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- [00:01]
A
Support for the show comes from vcx, the public ticker for private tech. The US Stock market started history's greatest wave of wealth creation. From factory workers in Detroit to farmers in Omaha, anyone could own a piece of the great American companies. But today, our most innovative companies are staying private longer, which means everyday Americans are missing out. Until now. Introducing VCX, a public ticker for private tech. Visit getvcx.com for more info. That's getvcx.com carefully consider the investment materials before investing, including objectives, risk charges and expenses. This and other information can be found in the funds prospectus@getvcx.com this is a paid sponsorship.
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Adobe Acrobat, your team's home base. Collaborate within a shared PDF space. You've got your docs, your plans, your specs, and then invite the crew to build what's next. Talk off the teamwork. They think that this design could be a contender. When somebody wonders what's the next steps, AI helps you finish the rest. Bolts are tight now your plan's refined.
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A
Run a smoother business when you're all aligned. Do that with Acrobat.
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B
Learn more@adobe.com do that with Acrobat.
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C
Support for the show comes from Amazon. There are the things you can plan for a first birthday party, a movie marathon, a renter friendly bathroom reno. And then there are the things you can never plan for. A surprise rainstorm. A Blu Ray player calling it quits. Stick on tiles that looked way better on the package for all things planned and unplanned. Amazon has you covered. You'll find low prices on everyday essentials and last minute lifesavers. Shop Amazon and save on essentials. Save the everyday.
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A
Today's number, $150. That's how much New Jersey Transit is considering charging for a round trip train ticket to the World cup this year. Ed, what do a 12 volt battery and an asshole have in common?
- [02:05]
B
What?
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A
Well, you know you're not supposed to put your tongue on it, but you do. Anyways.
- [02:20]
B
Are we going to get to the World cup this summer? What are we going to do about this? I'm very upset because this is like the big moment. I should obviously be going to the World Cup. Huge football fan. Never gone to the World cup in my life and it finally arrives in America, but I can't get a ticket. It's just insane.
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A
Well, I don't know if you heard, but an alcoholic, a priest and a pedophile are going to the World Cup. And that's just the first person.
- [02:42]
B
What is the joke? Who Are you making fun of.
- [02:45]
A
I'm saying they're the same person. Alcoholic, pedophile priest. Anyways, maybe I didn't deliver that well. It's time to bring in our producer. Okay, wait, hold on. No, no, no, no, no. I've got a better one. I was interviewing for a job and the interviewer said, what is this four year gap in your resume? And I said, well, I went to Yale. And she said, wow, that's impressive. You're hired. And I said, oh, God, that's such good news. I really need this yob. Think about it.
- [03:15]
B
I got it. I got it. Again, the silence is not an indication of confusion.
- [03:20]
A
Anyways, how are you, Ed?
- [03:21]
B
I'm doing well. I again present you the question, what are we gonna do about this World cup thing? Are you gonna be able to figure it out? I don't know what to do about it. I'm just going to regret it the rest of my life.
- [03:32]
A
Is it really that hard to get tickets right now?
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B
It is. Unless you're willing, I think, to spend like a lot. Not just a lot, but like a fortune.
- [03:41]
A
Better start wearing more quints, bitch. I. So I've been. Yeah, I've been the last two times. Look, I get. I don't know how to. I get a brand takes me, so I don't. But I would bet, if you want to figure it out. I would bet tickets start to free up towards. America's never been that into football, so I don't. I would bet a lot of tickets will free up, but I don't. Do you want to go to the big games or do you want to follow team England?
- [04:11]
B
I mean, England would be incredible, but I mean, that's. I think that's. That's high hopes to go see England. I'd go to anything. I'd go to anything in New York. What. I'm just to get curious. What is your plan here? Are you waiting for a brand to tell you, hey, we have some tickets come along?
- [04:29]
A
Yeah, that's exactly my plan. You just literally outlined my plan. I don't. I don't think about. I mean, it's not. Till. When is it? Oh, it's coming up.
- [04:35]
B
That's what I'm saying. I got to get my act together.
- [04:37]
A
I get the sense, Ed, you're going to figure this out. We're going to figure this out for you. I get the sense that someone's going to.
- [04:42]
B
Well, that's kind of why I bring it up. I was. I was hoping that maybe you'd give me sort of the inside baseball.
- [04:47]
A
This is you fishing for invites to the World Cup.
- [04:50]
B
Yeah, exactly. Maybe you get offered tickets and then you kind of forward me the email, like maybe you have a conflict or something.
- [04:57]
A
Yeah, I think the answer is Paramount plus. We'll see. We'll figure it out.
- [05:03]
B
Paramount plus. That's very exciting. And in other good news, they are. I'm now going to get dragged for saying good news.
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A
It's not good news.
- [05:14]
B
Warner Brothers has officially decided that they are going to get sold to Paramount, which is something we could discuss, but that's not on the docket today. We have other stuff to discuss before we get to that, though. I want to promote our tour again. We are hitting San Francisco, Louisiana. Miami, Chicago, New York. We're going to be on the road May 27 to June 2. If you haven't gotten your tickets, do it now. Go to profgmarketstore.com Scott and I are going to be live in conversation. We're going to be doing Q and A. We're going to have some very, very special guests.
- [05:44]
A
It was just interesting. We were worried. We knew we would do well in New York. We're almost sold out in New York, but we're almost sold out in the city we thought we were going to do least well in. You know what city that is?
- [05:53]
B
I do. San Francisco.
- [05:54]
A
San Francis. That's right. I think they're coming to throw shit at us. But yeah, we're doing well in San Francisco, but it's going to be great. It's going to be a chance for us to spend a lot of time together, which will be nice. But anyways, I don't know how to promote it other than saying they're a great time. And Ed likes to drink, unlike Kara Swisher, he likes to drink. So we'll try and do an after party at all of them, which will be fun.
- [06:21]
B
I'm going on the road with Scott. I'm excited about that part.
- [06:24]
A
We're going to take a big bus. We're driving across this great nation.
- [06:28]
B
We're going to get groupies.
- [06:29]
A
Let's hope so. Yeah. I don't know. All right. In other news, let's talk about Iran. Oh, God. Let's move to something more light.
- [06:38]
B
Yeah. Okay, let's do it.
- [06:42]
A
Now is the time to buy.
- [06:45]
B
I hope you have plenty of the wherewithal. The war with Iran reaches its two month mark tomorrow. That's well beyond the four week timeline the Trump administration had initially suggested. So with the conflict stretching into its third month, we thought it was a good moment to step back and assess how it's impacting prices and also the broader market. But the bigger question still looms. How and when does this actually end? Scott, let's just look at what's happened with the markets here. We're now at month two. We started this war on February 28th. So we're essentially two months into this thing. Oil prices are rising still. Brent crude is above $103 a barrel. So I think a lot of people expected that maybe oil prices would kind of calm down, that the markets would sort of temper. That hasn't really happened. It's still very volatile and it's still pretty significantly elevated compared to where we were before the start of the war. But what has been interesting is how well the stock market has performed. So since the ceasefire was announced, the dow has risen 6%, the S&P has risen 8%, and the Nasdaq has risen 12%. And actually, it's not just US markets that are rallying, it's markets everywhere around the world. So again, since the ceasefire, since Trump announced that ceasefire, and we can debate whether it actually was a ceasefire. But since that announcement, Europe's stock market up 3%, Germany's up 4%, China's up 5%, India's up 5%, Japan up 10%. So it does seem that investors are either breathing a sigh of relief or deciding that things don't matter perhaps as much as they originally thought when it comes to the war and its impact on the larger economy, or they're just looking at the earnings that we're seeing. And the earnings have been pretty phenomenal that that which we've seen since the start of this war. The point being markets, stock markets are doing pretty well right now and they continue to do quite well, there's some nuance that we can dive into. But let's just start with your reactions to that fact. S and P up 8% since the ceasefire.
