Navigating the Tariffs Chaos

[00:00:00.05] - Speaker 1
It. Foreign.

[00:00:38.15] - Speaker 2
Welcome back before the break for tomorrow, very excited to be here. We have some special guests today. First of all, I want to thank you, Tim, for those, of course you, they know you. You are part of our macro team within our discourse. So welcome, Tim.

[00:00:53.25] - Speaker 3
Hello, guys.

[00:00:56.07] - Speaker 2
Nice to see you. And then together today we have Larry. Larry runs a really nice YouTube and substack channel very focused on data, macro, financial modeling. So today we're gonna go through the impact of tariffs on obviously it's the theme of the. Of the month. So we're gonna look at it from a data perspective, a macro perspective. We're going to talk about the impact on China, Chinese adr, and then we're going to look into maybe even financial modeling at the end. So first of all, Larry, welcome. Maybe if you want to introduce yourself for those who don't know you.

[00:01:34.25] - Speaker 1
Sure. Well, Fabio, thanks for having me. Well, hello everybody. My name is Larry and I'm a creator on YouTube where I talk about macroeconomics, the impact of political developments, economic policies on US And China markets. My primary market is the nasdaq, the US Tech sector, but my secondary markets include the S&P 500 and the Hong Kong Hang Seng index. So I love sharing my research and insights with my audience, both through video on YouTube and also in written form on substack. So it's great to be here. Thanks, Fabio.

[00:02:08.20] - Speaker 2
That's awesome. So I think, let me pull up some slides. I think Tim, we can start basically talking about tariffs. So I'll let you start, Tim. And then we, we. We can get Larry and we make it very conversational. And guys, of course send us any questions you might have and we'll be happy to answer those.

[00:02:29.24] - Speaker 3
Yeah, of course we have talked about tariffs a lot in the last recent weeks. We also do it on Monday during the macro update. Right. So guys, don't want to boring you always with the topic now, but a little bit of stuff I have prepared here. Basically it's just. Yeah. Numbers to give you a little bit of an overview where we at. At the moment. Maybe. Larry, I don't know if we can pass questions about this topic to each other a little bit.

[00:03:05.03] - Speaker 1
Sure we can if you like.

[00:03:06.26] - Speaker 3
Yeah. Because I have read in your bio somewhere, I think it was on Twitter that you are also an investor in Chinese stocks.

[00:03:15.01] - Speaker 1
Yes.

[00:03:15.29] - Speaker 3
Yeah. So yeah, maybe a little bit later we will have a talk about this. Yeah. If there are maybe some problems. Right. China is maybe. Yeah, let's call it a hedge against U.S. stocks. You know, speaking of China, There is no alternative scenario that we have seen like the last two or three years, let's say it like that. And yeah basically in the market as of now tariffs are imposed, threatened, suspended. A little cool graphic here from Bloomberg. The stuff that's in oranges imposed world, world except Canada and Mexico. Why is it like that? Because the US has pretty, pretty big trade treaties with Canada and Mexico they are actually bigger than with China. Most people think all the stuff came out of China that we consume but in the US it's not the case. It's actually Canada and Mexico first and second place and the big, big elephant in the room is still China. This week some further escalation into this topic. Market was surprisingly yeah calm about it. I'm always in the camp that at a certain point markets are getting exhausted to some, let's call it news or developments may they be.

[00:04:39.28] - Speaker 3
Yeah, positive or negative. Right. And the stuff that came out this week wasn't a big problem at all. But as you can see in the numbers the market is still a little bit concerned how the stuff will affect not only trade balances with the countries, also GDP growth or inflation numbers and yeah basically the whole workforce. Think about stuff that you may consume that you buy or that you order from foreign countries. Maybe it will get a little bit more expensive for you so your consumption expenditure goes up, you maybe consume less. Of course in the end there is the labor market also tied to this topic a little bit. So yeah, market is kinda an uncertain state still. This led us to some really. Really yeah that I think most of you haven't seen since five years. If you are new in the game and you started trading investing after 2020 that's for sure the case. We are speaking of volatility here. We are speaking also in assets like gold performing or let's say outperforming nearly everything, even volatility for risk assets which is a hard job. If you look at volatility for stock markets in the last week and this uncertainty.

[00:06:18.09] - Speaker 3
Yeah let last week at least to a bigger extent to sell off in U. S Treasuries the gold dip. If you guys remember from the macro update like two weeks ago we have spoken about the 3k dollar mark in gold. We spent like one or two hours down there and now gold is trading in. Yeah, where I don't have a chart.

[00:06:44.21] - Speaker 1
Open here but it's around 3,300.

[00:06:48.18] - Speaker 3
Oh we have thoughts of your prepared Larry. That's great. Not that really prepared.

[00:06:53.06] - Speaker 1
Yeah I have, I have all these numbers memorized because Yeah, I, I, I, you know, I trade intraday throughout the week, so I have all these, I have, I have all these numbers in the back of my head.

[00:07:05.12] - Speaker 3
Are you, are you a good code trader?

[00:07:08.01] - Speaker 1
Am I, am I a what?

[00:07:09.05] - Speaker 3
Are you a good goat trader? Is it the assets you trade? Frequently, yeah.

[00:07:13.12] - Speaker 1
So no, I don't necessarily trade gold, but I have to watch it because it impacts, it impacts the sentiment related to the tech sector and the S P. So, so my primary market is nq, but I watch gold, I watch gold to make sure that, you know, things are not going out of control.

