← The Compound and Friends
The Compound and Friends
Nvidia GTC Highlights, Uber Is Too Cheap, Cliffwater and the Private Credit Panic
01:11:53
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- [00:13]
A
All right, gangsters, we're back. That's right, Luis Rojas. In the chat, Michael wants to know why we ditched last week. We were away. We were in future proof. Wake up, man. Come on. We would never ditch you for no reason. We were in. We were in Miami actually a week ago on Tuesday of last week. We were interviewing the CEO Charles Schwab. Got great feedback from that one. What about you?
- [00:41]
B
He was awesome. I had a great time. And credit to us.
- [00:43]
A
He's really good.
- [00:44]
B
I thought we did pretty good.
- [00:45]
A
That was one of our. That was one of our most organized conversations. I would say we were on point. Was good for that one. And he, dude, he spoke. He talked about Robin Hood, Goldman, everybody. Like he. He said, this is what I think. I thought, I thought that was awesome. All right, guys, we're back. It's five o' clock in the east on a Tuesday. Which means it's an all new edition of what are your thoughts? My name is downtown Josh Brown. My co host is with me as always. His name is Michael Batnik. Say hello guys.
- [01:16]
B
That's right, Josh. Hello. Hello.
- [01:18]
A
All right, so hello guys. I wanted the chat to give. Give Michael a big wave, guys. We have a big show tonight. We have tons to get to. But before we do, I want to say hello to a few people in the chat. I see Jimmy Moke made it. I'd like to go back to Miami if I am being honest. Me too, Jimmy. For those who don't know, Jimmy is the greatest publicist in all of financial services. And Jimmy's from Street cred which represents Witholtz wealth management. Welcome to the show, Jimmy. Appreciate seeing in the chat. Andrew Corman is here. Hello, Josh. Hello, Michael. What's up man? Who else is here? Jeremiah is here. Georgie Day. I see you, Gary. Walter is here. Cesar Vargas 4200 is here. First time watching live shout out from DeKalb Illinois. Well, thanks for being here, brother. All right, we have a sponsor tonight, Michael who's sponsoring the show.
- [02:16]
B
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- [02:52]
A
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- [03:04]
B
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- [03:26]
A
is sponsored by Janice Henderson Investors where we believe working together is the way to work better. Like combining your portfolio plans and our in depth strategy, your valued assets and our valuable insights. Your mission and our vision always working in perfect harmony to find the right investment opportunities. Janice Henderson Investors Investing in a brighter future together visit janice henderson.com well that was a 10 out of 10 read, Michael. We're going to talk about Nvidia's GTC event which took place today. Is taking place right now. I think it's in the hockey arena where the San Jose Sharks play. It's in something called the SAP center and that's what I think. I think it's at the hockey rink. Tbh. You want to check, you want to double check that before I run with it? Anyway, let me show you, let me show you guys a chart of Nvidia Full disclosure. I am long. I've been long for more than 10 years. The stock has not done much in the last six months.
- [04:32]
B
Digest.
- [04:34]
A
Yeah. Although it is one of the better performing mag sevens on most time frames, including recent time frames. And I have to tell you, I think it's going to 250. What do you, what do you think about that? This is the best stock. This is literally the best company in the world and it's one of the cheapest stocks in tech. And I think, I think it's in this like slumber as the shareholder base sort of gets bored with great news. It's nothing but great news. And I think a few items of uncertainty will be removed from the story and it's just going to launch and there won't be any news. No one. Because news doesn't move this stock. They put out the best earnings they've ever put out. The stock goes down 2%. Like it's not a news driven stock. One day people are going to be like oh my God, I can't believe I didn't buy it.
- [05:26]
B
Could you put that chart Back on. You know, it's funny you said this, Josh. I thought about buying the stock today because it is coming like the 200 day moving average is coming. It's basically there and it's go time. I think it's either going to break higher or lower. I mean, listen, Captain Obvious, it's not going to go sideways forever. Okay. I did find it notable though. I did find it notable that yesterday Jensen said that they have, they have through sight, throughput insight. What am I trying to say? Visibility boom into $1 trillion worth of revenue for their newest version of trips. A trillion dollars. That's not bullshit. They said $500 billion last year. He upped it to a trillion and the stock didn't do it was up a little bit yesterday, closed at the lows down today. So I don't know what's going to
- [06:12]
A
get for that number is for a three year period. It's for 25, 26 and 27.
- [06:18]
B
And that is a lot of cash.
- [06:20]
A
He took his, he took his visibility, his backlog basically and extended it to $1 trillion.
- [06:27]
B
But let me not hedge.
- [06:28]
A
Stock yawned.
- [06:29]
B
Let me not hedge. I agree with you. I think that the high, you have to give the bulls a benefit of the doubt. I think the likelihood of a break out as opposed to a breakdown is higher probability. So yeah, I would say 250.
- [06:40]
A
You know, one of the things with triple digit stocks that I always do, it's like a mental exercise. I asked myself, could an $18 stock go to 25? Happens every day. Yeah, literally every day. Now the difference here is we're talking about trillions and not billions, which requires a lot of investor capital to come into the stock. But this is a company that said next year they're going to do or, or the analysts expect them to do $330 billion in revenue next year. So forget about backlog. Like that's the, that's the estimate right now. I think it's going to go and I think it will be without warning. And I think you and I will be on the show maybe next Tuesday, maybe in six months and we're going to be like, oh my God, Nvidia is Nvidia Ing again. It's doing that thing. Is Jensen Wang the new Steve Jobs?
- [07:33]
B
I'm going to buy the stock. Yes, he is. Well, he isn't. He isn't. I would say that Jensen is right now, I think one of the best showmen, one of the most entertaining, I'm
- [07:44]
A
saying the best today.
- [07:45]
B
Okay. The difference is I listened to so he had, he had a call today with the analysts. Okay. To recap, to discuss, to let them ask questions. I listened to it as an hour, 16 minutes. I just don't understand what he's talking about. He's not speaking my language. A lot of this is very technical in nature. So I listen. I think he's got some great one liners, but generally speaking, honestly, I don't know what he's talking about.
- [08:10]
A
Well, fortunately for you, I'm here. Let's put that picture back up. This comes from take him. AKA at first adopter Tay wrote basically the bible of the Nvidia story. He wrote a book, I think it's from last year. He, I would say, at least for me, I think he's the world's foremost authority on Nvidia. And of course he was there today. That's a great shot. And that is Steve Jobs esque. I can't think of, I can't think of more than five corporate leaders, maybe even three where this might happen. Like this could happen with Elon today and probably Warren Buffett and like, is there a fourth name on the list?
- [08:50]
B
Carp.
- [08:52]
A
Oh, that's a, that's a good one. I didn't think of that one.
- [08:55]
B
But like that's about it.
- [08:56]
A
I think that's like, I think that's sort of. It's not that there aren't other famous corporate leaders, it's that many of them are now retired. And this guy's like in the game. He's 63 years old. He's not just the CEO of the company, he's the founder. He's obviously visionary and I do think that he has that level of, of like cult status and at least amongst people that know what the is going on in this world. Right. So he's. To your point though, he doesn't sell candy bars.
- [09:30]
B
It's not consumer products.