- [09:09]
A
The markets seem to believe that the war is going to come to an end. Also, I think it's a bit of a recognition or belief that we have fully transitioned to a tech and services economy. And the Strait of Hormuz doesn't stop that. And at the center for tech and services is the United States and distinctive the fraying of our alliances. I mean, I think long term, just impossible to believe this is not going to have some sort of a pretty serious economic impact. But when the majority of the S and P is fueled by companies and services and tech, whether it's JP Morgan or Microsoft, Those companies don't seem to be, I mean in many ways this company's kind of benefit from this. I mean there was talk of data centers being bombed, but not really. The tariffs don't affect them. Energy prices I guess arguably might affect them, but they have the capital to try and I mean the really good ones kind of secured the energy supply before this nonsense, right? So it has been. And if you look at the, the markets that have performed the best, the two markets that perform the best are one Taiwan of 15%. And I wonder how much of that is like, okay, AI is, is the place to be. They are the number one producer of chips, right? And so their market's up 15%. As the chips market goes, so does the Taiwanese market. And the interesting one is Israel's market is up 9%. And I think what people have, I think if you try and read into it, the market has basically decided that that Israel is the new superpower. Is the superpower, the definitive superpower in the Middle east and, and its tech sector. I mean, I think the market is betting that their technological excellence as demonstrated during the war, if you look at many of the, a lot of people would argue, who argue for military spending, that the spillover effect is actually accretive, that whether it was, you know, radar which gave rise to gps, you know, jet technology which ended up transforming jet transportation, that there's a lot of spillover. DARPA was basically a backbone communications network for post apocalyptic America, America that gave rise to the Internet. And I think a lot of investors are looking at Israel and saying the technology is demonstrated during this, what feels like a permanent conflict. The last, better part of the last three years is going to spill into their tech sector, which is now I think the third largest tech sector in the world and has really registered incredible growth. They have more unicorns per capita than any nation in the world. So I think the world or the markets have come to the conclusion one, rich people drive the markets and they don't care about energy prices. And two, the world has become, we're no longer a fossil fuels economy. It makes a difference, but this is a technology and a services economy now. And these companies are doing really well. And also to be fair, the earnings have been really strong across these companies. So consumer sentiment, there's some dissonance. While consumer sentiment claims, studies say consumer sentiment is its lowest level, it doesn't seem to be translating to a decline in consumer spending.
- [12:18]
B
I mean, I guess the first thing to address why are my markets rising? And it could be that one Investors think that the war is about to end, in which case I fundamentally disagree with them. I don't think this war is coming to an end. I don't think we had any indication that this war is even close to coming to an end. I think it's actually going to keep going for a long time or two. They've decided that this doesn't matter that much in terms of the markets because the markets care about earnings. And so far, as you say, earnings have been extremely strong. Every sector's earnings estimates have risen since the war began, especially the tech sector, which is the most important one, which the market is pretty much dependent on at this point. Their earnings estimates have seen the largest increase in recorded history. So I think that that is the correct reading, or at least if you're going to justify why the markets should go up, why right now is a buying opportunity. I think the correct reasoning is you would say, not that the war's going to end, but regardless of what happens with the war, earnings in corporate America are fundamentally very, very strong right now. And they are increasingly driven by one sector that isn't going to be hamstrung by the fact that there is traffic and blockades in the Strait of Hormuz. It isn't going to be fundamentally affected by rising gas prices. That's not going to be really a problem. And to your point, when we look at the backward looking data, meaning the data that we already know, the evidence that we have, yeah, consumer spending is actually not, not going down. We've seen that consumer spending is pretty stable. We saw that in most of the earnings from the banks. We also saw it from Capital One in their earnings last week. They said that, quote, so far we've not seen any adverse effects on our portfolio, even in our credit or in our spend metrics. Consumer spending is pretty much fine. At the same time, as you say, you've got consumer sentiment which has literally reached a record low. So how people feel about the economy right now is not good at all. And then the question then becomes, how much of a metric is that really? The question then becomes what happens next though? Because we haven't really seen what elevated and, and durable gas prices will do to this economy yet. And while, yes, we have electrified our economy more so than we have in the past. And while, yes, the top 10% of consumers make up half of all consumer spending and they are not very sensitive to gas prices, the reality is we haven't seen what a long and durable period of elevated gas prices, which are up 35% in America since the war began, and they're up even higher in basically every other market around the world. And so the question then becomes, is it going to have a real impact next quarter or the following quarter or the following quarter after that? And that is a question of how long are we going to remain in Iran? It's a very complicated and unclear question right now. And it does all go back to this point that we've said a lot of the time, which is that the economy is so fundamentally dependent on both a handful of tech companies at the top and also a handful of earners and thus spenders at the top as well, which means that it's very hard to even understand how the economy is even doing. And so the stock market is just, as we've said, a pretty shitty indicator of general economic health. But that's what we're here to talk about. And so far, investors believe, and they're probably right, that oil prices are not going to have that much of an impact on earnings, especially when we're in this AI boom and AI spending and revenue continues to rise.
- [16:35]
A
I mean, it's a couple things in terms of markets. Your proximity to AI coupled with the trade surplus of oil. So are you an oil exporter? Importer and your proximity to AI. So in the security around it. So Israel markets up, tremendous proximity to AI. Taiwan, tremendous proximity to AI. But they're both oil. My understanding is oil importers. And what that says to me is that proximity to AI bests your need for energy. And then you look at the us it has both got. It not only has proximity to AI, it's ground zero for it. And we're an oil exporter. And despite the fact, okay, so think about the cost of production for oil have not gone up in the United States. They can still extract a barrel of oil for about the same price as they could five weeks ago. The difference is they're now getting 40% more per barrel. That is money that goes into the pockets of shareholders of US companies. So it's not to a certain extent, the increase in energy costs here aren't leaving our shores. They're just being redistributed, maybe inefficiently, but you have a lot of companies, you have oil companies, big companies in the S&P 500 in the United States who are benefiting from this. So while it'll cost consumers money, and at some point you'd think that squeeze out other purchases, but you're not seeing a decline in the purchases of site licenses for anthropic because people are spending more on gas this week. And that's what drives the market now in terms of moving forward. Also, it just appears, I mean, there's just no getting around it. The market has just become this incredibly resilient organism.
- [18:15]
B
Yeah, it's just a dip buying machine.
- [18:17]
A
Yeah, it seems to be surviving wars, pandemics. And a friend of mine, Jason Mudrick, who started Mudrick Capital, he's a distressed credit investor, said something that is so simple, but it struck me as really insightful. He's like, as long as there's demographic growth, as long as there's population growth and innovation through technology, markets will, over the medium and long term, go up and to the right. And it just struck me that he's right. The market has decided that these dips are opportunities, that they're not structural, they're cyclical, and then immediately capital weighs in to benefit from the upcycle again. Now, having said that, in 2022, I didn't see any cause for the markets to throw up and they did. I don't know if it was people taking. We should ask Josh Brown what happened? Money off the table. But I still think it's more likely that a announcement from a large corporation who has been a big purchaser of site licenses of AI comes out and says we're scaling back on our AI efforts because we're not getting the ROI we had initially anticipated. I think that is going to be more likely to be responsible for a drawdown in stocks in 2026 than Iran or the oil or energy crisis. We've been saying this forever. We transitioned from an agricultural society to a manufacturing to a services. And a lot of people have said it's always been about energy. I get it. You know, Indonesia is a bit screwed here. India, big oil importer, but it does feel like oil. And I can't imagine the investment in renewables isn't going to have such a huge uptick that fossil fuels are going to. Are going to play an even less significant role moving forward.
