Speaker 1: 0:00

Felix and Winston here, and there are accusations against AMD out there on social media by relatively respected people who are basically saying, not only were these earnings not stellar, but they're actually cooking the books, and I think it's worth examining that for a few minutes. I'll do that for you, I'll break that down for you and I'll tell you my conclusion on it, because I think there is a lesson in it for every stock out there and for every investor. So stick around. We will also look at some of the other key things that are actually moving the market here. So there's a little bit more, even for people who are not into AMD. But it does affect not just AMD but the entire semiconductor sector, the entire AI sector. So this does really matter when people throw these things around. But before I do, I want to take one minute to show you probably the most important chart out there that nobody knows and understands, and I'd encourage you to take a screenshot of this.

Speaker 1: 0:51

The profit revisions, profit expectations compared to analysts of the MAG-7 are going up and up and, up and up. If you take out NVIDIA, it is not quite as glorious. There's quite a big gap here, which is entirely NVIDIA, but still pretty good. So the Mach 6, if you will, but the S&P 500 is actually disappointing us. And if you take the S&P 493, which is the 500 minus the seven magnificent ones, you actually see that profits are miserable and we're expecting about a 2 to 3 percent profit growth for the S&P 493. Now what does that mean for you who here owns an index fund? Now what does that mean for you who here owns an index fund? If you do put an eye for index funds in the chat or in the comments, and then we can see it and of course it's the majority of people. I own some index funds. So we all inevitably own some of these 493 stocks that are basically just doing 2% to 3% growth.

Speaker 1: 2:00

You got to ask yourself do you want 2% to 3% growth? Do you think that's going to make you wealthier? Do you think that's going to allow you to retire? Do you think that's going to allow you to live a beautiful life? Or do you think you're going to need a little bit more than 2% to 3%? Because if you want a 2% to 3%, well, you could just buy US government bonds, which would pay you like 4% plus right. So most people have a majority of their money tied up in failing investments. Look at your 401ks. What are they in right? What's in your IRAs and all your investment accounts. And to fix this, we need to take a little bit more control of our money that we've spent our entire life working for, and it's the one thing that's allowed me to replace my corporate income. It's literally just taking more control.

Speaker 1: 2:45

So for those of you who want to figure out how to do that, I'm running a special training on Saturday It'll be very different to any other training I've ever run in which I will break down for you how we can just do that, and it's on Saturday at 10 am, new York time. There's a link down below felixfriendsorg training and you can sign up for that while there are still spots available. There'll be no replay, so if you don't show up, you won't get to see it. Why? Because it's live and I see the data, the replay people. They skip, they don't watch, they don't get the whole thing. It's pointless. If you show up, if you care, if you are determined, you'll show up. If you don't, maybe you'll do it some other time if we ever run one of these.

Speaker 1: 3:23

Again, it's the link down below felixrunsorg slash training, so let's run through the AMD numbers here. Okay, so, first of all, amd reported a $872 million in profits. Right, $872 million for the quarter, million for the quarter. But if you peel back the layers, it's mostly smoke and mirrors from one-off boosts, accounting gadgets, not from actually running the business. Well, how did they manage to do that? Well, they got a tax windfall of 834 million. $834 million, that's a tax windfall, so some sort of rebate Well done accountants. Or rather, I think they just released some money from their tax reserves. It's like an internal thing. So nice surprise. But it's not from selling more chips or cutting costs, it's just sort of that. Right, they also have another 104 million and, by the way, my conclusion on AMD is common.

Speaker 1: 4:31

I just want to explain to you the facts here. These are from basically winding down some of their business. So part of the business is that they don't need any more and they're up for sale, sort of tackling. 104 million come from that. So again, you're cashing in kind of on an old asset. It's not corporations, and without these, amd actually had a pre-tax loss. So it's a little bit like claiming you're rich because you found $1,000 in your couch. You sold your car and your house. Your wallet is fuller, but it doesn't mean your job is paying you more or well, so slightly puffed up profits. That's the first part.

