Meta's $100 Billion AI Bet; Will Jerome Powell Be Fired? Nvidia Sells China; Earnings Season Kickoff (NFLX, ASML, TSM, IBKR)

Summary

Chit Chat Stocks Podcast Summary

Episode: Meta's $100 Billion AI Bet; Will Jerome Powell Be Fired? Nvidia Sells China; Earnings Season Kickoff (NFLX, ASML, TSM, IBKR)
Release Date: July 18, 2025
Hosts: Ryan Henderson and Brett Schaefer

---

Earnings Season Kickoff

In this episode, hosts Ryan Henderson and Brett Schaefer delve into the commencement of the earnings season, focusing on reports from major companies such as Netflix (NFLX), ASML, Taiwan Semiconductor Manufacturing Company (TSMC), and Interactive Brokers (IBKR). They also explore significant developments in the AI sector and address macroeconomic concerns, including the potential dismissal of Federal Reserve Chair Jerome Powell.

ASML Earnings Report

Brett kicks off the discussion with ASML, highlighting the stock's recent performance and inherent volatility despite strong business fundamentals. Ryan observes, “ASML just kind of a bizarre stock... the growth is fairly predictable...” [00:01:56]. They dissect ASML’s financial results, noting net sales of €7.7 billion, a gross margin of 54%, and a projection for a 15% increase in net sales for 2025. However, a cautious outlook for 2026 led to a significant stock drop. Brett points out a potential buying opportunity, stating, “If you think that earnings can grow at a double digit rate and you can buy it at 21 times earnings, you have 5 times earnings yield plus a lot of earnings growth. That's not a bad scenario...” [05:24].

Taiwan Semiconductor Manufacturing Company (TSMC) Insights

Transitioning to TSMC, the hosts commend the company's robust growth and strong operating margins. TSMC reported $30 billion in revenue, up from $21 billion a year earlier, and maintains an impressive operating margin of 50%. Brett forecasts TSMC’s revenue potentially reaching $100 billion by the decade’s end, remarking, “I think that's about 50%, 50% operating margin... Market cap of $1 trillion” [10:54]. Ryan echoes this optimism, adding, “I don't see how TSMC doesn't make a boatload of money in the process...” [10:54].

Netflix Earnings Performance

The conversation shifts to Netflix, where Ryan summarizes the company’s earnings with a “16% revenue growth slightly above their guidance” and improved operating margins, “34% operating margins versus 27% a year ago” [17:32]. Despite a weaker content slate, Netflix achieved record engagement and successful monetization strategies. Brett raises concerns about Netflix's high valuation, noting, “Trailing EV to EBIT. Maybe it hasn't updated this quarter yet, but shouldn't be too much of a difference” [22:03], and concludes that the stock’s trailing EV to EBIT ratio of 48.6 makes it “pretty close...just no” [22:16].

Bubble Watch: Meme Stocks Under Scrutiny

Brett introduces a segment on meme stocks, referencing Jim Cramer's creation of a new acronym for Palantir, Applovin, Robinhood, and Coinbase, which have delivered staggering cumulative returns since 2023. Brett criticizes their inflated valuations, stating, “Palantir... one of the most overvalued in history” [26:12]. Both hosts agree that these stocks are dangerously overvalued and urge caution, highlighting the inherent risks and potential for significant correction.

Cloudflare’s AI Scraping Crackdown and Its Impact on Google

Ryan brings up Cloudflare’s new policy to block AI crawlers from accessing websites without explicit permission, citing Ben Thompson: “Cloudflare launched an easy to block AI crawler a year ago... tens of millions of websites will block AI Crawlers with immediate effect unless they agree to be crawled” [43:51]. The hosts discuss how this move potentially strengthens Google’s dominance in AI, as Google’s own crawlers remain exempt, preserving its data advantage and possibly hindering other AI models’ data acquisition capabilities.

Meta’s $100 Billion AI Investment

The discussion then turns to Meta’s ambitious plans to invest hundreds of billions into AI and data center infrastructure. Ryan expresses concern over Meta’s escalating capital expenditures, questioning, “Will there be enough new revenue to get a positive ROI on that spend?” [50:10]. Brett echoes these sentiments, analyzing Meta’s shift from a traditionally capital-light business model to one that is increasingly capital-intensive, and debating the sustainability and potential returns of such massive investments.

Elon Musk’s Investment in XAI and Twitter

Brett and Ryan examine Elon Musk’s strategic maneuvers, specifically SpaceX’s $2 billion investment into XAI and the proposed merger with Twitter, valued at $113 billion. Brett draws parallels to Musk’s earlier acquisition of SolarCity, expressing skepticism about the long-term viability and profitability of consolidating such diverse ventures. He warns, “X and XAI could easily go to zero” [59:39], highlighting the risks associated with overvaluation and unclear business synergies.

Potential Firing of Jerome Powell and Market Implications

The hosts address the rumors surrounding the possible dismissal of Jerome Powell, the Federal Reserve Chair, amid political pressures from Trump and House Republicans. They note the market's reaction, including increased bond yields and investor nervousness. Brett questions the impact, asking, “If Powell gets fired, will that change your investment approach at all?” [59:14]. Ryan underscores the importance of Federal Reserve independence, stating, “This is why I love the market, because it's the ultimate feedback mechanism...” [61:00], suggesting that market forces will likely counteract unwarranted political interference.

Interactive Brokers Earnings

Skipping the sponsorship segment as per guidelines, the hosts discuss Interactive Brokers’ impressive earnings. Brett highlights a 27% increase in commission revenue and a 32% rise in customer accounts, praising the company's operational efficiency and strong growth trajectory: “This company is so efficient... a phenomenal business” [36:07]. Ryan adds that Interactive Brokers’ strategy with IBKR Lite has significantly expanded their customer base, growing from 690,000 accounts in 2019 to nearly 4 million [38:21], emphasizing the platform’s appeal to individual investors.

---

This summary captures the essence of the podcast episode, highlighting key discussions, insights, and notable quotes with proper attribution and timestamps. It provides a comprehensive overview for those who haven't listened to the episode, ensuring clarity and engagement.

Transcript

[Ryan Henderson]

Welcome to Chit Chat Stocks, the podcast where we help you find your next great investment. And today earnings season is officially kicking off. I'm one of your hosts, Ryan Henderson and I'm joined as always by the one and only Brett Schaefer. This is our weekly Power hour episode. We talk all things financial markets and as I assume the title is going to indicate, we're talking about earnings. This week Netflix reported ASML reported Interactive brokers trying to think of all the Taiwan semiconductor. We've got huge Capex plans from Meta and I literally mean physically huge. And then we have a massive crackdown from Cloudflare on AI scraping which may have some big implications if you are a Google shareholder. We're going to get to all of that in a second Quick housekeeping items. We do these shows live on Thursdays at 5, 5 o' clock Eastern Time, 5pm Eastern Time. If you want to tune in, head on over to our YouTube, check out Chitchat Stocks and feel free to ask some questions. We also post these on our podcast players, so don't mind if you listen there as well. And if you like the show, please, please, please, please give us a review. That's the best way to help us grow. Let's kick things off Brett, let's talk earnings. Where do you want to start? You want to start, want to go by the chronologically here? Go, go by the, the first reporting.