- [19:55]
B
You mentioned, like, if, if there were a drawback in AI spending, then that would be the thing that, that kills the markets, not this 100% agree. That's definitely true. The thing that, that is striking to me and I made this point in our previous Monday episode and I also said it on the Daily show last week. It also, to me, shows that investors just don't really care about Iran anymore, or at least their interest and their concern for the matter is waning. And when you're in that mindset as we've discussed, you start to go big, zoom out, zoom out, zoom out. And you go big picture, and you say, you know what? Fundamentals are strong. Earnings are strong in the medium, the long term, markets go up, population growth, you know, all the things which are true, and you revert to those things. But at the same time, I believe that there is a fundamental dis, as you said, dissociating from what is happening on the ground in Iran. And I think where they might mess up is mistaking their lack of caring for, convincing themselves that the situation is fine and sorting itself out in Iran. That, to me, is just wrong. And I just look at what happened in terms of developments in the past week where we had. I mean, I told you how the markets have responded since the ceasefire began. They've gone up. But the fact is, we didn't have a ceasefire, really. We still had Iran shooting at ships in the Strait of Hormuz. We still had a US Navy destroyer shooting at an Iranian container ship. We still had multiple violations of the ceasefire as expressed by both parties, by the US And Iran. And then we had an extension of the ceasefire which didn't mean anything because the ceasefire wasn't a ceasefire to begin with. They were still firing at each other. But Trump says, oh, we extended it. It's good. Things are we're moving in the right direction. Meanwhile, Iran says that the ceasefire extension means nothing. And they're right because the original ceasefire meant nothing. So you're extending essentially nothing. We're still in the same situation that we were a week ago, two weeks ago, three weeks ago. We're getting into seven, eight weeks. We're still in a very, very precarious situation on the ground there, to the point where it's like, okay, I take the argument that maybe it doesn't matter, that I think is fair. But I think where we're going to run into trouble is if we start confusing ourselves by saying it doesn't matter, by saying, oh, it's getting better and oil prices are going to go back up again. No. So I think that is going to be the thing that investors have to keep in mind at this point, and that we all have to keep in mind, because the more this goes on, to be frank, the more desensitized we become to the situation. When you hit, see these headlines and then you see things blowing up and you go, oh, yeah, it's just another day. Just. That's what happens. There's a war in the Middle East. Yeah, okay. And we become. The whole situation becomes Normalized. And what I would just again just emphasize there's a difference between believing that it doesn't affect the global market system because we are such a tech heavy and top 10% to 1% heavy economy versus believing that the thing is going to resolve itself.
- [23:19]
A
To your point, it is a little scary that the markets have totally dissociated from war. And I wonder, okay, does that mean future presidents decide that have more of just a hair trigger? And that is, I mean the problem is I think we go to war too easily and to be blunt, and this will piss off the people on us. I think we leave too easily and that is we have a glass jaw. And that is okay. Things don't go well, 14 people die. Tragedy for them and their families. Russia's losing a thousand people a day. And effectively the way you win a war if you're a foe of the US is the following. You just survive. I don't care if it's the Taliban, I don't care if it's Al Qaeda, I don't care if it's the irgc. They don't need to win. All they need to do is survive is just hold on. Now as it relates to energy prices to a certain extent, the war in Iran, the impact it's having on the US that economic impact has been registered by Europe for the last 30 or 40 years. What I mean by that, everyone's saying, oh, the elevated gas prices will have a huge impact on the US Economy. Maybe the gas prices we're paying now, European nations have been paying for decades.
- [24:29]
B
So the gas prices everywhere else apart from America, it's just unbelievable how they've increased.
- [24:36]
A
So these economies in Europe and this. I went on this podcast called Trigonometry and this really intelligent guy, Constantine Kissen, who I find really interesting is basically said that Europe has just fucked itself with all this taxation around energy. That access to low cost energy is kind of the grist or is the mother's milk for a strong economy. And what's just sort of interesting is Basically the last 30 years European energy prices have been where our greatest fear is, around our own energy prices. Which leads to the fact that, well, okay, what does that say about taxation of energy? What does it say about renewables? His whole point was this was just stupid. This massive move to renewable at the trade off of economic growth.
- [25:23]
B
I don't fully agree with that framing. Saying that taxation is the reason that energy prices are high in Europe is just the wrong focus. To me it's like you need to invest more in your own energy and become energy independent. That is definitely a good thing, especially if you're reliant on these nations like Russia who you're now at war with. So I just disagree with this framing.
- [25:44]
A
We should talk about the nations that are having the. Have had the worst performance. Indonesia, you know, they're an oil importer. Dollar denominated debt which has become harder to service. And also the global risk aversion leads to capital outflows from riskier emerging markets like Indonesia itself. The one that surprises me as India, which I thought would have had a lot of proximity to AI, their market is down about 5%. Again, they're a major oil importer and they're worried that they're exposed to price spikes which could lead to inflation. But it definitely, I feel like we're in uncharted territory. I just wonder, I just think, my guess is, and I don't have a rationale for this, the war ends and the markets collapse. I just something. This is just such a strange market right now. I don't know, I don't know how to play it. And again, it goes back to our major theme on this show. You don't try and play it. If you're worried about the world, then diversify. But my view is you're always in the market and you don't try to time it. And the key is just diversification and low cost index funds. Because it would have been very easy to make an emotional decision in March. Well, of course the market is down 10%. This war is not going well. It's going to be a forever war. We've lost all this credibility they're sending. They've fired more missiles into the UAE than they have into Israel. I'm selling. And then the markets rip back.
- [27:07]
B
Yeah. And I think just on top of that, like if you're going to play the market, if you're going to play games, if you're going to trade, don't do it on war. Don't think that you understand geopolitics and military strategy more than other people. I'm sort of down with making these more specific sector specific bets. Maybe you have some insight in the tech sector or you have some insight in some supply chain thing in some very specific industry and you want to kind of get involved in that and make some trades and pick some stocks. I'm actually for that. I think that it means that you get a better understanding of how markets work and how, how flows and volumes work. But the idea of like, oh, I know what's going to happen here. That is certainly not something that you should be trading on. Totally fair to have an opinion on it and you can have a belief about what's going to happen in the future. But the idea of like, and now I'm going to bet on that belief, now I'm going to bet on the outcome of, of our military engagement with Iran. That is just such, such a bad idea. And we have started seeing that some hedge funds, I forget exactly what the hedge fund hedge fund is called, but there's this hedge fund that just lost like 50% of its portfolio just this week because they were betting again on what was going to happen to oil prices as a result of what happened in Iran and in the Strait of Hormuz. And it was just such a terrible bet. So it is a reminder like, yeah, you definitely, if you're going to play games, you certainly don't want to play games on this subject. This is one of those things that you literally just cannot predict, especially when it's all in the hands of this one guy who not even his cabinet can understand or predict his thoughts and his actions.