- [09:32]
A
Right. It's very little of it is consumer facing other than for like video game aficionados or like, it's not like it's, it's just not as simple as like, oh, here's an iPhone. Everyone you know has one. It's, it's or, or a Tesla that you see on the road every 10 seconds. So it is a little bit different. Here's a chart, here's a, another pick. So this is where the puck is going and this is what I want to talk about today. He has gone out of his way in his two hour plus presentation today to make it clear how many areas the tentacles of this octopus are now Jutting into and it's literally the physical world is like the seems to be like the main message that he wants to get across. Here we are beyond the point of ask the chatbot a question and we'll give you an answer. Now we are getting to the point where the chat bot, the AI, is doing things for you and increasingly not just things online. Chart off. This is what I think the big takeaway is not just for Nvidia investors. I know not everybody cares, but for everybody, he said, we have reached the inference inflection. So inference and distinction to training. Most of what's gone on the last three years since the advent of ChatGPT, it had to do with training models. So making the. Making the chatbot smarter. And now inference is the ongoing usage. Think of inference almost as like a utility where you just pay the bill every month because it's continued use. It's not just about who can train the best model. The model race will continue without a doubt. Nobody's done. Anthropic is not done. Sam Altman's not done. But where the puck is going is the physical world and the inference inflection. So I want to share a couple of things I pulled out of some of the articles that I think are relevant. This is the SF Gate. Wang envisions Nvidia maintaining its instrumental role in AI by continuing to feed the feverish demand for chips that power chat bots and expanding its reach into emerging markets for inference. Once an AI tool is trained, inference chips enable the technology to take what it has learned and produce responses, whether that's writing a document, creating an image more efficiently than the processors that were used while the large language models were being built. Efficiency is about to become really important if we're going to be fighting over electricity. Everything that happens with an AI, interaction between either agents or people in AI generates a token. And tokens are expensive because the input is electricity. So being more efficient means getting more out of the chips that you already have and being able to do so in an electrically efficient way. And that's really what he wanted to talk about. The inference inflection has arrived. I think was the main, like the keynote of the whole thing. One more from courts and then I want you to react to it. Wang's answer was to widen the lens to make the market bigger and the workload Messier. He said the inference inflection has arrived and built the middle of the keynote around a simple argument. AI can now do productive work. Once that happens, the demand picture changes. Training giant models and admiring them was never going to be the final stage that all moves into production where the meter never stops running. The sharpest line of the keynote was the simplest. The inference inflection has arrived. Wang broke inference into two stages, pre fill and decode and laid out a system in which Nvidia's Vero Rubin chips handle the pre fill work while Grok. Grok is an acquisition they made sort of acquisition they made Grok derived silicon tackles decode. That's the step that actually spits out the answer. So inferences, where Nvidia's next chapter gets messier. Training made the company rich. Serving hundreds of millions of users in real time is where the customers start asking questions about cost, latency and whether they really need the same silicon for every step. So he doesn't just want to be known as the model training silicon now he wants to be a permanent part of the way that we're interacting and and deriving inference from our interactions every single minute of every day around the world. And that seems to be what the company wants to land on the public. What are your thoughts?
- [14:19]
B
Let me answer your question with a different question because I can't answer that. But I thought this is interesting. He was asked about the spend from their competitors. Not the competitors, the customers. Like a lot of the focus, a lot of your spend. You hear from the hyperscalers that they're spending $600 billion this year. They're going to get more revenue as a result of their spend. Where is that going to come from? And he, like I answered the question a little bit differently. He was talking about, he was talking about the private companies. So he said I wish those companies were public. And the reason for that is because then you'll see what I see. No company in history has ever grown as a startup company, non public company, increasing revenues one to $2 billion a week. John, throw this chart on. Look what Anthropic is doing. Catching up to Open AI. This is their revenue.
- [15:16]
A
It's hockey sticking right now.
- [15:18]
B
Unbelievable.
- [15:19]
A
So that is, that is Claude inference activity happening like on a. On a second by second basis and interestingly versus Chat GPT.
- [15:31]
B
And interestingly I didn't get a chance to read the article today yet but the Journal is reporting that. Chart off please. OpenAI is not going backwards but they're trying to do more of what Anthropic is doing which is clearly winning the race to code win. Winning the enterprise race. Right. Chow is the first consumer facing product and that is going to be interesting to watch to see if they can catch up there.
- [15:54]
A
Well, so that's what it is. It's AI can now do things. It started out AI used to be like six months ago, AI was for who, what, when, where, how. You would ask it questions, it would give you the answers. Now it's going to be tasked with actually completing things. Okay, and this is what, this is what inference, inference is about. And this is what Jensen is trying to make sure, like investors don't lose the focus, that that's what this company is really all about.
- [16:27]
B
So I don't know who they're. Who, like, who's number two. If, if, if people are not buying
- [16:33]
A
from Nvidia, TPUs, from Google and to a lesser extent, AMD.
- [16:39]
B
Okay, can they deal with these ships?
- [16:44]
A
So the biggest moat that Nvidia has and has always had is the Cuda software platform, which celebrated 20 years today. So because Cuda runs in every cloud, public, private, mag 7, you name it, like every, everyone working in AI is familiar with Cuda. It's like the operating system of AI that is a fairly substantial moat. That being said, again, when we're talking about cost and efficiency, other companies who have the ability to design and produce silicon are going to look for ways to do things faster and more efficiently and not, you know, try to run everything through the most expensive, fanciest chips on earth, which are coming from Nvidia. So that is, that is one of the, I don't want to say controversies. That's one of the open questions that's keeping this stock at like 20 times earnings.
- [17:39]
B
So Jensen was asked about his, the potential unsustainability of their high margins. And he said, listen, I'm not looking for value when I'm talking. When we're doing business with ASML and Taiwan Semi, I pay for a premium product and what the Nvidia chips are able to do. I saw this Guy on Twitter, compound248, tell a story about how he called a company to get his rug cleaned. All right, this carpet cleaned, whatever. And it took him a minute to realize that he was talking to a chatbot. Yeah, but it was, it was off hours. They asked him what he needed, they gave him a quote, they read back his information to him. He said, no, no, no, my email address is actually this. They fixed it, they booked an appointment with him all while the employees were at home doing something else on Believable. And this is only, it's only just beginning. So no more this. I said even I said, no, I don't want to do like all that shit, it's over, it's ending very soon.
- [18:41]
A
Well, so. Right. The difference between. Hey Siri, what time is it? I'm sorry, I did that to everybody. The difference between asking a natural language question to AI and getting a response versus a small business. Take care of this for me. Like deal with my customers from 7pm until 7am when they come back to work. When my employees come back to work. Deal with my customers overnight. So not only. So now we're not leaving voicemails anymore. Now we're getting into a realm where companies are going to be able to program their customer interaction. And though if it's done well, it'll feel seamless with the way they're dealing with customers in the daytime using humans. And it's not, it's not like there for everybody. It'll take time. We, we will all grow increasingly comfortable with those interactions and satisfied with how they turn out.
- [19:38]
B
We have that.
- [19:39]
A
And. But this is the. But this is back to the main point. This is not training models anymore. This is now the meter. The meter is always running because we are constantly using the thing that's now built. And that is that inference inflection point that he's talking about. They talked about a new cpu. CPU is linear processing, similar to what we are all accustomed to with our PCs. But also it's an important part of running data centers. You do need high power CPUs. They talked about Nemo Claw, which Jensen seems obsessed with. That's an AI agent platform that people are building on and chart on. They brought out a robot. It's an OLAF robot for those who are into Frozen.