[Brett Schaefer]

Yeah, what, what would listeners like to listen to first asml. We had a lot of people talk and ask about asml. I think three or four. So why don't we kick it off there. Stocks looking a little cheaper. I will say if you want more in depth analysis, go check out our friend at best anchor stocks. Leandro writes a lot of good stuff over about asml. Ryan, you made the notes, what happened? Why is the stock down and then we can get into the valuation.

[Ryan Henderson]

Yeah, I honestly find before we get into some of the numbers I find ASML just kind of a bizarre stock I guess because it's very volatile but the business itself like it's, it's going, the growth is fairly predictable in the sense that you know they will grow. They have this just massive moat and they are a total choke point in the semiconductor industry. And you know semiconductor spending overall is growing. Like if you see the Taiwan semiconductor is spending tons on Capex that, that bodes well for asml. So like you have good indicators for them but then you have so much volatility it just kind of surprises me. I guess the big thing here, like if I just go through some of the numbers. The numbers looked pretty good, like just the headline numbers. Net sales were up. Maybe I don't have the actual figure, but net bookings were 5.5 billion, which bookings is kind of a misleading figure for them because it could be one day later and they could add $400 million of bookings with one new machine sold. So it's the sales is kind of the figure of the track there. Net sales were $7.7 billion, 7.7 billion euros. Excuse me. Gross margin of 54% and everything looked pretty good. They said they expect a full year 2025, net sales increase of around 15%. So kind of business as usual for them. They just continue to be the innovator in the lithography space. But then they had one quote that I guess sent the stock plummeting more than 10%. Let me find it. Okay. It says, looking at 2026, we see that our AI customers fundamentals remain strong. At the same time we continue to see increasing uncertainty driven by macroeconomic and geopolitical developments. Therefore, while we still prepare for growth in 2026, we cannot confirm it at this stage. What do you think about that quote?

[Brett Schaefer]

They don't, they don't know what the government's going to do of the United States. They seem to switch their strategy every month. So they have to say there's some uncertainty there. I think the key for any investor and I'm looking here while you're talking, I've loaded up the chart on fiscal AI trailing EV to ebit, which I think is a fairly good metric. You might want to toss in some forward ones there and maybe normalize some stuff if you think there's any sort of lumpiness. But that's more of an in depth discussion on ASML, EBIT, EBIT 21 right now that's near the low on a kind of post Covid basis, even a little bit pre Covid as well. If you think that demand is there and you have a longer time horizon than 2026, which I think a lot of investors don't, a lot of investors might be impatient there. This could be a good buying opportunity. If you believe that earnings can grow at a double digit rate and you can buy it at 21 times earnings, you have 5 times earnings yield plus a lot of earnings growth. That's not a bad scenario, especially for a company that a lot would consider a rock solid monopoly.

[Ryan Henderson]

Yeah, definitely.

[Brett Schaefer]

I'm not buying. It's a little big for me. I like smaller companies these days. Maybe it's still. Maybe that's a weird thing to say to artificially put myself on, but I would, I think it works from here if you have a five year time horizon.

[Ryan Henderson]

Yeah. I mean they can only grow so fast. Like they could take on a bunch of bookings. Well for one they only have so many customers that can afford their machines.

[Brett Schaefer]

But they could take on manufacturing capacity.

[Ryan Henderson]

They only have so much manufacturing capacity. They could take on a bunch of bookings. But that doesn't mean they can deliver it right away because that manufacturing capacity. So like there is some ceiling I guess to their percentage growth rate. The thing that surprises me here is like if they didn't say anything, like if they would have not said a word about 2026, I imagine the stock would be up. But they tried to quell I guess any future damage that could be done by saying like look, we don't. You could have replaced their quote with we don't know what's going to happen in 2026 and it would have been functionally the same. Did anyone going into this think that tariffs like, like what they said could not have been new to anyone? Obviously customer demand could change if there's a big change in tariffs. So I, it just kind of surprises me that the stock is so volatile. Here's the, here's the thing that I think matters the most and what people should care about. It's A quote from TSMC's I guess quarter ago conference call. I think they re restated these numbers and it was just still the same. But they said combined with our previously announced plan to build three advanced semiconductor manufacturing fabs in Arizona, this brings our total investment in the US to $165 billion to support the strong multi year demand from our customers. They have like, they have plans to build, I think it was 11 more than 10 new fabs between Taiwan, Japan and the US I don't know what the dates are on those. That is just music to the ears of ASML shareholders because what do you think those fab facilities are going to be packed with? Yeah, asml.

[Brett Schaefer]

Pretty good. Pretty good. Pretty good growth trajectory for sure. Are you buying Ryan, do you own this stock?

[Ryan Henderson]

I don't own this. The other thing I'll mention is they are buying back a good chunk of stock. So four and a half. They've spent $4.5 billion on buybacks over the last two quarters which I think comes out to about 1.6% of their market cap. So now cash flow is somewhat lumpy for them. So it probably isn't useful to annualize that. But if they did annualize that figure, you'd be looking at about 3% of their market cap being bought back, being repurchased on a, on a go forward basis. I, I think you can make money here, but yeah, I'm kind of with you. It's a little too big for me, which is funny because we're about to talk about stocks. I know.

[Brett Schaefer]

So what's, what's the.

[Ryan Henderson]

I think maybe not too big. I don't love, I guess a. I don't understand them perfectly, although I think I get the gist. But I don't love that their growth is somewhat capped by manufacturing capacity like Taiwan Semiconductor. You could make the same case. But they're growing much faster and they can frankly raise. Well, I guess ASML could raise prices too. But I don't know. I feel like growth could be higher for tsmc.

[Brett Schaefer]

I guess growth could be kept on ASML for sure. It's almost like a guaranteed, and that's a dangerous word to say at investing, but it's almost like a guaranteed 10 to 15% return. We have a comma here that says 20, 30 guys is about 44 billion to $60 billion in revenue. I think that's Euros. But converting to dollars, not that big of a difference. It's not that much growth compared to what TSMC is doing, which I guess we can go straight into them kind of related. They reported this morning $30 billion in revenue versus $21 billion a year ago in the same quarter. So pretty fast growth. I think that's about 50%, 50% operating margin. 60% of revenue coming from 5 nanometer and below. So 5 nanometer and 3 nanometer. 60% of revenue coming from high performance. Compute growing 14% quarter on quarter market cap of $1 trillion. Ryan, they should do $100 billion in revenue soon. I would think by the end of this decade. $200 billion in revenue and $100 billion in operating income isn't an insane assumption. Are we still underestimating this company? And maybe I'm preaching to the choir here. I'm not an owner of the stock. You are a recent buyer of the stock. What did you think of the quarter? Seems like a, another fantastic result from one of the best companies in the entire world.