- [28:49]
A
The people making the majority of the money here are the ones on the inside who knows what he's about to announce the next day.
- [28:54]
B
Yeah, exactly. Plus, it's rigged. Are you really, are you really gonna play that game? It's a terrible idea. We'll be right back after the break. And if you're enjoying the show so far, please follow our new Prof. G Markets YouTube channel. The link is in the description. Support for the show comes from Deleteme. Deleteme makes it easy, quick and safe to remove your personal data online at a time when surveillance and data breaches are common enough to make everyone vulnerable. Digital privacy isn't just a concern for those in the spotlight. The truth is that even private citizens are at risk. And we should all be thinking about how to keep our own personal data as well as our families and safe. Our colleague Jennifer Sanchez tried Delete Me. She was surprised to find out how much personal information was already out there. But Delete Me made it very easy to clean it up, Take control of your data and keep your private life private by signing up for Delete Me now at a special discount for our listeners. Get 20% off your delete Me plan when you go to join deleteme.com Prof. G and use promo code Prof. G at checkout. The only way to get 20% off is to go to joindeleteme.com Prof. G and enter code Prof. G at checkout that's joindeleteme.com Prof. G Code Profg. Support for the show comes from upwork. There's no extra credit for doing it all yourself. In fact, that's more likely to lead to dropped balls and burnout. Successful businesses know when to delegate, even when that means growing the team. And if you're looking to hire, try upwork. Upwork helps grow your business by giving you fast access to specialized talent across more than 125 categories so you can fill skill gaps, launch projects faster and scale without committing to full time headcount. And finding the right talent is easy. You can browse profiles, review past work and get help scoping the role so you can get started quickly. Seriously, you could connect with the right freelancer in just a few hours, especially when you sign up with Business Plus. Their AI powered shortlisting pairs you with the top 1% of talent in under 6 hours. No endless searching required. Upwork also cuts down operational hassle by handling things like contracts and payments in one place so you can spend more time running your business. You can visit visit Upwork.com right now to post your job for free. That's Upwork.com to connect with top talent ready to help your business grow. That's upwork.com upwork.com
- [31:43]
A
Support for the show comes from VCX, the public ticker for private tech for generations, American companies have moved the world forward through their ingenuity and determination. And for generations, everyday Americans could be part of that journey through through perhaps the greatest innovation of all, the US Stock market. It didn't matter whether you were a factory worker in Detroit or a farmer in Omaha, anyone could own a piece of the great American companies. But now that's changed. Today, our most innovative companies are staying private rather than going public. The result is that everyday Americans are excluded from investing and getting left further behind, while a select few reap all the benefits. Until now. Introducing vcx, a public ticker for private tech, VCX by Fundrise gives everyone the opportunity to invest in the next generation of innovation, including the companies leading the AI revolution, space exploration, defense tech and more. Visit getvcx.com for more info. That's getvcx.com carefully consider the investment material before investing, including objectives, discharges and expenses. This and other information can be found in the Fund's prospectus@getvcx.com this is is a paid sponsorship.
- [32:56]
B
We're back with Prof. G Markets 2026 is shaping up to be the year of successions for some of the world's Most iconic companies. Tim Cook announced he's stepping down as Apple CEO after 15 years. He'll be succeeded by John Ternus, Apple's head of hardware engineering. And a couple weeks ago, Netflix co founder Reed Hastings said he will leave the board in June. We have seen some other departures. Earlier in the year, Disney named Josh d' Amaro as Bob Iger's successor. And also Warren Buffett stepped down as CEO of Berkshire Hathaway after more than six decades at the helm. So with so many legendary leaders leaving their roles, it raises an interesting question, which is what actually makes a great CEO and what defines an iconic one? So, Scott, a lot of departures here, some that I didn't announce or mention in that intro. Doug McMillan of Walmart, also stepping aside, James Quincy of Coca Cola, Brian Cornell of Target. And then, of course, the big news this week is Tim Cook. Let's just start with Tim Cook and kind of take a look back at his legacy. What he achieved, just some of the stats that really jump out. He quadrupled revenue during his 10 quadrupled profits, 13x to the company's market cap from 350 billion when he took over to 4 trillion when he left. Almost 4 trillion. He outperformed the S&P by 4x. Apple returned 2000% during his tenure. The S&P returned around 500%. I mean, when you just look at the scoreboard, when you look at the statistics, pretty remarkable. What do you make of his departure and what do you make of his legacy?
- [34:37]
A
Well, he's first ballot hall of fame for business. He is the most successful successor in history. And you weren't around or you weren't of professional age when Jobs died. But what happened? There was this weird shift in our society where we transitioned from the idolatry of athletes and government leaders and actors to innovators. And that is because of it, I think. I think as attendance to religious institutions went down, we still wanted kind of godlike answers. And the closest thing we could get to godlike mysticism was technology. I still don't understand how my phone does what it does. And then you collapse that or collide it with our idolatry of the dollar. And then our new heroes are these innovators. And all of a sudden, Bill Gates and Steve Jobs became the new. The new gods, especially Steve Jobs, because he did such a great job of branding. And he was taken from us early, like Jesus. And, you know, so they were the new Jesus Christ, if you will. So literally, Tim Cook didn't have to fill Shoes he had to fill, you know, Jesus's smock or whatever. And right away they started second guessing. Tim Cook. No new products, lacks the creativity. You know, all this shit. And like you said, he's probably added more shareholder value than any CEO in history, with the exception maybe of Jensen Huang. And he has. I mean, there's a few things that are extraordinary that won't be talked about as much because they're boring. He built arguably the most successful commercial supply chain in history, and that is the supply chain to aggregate and coordinate 2,000 separate components and build an item in China, in a different country, that takes advantage of their advanced manufacturing and their low cost of labor, such that he could produce a supercomputer for $400 instead of trying to produce it in any Western nation. It would have cost 4,000. The result was the most profitable, successful product in history. And that is the iph. And generally, the rules of marketing are you can have an aspirational niche product like a Ferrari, it's highly differentiated and has huge margins, or you can have a mass product that's great value, where you focus on cost and you have huge production values. That's Toyota. Apple is really the only product. The iPhone is the only product I can think of that has the margins of Ferrari with the production volumes of Toyota. It's created more gross margin dollars for shareholders than any product in history. It's arguably the most successful thing in history. And he did it because of this. In his background, what's in supply chain, he doesn't get enough credit for products. Because my favorite product, and I think the most underhyped technology product of the last 10 years, is AirPods. And if AirPods were their own business, they'd be a Fortune 50 company. In addition, he said, rather than trying to come up with new gizmos, I'm going to take this product, which is the most profitable product in history, and I'm going to move it slowly but surely but incrementally and purposefully from being a phone to a supercomputer. That's your center for media, where you can make payments so you can interact with other people, you can create presentations. I mean, this isn't a phone, it's a supercomputer. And it's revolutionized the way people do business. His ability to create a ring, fence and ecosystem such that he could get a little bit of the App Store, which is arguably the second most successful product in history or service in the world. The App Store, 100 billion in services revenue, and then another tectonic move. And while it was Jobs idea, Cook executed against it, just at the time when pre purchase branding, that is advertising was losing its effectiveness. They took billions of dollars out of pre purchase branding and transitioned it and reinvested it into distribution, where the distribution around technology. Again, you're too young to remember this. If you wanted to go buy a computer, you went to CompUSA or Circuit City or to like goodies or some shitty place. If your computer broke down, God help you. You took it to this weird place where they gave you a number and a guy who looked like he had to register with his neighbors, gave you a number and told you to come back in two weeks so you could find out that you need a new computer. And then they built these temples to the brand, 450 of them. You walk into an Apple store, I'd like to live in one of those places. If Apple put up a coffee bar in any one of its stores, it would be the most, the highest revenue per square foot retail in the world. But wait, they already are the highest per square foot retail in the world, having surpassed Tiffany in the aughts. So incredible innovation around distribution, consolidation of products into their core product, which has the margins of Ferrari, the volumes of Toyota. Also a great manager, no people going on background, no dramatic firing, no scandals, no lawsuits. Yeah, he himself, I think, handled himself with a lot of grace. Didn't shitpost other CEOs.
