THE BULL, THE BEAR AND YOU - EPISODE 62 NOVEMBER 3, 2026

[00:00:00] Welcome to the latest edition of The Bull, The Bear and You as we navigate what is happening in the economy and we take a look at investing. I'm Stacy Smith and I urge you to subscribe or say that you like this podcast on whatever platform you happen to use. Will Wall Street's romance with AI and tech hit a rocky patch during the end of October? Is it just a lover's spat or is there more to it? Why you should pay attention to what happens with private equity firms and will what happens in the election have any impact on your investments?

[00:00:28] My panel's opinions are coming up in this edition of The Bull, The Bear and You. And with me to talk about the economy and investing is my panel of financial advisors and experts in the R, Kerry Coghill, the founder of Coghill Strategies here in Pittsburgh. Next we find Frank Rossetti. Frank has his own alternative investment company, HF Management Company.

[00:00:58] Kim Forrest is the founder and chief investment officer of Boca Capital Partners. And we find Jim Senegal of Fregasso Wealth Advisors. Jim is a senior investment analyst for Fregasso. Jim is sitting in for our regular panelist, Michael Godwin. Thank you all for joining us once again for The Bull, The Bear and You. You know, October was not the best of months for the NASDAQ. By the time the closing bell sounded on Friday ending the month, the NASDAQ had lost more than 4% of its value in just the last two days of October.

[00:01:27] And for the month, the NASDAQ lost five and a third of its value. For the first trading day of November, well, it added to that decline. So if you combine the last three trading days, not including today, which is a Tuesday, the NASDAQ has lost 4% of its value and it's down nearly 9% setting its all-time closing high, down 9% from its all-time closing high less than a month ago. And that is very close to correction territory. Now the numbers for the NASDAQ are eye-catching.

[00:01:55] But if you pull back and take a look at the chart, for basically three months the NASDAQ has been trading in a little zone of its own, a trading range. So the question, of course, is whether the stocks that make up the NASDAQ will keep it in that range. And that may put a little bit more weight to the question that is the reason for the two-day drop. Investors are now eyeing critically the amount of money being borrowed by AI and the tech companies and whether those companies can indeed make a return on those investments.

[00:02:24] This, of course, is something that we have all discussed now for the last three months or so. And the last time we met, I asked whether one should stand pat with their AI and tech holdings. This time I'm going to change the question just slightly. And that is, is this the beginning of a pause in Wall Street's romance with AI and tech? Or was this just a little lover's spat over the last couple of days? Kim, I'll start with you. Well, thanks.

[00:02:49] And I think in our little talk before the show, you know, the meeting before the meeting, I said that I've been trying to run from my software engineering past and it always catches up to me. And here we are. So here's what I think. I think most people, most investors, and this is both professional investors and retail investors,

[00:03:12] thought that AI would now be so correct and so wonderful that it would be replacing scads of people. And that really hasn't happened. Moreover, it looks like to get to that point, the people making the AI, open AI and Anthropic are kind of selling us that all we need is a little couple trillion more dollars, right? To make this happen. And wisely, I think investors are going, hmm, is this for real?

[00:03:39] Now, I am not backing down from my belief that targeted AI, which is very different than what open AI and Anthropic are trying to do, is a winner. It's a winner in the short term. It's a winner in the long term. We have computers. We have data. This is going to happen. The AI revolution is going to happen, but it's not going to play out like everybody thought. And I think this is the cause of the pause.

[00:04:05] I was just going to say, Stacey, I appreciate you, you know, reframing the question. Unfortunately, we're probably not going to be reframing our answers. The answers are still pretty much the same. I think it's very interesting. I think that when you look under the surface at various economic data points, Kim had referred to the employment situation.

[00:04:32] And we haven't really seen much in the headline numbers. But when you start to dig underneath that, I think that what we're starting to see is some things percolate. Microsoft just announced laying off over 60,000 people. When you look at entry level positions, that's where things are getting hit the hardest.

[00:04:57] So, you know, I do think that it's an interesting time as far as the consumer is concerned. And my opinion about this pause is that I think there is a bit of reality coming into the forefront in terms of AI has to produce revenue. Like there has to be some sort of revenue associated with all this investment that you're making.

[00:05:25] I also believe that the markets realize what drove the markets this year in terms of the AI trade was going out and borrowing money and making those investments. Well, next year it's going to be much harder for them to drive that activity. It's not unlike, you know, you go and you run up your credit card bills now.

[00:05:51] You're not going to have the latitude to go out and do it again next year. So I think the markets are waking up to this. My hope is that they wake up slowly and it's not something that kind of accelerates because, you know, what happens when markets accelerate on the downside is that there's a lot of collateral damage.

