← The Compound and Friends
The Compound and Friends
Solana tokenizes stocks with Anatoly Yakovenko, eVTOL stocks with Andres Sheppard, Oracle questions, BDC trouble
01:49:14
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- [00:00]
A
Ladies and gentlemen, welcome to an all new edition of the Compound and Friends. Tonight's show is brought to you by Public. Public is the investing platform for those who take it seriously. You can build a multi asset portfolio of stocks, bonds, options, crypto and more. You can also access industry leading yields like the 3.8% APY you can earn on your cash with no fees or minimums. But what sets Public apart AI isn't just a feature, it's woven into the entire experience from portfolio insights to earnings call recaps. Public gives you smarter context at every touch point. Plus earn an uncapped 1% match when you transfer your portfolio, including IRA transfers, rollovers and even contributions. Fund your account in 5 minutes or less paid for by Public Investing Fund. Full Disclosures in Podcast Description ok this is a gigantic show. We talked to Anatoly Yakovenko who is the co creator of Solana and he makes the case for why traditional finance and digital finance or blockchain finance are about to collide as the stock market gets tokenized. And he explains why Solana is actually in in in the front of the race to be the protocol used as we tokenize all these assets. So it's a super high level conversation but a lot of really specific predictions and things that really could become a part of everyone's life and then it's an all new what are your thoughts? And normally I say it's an all new what are your thoughts? With myself and Michael Batnik, but Michael is is away on business and I took the show solo so we've never done it before. I think it went well. Had a lot of fun mixing it up with people in the live chat. Also had a special guest ring the doorbell to tell us about the low altitude economy and Joby and Archer and some of the hottest stocks in the market. So it's, it's a lot of fun for me and I hope you like it. Anyway, without any further bureaucracy, I'll send you right into the show. Thanks guys.
- [02:22]
B
Welcome to the Compound and friends.
- [02:24]
A
All opinions expressed by Josh Brown, Michael Batnik and their castmates are solely their own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Hey everybody, welcome to Live from the Compound. My name is Downtown Josh Brown. My co host Michael Batnik is here and we are super excited to welcome our guest today. Anatoly Yakovenko, who is CEO of Solana Labs and co founder of Solana, a high performance network powering Internet capital markets, payments and crypto applications. Prior to Solana, he was the team leader for developing operating systems at Qualcomm, distributing systems at Mesosphere, and compression at Dropbox. Mr. Yakimanto, welcome to the show. We're so happy to have you.
- [03:25]
B
Thanks for having me.
- [03:26]
A
Yeah, man, this is going to be fun. I have so many questions for you, but I already own a bunch of Solana. Did I make a mistake? Should we start there?
- [03:35]
B
Oh, man. I mean, who knows the future, right?
- [03:38]
A
Yeah. Okay.
- [03:39]
B
I hope not. Like, I. I'm in the same boat as you, okay?
- [03:43]
C
No, you're not. You're in a much bigger boat.
- [03:48]
A
All right, let's start with the origin story of Solana. Tell us who were the original founders, including yourself? What was the idea behind it? And what, what was the. What was the thing that you said was missing that drove you guys to say, let's put this thing out into the world?
- [04:07]
B
So, I mean, I've been aware of crypto since bitcoin. I think everyone remembers the 2008 financial crisis and kind of banks in Greece seizing people's money and stuff like that. And bitcoin was just kind of created and became aware. Like people became aware of it on the Internet. But as an engineer, I was always skeptical of how it's going to work, how it'll actually scale for payments, and thought it was a neat experiment. But engineers miss things all the time, like the social aspects of how a company grows. Right. It's just something really, really hard to predict. And especially with things like crypto, where it's a bunch of network effects that you don't understand. So it took me until 2017 to really be interested in crypto. And this again, again, came from a very engineering lens. I had a kind of a true eureka moment and two coffees and a beer at Cafe Soleil in San Francisco, and that mixture didn't sit well with me at all. So I was up till 4 in the morning and this idea popped into my head that there's a way to take a bunch of the stuff that I work. I didn't work at Qualcomm, but Qualcomm has built over the years and cellular networks were built on and apply it to blockchain and my back of the envelope kind of calculation.
- [05:28]
A
Wait, stop. So Solana, the name derives from the place you got a. The place you got a bad mixture of caffeine and alcohol. Cafe Soleil.
- [05:39]
B
Well, Solana, the name came after. I initially wanted to call it Loom, but Solana, the name comes from a town me and my co founders lived in while we worked at Qualcomm, all three of us.
- [05:51]
A
So coincidence that the Cafe Soleil. Part of it.
- [05:54]
B
Okay, yeah.
- [05:55]
A
Are you trying to not pay them royalties? Is that what's going on right now? Okay, they're not watching.
- [06:00]
B
Yeah, I don't think so.
- [06:01]
A
All right, continue.
- [06:03]
B
So I, you know, if this is a very, I don't know how technical you guys want me to get, but a super brief lesson in physics. If everyone remembers your high school physics powers transmit at the same time over the same frequency, they interfere, right? Because electromagnetic waves interfere. So you can't have radio on the same frequency at the same time. So the first cellular networks that were built use this thing called time division multiple access. I'm talking 1G networks. They would give each tower a clock and they would alternate by time, so that would prevent that collision. And Bitcoin and proof of work networks like Ethereum at the time have the same problems. If you have two block producers, two nodes that make a block, if they make a block at the same time, the network is in this noisy state where you don't know what's the actual state of the network. They have to go resolve that and figure out who is actually supposed to be next instead of at the same time. So that creates these gaps and how much information you can transmit. And my dumb eureka moment was that there's a way to build a clock in these systems that could coordinate all these nodes and use the same time division multiple access kind of hack that cellular networks did.
- [07:21]
A
So. So for people who are not in the crypto world, but are in the investing world, but curious about crypto, this is solving the main problem. When you talk to people and they say, if Bitcoin so great or if crypto so great, how come nobody's using it? Well, a very big reason is it's inefficient, based on the Bitcoin proof of work architecture, to have enough transactions happening at once. And so Solana, to you was a way to solve for that. And you're part of the answer for how this scales up to the point where millions of transactions can ultimately happen in, in a crypto format.
- [08:02]
B
So that was kind of this eureka moment. I quit my job, raised money, and got a bunch of my friends from Qualcomm that were. And I was blessed. Broadcom was trying to acquire them. So morale was down and people were looking to leave.
- [08:18]
C
What year was this?
- [08:20]
B
This was 2017. 2018.
- [08:23]
C
Okay, so you, so you raised money. Like how, how did that work? Was that the. The investors got. Got tokens or equity or, or what? Exactly.
- [08:30]
B
It was a sale of future token, so no equity. Because the goal is to build a decentralized network where the initial company that built it has very limited control and like, direction of the whole network. And right now Labs doesn't employ any engineers that even work in the protocol anymore. The main thing that Labs does is we're working on this secondary project called cpr, which is a cell phone thing.
