Ryan Payne predicts a ‘slowing’ in the US auto market: This will be ‘good for the consumer’

Welcome back to the sign for the Word on Wall Street Top investors watching You Money. Joining me now is Pain Capital Management and the host of Pain Points of Wealth podcast, Ryan Payne back with us. Also with us this morning is Adam Johnson and Kenny Polkary. Great to see everybody. Thank you so much for being here. Thank you for joining the conversation. Great to be here. We've been chatting all morning, this morning. But Adam, I want to get back to what we spoke about a minute ago because the S&P 500 and the NASDAQ were higher yesterday. The NASDAQ was on fire. It was up 220 points because NVIDIA LED a rebound after that three day sell off, of course, on top of two years of gains. But the company did lose $430 billion in market value in three days, and that caused volatility in semiconductor stocks. Look at the chip stocks this morning because I want to get your take on chips right now. I know you say that AI stocks could cost more, but they are also worth more. So you've got a list of the top 10 AI stock picks, right? Yeah, I absolutely do. And the reason is that I've gotten so many phone calls from people over the past couple of weeks saying, hey, AJ, what's the next NVIDIA? And I said, well, there are a lot of them out there. Is it really? So I actually put together the list, my top ten. And what I found is and and you know, Super Micro Computer, Marvel Technologies, Celestica, they're out there, believe it or not, even AMD and Micron, although NVIDIA would be a much better solution to those. You got Marvel, Microsoft, AMD, Palantir. Absolutely. Yeah. And and if you look at these ten top AI stocks, what you'll find is that they trade at an average PE ratio of 32. The S&P 500 is 21. You say, oh gosh, it's a lot more expensive than the S&P, Yes, but the growth range is anywhere from 25 to 200%. So you're paying more, but it's worth it because you're getting more, so much more growth. The S&P will probably grow about 10% this quarter. Would you rather pay 21 times to get 10% growth or pay 32 times and get 100% growth? And that's my point. So was the sell off in NVIDIA over that three day period a drop in the bucket? Did did it matter? No, to answer your questions directly, no. I mean, people forget that NVIDIA went down 25% in the month of April. Not only did it regain that 25%, it went up another 60%. So an 85 percentage point swing. That's incredible. So for it to just come down 13% / 3 days, fine. That's just the way markets work. All right, AJ, I like AJ Ryan, what do you think? And by the way, you have to tell us what you think in the context of a slowing economy, right? Because let's look at the economy. And US auto sales expected to slow during the second-half of the year, they're increasing by 1.3% over the next six months. And the feds favored inflation measure, the PCE index is out on Friday. The expectations there call for a gain of 110th of a percent month over month and 2.6% year over year. Ryan, so your thoughts on all of this? Well, I think First off, the auto market is kind of interesting, right? Because we had this huge shortage during the pandemic. Everyone need cars. People moved out of the city and you were paying like top, top price for automobiles. Now, you know, you supply chains have been normalized. You have a lot more inventory and the Fed has raised interest rates a lot. So financing a car right now costs a lot. So there's no surprise that you're going to see a slowing in automobile sales going into the rest of the year, which actually should be good for the consumer because prices should start to come down. And I think, you know, bottom line is we look at the consumer in general. We haven't been spending on goods, we've been spending on services. And if you look at that consumer confidence index that just came out, people are going to spend me on trips this year, not on appliances, not on cars. So I think that trend continues where the American consumer is going to spend on services. You're still light on spending on goods. But you know, everyone in that survey this past week, consumer confidence survey looked at, they still believe inflation starting to moderate and they also believe the employment market is going to stay strong. I think that's the combination that drives this economy. If you look at that GDP now growth indicator, it's like 3% for this quarter. So I think economic growth is going to stay strong. I think people are still going to be sad because I think they don't feel good right now because auto prices are up. If you look at energy prices are up, housing prices are up, you know, food costs are up. But if they're going to continue to spend, and I think that's what drives the economy, that's what's going to keep this economy in check. Well, I mean, just looking at autos and you say autos, autos, sales and the market will slow down. Does that mean auto insurance will slow down? Because that that's really been the issue, right? Auto insurance is one of those things that's outsized in terms of gains within inflation. And, and we're talking about inflation. Treasury Secretary Janet Yellen, who who we're told reportedly is worth $20 million, by the way, she said she goes to the grocery store every week, but she's not shocked at all by the rising prices. Watch this. Have you been to the grocery store lately? I sure have, I do every week. It's sticker shock, isn't it? Food prices still remain high. I know they're not rising at the rate that they were last year, but they're still up 20% from pre COVID. So should the US invest in agriculture to boost the food supply in this country? I think largely it reflects cost increases, including labor cost increases that firms, grocery firms have experienced. Although there may be some increases in margin, I would be reluctant to agree that we should be involved in subsidizing food. Inflation is up better than 20% since President Biden took office. Kenny, Right. And no, no. And to be clear, and everybody understands that, which is what I'm saying is, you know, we all experienced it every day. So they tell us what they want to what they want to tell us. Yet we see what we see and we pay what we pay. And to your point about car insurance and auto insurance rates, it's unbelievable. The cars have become more expensive that much more technology has more technology. So, so, so, you know, my wife got in the car. She had rear-ended on 95 down in Florida, which I thought wasn't really when I looked at the car, I thought, OK, it's not really that much. It was $25,000. The, the, the, the, the trunk and then all the, the cameras in the back, all the stuff that I'm going. And it was nuts in terms of what it costs to fix the car. And I thought to myself, why don't we just total the car? But they wouldn't total the car 25,000 bucks. I'm looking at the cargo $25,000 and it, and it's because, but it's all the technology. It's all the technology that's in the car. That's interesting that you know that that causes. And so the rates are sky high. Yeah. No, no, 100%. I mean, that's where inflation has been stubborn, right? That's where we haven't come down. But shelter costs should continue to moderate. The PCE number on Friday should come in around 2.6%. Yeah. But not according to Michelle Bowman. Now, she thinks that all the the immigrants are going to cause rents to go up. So shelter costs are actually potentially going to go up. Yeah, but you'll get it on the overall. We've overbuilt in some places in the South. So if you look at the overall country, you should see that continue to moderate. If you look at any like recent rent, like Zillow has their own index, it's also showing that's moderated as well. Are rents coming down in New York City? No, no, no. I want to believe that rent is coming down. Steve Schwarzman told me this, you know, a long time ago. He said, look, we're the, you know, largest owner of commercial real estate. And I can tell you for sure rents are down. OK. So I came back and said, look, Steve Schwarzman is the largest owner of real estate. He says rents are down. They're not. It hasn't caught up yet. Maybe it is coming, but it hasn't caught up yet. We'll see. Yeah. Great to see you guys. Thanks. Thank you so much. Ryan, Payne, Adam and Kenny, you're with us all morning and we're grateful for that.