[00:06:15] There are, you know, people that are on margin may not even own AI companies, but because of that domino effect, all of a sudden now other things need to be sold. So I think that, you know, I think this pause is really worth paying attention to. I don't think it's the opportunity that we in this industry like to say like, oh, buy on the dip. You know, I think that there's a little more. It's time to have some patience.

[00:06:46] I think I'm a little bit more optimistic. You know, we look at the capabilities of AI. It's continuing to improve. I personally use it more and more every day. Our firm uses it more and more. One of the things I've been saying is that I would bet that our AI budget is considerably higher five years from now than it is now. And I do think that's representative of the economy as a whole. So I think if we look out a little ways, you know, I don't think this is a a dot com bust. I think it's more like twenty twenty two.

[00:07:16] A little bit of a valuation reset. There's a lot of optimism priced into these companies. As Kerry pointed out, there's some impact from higher rates. So I think it's a little bit more of a breather. There's nothing really new here. We companies are still burning cash. We still don't know how good AI will get over time, how long it will take to get there or how profitable the companies will be. But I think, you know, we're still on the upswing if we look out a little bit over a longer time frame.

[00:07:44] Well, my my thoughts regarding this revolve around 50 and 100. Well, these multiples that are really not based on earnings because there aren't earnings for all intent and purposes. These these valuations that are based on smoke and mirrors. I don't even know what to call it. I mean, it's this is what's going to happen.

[00:08:08] And Anthropic just announced a whopping seventeen billion dollars in sales, which for a company that expects to be valued at one and a half or so trillion dollars. That is like nothing. And I these numbers start have to start have to start coming into reality. And every time I read a paper, who's going to borrow 100 billion or 200 billion or 500 billion to build out another data center?

[00:08:35] And I think at the last show we were talking about, I'm not sure we're going to need all the data centers. If this thing is as great as it's supposed to be, how many data centers do we really need? And so I sit and look at this and I see a bunch of it's kind of like one of those fiber optic lamps that you see with the strands going all over the place with that they all end with no, you know, remember 40 years ago, the bridge to nowhere stays.

[00:09:02] I mean, you know, there's a lot happening, but what's it going to? And the dollars that are being thrown around are so enormous that the impact of these products has to be unbelievable. And Jim, I see you're I see you're optimistic, but are is it that big of a deal? And is it soon enough to justify the money now?

[00:09:30] So I'm think that Gary said we have to be paying attention to this. Quite frankly, I personally am. I mean, I'm not advising anyone these days, but my advice would be to be really careful. And I would probably if you own all these things with huge capital gains be buying some puts, be putting some portfolio insurance in there because this could collapse.

[00:09:57] It's a house of cards potentially short term, long term. We all know it's going to be a wonderful thing. Just I'm not sure it's as wonderful as the trillions and trillions of dollars they're talking about. We have to remember that in any kind of new endeavor, there's winners and losers and any kind of new technology. And and this is a broad brush. But generally speaking, innovators don't necessarily win all the time.

[00:10:27] In fact, they rarely can scale up and become the company that delivers this new thing. You know, Amazon, that was different. Microsoft, that was different. But it's they probably weren't the innovators in. Well, I know Microsoft wasn't an innovator in basic programming language, which was one of their key wins in the beginning, nor was Amazon.

[00:10:56] People were selling stuff on the Internet. These were people that got together, a group of people and delivered products for real. And I think that's what we have here is the innovators are sucking up so much capital. Maybe there's other people out there that are able to deliver AI, productive AI in a way that is a financial win for the company and the people buying the product. I have a I have this question.

[00:11:21] Wall Street, as you all admitted here, has been investing or banks or private equity been investing billions of dollars into these companies. Now they they're going, oh, my, maybe this isn't going to work. Aren't these smart people? I mean, why would they go in with all of this money and then all of a sudden go, oh, my, this may not work? Let me say something. I'm not sure they wrote checks.

[00:11:48] Anthropic and Amazon and everybody are talking about what they're going to do and how much money they're going to need. But they've got they've got roadblocks to build these things because nobody wants them in their backyard. They've got all this stuff and some of them are being built. But these trillions, I'm not sure the money has actually been distributed yet. They maybe have said they were going to do it, but that doesn't mean they actually will. And it's conceivable that this will go.

[00:12:18] The politics of the event might slow it down so much that it'll be years before these things actually require the money they're talking about, which might be a very good thing, by the way. If you remember prior to the financial crisis, Chuck Prince, the CEO of Citigroup said, you know, well, while the music is playing, you know, you have to be dancing basically. And I think there's an aspect of that in the investment industry.