- [39:24]
B
Except for the plaque. I mean, that was his one, that was his one mistake. From a PR perspective, the trophy that he gave to Donald Trump, people would
- [39:33]
A
say his sycophantry around Trump is a bit of a stain on his legacy. No one gets it right all of the time. And what he, I think, decided to do, he decided to take one for the team. And the team was shareholders. Right. I can't imagine that Tim Cook's skin didn't crawl going to the Melania premiere. But look, let me put it this way. He had an opportunity to be a leader there. And like the other 499s and P500 CEOs, he decided not to. Fine. But I don't think that's, you know, if your career, if your business career is 35 frames in the blink of an instant, you know, he got 34 and a half. It's like try and find a CEO who's been more right than Tim Cook. It is really difficult.
- [40:18]
B
I really like your framing there. It's like he took one for the team. He ruined his legacy. He made himself look like just a sycophantic idiot. Everyone made fun of him and he did it for shareholders. That's why he did it was all for the investors. Which honestly when you put it like that, it's like, okay, fair enough. Great CEO, he took one for the team.
- [40:40]
A
So just let me also, Tim Cook will overshadow everybody. But it is important to recognize Doug McMillan. He started out, I think, loading trucks. I actually did some work with him back when I was at L2. Very decent guy, very smart stock return. He in his 10 years, up fivefold, 15% annualized return, outperformed a lot of large cap peers, Nike, Nestle, Diageo. And he was really one of the stronger large cap CEOs and probably the most iconic CEO or most important CEO in retail. And he was the first retailer to hit a trillion dollar market cap in 2026. And always been sort of a historically low multiple. Slow growth business revolutionized retail. And my story about Doug McMillan was he asked me to come to present to the board of Walmart. I think it was about seven, eight years ago. And the next day he invited me to his office and he spent an hour. They invite their associates, whatever they're called. There was a line of like, you know, Walmart has a lot of employees. So 400 people who all look to be like 110 showed up when they're smocks or Walmart smocks. And he just spent an hour going down the line and saying hi to everybody. It seemed very easy for him. He generally seems like a, I think arguably he's kind of the most down to earth. Like he's the guy that like, like we'll continue to live in Little Rock. He's not One of these CEOs who shoots in and then heads out to the Hamptons. He struck me as a very down to earth decent guy. My point is Tim's going to suck all the oxygen out of the room. And another iconic CEO we talked about, Reed Hastings. Doug did an outstanding job. And also Walmart had a lot of arrows coming from him. Whether it was the cheap capital of Amazon or especially retail or investors looking for higher growth companies. He was just, he was a, he was an adult in the room. And he, I mean he's been through, he's, he's traversed, he's waded in pretty dangerous waters with a lot of great whites with cheaper, cheaper capital coming for him. Walmart definitely could have been, I think under less deft leadership, Walmart could have been Kmart, but bigger. But he didn't. He, you know, it's been a solid performer out there performing the S and P. Yeah.
- [42:57]
B
And it's one of the best performing stocks of the year. I mean, the multiple is just incredible on Walmart at the moment. Just to go back to Tim Cook for a moment, I mean, the question we began here with is what? What makes a great CEO? What makes an iconic CEO? And that is the question that I'd like to get to the bottom of. Just to go through some of his wins. You mentioned many of them. AirPods was a win. The Apple Watch was a win. Wearables was $36 billion in revenue last year. Also growing the services business to more than $100 billion. Scaling the iPhone. He sold more than 3 billion iPhones during his tenure, grew it into a more than $200 billion business. Also something that we didn't mention in our Apple episode during the week was pioneering the M1 chip. Apple used to have a dependency on intel for their chips. They created this, what they call this unified memory design where the CPU and the GPU kind of comes together into one chip. And it is what led to what is now very popular in the AI community, which is the M4MA mini, which is now this go to machine for all these AI engineers. It is the most popular consumer product that you can buy if you want to run large language models. And he did that back in 2020. I don't know if it's because he predicted what was going to happen with the AI, but the reality is it is another winner of the AI boom. And then the biggest thing is that he was this supply chain genius. I mean, the biggest criticism of Apple before he came in was that the supply chain was a disaster. And he came in, he reduced the number of suppliers by 75%. He shut down half of the warehouses. He moved things into China. He massively increased margins partly by doing that in China, where he had all this cheap labor. He reduced the labor costs per iPhone by nearly 25% while tripling the price. So he massively expanded the margins. I mean, those are just some of his biggest wins. His failures, you'd have to say, was the Apple car, but also maybe credit to him for shutting it down internally. Vision Pro, certainly a failure. I think it's a little bit of a flop that they're kind of quietly pulling that and now he's leaving. And then also potentially AI, Their AI strategy has been considered by many to be not a very good one. I mean, there's also the question of should they be investing in data centers? Their decision is to not do it while everyone else does do it. We'll see if that ends up being a good decision or a bad decision. But certainly in terms of consumer AI, Apple Intelligence has been kind of a flop. Siri was very well primed to be a great winner of the AI revolution, and it wasn't. So you'd have to say that AI was kind of a failure on that front. And then finally, just his management style is something that I think would be interesting to unpack. Tim Cook has been described as the master of silence. That's what a lot of people call him. And supposedly he had this rule that in meetings he would always be silent for at least 10 minutes. And he made it a rule that he wasn't allowed to react or give any signals as to how he felt about what the other person was saying. And he said, quote, if I gave any reaction at all, people would often tell me what they thought I wanted to hear. I found that they were much more likely to say what they really thought, even if it wasn't what I was hoping to hear when I was careful not to show what I thought. And that was kind of his reputation, which is also very, very different from Steve Jobs. We should also note who was famously, I mean, very aggressive, commanded the room. He was the center of attention. Tim Cook decided to actually play it the opposite. He was this kind of quiet, methodical operator, not really a larger than life founder CEO. So that's an interesting dichotomy. There's. But I figure we should put it in contrast with Reed Hastings because he was kind of the not quite Steve Jobs level of the founder CEO cowboy, but kind of getting there. He was known for these very bold, risky bets, starting with DVD by mail, then betting the whole company on streaming at a time when Internet speed in America was pretty terrible, then betting in going all in on original content and then going all in on foreign content, et cetera, et cetera. So, I mean, as a CEO, Scott, and as someone who's been like, looking at these guys and studying these guys for a long time, what do you take away from, like, how to manage a company, how to manage an organization? What are your main learnings from Tim Cook in contrast to, say, Reed Hastings? And perhaps which things do you think they got wrong?