[00:07:33.08] - Speaker 3
Yeah. And what, what's, what, what's your take? Gold market, broadly speaking.

[00:07:37.26] - Speaker 1
Yeah. Right. So, you know, you know, everyone, Tim has a great chart in the middle of the slide here. You can see gold is going parabolic, right. And obviously it's not a live chart, but as of, as of the last check, gold is, you know, north of 3, 300 and we can see that it's rising at a velocity that's similar to previous types of asset bubbles. Now there's, there's macro support for gold, that, that's for sure. There's no doub. We know that China is a big buyer of gold, most likely Japan's a big buyer of gold and perhaps Russia as well. When there is this tariff policy where the US is being very protectionistic. Other current, other countries that need to devalue their currency. Right. Like China in order to, in order to be competitive with the global market. Well, they're actually hedging their bets by having gold. Right. So yes, they're depreciating the yuan, but because they bought so much gold over the last six to nine months, sure the Chinese currency may be weaker compared to where it was three months ago, but their reserve has actually gone up in value because they have so much gold.

[00:08:51.15] - Speaker 1
So you know, gold has macro support and long term it actually most likely will go higher from here. But, but these types of parabolic moves typically will end one way or another. And, and when it happens, probably looking at, probably looking at a 10% type of, type of technical correction. But gold is one of those areas that has macro support. So, so the next correction is, is not going to be all too deep. It will most likely be supported at some point.

[00:09:30.06] - Speaker 3
And it's cool and stuff like gold, you have the macro thing, but you also have actually also demand and supply. Right. Not spoken in terms of chart analysis or something like that, but gold is still an asset people can buy physically. Right? Yeah, that's also important to Note. And yeah, the fre charts over here, the white line is actually the 2nd of April where Donald Trump came out with the little chart thingy and shocked us with the recent tariffs that he put on. And gold sold pretty hard off from this evening. Right. It was about 3155 and the highs and then sold off into the next week, 7th of April. And then we have this massive rally to the upside. I mean that's over 300 bucks in code, right? That's, that's nuts. That's amazing. Completely.

[00:10:26.29] - Speaker 1
Yeah. So coincidentally I, I would say that the timing after that correction to the current surge coincides with the intensified tariffs on China. So you might have noticed that as Trump upped the tariffs on China from, you know, 125 to, you know, 145 to 200 plus. Right. And what's next? Right. 300, 400. All those tariff announcements on China align with gold continuing to go up. Yeah, so that's, it could be a coincidence. You know, we'll never really know. But it, we can see that the price action aligns with tariff intensity. So if tariffs continue to get more intense globally.

[00:11:13.26] - Speaker 2
Right.

[00:11:15.14] - Speaker 1
We can expect, we can expect that macro support for gold to continue to be quite strong.

[00:11:20.12] - Speaker 3
Oh yeah, yeah. And on the other hand, people also talk a lot about like the model of correlations with the dollar down and gold up. Right? Yeah, makes sense, kind of. But correlations are never minus one or plus one. They can also swing around. They change, of course. But personally from my view, I don't have it in my bingo card that we have seen the DXY, the dollar index below 100 in 2025. To be honest, that's, that's quite a big trend, to be honest. I mean, result of like six or seven dollars in one and a half week, two weeks, that's, that's pretty harsh.

[00:12:04.15] - Speaker 1
Yep.

[00:12:05.11] - Speaker 3
Fair to say people maybe are losing a little bit of trust into the dollar.

[00:12:12.20] - Speaker 1
Yeah, we're seeing the Euro strengthen all the way to that one. Well, 1.113.

[00:12:18.02] - Speaker 2
Right.

[00:12:18.20] - Speaker 1
1.14. As the dollar continues to weaken, you know that, that puts the, that puts the US Bond market in greater peril. So, so these are, these are cross assets that investors definitely should be watching. The dollar, gold, the 30 year, the 10 year. Because all of that impacts and reprices how it S&P 500, the NASDAQ and even the hang sang go about on a weekly basis.

[00:12:46.25] - Speaker 3
Yeah, that's the reason why I have the 10:2 yield curve on the left side. Massive steepening since the announcement of the tariffs because I trade a lot of bonds and yeah quite awesome moves. I mean last week I had a few intraday dates in the ZB future which is here for the year and I can barely remember making like 45 ticks on a day in an asset like bonds it's yeah, yeah the volatility.

[00:13:16.25] - Speaker 1
The volatility and bonds it's yeah good, good time to TR be able to trade bonds for sure. Not my specialty but I do have it on my watch list.

[00:13:27.19] - Speaker 3
Yeah it's considered boring most of the time like 1012 ticks you'll trade right, right. But 50, 45 it's yeah something special. Also a few friends from me are a few year yields more into bond trading and they say wow, that's completely amazing. Some people have to be wrong footed in this market. Yeah and if we all speak about those massive movements we didn't even have addressed the stock market which was down nearly to yeah circuit breaker levels in futures last week. I mean we never had it. There was some chatter about the nest. If you're trading nested I don't know if you are aware of it very painful.

[00:14:16.22] - Speaker 1
I, I, I, I mean I'm actually you know I have a live pulse on, on, on what you know NASDAQ feels like during those moments and I can tell you that that last week it was a, a moment, a moment of fear for sure for, for tech investors. There's, there's no doubt about that because that limit down day came one day after a 10% surge. Right. So caught a lot of people flat footed. So yeah, I, I, I, I, I remember distinctly how that feels.