[00:12:44] When these companies are going up, you know, 100% in a year, 200% in a year, there's a lot of career risks and not being involved. People say, you know, why aren't you in AI? Why aren't you in the big winners? So I think on one hand, there's some optimism that maybe one of these companies will reach artificial general intelligence and take over the entire economy. But there's a lot of people that are following to and just jumping in to follow the herd, basically. And I think that's something you always have to ask when getting into one of these trends.

[00:13:13] Who's going to come after me? And I think in a lot of cases, you know, the smart money is in first and the dumb money goes in much later. All right. Before we before we move on to my next point, Carrie, I want to come back to you just for a second. How concerned are you that there might be this snowball effect down the road if if if people start to really pull back on their AI investment? I mean, it's a scenario that we're watching. We're not really seeing anything.

[00:13:43] We're not really seeing anything break too much. I mean, what we're paying attention to and we've talked about this in the past more so is the private credit area and also just looking at different spreads in the in the fixed income market, which, you know, bonds. And that's what we're seeing. No one wants to talk about. So I think that the risks are increasing under the hood.

[00:14:07] But from a systemic perspective where you see a lot of selling, I'm not we're not really seeing that at this point. And, you know, to Jim's point about, you know, dance while the music's playing, that really speaks to the value of professional advice.

[00:14:28] Because what I can tell you as an individual who is not spending their day looking at these things, looking at trends, looking at the things that would cause companies to break. You have to be willing to get out and investors generally are not willing to get out because, number one, why would you sell something that's doing so well? And number two, if it's in a taxable account, I don't want to take the tax hit.

[00:14:55] So, you know, you really do have to watch these things if you're playing in that space. And if you're in that space, you also have to make sure that you're right sizing your portfolio and not overextending the risk in your portfolio unless it meets your long term goals. So, you know, I do think that it's an important time to just watch. All right.

[00:15:25] Wait, I have a point about professional investors, too, getting taken by things. Remember the Sam Bankman-Fried FTX thing? Mm-hmm. So many of the world's smartest people got taken by that. And I think it's because technologies that they don't understand, they assume that the young people know what they're talking about.

[00:15:47] And they do as much due diligence as they can, but there's limits to new technology about, you know, being able to read the papers and understand them and listening to the people delivering the products. You kind of have to believe them at a certain point. So people do get taken in the world that should, on paper, should not, right? These were the smartest hedge funds. Mm-hmm. Got taken.

[00:16:17] All right. Kerry, you brought up private investment. I wanted to get into that. Frank and I were at a dinner about a week and a half ago or so, and he brought up that private equity could have a problem if the AI and tech companies can't deliver on their returns. As a regular, just run-of-the-mill investor here, one who pays attention, Kerry, to his financial advisor, why should I care what happens to these private equity firms? Yeah.

[00:16:44] I mean, it goes back to what we were just talking about a little bit is that even if you don't own private equity there, if there is a serious breakdown in that market because it's so highly leveraged, it can spill over into the broader markets because we have this thing called forced selling.

[00:17:02] That if you borrow money and you have that out on margin and now the value of your portfolio goes down, you have to even, you know, like private equity and people that play in that space have to sell something to meet their margin calls. That something is usually the good stuff, which then filters into the broader market. So, you know, it's an interesting, very interesting dynamic in the private markets right now.

[00:17:32] And, you know, to your point about these people are really smart and, you know, why? Why would they not be able to anticipate this? And I think that it's really for two reasons right now. Understanding what the goal of private equity is, which is to buy something and sell it. It's not to buy for the long term. It's to buy something, help support it, build it, sell it.

[00:17:55] So the timeframe is usually much shorter than the timeframe of an investor. I think what's complicating the situation right now is that aside from having borrowed tons of money, the technologies are evolving so quickly that now some of these investments that look like great investments two years ago, are obsolete. So that's creating some challenges in that space.

[00:18:26] The other thing that's happening in the private equity space and the real estate space and the alternative assets space in general is the rise in interest rates is making their leverage change the equation that they use to buy this. When they, when these funds, many of these funds made their investments with next to zero interest rates. And that's no longer the case. Now we're dealing with five, six, seven, eight percent, whatever it is, depending on the asset that they've levered.

[00:18:55] That's sucking off cash flow that they no longer have available for their investors. You've also got the situation where Anthropic keeps bringing this thing public, but it still hasn't gone public. The equation's changing. The whole thing, it may not come public for a year. I don't know how long their S1 is live, but they have a clock on that and it, they may have to refile the thing before they're actually feel the market is right for them to realize the value that they want.