- [20:37]
B
Who is it?
- [20:38]
A
And they did this in partnership. Do we have this picture? They did this in partnership with Disney. And this is basically to show now the physical manifestation of all this AI. And you can't do robotics without AI. And so like these aren't two distinct technological waves. These are highly overlapping things that are happening all at once and they're reinforcing each other. Which is part of why I'm so bullish on, on Nvidia the stock. Because I don't think the robotics thing is anywhere near being priced into the current valuation. But as we start seeing more and more real world products running Nvidia silicon in the physical space, that will change. You know what has Nvidia chips in it? Those little buckets that roll down the street in Miami. The delivery robots that serve robotics running on AI chips from, from Nvidia.
- [21:39]
B
Why do you think the stock isn't working? Do you think the street is worried that Meta or gold.
- [21:45]
A
I told you, go ahead, say that. No, I think, I think people, I think people believe, and probably they're not wrong, that the Nvidia chips are pricing themselves out of a lot of like everyday applications. And you will see, TPUs from Alphabet and others, you will see, I'm not gonna say cheaper, I'm gonna say more abundant, lower cost chips, be able to take a lot of workloads and people are worried about market share. So that's 1, 2. We still have this drama hanging over us about the financing of data centers. And if the financing to data centers in any way gets called into question to the point where people pull back the reins, the first company to feel it is going to be in video. They'll feel it more than anyone. Because where do you think the orders are coming from when you hear them say trillion dollar backlog? Well, where do you think that money is coming from? That's coming from the builders of data centers who need the chips to make the data centers work. So those are the, to me, those are the two things hanging over Nvidia's valuation. There was a third thing that I think is no longer an overhang, which is their China business. And in fact, relations between the US and China seem to be thawing. And Nvidia said they're getting the H200 business back this year. Now, investors are not going to give them credit for that in the form of the stock going up because there've been so many fits and starts with Nvidia in China. Can they do business there? Can they not do business there? So I don't know that you'll get a multiple boost from that, but it's a negative that's been kicked out from under it and is no longer something that we could say is keeping the stock down. I want to get to this too. This was really interesting. Somewhere in the middle of hours worth of commentary, Jensen said they Plan to use 55.0percent of their cash flow in the second half of this year on shareholder value creation activities like dividends and buybacks.
- [24:03]
B
It was actually the CFO who said that.
- [24:05]
A
Okay. Do you think the shareholders care about a token dividend being paid? I don't.
- [24:14]
B
Not the, not the short term shareholders. I think the long term shareholders care, of course.
- [24:19]
A
Okay. If this is going to start to look more. I don't, I don't mean utility in a denigrated way, like it's boring. But if this is going to look more utility esque with just this constant inferencing related cash flow tokens being generated, then maybe the dividend is actually makes a ton of sense. But my bias with tech stocks is I just feel like the shareholder base would much rather see the flow shrink. So. Yeah, but if, listen, you think about the amount of cash flow being generated here, there's no reason not to do both. Apple did both. Most of the large technology stocks have figured out how to do both. And imagine this thing is paying like a 1% dividend yield and it starts shrinking the float by 2% a year.
- [25:05]
B
I can't imagine that the, the boost,
- [25:06]
A
the boost to earnings per share as a result of that, as well as bringing in new shareholders who never even considered owning the stock. So I think it goes to 50. I hope it happens this year. I hope I don't look like an asshole. This is not investment advice. But the other thing I think is there will not be a bell. They're not going to tell you it's just one day. I think it's just going to. It's been consolidating for six months.
- [25:31]
B
Well, I think it's there. I think like the rubber is meeting the road. I did the 200 moving averages. The road.
- [25:36]
A
Right. People like, what's the catalyst? They had their earnings. They were blockbuster earnings. They had gtc.
- [25:41]
B
Well, it's a fair question.
- [25:42]
A
You don't need a catalyst.
- [25:44]
B
Higher prices, that's a catalyst. Well, once.
- [25:48]
A
Here's the catalyst. Imagine it goes to 200. It's been sitting between 180 and 190 for six months.
- [25:55]
B
Yeah, that's all you need.
- [25:56]
A
Magic goes to 200. You think, what do you think happens then? Think about that. What do you think? Everyone that watched it at 180 for six months goes, oh, no, no, no, no, no. Yeah, I'm doing this 30 years. I'm 49 years old.
- [26:13]
B
That's.
- [26:13]
A
I'm not saying it has to happen. I'm just telling you that's how it does happen. It always happens that way. Sorry. Apple too. What's the catalyst on Apple? Apple hasn't been a catalyst driven stock. It's in five years.
- [26:28]
B
Who are you yelling at?
- [26:29]
A
You, the colloquial. You, Everyone.
- [26:35]
B
All of you.
- [26:36]
A
What's the cat? What's the catalyst next?
- [26:40]
B
All right, here's the thing that I am the most worried about. And that thing is financial stocks. Adam Parker.
- [26:48]
A
That's a good one. Although. Although they went up today. Great. Are you less, less worried?
- [26:53]
B
I am 2% less worried. All right. Adam Parker said we are downgrading Financials. We have been writing for weeks now that we are teetering on our overweight financials recommendation and we are now moving to make a downgrade. We no longer see estimate. We no longer see estimate achievability as above average financials typically don't perform well after oil spikes. And we are sufficiently worried about credit issues spreading that the risk reward on multiple expansion appears increasingly poor. Reading that OWL or Zion or Deutsche bank has issues is one thing, but the private credit parts of Blackstone and Morgan are getting their investors according to reports this past week. And that is enough to make us throw in the towel in our overweight recommendation. Moreover, as we as we wrote several weeks ago, we were we are no longer as optimistic that many of the larger financial institutions are AI beneficiaries as we were previously. Large institutions is a big one. Yeah, large. Yeah, because. Right, because what was Nikola saying? That JP Morgan works a text doc? Maybe it was Adam. Actually large institutions invariably compete on pricing and pay their employees more than when times are good, making it less likely that any AI benefits accrue to the shareholders. Typically, financial institutions will spend money and run AI systems in parallel to legacy systems for some trial periods, potentially making bank efficiency ratios more stagnant than many investors are currently discounting. We should have known when top down strategists were universally bullish at the year ahead outlooks that we should run for the hills. Well, I'll tell you what, investors are running for the hills. Trot on please. Bank of America shows record outflows from financials as in record outflows as well as biggest outflows from bank loans since April 2025. I suppose if there's any good news here, and I'm grasping at straws, is that like they've maybe have been sufficiently de risked from the sense of like investor optimism is clearly gone. But I have said repeatedly don't show me the surveys and I understand how people feel. I believe the stock market more than I believe the surveys. And when people were hemming and hawing about this or that, I pointed to Capital One Financial at an all time high or 52 week high. And I said come on, how bad could things be of Capital One credit exposure everywhere is at the top of the stack. How bad can things be if Ally Financial, the biggest subprime lender is at a 52 week high. They ain't at 52 guys anymore. Look at this chart. Capital One is in a 30 drawdown. This is my attention.
- [29:12]
A
It's nasty. That's nasty.
- [29:16]
B
So I'm not even talking.
- [29:17]
A
Look how fast that happened too.