[00:14:57.00] - Speaker 3
Yeah I can, I can relate. We had it like 2020. Yeah it's something special and if we have listeners trading intraday make sure you have those levels where the circuit breakers are kicking in from the CME to have them somewhere it's not that funny to be in the trade. Right. Because trading is holded and the next didn't ask can be anywhere. Okay so I mean it's maybe not important if you are in the NQ green like 15000 ticks. I don't know but anything can happen. Okay just a small reminder from my side and yeah the next pain intervention time the graphic on the left side is obviously again from Bloomberg and there are some yeah stuff like the COVID pandemic I think also the regional bank crisis blow up in March 23rd. Yes. With Silicon Valley bank and global financial crisis below unemployment rate then they're below the US Core PCE price index. And what this chart tries us to telling is that at a certain point markets are awaiting an intervention and those interventions mostly or usually came from the central bank. Are we in this situation now where this might be happened? It's a no from my side to be honest.

[00:16:33.11] - Speaker 3
I don't know Larry, if you have a take for this, I know it's a little bit more macroeconomic stuff.

[00:16:39.04] - Speaker 1
Sure, sure. So the Fed put, and you know, the Treasury Secretary Bess input is something that investors want to see. They actually investors have been craving for some type of backstop. Right. The Trump put, Fed put, Besson put. Right. Or even, or even, you know, earnings put right. Like meaning how far do valuations have to get stretched and repriced before investors, you know, dip their toes? Back recently the Fed talked about in their recent interview at the Economic Club of Chicago that they're not really looking at the current market price as an environment of panic. So that implies that, you know, s and P500 of 5,300, the Fed's not really concerned.

[00:17:29.00] - Speaker 2
Right.

[00:17:30.11] - Speaker 1
Will they change their tune if S and P retest the lows of 4800, 4500? It depends. It depends. And I think the Fed put will start to come into place when there's more turmoil in the bond market. So once we see more turmoil in the bond market and that raises the borrowing costs of the United States, that's when the White House and either the White House or the Fed is going to step in. And we actually saw that with Trump and Besant coming out and saying that the bond market had them a little bit concerned. That was last week and that was when the 10 year had made a very sharp move from 3.8% to 4.5% in the span of two, three days. That's, that's a, that's a, that's a untypical move in the bond market. That's a very severe sign of stress. At the same time, the NASDAQ had from peak to trough fallen 25%. The S& P had fallen into bare market territory. So when you combine the stock market turmoil along with the bond market turmoil, it seems that that's the point of pain. But it looks like that after the market rebounded, Trump and his team have a little bit more flexibility for hawkish tariff policies.

[00:19:04.24] - Speaker 1
So we can see that as the market rebounds, the White House has more ammunition to tariff. Europe, China, rest of world as, as the market weakens, enters turmoil. Vix is over 45, over 50, over 55. That's when the White House starts to be a little bit more cautious with policy and starts to have a little bit more of a dovish tone. So. So as of right now, where markets are right now, I know that a lot of retail investors are in serious pain. I know that a lot of retail investors have seen call options long term, short term, intermediate term. That strategy hasn't worked. Right. It just hasn't worked, plain and simple. So because retail investors are one of the biggest participants of call options, the fear and greed index as reported by CNN is still under extreme fear. So even though the market in terms of retail investors is in extreme fear and retail participation is very discouraged even at today's level there's no Fed put or or best input it. We have to retest the lows at the minimum or maybe have to undercut those lows a little bit for for the White House or the Fed to really change their tune.

[00:20:30.26] - Speaker 3
Damn. I mean like two weeks ago the news tickets, you could always read some stuff from Donald Trump like I'm not watching the market or is the market down today question mark. Something like that. I don't buy this at all. I'm pretty sure we get briefed at least a few times during the week how the market is going on. Think of the wealth effect and the massive asset allocation into the U.S. right. It's not a joke. And I'm pretty sure the White House is pretty aware of this stuff. Yeah. Bond market, we have talked about it. Yeah. Funding costs of the US of course but also funding costs for corporate America. Right. Lending money out of different tenors. I mean credit markets have ticked up a little bit as well. Last week's credit spreads. I think you guys are pretty familiar with the infamous bank of America option. Adjusted CCC and triple B spread chart some upticks over there. Usually people that I know doing credit they say if the labor market goes credit spreads are going up. Right. Some correlation over there. We don't have seen this but yeah it obviously casts some stress.

[00:21:53.21] - Speaker 3
But from. So my final take for this is people are just a little bit afraid of yeah. Realized volatility because in the last years we haven't seen something like that. So it's maybe a new concept for some people that stocks can go down two or three weeks in a row and yeah buy the by the dip isn't a good strategy. Also all the passive income option sellers, I think they have some serious problems if they are absolutely maps not correctly in this market.

[00:22:33.03] - Speaker 1
Yeah.

[00:22:33.15] - Speaker 3
I mean imagine run a strategy like that unhatched waking up Monday and the spx is down 4%.

[00:22:42.18] - Speaker 2
Oh yeah.

[00:22:43.04] - Speaker 3
I mean then it's over for you.

[00:22:45.17] - Speaker 1
Yeah, yeah. This. Inside my, inside my investment community.

[00:22:54.11] - Speaker 2
I've.

[00:22:54.25] - Speaker 1
Talked about how selling puts or selling options in general in this environment is very, very dangerous.

