The World Grows More Uncertain

Summary

Motley Fool Money: Episode Summary - "The World Grows More Uncertain"

Release Date: June 13, 2025
Hosts: Dylan Lewis, Ricky Mulvey, and Mary Long
Guests: Matt Argisinger and Jason Moser

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1. Geopolitical Tensions and Market Reactions

Timestamp: [00:57] - [03:48]

The episode opens with a discussion on the recent escalation between Israel and Iran, highlighting Israel's airstrikes targeting Iran's nuclear sites and military leadership. Ricky Mulvey emphasizes the broader implications of these actions, stating, “This is a stark reminder that our peace in the world in America should not be taken for granted” (01:23).

Jason Moser provides an analysis of the potential prolonged nature of the conflict and its impact on global markets. He notes, “We've seen retaliation already from Iran... it could lead to continued uncertainty, obviously, beyond the markets just around the world” (02:00). The immediate market response included a spike in oil prices and a flight to the U.S. dollar. Moser also points out that defense-related sectors, such as weapons manufacturers and government contractors, benefited from the tension.

Matt Argisinger adds, “There’s so much uncertainty, as Jason said. And that is one of the things you have to live with if you're an investor and a citizen of this world” (03:30). He underscores the inherent unpredictability investors must navigate in such volatile times.

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2. Market Resilience Amid Uncertainty

Timestamp: [03:48] - [06:19]

Transitioning to the business landscape, the hosts discuss the paradox of substantial market resilience despite widespread uncertainty. Matt Argisinger expresses surprise that the Standard and Poor's 500 remains near all-time highs amidst global conflicts and rising interest rates. He states, “It just doesn't feel like a stock market that should be within 2 or 3 percentage points of an all-time high” (04:08).

Jason Moser counters by highlighting strong corporate earnings and a resilient economy. He mentions, “We continue to see strong corporate earnings and that’s obviously very encouraging” (05:15). Moser anticipates potential Federal Reserve rate cuts in the latter half of the year, which could further stimulate market activity.

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3. Real Estate Market Dynamics

Timestamp: [06:19] - [09:34]

The conversation shifts to the housing market, referencing a Redfin report indicating a surge in home listings and a mismatch between sellers and buyers. Matt Argisinger analyzes the data, noting a 20% year-over-year increase in listings and a significant rise in homes staying on the market longer. He explains, “People may be trying to move, Ricky, but I don’t think they’re in a rush... affordability issues have persisted” (06:47).

Mulvey adds a personal finance perspective, advising potential buyers to remain patient and continue saving, as the market may eventually tilt in favor of buyers if mortgage rates decrease or sellers reduce prices.

Quote Highlight:

“We have to start focusing more on the demand side. If mortgage rates don't come down or sellers aren't willing to cut the price, we might still have this mismatch in supply and demand.” – Matt Argisinger (08:33)

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4. IPO Market Rebound with Chime's Debut

Timestamp: [09:34] - [15:18]

The discussion moves to the resurgence of Initial Public Offerings (IPOs), spotlighting Chime's successful debut. Jason Moser comments on the increased IPO activity, attributing it to private equity firms divesting holdings. He notes, “There is this feeling that private equity firms are looking to start divesting some holdings, which ultimately leads to more IPO activity” (11:31).

Chime's IPO saw a remarkable 37% surge on its first trading day, despite its valuation dropping from $25 billion in 2021 to between $10-12 billion. Moser advises caution, emphasizing the importance of understanding Chime's revenue model based on interchange processing fees and its path to profitability.

Quote Highlight:

“Remember this IPO and you get the company value today at 10, 11, $12 billion. That’s down from it was a valuation of $25 billion.” – Jason Moser (12:40)

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5. Earnings Highlights: RH and Adobe

Timestamp: [15:18] - [20:54]

RH (Restoration Hardware) reported a surprise profit, leading to a 20% stock jump. Matt Argisinger praises CEO Gary Friedman’s communication but expresses concern over inventory growth outpacing revenue. Despite these concerns, RH maintains strong free cash flow, signaling a robust business model.

In contrast, Adobe raised its guidance, a rare move demonstrating confidence. Jason Moser highlights Adobe’s revenue growth and introduction of AI-driven tools like Firefly, which saw a 30% increase in first-time subscribers. However, he urges investors to remain cautious about the long-term impact of AI on the company’s competitive positioning.

Quote Highlight:

“We have an interesting growth profile here that could be in play... I think it’s the former [AI enhancing the business].” – Jason Moser on Adobe (20:01)

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6. Cybersecurity Sector Concerns

Timestamp: [20:54] - [31:57]

Malcolm Etheridge, a guest expert, delves into the state of cybersecurity, particularly focusing on the departing officials from the Cybersecurity and Infrastructure Security Agency (CISA) and budget cuts impacting the sector. Etheridge explains the critical role of CISA in coordinating cybersecurity efforts across major tech companies and the potential negative impact of reduced funding.