[Ryan Henderson]

Yeah, it struck me as a pretty good quarter. The. I think people are underestimating it. Obviously if something really were to happen to AI demand, which I, I don't see that happening anytime soon, at least it could impact their Growth rate in a big way. But I just don't see if we think that in five years AI spending overall is larger or is higher. I don't see how TSMC doesn't make a boatload of money in the process and get to that hundred billion dollar figure. And even if you tell the next.

[Brett Schaefer]

Five years compared to the next 12 months or from the previous 12 months, because the next 12 months we could be getting into, which I'll talk about in another section here, potentially bubbly territory.

[Ryan Henderson]

So, but yeah, okay, spending could be higher next 12 months than five years from now in terms of like they're building out these massive data centers like Meta is. But even in those data centers they're going to need to upgrade their chips. I assume they want to continue to be on the leading edge. That just can, that means more spending for tsmc. So that's what I mean in terms of more spending is more spending on leading edge chips which is always going to benefit Taiwan Semiconductor. I thought the quarter was good. These quarters can be, I guess somewhat, I don't want to say boring, but management keeps things pretty close to the vest. Like they analysts try to ask questions and they are basically give the same answers over and over.

[Brett Schaefer]

It's like they're useless.

[Ryan Henderson]

Yeah, don't, it's like read them. We're gonna, we're gonna continue to serve customers and we're expanding capacity and everyone's like, I know but like what exactly is the gross margin going to be in two years? It's like, who cares?

[Brett Schaefer]

Well, they don't know. They don't know. They don't know. Hopefully as high as possible. Yeah, they're, they're, they're a company I trust very much, but their conference calls are useless. Just read their presentation. There's a couple notes that you just need. What's, what are margins looking like? What was the revenue number? Where is it getting divided into what segments, high performance, compute smartphones and what have you. Besides that, I don't think you need to do much.

[Ryan Henderson]

I think you can safely assume about half their revenue goes to operating income. So if you're right on the revenue trajectory.

[Brett Schaefer]

Let'S look at the historicals. I think it's been lower.

[Ryan Henderson]

I think, I think they're at about 48% operating margins if I'm not mistaken right now I'm saying it could come come down slightly with the US Fabs, which is what they're forecasting. But even the, the bridge between gross margins and operating margins over time I imagine should contract continue Continue to contract, which they have the, here's my thing they basically laid out in the conference call. They're like, like analysts kept asking, well, you know, if margins contract, are you going to do anything for pricing? And they were just like, they basically said, yes, if we want to extract more value, we will. Like if they will get to a margin target, if they want to on price. Yeah, they do because they have that power.

[Brett Schaefer]

Yeah, yeah, it's, it's really interesting to look at the semiconductor space because ASML and the equipment providers have pricing power. TSMC has pricing power. Some of these other companies that are manufacturers also have pricing power. Nvidia and Apple, I guess. And all these other customers of TSMC seem to have pricing power. It's because it's such a lucrative industry, such an important industry, so large and there's so few players that seem to have many monopolies at each step in the chain that everyone wins. And if we're looking at the operating margin chart, it has trended upward over time. Conservatively, I'd maybe think 45% makes more sense, but that's still really, really strong. Better than Apple, better than other manufacturers out there. And it continues to be high. And they have that pricing power because for advanced chips they keep extending their lead versus Samsung, intel and I don't know the Chinese players that well, but they're ahead of them.

[Ryan Henderson]

Yeah. And we're going to talk about the Nvidia news too. I think if they're selling into China, that means more demand for Taiwan Semiconductor.

[Brett Schaefer]

More demand for everyone. Yeah, I think. What do you think? Did Jensen go to the White House and say, hey, if you put out this headline, the stock market's going to go up? That's all he needed to say.

[Ryan Henderson]

Might be all it takes. Let's jump to that. But before we do, we want to talk about the TSOH Investment Research Service, new sponsor for us. I'll just go ahead and say I absolutely love this service. We read it regularly. It's run by a friend of ours, Alex Morris. Inside his research service, subscribers get access to 6 high quality stock research reports per month, including initiation reports, as well as regular updates on current TSOH holdings and watch list stocks. Plus there's 100% portfolio transparency. His coverage on top of him being a phenomenal analyst and I think making things very digestible for all the readers he covers. Interesting companies which are at least interesting to me. Companies like Airbnb, Celsius, Roblox, Netflix. I know most people won't think this one's Exciting. But Ally Financial, he helps me with that. TSOH is a premium research service and if you are serious about investing, this is like outsourcing. A professional analyst, I lean on him for quarterly coverage of a couple of the companies I own. He has also he does get, like I said, full portfolio transparency and he talks about his returns and he's absolutely crushed it over the last two years. If that intrigues anyone but you, if you're interested in the service, head on over to the science of hitting dot com. The link will be in the description. Again, that is the science of hitting dot com. Do you want to talk Netflix earnings?

[Brett Schaefer]

Sure, sure, let's talk Netflix. I haven't looked. What were the numbers?

[Ryan Henderson]

This may have I know this is not a good tease for anyone listening to the podcast, but this might be one might have become one of the most boring reporting companies out there. It seems like very predictable business at this point and they have such good control over their margins now in terms of they can really turn up pricing, they can turn on the ads. It just seems like just a really well run business. 16% revenue growth slightly above their guidance, 34% operating margins versus 27% a year ago, also ahead of their forecast. Now in this case, the primary driver of their outperformance relative to guidance was a weaker than expected FX headwind. But they grew members, they increased subscription prices and they increased ad revenue. And I would say they did this all with a pretty weak content slate. And now that's your personal opinion.

[Brett Schaefer]

But also not a Love island fan, Ryan, Huh? Well, people are watching. Isn't that their number one?