- [47:36]
A
If a CEO doesn't have gigantic flops, it means they're not trying hard enough. It means they're not at the frontier edge of innovation. So I would argue that, okay, the mixed reality headset, that was just an option to make sure that, okay, if that crazy. Zuckerberg is crazy, right? We at least will be at letter D. And they shut that down. The whole thing was fucking stupid. Did they miss out on AI or are they. They decided they don't want to go into those capital wars and they'll ultimately garner a ton of revenue by being the default AI, the car company, in my view. And this will come back to what I think. I'll come back to that. On what I think makes a great CEO. So I've never run a big company. I've run small and medium sized companies, but I've worked with a lot of CEOs and I think generally speaking, it kind of comes down to three things that great CEOs or attributes that they share. The first is they demonstrate excellence. They are someone who came up through the ranks and they were just outstanding at what they did and they understand the business. So Tim Cook is arguably the best supply chain person in the world. A guy like David Solomon had a reputation for being a great trader. I think Jamie Dimon was a great investment banker, a wealth management guy. These guys are just, you know, they're just very. They, they are better at a component of their business than almost anyone. Everyone, everyone looks at these people and says they are just very good. You have to demonstrate excellence and not just be, quote, unquote, a manager that can shift the pieces around.
- [49:05]
B
And this might be like an obvious question, but why do you have to do that? Why is it important to be excellent?
- [49:12]
A
Well, I'll give an example. John Donahoe, who was a failed CEO at Nike. Was he a great merchandiser? Was he a great brander? Like, what was his greatness? He was essentially a consultant. I think it helps to be demonstrably great at a key component of the business. You know, Steve Jobs is arguably the best marketer in the world. So I think demonstrating excellence around a specific function of the company. Most of the great CEOs I know are just outstanding at a key component of the business. And that's how they got to that point. And it gives them an insight into the insight into the company.
- [49:47]
B
Something I would just to build on that. Something I was going to also think is important is that.
- [49:51]
A
And typically great leaders don't interrupt. But anyways, go ahead. Jesus Christ. You're like fucking Kara Swisher. Second thing, I'm sorry, go ahead, go ahead.
- [50:02]
B
I think the other thing that is interesting about demonstrating excellence and is important is that it commands respect and you need the employee base to be like, yeah, this is the right guy for the job. And the reason I'm thinking that is because we just saw my favorite team, Chelsea. We just fired this guy, Liam Rossinha, the manager of Chelsea.
- [50:20]
A
How many managers is that Joey Bag of Donuts posing as a football club had in the last three years?
- [50:24]
B
Yeah, exactly. It's getting out of control. And. And one of the big problems was he just didn't have a lot of experience. But then everyone said, yeah, but, you know, he. He could be great. He could be great. And the problem is he comes into the club and. Because he doesn't have enough experience, because he hasn't demonstrated the excellence beforehand, apparently what happens that the people in the train, in the dressing room, just didn't respect him. And that in and of itself is a problem. So they could have given him some time, and maybe he would have turned out to be great. But the trouble is, because he didn't have the track record, it just meant that when he said things, people didn't listen to him because they didn't respect him. So that's just a side comment. I apologize for the interruption.
- [51:05]
A
He's now Mikel Arteta. He's not.
- [51:06]
B
Mm.
- [51:08]
A
So. But these guys. I. I would argue these guys. Most CEOs I've known are, you know, specifically, like, they're just. No one could do. No one could do an earnings call or invest relations like Jeff Bezos. You really were in awe of these people. I've. I've worked with some CEOs where I think, gosh, these guys are just so good. And they're almost always guys. And then two. And this is key. They hold their people accountable. And it's not a Hallmark commercial. They put in place very definitive metrics for people. They have honest and open conversations. Because the fastest way to just really diminish morale is to let mediocre performers survive and keep them in your company. Everybody in a company, they don't need to like each other, but they need to be able to look left and look right and go, okay, I get it. I get why they're here. They're good at what they do. Otherwise, why am I working so hard? If Joey Bag of Donuts over here can be just, you know, okay at their job and take off early on Thursdays, and they get. You know, they make. I get 6% at the end of the year, and they get 5%. So holding people accountable, outlining metrics, straightforward, honest conversations with them, shedding people on a regular basis. And I know that sounds harsh, but I think great CEOs hold people accountable. And this Goes back to the Apple Titan, which was their car effort. I think what happened there was, it was constantly delayed, constant production overruns, weak designs, bad strategy. And he said, fuck it, I'm closing the whole thing down. He held that team accountable rather than, you know, that must have been embarrassing. And then people talk about it as a failure. I see it as a sign of a good CEO. This isn't working. You said you were going to deliver X by. Yeah, you haven't. I'm shutting this shit down. I doubt the head of Apple's Titan came to him and said, you should shut us down. He kept coming to him, or, you know, or her, kept coming to Tim and saying, oh, this is why we have missed this deadline. This is why this is not going well. And he said, okay, you're shit out of luck. And then the third thing, and it is more of a Hallmark commercial, is I generally find These really good CEOs have really good empathy. And that is they understand what their employees want and get to know them on a personal level and what's important to them. And then they try and adapt or they try and recognize. Maybe that's more true in small companies. But I always found that if I could understand somebody and what was important to them, whether it was flexibility, so they could coach Little league where they were totally focused on. Some people love to manage people. Like, they just get a thrill out of managing people. So find that person and say, I want you to manage this person. Some people get so much reward out of seeing their name in lights, right? Big egos. I'm one of those people. So I used to, if a newspaper would call, I would say, do you want to give this person a quote? And letting them give a quote in whatever it was, Women's Wear Daily was like enormous compensation for them. So trying to understand your management team, what's important to them, and reflecting that I have empathy for you. And the key component, the key message the CEO has to give to his management team is the following. If I win, you're going to win. You're coming on this ride with me, and I am really good at what I do. And when I win, it's going to be a win for you. I want you to be successful. I'm going to hold you accountable, but I'm going to give you good feedback and I want you to win. I don't need to like you, but I want you to have economic security. I want this to be the best platform you have ever engaged in. And I'm going to take My excellence as platform and an understanding of what you're good or not not good at. And I'm going to get you further faster here than any other platform you could associate with. Not necessarily because I'm a nice guy, but I understand why you're here. And I promise you, I'm really fucking good. And me being really fucking good is going to mean you're going to do really well too, because I'm going to bring you along with me. And it sounds trite, but it's true. Team of the best players wins. The metric I always looked at in a corporation at board meetings was churn. I want to know industry average for churn at every level of the company. And if we're churning faster, there's always a good reason for why. Oh, so and so left to go to another company. I'm like, well, okay, why? I'm an investor in an AI company. Right now we've lost two senior managers to AI LLMs. I'm like, why would these people leave? They've got big equity stakes. Like, what's wrong here? And I said to the CEO, this is a poor reflection on you. How could you? Why did these people decide? They don't have faith in this company and you for you to get them to the promised land? Like, what's. Is it a culture thing? Is it. We're not. They don't have strong expectations about an outcome here. So one demonstrates excellence, two holds the team accountable and three, has an ability to really understand what people want and convince them that if I am successful, you're going to be successful. Because I understand you and I understand the unique kind of desires you have. What you're looking to get out of this. Anyways, Those are my three no notes killed it.
- [56:19]
B
I 100% agree with all that. I love it.
- [56:22]
A
Who tells the best Dick jokes Ed. Who demonstrates excellence at the top of the show. That's right. That's right.
- [56:30]
B
Yeah. That's not your area of expertise, but you have plenty of others.
