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Support for the show comes from Ferragamo This Father's Day, Ferragamo presents their the Things I have Learned from youm collection. Because a father's influence is reflected in the details, in the way they dress, in the appreciation of materials, and in making considered choices, these elements build over time and become part of a shared identity, and Ferragamo wants to highlight the style, assertiveness and poise that are naturally showcased with the everyday moments between a father and the ones they love. Discover Ferragamo's Father's Day gifting selection@ferragamo.com or in store.
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Support for the show comes from Odoo. Running a business takes everything you've got, and a lot of the tools out there that are supposed to make your life easier just aren't great at talking to each other. And that means you end up having to toggle between a dozen different apps and services just to keep the lights on. Enough of that. Now there is Odoo, the all in one fully integrated platform that might actually help you get it done. Thousands of businesses have made the switch, so why not you try Odoo for free@odoo.com that's o-o o.com.
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Support for the show comes from bcx, 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 can own a piece of the great American companies. But today, our most innovative companies are staying private longer, which everyday Americans are missing out until now. Introducing vcx, a public ticker for private tech, now available wherever you buy stocks. Visit get VCX.com for more info. That's get VCX.com carefully consider the investment material before investing, including objectives, risks, charges and expenses. This and other information can be found in the fund's prospectus@getvcx.com this is a paid sponsorship.
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Money market matter.
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If money is evil, then that building is hell. Welcome to Profit Markets. I'm Ed elson. It is June 18th. Let's check in on yesterday's market vitals. The major indices tumbled following the Federal Reserve's press conference. More on that in a moment. Treasury yields spiked, as did the doll, and the odds of a rate hike before the year end are now at 62% on Kalshi. Meanwhile, SpaceX declined for the first time since it went public, ending the day down 5%. Okay, what's happening? Snap just unveiled its new augmented reality glasses, and despite a lot of anticipation and a lot of hype it was a bit of a flop. The glasses, called Snap Specs, feature an in frame display which overlays apps onto the real world. They're priced at $2,195, making them significantly more expensive than Meta's Ray Ban display glasses, which start at $800. CEO Evan Spiegel called Snap specs a leapfrog advancement and the computer of the future. But the market doesn't seem to agree. The stock closed down almost 8% today and it's now off 40% over the past year. So here to tell us more about the Snap specs and potentially why it was such a flop to Wall street, we're speaking with Mark Gurman, managing editor and chief correspondent for Bloomberg News. Mark, thank you for joining us. These glasses are all over my social media feed and not in a good way. Everyone is making fun of them. And I gotta say, I've looked at these things, I've seen the way that they sit on, on Evan Spiegel's face, particularly his ears. And I just think this thing is way too heavy and cumbersome and they don't seem to look very good. And I wonder if that's the problem here. What do you make of these Snap specs and also the reaction to them?
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D
I think for the available technology today, something that has augmented reality, something that's an all in one wearable headset, I think the design actually is quite good and I think the price is actually quite reasonable for the tech. Now, I don't think it's reasonable for a mass consumer. I don't think anything of this ilk is going to become a hit at $2,200 US but I do think for what the state of this technology is, they are in a fairly good place. I think the 8% decline in their stock is more a reaction to how expensive these are to develop and build and how much money Snap is putting into this product that is unlikely to become a smash hit. So I think that's what the concern is stemming from. But in terms of the technology, it's int intense technology, it's advanced technology. And I think it's an exercise that's showing us what eventually is going to be a mainstream computing form factor, because I do heavily believe in the augmented reality category. I'm just not sure Snap is going to be the one to take it to that next level.
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B
What do we know about how much they're spending on this stuff? Because we know that Meta's been plowing tens of billions into this thing. Apple doing the Same thing, but it's almost like they have the capital and the cash flows to do it. Snap is a significantly smaller company and yet they're also going for the big fish in augmented reality. So what do we know in terms of the spending and whether this is even possible for a company like Snap?
- [05:42]
D
They've spent billions on this and I do think it is certainly possible for a company like Snap. If there's a scenario in which there is gigantic demand for these things, I think they are going to find a way to be able to get these into the hands of consumers. But I think early on this is going to be the early adopter of early adopters. This is going to be developers, this is maybe going to be an enterprise play. If you think about the other products that have launched in this space, none of them have been really taken, have really taken the world by storm with consumers. A lot of these are enterprise products and a lot of these companies, they don't even sell the product anymore. Microsoft tried their hands on this with the Hololens. Meta has tried their hands on this as well. The quest is no longer the priority. It's all about the smart glasses. Magic Leap no longer sells their product anymore. They've become a AR lens supplier now based in the US The Apple Vision Pro obviously has not taken off in the way that Apple had anticipated. So this is not a thriving category at this point. I think we're still in a very early stage here.