[Ryan Henderson]

I don't know, I'm not sure. But they do give that data out so maybe I could check the it's I think it was kind of a poor slate. But they also said they produced all these solid results. Record engagement, record members and price successful price increases when the majority of their content slate is weighted to the second half of this year. So hopefully I imagine for them should be even better results coming out of the second half of the year. I thought this was an interesting stat and it kind of puts it goes to show just how valuable Netflix is and how they're not dependent on any one thing. So it says we are not dependent on any one title to drive engagement. For instance, even our biggest titles that have tens of millions of views account for less than 1% of total viewing. They really are you think about like hbo, maybe even Prime Video to some degree. Apple tv. Those services, they might produce great content, but they're typically Driven by a couple of franchises and viewership I would guess is somewhat cyclical and tied to those franchises. Netflix is just not the case. They are growing with their top titles accounting for 1% of the viewership. They're still growing members and they're the biggest service in the world. Biggest service, streaming service. So it's just, it's an exceptional business. There was one quote that stood out to me that I want to find that basically encapsulates their entire business model at this point. Uh, let me find it real quick. As we deliver more value to members, we continue to refine our plans and pricing to improve monetization, which in turn allows us to reinvest to make Netflix even better for our members. They're at the point where they have this competitive advantage. They've got a wide enough content slate, they can start to take profitable gambles, I guess you could say, on different types of content like live events and even gaming. Not sure if gaming's a profitable gamble, but you, I imagine those live events are given the engagement they get and they can just reinvest in the platform at a much higher rate than pretty much all the other streaming services. So last year we said Netflix won the subscription wars or the, sorry, the streaming wars. I see no evidence to disprove that theory. I think the streaming wars are over.

[Brett Schaefer]

I agree for the most part. The only thing that would be a leading indicator of a long term concern over the next, and this is not going to happen next year, but over a decade is the fact that watch hours on TV YouTube is growing market share much faster than Netflix. Now both of them are taking share from traditional players and there's still about half of viewing hours that on regular cable or legacy broadcast stuff that is going to go away. I would say that is a bit of a concern. I got nothing to say on Netflix. Good company. EV to ebit. Do you want to guess what it is right now? I'm looking it up right now on Fiscal AI.

[Ryan Henderson]

Trailing ebit.

[Brett Schaefer]

Trailing EV to ebit. Maybe it hasn't updated this quarter yet, but shouldn't be too much of a difference.

[Ryan Henderson]

Gonna go 50 times.

[Brett Schaefer]

Pretty close. 48.6. Not a buyer here. Gosh, just no. I guess people are scared and running to quality, but at a price of 1200 bucks, man, that. It's just not appetizing.

[Ryan Henderson]

Now I've. Okay, I've got the revenue per region pulled up here as well and a beautiful chart. Shout out fiscal AI and if you're interested, check out our link. Fiscal AI chitchat gets 15% off growth in all regions this quarter. 15% in North America, 18% in Europe, 9% in Latin America, 24% in Asia Pacific. They have content for every region. I. I just don't see how someone like, I could see how it slows down. Although they've got a lot of monetization levers they can pull now with advertising, but I don't see how anyone ends up supplanting them as the leader in streaming.

[Brett Schaefer]

YouTube. YouTube, for sure. I mean, YouTube is the leader in streaming.

[Ryan Henderson]

Sorry, the leader in original content, paid streaming.

[Brett Schaefer]

It's all overlapping. You can pay a subscription to watch YouTube without ads. I think that is their number one competitor. Video games as a competitor, staring at your phone is a competitor. The competitors that Amazon, maybe with sports, but Apple tv, hbo. Uh, I'm forgetting the other ones. Paramount. It's a joke. It's. It doesn't matter. Netflix has beat them. Their competitors are. Well, who. I just mentioned video games, YouTube. Essentially, people's leisurely hours staring at a screen. Can they win more hours of that? Probably. In the US I think it's going to prove more competitive than people think. Over the next five to 10 years, there's only so many people and so many hours that you can spend watching tv. Although maybe I'm underestimating the laziness of people.

[Ryan Henderson]

Yeah, I think you underestimate how many people are willing to pay for a service like this, have it on in the background and play on their phone at the same time. Okay. People have said that's a growing trend.

[Brett Schaefer]

But, yeah, you are correct. That is what a lot of people do.

[Ryan Henderson]

Before we jump to, we've got a lot of AI topics. I guess you could encapsulate it as AI.

[Brett Schaefer]

The news keeps coming every week.

[Ryan Henderson]

Let's maybe do something fun. Do you want to hit either a quick bubble watch, or maybe we could talk about Mr. Jerome Powell. Ooh, on the hot seat as always.

[Brett Schaefer]

The bond market's gonna save him. Someone asked what we use for streaming services. I made a rule for myself. I'm only watching sports now. Honestly, I got. Not wasting my life anymore. But that's just to answer that question there. Let's do bubble watch. There is a new acronym, Ryan. I'm sure you saw it, because Jim Cramer, the man, you may love him or hate him, he's got style, right? He knows how to put on a show. Jim Cramer, famous CNBC host, said a new acronym for the meme Stocks that just won't quit. The three exclamation points Park, Palantir, App, Lovin, Robinhood, Coinbase. Some people reversed it and said that these could be crap stocks. He may have done that on purpose because he knows how to drive memes. I think, I think he knows what he's doing. He's an entertainer. Let me give you some numbers on what these stocks have done since the beginning of 2023, which is just a tad over two and a half years. Palantir or Coinbase. Cumulative return and this is the worst performer. Cumulative return of 1000%. Palantir 2250%. Applovin 3270% Robinhood 1170%. If you bought at the beginning of 2023 with any decent amount of money, you are very rich. But I think you have to make a really tough choice now because are these insanely overvalued? I haven't looked deeply at most of them. Palantir? I'd say yes. Honestly. Full disclosure. Put on a tiny short on Palantir.

[Ryan Henderson]

Really?

[Brett Schaefer]

Yeah, yeah.

[Ryan Henderson]

Is that your first short?

[Brett Schaefer]

Yeah. Very small percentage of the portfolio. But just I don't want we're talking publicly about something I should disclose stuff like that. Nothing against the people that made 2000% on the stock. I just think it's one of the most overvalued in history. It's price to sales above 120. Maybe at this point it's a market cap with $350 billion and it's I don't think ever going to grow into its valuation.

[Ryan Henderson]

Let's take, let's take a second here. Do you think this is the most overvalued stock in history?

[Brett Schaefer]

I think given the market cap. Yes. Now people are giving examples. Back at the dot com bubble, Yahoo. As an example, they were smaller market caps. Yeah. The price to sales ratio might have been just as insane. But I think if you include the actual size and maybe we're not adjusting for inflation, but I think it takes the cake. You have something like Tesla in 2021. That could be an argument. But they, their financials were much larger. Even though I would say that they've proven to be fairly overvalued from that level. I don't think it's as insane as Palantir.

[Ryan Henderson]

Yeah. Trying to, just for fun, trying to do the math on what it would take.

[Brett Schaefer]

Get it to a reasonable valuation.