- [56:33]
A
My oldest asked me what condoms are used for and I said, so you can avoid stupid questions like this one.
- [56:44]
B
We'll be right back. And if you're enjoying the show, come join us on tour and hang out with us live. You can get your tickets@prof.gmarketstour.com the link is in the description.
- [57:03]
A
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- [58:08]
C
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A
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- [59:32]
B
We're back with profit markets. SpaceX just struck a major deal with coding startup Cursor. The agreement gives SpaceX the option to acquire the company for $60 billion or pay $10 billion for its technology if it chooses not to buy the company. The timing is notable ahead of a potential SpaceX IPO later this year. Okay, so Scott, SpaceX is buying cursor. For those that don't know Cursor is this AI coding company, it's exactly how it sounds. They use AI to basically do the coding for you or code alongside you, and they're buying this thing for $60 billion. And they also have the option to pay $10 billion to work together if it doesn't work out, which essentially just means it's just a breakup fee, a $10 billion breakup fee, which means that they probably believe that there's a chance, maybe a significant chance, that this won't go through for whatever reason. But this is pretty notable because SpaceX is about to go public, and that's what everyone has been talking about at nearly a $2 trillion valuation. So the idea that they would then buy a company for $60 billion, which is a pretty big deal for a private company, a startup, it's a pretty big deal for any company. And they're doing this just months before they go public. And if this goes through, by the way, they're going to have to refile their S1, they're going to have to report new financials, et cetera. So it's kind of a big deal in the IPO world because everyone's so excited for SpaceX to go public. This is going to be the largest IPO in history on various metrics, and now they're buying a company for $60 billion. That's a big deal. What do you make of it, Scott?
- [61:20]
A
Well, my understanding is, or what it feels like is there's definitely an Aqua Hire component to this, but Xai is desperate. My understanding is XI is just not scaled or shown an ability to develop a product or a front end that registers revenues. And that, I think cursor, is an attempt to establish a front end or bolt on a front end that might help them get more actual revenues going. The thing that struck me about the deal and its announcement is that, you know that saying statisticians lie and liars use statistics. This number just feels like such bullshit to me. First off, nobody's cashing a check for $60 billion here. I'd love to see the deal terms, but something along the lines of, if we go public, you're going to get, and you're here for 1, 2, 3, 4 years, you'll get 0.512 and 3% options on 3% of the company. And at a $2 trillion market cap, that's 60 billion. No one's cashing a check for $60 billion here yet. And so it feels to me like, and there's just so many bullshit numbers out there, like, you know, take any number that Sam Altman says about investments in Compute, right? What was it, one or $2 trillion, and that went away. $850 billion valuation well, okay, if you, if you offer me a 17% guaranteed return and a preference, a liquidity preference, I'll Invest at an $850 billion valuation, knowing the company's worth less than Anthropic, which just raised money at 350. So these numbers are more about a press release and kind of a jaw drop than they are about something that's actually real. I mean, SpaceX only had $25 billion in cash on hand. It feels like he's trying to create. I mean, nobody is better at saying, look over here, as he stuffs more rabbits into the hat. And to bring together this salad of space connectivity, AI, a communications platform, it all feels like, okay, at $1.5 trillion. I need a really dramatic story here. It can't be that SpaceX is only 12 billion. It can't be that my AI seems to be going nowhere. It can't be that robots, there's really no commercial application for these things. But all taken together, it just feels like the future. Right? So I don't, I would just love to know, how do they get to that $60 billion number? And what is it? What does it mean? And, and I think he's also, and this kind of goes to my prediction. I think he's going to roll Tesla into this thing. Because Tesla, all of a sudden, what you have is there's so much Elon magic built into these multiples. So many people just want to invest behind Elon. They think he's the, he's the Edison of our generation or this age, which I think is a credible statement. So they think, I just need to invest behind this guy. The problem is that the promise always outpaces the performance. So he always has to make a new promise because it's becoming clear that Tesla is a great automobile company that should trade at 20 to the third times earnings, not 155. So he'll probably roll that into the whole thing and say that it's about autonomous and AI, and that only, only his space connectivity and only his AI can power this autonomous car and that he's going to have more data inputs than anybody else. He'll keep. Just look over here, look over here, look over here. Robots, you know, humanoid robots. So I don't. But this circling back to the beginning feels like he needed a front end for xai, which is a distant player right now in AI.
- [64:50]
B
Yeah, I think that's exactly right. You point out this idea that the $60 billion number is. What does that mean? And that is a really important point because the first question is, is that $60 billion or is that $60 billion worth of SpaceX stock? Is that what the Cursor team is going to get paid? If it's $60 billion worth of SpaceX stock, then at what valuation are we talking here? Is it the private valuation that we've seen? Is it the internal valuation that they placed on themselves? Is it the IPO price, which is going to be closer to $2 trillion? I mean, that whatever the answer to that question is would change the $60 billion by orders of magnitude to the point where saying that they bought them for $60 billion literally does mean, like, actually nothing. The only thing that you could say maybe means something is they'll pay them $10 billion, because maybe there's more of a likelihood that that would be in cash. But even still, it could also be st which case, we don't even know what that means. And this, crucially, is becoming a trend in the private markets. And this has always been a thing with private markets where valuations aren't very clear. It sort of depends on which VC is preempting the deal and how much were you able to raise. And the numbers are softer. People don't really talk in terms of strict financials. They talk in terms of monthly revenue, and then they extrapolate and call it run rate and ARR and all these things. The numbers in the private markets world are famously very soft. And that's okay when you're dealing with very new young companies, because usually those companies don't really have much of a business yet. So to act as if they're Walmart is, you know, a little unfair. You should be maybe a little bit more lenient on how they report the numbers. But we are now getting to a place where these companies are worth literally trillions of dollars. And they're still private, and yet they're still treating it as if they are a series a startup that is just getting their feet off the ground. And the reality is these companies are about to go public. And it's not just SpaceX, it's also OpenAI, it's also anthropic. And if you put them together, I mean, we can just talk about what the expected IPO valuation is going to be. For space, it's $1.75 trillion. For anthropic, it's going to be more than a trillion. For OpenAI, it's also going to be more than a trillion. And if you add that up, if you add the combined market cap of those three companies, it would exceed the value of every single IPO from the dot com era put together. And at the same time, it would also be equal to half of every IPO from the 50 years before that combined. So we're looking at at one of the biggest moments in financial markets in a really, really long time. And it's not just that they're just going to be inserted into the stock market. They're going to go in the S and P. There's no way that they are not included in the s and P500. So what you're essentially doing there is you're adding more than $3 trillion in equity value into the S&P 500 and crucially, at the same time adding $0 in earnings because all of them are burning cash. SpaceX lost 5 billion last year, reported we think based on sources. Again, none of this is actually disclosed. Anthropic burned 10 billion. OpenAI burned 25 billion. And so we're now getting to a point where these companies are doing all of the things that gigantic public corporations would do. They're spending tens of billions of dollars on these huge M and A transactions. They're behaving like an Nvidia, like a Walmart. They're doing all the things that those companies would do and their market valuations would suggest that they are actually commanding that. But the way they're disclosing things is so unclear, like even cursor when you look at the reporting on the deal, the first thing I'm thinking is like, okay, what's their revenue? No one knows. We don't know what their revenue is. We know know based on Bloomberg's projections that they are at a $2 billion ARR. That's the run rate. But again ARR is just you take one month and then you times it by 12. Who knows what the month was before that? Who knows if they're cherry picking their months to increase the ARR. And then it's the same with the biggest companies, the same with OpenAI. We don't really know what the revenue situation actually is because again, we're depending on sources say that the number is close to this. OpenAI said that they generated $2 billion in revenue last month. So I guess the ARR we'd say is $24 billion. But again, this stuff isn't that clear and that's important, especially if they're about to go public. And I do think, I guess just to sort of put a button on this, when they finally disclose their financials, once we finally see the S1 from SpaceX and from OpenAI and from Anthropic. There's going to be no more capacity for the bullshit that we've been kind of receiving in these sources say, reporting for the past several years. And I think it's very possible that suddenly investors are going to go, actually, you know what, this thing is pretty ugly. They way overpaid for this company. They're burning too much cash. This is not something that deserves a $1.75 trillion valuation. And I think that could be the downfall. But again, we're going to have to wait and see if they even do go public. Maybe they won't. Anyway, I think you're onto something with that $60 billion number being bullshit. And I think it's indicative of something larger and more systemic in the private markets ecosystem right now.