- [08:56]
A
So. So Solana Labs is sort of like, operates like the, the Ethereum Foundation. It's. It's more of like an advocacy and a central intelligence repository for people that are working on their own projects.
- [09:11]
B
Labs is more like, I would say closer to consensus, where we build little products, then hopefully get bigger and actually create user functionality on the network, go get users, make money. But the goal of those products is to become their own companies with their own equity table and cap table and earn their own place in the world.
- [09:35]
A
So this is one of the first questions I wanted to ask you. Then this gets into one of the first questions on this. So this is conceptually how I think of decentralization. I think of Bitcoin as being highly decentralized at this point. Maybe I'm wrong, but I feel as though there were enough people early on amassing a lot of it and tons of miners. So it's very difficult to change the consensus on Bitcoin. You had a bitcoin cash fork many, many years ago. You probably aren't going to have another one of those of any meaningful size because, like, you just can't get everyone into a room to make an agreement, okay, that's a good thing, because they can't take Bitcoin off the rails. And then you have the opposite, which is Ripple, which basically looks like a corporate security. I know they spent 10 years telling the Supreme Court that they're not. But like, just for argument's sake, where does Sol sit on that spectrum from total decentralization to decentralized enough, but with some guiding central government, looking at how it, how it works.
- [10:45]
B
There is no guiding central government. It's. So there's kind of two. Two things that you have to kind of understand. Bitcoin is extremely simple. So you can still make changes. Like Segwit was a change, right? And so if you propose a change that is so obviously correct that it doesn't impact any of all those key stakeholders, the miners, the users, the exchanges, et cetera, that everyone's like, oh yeah, this is an obvious bug fix. It'll get rolled out immediately because it's not controversial. It's when you end up with controversial changes that there isn't a single tiebreaker that says we're pushing this through despite everyone's objections. Okay, so if in that sense, I think it's better to think of it more like an open source project. Linus may be a tiebreaker on a lot of the decisions in Linux, but even he doesn't have. He can't push a change that's going to break a bunch of other companies like Red Hat and IBM and intel and things like that. So I have influence as an engineer because I can propose a change that is obviously correct and people are going to be like, oh yeah, we should fix this. And it gets rolled out in six months.
- [12:02]
A
Is that by. Is that by virtue of you having been the creator though, or is that by virtue of whatever power you have over X number of Solana or both?
- [12:12]
B
Is it. It is just by virtue of me making a persuasive argument as a good engineer. So nobody cares about because I was a creator or how much soul I had. If, if I was a bad engineer, all the other smart engineers working on those would tell me to F off like immediately.
- [12:33]
C
Okay, yeah, in 2017, when you raise money for this thing, this is, this is pre NFTs. This is, as far as I know, like pre defi. Exploding. What was the vision behind building this? Was this, like, if we build it, they will come? Or did you have a specific problem in mind that this was solving for?
- [12:54]
B
Yeah, I had this idea that ended up being more correct than not, and that was that like Bitcoin kind of created a store of value. If, if you buy into that narrative and I think, you know, at this point it's kind of obvious that it works.
- [13:11]
C
Yeah, it worked.
- [13:11]
B
And Ethereum was really going after settlement and I never, in my. I had like a bit of trading experience. I built all these bots that would trade on interactive brokers and whenever I thought I had an algorithm at work, data would slow down. My trades would take a little longer to land and the system was completely a black box. So it didn't understand why my things were failing. So as soon as I kind of had this idea of what Solana could be in terms of performance and latency, the thought that popped into my mind, into my mind was that it's like Linux for trading. I have the entire stack open to me. As an engineer, I see exactly where the data is going, everything's available to me and nobody can actually withhold any of this from me because the network is decentralized kind of from engineering principles from, from the get go. So me as a trader, putting on my trader hat, I felt that this could be a fair open trading system for anybody in the world to, to trade. So I went after this, let's build a execution layer, let's get a decentralized dax. At the time, what they were called working on it as our demo project. So this was our first demo was let's build a little DAX and then almost build a network around it.
- [14:29]
A
I want to ask you about what's unique about Solana relative to. I think there's a pretty good understanding at this point even amongst casual people about the idea behind Bitcoin and why it works. ETH is maybe a little bit less well understood, but still fairly understood. You guys have this unique mechanism for consensus that I've seen described as a combination of, of proof of stake but also proof of history and those two things working in concert with each other. So just for the non crypto native people who genuinely want to understand why is the proof of stake part important? And then how does that combine with proof of history to make Solana so unique?
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B
So what proof of work? To understand proof of stake, I think it's important to understand proof of work.
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A
So just mining, calculating equations. Okay.
- [15:25]
B
The way Bitcoin works is it forces a block producer, somebody that creates a block to go spend a bunch of energy. And because that energy is not free, you just can't create it. A thin air. It solves this problem called the Sybil problem where you know how you get spam, like you get infinite number of messages, infinite number of.
- [15:45]
A
There's no cost.
- [15:46]
B
Yeah, because there's no cost, no cost to send it. So if there's no cost to create blocks, I could flood the network with infinite blocks and the whole thing stalls and you get a, a failure. So they use energy to do this and it's very simple and elegant and I think this is part of the strength of Bitcoin is how simple it is to understand a bitcoin white paper. And because of these principles. But it's slow like in terms of the number of transactions you can push through it and it's expensive like you're spending a lot of money on the security of the network, which is this energy thing. So proof of stake is this Alternative. I think Cosmos was the first major proof of stake network that was live and then I think probably us right after that. And then Ethereum transitioned to proof of stake. It's a way to use the same ledger. So you build a blockchain, just use the blockchain to do for the Sybil problem. And this kind of recursive self referential thing is complicated. It's hard to understand. The white papers have a lot more corner cases that they have to cover and things like that. And the assumptions that you can make of these networks are harder to make, which is why proof of stake networks like Ethereum, like Solana, like basically everyone else, have a lot more algorithm churn, they just change more because you always want to keep improving all these parameters and make it faster and things like that. But it is much, much cheaper. And as proof of stake is that.
- [17:20]
A
The, the owners who have stakes in the thing itself are responsible for the functionality of the network. Like very simple, we own it and therefore that's consensus.
- [17:35]
B
So yeah, it's simple to describe except when you think about it. Well, who says how much soul I own? It's the network. And how is the network secure? Oh, it's based on the soul that everybody owns and stakes. So you have this kind of looping problem and you can solve it. And it's been solved actually, I think before even Bitcoin came out. This Barbara Liskoff wrote this paper, Byzantine fault tolerance and things like that. So all of this stuff is possible, it's just much more complicated and equal.
- [18:07]
A
To what's the proof of history part.
- [18:09]
B
And the proof of history part was this Eureka clock idea that I had after two coffees and a beer. So that was this idea to use time division, multiple access, all the stuff at Qualcomm that has been around I think since late 70s at this point.
- [18:26]
A
Okay, so it's that combination that makes Solana as functional as it is relative to other consensus mechanisms.