[Ryan Henderson]

Yeah. Would require outrageous growth. And I, I can already hear some people that maybe own shares like, well, they can grow at an outrageous pace. But to do it for it'll they'll need to do it for 15 years at Amazon level growth rates, which, frankly, they don't have the addressable market to do it at. So I, I, it's absurd. I honestly, I agree with you. I think it's one of the most overvalued in history. And if you go down the list of. I know this is like a flawed way of thinking anyways, but if you go down the list of companies that it's larger than, it blows my mind.

[Brett Schaefer]

Yeah, it's like 25th largest company by market cap in the entire world.

[Ryan Henderson]

Larger than bank of America.

[Brett Schaefer]

Yeah, yeah.

[Ryan Henderson]

Bank of America does, I think, $27 billion in net income. I'm pretty sure Palantir does, like, maybe 3 billion. Really?

[Brett Schaefer]

Yeah. 3 billion in revenue.

[Ryan Henderson]

Let me pull up a chart. I'm gonna pull up a chart. Keep talking. Let me put some, I'm gonna put some numbers on this.

[Brett Schaefer]

When I mentioned that investors have to, if you own these, you have to get put into a tough spot, because I, I just think, okay, let's say you have a huge winner in one of these. I would applaud you for that. But I don't know if all four of these are grossly overvalued right now. Maybe one is still reasonable, something like that. But if they are grossly overvalued and you think, ah, this could be dead money for 15 years, you have to make a tough choice. You either keep it and maybe forward returns are terrible, or you sell and take a huge tax hit. I just don't like these type of stocks. My question is, Ryan, if, and I know you wouldn't, neither of us are doing this. Forced to go long or short. This basket equal weighted, not your entire portfolio. What would you do?

[Ryan Henderson]

Short. Yeah. Come on.

[Brett Schaefer]

It's dangerous, though. You can't. This is why if you short stuff.

[Ryan Henderson]

I know, it's dangerous. You'll have to do one or the other.

[Brett Schaefer]

Yeah, exactly. Exactly. I would be. I agree with you. Yeah.

[Ryan Henderson]

Maybe you could go long. Maybe one of these works. And here's the thing that I find interesting is, like, the companies that always get the most insane valuations are the ones that have legitimacy to their business model. It's not the ones that are like, well, maybe you can make the case for Nikola whatever whatever in 2020. And there are some concept companies that get to extreme valuations.

[Brett Schaefer]

Rigetti. Quantum. Quantum computing.

[Ryan Henderson]

But when you have legitimacy behind your business model as well, then I think it can get to crazy, crazy numbers like Shopify. I'm pretty sure Shopify has Put up incredible numbers over the last four or five years.

[Brett Schaefer]

Talking about revenue financials, I still don't.

[Ryan Henderson]

Think they've hit their all time highs from 2020.

[Brett Schaefer]

No stock is at. I think they did a split. Stock is at 127, give or take, and it peaked at 167 in November of 2021. At that point, the market cap was $200 billion. I think they were my old pick for most grossly overvalued stock, maybe Snowflake as well because their price to sales ratio was at 60. But Palantirs is double that, Ryan, double.

[Ryan Henderson]

Okay, so I got some numbers on it. Bank of America over the last 12 months, actually $28 billion in net income.

[Brett Schaefer]

Look at that chart.

[Ryan Henderson]

Palantir, which it's not like, oh, they don't have any earnings. They are a profitable business and they've shown some operating leverage.571 million in net income over the last 12 months. They are doing some back of the napkin math here. Bank of America earns 54 times more money on an annual basis than Palantir. And Palantir is bigger. It makes no sense to me.

[Brett Schaefer]

Well, okay, that's a big gap to make up. I have a question for you. Over the next 20 years, will Palantir earn cumulatively free the either free cash flow minus SBC or the net income that bank of America has earned over the last 12 months of one year.

[Ryan Henderson]

Over how many years for Palantir next?

[Brett Schaefer]

15, 20. I maybe have to think about it. The fact they might be able to get there. Yeah, yeah. The fact is that you have to think about this. We are not, not at the Mag 7 level, I don't think. But we are at 20, 21. Vibes across the board on all these shit goes across the board. You, this is time to stay conservative. Wait for the fat pitch. The fat pitches are not here. I just, it's, it's getting dangerous out there. That's all I'll say.

[Ryan Henderson]

I honestly, I don't know anyone that is actually buying Palantir at these prices. And so maybe that's just my circle of people. Obviously some people are, but I don't even some of the most bullish people I know have gotten to the point where like, I love Palantir, but I, I think the valuation's a little stretched and they're like, oh yeah, most optimistic.

[Brett Schaefer]

Take a little stretch. What a wow. Really going on a limb there. My God. Prices will drive people to conclusions that they never thought they would make. The most irrational conclusions. Price drives Your narrative. You have to remember that that's your instinct and this is what. The same thing has happened in 2021. Learn your lesson. That's all I'm, that's all I'm saying to the listeners.

[Ryan Henderson]

Okay, before we move on and before we talk about potentially Interactive Brokers earnings, let's talk about our sponsor, Interactive Brokers. Are you tired of moving money between your bank account and your brokerage account? Well, with Interactive Brokers, there's no longer a need to have a separate high yield cash account. Interactive Brokers offers up to 3.83% interest on instantly available cash. That means if you've got some cash sitting in your brokerage account and you're waiting to deploy that money until you find your next great investment, maybe a stock talked about here on this podcast. Now it's actually going to be earning something in the meantime. This is just one of the hidden advantages that comes with being an IBKR customer. They simply do not cut corners. And I constantly find myself surprised by just how much they're willing to do for customers that other brokerage platforms are not. If you are interested in checking them out for yourself, head on over to ibkr.com restrictions apply. Interactive Brokers is a member of SIPC. Now, shall we talk about Interactive Brokers earnings?

[Brett Schaefer]

We can. Yeah. I always feel weird that they're the. They're an advertiser and they've been a good investment for me. I would say go back and look at my research report. I did a full hour long podcast if you want the full details. And just as a disclosure, it always feels weird that they're a sponsor. But I own the stock. I want to hold it for the long term. And they seem to be doing well so far. Stocks have about 4 to 5% after hours. Ryan got some before I go.

[Ryan Henderson]

Just to be clear, those are two very separate things, Brett. Owning the stock and us talking about it has nothing to do with the sponsorship.

[Brett Schaefer]

Yeah, exactly. So let's go through the numbers. Commission revenue was up 27%. Interest income up 9%. So I guess they're getting a little slowdown on that. Interest rates have come down a tiny bit from last year. Pre tax margin expanded from. And I didn't even think they could get more margin expansion from 72% to 75%. Could we see 80% that these numbers are insane. This company is so efficient. Customer accounts are up 32%. Daily active revenue trades, which I think that's what DARTS are for. Their acronym increased 49%. All I have to say is incredible business. Not surprised the stock is up and I think looking back 10 years from now, when I bought at during the April panic in I think it was about the 40 range. I think it's going to end up feels like it's going to be one of my best investments over the next ten years. Dangerous words. But this is a company I just really have high conviction in that they're going to keep growing. People love the platform. It's better than everything else. There's going to be slow switching because there's friction to switch to new brokerage but they're gaining a lot of momentum and I think word of mouth is going to spread across the board for them.