- [29:19]
B
I'm not even talking about the private credit stuff, which of course we'll get to, and the marks and the this and the that. I don't like this at all.
- [29:26]
A
I think it's binary. I think if this private credit thing does not spill over into regular lending and regular financial activity in the public markets, I could see a scenario where the XLF goes out at the highs of the year because we are getting rate cuts. This oil price spike is temporary, I hope.
- [29:45]
B
Hold on. You know the market says that we're as likely to get a hike as a cut now.
- [29:49]
A
Yeah.
- [29:50]
B
But hard as it is to believe, I don't believe it either.
- [29:52]
A
I don't. I don't believe it. I think the market's overreacting to oil. Taranova was on TV saying something really smart. He showed this chart from 2011 to 2013 where the price of oil for three years averaged $95 and the stock market basically did nothing but rally. So this idea that $95 is this insurmountable level for oil, number one, we produce more of that oil here, therefore it shows up as like exports and it's actually profitable activity for U.S. stocks. That's one. A lot has changed in the last 15 years. And then number two, he showed us the chart like we've been here before. We've seen this sustained mid-90s oil price and regardless, companies found ways to get around it and we had a rallying stock market. So I don't believe that an Iran related, strait of Hormuz related oil price spike is necessarily the thing that's gonna cause the Fed to completely change course and start. And here's a thought exercise. What the would be the point. Let's say oil is at 95 in two months and the Fed says, well, maybe we should hike. Maybe we should make things worse for the people who are already suffering with higher gas prices. Let's give them higher interest rates on their credit cards too. To what end? Yeah, what is it? In what way does that solve oil prices? It certainly doesn't. In no way does it solve oil prices. So that's the same stupid ass instinct that the Europeans had in the wake of the great financial crisis. They thought the right move was to hike interest rates. Boy, did they have to about face shortly after. I just don't believe the Fed hasn't learned anything and that we're equally likely to see a rate hike.
- [31:48]
B
I totally agree.
- [31:49]
A
Absolutely no chance.
- [31:50]
B
I totally agree with you there.
- [31:51]
A
Not what's going to happen. Trump will put this guy in a gulag if he raises interest rates right now. So I'm inclined, I'm inclined to believe we are going to get rate hikes this year. The only real question is, God, let's hope they're not emergent rate cuts this year. Let's hope they're not emergency rate cuts.
- [32:11]
B
The, the other thing bringing it back to the financials that I don't love and this could be a total overreaction. This could be an AI overreaction. American Express, which is the premier card for luxury shoppers for the upper part of the K, the stock is in a 20 drawdown. I would say probably a great buying opportunity. But I hope I'm not wrong because if it goes down 30% then I don't think, I don't think American Express will go down 30 and just the market be completely wrong. I think there will have to be a softening upper K for that to transpire.
- [32:43]
A
If this, if this, we're going to get to the private credit stuff and private equity stuff, guys, we will, we'll do that in a minute. So I don't want to do a whole digression here again. If that somehow can be contained and run its course and people stop freaking out and it just sort of works itself out, we don't have a financial crisis that spills out of private credit and becomes the next subprime, which you and I talked about last week. If none of that happens, I think some of these sell offs in financials will have proven to be really good buying opportunities. I have no proof of this. I'm just giving you my feelings on the subject because, and I get it, it's scary. We've been reliant on the top half of decay and the wealthiest people doing the most spending and now we're seeing their asset prices teetering. Especially like all the people that are invested in private assets tend to be the wealthiest people in the country. And what is the negative psychology as a result of a private credit panic? Is it people using their Amex black cards less now to travel and go to restaurants? But like, it's just, it's premature. Yeah, yeah, it's premature.
- [33:57]
B
Let's keep moving.
- [34:00]
A
The securities and Exchange Commission is preparing a proposal to eliminate the requirement to report earnings quarterly and instead give companies the option to share results twice a year, according to people familiar with the matter. This was a scoop at the Wall Street Journal and I'd love to just hear your top line thoughts on is this good? Is this Bad. I hate it happened.
- [34:25]
B
I hate it.
- [34:26]
A
Why?
- [34:26]
B
I think the charitable interpretation is that coming public sucks. And it does. And it's expensive and it's annoying. And one of the most annoying things is having to report earnings quarterly. So if that will lead more companies to come public, fine, great. I like that. I don't think it will either. Okay. Why do I hate it? Because companies. Spoiler alert. Lie. And the public. The court of public stock markets, keeps them honest. And I understand that there are countries around the world that report semiannually. They're not Americans. They're not liars. Sorry.
- [35:02]
A
We.
- [35:03]
B
We. We. So I think you need. I think you need to hear from these companies every 90 days, not every 180 days.
- [35:11]
A
Are you saying American executives are more likely to cheat than executives from other countries?
- [35:18]
B
I can't prove that, but yes. Yes.
- [35:20]
A
I don't know about that.
- [35:20]
B
Yeah. Yeah, I am.
- [35:23]
A
Okay. That's a lot.
- [35:25]
B
No, it's not. Come on, dude.
- [35:27]
A
Chat is. Are any Canadians in the house?
- [35:29]
B
Don't be afraid. You don't. You don't think it's true?
- [35:34]
A
No, I don't think it's true. I think in Asia. I think in Asia they have financial scandals every day.
- [35:42]
B
Fine. You know what? I can't comment on the wire.
- [35:44]
A
The wire card.
- [35:45]
B
Fine.
- [35:45]
A
Fraud is a German company.
- [35:47]
B
Fine. Fine. I'm not.
- [35:48]
A
King was from Sweden.
- [35:49]
B
I'm not saying there's not frauds everywhere.
- [35:51]
A
The short sellers refer to Canada as art. Arctic, Mexico.
- [35:54]
B
I forget about that.
- [35:55]
A
Sorry. I forget about that. I don't. I don't think so.
- [35:58]
B
Dude, you're pandering. You are so full. You are so full of. You're pandering needlessly. Let me.
- [36:04]
A
Are we. Are we saying executives in India, China.
- [36:07]
B
I'm not saying that.
- [36:08]
A
Eastern Europe.
- [36:09]
B
I.
- [36:10]
A
Come on.
- [36:11]
B
Did I say that? Executives in other countries will not lie. No, I didn't. I said more likely to. So you're. I'm saying they're more likely. Donkey, get in here. I said they're more likely to lie. Stand by that. I didn't say executives in other countries won't lie. I said. Yeah, I think our executives are more likely to take advantage of shareholders.
- [36:31]
A
Oh, okay. So you are saying what you're saying. What I'm saying.
- [36:34]
B
You said are more likely are more likely. You're giving examples of fraud and saying that. I said that fraud doesn't exist elsewhere. Of course it does.
- [36:43]
A
Oh, thank you. Matt Stevik in the chat. Nortel. It's a big one. All right. It doesn't matter. Be that as it may, let's say you're right. Let's say you're right about that.
- [36:52]
B
I think that less transparency is bad for shareholders and I don't see how you could say otherwise.
- [36:57]
A
Oh, what about a foreign born executive in America?
- [37:00]
B
Stop, stop. I don't see how less transparency is a good thing. I just don't. Who benefits?