Etheridge expresses skepticism towards the proliferation of “AI security” claims, cautioning investors to look beyond buzzwords. He emphasizes investing in established players like CrowdStrike and Zscaler, which are strategically positioned to leverage AI in combating cyber threats. Etheridge also critiques cybersecurity ETFs for including non-focused holdings, advocating for direct investment in pure-play companies.

Quote Highlight:

“If you think about just not that long ago, anything online calling itself ABCCompany IoT... investors are just throwing money at it.” – Malcolm Etheridge (27:44)

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7. Apple’s Position and Future Prospects

Timestamp: [31:57] - [36:18]

The panel discusses Apple’s recent developer day and its implications for the company’s future in AI and user experience. Malcolm Etheridge critiques Apple for not showcasing a compelling AI-driven innovation akin to competitors like Meta or Alphabet. He speculates that Apple might be focusing on bridging physical devices with future AI interfaces, but expresses disappointment in the lack of immediate consumer-facing AI tools.

Despite these concerns, Etheridge notes the resilience of Apple’s stock, indicating “peak pessimism” where despite negative news, investor confidence remains intact, partially due to Apple's historical performance and robust capital allocation strategies.

Quote Highlight:

“I think we’ve reached peak pessimism on Apple shares. So I as an investor actually just added to my position in the company earlier today...” – Malcolm Etheridge (36:18)

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8. Radar Stocks: Chipotle and Whirlpool

Timestamp: [37:10] - [41:57]

In the Radar Stocks segment, Jason Moser and Matt Argisinger highlight their stock picks:

• Chipotle (CMG): Moser praises Chipotle’s management and new product offerings, such as the Adobo Ranch dip, as early indicators of leadership effectiveness and customer acceptance. Despite a downturn in stock performance, the introduction of new menu items is seen as a positive sign (38:09).

  Quote Highlight:

  “They’re bringing a new dip to its menu, Adobo Ranch... it’s worth noting when they do it” – Jason Moser (38:09)

• Whirlpool (WHR): Argisinger points to Whirlpool benefiting from increased steel tariffs, which level the playing field against cheaper foreign imports. The company's strong dividend yield of approximately 8% makes it attractive for income-focused investors (40:06).

  Quote Highlight:

  “It’s a positive development if you’re a Whirlpool shareholder” – Matt Argisinger (40:46)

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Conclusion

The episode of Motley Fool Money titled "The World Grows More Uncertain" offers a comprehensive analysis of current geopolitical tensions, market resilience amidst uncertainty, the evolving real estate landscape, a rebound in IPO activities, notable earnings reports from RH and Adobe, and critical insights into the cybersecurity sector. Additionally, the hosts explore investment opportunities through their Radar Stocks segment, highlighting Chipotle and Whirlpool as noteworthy picks. The discussion underscores the importance of staying informed and cautious in an ever-changing global and economic environment.

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Notable Quotes:

• “We have so much out of our control and so much uncertainty...” – Matt Argisinger (03:30)
• “We just have to ask yourself in regard to the growth prospects...” – Jason Moser (12:40)
• “If you think about just not that long ago, anything online calling itself ABCCompany IoT...” – Malcolm Etheridge (27:44)

This summary captures the essence of the episode, providing listeners and non-listeners alike with a detailed overview of the key discussions and insights shared by the hosts and guests.

Transcript

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[Ricky Mulvey]

The world and markets shake upon Israel's airstrikes on Iran. This week's Motley Fool Money radio show starts now.

[Malcolm Etheridge]

Everybody needs money.

[Jason Moser]

That's why they call it money.

[Matt Argisinger]

The best things in life are free.

[Ricky Mulvey]

But you can give them to the.

[Unknown Singer]

Birds and be like.

[Jason Moser]

From Fool Global headquarters, this is Motley Fool Money.

[Ricky Mulvey]

It's the Motley Fool Money radio show. I'm Ricky Mulvey. Joining me on the Internet today are Motley fool senior analysts Matt Argisinger and Jason Moser. Great to have you both here.

[Jason Moser]

Ricky, what's going on?

[Ricky Mulvey]

Big news is going on. Last night, Israel struck Iran's nuclear sites and military leadership. These moves have created big questions that go beyond the scope of the content promise of this show, like what will retaliation look like? What does this mean for America? And I want to set aside the business part because this is, you know, there are parts of history that exist in punctuated equilibrium. And last night was a stark reminder that our peace in the world in America should not be taken for granted. So before we get to the show, I'll start with Moser. Jason, any broad reflections about what's going on?

[Jason Moser]

I mean, it's obviously not good news. It does sound like it's something that could be somewhat protracted. I mean, we've seen retaliation already from Iran, and from what I was reading, it sounds like Israel had essentially planned out 14 days of operations to ultimately accomplish their goal. So let's hope that it's not something that continues to escalate. It will lead to continued uncertainty, obviously, beyond the markets just around the world. Particularly when you consider our role here in the US in regard to all of this. Right now they're saying we don't really have a role in this. But at the same time, they're saying, well, we knew it was going to happen. It just gets into a back and forth that is you just hate to see it from an investing perspective. No surprise. We've seen oil prices pop on this news. We're seeing, interestingly, a flight to the dollar. I think maybe the dollar's still got a little bit of a reputation there. I know there were some concerns recently then I think your obvious winners, weapons manufacturers, government contractors, whatnot, they've seen a little bit of a boost from this. It definitely makes you think of things beyond just and it's really sad to hear.

