This One Stock is The Canary in The Coal Mine (Not Nvidia)

Michael Zuber (0:00)

All righty, folks, I don't know if you know this, but Taylor from Life Goal Investments is the most followed financial advisor on Instagram. And he gives you and I one hour a week on One Rental At A Time. So we are truly honored that he comes here for some long form content. Taylor, thank you so much, man. We appreciate you. Congratulations also.

Taylor (0:20)

Yeah, thanks so much. I'll give you, I won't blow it right at the beginning, but towards the end, I'll give you my funny Taylor versus Tyler story, which is pretty comical at all.

Michael Zuber (0:29)

Not the first time that's happened, I'm sure.

Taylor (0:31)

No, but I have an hysterical story on that. Anyway. There you go.

Michael Zuber (0:34)

There you go. Thanks so much. I want to start with the canary in the coal mine. We'll get to three macro events for the week. We will, of course, touch on the Fed and some other things.

But let's talk about the canary in the coal mine, because this was a post you put out again, five minutes of value inside 60 seconds. And I would not have guessed this stock, but you're absolutely right. This one hinges pretty much the entire economy. So, educate us on what that is. Yeah.

Taylor (1:01)

So, this is a stock that I've been interested in just to say, okay, if there's one narrative in the market that seems to be playing out as to why our economy is holding up as well as it is in the face of inflation, in the face of all the struggles and perils that we're facing at this juncture, it's that we have a K-shaped economy, where the top end of the K, the wealthy, seem to be wealthier and wealthier and wealthier as markets continue to run, and their portfolios get larger and larger, and we can continue to spend and go out and do their thing. But if there's one stock that is most representative of the spending of the higher end of our economy, it is Amex, American Express.

And American Express has a stock price that's down about 20% from its peak in December of last year. So as the market is up 14% this year, 13 or 12 or wherever it is at this juncture, that's a 34% spread between where the S&P 500 is and the stock that seems to be most indicative of the spending that is done in the top end of the K-shaped economy that is the narrative that is driving our overall economy is the success thereof.

Michael Zuber (2:11)

Yeah, so I don't know if you really dug into it a lot, but when I hear that, so first off, Amex, does Amex report this week, or are they next week?

Taylor (2:19)

Amex reports on the 23rd, which is like two Fridays out or something like that.

Michael Zuber (2:22)

So next week, late next week.

It'll be interesting to see what those numbers look like, because again, you're right, it is absolutely the best single stock for the K-shaped economy, the top 20%. And it's interesting to see that they're already down 20% while the market's up double digits. So is this the market telling us that Amex is a busted stock? Is this actually the market telling us financials are broken because of the flattening yield curve? Is it bad debt rising? Do you know what the story behind this is?

Taylor (2:58)

It's interesting. On that post that I put out, a lot of comments came into, this is a myopic Amex issue, and they've changed their credit card benefits and all of this stuff. But at the end of the day, I think that Amex has a very, very loyal high end. I don't think a change in someone offering you a 3% cash back, which Robinhood is doing these days, is causing that Amex 20 year user to say, yeah, I'm going to flip over and start using Robinhood of all places.

Michael Zuber (3:28)

Yeah, where it might have impact, it'll be interesting in the numbers is new signups. Because I do think you're right, Amex loyalty is deep, and the benefits are consistent. But it may prevent new signups from occurring. The new signups might go elsewhere, maybe.

Taylor (3:44)

It may, I think that there is some prestige to an Amex card. If you look at the FICO scores across Amex versus all other credit card providers, it's significantly higher. And again, that is representative of that top end. Now, a stock is a stock, and a business model can change, and the business itself can falter or what have you. But really, you pop the hood on it, and that doesn't seem to be the case. So year-over-year revenue growth for Amex is right around 9 or 10%.