0:06 spk_0

Welcome to Stocks and Translation. Yahoo Finance’s video podcast that cuts through the market mayhem, the noisy numbers, and the hyperbole to give you the information you need to make the right trade for your portfolio. I’m Jared Blicky, your host, and with me is Yahoo Finance senior reporter Ali Canal, who’s here to connect the dots and to be that bridge between Wall Street and Main Street.Today we’re gonna be talking about fundamentals from a variety of Wall Street viewpoints, and our phrase of the day is priced for perfection, meaning there’s no airbag. One misstep and markets can fall. We’ll tell you which ones. And strap on your seatbelt for today’s market show and tell, we are breaking down margin of.Safety, which is something you’d want if your stocks are truly priced for perfection. And this episode is brought to you by the number $3,951. That is the current record high in gold. We know central banks are steering away from the dollar, but is it also the market’s panic button hiding in plain sight?Today we are welcoming back Michaela Galina, who’s seen markets from just about every role on Wall Street, from investment banking to buy side to sell side to the C-suite. She is now building her own platform as a founder and CEO of On Course Consulting as a strategic advisor, helping companies scale to the next level among many other things. Michaela, it’s great to have you back here, and we’re gonna get to ourphrase of the day in a second here, but tell us how you’re seeing markets,

1:31 spk_1

right? I love it.I love how you open that, Jared, because price to perfection is exactly what we’re seeing in the market today. We’re seeing very high valuations. In fact, the S&P today is trading at 25% premium to its call it prior average over the last two decades. And at the same time, we’re also seeing a highly concentrated market. So if you think the top10 names in the S&P today. They account for nearly 40% of the S&P’s market cap. What’s even greater than that is that 3 names today, Microsoft, Nvidia, and Alphabet have actually contributed 60% of the gains year to date for the S&P. So if you’re thinking that you have the S&P index in your portfolio as a diversified index, it’s not today. It’s a concentrated tech portfolio.

2:16 spk_2

Yeah, I want to pick up onBecause that is our phrase of the day, price for perfection. It’s when a stock’s valuation assumes flawless growth and execution, which means even small disappointments can trigger big re-ratings and sell-offs. So, Micaela, you were just talking about some of those stocks that are very concentrated, valuations high. What do you make then of the current bubble conversation that we’ve been having? Are we nearing a tipping point when it comes to maybe a little too much frog?In the markets. Well,

2:44 spk_1

I think there’s a lot of hype right now, and I’m a big disciplined investor. I think if you go back to the principles of Buffett and Munger, they choose discipline over hype, and they look at things like cash flow and tangible value, like gold that’s doing so well today in this macro backdrop. And I think that traders are telling you that there’s not an all clear safety signal out there in the marketplace today, and they’re looking for tangible value versus hype value.And just as you mentioned, as the margin of safety that’s so important in today’s market, I think that applies to some of the major tech mega tech AI stocks that we’re seeing. Even the S&P, as we talked about earlier, that’s priced at a premium, has no margin of safety right now. So the margin of safety allows you to have some flexibility for fallible human error, right, and valuation and market risk and what’s happening around the corner with the economy that we can’t see today.And with the market today and evaluations in both MegaTech, AI, and generally the S&P, I don’t think there’s a margin of safety.

3:41 spk_0

I want to, we’re going to return to margin of safety in a minute here. I want to ask you, in fact, let me just begin by paraphrasing John Maynard Keynes, who I think he’s the one who said markets can stay overvalued or more higher priced for longer than you or I can remain solvent. We’ve seen this happen time and time and again in the markets, and people sometimes see these high valuations as an exit symbol, as an exit signal, and then they’re.flat and then they don’t participate in the gains. How can investors still reap some of the rewards that the market is giving right now?