- [37:08]
A
All right, I agree with you. So first of all, I agree on every point that you made. Other than Americans or scam artists, the first point that you made was the most powerful one. If the purpose of this is to alleviate the concerns of VC backed companies who are holding off as long as possible and you're like, hey, great news. Now instead of doing four quarterly reports, it's just June, June and December or whatever those, you know, the semi. Like that's not that. That doesn't do anything for me.
- [37:43]
B
Right.
- [37:43]
A
So it's almost like a solution. And I shouldn't say a solution in search of a problem. There is a very high cost, both in dollar terms and time and energy compliance. There is a very high cost of being a public company in America. I would argue, tough shit. That's the privilege of taking money from American households. You sort of have to just live with it. You're all zillionaires, it's fine. Hire enough people and do your stupid quarterly report. That being said, we have a great chart here. This is the uk. Their standard tends to be semiannual.
- [38:24]
B
Yeah, they're very honest people over there.
- [38:26]
A
Sure.
- [38:27]
B
Very charming.
- [38:27]
A
Have you read any Dickens, sir? They have as many scam artists per capita as we do. All right, but the companies in the UK to 50, overwhelmingly, almost 100%, are on a semiannual schedule. The.
- [38:41]
B
Hang on, dude, I can't let this go. We
- [38:46]
A
all day.
- [38:47]
B
We are the most capitalist, money hungry society in the world. And therefore people's motivations to do unscrupulous things are higher here because we are. We have the most incentives.
- [39:00]
A
You might have a point. We have on incentives. You might have a point.
- [39:02]
B
The most materialistic society in the entire world. We worship the dollar like no other country around the world. So I'm not saying that there's not scumbags everywhere. Obviously there are. But we bow at the altar of the dollar here.
- [39:15]
A
Okay, from. From the standpoint of incentives, like the benefits of being aggressive and higher, how do I here, how do I place?
- [39:26]
B
How do our executives get paid? Where does the bulk of their compensation come from?
- [39:29]
A
Stock options. Okay, okay, I'm with you on that. I Thought you were being racist again. I like what you're saying now better. Like, is our. Is the, is American style capitalism and the US Stock market more prone to. Because of the way that we structured. I think, I think there's a lot to what you're saying. I don't disagree with that. It's, it's, it's, it's less insane to me now. All right, so this is, this hasn't happened yet. What's going to happen is a proposal is published, and then it's subject to a public comment period for 30 days. The SEC listens to what people have to say, and I would imagine you're going to hear the Andreessen cohort come in and say, yes, do this. And in fact, what if we never have to report earnings? And then on the other side, you're going to hear from a lot of the machinery that profits from all this reporting. They're all going to come out of the woodwork to the bureaucracy because. Because this greases the wheels of their business.
- [40:35]
B
Present this as exhibit A. Your honor. This, this, this conversation right
- [40:42]
A
now.
- [40:42]
B
What?
- [40:43]
A
Now? One thing that I wanted to ask you, by the way. How long have companies been reporting on a quarterly basis? It's about 50 years. It started in the 70s. It became like a standard thing, and then CNBC turned it into, like a sport, you know, really like people, companies report earnings, nobody even knew. It's like, oh, they got a letter in the mail a week later. So TV sort of turned it into like the playoffs. Okay.
- [41:13]
B
Do you believe.
- [41:15]
A
So you don't believe that there will be more IPOs? I'm with you on that. Do you think a lot of companies will take them up on it?
- [41:25]
B
I have a few. A few possibilities, sure.
- [41:27]
A
Okay, so this is what I wanted to ask you. Which companies are most likely, if something like this passes, and I don't know the likelihood, which companies are the first ones to say, awesome, see you every six months.
- [41:42]
B
Okay.
- [41:42]
A
Tesla is my first guess, 100%. And in fact, the idea might have actually originated from ELON Telling Don Jr. Hey that I have to go on these conferences.
- [41:55]
B
I don't think Elon loves it. I don't think. You know what? We don't need to hear from energy companies, frankly.
- [42:00]
A
Time out, Berkshire Hathaway.
- [42:02]
B
Ooh, I'm so glad you said that. That was number two on my list.
- [42:05]
A
Me, too.
- [42:05]
B
You know what's funny, though? Twinning.
- [42:07]
A
Are we twinning? Because they hate that game.
- [42:10]
B
Okay. Okay.
- [42:11]
A
They hate it.
- [42:12]
B
So at first I had Berkshire as number One to least likely. And then I change them to the other category. Because I could see them going either way. I could see them saying, listen, we're long term investors. Our shareholders are all long term investors. They genuinely don't need to hear from us every 90 days. I could also see them saying, you know what, it's tradition. More transparency is better. But I have them as number two. Number three.
- [42:37]
A
What? Wait. So here's what's interesting. His is interesting. I bet you Berkshire likes it that the stocks they own will be reporting quarterly. But they hate this so much, they released their earnings on Saturday mornings and they have never held an earnings conference call. They don't play the game. They don't talk to the sell side.
- [42:57]
B
Yeah, they would always opt. They would.
- [43:00]
A
You have a third name that you could think of that would just stop on a dime?
- [43:04]
B
Yeah. I don't think Mark Zuckerberg likes doing it.
- [43:07]
A
Oh, no, I would. I think he uses it to promote. I was going to say Michael Saylor.
- [43:11]
B
No, he loves it. He loves it. I've listened to a few of his calls.
- [43:15]
A
He loves it. Yeah. But a lot of the earnings on what. Whatever they're doing are completely outside of his control because they have to account for the value of Bitcoin. And it. It's not like they're doing anything. They're just.
- [43:29]
B
He's a showman. He's a showman. He loves it.
- [43:31]
A
Okay, so you think, um. I think the banks will report quarterly forever.
- [43:35]
B
Me too.
- [43:35]
A
Because they're in the confidence business and it's their way of reminding people how strong their balance sheets are. And I think the banks would be the last sector to ever decline the opportunity to do that every 90 days. Like, all right, things still look good.
- [43:52]
B
I have the same.
- [43:53]
A
They're like in the business of selling that stability.
- [43:55]
B
Correct. As far as most likely to take them up on the offer, it's a. Yeah. You know, we don't have to do this. En energy companies, we know what the input is for the most part. Like, there's not. They don't really say a whole lot that's.
- [44:06]
A
Oh. Like, which sector could you live without hearing from? 100%.
- [44:09]
B
We know.
- [44:11]
A
Once. Once a year on Exxon.
- [44:13]
B
Okay, here's a comp. The last one on my list. I don't think that David Ellison is going to have very much fun talking to analysts. There is so much debt on that stock. I think he's really not going to enjoy himself.
- [44:24]
A
Is it 100? Is the combined company going to have $110 billion in debt or something.
- [44:29]
B
Yeah. That's a lot.
- [44:31]
A
It's incredible. The whole conference call is like, all right, well, Batman was a hit, and we paid down another $4 billion in debt this quarter.
- [44:40]
B
Yeah. So there was only two other companies that I could think of that would be least likely to skip earnings calls, and that would be, number one, Palantir. I think Alex Karp loves delivering a show for his shareholders.
- [44:51]
A
He loves it. And Jensen just wants to. He just, like, he gets revved up for it, and Jensen loves it, too.
- [44:56]
B
So that's.
- [44:58]
A
It's a great list. Well, well done. Do you think this will happen?
- [45:04]
B
Probably.