- [18:37]
B
It allows us. So the thing is, I'm not a consensus engineer, I'm not a, I mean I'm a consensus engineer, I'm not a consensus researcher. And the property that actually is important out of all this combination is that the network can use all the bandwidth that you allocate to it. So if everybody's on the Network has like 10 gigabit transact 10, like how you get your cable connection on the Internet, Comcast is selling you 10 gigs or whatever. If everybody on the Network has a 10 gigabit node, you can actually use all 10 of it. For to send transactions which would be million tps or something like that. And this is kind of the key property that I was bad at explaining to VCs and things like that, but turned out to be extremely right because all the next generation networks that are coming online now are targeting this specific property that nodes have to be able to use all the bandwidth available to them. And the next version of the Solana consensus was built by these bleeding edge researchers out of ETH Zurich. This professor and his team was I think aqua hired by the Anza team that's working on consensus right now and that's rolling out I think end of the year.
- [19:53]
C
Anatoly, we don't get to speak to engineers that often, let alone the founder of one of the largest blockchains in the world. Quantum computing stocks are having a moment right now. I don't know anything about quantum computing other than the stocks are going vertical. And one of the things that people just offhandedly say is that they're going to crack the bitcoin blockchain and they're going to steal all the coins. I don't know why they wouldn't go after the treasury first, but whatever. Is that complete BS and how might that impact, how does Salana fit into that? Like are you guys hackable as well? To the extent that bitcoin might be in this world of quantum computing, every.
- [20:28]
B
Major protocol is hackable to a quantum computer that can crack the elliptical curve like disc discrete log problem, which is. But this is a problem that would require like million cubits at current technology, like error levels. So we're very far.
- [20:48]
C
What does that mean?
- [20:49]
B
Okay, so the problem with quantum computing is that and this is what everybody talks about like oh, we solved the error bound on like the Microsoft thing was all about solving the amount of error that you start accumulating the more qubits you add to the system. And it's extremely hard. And the thing is that it's going to take a really long time to get even toy examples that can solve a much smaller version of the like discrete log problem, like with much fewer bits than what Bitcoin currently uses. It's just going to take a monumental effort on the technology side on the quantum side. So there's going to be a lot of kind of notice that oh man, these guys just broke the discrete log problem at 64 bits or something like that. And it's going to take an insurmountable more time and effort to get to 128 bits from that. And like I Said Bitcoin will coordinate around an obvious bug that everyone needs to solve. So as soon as we get there.
- [21:55]
A
It'S like survival, like self preservation. Everyone that's got a lot at stake, they're going to have to work together and come up with a way to fight this off.
- [22:03]
B
Exactly. My, my guess of what's going to happen if quantum computing works, it's going to unlock a massive amount of wealth for the world. Because to me, the biggest problem, this is how my brain thinks of technology. We've solved Newton's laws of physics exceptionally well. We can measure things that are basically like, we can see with an eyeball and how fast we're going really, really well. But as soon as you get to something really, really small, the amount of interaction between all the tiny particles creates such a large computational problem that it's impossible for us to solve. And this is the blocker for us for curing cancer, for doing all the little diamond age molecular stuff that you read in sci fi where you take a pill and it cures everything. You need to understand physics at that micro level to the same degree that we understand cars, like moving at 50 miles an hour. Right. We can model that. You know, we can build a skyscraper that's two miles high because we understand all the physics in that building really, really easily. But we can't cure cancer. Right.
- [23:16]
A
Do people tell people ask you, I'm sorry, to follow up on Michael's question, though. Do people ask you, like, is this something I need to worry about the next three years or 10 years? And I know you don't really know the answer, but, like, is that the kind of question that you get?
- [23:31]
B
Yeah. And my. And there's so much hype that it feels like it's five years away. It would be awesome. It would be awesome if we're five years away from that much qc, because I think it would really be a fundamental change to the amount of wealth we can create in the world. It would be huge. But my gut is probably 20 years, kind of like fusion. It's just hard. It's a really hard problem.
- [23:55]
A
But yeah, so I want to bring things back to the 21st century. So my first awareness of Solana was in the nft moment in 2021. And I think that's probably the same for most people where it's like, okay, there's this thriving marketplace for NFTs. We don't have to spend a lot of time on NFTs themselves. But Solana was like the currency on the OpenSea platform that people who had never heard of it, just decided, I'm going to start, I'm going to start transacting in Solana because I really want this digital baseball card or whatever. That was a really big moment for the protocol itself, probably for you. I wanted to ask you, was that deliberate positioning Solana in that marketplace or is that just something that happened organically because this protocol is uniquely suited for that amount of transactions to take place? How did that whole thing happen?
- [24:55]
B
Yeah, I think we got a bunch of things kind of came to head. Was NFTs launching on Ethereum. What's caused the network to spike in fees. Like nobody wanted to pay 20, $30 for a transaction when interacting with, with NFTs that are at the tail end. So when you have a big launch and the value of something is tens of thousands of dollars and the change in price is tens of thousands of dollars and people just don't care about the $30 fee. So they're still doing it. But that blocks all the small tail end artists that want to launch and experiment and they just don't have the opportunity to have this kind of big pop. So we've been around, I think at that point for about a year and a half and one of our product engineers built this kind of small NFT standard and auction mechanism and just released it as open source software. And people started forking it and creating NFTs and running their own auctions and it just kind of blew up all of a sudden.
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A
Were you surprised?
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B
Yeah, we didn't, you know, like again, I'm an engineer, so I look at NFTs, I'm like, why are people doing this? But this is, this is a, you know, this is a generic technology that is a very simple escrow mechanism that could be used for selling anything. And it ended up that those same NFTs ended up being what, like helium, which is this decentralized Verizon, if you want to think of it, decentralized cell network tower. They're building 5G networks. They created an NFT for every cell tower that they have. So to me, it was like, okay, great, this is a general purpose technology, let's see what happens. But the reason why it took off, I think was because you had this tail end of artists that wanted to create stuff that were blocked on Ethereum effectively. And we gave them free tools and unblocked them and it all kind of snowballed after that.
- [26:52]
A
Let's talk about the Solana ecosystem today. How big is the market currently? Is total value locked a relevant metric or like, how do you think about the size of the current Solana ecosystem? And what do you personally monitor so that you have an understanding of what's happening, what the supply, demand is. Just love to hear about your own creation directly from you.
- [27:22]
B
So a lot of my kind of, you know, none of this was something that I thought of before I started Solana, but through the ups and downs and through kind of the, the crashes and the trauma that, you know, we got through the, through building this, the thing that I really care about is like basically Team Runway and whether they've been able to raise capital building a product in Solana or they now have revenues and they never need to raise capital again. So these are kind of the KPIs that I started really caring about. You know, I think about a year into. Because you quickly realize that teams can launch a token, but if there is no product market fit, there's no revenue behind that token, it will go to zero. Like, if you cannot build a sustainable business around it and have some of those economics go to the token. I'm a traditional, you know, intelligent investor kind of person. Like, it's got to have something. Now, Bitcoin doesn't have any of this. And I think the trap that a lot of crypto founders fall into, that Bitcoin doesn't have revenues. Therefore I can build a better Bitcoin or, you know, a gadget that kind of is Bitcoin plus something, and it's going to work just, you know, have value simply because of that. And I think that's a really false premise because the reason Bitcoin has value is totally separated from the technology at this point in a lot of ways, outside of the simplicity aspect of it.