- [06:40]
B
What is it going to take for this stuff to work? Because you know, we've been hearing about it for such a long time and it seems like there's issues with how long it lasts in terms of battery, like the look of them, motion sickness. I mean so many things like what do you think it would look like to see an AR headset that actually is popular?
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D
A lot of things are going to have to converge. You're going to have to see a combination of all the battery life, which we don't have yet. You're going to have to see a price point in the thousand dollar to 1,500 range, which we're not at yet. You're going to have to see that be in an all in one design that's nearly as thin and light as everyday glasses. And we're so many years away from that. And you're going to have to see that all with visual fidelity and quality where you can't really tell the difference between the real world and what you're seeing in the displays. Because that that technology has to look Innovative has to look impressive, it has to look highly legible. And so I think we're several years away from hitting any of those metrics, let alone all of them converging simultaneously into a singular product. But what we're seeing from Snap is the closest incarnation to that yet.
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B
I just want to read you a tweet that I saw. This is from a user, Uncle Doomer. This, this individual said, quote, anyone who has ever built anything can tell you that there's a point in the development cycle where the sunk costs become too great and the entire org chart starts walking on eggshells around an exec who is too tunneled in to realize that his product sucks. That was in relation to these Snap. And it, I think it does kind of capture probably what the concerns are on Wall street, which is that Evan Spiegel is the founder CEO. He has, he and his co founder at least have 99% of the voting power. He decides what to do as a company. He is going full steam ahead with this thing. And I think there are now concerns for the company, which, you know, the stock has been really struggling, that he's out over his skis or maybe in over his head or too committed to this vision. I'd just be curious to get your reactions to that view of Evan Spiegel in the direction of this company.
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D
I think investors are asking why are we playing with hardware when the money is to be made on high margin products, which is applications and software and AI. And so yeah, the big question is why are you even playing in hardware and burning all this money? And Snap recognizes this. This is why they've created a subsidiary called Specs Inc. They're running this all through. I think it's going to help, you know, the numbers they're able to talk about in their, you know, earnings reports and what have you. I think that's the driving force behind this. But you know, they've been investing so much in this for 12 years. They are really one of the pioneers in the AR space. If you think about the lenses and different overlays and such you can do in Snapchat. So I think there's a lot to like from this product. It's just not something that people are
- [09:40]
B
going to buy, say this just doesn't work out. Snap specs, there are no sales and it really is a flop. What do you think that means for the company? Is there a viable way out for Snap if Specs don't work?
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D
Well, the viable way out is being the platform or the app provider and becoming a hit software product like they were on the iPhone for these next generation of devices that someone is going to have success with, whether it's Apple, Amazon or Meta or even Snap, someone is going to do this successfully. And being able to transform Snapchat to being the killer app on that platform, on that, on that hardware will probably be their next step. But I think if this Specs product is not successful, I don't think this is a wrap. I think they'll keep trying and keep building and try to get out a subsequent version that's thinner, lighter.
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B
My final question for you, Mark, Would you ever buy these things or wear these things?
- [10:36]
D
It's hard to tell. I haven't used the latest version. At this point. I'm going to have to see the use cases and how they would fit into my daily life. I am a huge believer in the AR glasses category. I will say that.
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B
All right, Mark Gurman, Managing editor and Chief Correspondent for Bloomberg News. Mark, we really appreciate your time. Thank you.
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D
Thank you sir.
- [10:57]
B
After the break, the first unanimous Fed rate decision of the year. And for even more markets insights, you can subscribe to my weekly newsletter. Simply put@simply put.profgmedia.com. Support for the show comes from Odoo. Running a business is hard enough, so why make it harder? With a dozen different apps that don't talk to each other, One for sales, another for inventory, a separate one for accounting. Before you know it, you are drowning in software instead of growing your business. This is where Odoo comes in. Odoo is the only business software you'll ever need. It's an all in one fully integrated platform that handles everything CRM, accounting, inventory, E commerce, HR and more. No more app overload, no more juggling logins. Just one seamless system that makes work easier. And the best part, Odoo replaces multiple expensive platforms for a fraction of the cost. It's built to grow with your business whether you are just starting out or already scaling up. Plus, it is easy to use, customizable and designed to streamline every process so you can focus on what really matters running your business. Thousands of businesses have made the switch, so why not you try Odoo for free@odoo.com that's o d o o.com.
