MoneyLife with Chuck Jaffe
Rainwater's Shaposhnik: Excessive Software Selloff Is Creating Attractive Buys
Why It Matters
Understanding why software stocks are on sale helps investors capitalize on a potentially undervalued sector amid AI hype, while the auto‑finance discussion offers practical strategies for managing ballooning vehicle costs that now rival mortgage payments. Both topics are timely as AI reshapes tech valuations and high car prices strain household budgets, making the episode relevant for anyone looking to protect and grow their wealth.
Key Takeaways
- •Software stocks down 50%, now trading at nine times earnings.
- •AI hype deemed overreaction; value investors see buying opportunities.
- •Average U.S. car payment $735, many exceed $1,000 monthly.
- •Biweekly auto payments cut interest, accelerate equity up to 12%.
- •74% of parents plan to help kids buy homes.
Pulse Analysis
The software sector has endured a brutal 50 % plunge, dragging price‑to‑earnings multiples from roughly 30x to just 9x. Rainwater Equity’s founder Joseph Shapochnik argues this drop is a classic market overreaction to AI hype, not a fundamental earnings decline. He points out that many enterprise‑software firms still generate steady cash flow and possess defensible subscription bases, making them attractive entry points for value‑oriented investors. By treating the current discount as a temporary sentiment swing, portfolio managers can capture upside when AI‑driven fears subside and earnings multiples revert to historical norms.
Meanwhile, the auto market tells a different story of consumer strain. Cox Automotive reports the average monthly car payment now sits at $735, with one‑in‑five borrowers paying over $1,000. Longer loan terms—averaging 84 months—inflate total interest costs, effectively turning a vehicle into a second mortgage. Leasing, once a niche option, has become a pragmatic way to sidestep excessive debt, especially when paired with biweekly payment structures. AutoPay Plus automates this approach, splitting payments every 14 days, which can shave 10‑12 % off loan terms, reduce accrued interest, and protect credit scores by avoiding late‑payment penalties.
On the housing front, Northwestern Mutual’s 2026 Planning and Progress study reveals a seismic shift: 74 % of parents with children at home are already budgeting or planning to assist with a home purchase. This surge reflects both lingering affordability challenges and a broader reevaluation of intergenerational wealth transfer, where homeownership is seen as a more tangible legacy than a college degree alone. Financial advisers suggest structured gifting, joint‑mortgage arrangements, and early savings plans to maximize impact while preserving the parents’ own retirement security. As the market adapts, these parental contributions could reshape demand dynamics in entry‑level real‑estate segments.
Episode Description
Joseph Shaposhnik, founder/chief executive officer of Rainwater Equity — manager of the Rainwater ETF, which focuses on buying into recurring revenue models at reasonable prices — says that the software industry "is embroiled into a controversy that is very difficult to dispute until we have [multiple] quarters of these businesses putting up very, very strong results." But because he expects those results from software firms, he thinks the market has beaten up software stocks as if they are all going to fail, making them bargain priced now with a potential rebound in sight. Shaposhnik talks about how recurring-revenue stories lead to more predictable results, which should give investors some comfort against uncertain times.
With the average price on a new car now hovering near $50,000 at a time when Americans are being squeezed by higher prices at the gas pump, Robert Steenburgh, chief executive officer at AutoPayPlus talks about how consumers should be dealing with the challenges of financing a car, particularly at a time when the average monthly payment is now $735 — and more than $1,000 for 20 percent of new-car buyers — with teh average loan term now stretched to 84 months.
Another way that consumers are finding their finances stretched is in home buying, and Ted Shanahan, chairman of Blueprint Financial Group, discusses the latest data from Northwestern Mutual's 2026 Planning & Progress study, which showed that parents now play a bigger role in helping children buy homes, and say that providing that assistance is as or more important than paying for college.
Plus, Chuck answers a listener's question about closed-end fund discounts, how they put stocks on sale and why discounts are appealing even when their benefits aren't readily evident when researching a fund or holding it in a portfolio.
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