- [28:50]
A
Maybe Solana has value being generated, but by way of staking fees. And some of that is accruing to the token itself, which is what propagates that value.
- [29:03]
B
So not just staking fees. If you stake a validator and you run like effectively think of it as a small business, you run a validator that is high performance and can make blocks transactions that submitted to your block producer, pay a tip to that validator so you can collect all the tips. And these are substantial. I think last year it was over a billion dollars and I think it passed. If I'm not mistaken, you can go on blockworks.com on Solana and see their total revenue generated by tips. I think it's over a billion this year already. And similarly for applications, if you build a Dex, right, a decentralized exchange like Raydium you can collect fees for the Raydium token, and those are revenues that are going to those token holders. So. So it's a very, very boring traditional. Let's look at the revenues and the multiples and figure out is this a sustainable product and where is it going and growth and things like that.
- [30:00]
A
What do you think is the. What do you think is the largest application right now of Solana in the real world? And then what do you think is the biggest opportunity in the future, either as a technology or as a currency or medium of exchange? Like, what would you tell somebody is the bull case for Solana use not price, but. But use.
- [30:24]
B
The largest is probably trading. Like, this is where most of the revenues come from. And a lot of that used to be NFTs, but now it's all. It's Meme Coins. And to me, that's like, you know, I. When I was working on those DAX and thinking about financial markets, my focus was, let's get equities and real trading and compete with nasdaq, because we can offer an open, fair version of it. And what took off was Meme Coins. But if you.
- [30:53]
C
Does that upset you or excite you? Like, are you like, I can't believe I did all this hard work and they're trading coins or are you like, all right, they're.
- [31:00]
B
They're using it as a founder. You know, I don't know if you ever been a founder, but 18 months into any project, you. You either, you. You're surviving, right? Your goal is to, like, you're just trying to survive, get to the next stage, wherever that is. So any kind of usage is good. Like, you. You almost forget about, like, your ego is totally stripped away at that point.
- [31:23]
C
But what about now? We're eight years. We're eight years later.
- [31:27]
A
So people are using Solana to create their own tradable assets. And many of those are other coins or Meme Coins. But that's. That's right now, a lot of the activity in the Solana ecosystem.
- [31:42]
B
Yep. Yeah. And again, Blockworks has all the stats on, like, I think how much of that. I think it varies, you know, 10 to 40%, depending on the day. From how I think of it, is that, you know, if you look at iOS, vast majority of applications are games, loot boxes.
- [31:58]
A
And those are stupid, too.
- [32:00]
B
Those are stupid. You know, Steve Jobs had to, like, say, we don't need 10 more fart apps in the App Store. And I kind of think about, okay, these are fart apps, and that's fine because.
- [32:13]
C
And you have fart coins?
- [32:15]
B
Yeah, there's fart coins. People can do whatever they want. This is their, you know, up to them to build their own businesses or, or run their own activity. They're adults. Our goal is to unblock whatever use cases that we, you know, we think are important and getting regulated equities and, and things like that on, on chain is like these big hurdles that the foundation can work on and like talk to regulators and companies and get them across the line.
- [32:43]
A
Can we, can we ask you about that? So when Robinhood announced that they wanted to tokenize non traded stocks such as shares in SpaceX and Starlink and Databricks and some of these really sought after private companies that had not yet gone through the traditional securities IPO process. And Robinhood said we've come up with a way using a layer two sitting on top of eth where we will create liquidity for people who own those shares and people who don't, but want to. We'll build this marketplace. Forget about the controversy around that. A lot of the startups weren't thrilled with that idea. But putting that aside, were you surprised that Robinhood opted to build via ETH as opposed to Solana given Solana's obvious advantages toward high volume transactions?
- [33:42]
B
Well, I think that same day that they announced it, X stocks launched on Salana and I think is 90% of volume I think is going to X stocks right now. Okay, I think the.
- [33:55]
A
Tell us what xx what is X Stocks?
- [33:57]
B
It's a similar thing. It's a project that effectively gives you price exposure to equities like this. There's a bunch of them. So you can go buy a X Tesla stock on a Dex right now on Jupiter or some other decks on Solana and trade them.
- [34:14]
A
And I think it'll mimic the price of Tesla, but it's a tokenized version.
- [34:19]
B
Yeah, Yep. So I think they're up to a few hundred million of volume per day. Not per day, sorry, per week at this point.
- [34:28]
A
Okay.
- [34:28]
B
So, so it's, it's growing. I think in the initial launch, the first week like 40,000 wallets interacted with them and like bought or sold X stocks. So there is demand for this. And to me these are baby steps in terms of these aren't actual real stocks. And all the, all the problems that you guys are aware of between actually getting a person a real Stock on chain, 100% agree with you that that's really lame. Big part of that is regulation. So slow. And the goal is to get rid of all these layers and Just have a real stock.
- [35:00]
A
You think Solana will play a big part in the tokenization of stocks and bonds?
- [35:05]
B
That's my. Yeah, 100%. I mean that's my dream. This is what it was built for. And the difference between, I would say the difference between Solana and Ethereum is that you can just launch the product on Solana on Ethereum you have to announce an L2 for it first.
- [35:25]
A
Okay, got it.
- [35:27]
B
Look, you don't need all this extra infra. You can actually just go reuse all the smart contracts, everything else that's available and go mint the asset and it'll get usage immediately. And I think that kind of rapid innovation will accelerate products being launched on Solana much faster than think about what happened with you need a big company like Robinhood to first support NL2, then this product ID and then go build a whole bunch of usage for it and acquire users and all of this. That's a much slower process than a small company like X stocks just go goes and creates these assets and mints them and gives users exposure. So that cycle is just much, much faster on Solana. So to me it seems like if you have financial innovation, it's going to happen much faster on Solana as, as we've seen. And yes, companies are going to want to own the entire stack for product reasons or revenue reasons or whatever. But I think if you're targeting kind of the rapid release and kind of these in it disrupting the incumbents, it's likely going to come on the. On Solana.
- [36:37]
C
Anatolia, what's your take on the size of the market in terms of Solana? Like we, we, we're calling it a market cap because that's just shorthand. That's what we know. Number of shares outstanding times total price and we're doing that with the coins. But the difference between the coins and real equity is that theoretically if, if everybody wants to sell Apple and I know that's, you know this is make believe but there's a floor to the price where private equity where a group of buy would say wait, wait, I want to buy the whole company. So like it's not so with Solana. Theoretically if everybody wants to sell again, I know it's not, it's just, it's not equity is my point. Like how do you think about the size of it? Is market cap the right word or is that, are we sort of confusing the.