Speaker 1: 5:12

Now the second part. There's a little bit more to this and I'll show you what the actual numbers are. I need to make a little bit of space here. The second part is cash flow, and one of the things I really care about within companies I invest in is cash flow. Cash flow, and one of the things I really care about within companies I invest in is cash flow. They said they have strong cash flow, which is, by the way, if you don't know what cash flow is, most people don't. It's the actual money coming in and going out of the business and then what's left over, and it's different from profits. You can be very profitable and never have any cash and never have any cash.

Speaker 1: 5:51

But they've done some tricks here too. They have sold 330 million essentially customer IOUs, so money they were going to collect. Later on they sold that to a third party so they would get the cash. Now Completely legal, but it's still a little bit of a trick. It's a bit like pointing your paycheck 10 days in advance. Right, get the money now, but well, at some point it's going to come out of your future cash flow, right, paying suppliers. So they delayed supplier payments to the tune of 836 million. So again, it's a bit like maxing out your credit card and then calling your bank and say can I please have a grace period? And for some reason they give it to you. It's temporary, but eventually the bills are going to have to be paid. So again, the cash flow number looks a little bit fluffed up, right, not really genuine strength, payday loan type stuff.

Speaker 1: 6:52

Now the second thing, or the third thing rather, is they had to write down some inventory. Because the US export bans and so on, they can't sell certain chips, so that stock is now worth less. But their overall inventory and, by the way, similar accusations have been thrown at NVIDIA, and obviously NVIDIA is doing very well, so I'm not saying this is the end of it, but it's something to understand so inventory has gone up by 6.7 billion, which is well, good or bad. Well, combine it with this the. There's a thing called days sales outstanding, and it means how long does it take for customers to pay? Well, that went from 91 days to 60 days, so customers are paying faster. Isn't that brilliant, amazing. But if you combine faster payment with significantly higher inventory, it does smell a little bit like channel stuff, which is what a company does when they basically push extra product into distributors or retailers to book sales now, even if the end customers aren't buying it yet.

Speaker 1: 8:08

Common strategy, completely legal, like a carmaker basically flooding its dealerships with vehicles to hit their quarterly targets. Right, the dealer might accept them, but it might hurt future sales, right? So what's the story here? Well, you've got shrinking margins, you've got fluffed up cash flow, you've got flushed up profits, but AMD is a business in change. It is a business that I believe will actually grow. So, yeah, all tricks, but not really tricks I haven't seen before. And the same people who made this accusation, as I say, made similar accusations against Nvidia about a year ago. I also covered that because I always think it's good to look at the other side of the story. So, yes, they're trying to polish the pig a little bit you know, lipstick on the pig, that sort of thing but more money has been lost waiting for a crash than an actual crash.

Speaker 1: 9:06

So, in my humble opinion, I'm going to keep investing in semiconductors. I'm going to set stops to manage my downside risk. Frankly, I am not too upset with the from our last entry point here at present, even after the dip, the 35% gain in the last 38 trading days on AMD. So, yes, I am bullish on semiconductors, I am bullish on MMD. Let's see how hard the pullback is. If it's really hard, I'll be out of it and you might want to consider that too.

Speaker 1: 9:37

But I do think and this is a little bit of a word of warning here that as a long-term buy for those of you who just want to buy and forget stuff I still think Nvidia steals the show and I think AMD is a follower who may catch up, but they also may not. So it's a bit like going what's the next Tesla? What's the next Amazon? What's the next Microsoft? What's the next Amazon? What's the next Microsoft? What's the next Palantir? Well, you might as well buy the primary stocks, because at least they're a proven model and NVIDIA is an insane business that is very, very hard to replicate. Now let me run you through a couple of other key things here. By the way, if that was useful, put a? U in the chat or in the comments down below. Thanks, sephora for put a. Put a you in the chat on the comments down below. Thanks for for that and is a bit of a bit of a cautious word for those of you who are going all in or are all in the market right now.

Speaker 1: 10:32

Every single august, what happens? Those with lots of money go on holiday. Yes, they do so every single year. This was in 2021, liquidity so how much is actually being traded goes up at the beginning of the year and then, as we hit the middle of the year, it comes down pretty sharpishly because the bankers are on holiday. If you're not seen on a yacht off Saint-Tropez or Monaco or somewhere else, you are a loser in that circle and therefore you have to be there.