[Ricky Mulvey]

Matt, anything you want to add or we can keep it moving to the content promise of this show?

[Matt Argisinger]

I'll just say as investors, I think we yearn for certainty in an uncertain world. And this is just a reminder that there's so much out of our control and so much uncertainty, as Jason said. And that is one of the things you have to live with if you're an investor and a citizen of this world.

[Ricky Mulvey]

Let's move to the business side. There is uncertainty. That's the key theme. Trade uncertainty, geopolitical uncertainty, uncertainty about the job market and artificial intelligence. And yet Matt, the Standard and Poor's 500 is still within spitting distance of all time highs. What's that say about the market to you?

[Matt Argisinger]

I know it is, it is remarkable that we're so close to new all time highs and we have all this trade uncertainty still. We have a new one, but we have multiple large scale conflicts now around the world that could escalate that we don't have an end time for. And treasury yields interest rates are still at multi year, if not multi decade highs. And that to me just doesn't feel like a stock market that should be within 2 or 3 percentage points of an all time high. We can go through the positives too as well though. You do have a strong labor market. We have consumer spending that keeps holding up for the most part. And the AI revolution, we have all this massive amounts of tech spending that's going to change the world, hopefully in a positive way. But Ricky, the macro backdrop could not look worse for me as an investor right now. And I guess I'm just amazed by the market's resiliency and Friday's sell off notwithstanding.

[Ricky Mulvey]

Jason, I can't tell if you were shaking your head because you just really disagreed with what Matt Argosinger had to say or if it was because dogs were barking in the background.

[Jason Moser]

It's the latter.

[Ricky Mulvey]

Okay. Okay.

[Jason Moser]

Yeah, I think Matty said did a lot of good things there. I mean it does feel like we shouldn't maybe be in such a good position in regard to the markets given the macro backdrop, given what has developed here over the last 24 hours. But I guess when you look at it at its Core. We continue to see strong corporate earnings and that's obviously very encouraging. I mean the economy we were talking about this last week, it is still ultimately fairly resilient. And I think that most recent jobs report number is starting to create a little bit more of a belief that we will see the Fed jump in there and start cutting rates in the back half of the year if that happens. Obviously that frees up some capital with lower rates and maybe we see more money moving around that way. Housing. But, but the AI conversation continues to dominate. There's just a lot of, a lot of enthusiasm out there right now. So I get, I'm not complaining, but it just, it doesn't feel like it quite squares up. Yeah, I agree.

[Ricky Mulvey]

Let's move from big macro to big real estate. Matt, since you're the real estate guy, I need you to explain this to me. And it's a Redfin report saying that US home sellers are sitting on $700 billion worth of listings. That's up 20% a year ago and an all time high. And another Redfin analysis found that there are nearly half a million more home sellers than buyers in today's housing market. What's, what's going on behind these numbers?

[Matt Argisinger]

Well, can you explain it to me because I don't, I don't quite get it either.

[Ricky Mulvey]

You're the analyst, I'm the host.

[Matt Argisinger]

I know. Well, what happened to those, those golden handcuffs that we thought homeowners had to their low fixed mortgages or the fact that inventory has been so stubbornly low for years? I mean, what happened to all. You mentioned it. We're seeing all time high value of listings. According to Redfin, and that data goes back to 2012, the number of homes for sale on the market is up 17% year over year and that is at a five year high. @ the same time, houses are sitting on the market for longer. 330 billion. So almost half the number you mentioned of home values have been sitting on the market for 60 days or longer. So what does that say about demand? I mean that we've assumed that demand has always been the strong factor here and it's the supply that's lacking. But I think there are a few things going on. People may be trying to move, Ricky, like you suggested, but I don't think they're in a rush. I mean, if you look at the median US home sales price, it's up 1.4% year over year. So I think a few things sellers want to sell, but they're not willing to cut the Price at least enough to really move inventory. Second, that contributes to this affordability issue we've been having, especially for younger first time home buyers who have sticker shock. When you compare the monthly rent for an apartment in most markets and compare that to what it costs to buy a home in most markets, the spread is hundreds of dollars, if not thousands of dollars. In some cases, it's much more expensive to buy than rent. The housing supply might be getting unstuck, but maybe now we actually need to start focusing more on the demand side. If mortgage rates don't come down or sellers aren't willing to cut the price, we might still have this mismatch in supply and demand. It's just the opposite side than what we thought.

[Ricky Mulvey]

Well, in a non cheeky response, I'm in Denver, Colorado and it makes a tremendous amount of sense to rent versus buy. For me, my personal situation in this market and I think you keyed in on it there, which is this is all about price. Yes, sellers can wanna sell, but unless you really want to sell, you need to cut the price. And until sellers are willing to do that, this is a simple supply demand game that's not going to go back in balance. So, Matt, more of a personal finance question. If you are a home buyer right now, you're not used to being in a buyer's market. So for someone looking for a home, listening to the show, any advice to them right now, I would say, you.