4:13 spk_1

I think having a diversified portfolio is really, really helpful. You know, we see a lot of the trading right now as FOMO, fear of missing out on momentum trading, but I see that there’s an absence of the fear of risk right now in the marketplace. And when you think about another Buffett principle, he, he refers to, um, theStock market as Mr. Market, right? And what he means by that is the market is essentially this moody person who comes to set prices every single day, just like you and I have moods. And right now, Mr. Market is euphoric about AI and tech, but that doesn’t mean that at some point in time he’s going to be fearful or scared or nervous about what that industry might be facing from a challenge perspective. And so that Mr. Market theme.Essentially gives you the knowledge to say, hey, at any point in time you might be higher or lower than the norm, but likely the market’s going to revert to the norm in the meantime. So euphoric valuations might be a great point to take some money off of the top, uh, to reap some gains for sure, because we know at some point Mr. Market’s going to come back and he’s going to be maybe slightly fearful in another day and then that creates a buying opportunity. So staying, staying.Disciplined in where you trade is really important in today’s market. I think more important than it has been in a long time. Well,

5:24 spk_2

it’sinteresting you say that because we’ve spoken to strategists, even some on this show, that say there is a healthy amount of skepticism in this market, and that’s why we’re not in bubble territory. What do you say to that? Do you think that we’re too euphoric atthis point? I do.

5:37 spk_1

I think from a valuation perspective we certainly are, and I keep going back to the saying on Wall Street whereValuations mean nothing until until they’re the only thing that matter. And I think we’re at this point where there’s been so much momentum trading in AI that we’re maybe not necessarily pricing in some of the risks that’s to come.I think looking back at history, right, history repeats itself all the time. There are great lessons we can learn from history. If we look back at the dot-com bubble, there are, I think a lot of parallels. No one would argue that the creation of the internet and the revolution of the internet was a step function change in the way we operated as a society, trade and knowledge, etc.In the same vein, AI is that today. There is absolutely no argument against that. But let’s think back to the internet and tech bubble. There were huge names like Cisco. They were absolute darlings who had sky-high valuations who today are just a footnote. In fact, many of those dot-com bubble names like Pets.com was this huge darling IPO doesn’t exist today. Many other names were the same. So while I think AI absolutely is the way of the future and a big place for investment that needs to happen right now.It doesn’t mean that the hype valuations applied to every company in that space today are warranted on my part.

6:52 spk_0

All right, let’s do this. I want to pivot now to market show and tell because that is margin of safety directly relates to what we’re talking about here. Margin of safety is Buffett’s favorite seat belt, and we’re looking for great businesses with prices as a cushion. So if if if, in fact, the story wobbles, your downside doesn’t necessarily do that too. And to find those stocks, we need to first to find something called intrinsic.It’s what a business is really worth based on its cash flows and economics, not necessarily today’s market price. It’s a reasoned estimate that can differ pretty widely from the market quote. So Michaela, uh, tell us how investors can find this margin of safety and maybe just throw out some sectors or tickers there. What do we diversify into?

7:36 spk_1

Definitely. So today we can look at average or median PE.shows or the certain type of ratio that indices are valued on. So for the S&P 500, we talked about this earlier, the, the market is putting a PE of something 25% greater than it normally does. And to me that tells you your price at a premium and you do not have that margin of safety. If you’re priced at a discount to that median or average multiple, then you’re in the margin of safety zones. So those are the things I, I typically like to look at.I think one of the reasons that traders today are fighting to assets like gold or precious metals is because they don’t see a margin of safety and a tangible asset.They can’t really see the intrinsic value because it’s hype, it’s euphoric, it’s all of these things down the road of what AI could be versus tangible value, Jared, that you just mentioned that they can actually hold onto from an assetperspective.

8:23 spk_0

So diversification into gold, um, like what what is the solution here?

8:29 spk_1

What do you like? I think diversification generally, as we talked about the top 10 stocks in the S&P.Account for 40% of the market cap. If you took a neutral market cap weighting to the S&P, those stocks have only increased about 4% this year. So you’re seeing outsized growth, and I think outsized confidence in the strength of the market because of that, when I think there are some fundamentals like wage growth not keeping up, sticky inflation, a softening labor market.That would say we need to be a little bit more conservative. Now that’s why gold is trading at the prices that it is today. It’s up

9:03 spk_0

45 3951 they say

9:05 spk_1

exactly of the day, exactly. But you got to keep Mr. Market in the picture there and not chase the FOMO, right, and know that there might be some better entry points, butI think it just goes back to the S&P 500 and other indices have had so much outsized growth from the mag 7 and the top names that you’re really not as diversified as you think you are, so you need to pay closer attention to making sure you truly are diversified from a sector perspective. So what’s not performing well, that as AI might tend to fade, um, and healthcare, healthcare perhaps, um, energy industrials, things that need to be invested in in order to keep that boom going.