[00:23:01.26] - Speaker 3
It's very naked.

[00:23:03.20] - Speaker 1
Yeah, very dangerous. I mean if someone wants to use leverage futures is better than selling options, so. Because at least, at least the risk is somewhat more defined there.

[00:23:20.24] - Speaker 3
I mean you have to put a little bit more margin sometimes. I also got email last week that margins are going higher now.

[00:23:27.21] - Speaker 1
All margins are much higher. Yep, margins are much higher. So I, I know the numbers. So on NQ, okay, before this tariff tantrum, overnight margin to, for one full contract is, you know, roughly, roughly 35,000. Now that number has been up to 40 to 42,000 for, for one, for one contract. So yeah, just holding the position has gone up in terms of requirements. So for those who can weather this storm, they're going to get through it, in my opinion. But the last, the last six weeks has been a very large washout among option traders, intraday players. The last six weeks have been very, very challenging, at least for, at least for folks who, who focus on the long side.

[00:24:30.03] - Speaker 3
Yeah. But also people that are trying to. It sounds a little bit stupid, but try to play the big game. And then I read takes like, wow, Vix 35. It's unusual high. Let's sell it.

[00:24:43.14] - Speaker 1
Oh yeah, but it goes to 50, right? 35 to 50, right.

[00:24:50.11] - Speaker 3
Another five points. And even if you have a position and options aiming out for like one month or something like that, you don't want to make money actually. Right. Because it's a complete new market behavior compared to your trading strategies you had. But that's the point. It's dangerous.

[00:25:15.02] - Speaker 1
Very dangerous.

[00:25:15.29] - Speaker 3
So this, this, this. Oh yeah, and last take about the bailout or if there is a potential bailout, Just quick reminder, March 24, 2023 with the Silicon Valley bank problem, it took like a week or a few days. Bank term. Funding program was tapped from all the investors, from all the people that are supposed to have problems in this market and needed more cash. In the end there was a big, big arbitrage trade going on in this. The Fed realized this at that point. But it's a funny story for me because it was a bailout facility but it was used for a big arbitrage trade. So yeah, everything is good. And yeah, I say if we have big, big problems, the Fed hopefully has our back. Right. And we almost fruit traders Versus investors in this environment. Of course, for traders, it's still something new. We have covered this, right? Elevated volatility. Some strategies are not working that good in this point. Maybe. Yeah, Iron Condors too tight in spx, you usually get blown out if they moves like last week's, but mainly spoken. It's a good environment for us, right.

[00:26:47.11] - Speaker 1
Because for traders this is a good, this is a good environment.

[00:26:49.26] - Speaker 3
So because we are slaves to volatility, right?

[00:26:52.25] - Speaker 1
Yes, yes. You need the market to move, right? In order to, to. In order to exit your position, you, you need the market to move up or down. It can go against you, that's fine. But as long as there's movement and there's mean reversion, the probability that your exit is secured is higher. As long as your target isn't unreasonably, you know, far away. Right. But yes, like you mentioned, anything that's market neutral, like Iron Condors, very dangerous. Right. Market can rip higher, it can destroy the call side. You know, market can plunge with one tweet and that can destroy the put side. So market neutral doesn't work lately. Buying calls doesn't work. Selling puts doesn't work. Going long puts has a better chance of success in this environment. But if they're not monetized at the right time, those puts go to zero as well.

[00:27:54.23] - Speaker 3
I mean, you can, you can get quickly crushed with IV coming down. Right. And then, right, like 75 of all your field trade is busted because the IVS collapses.

[00:28:06.20] - Speaker 1
Right. So the market makers in this environment have done, you can, you can say that the market makers have done a masterpiece job over the last six.

[00:28:18.11] - Speaker 3
I agree on that.

[00:28:19.17] - Speaker 1
To ensure, to ensure that as few people as possible can make it out profitable over the last six weeks. Because we can run through the combinations. Market neutral, Iron Condors, no selling puts, no selling calls, no buying calls. Definitely no long puts. Yes, but only for a very limited duration. And you have to be able to get the timing really right. Right. So the ultimate winners at the end of this cycle, in my opinion is, are the, are the people who patiently buy direct shares of gray companies and then they have a long enough time horizon where say six to nine months out, not one month or even two months, but six to nine months out. When earnings revisions are a little bit more normalized because of trade clarity. You know, people who buy in today will see the reward longer term. But anyone who is, you know, trying to use exotic strategies, that's a little bit more difficult. That's a little bit more difficult. So, so for me, in terms of my perspective, I think that, by the way, I think the Mentor queue platform is excellent. And I'm not just saying that because I'm a user, but it truly is excellent because it gives, for instance, intraday players like myself a roadmap of where the call resistance and the put supports are on a day by day basis and on a weekly basis.

[00:29:57.15] - Speaker 1
So even though option strategies might be far more challenging in this environment, if someone is a, is a disciplined intraday scalper in a fast market like NQ, NASDAQ 100 or ES, right, someone like myself for the Nasdaq with this kind of volatility environment, I go for 75 to 100 points. Right. And I go for that, you know, around support to the best of my ability. Right. For, for ES, S and P 500, I go for 15, 20 points. And with the Vix above 30, you know, these types of targets are a lot more achievable than they were when Vix was under 20. So, you know, really, really great resource from your platform Mentor, having that really nice road map on like where the resistance is, where the support is. Very, very strong resource for sure for intraday players like myself.