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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 a part of that journey 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 can 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 they select. Few reap all the benefits until now. Introducing vcx, the public ticker for private tech now available wherever you buy stocks. 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, risk charges and expenses. This and other information can be found in the Fund's prospectus@getvcx.com this is a paid sponsorship.
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Support for the show comes from BetterHelp. Summer can be a mix of things. For some, it's about travel, adventure, making memories. For others, juggling everything can feel overwhelming. Kids at home, packed schedules, shifting routines. It's easy to slip into survival mode and wonder where the days are going. Taking time for yourself can make a difference, and therapy can support that, helping you feel more confident, setting boundaries and making space to recharge so that summer feels more balanced and enjoyable. With BetterHelp, you can connect with a licensed therapist online. You'll be matched based on your needs and can switch anytime if it's not the right fit. With over 30,000 therapists and millions of clients worldwide, people are finding the support they need. With BetterHelp, you don't have to say yes to everything this summer. Find guidance in therapy. Visit betterhelp.com VoxPods to get started, that's better. H-E-L-P.com VoxPods.
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We're back with Prof. G Markets. In its first decision under Chair Kevin Walsh, the Federal Reserve held rates steady. It was the fourth meeting in a row that rates went unchanged, but it was the first time this year that the vote was unanimous. Still, the committee is divided on the par forward. Nine officials expect at least one hike this year, while eight expect to hold and one expects to cut. Meanwhile, Walsh declined to submit his own rate forecast, an unusual move for a sitting chair. As a reminder, inflation remains elevated, reaching 4.2% in May, the highest reading in three years. Joining us to discuss this interest rate decision and Kevin Walsh's first press conference, we're speaking with Mark Zandi, chief economist at Moody's Analytics. Mark, thank you for joining US on the show, the Fed has decided to hold rates here, which no one was surprised by. I think the one thing that really stands out to me, at least, is that the vote was unanimous this time. No one voted to cut, which to me says that the Fed and all of its officials are really taking inflation seriously at this point, or at least maybe more seriously than they were before. What do you make of what we saw in this press conference?
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Yeah, that's right, Ed. I think they're taking the inflation very serious. As you point out, we're 4% ish and that's double the Fed's 2% target. And Chair Warsh did make a point several times about price stability and the 2% target. And then you got the dot plots, which are very clear that many of the Fed members want at least one rate hike this year or thinking there will be at least one rate hike this year and perhaps two. And that was much more hawkish than I had anticipated, certainly for this first meeting for Chair Walsh, Wash. So yeah, I was a bit taken aback by how aggressive they were at
- [16:48]
B
this first meeting, which is also striking given what the rhetoric we've been hearing from the President who has been aggressively calling for rates to be cut. This is what he was complaining about with Chair Powell for the longest time. There was a lot of debate over whether Kevin Walsh would kind of obey those demands, those sort of implicit demands, or if he would decide to be hawkish. He has decided to be hawkish here in a lot of ways defying the President. Do you think that this could be, I don't know, maybe a point of tension moving forward? Were you surprised by the fact that he didn't do what the President might have wanted him to do?
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F
Well, you know, and he couldn't do it any, you know, even if he wanted to. Right. I mean, he's a vote on a committee with a lot of votes and clearly the committee had a very different perspective on things. So even if he wanted to cut interest rates, that that wasn't going to happen. And you know, I think the data are pret clear. I mean, it's irrefutable that, you know, the inflation is just too high. And yeah, there's some arguments as to why that might come back in as the Iran war winds down and hopefully oil prices come in and stay down and that translates through. But there's a lot of reasons to be concerned that it will be more persistent as well. You know, we talked last time about artificial intelligence and the impact that's having on inflation, which will be more durable. So, you know, I think that the reality of what's going on is just, just too difficult to ignore. You just can't and therefore you have to be hawkish. The other thing to consider, I don't know if the President would think this way, but I think it's clearly the case that if you start trying to cut interest rates in a world where everything screams you should be raising interest rates, you might get the federal funds rate target down. By definition, you can get that down because you're the Fed. But long term interest rates will go the opposite direction. They'll rise. And in fact they did rise today. So I don't think he chair Walsh had any options here. Right. He had to go along with this and be very hawkish in the way he's presenting things.
