Joel Litman: We Are NOT in an AI Bubble

In this week's Stansberry Investor Hour, Dan welcomes Joel Litman back to the show. Joel is the founder and chief investment officer of our corporate affiliate Altimetry, where his team uses their Uniform Accounting system to look beyond the as-reported numbers in financial reports to see how companies are really performing.   Joel kicks things off by discussing the increases in the U.S. military budget and says that investors should be wary of which stocks they decide to buy. While overall military spending has gone up, certain branches like the Army have seen a decrease in spending, so it's vital to put your money to work in the right sector. Joel then shares that despite concerns over America's munitions being down and our supply-chain reliance on China, many companies are innovating to either break away completely by manufacturing what they need or substitute materials or products to achieve similar results. And Joel says that AI woes are overblown because of a few questionable stocks. (0:00)   Next, Joel explains why Altimetry uses Uniform Accounting and why serious accountants don't rely on generally accepted accounting principles ("GAAP") data alone. In short, GAAP accounting has become increasingly unreliable due to its many changes that misrepresent how a company is truly performing. Uniform Accounting cuts through the noise and creates a set standard to determine how well a business did during earnings season. And while the cyclically adjusted price-to-earnings ratio says the market is expensive, Joel says that metric is flawed and that the market is actually cheap. (17:54)   Finally, Joel shares the dynamics and problems with buying IPOs. The greatest issue is not having enough financial data and having to wait months before you know enough details to judge if a company is worth investing in. Joel then mentions one major defense business that he's interested in and believes will do well. But he says the better opportunities are in the smaller companies. These are cheaper stocks that have more room to grow and, therefore, have potential for better returns. And while these are the kind of businesses that Warren Buffett would own, investors don't have to compete with him to buy them. (40:08)