Predictions Are for Fun, Not for Portfolios | AWM Insights #254

This week Justin and Mena tackle the hottest market headlines, from SpaceX's eye-popping valuation to the effects of oil prices and inflation on investor portfolios. Backed by real data and hard-won experience, they break down the numbers, challenge the market hype, and share why disciplined decision-making trumps short-term bets for building 100-year family wealth. If you’re ready for candid opinions, memorable lessons from the field, and strategies to protect your legacy, this episode is a must-listen.

Chapters
(00:00) Forming Opinions Versus Disciplined Action
(01:50) SpaceX Valuation and Market Hype
(07:29) Short-Term Oil Prices and Geopolitical Impact
(13:00) Fed Funds Rate Expectations and Inflation
(15:58) Managing Fixed Income and Portfolio Risk

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Creators and Guests

Host

Justin Dyer

Chief Investment Officer and Chief Operating Officer at AWM Capital

Host

Mena Hanna

Senior Investment Analyst at AWM Capital

What is AWM Insights Financial and Investment News?

A bite sized discussion on timely financial news and investment topics, to help you maximize your net worth and wealth for the next generation with Justin Dyer and Mena Hanna of AWM Capital.

Intro Hook: Having the discipline, knowing
what the data says on whether you should

act on that opinion is super important.

99% of the time, you
shouldn't act on that opinion.

People always complain about
how the S&P is overpriced.

The S&P is at 3.7

times.

SpaceX is 100.

Their stock sometimes is down over
a two-year stretch of time, like

80%, which is a massive amount
of movement for a company that

right now has a market cap of $1.3

trillion.

Markets are voting machines in the
short term and weighing machines

long term, and the problem is you
don't know when that measurement

methodology is going to change.

Inflation especially just erodes wealth.

It erodes wealth over the short term
and erodes wealth over the long term

Justin: Hey, everyone.

Welcome back to another
episode of AWM Insights.

It's your host, Justin Dyer, chief
investment officer here at AWM,

joined as always by Mina Hana,
portfolio manager here at AWM.

And we're gonna change
things up a little bit.

Maybe, uh, you could say there's
a little bit of, uh, research and

development on, uh, on how we, we,
um, host and, and generate ideas

and discussions within this podcast.

And, uh, don't worry if this sucks, we're
not gonna continue to do it, or maybe

we'll just incorporate this every so often
'cause it's a little bit more fun for us.

But, uh, you know, we often talk about
headlines and then extrapolate those

into how the 100 Year Investor, the 100
Year Family should, should think about,

interpret those, uh, those, those various
headlines, questions, topics, et cetera.

And, um, and that is super
important, and we're gonna

definitely continue to do that.

But today, we're just gonna have a
little bit more fun and, and, and develop

some opinions around what's going on,
uh, in the world today, uh, uh, m-more

focused within the world o-of investing.

And, and know, though, that having
that opinion and acting on that opinion

is, generally speaking, not something
that supports the 100 Year Family.

Reason why we're kinda jumping
into this today is, like,

it's okay to have an opinion.

We actually had a lot of opinions
internally, but having the discipline,

knowing what the data says on whether
you should act on that opinion is super,

super important, and 99% of the time,
A, you shouldn't act on that opinion.

And then we're even gonna dive into the,
the, the kind of reality that e-even

if you were to act on that opinion and
go bet on something on Polymarket or

Kalshi or whatnot, like, it actually
doesn't change the outcome, uh, all that

much, uh, unless you were putting it
all on, on black or red, so to speak.

So anyway, without further ado, Mina,
what are we gonna talk about today?

Mena Hanna: SpaceX.

Let's start with SpaceX.

Okay.

Is-- Do you think SpaceX's value share
price in six months when all of the shares

unrestrict and everyone's freely able to
trade it, do you think that price is going

to be higher or lower than the IPO price?

Justin: Yeah.

Okay.

So for anyone listening to the
last episode, you probably know

exactly what I'm gonna say.

But like, again, going through kind of
how we think about things and, and forming

and shaping opinions, um, we use the data.

I generally use the data, and I would say

Mena Hanna: if

Justin: you look at IPOs six months
post when they go public, which is

effectively what you're asking me,
more often than not, they are trading

below that initial offering price.

So if, if I'm on one of those
prediction markets, I would say lower.

Mena Hanna: Yeah.

I, I, I agree with you.

I think this is an interesting
one because there's so much hype

and speculation in their offering.

SpaceX kind of touted a, a potential $28.5

trillion valuation, which
gets people excited.

You know, the entry price, whatever
it is, I'm willing to pay it.

I'm willing to get in at two
if it's gonna be worth 28.