[Matt Argisinger]

Know, to potential home buyers, stay patient, keep paying that relatively cheaper rent and saving for that down payment. Because I do think eventually something breaks your way. Either mortgage rates come down at some point soon or sellers finally start cutting prices, maybe by the end of this year and enough to move inventory. So I think the power is getting on the side of the buyer. You just might have to be a little more patient.

[Ricky Mulvey]

Up next, we're looking at big tech earnings in an IPO. Yes, IPOs are back. Stay right here. You're listening to Motley Fool Money. Today's show is brought to you by.

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[Matt Argisinger]

Foreign.

[Ricky Mulvey]

Welcome back to Motley Fool Money. I'm Ricky Mulvey here with Matt Argisinger and Jason Moser. Fools we had a big IPO this week. I can't remember the last time that happened, but also the Internet has atrophied my attention span and memory. But let's talk about the one that happened and that is Chime. Jason, this is a company that offers banking services but is importantly not a bank. Don't call it a bank. They do high yield savings. They do some interest free payday loans and the stock rose 37% on its first trading day. Seems like investors are excited about the IPOs again.

[Jason Moser]

Yeah, I guess that that is the case. I mean in the first quarter of 2025 we definitely saw an increase in the number of deals. There's some reports that showed a 55 to 76% year over year rise here in the US and total proceeds from these offerings also increased. There is this feeling that private equity firms are looking to start divesting some holdings, which ultimately leads to more IPO activity. I think we could see in the back half of 2025 and going into 2026, I think we'll continue to see this modest enthusiasm in getting IPOs coming back to public market. We have some companies to look forward to out there. I think Stripe is a big name that folks are paying attention to. Klarna is one. They've put it on hold for now. But with Chime, I think the one thing to keep in mind is remember this IPO and you get the company value today at 10, 11, $12 billion. That's down from it was a valuation of $25 billion. At their last fundraise in 2021. That valuation has certainly come down, which is I think something to pay attention to.

[Ricky Mulvey]

Modest enthusiasm is the key theme that I think we should, we should dig into. I really like that phrase, Jason. When you look at the business of Chime, the fundamentals, this is a company that handled $121 billion in transactions over the year before it went public. 8.6 million active users. And when you look at the financials on the S1, you can see that nice trend line. As this business scales closer to operating profitability. I know you don't like to jump into an ipo. You're patient, you like to wait and see what's happening. But is this the business itself here? Is this interesting to you?

[Jason Moser]

It could be. I mean, I think Fintech certainly is a fun space to follow. As you noted, this is not a bank. It partners with a couple of banks in order to be able to provide these services. What the Bancorp bank and Stride Bank. So there is the FDIC angle there, which is encouraging, I think. I think the one thing to keep an eye on with this business is the way it makes its money. Ultimately, it makes most of its money just through interchange processing fees. Essentially, it's a card company. On the one hand, there's an interesting growth profile here that could be in play. Again, looking at that valuation, how far it's come down from 2021. You do have to start asking yourself in regard to the growth prospects there. On the flip side, if you're looking for a payments company that's making its money off of card swipe fees, you got Visa and MasterCard out there right now. Those companies have really been lighting it up here lately. There are a lot of qualities that make this a compelling business to follow. You've got co founder Chris Britt, the CEO of the company, and Ryan King, another co founder who's a director. They're still with the company as well. So you have that skin in the game which is always an attention getter. So it's definitely one that I'll be paying attention to in the coming quarters. But you're right, Ricky. I think investors likely should exercise patience here and let's see exactly how they behave as a publicly traded company.

[Ricky Mulvey]

For newer listeners, Jason did something there that you should do anytime you're looking at a new company and that's key in on the fundamental value drivers. How does this business make money? How does this business make more money? And in the case of Chime in, it is those processing fees something that you want to pay attention to? Let's get into the earnings rundown and we will start Matt with rh. This is the aspirationally priced furniture retailer that sells inside of stores that occasionally look like Scooby Doo mansions. But the important part is that the company reported a surprise profit and the stock jumped 20% this morning. What'd you see in the results?

[Matt Argisinger]

Well, a few things, Ricky. It was a good report and a shout out To CEO Gary Friedman, who I think is the only CEO that can quote Pablo Picasso, Warren Buffett, Teddy Roosevelt in the same shareholder letter. I love that. But yeah, a few things. I mean they maintain their full year guidance as well, which is something few I'd say consumer facing companies have done this earnings season. So that's good. One thing I am a little bit worried about, revenue grew 12% year over year. Nice growth there. But inventories up 26% year over year. Now they've opened some big galleries over the past year. They're opening more. That explains some of the inventory build. But generally you don't want inventories to grow faster or so much faster than revenue over time. That can lead to trouble. They did however generate nice free cash flow. 34 million in free cash flow in the quarter versus a loss of 10 million a year ago. And so the business is sound and the profit was nice to see for the quarter.