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Yeah. Just look at the odds on Kelshi of a Fed rate hike. It started around 12% towards the beginning of the year. Now we're up to 62%. So traders believe that the likelihood is that we will see a rate hike. I think I would agree. I would be interested to hear your perspective on that too. But just going to Iran for a moment. We have seen this deal memorandum up for debate. How real we think it will be, but seems certainly more real than previous announcements of deals that we have seen before because Iran has signed up for this and they've publicly spoken about it. Did we learn anything from the Fed or at least on their views of how real this deal actually is? Because it seems that what happens in Iran is the most consequential event as it relates to inflation and prices. So it seems that there's something that we might be able to learn about what's happening in Iran from the Federal Reserve. Did we get any insight on that front or still unclear?
- [20:05]
F
I don't know that we get any insight into what's going on with Iran and how they're thinking about it. I'm sure they're as uncertain as we are about how this is going to play out. That's playing into their thinking that maybe we need a rate hike or two here just to keep things inflation from becoming even worse in the context of the uncertainty around the war. But I didn't learn anything per se about the war and how that might unfold. I'm guessing there is in the dark about this as everyone else is. This thing can go in lots of different directions. I will say, Ed, I mean, I'll push back on the rate hike. My sense is the economy, economy is also pretty soft. Yeah. We did get a couple, three months of good job numbers, but I suspect that's not going to be sustained, particularly as the deficit financed fiscal stimulus that we've enjoyed since the beginning of the year fades into the background and we're still paying higher prices for gasoline and groceries. So I think the Fed's got a problem not only with inflation, but they are also going to have a problem with growth, which is going to complicate things even further for them.
- [21:09]
B
Oh, wow. So you would bet then that we probably won't see a hike this year? I mean, where do you stand?
- [21:16]
F
No, I don't think so. My sense is that clearly inflation screams for a rate hike, but the job market will be telling a strong story that rate hikes don't make any sense and maybe rate cut and that'll go to a draw and we don't get any change in policy this year. That would be my thinking, but a lot of script here to be written. But my sense is as we move into the summer months, the economy is going to start to weaken again.
- [21:45]
B
All right, Mark Zandi, chief economist at Moody's Analytics. Mark, always appreciate your time. Thank you.
- [21:51]
F
Anytime, Ed.
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B
AI is taking an outsized presence in the market. From AI companies going public to the rise of AI agents trading on a user's behalf. Now more than ever, investors need to consider what role AI should actually play in their portfolios. So joining us to discuss that is an AI researcher who brought machine learning to Wall street decades ago. Vasant DA is a professor at the NYU Stern School of Business, founder of SCT Capital Management and author of Thinking with Machines. His new book Vasant, thank you for joining me on the show. You are, are an AI researcher. You founded a hedge fund that specializes in machine learning and machine learning based investment. So you were quite early to this. AI is now taking over. So I'd be interested to hear from you how AI is changing investing and if we should be using it to invest.
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C
Yeah, you're right. You know, when I went to Wall street, when I brought machine learning to Wall street, it was, AI was sort of, you know, it was a, a thing that people viewed with suspicion. You had economists who were used to linear models and you had physicists who were used to physical kinds of models. And machine learning sort of fell in this awkward space. They didn't quite know what to make of it. And my objective really was to see if I could get a machine to learn how to trade. That was just an open question. It wasn't clear to me that that was Even possible. And the after a few years, I had a conversation with Scott actually in 2015 called should you trust your money to a robot? And I broke the investment landscape into three holding periods, High frequency, short term and long term. High frequency being intraday, short term being days to weeks, and long term being weeks to months to years. At that time my position was that AI had tremendous potential in investing in the high frequency and the short term space space because there was sufficient data and machine learning methods were actually capable of picking up on the nuances in markets that the cruder linear models sort of missed. And I recall that Scott ended that conversation by saying, okay, so trading flows will disappear, but private equity and long term investing is safe. And I said, yeah, that's pretty much the case. And ironically I'd had a similar conversation with Demogoron in 2015 about whether we could simulate him. And at that time we felt it just wasn't possible with the tools. But in 2022 with the emergence of LLMs, we sort of revisited that. And now three years later, three plus years later, we're getting ready to release the mother and bot next month for commercial use. And I'm fairly confident that we've actually managed to to simulate his kind of thinking to a reasonable degree. So to the extent that you actually believe in sort of a free cash flow model to the firm fundamentals approach to investing, we've actually managed to do that reasonably well. So I think we're close and we're there where AI can actually play a pretty significant role in sort of long term systematic investing.
- [25:18]
B
What was it about long term investing that made it difficult to use machine learning for long term investing? Previously, I mean, we know that machine learning has been used for high frequency trading, the stuff that is less long term, short term stuff. But then AI comes along and now it's possible. Why is it possible now?