Speaker 1: 11:03

So what are we seeing? We're seeing a pretty sharpish correction down in liquidity, and Goldman Sachs expects that to continue and to fall further and therefore, if one little thing breaks or snags in the market, there aren't any buyers. There are only sellers, and very few of them, and when they sell, the market could tank bigly. It doesn't have to, but it is something that makes August riskier. September also not much better. On top of that, the algo funds, which are also known as CTAs. Well, in the next week, if the market is flat, they are going to be selling. If the market goes up, they're going to be selling. If it goes down, guess what they're going to be selling. What about for the next month? Well, flat and down, they're still selling.

Speaker 1: 11:55

So, unless we get a big, beautiful green market because trump pumps it or something, or earnings come in even more and better than expected and a word on that in a second the outlook is a little it's a little cloudy, I would say a little cloudy. So again, bear that in mind. Right information very few people look at, but there is some goodly news out there, and that is this every quarter, the analysts, the Muppets who sit in little cubicles inside investment banks and who come up with random price targets and expectations for companies on the basis of you know what their mom told them that morning it's a little bit more scientific than that, but not a lot honestly they come up with expectations for profit growth and they were expecting in their motherly wisdom that we would get four percent profit growth. Now, so far, we are getting nine percent. It's nine percent better than four percent, yes or no? Um, serious question. Yes, of course it is. So therefore, the market looks pretty good.

Speaker 1: 13:03

The main thing is that profit growth keeps going up, and Albert agrees with that, as he shows you his derriere. It's a bit rude, albert. You might want to stand the other way around. This is the largest cat I've ever had and he's only about a year old, aren't you? So I'm not a doom and gloom. I think this rally's got legs. I think there might be a temporary setback. I think there might be a temporary setback. I think there might be a temporary slowdown, and we like those. They allow us to position ourselves in the next big thing. And, if you note, for example, gold went up on the not-so-nice day yesterday. Well, guess what? We like gold. We are in gold, aren't we, albert?

Speaker 1: 13:40

Here's my chief gold analyst. No, I have a mentor who used to be a market maker on the London Metal Exchange. He knows more about gold and silver and other metals than anybody else I've ever met, and that's tremendously helpful. So, really, what it's all about? It's about learning, it's about improving your skills, which is why he's paying so much attention. He wants to be a. What do you want to be? You want to be a small sardine trader, something like that. Probably right, although you'll eat most of them. So all I'm saying is invest in yourself. That's way, way, way more important than chasing the latest thing and whether or not Figma is going to go up or down or any of the other latest stocks out there.

Speaker 1: 14:21

We can also have a quick look at the VIX, the V-I-X, which is the fear index, and at the moment that's at 17, which is a level that is saying to us the world isn't over. Good things are coming. The S&P itself, even though down a little pre-market here at least not looking terrible it's at just under $6,300. Whereas the support it's exactly where it's about $4 below where it's trading. 6295 is the market maker support which held yesterday.

Speaker 1: 14:54

If you looked at QQQ, you can see or you can't see that. I'm sorry, I have to go back. You can't see that, let's do those again. So let's go back to Vix is at 17 40. That's pretty good, right? We look at the smp. I've got to share my screen with you, don't? Maybe that's what he was trying to tell me, and that is. There's a support and resistance line here, which is something you'd only get in, uh, in trade vision, which is a software that we build, and you can see the support here is at 6295, right, that's the number that matters there, right? So that's important.

Speaker 1: 15:29

And qqq is also, well, actually not looking so happy this morning. It's dropping a bit here to 558, possibly below that support. 560 is the support. You're going to want to close above that for the world to continue to be a wonderful place, at least for the next couple of days. But in the long run, I think this market's got a lot of legs. That's just my humble opinion. Not every sector, most sectors actually probably don't. But the right sectors do the right stocks do so. All I'd encourage you to do is, well, join me on Saturday. Felixfriendsorg, slash training and Albert and I here. This is Albert will open your eyes to what is actually possible and to what we're missing out on because you've got your money sitting in your 401k or some other godforsaken place that's killing your future. So, on that happy note, albert says thank you for watching.