks about it, how it may impact monetary policy. Nothing on this front, which is kind of disappointing. So that's with regards to the macro. So with regards to the macro, I see inflation coming under control. I see the possibility for rate cuts to be probable, at least one, perhaps two this year, and again, two or three next year. Therefore, money supply should be increasing. Therefore, asset prices should go higher. It's very simple. I also think that AI productivity generally will help companies with their bottom lines, with their margins. And when you talk about healthier margins for companies, that means that they should command higher multiples on their earnings and therefore there's additional justification for the fairly highly prices that we're seeing in the market that Jerome Powell noticed in the market as well. All right, so moving on to from macro to a bit more micro topics and talking about assets specifically. So after hours today, we got news that the US government that is maybe looking to acquire a ten percent stake in lithium america and on that news the stock popped i'm not sure what it's doing right now but it popped initially seventy one percent and i do believe that if it is to acquire the u.s government which is by the way on its way to acquire a pretty diversified portfolio of assets with you know intel stake and now lithium a bunch of other companies that it's doing business with. It's starting to become very much involved in many major companies. I do believe that there is more incentive if the US government acquires a stake in a lithium company. that tariffs are imposed on lithium. And the number one exporter of lithium globally is China. And they've been responsible for keeping the prices of lithium down for a very long time. And so if there are... If there are tariffs imposed on lithium imports to the United States, local lithium producers will benefit massively from those tariffs. You can basically say that those tariffs, whatever percentage those tariffs are, are going to flow directly to these companies' bottom lines. And so one of the companies that we invest in, Piedmont Lithium, which is now Siona Mining, it stands to benefit. Initially popped. I think it pared back its gains. But I do think that there is a There's a non-trivial probability that some substantial material tariffs are imposed on lithium and the lithium industry in the United States gets a boost from the U.S. government, gets incentives from the U.S. government, and that's going to bode very well for lithium producers who have been really struggling with the price of lithium. As I mentioned, primarily China is responsible for bringing down the price of lithium and To the point where producers are basically in the loss. They're producing negatively. And that is, you know, every ton they produce, they actually lose money on. And so I knew this was not sustainable. So even without this happening, naturally, the price, we did have oversupply. Now from the twenty twenty one period and the rational exuberance that happened there where everyone was setting up shop and lithium mining when the price of lithium shot up. But we've been working through that oversupply and eventually demand was going to overtake supply and we would get higher prices. I knew that was coming, but this may provide an accelerant to that process. All right. And gold, as I mentioned, has been hitting new all time highs. Seems every day now. And typically Bitcoin follows gold. So if history is to rhyme, Bitcoin is next. And in fact, if you look at the seasonality of Bitcoin's returns, then September which is right here. Let me adjust this for you guys. If you haven't become a PIF member yet, make sure to join our community and become a PIF member. Link to do so is in the description. All right, so, sorry. Okay, so let me go over that last. So can you all hear me right now? Can you hear me right now? If you can hear me, Leave a like. Yeah, I can see. You guys should be able to hear me. All right, so what I was saying for this, because I think what happened is when I adjusted the slides so you guys could see the headers here, that may have... impacted the sound all right so let me go over this one more time uh so what i was saying is that um in september typically uh if if we get a green september typically october and november actually a hundred percent of the time october and november are green uh so you know in the positive for bitcoin so if you look at twenty twenty four for example um september but on average is is Typically the worst or one of the worst months of the year. In fact, it's the worst on average. But we are looking at a positive September this year, so far at least. If you look at twenty twenty four, twenty twenty three, we were up, for example, twenty twenty four, seven percent. We were up in October, ten percent and November, thirty seven percent. We're up in September, twenty twenty three. And then we were up for the next three months after that, October, November, December. Typically, by the way, Q four is very strong for Bitcoin. If you look at twenty sixteen, twenty fifteen, we were up in September and then we were up for all three months for the remainder of the year. So good historical precedent there. when we are up in September. And if we can close out this month up, then we'll set ourselves up for a pretty strong Q for inshallah. All right, so with that being said, if you haven't become a PIF member, do become a PIF member and join our community. Like to do so is in the description. Thanks, guys, for letting me know about the sound. Sorry about that hiccup. All right, let's go to questions. Assalamualaikum, Omar. It's nice of you to join us, Safa. Nighttime stream, yep. Good to see you. Malik, what's going on with CRMD? What is going on with CRMD? Um... It's up today slightly. It's down one percent in the last five days. So if you look at the last month, it's down sixteen percent. Last six months, it's up six percent. So the latest news on CRMD is they're trying to do away with the twenty percent cap on dilution. I talked about this in the last stream, by the way. I believe I did. And that's likely because, by the way, they have a healthy balance sheet and they've made an acquisition. They've been known to sort of make acquisitions. And I think they're trying to diversify their sources of revenue, basically, diversify the products that they sell. I