[Ricky Mulvey]

When you look at Friedman's commentary, I think when he was talking about tariffs is that when he uses the Pablo Picasso quote of every act of creation starts with an act of destruction. What a mind, what a mind behind rh. I know, but you mentioned tariffs, a slow housing market. RH still predicting double digit sales growth and we've talked about the slowing housing market. What's that say to you about rh? What's that say to you about the economy?

[Matt Argisinger]

I think it says to me that our age, and we know this is very, a very unique company, it's an outlier in its space. I don't think I can glean any big insights about the economy. I think it's an outlier brand, it's aspirational, it's got a very loyal member base of buyers. And so I don't think it gives me many clues about the economy, but it does tell me that RH's business is very sound and you know that it's holding up very well in a lot of uncertainty.

[Ricky Mulvey]

So for newer investors, this is a letter that I would encourage you to read because it is. Gary Friedman is a wonderful writer. It's actually a fun read. And it is also a time for you to exercise your skepticism radar. And here's a part that sort of got my skepticism radar going, Matt. And it's when he said, quote, our debt is reflective of a washtub bet on ourselves. We repurchase 60% of our outstanding shares. That greatly benefited our long term shareholders. Post the publishing of Mr. Buffett's letter in 2016-2017. He goes on to say that he makes these big repurchases when he believes the stock is undervalued. Then here's the key part. In addition, we believe another washtub bet is to play offense in the current environment by increasing our membership discount from 25% to 30%. Wait, what? You just went from repurchasing more than half of your existing shares to Talking about a 5% increase for a membership discount. What is this guy saying, Matt?

[Matt Argisinger]

He says he's unconventional. That's what he's saying. And I have to say, when you take on a lot of debt to buy back stock, and their net debt, by the way, is almost twice where it was before the pandemic, you better be right about the business. And so Freeman's making a big bet on his business. Like you said, they've got a lot of real estate, they've got assets, they have inventories, a nice quarter of free cash flow. So the debt right now is probably pretty manageable. Just watch out. If the business falls off though, and.

[Ricky Mulvey]

The membership discounts going up 5%, we'll also call that a washtub bet. Let's quickly move on to Adobe earnings. Jmo, Adobe reported yesterday this is a rare bird that is actually raising guidance right now. What did you find in the results?

[Jason Moser]

Yeah, I think the results were better than the market would have you believe today. Stock down a little bit after the report and there seemed to be at least some minor questions regarding deceleration in subscription growth and remaining performance obligation growth into the back half of the year. In quarter four in particular, as you noted, they raised guidance all the way around, which is very encouraging. The quarter was a good one. Revenue was up 11%. They saw earnings per share $5.06. In raising the guidance, I think that's really encouraging. They raised a midpoint of $20.60 per share, which puts shares now at around 19 times full year estimates. They're going to grow earnings this year about 12% from a year ago. So that multiple makes sense. That multiple sounds low for a business that has historically commanded a higher valuation, but that's ultimately why that is. So then you just have to ask yourself the question, is this company going to be able to continue to grow?

[Ricky Mulvey]

I mean the big question, the big question about the growth is AI. What does AI mean for Adobe? Can creators get to good enough with free and other tools? And Adobe's response seems to be if you want the best tools you can, you still come to Adobe. We have this product called Firefly where first time subscribers to Adobe grew by 30%. Are you buying that explanation from Adobe?

[Jason Moser]

To a degree, yes. I mean, there are a lot of tools out there, and Adobe is considered to be one of the leaders in the space. But there's no question its competitive position is under more attack today. And we're seeing encouraging numbers with things like you, Firefly, like you mentioned, and how it's bringing AI into its portfolio. I just think the question really is, is this a business where AI makes it better, or is this a business where AI displaces it? I think it's the former. But again, we're going to have to see the numbers and that'll tell the tale here in the coming quarters.

[Ricky Mulvey]

We're going to see Jamo and Matt a little later, but up next, we're taking a look at cybersecurity with Malcolm Etheridge. You're listening to Motley Fool Money.

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[Ricky Mulvey]

Welcome back to Motley Fool Money. I'm Ricky Mulvey. Malcolm Etheridge is a managing partner at Capital Area Planning Group, a boutique financial planning and investment management firm. He's also the author of Financial Independence Doesn't Happen by Accident. Etheridge caught up with me earlier this week to chat about the state of cybersecurity and why investors may be a little too pessimistic about Apple's future. Malcolm, an under discussed story that you brought to my attention is that virtually all the top officials at the Cybersecurity and Infrastructure Security Agency have departed the agency or will do so in this month. That was according to an email obtained by Cybersecurity Dive. And the latest spending bill that's going around slashes the budget for this agency by about $500 million. It currently spends about $3 billion a year. So this is all new to me. I don't what is the Cyber Security and Infrastructure Security Agency and what does this mean for the cybersecurity companies? You follow?