But, uh, but yeah, that's not
typically how things work and

that's not, that's not investing.

Justin: It's not investing.

And like, like let's, let's unpack
this a little bit more, right?

'Cause there's also…

Okay, we can just look at what the
aggregate data says, and most of the time

IPOs are actually trading lower after
their, um, their initial trading date.

So yeah, okay, that's kind
of a boring, boring stance.

But then let's look at, you know,
you-- I think you coined the term

or used the term financial physics.

Let's look at that a little bit.

And is there the potential
that it's trading higher?

Sure.

Right.

There, there's examples of that.

We're certainly in an
interesting market, right?

At least as we sit today.

The power of the narrative, the Elon
power, if you will, is, is, is there.

Is that something that a 100-Year
Family should be trading upon?

No, 100%.

But then, okay, let's acknowledge
that, but then let's look at

the financial side of things.

Before we hit record, what did you say?

Like, the-- From a revenue perspective,
and then what some analysts are

actually out there saying around SpaceX.

It just, it just…

You would have to stretch
your imagination so far.

And again, maybe the power of the
narrative disconnects the financial

physics from that power, and we, we end
up being wrong on this, but it's not

a predictable game that I wanna play.

So sorry, uh, I rambled on there
with the- Yeah … but g- just

give some of those numbers.

Mena Hanna: Yeah.

I-- Their revenue in twenty twenty-five, I
believe, was nineteen billion dollars, and

the valuation would come at one hundred
times what they actually produced in terms

of revenue in twenty twenty-five, which
is a crazy multiple when you think about

Justin: And what would that valuation have

Mena Hanna: to be?

That va-- It would be a hundred X.

So-

Justin: 100X on revenue, which is-- for,
for those of you who don't track valuation

metrics, that is a very, very, very high

Mena Hanna: valuation.

Justin: What you're paying for that
amount of revenue is exceptionally pricey,

is the simplest way to think about it.

You pay that at the earliest stages
of venture capital when a company has,

like, basically no revenue or very little
revenue, and then that gap starts to widen

over time as companies mature and whatnot.

But yeah, the, the- Yeah … a
company of this size trading

at that multiple is pretty

Mena Hanna: people always complain
about how the S&P is overpriced.

The S&P is at 3.7

seven times.

So just to

give you- So yeah, to

Justin: a relative basis.

And about what, just again, to
be, uh, super clear, we're taking

revenue times three point seven,
just that simple number gives you

the valuation of the entire S&P 500.

SpaceX is 100

Mena Hanna: Yeah and yeah.

Yeah, it's crazy.

And I'd say we've also seen…

Like Tesla, I would say, doesn't trade
at your standard ratios or valuations.

There's, there's a- It's the Elon effect.

Yeah.

It is the Elon effect.

But the other side of the Elon
effect, and, and you know,

s- Tesla has done very well.

It kinda depends on when you got in.

There have been times, late 2021,
kind of around election season, at

the end of 2024, where their stock
price went absolutely crazy, and if

you bought in at those periods, like,
your return is not, not substantial.

Um, so buying in during these
points of market hype doesn't,

doesn't necessarily work out.

Now, yeah, Tesla obviously does not trade
at normal, call it, market valuations.

And it kinda makes sense.

Like, their, their stock sometimes
is down over a 2 year stretch of time

like 80%, which is a massive amount
of movement for for a company that

right now has a market cap of $1.3

trillion.

So buyer beware, if you
invest in hype cycles.

You know, it could go well, or
most of the time it doesn't.

So that's why we're both predicting
that, you know, we're in a hype

cycle when it comes to SpaceX
from, from every standpoint.

Odds are not in your
favor if you're getting

Justin: right

Yep.

Yeah, yeah, exactly.

Mar-- What did we say?

Markets are voting machines in the
short term and weighing machines long

term, and the problem is you don't know
when that, uh, when that measurement

methodology is going to change and
it can change pretty dang qui-quick.

All right.

Um,

Mena Hanna: where to

Justin: where to next?

Mena Hanna: Where to next?

Uh, you wanna talk Fed funds rates?

You wanna talk oil prices?

What do you wanna talk?

So many things to, to bet and
gamble on, on these sites.

What do we wanna talk

Justin: about?

Uh, let's do, let's do oil, and then
we can wrap with Fed funds, which

is probably the least interesting.

Mena Hanna: Cool.

Where do you see oil, oil
moving in the short term?

The markets right now for June have
oil roughly sitting, sitting where

it's at today at 100, 90 to $100 a
barrel with the odd chance that we do

get an escalation in the Middle East.