think for good reason. It makes sense to diversify even if you have a sort of blockbuster product like they have in DefendCath, which is a great product to have a patent on because people need to use it all the time. And it's selling for... a really good gross margin. And so I can see why they would want to do away with that equity cap. Previously, I think that the acquisitions that they made have been accretive for shareholders. So earnings per share should actually increase, not decrease, despite the dilution. And so I'm hoping this is the case moving forward. I think management has so far performed in a competent manner. So I'm not really too worried about that it was at sixteen pulled back to now it's eleven and change I think that that may have been an overreaction from investors by the way they haven't removed the cap yet they've proposed the voting on it and who knows if the shareholders will will actually agree to it or not. It's very likely that they don't or very possible that they don't. And so I don't really see anything fundamental, nothing fundamental from this company has come out that has caused me to say it's now worth less in terms of value. Nothing has come out that says, okay, the future cash flows for this company have now been, their prospects have been deprecated. So pull back some volatility, that's part of the game. um hey nice to see you halfers the one says salam bro why you don't day trade we're actually having a discussion about this on discord i like probabilities and the probabilities of you know doing well day trading are slim to none that's why i don't day trade salam alaikum what is your take on us's playing a game i'm referring russia comment about thirty seven point five trillion that's also where should we be all this happened market out of market gold crypto So I think that what you definitely don't want to be in is in fiat. You want to be in scarce assets. And really, the top players are the one that you want to be in. I would say the top player in terms of the scarcity play would be gold and silver and Bitcoin in terms of scarcity. And other cryptos... that have built-in scarcity, and some people are going to be mad at me for saying it, but something like Dogecoin I think may perform well as well. Other than that, you want to be in value-producing assets, things that produce value for people. So if you know a company that's going to revolutionize ride-hailing, and you think ride hailing is going to impact the lives of many people, then you probably want to own shares in that company. If you know a company that is perhaps working on charge recycling and could make GPUs more efficient, then you may want to own part of that company. So you really want to be in the companies that are producing the most utility for humanity and assets that are scarce, that are built in scarcity that can't be manipulated by self-interested parties. Malik Fakhr, how do you avoid value traps? Every investor is going to fall into them. You can't really avoid them entirely, but the best way to avoid value traps is to have a very deep understanding of the business itself, the industry itself. Once you understand an industry deeply and the business that you're investing in deeply, you have competent management, then you can avoid value traps. Hey, Salam, Dr. Khaled, nice to see you. Bruce Wayne, if I was running out of cash, will you recommend liquidity, PIF crypto, or PIF growth portfolio? If you're running out of cash, well, it depends on your investment horizon. I do think that we'll have a pretty strong Q for in all our portfolios, inshallah. So, Obviously, crypto is going to be a lot more volatile than something like growth. I would definitely not grow a hundred percent in crypto. I would, under any circumstance, I would put money in growth first and then, you know, maybe a subset of that in crypto. Do you think quantum computing makes a good investment? I got that question last time. I still haven't looked at it. Perhaps I will. If you keep asking me, I will for sure look at quantum computing. What do you have percentage of cash? Right now, it's twenty percent of the portfolio's cash. Because I do think that we have run up high. Salam has a fund management website coming along. I'd love to send something like that for my parents. I'll share something on our Discord, inshallah. So our members have first swing at it, inshallah. Rafi says, if you ever make a fund or ETF that trades on Stock Exchange, what would the expense ratio be? Well, right now, actually, we are starting a service where we manage people's money. All you have to do is have a Charles Schwab account and we'll be able to help you out. Thanks, guys, for letting me know about the Mac. And again, apologies for... for the audio cutting out. When would you like to enter gold and silver? Wait for consolidation. I think that there's probably an opportunity to rotate, you know, in Q four from like a lot of the risk on assets that we have into gold. I think that, I think that might be advisable. A fall at some point, a fall is inevitable. A fast and furious ten to twenty percent fall at some point sooner. All right. Well, I will say that, you know, if you're a net buyer of any asset and it falls in price, like if you walked into a mall and you had the intention of buying, but you discovered that things were off by twenty percent, you should feel happy. You shouldn't be like, oh man, I was going to buy. I wanted to buy full price. No. I fell down. I fell ten percent, twenty percent. Great. I was a buyer anyway. Ciro says, always like when you add nuggets of Islamic reminders. Oh, thank you, brother. Really appreciate it. What's your opinion on using stable coins since they are usually backed by bonds and directly financing debt? Well, I mean, fiat is indirectly backed by bonds. So, you know, the entire system we have is messed up. And perhaps we're fast approaching a reset here as, you know, the debt burden gets out of hand. But I don't think they're any more problematic than fiat. Um, how would you convince someone who doesn't own any assets apart from their house to start investing? Well, follow the prices of stuff that you buy. Prices are going up. So if you don't invest, your purchasing power is like a melting ice cube. You're losing purchasing power. You're becoming poorer in terms of the things that you can buy with your money if you're not investing. So