- [45:06]
A
I think. Probably. I think it's like 247 stocks. It's funny. Now we can trade stocks 24 7, but we're going to limit the amount of transparency that the companies are forced to provide us. It almost is like. It's almost like a joke. But this is what. This is what we're doing.
- [45:23]
B
I really. I. I don't like it. All right, I'm gonna step away from my wife. I'm gonna get loud. We. We're talking all the time about private credit, right? About the gating, the loans, the nav, the. This. Hey, guess what? Private credit. These are loans made to company. You either get paid back or you pretend to extend, or you. Or there is a restructuring or whatever. Why aren't we talking about private equity? Are you kidding me? If there is problems with private bonds, what do you think the equity is doing? Yeah, are you kidding me?
- [46:00]
A
Can you imagine the price of the equity? Could you imagine if we're worried about the debt.
- [46:05]
B
Salesforce did seven and a half billion dollars in earnings last year. And Salesforce Equity is down almost 60%. What do you think? Company XYZ, with an earnings EBITDA of $250 million. What do you think their equity is down with leverage? Are you kidding me?
- [46:25]
A
What did this guy from. What was the gist of what the guy from Apollo said?
- [46:30]
B
John, play this, please. I'm just curious. Like, when you think about Apollo's portfolio
- [46:34]
A
on private equity or other industry, like, do you. Where do you see the pain? I literally think all the marks are wrong that way. You're asking me? I think private equity all. Dude, all the marks are wrong.
- [46:53]
B
Now he was talking about the software names, but all. And guess what this industry has been built on over the last 10 years? All of these beautiful recurring revenue SaaS. Companies where the earnings and everything's predictable. Are you kidding me?
- [47:10]
A
You could set your watch by the cash flows coming in each month.
- [47:13]
B
So if the loans are bad. Oh my God, dude. The equity. So. Oh, the equity.
- [47:20]
A
So that was John Zito from Apollo Global Management and I think Apollo, like
- [47:25]
B
a year, they're all private credit for the most part.
- [47:28]
A
I think a year ago they stepped away from the software sector. I was reading somewhere where they, they were like more cautious on software than the other lenders. And I think because of AI disruption and they, I don't know, I feel like if I'm going to bottom fish in one of these things in the equity of the private credit companies themselves, Apollo's got to be high on my list.
- [47:53]
B
Mine too.
- [47:54]
A
Yeah. So I haven't done it. I keep talking about doing it today. They all went up a lot. In fact, the top names in the s and P500, I think Aries was the fifth best stock up 5% today. Apollo was next up 5%. Blackstone up four and a half.
- [48:11]
B
All right, so throw this chart on. John from Chartgoat. So Blackstone, the price, the stock is down, I don't know, 40%.
- [48:19]
A
Yeah.
- [48:19]
B
And the forward EPS is still at an all time high. And this is really remarkable. Like the, the disconnect here and now. I don't think that people selling the stock are idiots. Okay, Just to be very clear, I think the disconnect makes sense because the headlines, the outflows, they're not going to stop on a dime. But. And also this idea that it's going to bleed over and it's the next subprime and it's a GFC 2.0. I reject that premise. I obviously could be wrong.
- [48:53]
A
Like no evidence. There's no evidence of it. So for right now you can reject it. I just think it's simpler. I think it's even simpler. I don't think you need to be an expert on every investment these companies have in every one of the funds they run. I think you just have to know one very big thing. 2026 fundraising is going to be the worst correct that they've seen in maybe, maybe the last five years since the gfc. In absolute dollar terms. This, this could be the worst fundraising environment for most of these funds offered by most of these companies. And you don't have to be an Expert in Tier 1 and all these liens and like, you don't have to skip all that. You can end run that.
- [49:35]
B
So this is not the same thing. Okay, so I'm going to make a comparison that is not apples to apples because Blackstone's be ready. None of these companies Were real estate primarily company. Real estate dominated companies. It was a piece of their business. Okay. Apollo is primarily a private credit company. This is their business. Aries, this is their business. But the B read stuff was so bad, the headlines were so bad because we knew the fundamentals were going to be so bad on office. We knew for a fact that it was going to be a bloodbath. And it was. And the.
- [50:14]
A
But we also knew that a lot of the holders were unsophisticated, new to the asset class and that they would redeem more than they should have.
- [50:22]
B
Okay.
- [50:23]
A
Which then creates sales that should never have taken place.
- [50:26]
B
And you know what happened? I don't know this marked the bottom yet. Calper step in with a massive injection of liquidity. They got preferential treatment. And I suspect if we continue to see redemptions on these loans, which we're going to. And let's say that the software loans, yeah, they're not bad today. Mark Lipschultz. The fundamentals aren't bad today. We're not idiots. We all know that the loans are going to be impaired. And if you think we're idiots, watch your outflows for the next couple of quarters. There will be no more inflows. There will be outflows. And so maybe there was an institutional buyer that steps up to the plate and says, you know, we're Gonna, we'll take 4 billion off you. We'll do it at 85 cents on the dollar. Give your investor some money back.
- [51:08]
A
People for people. Not that, not that I'm equating this to the gfc, but people forget Bear Stearns, Lehman Brothers all had record earnings in 07. All of them. Like what, what do you think caused the crash, the bubble that preceded it? Record record earnings. The question how did you have record earnings right now? How did you, how did you generate those record earnings?
- [51:28]
B
So scary talks aside, because this can be scary. I think that the, the, the 5% liquidity feature. Thank God that exists.
- [51:40]
A
I actually think it should. I think they should stop launching so many of these.
- [51:46]
B
You don't have to worry about that.
- [51:47]
A
Yeah, I don't. I. Because I just don't. It's private credit or it's private equity, but it's liquid, but it's not really liquid liquid or it's not liquid when you actually want it to be. When, when other people are trying to get liquidity at the same time. I, I just think it's a forever mismatch. I'm not criticizing them. I understand why they're raising money from the public this way. I understand the intention of partial liquidity. I just think like, people are not going to behave the way you want them to. And that brings me. That brings me to my next question for you.
- [52:21]
B
14% redemptions on cliff Water. Is this where you're going?
- [52:24]
A
Yeah. So, okay. Bank loans to non depository institutions like regular companies. This is private credit. Hit $1.2 trillion last year. That is a triple versus last year.
- [52:40]
B
Not nothing.
- [52:40]
A
Okay. Okay. This is a huge business with many players, many very good players who have been in this market for decades. What I'm gonna say is not a recrimination of private capital. Like people need to raise money, people need to borrow money. People put all that aside, how did Cliffwater out of nowhere become the most controversial name in alts in 2026? Because they were big last year, they were big the year before and nobody gave a shit. And whatever they're doing, whatever they have said, whatever they haven't done, they have now landed themselves where there are six different reporters at the Wall Street Journal filing stories on them in the last five days. And that takes something to reach that place. They are now being more heavily scrutinized than any other. Even Blue Owl.
- [53:39]
B
Nah, Blue Owl.
- [53:41]
A
I'm not saying bigger or smaller. I'm saying the level. Cliff. Because Cliffwater epitomizes the wealth management connection.
- [53:49]
B
Correct.
- [53:49]
A
To private credit. That's what I think is one of the main reasons. But are there things that they are doing as a company that's making the situation worse?
