Prof G Markets: "Has Apple Lost Its Mojo? + BlackRock’s $23B Bet on the Panama Canal"
Release Date: March 10, 2025
Hosted by Scott Galloway and Ed Mylett

1. Introduction

In this episode of Prof G Markets, hosts Scott Galloway and Ed Mylett delve into significant developments impacting the capital markets. The discussion spans from financial fraud in fintech startups to major investment moves by BlackRock, culminating in a critical analysis of Apple's current market standing.

2. Aspiration Fintech Fraud ($02:15 - 06:56)

Scott Galloway opens the episode by highlighting the recent arrest of the co-founder of Aspiration, a fintech startup, for allegedly defrauding investors of $145 million. He asserts, "We called bullshit on this company four years ago" (00:55).

Ed Mylett and Galloway reminisce about their early skepticism regarding Aspiration, emphasizing the red flags that signaled the company's fraudulent activities:

• Celebrity Investors: High-profile names like Leonardo DiCaprio were involved, masking underlying issues.
• Questionable Financials: Aspiration's ESG fund, the Redwood Fund, charged exorbitant fees without truly sustainable investments, including holdings in companies like Southwest Airlines and a fracking firm.
• Ebitdam Metric: The company misrepresented its profitability by defining Ebitdam as "earnings before interest, taxes, depreciation, amortization, and marketing" (06:19), effectively obscuring their unsustainable marketing expenses.

Galloway criticizes Aspiration's strategy as "WeWork with a climate change veneer smeared over it" (04:20), drawing parallels to other high-profile corporate frauds.

3. Disney's Workforce Reductions and the Decline of Linear TV ($08:33 - 14:13)

The hosts examine Disney's recent decision to lay off 200 employees, representing 6% of its workforce within ABC News Group and Disney Entertainment Networks. Galloway explains, "This is part of capitalism... Companies need to consolidate, bulk up, and then cut costs" (08:33).

Key Points:

• Revenue Decline: Disney's Linear Networks saw a 9% revenue drop and a 16% decline in operating income last year.
• Advertising Downturn: U.S. linear TV advertising is projected to decrease by 4% annually through 2030, signaling long-term revenue challenges.
• Workforce Cuts: Galloway predicts further layoffs of 20-30% over the next five years, affecting high-profile anchors and executives.

Ed Mylett shares his visit to ABC Studios, noting the paradox of a highly operational facility without corresponding economic sense, ultimately leading to workforce reductions.

4. Walgreens Goes Private Under Sycamore Partners ($14:54 - 17:09)

The episode covers Walgreens' transition to a private entity following a $10 billion acquisition by Sycamore Partners. Galloway remarks, "I think they're doing the right thing again. Capitalism in the markets at work" (14:54).

Ed Mylett attributes Walgreens' struggles to:

• Poor Management: Inability to modernize the pharmacy business.
• Unsuccessful Acquisitions: The purchase of Village Maryland led to a $6 billion impairment.
• Legal Challenges: Recent lawsuits, including a significant case with the DOJ over opioid sales, have strained the company's finances.

Galloway discusses the challenges of retail real estate and predicts that Sycamore Partners will likely attempt to restructure Walgreens by renegotiating leases and cutting costs. He remains cautiously optimistic about private equity's role, despite acknowledging the high bankruptcy rates among PE-owned companies.

5. BlackRock’s $23 Billion Investment in Panama Canal Ports ($30:21 - 38:58)

A major focal point is BlackRock's consortium acquisition of two ports surrounding the Panama Canal for nearly $23 billion. Galloway compares these ports to "tollbooths" like giants Amazon and Google, whose platforms act as critical access points for businesses (31:34).

Key Insights:

• Geopolitical Maneuvering: The deal is viewed as a strategic response to former President Trump's remarks about reclaiming the Panama Canal from Chinese influence.
• Financial Justification: The acquisition price significantly exceeds the market value, indicating BlackRock's confidence in capturing substantial revenue from tolls.
• Strategic Relationships: Ed Mylett suggests the move strengthens BlackRock's relationship with political figures, potentially yielding future advantages.

Galloway expresses skepticism about the deal's fiduciary soundness, pondering whether the premium price aligns with long-term value extraction. He raises concerns about the sustainability of such a heavy capital outlay purely for political goodwill.

6. Apple's New Products and Market Valuation ($39:35 - 53:08)

A substantial portion of the episode critiques Apple's recent product launches and current market valuation. Galloway and Mylett express disappointment over the company's innovation stagnation and inflated price-to-earnings (P/E) ratio.

Key Points:

• Product Launches: Apple introduced an updated MacBook Air with a new M4 chip, an AI-centric iPad Air, and a high-end Mac Studio. However, Galloway finds these updates underwhelming, noting, "The new features include a new and improved M4 chip... and that's it" (43:24).
• Stock Performance: Despite an initial 3% drop post-announcement, Apple's stock stabilized. Galloway announces his decision to sell his Apple holdings due to excessive valuation, stating, "It's trading at a P of 37 or 38... I think it's overvalued right now" (48:31).
• Valuation Concerns: Apple trades at 38 times earnings, significantly higher than companies like Microsoft (16% growth) and Meta (22% growth), despite Apple's revenue growth stagnating at 2%.
• Innovation Deficit: Both hosts lament Apple's lack of significant hardware innovation, highlighting failed ventures like the mixed reality headset and the abandoned Apple Car project.

Ed Mylett concurs with Galloway's bearish outlook, predicting Apple's stock to fall below $200 within the next six months. He emphasizes that Apple's current trajectory positions it as a mature, rather than a growth, company, which should reflect in its market valuation.

7. Market Review and Predictions ($53:21 - 54:37)

In their weekly market review, Galloway and Mylett touch upon:

• Economic Indicators: The S&P 500's decline, the dollar's slide, Bitcoin's volatility, and the rising yield on 10-year treasuries.
• Upcoming Reports: Consumer and producer price indices for February, and earnings reports from Oracle, Adobe, and Williams Sonoma.

Predictions:

• Apple's Stock Decline: Both hosts anticipate a significant drop in Apple's stock price due to its overvaluation and lack of product innovation.
• Market Shifts: Galloway plans a strategic rotation from US Growth and tech-heavy portfolios to European and Brazilian stocks, citing overexposure in US tech.

8. Conclusion

The episode wraps up with reflections on the discussed topics and a teaser for the next episode focusing on BlackRock's investment in the Panama Canal. Galloway and Mylett underscore the importance of diversification and cautious investment strategies amidst evolving market dynamics.

Notable Quotes

• Scott Galloway: "Can climate change deniers and pedophiles have anything in common? They're both fucking the next generation." (02:15)

• Ed Mylett: "Few people actually knew what Aspiration was, which I think is why it was so appreciative of you to point it out." (04:29)

• Scott Galloway: "Apple is ..., it is overvalued right now." (48:31)

• Ed Mylett: "I think Apple is officially a mature company, which means that it should be valued as a mature company. I don't think this can continue." (45:02)

Conclusion

In this episode, Scott Galloway and Ed Mylett provide incisive commentary on critical market developments, emphasizing the importance of vigilance and strategic diversification in investment portfolios. From uncovering financial fraud to questioning the sustainability of tech giants like Apple, the hosts offer valuable insights for investors navigating the complexities of a capitalist society.

Disclaimer: This summary is based on the provided transcript and is intended for informational purposes only. It does not constitute financial advice.