[00:19:21] And not my private equity stuff doesn't own that, but other people I know are in that thing and they're expecting a payoff that may, may or may not happen soon. And that's the nature of the beast. Most investors in that space understand that and they're okay with that and they can afford that uncertainty. The problem is now they're talking about putting them in 401ks and this, that, and the other thing. And that scares me, the bejeebers out of me. All right.

[00:19:51] And the reason is you're not talking about people who get it. You're talking about people who look at it like a CD sometimes. And it's not, it's not even close. It's. Jim, your thoughts? Oh, I agree with what everybody's saying. I think it's, um, uh, smart people putting money to work. Things change. I love that. That, you know, uh, the, the new stuff of two years ago may have gone through its whole life cycle.

[00:20:19] That's frightening, but that's what some private equity does. And maybe we've thought about private equity as more of a bond-like, uh, instrument rather than venture capital. And I think there's really been a, where venture capital always has been putting lots of bet on new companies. And so private equity generally had a lot, an older company base.

[00:20:43] So, and maybe I, I pulled a lot of private equity people into these, um, uncertain payoff companies. So I, I think I would take care about investing in these things. And, uh, I don't know that it can bring the whole market down. We'll see. This is definitely not like 2008 where we were talking about mortgages and banks and this whole layer cake of disaster that happened. So I don't think that's going to happen. Yeah, totally agree.

[00:21:13] There's a kind of marginal knock on effects more than the 2008, 2009 knock on effects of these localized problems. Uh, there are a couple areas where the average person, if not the average investor might care. So the tech ecosystem that includes both public and private companies, we've heard a lot about circular financing. And these private companies are a big source of marginal demand for compute.

[00:21:37] So if you look at who the Amazons of the world are selling to, uh, on the cloud computing side, a lot of them are private companies. It's also a meaningful, uh, part of the overall economy. If you look at medium and large companies, private equity owns more than 10,000. Uh, so that's at least twice as many companies that are private that are public. If those companies run into problems with leverage, if they run into problems where they have to lay off employees,

[00:22:03] obviously that's going to have an effect on the overall economy, uh, as well. You know, if your job depends on, uh, the company you work for, uh, you know, having the money to, to pay its bills and they can't do it. There's an effect on the average person as well. Uh, we're recording this program on Tuesday, November the 3rd, which happens to be election day in the United States. And in the past, all of you have said elections basically have little to no long-term impact on the markets.

[00:22:31] So do all of you still hold to your previous beliefs, even if the House and perhaps the Senate change hands? And, uh, what about the local and state races where candidates have been campaigning and putting their commercials on, not only in the state of Pennsylvania, but across the country, as Frank said before, these data centers not in my backyard. Uh, wouldn't that have an effect on some of these companies as well? I can start with, um, you know, it's an exciting day.

[00:23:00] Um, however, the impact that it actually has on the direction of the markets from, you know, I'm sticking to my same answer. Um, although I do appreciate you trying to get different answers from us, Stacy. Uh huh. So, uh, the elections, you know, it's very interesting when you go back and you look at history of when we've had one party have the, when the presidency, the House and the Senate.

[00:23:28] And when you go back to as early as 1992, you look at that in every situation, every time, two years later, either the House or the Senate or both switch. We've never had a time where we had a sweep and two years later, everyone's like, this is great. Let's stick with this plan. So I think that it's going to be interesting to see what happens.

[00:23:54] The best outcome that the markets generally like is a divided government because it creates more stability because people can't get things done. And the markets actually like that versus a government that can come in and change. And when I talk about change, it's not about politics. It's about policy.

[00:24:18] So as the evening moves through and we get an outcome to all of these elections, which hopefully we will, um, it's really an issue of paying attention to what impact it may have on policy. But those policy changes don't happen overnight. And that's really why we say, you know, these, these types of events with would like them to be super exciting and have out, you know, incredible outcomes.

[00:24:45] But at the end of the day, it really, it really doesn't directly impact the market. Can I argue with you just for a second? Sure. Um, policy changes, you are correct. Uh, but policy changes also can affect the markets. Uh, President Trump imposed tariffs, which sent the market, uh, down tremendously for a couple of days until he also then about a month later, I think, started to back off on some of those tariffs.

[00:25:12] Um, this, uh, president also entered into a war with, uh, with Iran and oil prices have gone up and inflation has gone up, which means that, uh, obviously the, uh, interest rates have, have, uh, stayed higher than what a lot of people would like. But as Frank has said many times, and he's absolutely right, uh, you know, you take a look at a long-term average, not 20 years, but much longer than that, rates aren't necessarily that high.