[00:30:51.02] - Speaker 2
Yeah, thank you so much, Larry. And we really appreciate and happy that you're leveraging it. Like, would you maybe be able to show us like how you kind of use data? You mentioned a couple of interesting data points that you use and also we can combine that with more like fundamental analysis.

[00:31:08.18] - Speaker 1
Yeah, I'd love to, yeah.

[00:31:10.11] - Speaker 2
Which of course not everybody's really using in the last few years because obviously it doesn't work. But in downtown markets, that's when fundamental comes in and can be actually very, very important.

[00:31:20.29] - Speaker 1
So, yeah, yeah, what I can do is I can show how I use Mentor Q as it relates to my own personal sty, which is financial modeling, stock selection. So before I walk through, like what's on the screen, which is my DCF model of Broadcom, my approach is very simple and I believe it's very mathematical and very logical. So if we think about the NASDAQ, right, we think about the S&P 500. These indexes have top 10 companies in them like Broadcom, Apple, Amazon, Meta, Google, and these top 10 companies within NQ and ES take up about 50% weighting of these indexes. Very, very large allocation. So essentially what I do is I try to do the best of my ability, find the fair value of the top 10 companies in the index. And when I find the fair value of the top 10 companies of the index, bear case, base case, bull case. Then I have a tradable scenario for the s and P500 and the NASDAQ. So here's how I combine my financial modeling with Mentor Q. And when I use financial modeling, it goes beyond just intraday trading, right? This goes into the scope of, you know, multi month holdings.

[00:32:43.08] - Speaker 1
So here's an example. On my screen I have, I have Broadcom in front of me.

[00:32:48.19] - Speaker 2
Make it a bit bigger, Larry. Just if you can, I can make.

[00:32:51.06] - Speaker 3
It a little bigger.

[00:32:52.15] - Speaker 1
Is this better?

[00:32:53.21] - Speaker 2
Yeah, just a little bit more, I think.

[00:32:55.10] - Speaker 3
Yeah.

[00:32:55.23] - Speaker 1
Is this good?

[00:32:56.22] - Speaker 2
Yeah.

[00:32:57.14] - Speaker 1
Okay. So I've built a financial model on Broadcom. And the way it works is I spend a lot of time understanding what is likely going to be the final year, or in Wall street terms, they call it the terminal year for revenue and the terminal year for ebitda, which is essentially free cash flow. Now, when it comes to financial modeling, there are a couple inputs that are really sensitive to what the stock price will end up being. A couple factors such as final year revenue, final year, free cash flow, ebitda. What the valuation multiple you're using is what the share count is. Because if the company is doing share repurchase, that ends up like increasing epsilon. And then of course, what is the margin expectation? Because margins, when you multiply that with the free cash flow, basically determines how profitable the company is. And how profitable the company is is going to determine the share price. So I built a financial model for Broadcom and I typically come up with three cases, okay? Bear case, base case and bull case. So these are margin levels and valuation levels based on my own interpretation and analysis of the company.

[00:34:23.08] - Speaker 1
Now this is where it becomes fun for financial modelers, right? Because they can put in their own margin expectations, they can put in their own valuation expectations, but these are the margin expectations that I have come through based on the historical data, based on my understanding of the company. So there's a little bit of a subjective element here, but these are my own figures. Now, the interesting part about my financial model and how it integrates with Mentor Q is this. So I'm going to talk about the pessimistic case for Broadcom, the bear case. Bear case in plain English means where can the stock trade if things get, quote unquote, really bad, right? So Wall street expects margins to be 67% in 2027, a couple of years from now. But over the last 12 months, margins were only 46%. So I'm going to assume that in the final year we're not going to hit Wall Street. 67%. We're just going to do last year's numbers, 45%. I consider that to be a pessimistic scenario for Broadcom.

[00:35:27.29] - Speaker 2
Okay.

[00:35:28.26] - Speaker 1
And then for valuation, despite how profitable they are, I'm going to use a 15x multiple. Super conservative.

[00:35:36.10] - Speaker 2
Okay.

[00:35:36.29] - Speaker 1
And so when I substitute those values into my model, I get a 135 to 140 value for Broadcom in terms of the value. Now here's where it gets really interesting. When I open up mentor queue, if I share my mentor queue screen. So if I like share the mentor queue platform, okay, I have Broadcom, I'm going to open up Broadcom. And I previously talked about how that the bear case on broadcom is around 135 to 140 according to my model. Okay. Of course, my model is my own opinion. It's subjective. Everyone has their own opinion, right? But if we look here, here's where it gets really interesting. We can see the put support on the mentor queue platform is 150, okay? 150. And that's not too far away from my financial model bear case of 140. So we know stocks, they go up, they go down, they move in a wide range, right? But what's really interesting is if we pull up a technical chart of Broadcom and I'm going to share my share my chart here. So here we are. I mapped out Broadcom, okay? So if we take a look at my DCF level, okay, that was actually reached in early April, 135 to 140.