- [25:37]
C
So the traditional view of machine learning is supervised learning. You have examples that you learn from. There just weren't sufficient examples or training data to learn from. The motherin is sort of exceptional in terms of the number of reports he's written, which go into sort of the low thousands maybe at this point. But that isn't sufficient data to really train an AI compared to how much data there was in the high frequency in the short term space. So there just wasn't enough training data. What's different now, and this is something I write in my book, is this emergence of general intelligence where the machine knows something about everything thing and the division between common sense, reasoning and expertise. Is broken down to me, that's like the big deal about AI that's made it a general purpose technology. That was always the hindrance that we sort of drew this artificial boundary between expertise and common sense. And with LLMs that became available. So now you can build on this sort of substrate of a machine that has common sense and you don't need as much training data because it's ingested sort of the wisdom of humanity on the Internet. And now it's a question of like, you know, tilting it in an appropriate direction, such as a value or a fundamentals approach, like De Motoron does. Right. And that's what's made it feasible for reasoning about sort of long, longer term investment horizons.
- [27:03]
B
I'd be curious what Demoterin thinks of the Demoterin bot. Have you spoken with him about it? Does he have a view on the fact that he's been automated? To a degree.
- [27:13]
C
So I've discussed the SpaceX valuation with him. He published his report and then that ran the bot several times on it and I shared it with him and asked him what he thought and he thought that its thinking mirrors his relatively closely. Even though the bot was much more bearish than he was, his valuation was like 1.2 trillion. The BOT had a hard time justifying anything above half a trillion, so. So he actually feels that it does a reasonably good job of simulating him. Where it falls short in my estimation is in sort of the quality of framing questions. Right. He has a sort of exceptional ability to sort of frame the problem in a way that then sort of drives the analysis. We've tried really hard to do that and the machines got quite good at actually coming up with these framing questions. But in my estimation that's where it falls short relative to its master.
- [28:09]
B
Well, half a trillion dollars on SpaceX. I think demoter Embark might be the first, well, the only person, entity in the markets that is more bearish on SpaceX than I am. So it's quite a striking number. Vasant Daw is professor at NYU Stern, founder of SCT Capital Management and author of Thinking with Machines. Vasant, this is fascinating. Thank you for joining us.
- [28:31]
C
Thanks for having me on the show, Ed.
- [28:35]
B
We end this episode back where we began with a few words of remembrance for snap. I know Mark is more optimistic about the technology and the company, but the stock has fallen more than 90% in the past five years. It is now less valuable than Domino's Pizza and roughly as valuable as the Gap. And to add insult to injury, they have now come out with what might be the ugliest wearable in wearables history. And that is saying something. In addition to weighing 132 grams, which is five times heavier than a regular pair of glasses and about as heavy as a baseball, the Snap specs were also incredibly expensive to build. The company dished out an estimated three and a half billion dollars creating this product, which is equal to more than half of the company's annual revenue. In other words, unlike Apple, which made a somewhat calculated gamble on its headset, Snap has literally bet the farm on this thing. And Evan Spiegel has said as much. He called this launch his crucible moment. And the street was still less than impressed. The stock immediately lost a tenth of its value. Snap has been sliding for a long time. Now, now. But in my view, this might just be the nail in the coffin. In the words of Dr. Seuss, My message to shareholders is the following. Don't cry because it's over. Smile because it happened. Snap, we will miss you. Okay, that's it for today. This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Our video editor is Brad Williams. Our research team is Dan Shalon, Isabella Kinsel, Kristin o' Donoghue and Mia Silverio. And our social producer is Jake McPherson. Thank you for listening to Profigy Markets from Profgy Media. If you liked what you heard, give us a follow. I'm Ed Elson. Tune in tomorrow for our conversation with Barry Ritholtz.
- [30:42]
G
Support for this show comes from Odoo. Running a business is hard enough, so why make it harder with a dozen different apps that don't talk to each other? Introducing Odoo. It's the only business software you'll ever need. It's an all in one fully integrated platform that makes your work easier. CRM, accounting, inventory, E commerce, and more. And the best part, Odoo replaces multiple expensive platforms for a fraction of the cost. That's why over thousands of businesses have made the switch. So why not you try Odoo for free@odoo.com that's o d o o.com. Athletic Brewing Company crafts award winning non alcoholic beers for those who want to be part of every round. With over 185 flavor awards, they're exceptional NA beers that fit your lifestyle and any social occasion. Summer's full of good times and Athletic fits right in. Go to athleticbrewing.com to have brews delivered to your door or find them at a bar, restaurant or store near you. Near Beer Athletic Brewing Co. Fit for all times.