[Malcolm Etheridge]

Yeah, it's really one of those things that we as American citizens don't really want to have to know that it exists. Frankly, I probably hear more about it and talk more about it just because, you know, in my day job running a wealth management firm. A lot of the clients that we work with happen to be executive level folks at some of the most important, largest companies in cybersecurity. And so, you know, as I'm having dinners, playing golf, whatever, casual conversation, these kinds of things tend to come up. And so the way to think about CISA though, is they are the foremost or the most important cybersecurity agency within the US government structure. The DoD is the largest that people would typically think about, but CISA kind of runs the show. They coordinate with companies like Microsoft, Google, Amazon Web Services, and share information back and forth to make sure that each other is aware of bigger threats that are coming at us from state agencies, more specifically our adversarial countries, that actually sponsor a lot of this cyber warfare that happens.

[Ricky Mulvey]

And this overall bill actually does add spending, it adds deficit spending. But there are some cuts going on. This is one of them. Are there any companies you think in this zone, in the cybersecurity area that are particularly prone if there are federal spending cuts to cybersecurity?

[Malcolm Etheridge]

Well, so one of the things that I think is interesting, I started investing in standalone CyberSecurity companies about three years ago, started making a case publicly about this on shows like MFM and others about the opportunity to invest in these companies. And one of the reasons that I made that case was because at the time, the Biden administration had about $13 billion set aside for cyber defense. And there was talk about the importance of increasing that number, which meant that any standalone cyber firm that existed, existed at the time, was gonna be bidding for contracts to help defend the different US agencies. Cause all of our infrastructure, as you can imagine, is just years and years behind where it should be. And when I say our, I mean the countries. And so the DoD specifically was kind of leading the charge along with CISA, trying to get to what's called the zero trust environment, which is sort of the standard today as far as how we're supposed to interact with our technology inside of an entity. And so all of the different standalone companies, your cyber arcs, your Fortinets, Okta, all the smaller ones, in addition to Palo Alto, CrowdStrike, Zscaler, names like that, were looking to be bidding on those bigger contracts, and that was how they were going to grow top line revenue. It just so happens that Palo Alto Networks is one of the largest suppliers of those services to the government today. And the government deciding at least showing its hand with what's happening with cisa, which I should assume means that that's going to be their stance with all the other agencies with future bills. The fact that they're reducing that expected spending at a time when they should be ramping up how much they plan to spend means that you have to investigate a little bit closer or listening to the earnings calls a little closer. For some of these companies, I've even heard as recently Zscaler's call, I'll use them as an example. They spent a decent amount of time talking about how much of their business does not come from the government. Sort of just to say to potential shareholders, nothing to worry about over here.

[Ricky Mulvey]

Yeah. And a lot of these cybersecurities at this time of federal spending uncertainty, there is a lot of excitement about what artificial intelligence means for the needs for cybersecurity. As spoofing becomes easier, spear phishing, we were talking before we started recording about how it's easier. It just becomes immensely easier to fool for adversaries, to fool companies and people. And I think that's one of the reasons you're seeing a lot of these companies, including Palo Alto Network, Zscaler, Crowdstrike, at or near all time highs. And it's a lot of that excitement around artificial intelligence, or maybe not excitement, but recognition of the need for cybersecurity spending. But I know you've become more bearish on this space. Do you think there's something that investors are missing with that story?

[Malcolm Etheridge]

Well, I'm not necessarily bearish on the space. I'm hesitant to cast such a wide net and say anything calling itself AI security, cybersecurity with an AI tilt, we should throw money at it without really investigating. Right. If you think about just not that long ago, anything online calling itself ABCCompany IoT. Right. Internet of things was automatically a thing that investors were throwing money at because that was the new wave. That was where we were going as far as technology is concerned. And then 2022, maybe anything AI, all of a sudden investors are just throwing money at it. And so I hear stories of people who are doing control F and doing ChatGPT searches for how many times did this company mention AI on the earnings call?

[Jason Moser]

And.

[Malcolm Etheridge]

And that's the thing that they're using to determine whether they should invest in this company or not. And when we hear companies talk about using AI in their cyber defense capability, that doesn't necessarily mean much of anything. Right. So where we talk about what AI has allowed bad actors to be able to do, there's this new thing called a zero click attack, which basically is a text message that comes to you or an email that comes to you that you don't even have to interact with it the way you do with a phishing scam. You don't need to click on a bad link. The fact that you opened it and it's in your environment, it now can talk to the AI agent inside of whatever that device is. So if Siri was a little bit smarter, it would be vulnerable to this. So maybe Apple is at an advantage by being at a disadvantage with their AI components so far. But Microsoft Copilot is an example. You know, every one of the large language models has their own version of a Copilot which is vulnerable to these types of zero click attacks. Because the AI is the thing that's acting as if it's you coming into the environment and telling it, give me access to this information because I am Malcolm, give me access to this set of data and then share it with Ricky because I am Malcolm and I normally will share that information with. And so that's what we have to be concerned about and guard against. That is what a lot of these cyber companies are using AI to help defend against. But not everybody, right? And so just because the CEO gets on the earnings call and says AI or we've struck a new partnership with XYZ company doesn't necessarily mean that that's where your dollars as an investor should go in cybersecurity.