- [70:46]
A
So if you look at the way the deal was structured, it was just weird. So it's all stock deal, no cash, structured as a share exchange and each XAI share converted to 0.14 shares of SpaceX.
- [70:58]
B
You're talking about the Xai merger.
- [71:00]
A
Yeah, Xai and SpaceX. But essentially Xai was priced at 76 bucks, SpaceX at 527, which valued SpaceX at 859 to 1.3 trillion, which is expensive, but it valued XAI at like 250 billion. And basically that, that overvalues, in my opinion, massively. Xai, which is also, I believe now owns Twitter, which was overpaid at 44 billion. But what you have here is a lack of representation for the individual companies. I don't think an independent, a truly independent SpaceX would ever pay that kind of money for XAI.
- [71:40]
B
But again, that number is also BS. And that's because, remember the headlines came out, they were like, like $250 billion for xai. Wow, what a company. And then you look at it, it's like they, they actually made that number up. It's based on a, like a, a ratio of SpaceX shares that they converted and they just decided, oh, SpaceX is
- [71:59]
A
worth a trillion dollars, okay, but SpaceX, 15 to 16 billion in revenue, 8 billion in profit. So, you know, trading at whatever 100 to 145 times revenues. That's fucking insane. But it's an amazing company, Xai. They did 2 to $500 million last year and they burned 8 billion and it's being valued at 250 billion. So my prediction is the following, that the biggest IPO in history will be SpaceX. It'll get out the best performing IPO will be Anthropic. I've never seen that company has more momentum right now than any company. And this is the big prediction. I don't think OpenAI gets out. I think that the numbers are so stark right now for OpenAI and it's going to be so overshadowed by the upward trajectory of Anthropic. I think they're going to come up with a jazz hands reason for why they're delaying the ipo.
- [72:49]
B
Yeah, I think that's going to be really interesting. And I think the other thing to keep an eye on and the big moment is going to be when these Companies release their S1 filings to the public.
- [73:00]
A
Oh, I can't wait.
- [73:01]
B
I cannot wait. We're going to finally see. And who knows, maybe it'll be a lot of, of, as you often say, smearing Vaseline over the lens. Maybe it will look like wework again. I mean, we know what wework did. They created the most BSS1 filing in the history of markets. And a couple people, namely Scott Galloway, were like, hey, this is a bunch of bullshit. This doesn't make any sense. They're basically just lying over and over again and obfuscating and confusing away from the point, which is this is not a great business. It's possible that SpaceX does that, but even so, I do think people are going to be be looking for that. Like this is such an important, systemically important IPO for the entire market. I mean, it's literally going to be inserted into the portfolios of essentially every American. There's no way this doesn't get placed in the S and P. Same with anthropic, same with OpenAI. And so everyone's going to have to be very, very vigilant, like, okay, we're finally going to learn what actually is going on with these businesses. How good are they really? What did they pay for? Cursor. What did OpenAI pay for TBPN? Was that cash? Was that stock? What did SpaceX? I mean, what does this XAI SpaceX merger actually look like? What are the financials of Twitter? How is that all playing out? I mean, so many gigantic questions which they just haven't had to answer because they've been private. But I'm excited for them to go public because we are finally going to get some answers to those questions. Okay, let's take a look at the week ahead. We will see consumer confidence for April. We'll see an inflation reading from the Personal Consumption expenditures index for March and GDP for the first quarter. And the Federal Reserve will deliver its next interest rate decision on Kalshi. The odds that the Fed will hold rates steady are at 99%. And finally we'll see earnings from Google, from Apple, from Microsoft, Amazon, Meta, Eli Lilly, mastercard, Visa, Coca Cola, Exxon, Chevron, bp, Starbucks, Spotify and ups a ton of earnings and most importantly the big tech earnings. Scott, do you have a prediction for us?
- [75:15]
A
Yeah. Almost every one of those companies is going to be to the upside. The expectations have been a little bit beaten down by the war in Iran and I don't see any of those companies other than to the upside see above, Chevron are going to be affected. So I think there's going to be, we're about to see just a series of earnings beats and then the prediction I made before SpaceX, biggest IPO in history, anthropic is the best performing. OpenAI does not get out. And then also if SpaceX gets out at the level I think it's going to, I think a lot of that, I think there's a lot of acolyte buying in Tesla. They go, I don't care if it's not our company, I don't care that it's had quarters of declining sales. I don't care that BYD is kicking its ass all over the world. It's got that Elon magic and he'll figure it out. And I think a lot of that capital, that acolyte capital is going to go into SpaceX and out of Tesla. And I think just as you're going to see an unnatural multiple in SpaceX, some of that is going to come at the cost of a rationalization and a leveling and a recalibration down of Tesla when it becomes obvious that Musk is much more interested in his new SpaceX thing. And people are going to say I want some of that Musk secret sauce. But I'm going to sell this at 125, whatever it is, or whatever Tesla trades at and I'm going to go into the new cool thing and then there's an outside shot that he merges Tesla into the whole thing to try and sustain it such that it doesn't just totally implode.
- [76:47]
B
My prediction is a two part prediction. Number one, we've got the interest rate decision. My prediction is that we're not going to see any rate cuts for the entirety of the year. That's not that bold of a prediction. But the reason I think that is because of my second part of the prediction, which is I think that the war is going to continue into 2027. We're at two months. My takeaway is nothing's changed. Ceasefire. No ceasefire. Blockade. No blockade. Seen this movie before. They said Iraq would be six weeks, it was eight years. They said Afghanistan would be $200 billion, it was $2 trillion. Trump just requested one and a half trillion dollar defense budget for next year, up from 900 billion. I mean, I think all the signals are clear that this war isn't going to end anytime soon. So I think it's going to continue into 2027. I don't think that necessarily means that markets get crushed for all the reasons that we described, but I certainly think that it means that they're still is. We're not going to see any interest rate cuts despite whatever pressure Trump puts on the new guy, Kevin Walsh. So that is my prediction. This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Our video editor is Jorge Carty. Our research team is Dan Schlan, Isabella Kinsel, Kristen O' Donoghue and Mia Silverio. Jake McPherson is our social producer, Drew Burrows is our technical director and Catherine Dylan is our executive producer. Thank you for listening to Prof. G Markets from Prof. G Media. If you liked what you heard, give us a follow and tune in tomorrow for a fresh take on the markets. Time Reunion
- [78:35]
A
as the World Turn.
- [78:53]
C
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A
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