[00:25:38] So, uh, my argument is that, uh, I do believe that sometimes, uh, who is elected, uh, can make a difference on, uh, uh, uh, on, uh, on, uh, uh, the policies that people who are elected can make a difference on the economy. I also agree with you wholeheartedly that if I'm an investor, I probably would like to see control over here on one side and control over here on the other side and not a lot done. Go ahead. I'm sorry.

[00:26:04] Let me jump in. Let me jump in. Cause I, cause I can say these things because I don't have to please anybody. All right. Um, Stacy, the media creates emotional reactions to all sorts of insignificant things. And not that the case, the tariffs were insignificant, not that the war is insignificant, but they were very temporary.

[00:26:29] They all happened this year. The market, it so happens is up, what, about 13% this year through all this chaos. So the market's going to do what it does. And the reason is the market is about capitalism. It's not about politics. And capitalism requires a few things for it to work as well as it has worked in our country versus virtually anywhere else in the world.

[00:26:55] The rule of law, um, property rights, uh, dependable elections, and a independent federal reserve. The courts have protected all of those things in spite of what's been going on in the media.

[00:27:19] The media has created short term reactions that were nothing more than that. We've all said many times in this show that this market is emotional on the short term over the day. Tomorrow, this election, if there's a, if there's conclusions, which there may or may not be, uh, with all the questions that are out there, eventually there will be a conclusion this election and the market will react one way or another to that.

[00:27:44] And it will probably be an overreaction to whatever happens because much of what's being said right now is rhetoric to get elected. It has nothing to do with what anybody's going to do. So, Stacey, to your point, you know, it's so interesting and Frank hit on it. All of those things that you mentioned, which the markets reacted in the short term, but they're long term issues. We're still facing, you know, higher enterprise energy prices than we did. We're still facing tariffs. We're still facing inflation.

[00:28:15] And had we invested around that, we would have lost out on performance this year because those types of issues, policy issues, they can't be looked at in a back year. You really have to look at the overall environment and how those policy issues, even though they were negative, there was a lot of other things going on that really could support this market going up.

[00:28:38] So, um, you know, the, the, the reaction of the markets, um, generally are very short term. Um, but to, to invest just purely based on, you know, a policy decision without looking at the bigger picture this year is a perfect example. As to why you shouldn't be investing based on policy.

[00:29:06] Yeah. I think we're all pretty, uh, in line on the timeframe. You know, if you're a short term investor, try a hedge fund, trying to beat the market over a quarter or two. Some of these things like, you know, the Iran war, the jump in oil prices, the swings back and forth in tariffs. They can be very important. But if you look at the last 20 years, we've had Bush, Obama, Trump, Biden, Trump again, COVID, the financial crisis.

[00:29:30] The S and P is up 700% over that period, despite all of these changes in the political environment changes in the overall economy. And that's because over the long term, uh, the economy is incredibly complex. You know, whether open AI achieves a super intelligence or whether you and Frank go out to dinner tonight. That those decisions that make up the entire economy, they don't depend primarily on what's going on in Congress.

[00:29:57] You know, you're not going to look at the election results before you decide, uh, you know, whether you guys go out to eat. And so I think that long term perspective is really helpful because, you know, anything can happen in the short run. But as Frank pointed out, the system that is in place, the government we have in place, uh, it, it has been a very long term winner and I'll probably continue to do so.

[00:30:18] And I have to make, uh, an argument for people out there that are doing their own investing, um, to be longer term, uh, traders, right? To be long term investors, buy good companies, don't buy ideas that are good for the next three months, right? It's really hard to trade on those short term kind of swings that you anticipate. And a lot of the times it reverses, right?

[00:30:46] Something that you think should make a stock go up, it kills it for another reason, right? So be that long term investor, overlook short term kind of issues and know that it's pretty likely that the U.S. is going to survive. We're going to be a capitalist country and just look for good companies that are trying to, um, return shareholder value by doing good, uh, work for their clients. Could it be that easy?

[00:31:15] Yeah, I think so. All right. Great. Uh, Carrie, I, just to let you know, I was not trying to get you to change your answer on anything. I'd like to hear what your answers are to start with. And Frank, thank you. Now I know that when my financial advisor makes a mistake and has me in something I shouldn't be in, I'll blame the media. Thank you. That's a good idea, actually. Yeah, of course. We will continue our look at investing in the economy in our future editions of The Bull, The Bear, and You.

[00:31:43] And since you're watching or listening to this particular podcast, I ask that you hit the like or the subscribe button. That does it for now. Thanks for joining us. We'll see you again in about two weeks and we'll find out whether the election has any impact at all on your investing. Thanks for joining us. We'll see you. Thanks. Thanks.