- [53:58]
B
I wouldn't know. I couldn't know. But here's what I'll say. So Cliff Water, for people that don't know the reason why they are at the epicenter of this. They've been in the institutional consulting space forever and ever. And they created an index for private loans. And by the way, on the private loan front, over 90% of companies in the United States with revenues of a hundred million dollars or more are, are
- [54:22]
A
privately held businesses and need to borrow money.
- [54:25]
B
They can't. They can't just issue bonds for the public. Okay. And that's what the banks were for, these syndicated loans. And that's what private credit is for. So it's not all companies, these small businesses, they need money and these are the providers of capital. Okay? So there's nothing like there's no smoke there.
- [54:43]
A
But whoa, there is smoke there. There just may not be fire. There is a ton of smoke there. Boaz Weinstein says there's smoke. The guy from Rubrik Capital who's In a former SAC hedge fund. Guy says there's smoke doesn't mean there's fire.
- [54:59]
B
I mean, I just mean at the idea of private loans. That's what I mean. There is absolutely smoke. There is 100% smoke. So Cliff Water just got hit with. And they grew from.
- [55:12]
A
I don't want to $40 billion giant fund.
- [55:17]
B
Were they $5 billion in 2021?
- [55:19]
A
Well, we know how they did it. They want. They wind up dying.
- [55:22]
B
No, no, no, no, no, no, no. The advisors did it. The advisors did it. The advisors did it because. And if you put your clients into this fund and you take your clients out of this fund in a two year window, you're in the penalty box. You are in the penalty box.
- [55:39]
A
Whose penalty box are you in?
- [55:41]
B
Name names. I want a list of all the advisors that redeemed. I'm kidding. But here's, here's what if the.
- [55:46]
A
What if the. What if the holdings have multiple meltdowns and the marks come way down? Do they. Those advisors still belong in your penalty box.
- [55:55]
B
So the right thing. The advisors are. This is a good question.
- [55:59]
A
I don't know the answer.
- [56:00]
B
This is a good question. The advisors are stuck between a rock and a hard place.
- [56:04]
A
Yes, that I know.
- [56:05]
B
Okay, so in 2022, here's the story, why we talk about this. Why did it go from 3 billion to 40 billion in 2022 as a 6040 portfolio experienced its worst year since 1843? What worked? Floating rate bonds. Private credit worked. There was no recession, there was no defaults. They were up double digits. They paid their coupons and boom, gasoline. Okay? So the advisor said, give me more and more, more, more, more. And believe you me, all these private managers were happy to supply them. And this is the problem, this is the potential problem that we're going to learn over the next 12, 24 months. Howard Marks says famously the worst loans are made in the best of times. And this is the worry. There is too much supply of capital. And there's no way that there is that many companies that need these loans. And there were companies competing to give loans. What does competing for loans mean? Worse covenants or lowering the rate. Worse protection. Worse protection for the borrowers. So there is smoke. And we are going to see. And God forbid we enter a credit downturn. Oh my God. God forbid.
- [57:17]
A
I don't know the right thing. So I don't know the right thing to do.
- [57:19]
B
Okay. Yeah.
- [57:21]
A
What I could tell you is gigantic RIAs in our industry. Like $600 billion RIAs. Hundred billion dollar RIAs. It's a little incestuous. There are rias that are owned by the same parent company in the private asset world that Cliffwater is owned by.
- [57:41]
B
Correct.
- [57:42]
A
And they're recommending the Cliffwater fund. I mean, I don't even know, like, in a different presidential administration with a different SEC chair.
- [57:51]
B
Yeah, that's.
- [57:52]
A
That's questionable nuts to me. But put that aside. I don't even know what the right thing to do is. If you are one of the advisors at these giant firms and they told you, hey, we have a 5% allocation sleeve to Cliffwater as part of our portfolio. That means all of your clients, 5% of their money goes into this. And you listened and you did what you were told by the investment committee. And you have $10 million client who now has a half a million dollars in a Cliff Water fund. Okay, something. Whatever it is.
- [58:23]
B
Yep, that's right.
- [58:23]
A
Now, now, what is the right move? A call the client and say, I. I couldn't tell you. This thing has 3,800 different loans in the book. I am not equipped to comb through and tell you how many are bad. Let's just redeem as much as they'll let us over the next four quarters. Is that the clown move or is the clown move to say. Nope, I said it last year, therefore it must be true. This is the right fund, it's the right asset class. Stay the course and then some bullshit happens.
- [58:58]
B
Yeah. Okay. I don't know what's worse. Okay, so obviously the latter is worse,
- [59:03]
A
and the latter is worse because you'll lose more money. But I think you lose the client either way.
- [59:10]
B
I don't know. I don't know. But the interesting part is, so the advisor, based exactly on what you said, is stuck between a rock and a hard place. Because if you say, yeah, we should redeem, it's like, well, then why did you put me in this three months?
- [59:19]
A
Why did you buy this for me that you're telling me to sell it? Right.
- [59:21]
B
So. But. And also one part of the story that's being not reported enough, and the financial media. And there is smoke. So listen, it's their job. I'm glad that they're reporting on this. They are so horny for a meltdown because I agree with you. It's such a salacious story. It's like, see, this is bullshit. They're trying to stuff your 401ks, these billionaires. I get it. I get it. The interesting thing, though, is that these. These clients that are requesting their money back, they're getting it back at nav,
- [59:47]
A
which just probably more than what the assets. Right.
- [59:50]
B
So if. So, so if clients, if the nav was in a 50% drawdown, I think, I think paradoxically, a client might be more inclined to stay the course. Not. I want to sell now. I'm already down 15%. They got their money out.
- [60:02]
A
That's interesting. That's interesting, right? This, by the way, this whole conversation we're having and the 15% redemption request that Cliffwater reported for last month, et cetera, et cetera, is happening against the context where nothing's really gone wrong yet.
- [60:17]
B
So God forbid, God forbid we enter a credit cycle, a downturn.
- [60:25]
A
Well, everyone will be affected, but this will look really bad. Now, if you have an advisor that you thought was your fiduciary and, and they are your fiduciary, they thought they were doing the right thing that just. You need to recognize that they might not be sure what the right thing to do is right now. Most advisors I know want to do the right thing. It's an open question of what is the right thing to do. Because it's sort of like it's a trap. And the only way out, it's like President's Dilemma. Well, the only way out is if we don't have a credit event in the country and cooler heads prevail and the redemptions trickle away and like these, these things can continue to operate and the loans are good, then everyone will be fine.
- [61:12]
B
But the reason why I find a way out, the reason why I find that scenario unlikely is because AI will impair a lot of these businesses and a lot of these businesses, unfortunately. And a lot could be 2%. That's a ton, right? That's a ton. Let's say, let's say 20 basis points of these companies go to zero. The headlines, dude, they're not.
- [61:37]
A
So as an advisor, that's part of your problem. So if you know headlines are not
- [61:41]
B
going to stop, you have to sell first. That's your responsibility. Unfortunately. Unfortunately.
- [61:45]
A
But you can't sell enough for it to really matter.
- [61:48]
B
It's tough. It's really tough.
- [61:51]
A
What's the lesson for, for like we're financial. It's the lesson for advisors. Never take a risk for your clients because that's not good. Or is it like if the exit is this much, is this big, but the entry is that big. This is maybe under allocate.
- [62:08]
B
Well, this is, this is the lesson is know what you own. Sounds trite. This is the classic asset liability.