9:40 spk_2

Now, could you say industrial.is connected to the AI trade inmany ways.

9:43 spk_1

Definitely, but I think that’s one of the reasons that AI in some cases is overvalued today. We know there’s a constraint from a power problem and we know further infrastructure needs to be built out. That’s one of the reasons we saw AMD’s stock pop this week, because chipmakers are trying to solve that problem.

9:59 spk_2

So that’s oneof your risks, and you were talking about risks with the AI trade. You think the supply versus demand picture is one of them. That’s

10:06 spk_1

right. And I think a lot of companies are ahead of the game.We’re seeing a lot of deals being made in the marketplace to try to mitigate that risk. Not all companies are going to be able to solve that. Not all companies have the scale to solve that at this point in time. So I think that’s a broader industry risk that isn’t being priced into all of our AI stocks.

10:22 spk_2

Well, we need to take a short break, but coming up we’re diving into gold’s big move as prices near $4000 an ounce, plus a Warren Buffett inspired runway showdown pitting the hype cycle against the cash flow cycle. Stay with us.This episode is brought to you by the number 3,951. That’s gold’s all-time high priced in US dollars per ounce, and it’s quickly closing in on that big $4000 mark. Some see gold as an inflation hedge, others call it an Armageddon hedge or just a safe place to park cash as the Fed keeps cutting rates. So, Michaela.We talk about gold, there’s a big correlation between the decline of the US dollar and what we’re seeing in these moves in gold. How much do you do you attribute that to the rise that we’veseen?

11:16 spk_1

I think there’s been a perfect storm in a good way for gold to have a good year. The economic backdrop of geopolitical uncertainty of central banks around the world accumulating the asset.And being in the inflationary environment that we’ve been in, more recently we’ve seen the Fed have a dovish signal, and we know that they’ve indicated they’re going to cut rates a couple times this year by a small amount, probably 25 basis points, and that is historically a tailwind for precious metals. So we’ve seen a nice setup for gold. I think one of the reasons that it’s outperformed on even a greater basis than what we would see in that setup is because there is, I think, a hedge and a flight to safety for tangible asset-backed.Investments. And so, you know, when you see the market being really strong alongside a precious metal market that’s really strong, the equity markets and the precious metal market, I think there’s something to be said about that because those don’t typically happen in tandem. Yeah, what does that tell us? I really think it’s traders out there saying we’re playing the hype cycle, we’re playing the momentum trade, but we also know we need a flight to safety with real assets that can be backed by physical value.

12:20 spk_0

Anything else in that category like real estate, physical assets?

12:24 spk_1

I think just the economic backdrop that we’ve talked about and I think a flight to safety for the concerns of the softening macro wage inflation that hasn’t kept up. We’re seeing consumers being crunched like we haven’t before. I think we’ve, we’re finally seeing a softening of the strong consumer narrative in the data. Credit card defaults are at 11 year highs. We’re seeing consumers who can’t afford to buy homes. We’re seeing, uh, hiring not keep up, um.With the market and so all of these things I think point to some cracks in the market. I don’t think it’s a coal mine in the canary. I just think we’re in this period of a prolonged and delayed slowdown that maybe would have happened before had we not had some of the things happening in the marketplace over the last couple of years, some of the stimulus that we’ve had. What

13:09 spk_2

about Bitcoinprices? Doyou

13:12 spk_0

crypto to put you on the spot here.

13:15 spk_2

I’m

13:15 spk_0

sorry

13:15 spk_2

it’s at arecord and there’s more conversations about.Yes, it’s risk gone, but it also could be a flight to safety play. Do you agree withthat?