[00:37:13.22] - Speaker 1
So is it a coincidence that the market bottomed at exactly my, my bear case? Well, hard to say, right? But at the very least, we can see that my bear case 135 to 140 actually aligns with the September 2024 low in, in Broadcom. Now, of course, Broadcom is well above that 140 level. But if we also analyze the mentor queue, put support at 150, okay. We can see that between my financial models bear case and the mentor queue options data of the put support, that ended up being a tremendous entry for this company. Right? And so now the way I use Mentor Q and the way I use my model is if there's alignment between my bear case and the put support, that area is a long term buying area. It's not a scalp, okay? It's a long term buy because it would be a shame to have bought at 140 and then sold at 145. Right? That's not as Meaningful. But you know, to buy something at 140 and then have it ride back to at least you know, the base case, which in my model, let me check here, my base case is closer to 1.

[00:38:39.17] - Speaker 1
190. 190. That's a really nice 25 to 30% return. Right. From, from bear case to base case. So, you know, combining my approach along with the options chain data is just one more powerful confluence that adds into, you know, separating signal from noise in this, in this really, in this really difficult market. So, you know, being able to combine the best of my expertise along with the platform that Menswear Q has to offer. Tremendous.

[00:39:16.13] - Speaker 2
Right.

[00:39:17.26] - Speaker 1
And we can see that it all aligns. So, you know, Fabio built this platform. It's, it's really, really awesome. Right. But we can see that my financial models bear case aligns with the mentor queue put support. And then the Mentor Q put support also aligns with the technical chart revisiting like for Broadcom, at least last year's, last year's swing lows.

[00:39:38.10] - Speaker 3
So that's, that's pretty quantitative right now. Right. Your model is the MQ MQ data. Is. Is there sometimes some sort of idea behind. Because that's obviously investing. Right. That's not short term trading, if I get it correctly.

[00:39:55.11] - Speaker 1
Yeah.

[00:39:56.20] - Speaker 3
Do you have an idea in your mind like let's create something out of the blue. I don't know. Nvidia, Broadcom sector semis, they doing good. Because my ID is xyz and if Nvidia goes up, Broadcom should be doing the same because sector correlations, something like that. Right. Is this something that's in your head as well?

[00:40:25.02] - Speaker 1
Yes, yes, yes. So what ends up happening is typically, not always, but if the earnings estimates for Nvidia are moving higher, the earnings estimates for Nvidia's peers are likely to move higher as well. Yeah. So it's the concept of if, if Walmart is expected to see strong retail sales, we can expect Costco to do relatively well.

[00:40:53.25] - Speaker 2
Yeah.

[00:40:54.14] - Speaker 1
As well. Yeah. So Rising tide lifts, lifts all boats. If Nvidia's AI AI suite of products like Blackwell sells well globally, then that signals that AI demand for Broadcom's infrastructure tools is also very strong.

[00:41:14.11] - Speaker 3
Because sometimes I think people aren't aware of these effects. Like when United Airlines are reporting pretty, pretty good stuff like traffic turnovers and something like that. It should be the same on Delta Airlines. Right. On Southwest. So you maybe have a trade idea out of this stuff. So it's a little bit important to mention this at least.

[00:41:39.28] - Speaker 1
Yes.

[00:41:42.12] - Speaker 2
And the other thing, Larry, that you mentioned is the use of, Obviously you trade NQ and S P. The use of our CTA's models. Yes, maybe would be great to understand how you use those and how they can be of help for traders or futures trader or so like investors.

[00:42:00.02] - Speaker 1
Sure, yeah, I love to talk about that. So on the screen here we have the CTA positioning of the S P500. And so, you know, for listeners just to make it really like educational and simple, CTA is the Commodity Trading Advisors where these are momentum funds that are trend following the market. So when the market is going higher, they buy. When the market goes above a certain moving average, they buy. When the market breaks a certain support level or falls below a certain moving average, they sell. Right. So if we have noticed that moves over the last 60 days have been amplified. Right. A lot of that happens to be CTA positioning. So what you have here on the screen, the green line is the CTA positioning and the white line is the S&P 500 level. So the white line you can refer to the left axis for the S&P 500 prices, right? And we can refer to the green line for the, the right axis, the CTA positioning. So anything over zero means that the CTAs tend to be net long and anything under zero means that the CTA tend to be net short.

[00:43:16.00] - Speaker 2
Right?

[00:43:16.20] - Speaker 1
So CTA positioning is quite helpful when it comes to understanding the overall context. You might not be able to use CTA positioning every single day to inform your decisions, but from an intermediate standpoint, a multi week swing standpoint, the CTA positioning can tell you, hey, like we're getting to really oversold levels. And not only are we quote unquote oversold, but a lot of funds are net short. Which means that any type of positive development can send the market ripping higher. Right? So we can see in early April, CTA positioning was so stretched to the downside when, when The S&P 500 was close to 4,900, 5,000 that the moment Trump talked about a bit of tariff relief with the 90 day pause that sent the market up 10%. Right. So the CTA positioning, by having it be so stretched to the downside, it, it was kind of a prelude to the fact that a large rebound could be coming. Now, of course, will the CTA positioning tell you how durable the rebound is or how sticky it will be or whether it will sustain? No, no, no, the CTA positioning will not tell you that. Only that when the rubber band is stretched too far in one direction, it tends to snap back in the other direction once some type of catalyst comes through.

[00:44:48.20] - Speaker 1
So in that sense, when The S&P 500 hit bear market territory and the NASDAQ fell 25% from peak to trough, even though every retail investor, myself included, our positioning was very, very vulnerable. It's hard to be too bearish when CTA is that net short actually. So you know, actually in that environment, even though market price action was extremely bearish and you know, losses are mounting and everything, everyone's very fearful. Retirement accounts are greatly, greatly impacted. By looking at the CTA data, I'm thinking, well yeah, I know this is bad but that's today. But a week from now things can change because of how positioning is.