[Ryan Henderson]

Well, you mentioned slow switching. Some of these numbers might disagree with you here. Total accounts shout out to fiscal AI for tracking. This data has gone from 690 million. Sorry 690,000 total accounts in 2019 to just under 4 million today. So it's 5x its total accounts now I will say the average run lot of room this has been I believe due to the very successful rollout of their IBKR Lite. Because if we look at maybe I can pull up some custom metrics here on fiscal average equity per customer.

[Brett Schaefer]

Is it down?

[Ryan Henderson]

Yeah. Relative to. Well, maybe this is just the bubble period but it's shaved off a little bit. Probably down 30%. Yeah, basically 30% since 2019. So my guess is they've made a plan or they've built a plan that's accessible to people that don't have that aren't massive accounts and they've now average individuals can unlock the benefits and honestly they're best in class trading execution. So that's probably been part of the reason for the average equity per customer going down now do you want to see a sign of the times, Brett? Maybe this will help you with your bubble watch. I'm going through a whole bunch of data on fiscal AI here. Total customer equity.

[Brett Schaefer]

Yeah.

[Ryan Henderson]

Which is just it's predicated primarily on deposits. It's, you know, it could be hit.

[Brett Schaefer]

Ooh, that's a nice bump.

[Ryan Henderson]

Yeah, this quarter was real good and now they did grow active accounts but my guess is the majority of that has to do with market valuations.

[Brett Schaefer]

Yeah, we have a comment here. IP Care is the best brokerage platform hands down. Thank you for agreeing. I think our sponsorship, they like those comments from the listeners. When you say 3.8 million, Ryan, remember Robin has 25 million accounts. I know there can be overlap with people. Robin has 25 million. I think Schwab is 30 to 40 million. Vanguard has like 50 million. And this is just in the United States. Globally I think IBA KR has can easily get to 10 million and just keep slowly gaining accounts over the next decade and, and beyond its knock. It's not like oh, you can just download this platform and try it. It takes a long time or there's a lot of friction to switch, like hey, I need to get my accounts transferred over. It's, it's a multi step process but it's a great business. And those margins, they'll make you salivate. That's, it's basically there's that Visa hurdle. If margins are above Visa, you know, it's a damn good business.

[Ryan Henderson]

What are the highest post tax margins possible? Because for them income tax is like what, 20%? Slightly lower. 15.

[Brett Schaefer]

Sure, let's just assume that. So I think they could get the Pre tax of 80%. So 65% to 70% post tax margin seems doable. Why, why couldn't they get to 80%?

[Ryan Henderson]

Is that the highest margins you've ever seen?

[Brett Schaefer]

I think so. Maybe Evolution Gaming, maybe some weird software companies, but outside of something that's a strange situation. That's almost like a licensing deal. Yeah, these are d this. It's a good business. It's a good business.

[Ryan Henderson]

Yeah, it is.

[Brett Schaefer]

I'll say it a million times.

[Ryan Henderson]

Before we go talk about Meta's outrageous spending, I want to talk about this crackdown on the AI platforms. Did you hear about this?

[Brett Schaefer]

I did not. Yeah, maybe since I'm sure it was spread around your internal communications, you're more in the know keeping up on the day to day stuff since you work literally at an AI startup.

[Ryan Henderson]

Yeah. So Cloudflare, which is I believe one of the most popular content delivery networks in the world today. 16% of the world's Internet traffic goes through Cloudflare. And if you want to remember just how impactful they can be, think back to their outage when they launched one product that had like a some flaw in it. They launched some update and it basically took down the global Internet. So apparently Cloudflare is going to start blocking artificial intelligence crawlers from accessing content without website owners permission or compensation by default. Here's a quote from Ben Thompson who is always exceptional at dissecting this kind of news. He says Cloudflare launched an easy to block AI crawler a year ago and they say that more than 1 million customers have enabled this feature since then. That however, was an affirmative choice. Now tens of millions of websites will block AI Crawlers with immediate effect of unless they affirmatively agree to be crawled. And then he talks. He has a section about Google's advantage. He says there is one important exception to these defaults. Google, which has two crawlers. Google Bot crawls the web for Google Search while Google extended crawls the web to capture data for Gemini. What is critical to understand however is that data for Google Search AI products, including AI Overviews and AI Mode is gathered by Google Bot. That that means if you want your website to show up in Google Search, you have no choice but to have that data also be used by any AI product that are under their search umbrella. This feels like a kind of a flex of power on cloudflare's part. But this feels really damaging to the, I guess answers out of a lot of the foundational models. Pretty much everything except Google. Am I thinking about this wrong? Is this not a massive win for Google?

[Brett Schaefer]

I would think so. Looking at the outside, not sure how this tech really works besides the basics that people outline. Seems like Google will do well if it's 16% of the Internet traffic though maybe that in a vacuum is not the biggest loss. But from what I understand, the most important thing is conversational stuff such as Gmail, you have Reddit, Twitter, YouTube, I guess for video and conversations. They'll probably train on this data that you're we're giving them right now. I found that you can with. So I've written like 2000 articles for the Motley fool or something like that. They can, they probably train in a lot of that data and they can put something out that's kind of gibberish that doesn't actually make sense. But it's in the exact style of how I write for the Motley fool and how they want people to write if that stuff goes away. Yeah, I think this could be a concern here. In all this art you could start having to use the. What is it called, the fake data, the artificial data that is just created. It seems very strange for me, but over the long term the companies with the data seem to have a more rock solid foundation. OpenAI and thropping and some of these other companies have gone wild west I would say to try to capture all this data and train and that could be reversing going forward. I've seen a lot of lawsuits out there. Don't know how they're going to work out. But Alphabet as usual has a clear competitive advantage in essentially everything in AI. The only question is if they can execute with branding, product strategy, getting distribution.

[Ryan Henderson]

To customers Yeah, I agree. The. I've always been sort of unclear on the legality of like ChatGPT's business, I guess in that crawling every website, training.

[Brett Schaefer]

On other people's data, scraping other people's.

[Ryan Henderson]

Data and using it has always been a confusing concept to me. It's always felt like maybe it was wrong, but everyone was doing it, so it was like, was it acceptable? So I imagine this is pretty impactful, this from cloudflare and might impact the answers or the quality of the answers that you get from a lot of the conversational models. We'll see. I'm a Google shareholder, so maybe I. Isn't that like astrological sign?