13:24 spk_1

I think in some ways the Bitcoin market, I think, has not been proven out. In theory, is it something that I think our world desires to have an honest currency? 100%. Have we gained the trust that we have the right systems in place to make sure it’s an asset we can trust? I think the, the general consensus, um, is out on that. And I think the resurgence of retail trade.has really piled on in 2025 and contributed contributed to Bitcoin’s recent highs because retail traders even a few years ago weren’t nearly as meaningful as they are this year. And we know that retail traders pile on with momentum and they read the headlines and we’re seeing a lot of those too, exactly. And even the market performance, right, because this high concentration of tech names is driving a great number of headlines related to them. In fact,80% of headlines are related to these momentum stocks rather than the broader market. Same, I think, goes for Bitcoin in terms of the level of coverage that it gets in the media that gets retail investors engaged and wanting to pile on. So I think that’s all been part of it.

14:27 spk_0

Iwant to stick with retail traders because you hit the nail on the head. There’s been a resurgence, if not a brand new kind of elevation for the retail traders. What would you say to somebody who’s just getting their feet wet in the market right now? How do you kind of dip inWithout diving in.

14:41 spk_1

If you’re a retail trader just getting in the market right now, diversification is more important than ever. So pay real attention to indices and broader diversification versus individual stocks. You can get in a lot of trouble with individual stocks. If you choose to be involved in individual stocks, you need to do a ton of research. You need to make sure you understand what you’re actually investing in, and you need to make sure it’s a small part of your overall portfolio. And don’t forget to always have a margin of.Safety as we talked

15:08 spk_0

about as we call it

15:10 spk_1

to protect yourself on the downside because I think you can get caught up in in the momentum.

15:15 spk_2

You’ve mentioned margin of safety a few times. Is there, I don’t know, a formula that folks can use to determine what is an appropriate margin of safety or or what exactly are you looking for? Yeah,

15:27 spk_1

yeah, I would say it’s a very basic baseline of what the median or average multiple of that stock has traded out historically.And if you’re above that average or median you’re in the premium territory, if you’re below that, you’re in the discount territory, I would say a 10% bar on either end keeps you out of purchasing that stock. And anything greater than that, it’s a good indicator that you should do some more work.

15:48 spk_0

Great use of Yahoo Finance data right there. It’s time now for a market’s take on a classic Hollywood ga show staple. Who wore it better?Today we are pitting the hype cycle against the cash cycle. On the left catwalk, the hype cycle dashes in, embodying the buzz phrase when a hot story like AI drives headlines, downloads and dreams. It’s a great for attention, but it’s not always for profits. But then we have on the right catwalk confidently striding in the cash cycle, the boring but beautiful loop where a company turns.Sales into cash, pays the bills and still has money left over what investors call free cash flow. It’s glitter versus gains, spotlight versus spreadsheets. Mica, who’s wearing this market better, the hype cycle or the cash cycle?

16:32 spk_1

No question in my mind, the cash cycle is wearing this. I’ll go back to Warren Buffett, who is so much smarter than me, and he specifically pays.And Buffett specifically says you do not pay for perfection, you pay for cash flows. I think that ends that argument.

16:46 spk_0

There you go. Oh, we got, we got a few minutes left. Um, you just started your own shop here. Tell us about some of the consulting work and kind of your transition. I find this fascinating because you’ve worked, as I said in the intro, all over Wall Street from the C-suite to investment banking, buy side, sell side.How is this? How have you parlayed that into what you’re doing right now?

17:05 spk_1

I have loved every role I’ve ever had in my career. I got to really understand valuation as an investment banker. I got to participate in the markets as a buyer and seller of consumer and technology stocks when I worked on the buy side, which was fascinating. And then I went and did corporate turnarounds, so I got to see the other side of the table and create value rather than trade around it.And all of that has led me to a point where I can provide a level of expertise from all of these different perspectives rather than being or wearing just one of those hats and being able to help companies as a fractional CFO um providing strategic advice whether they’re going through a

17:39 spk_0

you just tell us what a fractional CFO is because I can imagine you getting your time gets split up, but do you like how doesthat work?