[00:45:37.17] - Speaker 2
Yeah. And I think also Larry, when we see those 10% we need to also as retail investor don't just look at one data point. So the news was of course the catalyst. Right. But then the 10 move is also driven by CTA's positioning, by dealers hedging, by option flow. So the option floor in the recent weeks has been super, super high. So whenever we have those strong moves, those hedges are going to dictate the liquidity. So is the news is of course the, the catalyst but there's also a lot that goes in, in, in between that you can use to potentially understand where the price could go.

[00:46:14.17] - Speaker 1
Yeah, absolutely.

[00:46:16.14] - Speaker 2
And I think the other interesting part about CTAs is also look at correlation. So when the market was going down the Treasuries were actually being bought so we had a very strong uptrend on the treasury which is of course inverse correlated to kind of like the stock market. So.

[00:46:34.25] - Speaker 1
Yeah, yeah, very, very good correlation data on the CTA page for sure.

[00:46:41.09] - Speaker 2
Yeah. I don't know if Tim, you, you have anything to add here on, on the CTA side.

[00:46:49.29] - Speaker 3
Oh, CTA side is most fun in commodities especially oil or because CDAs are actually big players in oil futures. Most people think it's the big catchers and big inventory and warehousing portfolio managers. But CTA is a playing. Yeah. Actually the biggest role and due to the nature of like futures can behave with the term structure being in backwardation or contango if they are too short. And yeah, oil is an asset that can obviously move on. Yeah, developments coming out of the news ticker, if they are wrong footed in stuff like CL stuff can escalate quickly, quickly. And you have like five dollar moves during the day. Yeah, that's always my main take when I look at it and probably if you can show the Tables, the CTA tables. Also pretty cool. Compare the positioning with 1 month percentile, 3 months, 1 year, and the set score, which is the standard deviation, it can tell you a little bit of speed how they change positioning. Right. Because you can always say the positioning in ES was minus 2, now it's plus 2. But the minus 2 part, how far was it away? Was it a month or was it two weeks?

[00:48:22.16] - Speaker 3
Right. Because rate of change matters even more than notional change. Right?

[00:48:28.28] - Speaker 2
Yeah, yeah, that's awesome. I think for the last maybe 10 minutes, Larry, a lot of like retail traders are looking at opportunities, of course with all these sell off on Chinese stocks, but also risks. So I think would be great to hear from you. We've read the news that maybe there's even a remote possibility that ADR could be delisted as part of this trade war issue. But so for those who are holding, for example Chinese ETFs in their asset allocation, whether it's the FXI or whether it's Internet stocks in China, from your take and from your knowledge, what are the risk and what are the opportunities that we see right now with the tariff situation?

[00:49:14.09] - Speaker 1
Sure. I'm going to start off with the risks because before we even talk about reward, we have to talk about what can go wrong. And in this environment, it appears that it's very, very easy for things to go in the wrong direction. Right. US markets, even Europe and even Chinese stocks which have been relatively very strong this year, all things considered. So the risk is that if the US and China can't come to a deal, that there could be further tit for tat retaliation and that could go into the realm of, you know, possible delisting, where Treasury Secretary recently talked about how all things are on the table, including delisting ADRs. So if that were to happen, well, that would make it very difficult to invest directly in, in, in Chinese ADRs like Alibaba, like Baidu, New Oriental Trip.com. so the risk is there. And if I had to give a probability as to the likelihood of that happening, I would say the probability is definitely not zero, it's not too high. I would, I would put that figure close to 15. And so in plain English that means there's a 15% chance that US ADRs get delisted.

[00:50:44.05] - Speaker 1
And if that's the case, it could be a very short term bearish event for the entire Chinese Internet sector. Just it's going to be a huge impact. And in terms of how large the impact would be, I would estimate that it would be it could be in the realm of 15 to 25 in, in one session.

[00:51:12.11] - Speaker 2
And what, what is the impact? So for those who are holding like Chinese stock like Alibaba or JD or even like ETFs like on, on, on China, like FXI, what would be the impact if that happens? So like are you gonna lose all your money or what is like. Right.

[00:51:31.23] - Speaker 1
Yeah. So there's a lot of uncertainty as to how that will play out. So the best I can do is to give my, my, my own thoughts on this. Right? Because it's hard to say exactly what will happen. But here's how I see it. So there's the Hang Seng market where you have the Hong Kong listed tickers like Alibaba and the Hong Kong Edition is 9,988.

[00:51:57.04] - Speaker 2
Okay?

[00:51:58.12] - Speaker 1
So the primary market for these stocks tends to be in Hong Kong. The US is the secondary market.

[00:52:07.02] - Speaker 2
Okay.

[00:52:08.29] - Speaker 1
So there is a possibility that the K web etf, which is the China Internet ETF or fxi, the China etf, what they may do is they may begin to sell out of the US ADRs and they might buy the Hong Kong counterparts.

[00:52:26.17] - Speaker 2
Okay?

