The story behind the interview:
The world is changing and the stock market is finally catching up. Kirk and Brian discuss where the dangers lie and where to look for opportunity.
For those who prefer to read, my full interview notes are copied below.
Link to Kirk's original article:
Kirk called the last two crashes and is predicting 2020 as the next
There is this idea that if you are 60, your portfolio should be different than if you were 30. The reality is that a good investment is a good investment
Right now, bonds are a bad investment
You don’t want old economy stocks: ones that are highly capital intensive and no moat, are overpriced and indebted, are not specialized, and have too much competition. Get rid of these companies.
Sell Caterpillar (CAT). It's a cyclical company that is being hit by the decline in coal and could end up back in the $60s.
Sell Transocean. It will never rebound. We are at a different place in history, we are at the beginning of the end of the oil phase. There are around 10-20 years left. Most of the easy ocean oil has been drilled, new projects are too expensive. Companies don’t want to finance these high-cost products knowing oil is on the decline.
EVs are getting better, solar, batteries, etc are getting better and cheaper. Expect a big breakthrough in years that will boost EVs, etc. Expect governments to continue to support and boost EVs, etc.
This is the last bull market in oil. Buy the short cycle drillers (ex: fracking) and EPs. They can be breakeven on a project in a year or so, but this will last a few years only. Kirk likes Occidental (OXY) and Pioneer (PXD) and Encana (ECA). Gundlach likes SPDR S&P Oil & Gas Exploration & Production ETF (XOP) to play the field. These earnings will level off in a few years.
Dividend growth stocks are only growing due to financial engineering
Ex: Coke (COKE). They have a dividend, but no growth, and bad revenue. We just came off a decade of free money. They now have a big debt. We just had a big tax break. Eventually, the tightening financial environment will catch up to them.
The real money is in technology: IoT, Blockchain, Edge Computing, AR, VR, Smart everything, Alt energy, Smart grid, etc.
Expect a huge catalyst for AT&T (T), Verizon (VZ), and CenturyLink (CTL). The new range for AT&T will be $40s-60s in coming years. Their revenues already cover the new debt from Time Warner (TWX) deal. The pipe owners will make the real money on the content.
Kirk is currently a net seller. Most clients are in 25-40% cash. Risk-averse investors should take profits as the Fed and Central Banks are becoming less accommodative.
Reasons for caution: We don’t have the tailwind of super cheap energy, tariff wars could become a big problem, tailwinds are going away, and headwinds are increasing, the marginal buyers are disappearing (less Fed money and China pulling back), the buyback bubble bursting, massive insider selling as they use corporate money to buy the same stocks
What to do now? Sell your grandpa stocks, take profits and wait for a correction, sell your losers and keep your winners, keep a shopping list, and remember you don’t have to always be invested.
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Disclaimer: This article is for information purposes only. There are risks involved with investing including loss of principal. Brian and Investor in the Family make no explicit or implicit guarantee with respect to performance or the outcome of any investment or projections made. There is no guarantee that the goals of the strategies discussed by Brian and Investor in the Family will be met.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.