this is not the option. This is not like, oh, should I or shouldn't I? This is a necessity. And no amount of work is going to is going to enable you to keep up. You have to own the right assets. You have to own scarce assets that people want, and you have to own productive assets that are producing value for people. This is a necessity. It's not a nice to have. Hamad Salim says, any update on the lead trading course? Well, we will. So the development is done. We will start uploading tomorrow, inshallah. You're not living in a cave. I appreciate your patience. So hail says some money. Come on. I'm Sam. Some money can bro. I'm almost zero percent in cash. I have sixty percent ETF, twenty percent Tesla, five percent in crypto and rest in all of stocks. What should I turn to bring twenty percent in cash? I'm not saying you should trim. I'm not saying you should turn at all. But if you have cash to deploy. Then. then wait for the right opportunity to deploy it. I remember you recommending M-One Finance. Did you change to Schwab? M-One Finance is what I was telling basically PIF members if they wanted to follow our portfolios. So this is where they would trade themselves in M-One Finance. By the way, M-One Finance is only available in the US. A lot of people couldn't use it anyway. Charles Schwab is actually the custodian that we use to trade on behalf of clients. And so a different use case. So the client wouldn't be making trades themselves. We would be making them on behalf of the client. What is your take on the Russian comment about the US trying to shift their debt to cryptocurrency stablecoins? I mean, I think there's some truth to that. I think that the um stablecoin issuers are becoming a larger and larger holder of u.s debt for sure and so i do believe that there's going to be a lot of support for the crypto industry because of this and indeed we're seeing legislation i mean it's not just okay to appease the crowd there's actually there's actually a method to this madness and so i do believe that you know as the financial system moves on to the blockchain there are a lot of tokens that will really benefit from this uh but i just i mean alhamdulillah for islam i mean we don't have interest-bearing debt we don't use interest-bearing debt so it has I mean, when implemented, should save humanity from this mess that it has found itself in. And so I am optimistic that looking into the future, I see sort of I think that we're approaching a melt up in assets or actually we're in the midst of a melt up in assets. I don't know how this is going to end, but it's going to be bumpy. But after those bumps in the road, I see a better state of human existence. a better financial system. So yeah, maybe we're approaching a speed bump, but afterwards I see the road as being more smooth and inshallah better. Breakdown of new conviction and price target. Perhaps we'll do a breakdown for Bithir for our next elite session, which is coming up soon. Um, or maybe we'll make it as an extra, uh, sofa, but again, my conviction in Bitdeer has increased. And I know it's kind of been lagging other miners. That's, you know, kind of been frustrating to, to go through, but actually from a fundamental perspective, I'm more bullish now on Bitdeer than I was a few months ago. And I want, then I was a year ago because they continue to deliver at a high level, the A three that they have. and now made available, is now on par with the best that Bitmain offers, their main competitor in terms of mining rigs. And the A-Floor, as is promised, is going to blow Bitmain out of the water. And so basically, thirty five to forty five percent of bitcoin mining rewards flows to basically mining rigs uh mining rig manufacturers and so if you look at the the market that's ahead for bit here and what they could potentially be selling their rigs for because again this is the pricing on the these rigs is based on a return on investment so uh like period like how long does it take for uh miners to to get a return on their investment and so the higher the price of Bitcoin goes, the more you can sell these rigs for. And that's going to flow directly to Bitdeer's bottom line. Additionally, if their technology works, it could have their ASIC technology. It could have far-reaching applications. Beyond Bitcoin mining. And maybe it takes, you know, a year or two for those other applications to materialize. But even if we're just talking about Bitcoin mining, I'm thinking like Bitdeer may become the biggest publicly traded Bitcoin miner next year in twenty twenty six. and at the same time be the most profitable bitcoin miner in twenty twenty six since it's vertically integrated and it's also and it's not losing the part of its profits to their bitcoin mining manufacturers so and if you and this is And if you look at the rate at which they're increasing their Bitcoin mining week after week, it's very impressive. And I estimate I posted this on X. I think that they're going to pass iron in terms of Bitcoin production. I think at latest Q one, twenty twenty six. So they'll start making more bitcoins than iron by Q one, twenty twenty six. I believe this is the case. And oh, by the way, they kind of have. An AI HPC angle to them as well hasn't really materialized, no one really is talking about it, but I do believe that it is. you know, I don't know what's going to happen with it, but it's, it's definitely there. They have an Ohio site. That's, they said that they were talking with, with partners. So I think that that could be a real thing too. And so I really liked this company. It hasn't run as much as I wanted it to. And this, yeah, the timing, I can't, I can't really get the timing, but, um, I'm, I'm very bullish about it. So we'll see. Uh, Let's hold off on the very specific names, guys, and talking about them. Let's take that to Discord, please. Is it safe to keep your coins in exchange? I wouldn't keep that much in an exchange. Especially Coinbase. It's known for going down whenever there's a bull market. Malik, should we wait for a strong pullback on Bitdeer? Stick with the buy below price that I have on our watch list. I think that's a well-researched number. So stick with that on the buy below price. All right, guys. Love you all. Thank you for tuning in. Leave a like if you enjoyed this live. And until next time, make sure to take care of yourself. Assalamualaikum and peace be upon you all.