[Brett Schaefer]

Yeah, exactly. That's why I think it's funny to say that.

[Ryan Henderson]

Yeah, as a Google shareholder, I think this has got to be viewed as a positive.

[Brett Schaefer]

I think so as well. Okay, Meta's data center plans. Ryan, you want to learn about depreciation expense. Did you see this chart I put in Meta? And I guess Zuckerberg says okay, Brooks, the one leading the charge here, he has been. And I think it's maybe to get people onto the Twitter competitor threads, which I don't really like too much, maybe because you need an Instagram account, that's besides the point. But he was on threads putting a thread together about their new data center plans for their super intelligence teams. We talked about last week, I think two weeks in a row now, about how they've been trying to acquire all the best scientists with huge salaries. And in order to acquire them and entice them, he wants to build the best in class infrastructure out there. Again, I would say this is trying to catch up with Alphabet, who has been doing this for 15 years. So here's the quote for our superintelligence effort. I'm focused on building the most elite and talent dense team in the industry. We're also going to invest hundreds of billions of dollars into compute to build super intelligence. We have the capital from our business to do this. Two things I think should make investors nervous. One, hundreds of billions of dollars, not a hundred hundreds. And saying second, we have the capital to do this. Not saying it's going to have a positive roi, but we have the money. So let's burn it. Apparently Meta is the first company on track to produce a 1 GW cluster. I forget all the exact terminology, but essentially gigawatt is a lot of electricity and a lot of electric power. Usually you're in, I think some of these like 100 megawatts. So there's just the scaling up here is tremendous. Zuckerberg says further on in the thread they are going to be spending hundreds of billions on multi gigawatt clusters. So I think that means one data center that he says is going to be the size of Manhattan that will have multiple gigawatts of power in that single data center, which would be tenfold increase from like current levels of these giant data centers. My first question, Ryan, crazy, stupid, smart or all three? I honestly think could be all three.

[Ryan Henderson]

Yeah, I mean this isn't the first time that he's, I don't want to say staked his reputation, but more committed to spending billions of dollars on questionable projects, I believe, I think it was, must have been three years ago when he changed the name of the company to Meta. He said, I think this work is going to be of historic importance. And he basically said he's willing to lose a lot of money on it. He has shown an ability to like still grow shareholder value in the process. So I will give him, I guess, kudos to that. What I don't love, and we're seeing it with all big tech companies now, is the bragging about capex specifically. Like it's a, it's a capex brag fest. Everyone's like, who can build the biggest data center? Like, I would rather him talk about the returns that this could drive, the impact this could have on the consumer experience, the impact that it could have on the business overall.

[Brett Schaefer]

I'm just curious about what their business model is with this.

[Ryan Henderson]

If they're plowing all this money into llama, I would be very skeptical.

[Brett Schaefer]

Yeah, I agree.

[Ryan Henderson]

Although.

[Brett Schaefer]

Okay, let's look at the numbers. CapEx for reference, $44 billion over the last 12 months. I think he's saying they're going to go well over $100 billion a year eventually once they can get there currently. And depreciation expense, this might not include all of depreciation amortization, but I think it was the majority. Using a fiscal AI chart here that I'm sharing for the video watchers, it has grown at a 32% rate since 2015, going from $1.2 billion a year to about $16 billion a year. For reference. And let me stop sharing the screen here. For reference, Meta's revenue is $170 billion. If he does this and they start spending hundreds of billions and depreciation grows to maybe this is a bit high, but 50 billion a year, will there be enough new revenue to get a positive ROI on that spend? Because it's going to impact the income statement. And you need an increase in revenue in order to make up for this gargantuan levels of new depreciation that are going to roll through. Are they going to get a positive ROI? I understand the OpenAI anthropic or Google argument because they have business models, but Metas is advertising. Sure, but that's a different ball game. How are they going to make money by just making it free on WhatsApp and Instagram?

[Ryan Henderson]

Yeah, I'm not sure if it's using AI. I'm not really sure what's going on here, but somewhere in the back end to improve ad efficiency and ad targeting, then maybe there's a clear revenue bump there. But I can't imagine they're bragging about building this 1 gigawatt cluster, the data center the size of Manhattan, specifically just for those back end AI improvements. It's got to be big spending for Llama, the consensus analyst estimates. So you Talked about how capex has exploded over the last decade from 3 billion to 44 billion. This year they're expected to do 67 billion. That's analyst estimates. I wouldn't be surprised if that ends up being conservative.

[Brett Schaefer]

If they can get to the capacity, yes. I think from reading his thread we're looking at 100 billion in 2026.

[Ryan Henderson]

Wow, that's, that's insane. The most capital light business of this size. You think about the business seven, maybe even five years ago they were doing 100, what was it? Let's go back to their 2020 financial statements, shall we? Okay, 2021, $118 billion in revenue. Less than $20 billion in CapEx today or this year. Cap, that's Capex as a percentage of revenue is probably going to go from about 15% to I would guess 30 to 40% this year. They've become like the capital intensity of Amazon. Despite having one of the most capital like core businesses of all time.

[Brett Schaefer]

Yeah, and the multiple keeps rising. I'm not a buyer here.

[Ryan Henderson]

Anyway.

[Brett Schaefer]

All right, good business. But.

[Ryan Henderson]

Of course it's, it certainly was and is. Its core business is incredible.

[Brett Schaefer]

But I, I can't understand people when I say that these businesses models are getting worse. Like if the business was rock solid, these Meta was one of the. Is one of the best businesses ever. Instagram's one of the best businesses ever. Facebook still one of the best businesses ever. WhatsApp is developing into a good business with a strong network effect. But they were capital light. If you have the same exact business, but it's capital intensive, it's A worse business. It just is.

[Ryan Henderson]

Yeah. I think the argument most people would make is that they can turn this off if they choose to, but Capex seems like an addiction to some of these management teams.

[Brett Schaefer]

Yeah, it's a good way to put it.

[Ryan Henderson]

All right, do we want to talk about Musk's circular investment? Shall we call it?

[Brett Schaefer]

Yeah, yeah, sure. These should be quick. We can hopefully get Musk and Jerome Powell, maybe Rocket Lab since people are asking about it. Musk, I'd say I'm a very strong Musk follower. I know I've known him well after reading too much into him for the last 10 years and I think the most important recent development people need to track is these cross investments and proposed cross investments that he. He's dropping into the Twitter Twitter sphere and trying to make happen by just saying things. You, the listener can make your own conclusions on why he's doing this. But this week SpaceX made a 2 billion dollar investment into XAI. Were the huge VC backers of SpaceX okay with this? I like did they think I thought they were investing in a rocket company. But now we're going to invest into a talk about Capex, intensive AI startup that is well behind scale wise XAI and X the company. Sorry, he loves the name X and Twitter. Essentially Twitter and this XAI startup merged for $113 billion in combined value. Elon wants Tesla to invest in Xai. I predict that what the man really wants is to merge everything into one company.