[00:52:27.08] - Speaker 1
So that will create less and less liquidity for, for the US China shares and all that volume is going to move into the, the Hong Kong listed shares. So in theory, in theory, as long as the Hang Sang tickers continue to normal, have, you know, functioned properly in theory, people who own Chinese ADRs might get it converted to maybe the Hong Kong listing, okay, the Hong Kong listed shares, or if they own the K web ETF or they own fxi, then actually nothing may change because the internals of the ETF behind the scenes basically converted the ADRs to the, to the Hang Seng listed shares. That's the optimistic scenario, right? But the, the pessimist, pessimistic scenario is if we recall what happened between US and Russia back in 2022 where Russian assets were basically fully delisted and they, they became OTC illiquid and untradeable and cut off from the rest of the market. And that, that kind of scenario is much more worrisome because in that scenario I actually don't, I'm not able to estimate what downside is. It could be much more substantial than what I talked about, 15, 25%. So I don't really want to give scenarios like that because that's going to scare people.

[00:53:50.09] - Speaker 1
But, but in a worst case scenario, when we use the word word worst case scenario, really anything can happen. So, so there's that now in terms of how investors can think about the reward. Right. Well, the good news is this, the good news is at least from my personal opinion that the probability of this happening is only 15%. So 85 chance that this isn't going to happen and Chinese adrs will continue to be investable. So to, to hedge that risk, right. Investors can buy calls on Chinese adrs rather than direct shares so that the capital outlay is, is less and they can still participate in the upside. Right. So there's that. And on top of that we know that China is in a pro growth economic environment. We, we know that they're setting gdp targets at 5%. Okay. We, we know that recent GDP data was actually better than expected. So they're pro growth. Whereas here in the US not that we're not pro growth, but it's a little bit more mixed, mixed signals. Okay. At best.

[00:54:59.21] - Speaker 2
Okay.

[00:55:00.08] - Speaker 1
More, more protectionistic. So because China is pro growth, it tends to manifest itself into a market structure where dips are bought where if we look at the Hang Seng, the biggest sell offs are external. Okay. They're caused by US tariff turbulence, escalation. But before the US raised tariffs to say 245% on China, the Hang Seng was very, very strong. And you can see in the market structure that dips are being bought, higher highs get even higher and investor confidence is actually strengthening. I would say that opportunities continue to exist but for American investors, for European investors. Here's how I would think about it. Maybe take a look at call options, longer term call options on the, the U.S. aDRS so that capital outlay isn't as large in case a delisting really does occur. And, and so if, if you know there is a loss, it happens at the call option level. So okay, call option goes to zero. Fine. That's better than, that's better than, you know, several hundred shares of Alibaba going to zero. Right. Not that that's going to happen because it's going to trade on the Hong Kong exchange at the very least.

[00:56:24.12] - Speaker 1
But yeah, call options going to zero is better than a 30 haircut on a large Alibaba Direct shares position. Now in the, in the Hang Seng market, there are a couple companies that have very strong outlooks. So because if the US is going to limit semiconductor, you know, products to China, companies in the big tech space over there like Xiaomi, Alibaba byd, they're going to take a hit in terms of their R D development and pace. But long term this might actually, they might actually have Government support, they might have fiscal support. And that's very bullish long term. So. So if China is actually going to invest in their own consumption economy and they're going to support their big tech names because they're, because their big tech names aren't getting the semiconductor resources from the US you can say macro is on the side of Chinese Internet companies for sure. And the valuation is not demanding either. It's not demanding. So when you combine undemanding valuation, macro tailwinds, you know, it's a pretty strong case that, that China stocks after the recent sell off is quite attractive. So that, that just has to be balanced with the fact that, you know, there is a correlation between Chinese ADRS and the NASDAQ.

[00:57:53.11] - Speaker 1
When the NASDAQ falls substantially, we can't expect Alibaba Baidu 10 cent new oriental trip.com to escape that. But it, but if the NASDAQ is at the very least flat, we're talking about flat tape. It doesn't even need to go up. China can go higher.

[00:58:11.03] - Speaker 2
Yep, makes sense. All right, I think we, we have a couple of minutes left and I think I want to share your, your page again because I think it was great. So if you guys want to follow Larry, definitely great content on your YouTube, on your substack here, you can find him and if you have any questions, please send us an email and we can send you the links as well. I don't know if you have anything to add Tim, from your end and if not, basically I really thank you Larry because this was awesome. We combine a little bit of everything, macro, fundamental with data that can be used by investors. So I think this was a really great, great webinar. Thank you so.

[00:58:58.02] - Speaker 1
Yeah, yeah, thank you. And you know, for our friends listening.

[00:59:01.19] - Speaker 2
Right.

[00:59:01.26] - Speaker 1
There's so many different styles investors can use. Fundamental analysis, technical analysis, option flows, financial modeling. Right. And you know, I use financial modeling as my primary way to analyze markets, but complementing it with the option flows from Mentor Q gives me that additional confluence to make me more confident that this entry isn't just, you know, a financial modeling conclusion, but it's also supported real time option flows. So, you know, Mentor iq, definitely one of those tools that investors can benefit from.

[00:59:34.02] - Speaker 2
Thank you. And thank you again. And thank you Tim for being part of this webinar. Loved your comments as always. And for those, we're taking a break tomorrow and Monday. Have a really happy Easter guys and see you back next week. And thank you, Larry.

[00:59:49.12] - Speaker 1
Happy Easter everybody. Happy Easter.

[00:59:52.02] - Speaker 3
Appreciate it guys. Happy Easter from me. Too. And. Yeah. See you soon.

[00:59:57.11] - Speaker 1
Thank you. Thank you. Bye. Bye.

[01:00:00.14] - Speaker 3
Bye.