[Ricky Mulvey]

Where are your dollars as an investor going? Have they changed?

[Malcolm Etheridge]

Yeah, so right now the only two companies that I own as a direct Cyber investment are CrowdStrike and Zscaler. The reason being one, I do believe that when it comes to AI, those two companies are leading the charge as far as being able to to build to meet that AI enabled bad actor who can run these attacks at scale. But separately from that, I like the Flex model that both of them have adopted, which both CEOs say was born out of a request from their core customers. Hey, we don't want to have to go through a procurement process over again from scratch each time we want to add an additional module that you have to offer. It's a pain in the butt. Can you give us a way to flexibly move between one product and another on your platform? And both companies said, hey, listen, sounds reasonable, let's throw some capital at figuring out how to solve it. And both have rolled those Flex models out very recently. Z Flex and Falcon Flex I think is what they both call them, respectively. So I think that's a place where both companies will grow their annually recurring revenue, which is the core target financially that they are telling shareholders to focus on. That is a story I can buy into and I love. I sold out of cibr, the first trust cybersecurity ETF recently because I noticed that the underlying holdings inside of that ETF are no longer cybersecurity focused the way you'd want them to be. The top five holdings in there were CrowdStrike and Palo Alto. Yes. But also Avgo is that Broadcom is the number one holding at a 9 to 10% weighting depending on which day you look at it. Also Infosys, also Cisco. So these are companies that, yes, they tangentially have a AI component, they have exposure to AI and binary mandate. This particular ETF doesn't require the majority or all of your revenues to come from cybersecurity related activities. It just has to be one of your service offerings. But because of the way it's structured and the growth that has happened in legacy tech or old tech, whatever you want to call it, that's really gotten the holdings inside of that ETF out of whack. So if you're looking for something like a pure play, something like bug is probably a better way to play it. But then you're investing directly into small caps and that might not be where every investor wants to be. So all that to say, I've decided rather than go the ETF route today, I've pivoted to just owning the two lead horses in the race and then I'll figure it out from there.

[Ricky Mulvey]

A good reminder for people to check under the hood when they buy an etf because the headline might not always be what you're getting. And for me that's something that's attractive as an ETF for cybersecurity especially. This is a space that I know I'm less knowledgeable about and it's hard for me to parse through the earnings calls and say, okay, so is this one the best at using AI agents or you know, do I just, do I want zero trust or do I want a holistic approach like CrowdStrike? And that's, that's been to my detriment since a lot of these companies have done fabulously well. One other story I wanted to hit with you is Apple. They just had their developer day. We got Liquid Glass and it was a lot about the user experience. But what did you think? A developer day or where Apple's at right now?

[Malcolm Etheridge]

Yeah, so Apple is in a tough spot in the sense that we are looking to them. We as investors are looking to them and saying what's next. And so you listen to Mark Zuckerberg over at Meta talk about what's next and it sounds fascinating. Or you listen to some of the smart folks over at Alphabet talk about what's next and it's fascinating. You see these new partnerships that are being struck with OpenAI and all the different companies that they've either committed to acquiring or partner with. And you look around, you say, well, where's Apple, right? Apple is usually one of the loudest voices and one of the trendsetters, if you will. And so we as consumers don't really have a consumer facing AI tool yet that satisfies that most of what we've done with AI so far for the last three years since ChatGPT hit the scene has been at the enterprise level. It's a workplace tool. And so for Apple, maybe the liquid glass reconstruction is meant to mirror what the vision goggles will show you. And there's a goal to kind of tie those in together. Because we've been told a few times by some futurists in the space out of Silicon Valley that the physical device is no longer gonna be the way that we interact with apps five to ten years from now. And so maybe for Apple this is a bridge, right? I get you used to the interface of the liquid glass and then everybody will put on the headset and feel less out of place. Maybe, I don't know, I don't know anybody internally on that team who's told me anything. But in the meantime, investors are looking and going, yeah, but right, like that's not exciting to me today. That's not enough of a reason for consumers to line up outside of an Apple Store the way they were in 2007 to say, I gotta have that next device, right? However many iPhone owners there are in that number that are supposed to be upgrading all at once in what they refer to as the Super Cycle, the Super Upgrade cycle come to fruition because Apple intelligence wasn't really what we were told it was going to be. I personally got the iPhone 16 only because I was holding a brick of an iPhone 8 or SE or whatever it was, and I literally needed a new phone. But for most people, they looked at it and went, eh. So for Apple, they really need to be able to tell a compelling story about how they are going to participate in the next leg of AI enabled smartphone device interaction, whether it's the MacBook or the iPad or the watch or anything else. And they haven't yet. But I personally have gotten to a place where I feel like we've been saying that about Apple for the last two years. We saw with quote unquote Liberation Day when tariffs were enacted, the freakout moment there. We saw as the President of the United States was attacking the CEO of Apple, Tim Cook on Twitter, what happened to the shares there? We saw at last year's WWDC where everyone was underwhelmed and then again this year. All that taken together and the lack of movement in the share price in one direction or another leads me to believe we've reached peak pessimism on Apple shares. So I as an investor actually just added to my position in the company earlier today before we recorded. So that's why I'm allowed to share it with you without violating our trading rules. But I think personally this is about where we go as far as Apple shares are concerned because all the bad news is out there and investors still seem to be sticking with it and giving Apple the benefit of the doubt based on what they've been able to do for the last 20 years and.