[Ryan Henderson]

Yeah.

[Brett Schaefer]

To me it's reminiscent of the 2016 Solar City debacle where liquidity was tough, things were spiraling for his empire of companies, and he took on a really, really bad acquisition to save his cousin. This very, very much reminds me of this.

[Ryan Henderson]

Have you. So this might not be Xai's core business, but I tried to use. I don't know if Grok and XAI are the same. I assume Grok is like the conversational model on top of xai. I tried to use it and like asked it a question about if there was any standout quotes from a company's earnings call and it fed me an answer from my own tweet and I just realized they're pulling from probably one of the most unreliable data sources.

[Brett Schaefer]

Sarcastic data sources.

[Ryan Henderson]

Yeah, yeah. Like think about all the crap you see on Twitter and unsupported opinions. For the most part it feels like it's going to be hard to parse what's truth from what's not and what sarcasm from what's not. And I just Feels like a pretty. We talked about data as an advantage. I would say this might be a disadvantage to be using that data.

[Brett Schaefer]

Maybe. Maybe people talk about Grok, they can talk about it all they want. I know what I'm using. I know what people use. ChatGPT and Gemini and Google, Google, slash Gemini. People can at Grok in replies and get a stupid response. That's not a business model. Yeah. I pulled up Tesla's stock price. It's at almost exactly a trillion dollar market cap. Would you think it's reasonable to take 10 of that stock and do an all stock deal for X and Xai?

[Ryan Henderson]

Here's my question.

[Brett Schaefer]

Probably. They'll probably need to raise honestly, like $50 billion.

[Ryan Henderson]

But I'll take your question and I'll raise you one. Which business would you rather own?

[Brett Schaefer]

Tesla or X and Xai?

[Ryan Henderson]

Yeah.

[Brett Schaefer]

Oh, man. Neither. You got to own one at $113 billion valuation. What's going to lose less money? I think Tesla.

[Ryan Henderson]

You think you'd rather own Tesla there?

[Brett Schaefer]

Yeah. X and Xai are probably burning an insane amount of money, have no path to profitability and are wildly overvalued at $113 billion combined market cap. Now, Tesla is wildly overvalued, but I think there is some semblance of normalization of the EV business that could get established.

[Ryan Henderson]

Sure.

[Brett Schaefer]

But I think X and Xai could easily go to zero. Fairly easily.

[Ryan Henderson]

Okay. Jerome Powell apparently potentially fired. I didn't even know this was possible.

[Brett Schaefer]

Yeah, a letter was drafted, Ryan. We're actually going to spend another hour going through line by line the Federal Reserve renovation plans and doing an investigation to make sure they were not misappropriated. No, that's going to be next week. But as a reminder, when we discuss anything political, we're not. We're looking at, through an investing lens. We don't care what side any of you are on. We're on none of your sides. Quote. Trump confirmed that in a White House meeting Tuesday night with about a dozen House Republicans. He had discussed the concept of dismissing Jerome Powell, long a target, because of his refusal to lower interest rates as Trump wants. Apparently most of them said he should, but I mean, these are House. House representatives, people. Bond yields ripped higher on the rumor. So people were nervous. It's the exact opposite of what they'd want. But then they were fell or, sorry, then they fell back to. Or whatever Rose back when the idea was shot down and that, oh, we're not actually going to do it. They kind of tossed that out into the news cycle. Trump then said he was told the markets wouldn't react well if he fired him. So he has held off. And the big bank CEOs, such as JP Morgan chases and Goldman Sachs have said publicly that it shouldn't happen. Many people have started to say this. It seems like the market and the bond market are going to keep this in check, as well as the Federal Reserve presidents that are members that are in the President's ear. But if Powell gets fired, will that change your investment approach at all? Because I'm telling you, it makes me nervous. I think Fed independence is very important.

[Ryan Henderson]

Yeah.

[Brett Schaefer]

But I'm not sure I can do anything about it.

[Ryan Henderson]

Yeah, I don't know if it would really change my investment approach, but, yeah, it would make me very nervous and kind of cynical. Bit honestly, it would. It would turn me into a bit of a cynic. It's, this is honestly why I love the market, because it's the ultimate feedback mechanism. Anytime Trump has a dumb idea and he puts it out there, the market tells him how dumb it is.

[Brett Schaefer]

Yeah.

[Ryan Henderson]

And it's. I mean, you see that in this case, it happens right away. Like the feedback is obvious because bond yields rip with equities. Sometimes it takes a little longer for the truth to come out, but it is like the ultimate weighing machine as, as Munger says. So it's, it's, it's nice that in this way, it's actually nice that he kind of uses it as his scorecard a bit. I've always thought Trump cares a lot about what happens to the market. Most precedents do, I guess. And I doubt he really wants bond yields to rip higher, so I imagine he'll hold off.

[Brett Schaefer]

It's interesting, though, because I think the Fed is worried about what tariffs are going to do to inflation. That came out this week. And if we look, it has accelerated in recent quarters or recent months. April is 2.3%, May, 2.4%, June, 2.7%. So we're getting off of that 2% target. What do you expect the Federal Reserve to do, especially when a lot of the macro stuff looks solid right now, doesn't matter that homes aren't affordable? That seems to be what they care about. They're calling for interest rates to be, I think, at 3 percentage points lower for the Fed, which would be, I think, one and a half percent. I would be very worried about inflation if that happened.

[Ryan Henderson]

Yeah, that seems unrealistic. I just honestly feel for pal. I know we're running up on time here, but, like, I can't imagine that what a. What a horrible job to have and have him like, putting all this political pressure on you.

[Brett Schaefer]

Hey, serving. Hey, he's. He's a good patriot. He's serving the country. That's. That's all I'll say. It's a good. Seems like a. He's made some mistakes, as anyone does, but yeah, he's doing. I think he's trying to do his best.

[Ryan Henderson]

I think that's going to do it. Thank you everyone for tuning in. Thank you to our sponsors, the TSOH Investment Research Service, Interactive Brokers and Fiscal AI, which is an awesome tool to have during earnings season. Thank you everyone for tuning in. Tuning in. We want to remind you that Brett and I are not financial advisors. Anything we say or discuss here on Chit Chat Stocks is not formal advice or recommendation. We may buy, sell or hold any of the securities discussed in this podcast. So do your own work. Thank you again. We'll see you next time.

[Brett Schaefer]

Mama, Papa.

[Ryan Henderson]

Moipena moi pronto. Perobijos de la vuelta classes Amazon, Amazon Gastamenos sonrimas.