And,

you

Justin: There's

Mena Hanna: roughly a 10% chance that we
see crude go above $150 a barrel, which

would mean that probably all of us that
don't have electric vehicles are gonna

be paying seven to eight dollars for

Justin: a gallon of gas

And where do-- I'm just pulling
up where we stand today exactly.

Um.

I believe

Mena Hanna: we're at

Justin: ninety-two dollars.

Ninety, low nineties, yeah,
um, as, as of this recording.

Man, I think, um, gosh, uh, th-this,
this, this is, this is a fun one and, and

a little bit, um, you know, hard 'cause
y-y-- there's no data, if you will, to

unpack how, uh, how oil markets will
respond to, uh, geopolitical conflict.

I would guess, um…

What are my, what are my

price

levels?

What'd you give me?

Hundred.

I guess

Mena Hanna: 100 is, is
studies say- Under 100.

Yeah, I would say under 100

Justin: under ninety

Mena Hanna: break even.

105 is the break even for,
for the markets right now.

There's, there's a 50/50%
chance that you're over 105 or

Justin: under a hundred and five.

I

I would say

Under a

a hundred and five, but
north of ninety- Okay

Mena Hanna: That's my

Justin: prediction.

Okay.

End

Mena Hanna: of June,

is

Justin: what you told, you told me?

End of June.

Okay.

Yeah.

I'm gonna, I'm gonna say that.

Mena Hanna: So we don't
get a full on resolution.

I, I assume we're not

Justin: gonna- No.

If I'm gonna, if I'm gonna
go ex- a step further, I say

I'm

I'm an optimistic individual, so I'm gonna
say there's a, there's a resolution, uh,

the strait, i-- gets effectively opened,
but there's going to be so much caution

and details and all of that that still
has to work its way through the system

that mar-- that oil prices will stay, um,

Mena Hanna: higher

Justin: for longer as all that stuff

working through

Mena Hanna: Yeah, I agree with that.

And I think we've talked about it
here, where there is an international

shortage of oil right now.

It's around a two-week international
shortage, and infrastructure

has obviously been hit.

A lot of the attacks that have
happened on both sides have

been to oil infrastructure.

There's a massive portion and share
of oil that comes out of this region.

So you have a shortage, you have
a, call it, supply line that is

massively constrained, and what
that probably means is we are going

to see elevated energy prices for,
for a substantial period of time.

Now, how does that
actually impact portfolios?

I would say it doesn't, because if
you're a globally diversified investor,

you have exposure to these, these
oil companies, these energy companies

in general, which are doing well.

You can't really-- Like right now
they're trading at substantially higher

prices than they were six months ago.

Exxon is, is up thirty-five--
around thirty percent,

thirty-five dollars a share.

You're not getting in now.

Um, and if you are, you
just missed a massive rally.

So, so yeah, how does it impact our
future take, our future holdings?

If you're a diversified investor,
you benefited from the rally.

You're also-- I would say your portfolio
is a little bit offsetting the price

that you're paying at the pump.

So even though your credit card
statements might be, uh, might be a

little higher, your brokerage account is,
is pseudo helping you out on that end.

But, but yeah, I wouldn't say that
there's any real impacts to the portfolio.

What would,

Justin: what we typically hold

on that?

Um, I would agree.

You know, we can't help ourselves but
talk about the long-term investor and

diversification, all the things that
we, we always like to go back to.

But, um, kind of a simple framework
that I believe people with, with

respect to this is, um, in times
of un-uncertainty, and generally

there's always times of uncertainty,
but the-- it's heightened right now.

A lot of questions, a lot of
interesting things going on.

You start to unravel or unpeel, um,
all the different layers and whatnot.

Okay, what-- how, how is this
going to impact my portfolio?

How is that gonna impact my portfolio?

How is that gonna impact the economy?

Et cetera, et cetera.

And then you really, at the end
of the day, you say, "Oh, wow,

actually diversification, uh, is,
is the best way to protect against

any and all of that uncertainty."

Now, it's not to say if there is some
s-some substantial shock or we're in

an AI bubble and markets do decline,

a

a diversified portfolio is going
to do decline with all of that, but

it's gonna be far better protected
than it otherwise would be.

And so it's a, it's a great
old, um, great old lesson, uh,

especially in times like today.

Yeah.

Um, which actually-- Okay, so
that leads us quite nicely, I

think, to, to Fed funds rate.

So Fed funds rate,
quick unpacking of that.

Uh, we mentioned that term,
but just to level set everyone.

So Fed funds rate is the, uh,
kind of base level interest rate

that the Federal Reserve Board
here in the U-US sets, which is-

foundation

if you will, of so many other
interest rates within the economy.