- [37:20]
A
And just for context before you answer, as of this month, the market cap, whether it's appropriate or not, you're about to tell us is considered to be $127 billion in US dollars. Basically the price $234 times 545 million tokens.
- [37:39]
C
But yeah, but people will compare this with, with this with the market cap of a company. It's like these are not the same things.
- [37:44]
A
Yeah, we'd love to get your take on how appropriate that comparison is.
- [37:48]
B
So this is where proof of work store value is separate from proof of stake is because you need to have the underlying coin and a proof of stake network like Solar Eth to create blocks. And creating blocks is a normal revenue generated business. People pay you to add their transactions to the blocks you create. You actually have revenues that you can tie back to the underlying coin. And to me proof of stake networks should be valued just like any other company. You can look at revenues. There is no central corporation that can make decisions for it because it's purely defined in software. The entire protocol is defined in software. How you interact with other block producers and you agree on this is defined in the software that you download. That's it's all open source. You have full control over that. You can fork it at any time and do whatever make changes to it. Which is different from Apple. Right. I can't go say I'm going to take my iPhone completely change the business model on it and now it's part of. It's mine. Right. You don't have that capability because it's a closed system that Apple completely controls or even Google. Even though they release some of the software, their stack is fully controlled by them. This is the, this is the decentralization aspect where there's no essential person or company that can actually make changes to the business models in the network. That doesn't exist in Solana. But you do still have revenues if.
- [39:18]
C
You run so what so is the revenue of the network the right way of phrasing that question like what this is how to compare that to the market cap.
- [39:26]
B
This is how I think of it. I think the blockworks guys were the first ones to actually start listening to me or maybe thought the same way. And they've done a lot of work on data collection to figure out what our actual revenues. What happens like if you buy a bunch of soul, you stake it and you're on. You run your own block producer. There's costs associated with that. How much revenue can you actually capture?
- [39:49]
A
And that's a cost of goods sold. Cost of goods sold is like how much does it cost us to mint a block relative to how much revenue are we taking in. It's almost like a profit margin calculation.
- [40:00]
B
Yep, totally.
- [40:01]
A
Okay, so then okay.
- [40:02]
B
And this is very different from proof of work networks where the only you have to spend electricity to make blocks and generally those don't generate enough revenue to even be substantial or to cover the cost of the electricity. They're purely running on the inflation. And you have like. I think it's important people to understand that like stake like proof of stake staking rewards and you think of inflation, you have to separate that from revenues because this is just tokens moving around in a black box. So pure network rewards and pure network inflation is not actual revenue. It is effectively an incentive for people to stake and run these businesses. But it is a fee on people that don't. This is the best way to think of it is like if you don't do it, you're actually like losing money. You're being diluted by people that do. So you're forced to go make the do the work effectively.
- [40:59]
A
Is the token scarce or becoming more scarce? Are the units being created faster than they can be burned? Because I think a lot of our viewers think like investors like and they're. So if somebody wants to have some money invested in SOL and they have no intention whatsoever of transacting with it, what is the bull case for why SOL tokens will appreciate in value over time? Not a prediction, but like why would they.
- [41:29]
B
If the network activity grows and more tips are generated on the network then more people are going to. Their people are willing to pay more dollars. Right. You're making your Kelly optimized portfolio. Some amount of is going as Treasuries at risk free rate. And there is this other thing. You can go and run a validator that has revenues. What percentage of that portfolio should go to that you do your own calculation. Right. So if the as the tips increase you will allocate more towards that business versus Treasuries.
- [42:01]
A
Okay, so, so, but is the. Are we still growing the amount of tokens in the world as fast as we were a few years ago or has the growth of the amount of tokens slowed so that people can start thinking about this as an accumulation asset?
- [42:18]
B
I think so. If you're just. If you're not staking and not running a validator, then inflation is a cost to you. So you can think of it as a fee.
- [42:28]
A
Okay.
- [42:29]
B
Right.
- [42:29]
A
So if you're running a validator, it's like you've got a cash flow coming as a result of tips and staking fees.
- [42:38]
B
Correct.
- [42:39]
A
Okay, got it. You Think we'll see an ETF based on SOL at some point in the next few months or year? Why do you think there isn't one yet?
- [42:50]
B
I mean, there's been like a bunch of filings with the SEC and it seems like they're very receptive to the idea, but I don't, don't know inside their, their head. Right. But everything that I know about the current SEC administration is that they were extremely frustrated that the process was so bad in the last administration. I just kind of want to simplify it and make it faster and simpler. So it looks like the rules that they are proposing for kind of these standard rules for how a crypto asset becomes an ETF seem pretty normal to me and like, pretty straightforward.
- [43:27]
A
Do you get calls from the etf, like the asset managers who would love to have you attached to a fund product that they launch?
- [43:37]
B
Not anymore. I mean, initially they did and like, okay, this isn't like it's not, it's all.
- [43:45]
A
You want to be an, you want to be an engineer, not a, not a mogul, not a financial.
- [43:49]
B
Exactly.
- [43:50]
A
Good for you. Hey, Natalie, this has been so much fun for us and Michael and I have learned so much. We really appreciate it. Is there a specific place that you would send our viewers and listeners if they want to learn more about the mission of Solana? Is there a URL or a social.
- [44:06]
B
Media solana.com super easy.
- [44:09]
A
That simple. All right, thank you so much for doing this. We appreciate it guys. Thank you for watching and listening. If you want to learn more, go to Solana.com we'll talk to you soon. Foreign gangsters. It's 5pm Eastern time. Tonight is going to be a special edition of what are your thoughts? I'm so glad to see so many of you guys joining me live in the trap chat because I almost said live in the trap because I listen to too much hip hop because I'm gonna need your help. Tonight's edition will be the first time ever that I've gone live without my co host, Michael Batnik. Michael is in Texas doing actual work on behalf of Ritholtz Wealth Management. So while he's on assignment, I basically said focus on that. I'll, I'll, I'll take care of the show and I knew you guys would be here to back me up. So we're going to have a lot of fun. We're going to get to all of the biggest topics and things happening on Wall street this week. Want to say a couple of quick hellos here and I'll do more, obviously, as the show goes on and you guys contribute. Matt Stavic is here. Brian Grill, Chris Hayes. Rachel's back. East Bay. Elitist. Good to see you. Who else? The guys, say hello to Nicole. Nicole's in the chat. The chat. And she's got a link she's about to drop that she's very excited about. Dr. Horton, John Needham. Good to see you guys too. Cliff, what's up? David Shoko is here. He says let's go. I agree. Let's get on with it. First things first. Quick item of housekeeping. We are doing our next live from the compound recording before a live audience in New York City. Guys, I believe the graphic for who our special guest is. Oh, my God. Can you believe it? Do I have any sound effects? Can we play? Can we do a horn or a bell? I mean, first time ever, guys. Jim Cramer and the compound will be live from the financial district in New York City. It'll be Friday, October 24th at 6pm Jim is so pumped to be part of the show. We are too. They said they would never see me and Jim on the same stage or in the same room. They're wrong. It's gonna happen and we, we love each other. So it's going to be a really great event. If you guys want your ticket to come see Jim and I, Nicole's going to drop the link. Or maybe she already up. There it is. Wow. She dropped it 50 times. I don't know how I missed it. Unfortunately, there's less than 120 tickets for sale. So if you want to do this, you got to, you got to act. And I hope anyone that's going to be in New York that night is. Is able to join us and we'll have a ton of fun. I promise. There'll be drinks, there'll be podcasting, there'll be food, there'll be Kramer. Love to see you guys. Then it looks like somebody's at the door. I wonder who. I wonder who that could be. All right, let's, let's, let's see. Who do we. You guys, it's Andre Shepherd. Andre is going to lead off tonight's discussion on a topic that I'm super excited about. He is the lead mobility equity research technology analyst at Canter Fitzgerald. Andre, welcome to the show.
