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Citrini

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2024-06-18
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2024-06-18
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  1. “Interest rates. And it is very speculative, but if Trump wins, what assets are going to do well? You've created a basket if Biden wins, what's going to do well, you've created a basket. Tell us about your process and how you even constructed these baskets.”

    2024-06-18 · Forward Guidance · Citrini on 2024 Election Portfolio Construction And AI “Mania” · IDENTIFIED FROM THE TRANSCRIPT

  2. “Don't talk about politics unless it impacts the financial market because I know, you know, some part of my audience is going to be on one side and another is going to be on the other side. And if they met each other and started talking politics, they probably wouldn't agree with each other very much, but they do agree with me when they're listening to me about listening to Joseph Wang talking about quantitative tightening or about the construction of the CPI index. So I think that I intentionally shy away from politics. But in this topic, it is coming up and it undoubtedly will have an impact on the fundamentals of markets, definitely and probably on the short-term price action, probably not definitely on that. And you really are perfect to address that because that you say you have no political beliefs whatsoever. You only care about how you only focus on how the election will impact different types of securities, different currencies.”

    2024-06-18 · Forward Guidance · Citrini on 2024 Election Portfolio Construction And AI “Mania” · IDENTIFIED FROM THE TRANSCRIPT

  3. “Yeah, well, you know, I figured that since everyone was so kind of angry about me being super bullish on AI the first time that I came around that we could talk about something a little less controversial like US politics.”

    2024-06-18 · Forward Guidance · Citrini on 2024 Election Portfolio Construction And AI “Mania” · IDENTIFIED FROM THE TRANSCRIPT

  4. “And so it's an important consideration that you are diversified in number of securities, but not thematically. And so yeah, like if someone owns a lot of real estate in China, it's not all of their hopes are on one property. But, you know, if you own apartment buildings in Shanghai and in Beijing, they're correlated. And, you know, Broadcom and NVIDIA have been correlated on the way up. And if you go down, your names probably will go down together too.”

    2024-06-18 · Forward Guidance · Citrini on 2024 Election Portfolio Construction And AI “Mania” · IDENTIFIED FROM THE TRANSCRIPT

  5. “The thing that I'll always say is if you own the SP, you own 500 names. And if you can just own 300 and end up outperforming, that's pretty good, especially when it makes it so that your drawdowns are not life-threatening.”

    2024-06-18 · Forward Guidance · Citrini on 2024 Election Portfolio Construction And AI “Mania” · IDENTIFIED FROM THE TRANSCRIPT

  6. “Yeah, yeah, exactly. And the idea that NVIDIA has been kind of like the sole beneficiary, I can see where people might say that if they're looking at the S&P and then you get the whole S&P 493 versus the S&P 7. But there have been plenty of good returns to be had elsewhere. If I look at like a waterfall of the contribution rate of every name in this basket, NVIDIA obviously is pretty up there, but it's shares that spot with a lot of other names. Vertive, for example, Credo, Arista Networks, Oracle, Amazon, Amphenol, Fabernet. This is the point of the strategy that I use, which I think, you know, people kind of are taken aback by how many securities there are.”

    2024-06-18 · Forward Guidance · Citrini on 2024 Election Portfolio Construction And AI “Mania” · IDENTIFIED FROM THE TRANSCRIPT

  7. “Not really. I think that there are certainly names that didn't perform as expected. As far as the diverse, just this is kind of a two-part question, but as far as diversification goes, I kind of view it as being diversified on a security level, but concentrated on a thematic level. So the way that I think about it is essentially I have it's varied over the past year, but between 10 and 20% of my book in artificial intelligence, right? I want to avoid is essentially a theme that moves so fast like AI does. And then there's a development where it significantly affects single security that I'm concentrated in. And that doesn't mean that I really shy a ton away from concentration. Celestica, SMCI, AOI, at one point, you know, these made up anywhere from two to, you know. Even 10% of the portfolio in a single name”

    2024-06-18 · Forward Guidance · Citrini on 2024 Election Portfolio Construction And AI “Mania” · IDENTIFIED FROM THE TRANSCRIPT

  8. “Yeah, absolutely. But it's still in a way where NVIDIA doesn't exist without TSMC. And it's something that we absolutely want to have very advanced foundaries that are located in America. So I think that there is also kind of a fiscal tailwind for Intel regardless of who wins. And so that's another kind of margin of safety there.”

