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NVIDIA earnings, those are out Wednesday. So to discuss how investors should be positioning themselves ahead of that major report, we have Max Wasserman, Miramar Capital co-founder and senior portfolio manager. Great to have you here in studio with us, Max. You know, first and foremost, I mean, just the setup going into this earnings report, it seems like once again the AI poster child is the bellwether for this earning season. And if that is still the case, where else should investors be looking around and through what NVIDIA says to other companies that it could impact too?

Well, I think, you know, we don't have an investment currently in NVIDIA. We have some other chip investments, but the hype is there. And since it is the bellwether, it's not just what they report, it's what they're going to project. So the guidance they're going to give is is continue to growth rate and the margins. And they're going to want to update on that black belt chip, to see if, you know, they can still keep 75% margins, if the growth rates are accelerating or did it peak? So the problem that we see going into it is the hype and asymmetrical return. So if you're going into it, if it does well, it's already expected to do well. If it disappoints, then we think it affects the valuations and the rest of the stocks are invested in AI. And that could do a little bit of a pullback because everybody's so focused on this, it doesn't give you a lot of room for error. And that that concerns us.

What does that mean for volatility elsewhere if we do see a disappointing print from NVIDIA?

Well, then I think people are going to start re-examining the multiples, they're going to apply for the Microsofts, the Apples, the Broadcoms, and other AI stocks. They're going to think, are we too high, are we too optimistic? Is the valuations just too big for what we're seeing in the growth rate? Did we pull forward too much in the earnings from for forward years? So I think if they show you a chink in the armor, then people may say, maybe we need to take a couple of multiples out of points out of that and bring the Nasdaq down a little bit. Long term, AI is definitely a growth engine, but at these multiples, I don't believe there's a lot of room for error here. And as an investor, I'd be cautious going into the print.

We were just discussing with our own reporter, Carrie Hannon, just what the setup is for this market right now, more broadly, as it relates to this first rate cut that's anticipated and and kicking off the Fed's cutting cycle here. What does that do in terms of portfolio positioning that investors should be evaluating right now?

Well, a short-term cut of 25 basis points is just sort of a signal. The investors should be looking at is the Fed going to try to bring it into the neutral rate, which is, they're saying that if the Fed funds rate is roughly about 5 and a quarter, the Fed is saying that inflation is a little bit below three. They're looking maybe for 200 basis points cut over the next 12 to 18 months. So as an investor, we would start saying, expand the short-term 30, 60-day outlook and look for the next 12 to 18 months. What does it mean if money market rates come down from 5% down to three? So we would encourage investors, and we're dividend investors, look for alternative ways to get yield than just short-term paper, right? So we would tell them, look for dividend stocks, look for places they're giving you higher cash flows that are growing. But investors need to take a longer look than the next 60, 90 days, which tends to be very volatile. See what the Fed is doing, are they going to accelerate? If they look like they're really going to start heavy cutting, then they need to look for alternatives because the market's going to react quickly to the Fed funds rate. It's not the quarter that they're going to do, it's the guidance they're going to give.

The sector that jumped on the Fed and Fed chair Jerome Powell's Jackson Hole comments last week was real estate investment trust, was XLRE. And so what do you anticipate for how real estate could react to the beginning of this cutting cycle as well?

Well, you know, you got to look how they're financed. Everybody's financed through debt, right? And so every time a REIT comes up with a new offering, it's either equity and debt. So lower cost of capital to them makes it a better return on their investments. Also they're hoping that refinancing, it depends on what type of REIT it is. All of a sudden, if interest rates are coming down from 7% on a building to 5%, that frees up more capital for them and make them a better return on capital. So anything debt heavy that has to reset their cost, that's going to be very favorable. That's why I think you see REITs. That's why I think you see utilities. That's why you see maybe consumer staples, and those things are positive reacting because lower interest rates benefit their balance sheets.

Max Wasserman, who's the Miramar Capital co-founder and senior portfolio manager. Max, great to have you here with us.

Thank you so much.