- [47:45]
D
So happy to see you to be here. Yeah. Good to see you again.
- [47:47]
A
All right. It's epic for our audience that you're here because you have been covering the Evtol sector and what I'm calling Many people are calling the low altitude economy. For how long?
- [48:00]
D
About four years now.
- [48:02]
A
Okay, four years ago, what were we talking about? Blueprints on a drawing board? Or was. Was there some. Was there something here?
- [48:10]
D
It was a very early and rudimentary start with basically an idea, a pen and paper to try to make the skies cleaner and more efficient and more accessible to just the everyday passenger. What started off as thing as a dream is now coming closer and closer to fruition.
- [48:30]
A
Can we just say it out loud? It's literally flying cars. It's not helicopters.
- [48:34]
D
That's right. That's right. So evtol, as you mentioned, right, that stands for electric vertical takeoff and landing. And so these are electrified miniaturized aircraft that will take five people, one pilot and four passengers of distances of up to 100 miles. So flying cars or flying taxis is one way to describe.
- [48:56]
A
Okay, I like that description. And I know the early stages of this won't be flying cars. It's more likely that it'll be rescue vehicles and things of that nature in the government sector, maybe military, maybe cargo, before we're ready to start loading tourists and fanny packs into these things. But that is where this is ultimately headed. You guys seem to have a pretty strong level of conviction that this is going to be an everybody technology at some point.
- [49:26]
D
Yeah, that's exactly right. So if we maybe take a step back and sometimes people don't forget, forget this. But Michael, Leonardo da Vinci is basically the first person credited for designing the idea of a helicopter. We still have the draws from his diary since then. Well, helicopters today have three fundamental flaws. Number one, they are obnoxiously loud. For anybody who's been inside a helicopter knows that the noise can sometimes be unbearable. In fact, for just that reason alone, we don't have more helicopters in cities like New York because tenants complain about the noise profile. The second flaw, maybe their biggest flaw, is that they are not ultimately that safe. Helicopters on average have two rotors, one at the top to go up and down and one in the back to steer. And if something happens to either one, let's just say it's not a good day for the people.
- [50:21]
A
No redundant. No redundancy.
- [50:23]
D
No redundancy. Single points of failure.
- [50:25]
A
Exactly.
- [50:26]
D
And then the third issue that they have, I would say is that they're very costly, both to build, to purchase and to maintain. And so EVtols addresses those three flaws. For starters, they're electric, so that reduces the noise profile significantly. Then depending on the company.
- [50:45]
A
I want to pause there. All of this is all the way has been paved for this by the start of the EV revolution. This, the idea of like working toward eventually solid state batteries and having those have the power and the energy density needed to fit on board one of these things. Like none of that was possible until Elon proved that you could do it with cars. So that's a really big. The power and it being electric. The E and the EVTOL is a really big component of this conversation, 100% completely.
- [51:20]
D
And I think it's important to touch on that point. And so similarly, when you now look at the technology, right, helicopters, as I was saying, they have two rotors. These EV tolls depending on the company. Each company has their own design. Some of them have up to 12 rotors. So there are no single points of failure, additional redundancies. In fact, these aircraft can both take off and land vertically or conventionally. And so there are these extra layers of safety, which I think the consumers and the investors will ultimately appreciate. And then finally, and my last point there, sorry, is they are significantly more affordable to both build and to maintain. And you touched on that a little bit. The fact that they're electric, there's a lot simpler components, and it just becomes a question of integrating the battery pack into these aircraft. So simpler, safer and quieter. And for us, that ultimately makes them a no brainer to get adopted and to disrupt the mobility industry as we know it.
- [52:19]
A
Okay, I have a million questions, and I know the live audience does too, and I'm monitoring the chat. So if somebody asks something poignant instead of what could possibly go wrong, lol, I'll, I'll lob it at you. Here's, here's the first question. So this is where these things will differ from an electric vehicle on the road. They require a huge burst of electric power upon the takeoff itself and the landing. Whereas driving an ev, it's a much more steady. I don't know if current is the right way to explain it, but it's a, it's a much, it's a much more steady, consistent demand on the battery as you operate the car. This is like a burst. And then if they're flying on a fixed wing, the battery power is still running, but it's not as intense. And then on landing, it's another burst. That's an engineering challenge. Do you think that that challenge has been solved by the companies that are now. And we'll get into the companies in a second that are now in the process of completing the FAA certification, various stages?
- [53:30]
D
Yeah, I think that's A great question. You touched on a lot of points.
- [53:33]
A
Very bright.
- [53:35]
D
Let me try to address everything that you said. So in terms of the technology, you are exactly right. Once these aircraft take off, the amount of energy that they're using, not to mention powering the aircraft, which depending on the company, can, can weight between 6,000 and 4,000 pounds, it's a massive use of energy that's being used to. To ultimately elevate that aircraft. Once it transitions into its cruise phase or the fixed wing, then the energy usage is significantly less. But as a result of that takeoff requiring the amount of energy that it does, these vehicles today are being limited to up to 100 miles of range. And that's just the nature of the battery technology that we have available today. But as that continues to develop, so will the range and the payload capabilities of these companies. And so, yes, the technology works. In fact, many of them have conducted several test flights over the last few years, some of them even in New York City with a pilot on board. But so yes, it works. I think that as the batteries get better, we'll see extended battery range similar to what we've seen in the EV industry as well.