    2024-06-18 · Forward Guidance · Citrini on 2024 Election Portfolio Construction And AI “Mania” · IDENTIFIED FROM THE TRANSCRIPT

  9. “Mean, I'm sure if Pat Gelsinger heard you call Intel and American Taiwan Semi, he would be real happy But essentially that's one way of putting it where even though it's an election year, I've been focused on what are the priorities going to be regardless of who wins the house, who wins the Senate, who And something that is pretty obvious from both sides is basically chips, right? You could make a lot of heated debate over who has better technology, who is better in this area or that area with the US and China. One area where it's kind of unequivocal is AI and machine learning.”

    2024-06-18 · Forward Guidance · Citrini on 2024 Election Portfolio Construction And AI “Mania” · IDENTIFIED FROM THE TRANSCRIPT

  10. “Narrative that could materialize, and then you have a reasonable margin of safety, and you know, I think that those two, you know, that's what I'm trying to do. I'm trying to narrow this down to places where I don't have kind of this asymmetric risk, like I would have if I was still holding super micro.”

    2024-06-18 · Forward Guidance · Citrini on 2024 Election Portfolio Construction And AI “Mania” · IDENTIFIED FROM THE TRANSCRIPT

  11. “If a technology becomes intrinsic to day to day life, what you'll see is innovations that make it possible to have the capacity to use that technology. And I think that's probably what will happen on the power side here. You have something like Vistra, which I played on the way up because I'm definitely not someone who shies away from just like solely narrative driven price. But the idea that something like Intel, you know, they have their the only foundry that's going to be doing if they deliver on their promises, which they haven't historically been great at, but they're the only one that's going to be doing what's called ribbon fet and backside power delivery on the same chip. You get into this calculating what's called flops to watts, right? Basically, how much compute can you do for the power you're using? And, you know, I think Intel is pretty well positioned there. And you look at the stock and it's all a margin to safety thing.”

    2024-06-18 · Forward Guidance · Citrini on 2024 Election Portfolio Construction And AI “Mania” · IDENTIFIED FROM THE TRANSCRIPT

  12. “I look at Intel's pipeline, and one of the big things that has kind of become a central narrative here is the power requirements for AI. And as like a student of past financial manias and popular delusions, you can go back and see sell-side research from the year 1999 during kind of the personal computing revolution and what you see there is they were saying well you know if everyone in the u.s has a computer then the power that's necessary for that is going to be immense and we're going to see electricity demand grow at a 13 keger over the next 10 years and electricity demand from 2000 to today is pretty much flat and i think that that's because uh that kind of analysis uh discounts the innovation right where”

    2024-06-18 · Forward Guidance · Citrini on 2024 Election Portfolio Construction And AI “Mania” · IDENTIFIED FROM THE TRANSCRIPT

  13. “So I think you kind of look at some of these names that have had, they have AI tales, but they have kind of been depressed a little bit by external factors. And you wait for those external factors to kind of get a little better. This is the same thing, you know, the last time I was on, we spoke about Micron and kind of the high bandwidth memory requirements for artificial intelligence. That was kind of the same story where you had the memory cycle was not doing great and you had a big overhang from that. But the second that that started to inflect a little higher, you got this huge outsized move because the AI tail was front and center. So I think that you can kind of see that on TSMC and maybe to be a little bit more controversial. I think that it might be time on Intel just saying that I feel like, oh God, this is going to be a risky thing to say. But.”