17:46 spk_1

A fractional CFO is essentially an acting CFO for companies who may not need a full-time CFO or don’t have one.And they need that level of expertise. So I might spend a day a week with them improving their processes, doing financial analysis, modeling their company, really, truly at the end of the day, helping them understand what drives value in their business and creating a roadmap to creating that value themselves and then helping them achieve it.

18:09 spk_2

So you talk to companies a lot and probably from a lot of different industries. I’m curious what they make of the current environment, both on the economic side andOn the market side, because we keep hearing about, you know, uncertainty, tariffs, inflation. What are the companies that you work with? What are they tellingyou?

18:29 spk_1

The general consensus of the companies I’m working with right now is that they’re cautiously optimistic. I think many of them are watching what’s going on with tariffs, trying to do some prep work for how that’s all going to shake out, um, anxiously looking at the economic indicators and what their consumers, um, might be facing. But for the most part, I thinkEverything for right now is on the rails. Um, I’m actually working with a company in the broadband and data space right now who is just growing so fast they can barely keep up with it, right? Because our, our country needs an infrastructure of data shelters on the way to data centers, and building that out is critical. It’s just like what we’re seeing in the AI AI race. How do you make sure you have enough supply to power the demand that’s coming. So I think it’s really sector specific as to how people are.Feeling, but generally I think they’re taking a wait and see approach, maybe a little bit of a cautious approach when it comes to hiring and spending to make sure they’re being prudent. But overall, I think we’re feeling OK about how the environment is right now.

19:29 spk_0

I’mwondering if you could share with us, um, back in the day and you still do it, when you are or were for different industries or even individual stocks, some of the metrics that you would use to kind of filter things down and make sure that you were getting into an area that would providediversification or that margin of safety and also had maybe a little bit of hype behind it. I don’t think it hurts to be part of the AI trade. So what would you look for in some of these some of these screeners?

19:55 spk_1

I’m a very traditional investor and I want to pay for cash flows. So I look at things like free cash flow and free cash flow margins because that to me is telling me the true strength of how much that company is generating, how much you’re generating over time, and the optionality that they have with the cash that they’re generating.

20:12 spk_0

We got one more,

20:13 spk_2

I guess I I so you’re a cash-based investor, you’re not into the hype. How do you talk to someone though that is looking at this market, sees how well companies like Nvidia are doing, and says, I need to be in on this. Is it too late at this point?

20:31 spk_0

Good question.

20:31 spk_1

That’s a great question, and I think there’s no doubt in everyone’s mind that a lot of these companies are trading at premium multiples becauseThey deserve to be at the time, right? These are the companies people are paying attention to. They’re growing faster than most other companies, so they at times warrant a premium. I think the bigger discussion is around prudent investing as to how you place those in your portfolio when you buy and sell, and I think not getting caught up in a momentum trade and keeping the Mr. Market hat on your head to make sure that you’re investing in a prudent and diligent way is the more important discussion that needs to be had.

21:05 spk_0

Mika, lovely having you once again, and I love how you were kind of breaking down the Mr. Market, uh, Warren Buffett’s idea, his reminder that the market is always coming in each day, kind of wrapping us and say, oh, this is the price right here, something we have to keep in mind, and we also have to keep in mind all the hype that we’re seeing in the rally, which is now baked into a lot of the fundamentals that we’re talking about these stretched.Uh, valuations where the S&P 500 is right now and how diversification, uh, might be a very good thing to look into because if you own the passive in indices like the S&P 500 or the NASDAQ 100, you are not necessarily getting that, uh, diversification. So stock screening then and proper risk management and stock placement and all that good stuff is very important.So on that note, we are recapping or winding things down here in stocks and translation, but make sure you check out all our other episodes of our video podcast on the Yahoo Finance site and mobile app. We’re also on all your favorite podcast platforms, so be sure to like, leave a comment, and subscribe wherever you get your podcast. We will see you next time on Stocks in Translation.