- [54:44]
A
Okay, viewer Theo Williams says this is a Joby versus Archer conversation. Look, the way that I think about it, I just go by the market cap of the companies and that's who I tell you I think is in the lead. I know it's unsophisticated, but it's also helped me in a lot of other technological booms. But I want to do some charts. John, can we roll through a couple of these just so we give people an idea of what we're talking about? All right, Joby, full disclosure. I am long the stock, not for a trade, as an investment. I've talked about it here on YouTube as well as on TV. For the last couple of months, I've been accumulating the stock is about 19 and a half bucks. Looks like it wants to run up against the old high set earlier this summer. And who knows what happens if and when it reaches that price. Next chart. This is Archer. This is what a lot of people consider it to be the runner up to Joby. I don't know if it's quite that simple. They seem to be not as far along in their commercialization as Joby is. Also, Joby's made some bigger deals with companies like Blade. Andre is going to explain that all to us. But as you can see, Archer up 315% over the last year. Full disclosure, I also own this one. I think we have one more. This is Andre. I don't know if this is in your coverage universe. This is a. Not quite a flying car stock or EVTOL stock. This is the satellites that are providing all the data to enable the low altitude economy which we'll define in a minute. But Planet Labs is up almost 600% over the last year to $15 stock. They want to be like the data provider, maybe the Alphabet or the. I don't know the best way to phrase it, but they have a satellite constellation of 100, you know, low orbit craft that are monitoring the wind and geology and whatever else. Very. I'm very scientific. So let's start with, with. We could skip Planet Labs if it's not in your universe. Let's start with Joby versus Archer. How do you. I mean those are. Let me, let me just ask one final question. I almost view these as they. It's an anomaly of history that they're even public companies. They probably wouldn't be if not for the bubble of 2021 in SPACs. They both were able to come public with no revenue, pre revenue because they were merged with SPACs at the height of the post Covid stock market mania. And if that hadn't happened, these might still be privately funded VC backed companies. So it's almost like a gift. Like from my perspective, I don't know that the stocks will work but they almost don't belong as public companies or haven't until recently. Would you agree with that premise?
- [57:36]
D
Definitely. I think that is a very great point. To your point, even still today both these companies are pre revenue and on that note, they are contingent on receiving FAA certification if they don't. And our expectation is very much that they will and that they will soon and happy to expand on that. But hypothetically, in a scenario where they don't receive that FAA certification, these business could be deemed worthless to a degree and that they need that to enter commercialization. So certainly you can make the case that it was early for them to enter. But as you also said, right. They're here now and they can have as a kids for investors who are comfortable taking a medium to longer term view and who are comfortable with volatility. But let's get into maybe some of the similarities and differences between Archer and Joby. So I would agree that both Joby and Archer are today the industry leaders. We like to consider them kind of the Coca Cola and Pepsi of the industry. In a lot of ways they're similar. In some ways they're different in some ways, one of them is ahead and the other, the other one is ahead. But Joby is partnered with Delta for its operations, for, with Toyota with its manufacturing and as well with Uber and the military for a few record of.
- [58:54]
A
Programs there, which Toyota owns a big.
- [58:56]
D
Chunk of stock too Toyota and so does Uber. Right. They're two of the largest investors and they're also working side by side with these companies to integrate their manufacturing efforts into Joby's facilities, which so Toyota in fact has employees that are based at Joby's headquarters in California.
- [59:14]
A
This is significant. This is significant because 10 million automobiles made a year. Toyota makes 1 million of those 10 million. This is arguably the greatest scaled manufacturer of transportation vehicles the world has ever known. So the fact that they're not only partnering with Joby, but they're an equity investor riding along I think is really critical. I mean, could be really critical.
- [59:44]
D
It's an incredible resource to have somebody of Toyota's expertise and degrees in manufacturing working side by side with your engineers. And then we're seeing that Joby and is also leading the raise in the amount of aircraft that they've manufactured today, which is close to 10, whereas Archer is maybe still kind of ramping those up. But Archer on the other hand, their partner with United Airlines for their operations, Stellantis for their manufacturing, who's also an investor similar to Toyota, and then they're also working with the defense and with the military to expand programs there. So they both have, I would say, very strong partnerships and both of them have the strongest balance sheets in the industry today. Archer's total liquidity is around 2 billion. Joby's total liquidity is around 1 billion.
- [60:35]
A
Have you seen the news?
- [60:36]
D
Well, I was just going to say, except as of this conversation, they've just announced another 500 million equity race.
- [60:42]
A
So 1.5 joby secondary. Okay, all right.
- [60:46]
D
But still, right, Both of them have the strongest balance sheets. Archer maybe has the slightest lead there and that they have more liquidity and also a slightly lower cash burn that Joby. But both of them very well capitalized in our view is that they're funded through their commercialization and certifications efforts. Now one of the big differences here, sometimes people don't realize this is their business model. Archers is very straightforward. They want to be an oem and so they want to build the aircraft and sell the aircraft. And so for them it's quick revenue recognition at scale. Over the years they expect to manufacture each aircraft for around two, two and a half, $3 million.
- [61:25]
A
This is the Midnight craft, Is that the one they're going to sell?
- [61:29]
D
That's right. Okay. Okay. That vehicle is still being tweaked because it's not to the FAA degrees of certification just yet, but it's a variant of that. Midnight. Exactly.
- [61:39]
B
Right.
- [61:40]
D
And so Archer will sell their aircraft, whereas Joby, they're prioritizing, wanting to be an operator. So rather than selling these aircraft, they actually intent on owning the aircraft and conducting the operating business, similar to kind of how Blade business was, which we can talk about since Joby just acquired Blade. So I think that's a subtle difference in the business model. Joby today has significantly more test flights under their belt. Archer is ramping up theirs. They still have to transition their aircraft from a hover to a cruise, which Joby has now been doing for a few months. But both of them, again, strongest liquidity, closest path to certification, strongest personnel in terms of management teams and partnerships. And so we're confident that both of them are going to get to the finish line and commercialize.
- [62:34]
A
So I bought both for that reason. I don't know which business model is going to be the one that makes the most sense, selling these craft to others versus being the taxi service. And then I also know that Archer wants to have a taxi service as well. So it's hard for me to. It's hard for anyone, I would say, to know two years from now who does what first and more profitably. It just seems really difficult.
- [63:01]
D
That's fair. And a lot of this industry is still being developed. This is the first time the FAA defined a new category in over 50 years. So a lot of this is. We're learning as we go, which I think is. Is fair.
- [63:15]
A
Sorry. From the chat, someone's making the. Mr. R570 is asking. Archer equals Boeing. Joby equals Uber. It seems like an oversimplification. It's probably. There's probably more overlap, I would say.
- [63:31]
D
Yeah, I think that's maybe an oversimplification, but I think the, The. The example applies. Right, because again, Archer wanting to be an OEM like Boeing in the sense, hopefully a lot less issues and incidents than Boeing over the medium to longer term. But they want to. While they are going to have an air taxi service and that they're going to be transporting passengers, Archer intends to basically partner with their airlines or their partnerships and have those companies conduct the operating business while Archer provides the aircraft. Joby wants to do both. Build the aircraft and also operate it. Now, I can't think of any air airline today that is Both an OEM and an airline. In fact, Boeing tried it many, many years ago. It didn't work very well. Usually either you are an OEM or an operator. Well, in Joby's case, they want to do both. We'll see how that ultimately shapes out. But you could argue that from an investor's perspective, that raises a lot more questions because now you have to consider things, well, how many aircrafts, how many passengers, how many flights per day, what are you going to charge those passengers? And so it's a lot more inputs in ultimately your evaluation. Whereas with Archer, you could argue it's a much more straightforward model. They build the aircraft and then they sell the aircraft. So from an investor's perspective, that one's easier and more straightforward to understand. But again, we'll see which business model ultimately ends up being the more successful one. I think it's important, though, to realize that this is not going to be a winner take all industry. Right? They're going to be.