    2024-06-18 · Forward Guidance · Citrini on 2024 Election Portfolio Construction And AI “Mania” · IDENTIFIED FROM THE TRANSCRIPT

  14. “And kind of narrowing it down as you learn more about what's going on. Like a good example for the first phase, kind of like the build out, you know, TSMC has had this kind of overhang, or I guess like a litany of overhangs. You have, you know, geopolitics. You have the fact that it's kind of lower margin. You have their diversification and how exposed they are to the automotive cycle. But as everything progresses and as NVIDIA is more successful, the TSMC AGM was a couple weeks ago and the CEO basically said, you know, given NVIDIA's success, we can probably be charging a little bit more. Yeah, sounds like the surprising thing was however you would expect NVIDIA to react to that. No, Jensen came out, I think the next day and said, yeah, no, they should be.”

    2024-06-18 · Forward Guidance · Citrini on 2024 Election Portfolio Construction And AI “Mania” · IDENTIFIED FROM THE TRANSCRIPT

  15. “In the 1800s, there's a great chart out there from an academic paper of the dividend yield, basically, of these stocks, because most of them were preferred shares back then. And it basically represents earnings growth. And that went up commensurate with the price of the stock, you know? And so I think there's a difference between a bubble where things just get completely fundamentally disconnected and a mania. And obviously a mania can progress into a bubble. You know, I don't think that we're going to see something where NVIDIA's earnings kind of level out and the stock continues to go up, right? So I think that what's the most important thing you can do here in AI looking forward is basically, like I said, when I started, you know, I had 130 securities that I was putting on and saying, you know, this could benefit from AI. And then it progresses and you end up deleting some or adding some.”

    2024-06-18 · Forward Guidance · Citrini on 2024 Election Portfolio Construction And AI “Mania” · IDENTIFIED FROM THE TRANSCRIPT

  16. “Well, I don't want to be too antagonistic, right? Because the first time that I was on, I had a big put, those YouTube comments definitely kept me in the trade for longer than I would have otherwise been in because it was, you know, you couldn't imagine a better environment to generate kind of eye-popping returns in the clear winners, right? Most of the gains were accrued to NVIDIA and NVIDIA suppliers and hyperscalers. When you get into a theme, you have like a fundamental narrative and then you have sentiment tailwind. And the first thing you focus on is kind of that fundamental story. But as far as NVIDIA goes, I mean, I think that using the term bubble, it's much more like a mania, right? Because you look at railroad stocks.”

    2024-06-18 · Forward Guidance · Citrini on 2024 Election Portfolio Construction And AI “Mania” · IDENTIFIED FROM THE TRANSCRIPT

  17. “Somebody like 40 or 50. Interestingly, last year, people were saying NVIDIA is trading at 300 times earnings and it was based on the trailing earnings from the cyclical downturn when we had the slowdown of 2022. And like relative to those forward earnings, NVIDIA at the time must have been trading at a PE of 15, which is probably cheaper than the value stocks that they like. I don't know.”

    2024-06-18 · Forward Guidance · Citrini on 2024 Election Portfolio Construction And AI “Mania” · IDENTIFIED FROM THE TRANSCRIPT

  18. “It appears to me that over this AI bull market that let's say began with the NVIDIA reveal of 2023 that the real beneficiary list of beneficiaries whose earnings have gone up a tremendous amount there's a handful of names. And I really don't know how many I could come up with other than Nvidia. I mean, maybe MCI, I don't know their earnings, but I mean, Nvidia, they're earning, and this is what people say NV. Cannot deny, and if they do deny, I think they're wrong. Just the tremendous revenue increase from 7.2 billion dollars in Q1 2024, which really means 2023, to 26 billion of the most recent quarter in Q1 2025, fiscal year 2025. So that's an increase of 3.6 times or 260%. And the stock is up more than that, but the stock is pricing in that it can NVIDIA can continue to grow. So NVIDIA's forward earnings. I'm just going to say it's.”