It's not one-to-one, but
it impacts so many others.

Mortgage rates, uh, car loans,
credit card loans, et cetera, et

cetera, all that type of stuff.

So super, super important.

Um, we have a new Fed chair that
was just sworn in a few days ago.

What are, what are the, what are
the prediction markets saying?

Mena Hanna: Prediction markets are saying
that we have, even though this Fed chair

is, call it very, uh, very inclined
to cut rates, we have a 66-ish percent

chance, at least this is how markets are
pricing it, that we are gonna get no cuts

Justin: for all of 2026.

Yeah.

Mena Hanna: I--

Justin: Just no cuts?

No, and no increases?

We- are we

leaving

it at

it at no cuts We're just leaving it at no

Oh, okay.

Um, I'm gonna, I'm gonna
expand that further.

So I, I think this is why I said the
oil conversation, uh, sets us up.

So again, kind of trying
to go to a first principle.

So, um, the Federal Reserve
pays attention to inflation.

They call it price stability, but
basically it's inflation and unemployment.

We are, we are seeing inflation,
heightened levels of inflation because

of what's going on in energy markets.

If I

I think that that is going to continue,
uh, maybe to a lesser extent than it

is right now, uh, or rough- roughly
within the same, at the same point

it is right now for longer, I think
the odds favor An interest rate

increase between now and the end of
the year is my, my prediction on this.

I would agree.

Um- Come on,

Mena Hanna: you're not,
you're not- I'm not…

Yeah, because I guess we're, we're making
these decisions with data in front of us.

There's actually a little
bit of a dislocation here.

There's a lot of futures markets
that we look at, and, and yeah, the

odds right now are 53% in our favor.

So yeah, be, be the casino,
don't be the gambler.

Um, I think, I think inflation is real.

I think we're-- we've-- we saw
something similar in, in 2021.

Inflation was real.

Inflation moved interest rate markets.

The Fed has to do something
when inflation spikes up.

We're starting to see that spike.

So I do think it is going to be something
that impacts markets in general,

and that's okay, uh, with how we

build

Justin: Yeah.

No, I was gonna say go
into that a little bit.

What, i-if…

How do, how do we think about this
critical input into how we, we think about

portfolios from now

Mena Hanna: Yeah, so it's,
it's super fundamental.

It is, I would say, our
first building block.

So it's probably the thing that we
look at the most because everything,

inflation especially, just erodes wealth.

It erodes wealth over the short term,
and it erodes wealth over the long term.

Now, the other thing that also
erodes wealth is interest rates

moving up if you're invested
in longer term fixed income.

So the way that we look at it is
there is always going to be, for our

clients, a short-term pool of capital
invested in extremely short-term fixed

income that even if we get movements
like 2022 where interest rates were

up, call it 200 basis points, 2%, and

The,

the US ag, which is, you can
think about it as like the S&P 500

for, for bonds, that's down 14%.

That pool of money is effectively going
to be steady state stable because it's

not going to-- it's not taking on the
same amount of risk as the rest of

the market from a bond/fixed income
standpoint in terms of the number of

years of exposure that we actually have.

So that's, that's how we,
that's how we think about it.

Bond markets aren't really the markets
that you wanna be in, uh, and take

risk in because they're supposed to
be just a supportive portion of the

portfolio to your priorities, your spend.

That's what your protective reserve
should be actually composed of.

If things go wrong, these are the
assets that you should lean on, and

you probably shouldn't take risk
with that safety pool of capital.

We love taking risk in public and private
equities, but yeah, that's actually

rewarded risk that adds more than, call
it, a percentage point on the fixed income

side, which, which actually, if you kind
of look at markets over the last five

years, taking on that risk has, has led
to little to no return for some investors,

which

is crazy to

Justin: about

Mena Hanna: Awesome.

Justin: Uh, that's a great place to wrap.

So, uh, I guess we can't-- couldn't
help ourselves but talk about the,

the 100-year investor and, and, and
100-year family and how to think about

these certain prediction market topics.

But, uh, a little bit
of a different approach.

Hopefully it was, it was, uh,
more interesting for you all.

It was certainly fun for us.

Um, if there's any prediction market, uh,
what do you call those trades that- Yeah

… that you want us to talk about, uh,

shoot us a text Six two six eight
six two zero three five five

And we'll talk through it.

Any and all topics.

Doesn't have to be just something
that's on, uh, Kalshi or, or Polymarket.

But, uh, uh, hopefully this was a
little bit fun and helpful, like I said.

But until next time, own your wealth,
make an impact, and always be a pro.

Thanks for listening.