- [62:14]
A
Nobody could, Nobody, nobody could know What? They own this?
- [62:17]
B
I know. This is the classic asset liability mismatch.
- [62:20]
A
All right. Sean did a lot of work on our topic five, but we have run out of time. So I am going to push this over. Yeah. I'm going to push this over into next week. Sean, don't hate me. You got some great charts here. I appreciate it.
- [62:34]
B
I just. I want to do one chart for topic six. We'll throw the rest into the tcaf.
- [62:38]
A
Okay.
- [62:38]
B
All right. So I asked. I asked Chart Goat to make me a chart of the worst performing stocks going into the Citrini research piece and coming out. And this is a banger certified. Throw it up, John, please. So look at this line in the sand. The red line. The red dots are the 100 worst stocks in the S P, in the
- [63:05]
A
17 on the X. On the X axis.
- [63:07]
B
Yes. The ones that are. That are down negative 9%, negative 10 or more. Okay. With some down 40 in 17 sessions. So these were the 100 names going into. Going into the 17 days prior and then the 17 days since. And look at the bounce. Dude, like this. This stands out.
- [63:27]
A
Yeah, there's a lot of software stocks that, that have since started to outperform the halo stocks.
- [63:34]
B
Thank God. Thank God we got a little bit of a reprieve.
- [63:38]
A
Yeah, I don't know if you. I own a few of these.
- [63:39]
B
That's not just software. That's 100 names and they've bounced pretty strongly. So we'll talk more about the stock market, what's going on. On.
- [63:47]
A
Yeah, we have a great. You know what? I don't want to step on it. We have an amazing guy. You could, you could subscribe to the Compound Insider, which I think we have a link in the description below if you want to know the guest in advance. We have a great guest coming up this week and we have so much to talk about with that person. I'm super. I'm super excited for it. Let's do make the case and mystery chart. We'll get out of here. I want to talk about Uber. I know some people might be sick of it. And then.
- [64:15]
B
Do you own this real. Do you own the stock?
- [64:17]
A
I own. I own a lot of it. And I'm going to tell you, I think it's going to break its downtrend here because the news flow over the last four days has been incredible. And I think they're checkmating. They're checkmating the entire autonomous opportunity. I can envision a scenario where in five years it's Uber and Waymo and then Tesla sort of gets the Tesla fans as their customer and that's it. And everyone else has to play nice with, with the Uber network because here's what's happening. They just announced a strategic partnership with Zoox. John, let's roll through that real quick. So John's gonna put that on screen. Nope, the other one, the top one. There we go. You see that ridiculous looking horse and carriage esque Zoox carriage. You see? Whatever. All right, well these live at the Las Vegas Airport and soon to be at lax I think anyway, this, these are going to be on the Uber app and Zoox is backed by Amazon. And, and the. So what's interesting about these is they have no front, they have no back because they, they are bidirectional. So they go this way, they go this way. Both are forward. There is no reverse, you understand, there's no trunk, there's no right. It's not really a car. It almost looks like a Cinderella contraption, like a cat, like somebody turned a pumpkin into a, into a carriage. And anyway, big deal with Amazon backed Zoox, then they followed it up with a deal with Nissan and Wave, which is another one of the technology companies. Then they had another deal and then they just announced with, with Nvidia, 28 cities by 2028. So Nvidia to launch L4 software driven robo taxis on Uber. Can you imagine? Is there anyone you would rather have as a partner for the autonomous driving future than Nvidia? Because Nvidia is going to be the provider to every oem, Cadillac, Mercedes, Volvo, Volkswagen, Porsche, Toyota, et cetera, et cetera, et cetera. What Nvidia has built is the chip and software package so that these OEMs can roll autonomous ready cars right off the factory floor. And that I think is what changes the game. And that is how Uber becomes flooded with autonomous ride options from a million different providers, thereby keeping this a one on one horse race against Waymo, for example, or Tesla. So these are very big deals. Uber has responded. The stock is up from 70 to hit 78 today. Put the chart back up real quick, guys. I mean it could roll right back over again. And I'll look and I'll have egg on my face, but we took the 50 day. Not a ton of conviction. I thought it should have been up more, but it's possible that the stock is bottomed at 70.
- [67:24]
B
Yeah.
- [67:24]
A
And that the next wave of Waymo headlines are not going to be as damaging as the last three months have been. I think this is the cheapest growth Stock in the market today, it's 15 and a half times forward earnings. And I had Sean do some charts for me, man, and then we'll get. The market hates the stock because they, because they don't. They don't understand. All right. Uber is in the cheapest quintile of PE ratios within the S&P 500. So it's the bottom 20% on valuation. It is selling at a 36% discount to the median stock in the S&P 500 on P E ratio. On forward P E, it's 17 and a half. Not as egregious. The discount to the median tech stock 22 times versus 16.4. It's cheap on every metric. Let's show the growth expectations. This is the craziest thing.
- [68:22]
B
Yeah.
- [68:23]
A
35.8% expected growth. The median industrial stock, which is what Uber is considered, 8.7% growth. The median tech stock, 13 and a half percent. And the median stock in the S&P, 9 and a half percent. Uber is going to triple the growth of the median stock in the market. More than triple. And it's selling at a discount to all of them. A substantial discount. It breaks my brain.
- [68:53]
B
You usually don't see value based growth stocks hiding in plain sight like this, but maybe this is one of them.
- [69:00]
A
Apple was $150 billion market cap doing like 50 billion in revenue.
- [69:05]
B
It's bizarre.
- [69:07]
A
That's growing by 30. Something I don't understand is bizarre.
- [69:11]
B
I'm with you.
- [69:12]
A
I get it. Like, you're all right. You're worried about Tesla cybercap, which doesn't even exist as a human in the front seat. You're worried about that. You're worried about Google coming and they're going to put Waymo onto the Waze app. Yeah, they probably will. Or they'll bundle it with Google Maps. Yes, they probably will. Fine. But then Lyft is out of the picture and Uber is back to a horse race with one competitor. But the difference is they will have autonomous vehicles from companies backed by Amazon and Nvidia and, and all the OEMs and all these other AI startups we haven't even heard of. They're all going to list their cars on the Uber app because it's instant monetization, you know, expensive it is to produce a fleet of autonomous vehicles. It's billions of dollars. You want riders immediately. Uber gives you riders immediately. Am I like talking to a wall? How do people don't understand this? I feel like. I feel like I belong in a lunatic asylum. All right, mystery chart now.
- [70:17]
B
You know what we got late. My mystery chart's not going anywhere. We can roll it over. It's not time left. We'll do it next time.
- [70:22]
A
Guys. Thank you so much for watching. Thank you for listening. We appreciate everybody who came to the live. You guys rocked the live chat. I love that you all get to catch up with each other each week in the chat for our show. I think it's super cool. Don't forget tomorrow is an all new animal special spirits and we'll be back at the end of the week with the Compounded friends. We love you. Good night.
- [70:51]
C
Ritholtz Wealth Management is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Ritholtz Wealth Management and its representatives are properly licensed or exempt from licensure. Nothing on this podcast should be construed as and may not be used in connection with an offer to sell or solicitation of an offer to buy or hold an interest in any security or investment product. Past performance is no guarantee of future results. Investing involves risk and possible loss of principal capital. No advice may be rendered by Ritholtz Wealth Management unless a client service agreement is in place.