    2024-06-18 · Forward Guidance · Citrini on 2024 Election Portfolio Construction And AI “Mania” · IDENTIFIED FROM THE TRANSCRIPT

  19. “And you look at some of the areas where Fundamentals got a little too disconnected from reality, like Super Micro, for example, that thesis played out. And then it was time to get out because the theme had progressed. And I think it's just so interesting right now when you're looking at what is really the next phase of this going to look like. I would say we're in like phase one B right now where there's obviously still some upside on some of these picks and shovels, so to speak, plays, but we're also getting into the area where, you know, what is this actually going to be used for? I think the Apple's WWDC was... I mean, I was blown away. And I think that that really kind of informs what the next phase is going to look like.”

    2024-06-18 · Forward Guidance · Citrini on 2024 Election Portfolio Construction And AI “Mania” · IDENTIFIED FROM THE TRANSCRIPT

  20. “That would be an accurate way to put it. I think what I'm more focused on right now rather than macro would be how these kind of megatrends are progressing and kind of focusing on Narrowing down for their evolution. If you look at something like AI, when ChatGPT first came out, you could look at AI and everyone did this, right? You look at AI and you say, well, I know what it looks like now, but if I kind of blue sky and say what it's going to look like in five years, well, oh my God, maybe this is going to put everyone out of work, you know, or the thing is, I think that the best way to have played that was like I said, you know, basically AI is going to be a thing. And in order for that to happen, you are going to need a data center buildout and you're going to need a lot more GPUs. That was the quote unquote picks and shovels thesis. And that has played out, right? I don't think that there's anyone that denies that that's played out. What you needed there was for hyperscaler Capex to kind of skyrocket so that they could compete in AI. And that's what happened.”

    2024-06-18 · Forward Guidance · Citrini on 2024 Election Portfolio Construction And AI “Mania” · IDENTIFIED FROM THE TRANSCRIPT

  21. “Really was gonna have to hike rates off this zero lower bound. That's when I said, okay, you know, let me start really getting concerned about inflation. I think the same thing applies here with the recession stuff. When the Fed starts cutting, yeah, then that'll be something where I'm going to spend a lot of time saying, is this, you know, is this going to become something that I have to really be concerned about? But for now, I don't want to get thrown off by summer slowdown. You know, I don't think there's much to do until November, if we're being honest. It's an election year. So the environment right now, I would say, is not something that I'm too concerned about, but I am starting to get a little bit attentive to the risks. If I want to do my best, Jerome Powell impression.”

    2024-06-18 · Forward Guidance · Citrini on 2024 Election Portfolio Construction And AI “Mania” · IDENTIFIED FROM THE TRANSCRIPT

  22. “Macro, I try my best to not make decisions when the data is unclear. And right now, is this just a classic summer slowdown? Is it something where this is kind of the necessary quote-unquote Goldilocks situation where we get like a little bit of economic weakness, but ultimately that's what's necessary to bring inflation back within a reasonable level? You know, I don't know right now, but what's served me pretty well over the past three years is I don't make decisions on macro until it's painfully obvious. For example, in 2022, inflation in October 2021 was going higher and there was all this debate about, is it base effects? Is it transient, this, that, and the other thing? It wasn't until like the fed.”

    2024-06-18 · Forward Guidance · Citrini on 2024 Election Portfolio Construction And AI “Mania” · IDENTIFIED FROM THE TRANSCRIPT

  23. “What do you mean by that? The thing about the environment right now is. We've kind of hit this point where we're going to find out, right? We've gone back and forth. Is it going to be a soft landing? Is it going to be a re-acceleration of inflation? Is it going to be a recession? If anything, that constant wall of worry has driven returns, right? And now we're in a situation where I think over the next six to 12 months, we're going to have our answer, right? We're going to, are we going to be able to pull off this soft landing or are we going to overshoot to the downside and end up with an economic slowdown? I think the reason why it's tricky now is because you're starting to get some on earnings calls. You know, they'll say, you know, like Toyota Mota, for example, had some cautionary stuff about auto loans and delinquencies and, you know, the unemployment rate is taking up a little bit. The household savings rate isn't, you know, I think when it comes to”

    2024-06-18 · Forward Guidance · Citrini on 2024 Election Portfolio Construction And AI “Mania” · IDENTIFIED FROM THE TRANSCRIPT