[Ricky Mulvey]

Perhaps a underappreciated capital allocation story. They've been aggressively taking shares off market and they still I think have a hundred billion dollar buyback plan. Good place to end it it. Malcolm Etheridge, appreciate your time and your insight. Thanks for joining us on Motley Fool Money. As always, people on the program may have interests in the stocks they talk about in the Motley fool may have formal recommendations for or against don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley fool editorial standards and are not approved by advertisers. Advertisements are sponsored content provided for informational purposes only. See our full advertising disclosure. Please check out the notes in our podcast description. Up next, Radar Stocks. You're listening to Motley Fool Money.

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[Ricky Mulvey]

I think you're on.

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[Ricky Mulvey]

Welcome back to Motley Fool Money. I'm Ricky Morvey join joined by Jason Moser and Matt Argisinger. It is time for radar stocks. Each week our analysts pick a stock catching their attention not just because they think it will go up or not only because it could be catching their attention for a variety of reasons. And our man behind the glass, Dan Boyd, will hit them with a question, concern or a backhanded compliment. We'll go with JMO first. What you got this week?

[Jason Moser]

Yeah. Taking a look at Chipotle. CMG is the ticker and this is a stock I've owned for many, many years and I anticipate owning for many years to come primarily because I like the food, but it's also a very well run business. To that end, though, the stock has had a lackluster year to date, down about 15%. As we've got new leadership in place there, we don't see it all that often when they announce a new offering at Chipotle, it's every once in a while, but it's worth noting when they do it. I thought this was interesting news. They're bringing a new dip to its menu, Adobo Ranch. Ricky. It's the first new dip since the company introduced its Queso Blanco and it will be available starting on June 17th. I think it's just going to be something to watch and see how it's received. Typically when they bring something new to the market, it's usually well received because it's backed by a lot of data. They're not batting a thousand, but pretty darn close. I'm not much of a ranch guy myself, so I'm probably not going to be trying this. But I do know that people love them. Some ranch, like I said, new leadership there. And CEO Scott Boat, he's got some big shoes to fill. Taking over for Brian Nichols and bringing new things to market that sell are going to be very important. And this will be, this will be an early litmus test, I think.

[Ricky Mulvey]

Dan, question about Chipotle, its ranch offerings or a comment about Jason Moser's pronunciation of Queso Blanco?

[J]

No comment there, Ricky. I am a Chipotle shareholder and it's done very well for me. But I will say, I'll go on record and say that ranch is terrible and people that have to dunk all their food and ranch have the palate of children and should be ashamed of themselves.

[Matt Argisinger]

Whoa.

[Ricky Mulvey]

I mean, power ranking of condiments. There is, there is ketchup number one, maybe a good mustard, nice relish on a hot dog. Ranch can be there and it doesn't have to be for everything and every time. But Jason, it is a nice offering when you go to Chipotle. Let's go to Matt. Before we get too deep into the argument, Matt Argisinger, what you got this week?

[Matt Argisinger]

Ricky I'm going with Whirlpool Ticker WH r obviously leading appliance maker here in the US So earlier this week, the Commerce Department announced that increased steel tariffs would also apply to consumer appliances such as dishwashers, refrigerators and washing machines. Guess who makes a lot of those here in the US So under the new rule, imported home products will be taxed an additional 50% depending on how much steel they contain. So US manufacturers like Whirlpool have long complained that Chinese and other foreign made appliances have avoided tariffs on their products, which are often made with relatively inexpensive parts and cheap labor, making Whirlpool's products less competitive. This is a positive development if you're a Whirlpool shareholder.

[Ricky Mulvey]

Dan, you were talking trash about this company before we started recording, but any questions or snarky remarks about Whirlpool?

[J]

Well, I want to be honest with the listeners here, Ricky. When Matt brought this up as his radar stock today, I thought it was a hot tub company and I was about to disparage it because come on, who's buying hot tubs in 2025? But now that he's mentioned that it doesn't make hot tubs for the actually makes important home pines is maybe I'm thinking It's a good bet.

[Matt Argisinger]

8% yield, 8% dividend yield, roughly.

[Ricky Mulvey]

That's good to watch. For the dividend investor. Dan Boyd, what's going on your watch list this week?

[J]

Well, I'm already a Chipotle shareholder and I'm very happy with them, so I'll go with Ruble.

[Ricky Mulvey]

Ooh, a twist. That's going to do it. For this week's Motley Fool Money radio show, I'm Ricky Mulvey. That's Jason Moser. Matt Argusinger show is mixed by Dan Boyd. Thanks for listening. La.