Lee Munson on EV investing: 'Forget about what car manufacturer is going to win'

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Lee Munson Portfolio Wealth Advisors Pres. & CIO joins Yahoo Finance to discuss how he views EV investing, inflation and other trends in the markets.

Video Transcript

ADAM SHAPIRO: Let’s talk about all of the action that we’ve been watching, not only this week, but today, and then look ahead so that we can make decisions about where to put our money. One of our favorite guests, Lee Munson, Portfolio Wealth Advisors President and CIO is joining us. And Lee, I know I have to nudge you to don’t be shy, feel free to share your thoughts about things. Let me just talk, let me ask you real quick, where we are at this moment in time.

Because we’ve had a lot of guests say, we’re going to have a melt up at the S&P 500. I’m looking right now, we’re at about 4,700. We had a guest yesterday saying, look, 4,815 out of possibilities. I mean, anything’s possible, by the end of the year. What argument would you have us as average investors consider?

LEE MUNSON: Well, come on, you had your chance in September, the China scare around September 20, 21. We’ve had all these opportunities to buy low when we’ve had this corrective action and now people want to know, you know, should I be committing capital? So I don’t have a lot of, like, you know, a lot of feelings for people who haven’t been jamming it in all summer.

We had six months where the average stock did nothing but go sideways or flat and now we’re asking this? I do think we’re going to get a melt up, I do think you could see S&P– I don’t know, I don’t have any projection. You can see the S&P at 5,000, that’s not out of the question, but we have to ask, why and where? Right?

I would say that if you look back at the asset classes that are doing well, that aren’t just know overpriced, a little dodgy and requires like today, the 10 year yield going down for tech stocks to go up. But just look at the cyclicals, look at the banks, look at stuff like small value. Small value, that index, I like this one from Vanguard’s. The ticker is VBR, but that’s not important. The point is, is that it’s done just as well and slightly better than the NASDAQ year to date.

And a lot of people don’t know that, a lot of people are not aware that a lot of stodgy companies are rivaling that of your main tech indexes simply because going forward, I don’t care about yesterday, it’s day one. I want to know how I’m going to make money in 2022. When you have companies that can pass along price hikes to their client, to their customers without a sweat.


LEE MUNSON: That’s the area you want to be and that’s why you got to be pro cyclical. And fortunately, for the S&P, 70 plus percent of it is not in the FAANG stocks and that’s what I think will cause the melt up, not necessarily a few names. I think today, you see small caps selling off a little bit and we know why. Because the 10 year is going down. But when the 10-year hits 1.8, 1.9 next year, what do you think is going to happen? You think tech’s going to be up big and all the value stocks are going to be down? No, no that’s not the way it works. This year has proved it over and over again.

ADAM SHAPIRO: I want to ask you, because everyone seems to be hot on electric vehicles, Rivian is trading higher right now, and yet there’s that report that, oops, we kind of overestimated the range for at least our delivery vans. The vehicles, if you turn on the heating or cooling systems, drain 40% faster than had originally been thought. But I get it, you’re not buying Rivian, but is there a way to play EV? Would it be buying a lithium mining outfit or is there something else you would advise people to consider?

LEE MUNSON: I would. My God, I hope he’s not watching right now, but the guy who owns the place where I get my dog groomed, I dropped my little 3 and 1/2 pound chihuahua off in the morning and he likes to fiddle around, he likes to ask me questions. And today I said, so what are you doing? I always ask him, what are you buying?

Because he’s, like, a regular dude. He’s like, the big three. And I’m like, what’s the big three? And it’s like Rivian, Tesla. And he’s talking about, like, well I’ll buy it and it’ll be fine, because it’s going to go up.

It’s going to happen. And I remember people saying that about a lot of tech stocks like Cisco, and Oracle and Intel back in 2000 as they have never yet hit their high water marks. I like the commodity play, because one thing is going to happen. As we have to build out this new, green future, copper inventories are going to go to zero by late next year. Everybody knows it.

There’s a great analyst over in London at Goldman Sachs who can show you the numbers. And no matter if Rivian turns out to be whatever, or Tesla keeps moving, or whether Ford pops out a lot of electric vehicles you’re going to need those base metals, you’re going to need that stuff. And so I would look more into the commodity play. And remember, you need many more times copper to put into these cars than you do for an internal combustion engine.

So it’s kind of like by the pickaxes, not try to be the miner. I would say, look at what must happen. If we want to build it out, forget about what car manufacturer is going to win and think about who has to come up with these materials to get in there and those things are going to be scarce soon. You know what the problem, though, is?

A lot of this commodity nonsense, it’s in weird countries, a lot of them are small stocks so it’s problematic. But I’d rather have to do my homework on some dodgy Argentinian mine to see if they’re lying about the numbers then pay a multiple on Rivian where it’s, like, I could get GM and Ford. Forget that. It’s like, it’s worth more than Citigroup. Say what you will about banks, but come on, let’s get real.

ADAM SHAPIRO: Just make sure you’re trading in dollars with Argentina. You can’t even buy Argentinean currency in the United States. Real quick, you like to point out to people when we talk about consumers and in people who might be looking at retailers with the holiday shopping season now in full force, deferred spending. Explain to us what you mean by the deferred spending and how we could play that.

LEE MUNSON: Oh my God, OK. So, think about it this way, everything that you can’t get now, you’re not going to not buy later. Think of if you have to buy a toy for your kid and it’s all sold out. You’re going to get it when it comes due.

If you need to do a house remodel and the contractor said, I can’t even talk to you about your project till late next year. My pool contractor who’s finishing my pool, because I was early, because I know what I’m doing, said, he’s now accepting deposits for 2024. 2024 to build a pool. That’s deferred pent up demand, right?

Peter Lynch used to teach me about– And I mean, back as a kid, I read all his books, and he used to talk about waiting for the auto inventory in America to get really old. Because you’re like, they’re going to have to replace their cars. This is the same idea from back then, only has to do with supply chains. So we have another 12 to 24 months where the ports aren’t going to get figured out.

I mean, come on, Long Beach and LA, they are the worst ports of efficiency on the planet. They’re worse than Tanzania, OK? And that’s just– That is a fact. So we’re not going to fix that any time soon.

So when you’re looking at, where are earnings are going to be next year? Because I got to go make money. Where are we going to have– Where is that going to happen? You want to look at things that have plenty of demand going forward, where that demand isn’t going to drop off like Peloton.

We all know who you are. And where that demand is going to stay there, but also, you want to have consumers not ask how much it costs, you want them to ask, is it in stock? So we have this golden moment where we went from a service economy to a goods economy. It’s going to continue for a few years, so invest accordingly.

That’s why small value is just sort of a general asset class with a lot of stuff in it is doing as well, and some days, slightly better than the NASDAQ. The only thing is, it’s got legs next year. I’m not sure if long duration assets, all of FAANG stocks are going to have that type of mojo when the 10-year starts breaking above 2%. It’s just, there’s easier ways to make money with real companies that sell real stuff that can raise the price and keep their margins fat and make profits.

ADAM SHAPIRO: It it’s always good to have you here. I just wish you would speak up sometimes. I mean, you’re so shy. Lee Munson Portfolio Wealth Advisors President and CIO. Until the next time, have a wonderful Thanksgiving.