- [65:03]
A
It's too big.
- [65:04]
D
It's way too big. And there's going to be several players across several geographies, some in Europe, some in the us, Some in South America, some in Asia, some in many places. And also the business model is different. While some are focusing more on cargo, there's others who are focusing more on the air taxi, the passenger transportation. But the reality is that there are several use cases. Military, medical surveillance, police, Hamptons. Hamptons. Transporting Josh to the Hamptons. You know, all of these.
- [65:39]
A
Well, one of them, I think it was Archer, signed a contract to be the official EVTOL provider to the Los Angeles Olympic Games. Which is 2028. That's right. Was it Archer or Joby? Which one?
- [65:51]
D
Archer. Archer won the exclusivity for the LA.
- [65:54]
A
What does that mean?
- [65:55]
D
So that means that in 2028, in LA, once the Olympics start, Archer intends to already be transporting passengers.
- [66:04]
A
That's nuts. That's nuts. That's like tomorrow.
- [66:07]
D
Well, a few years from tomorrow. But to get to that point, that's a real question. How do we get to that point? And so Archer's expectation is that they will hopefully have received their FAA certification by 2026 set, because by then they'll give them a year to start ramping up. Now, I think it's important to be mindful of scale. We shouldn't expect thousands of these in 2008. At the Olympics, we should expect a handful of these, you know, maybe tens of these at most. But the idea is to showcase them, you know, for America and for the world to see that this is ultimately going to be another vertical out there. So Archer won the exclusivity. Archer and Joby were both bidding for it. Ultimately it was awarded to Archer. And so they are now kind of ramping up to start having enough aircraft and flight tests so that they can perform some sort of flight services during the Olympics.
- [66:59]
A
Okay, got a few more for you from the chat. A lot of people are asking about the Dubai connection here. So it seems as though Abu Dhabi and Dubai are really excited about being at the lead of this technology worldwide. They seem to be maybe a little bit less risk averse than Europe and the United States. Little bit more willing to try new things, and as a result, the center of gravity of this industry. Yes, these companies are American companies, but like a lot of firsts are going to take place in the skies over the Arabian Peninsula.
- [67:38]
D
That's exactly right. And in fact, I should congratulate your audience because these questions are really, you.
- [67:45]
A
Know, the compounders don't play.
- [67:47]
D
They don't play. Clearly it shows and you've taught him well. So. That's right. So the UAE by now has almost proven itself to. To be the first market to integrate and adopt this technology. Okay. They have developed their own regulatory agency separate from the FAA and from YASA in Europe. And so their goal is to be first. And so to that point, both Archer and Joby, for that matter, are targeting to first enter into commercialization in this part of the world prior to in the United States. So you nailed it. In fact, Archer is intending to sell one or two or a number of aircraft to that region this year. And Joby is targeting to enter into service by Q1 of next year, both in the UAE, both in a small capacity. But you nailed it. That will be the first market to adopt this. This new technology.
- [68:44]
A
Okay, I want to get into a name that we haven't brought up yet, but it's in your coverage universe. The what the company's called Vertical What's.
- [68:53]
D
Yeah, so that's Vertical Airspace.
- [68:55]
A
So it's called Vertical Aerospace. What's the ticker on that?
- [68:59]
D
Evtl?
- [69:01]
A
Okay.
- [69:01]
D
Echo, Victor, Tom, Larry. And. And so that is another variant of this EVTOL industry. In fact, Vertical airspace is the only remaining European OEM that's looking to bring this EVTOL to fruition. So they are in the same industry in Archer and Joe, trading in the.
- [69:20]
A
Is that trading in the US market.
- [69:23]
D
Has an ADR in the US market. This one is significantly smaller, has a market cap sub 1 billion. They're a Little bit, maybe further behind in that process. But they're also building their own variant aircraft and their goal is to prioritize Europe. Europe, we don't need to get too technical, but Europe has a different and a higher degree of safety requirement in their certification process. 10 to the next.
- [69:48]
A
We know.
- [69:49]
D
Yeah. And so, so Vertical is pursuing that. And so they, their goal is to be kind of the only or one of the only OEMs doing EVTOLs.
- [69:58]
A
Well, they got to get like Benz or somebody. They got to like Daimler. Like they got to get a European manufacturer.
- [70:05]
D
They used to be partnered with Rolls Royce, although that partnership ended up being dissolved and they still need to raise a good amount of capital. Whereas again, Joby and Archer, you could argue maybe they're funded through commercialization or certification, but they are another player in this industry. The last one to consider is a company called EVE holding and their symbol is EVE X. That's maybe the fourth and last remaining public comp in the space. Now their know how is that they are backed by Embraer. Embraer is the largest owner. They own more than 50, 60% of the stock. And so they're leveraging Embraer's experience in certifying and building aircraft to build their own EVTOL. But again. Oh, sorry.
- [70:51]
A
Oh, two, two more for you. Daniel McCarthy in the chat is saying, I played rugby with Andre at Boston University. You remember him?
- [71:01]
D
I do, yeah. Hi, Dan.
- [71:03]
A
All right, shout out to Daniel. I wanted to ask you about people who are saying that China is going to leapfrog ahead of us on this one. The Chinese are hell bent on having evtol taxis in Chinese cities for consumers. And I think there's like a point of pride. They don't, they don't want to be deep seek anymore. They don't want to be two years after everything we do. What do you think of the. I mean I know there was the Osaka Air show, the Paris Air show, the Dubai Air shows coming up and at each these stocks, because they have no revenue, they seem to be driven by headlines and partnerships coming out of these events. Do you see the Chinese being a major factor here in the development of the technology?
- [71:50]
D
100 but what I will say is, is there's a lot of parallels between the evtol industry US versus China than with the EV industry US versus China. So what do I mean by that? So China is actually today ahead of the US in its EV tools. They have a company, a Chinese company which has an ADR that trades in the U.S. it's called EHang, symbol is eh. And I'll just preface by saying we don't officially cover it but you know, we are aware of them.
- [72:20]
A
Sure.
- [72:20]
D
They are the only company today in this industry who has already received their type certification. So they are certified now.
- [72:28]
A
The big certified in China.
- [72:31]
D
Exactly. They're certified in China and not in the US and get this though, their aircraft, remember archers and jobies are between five and six thousand pounds. They take five passengers. Ehangs aircraft is a two seater autonomous aircraft. So there are no pilots and it's just two people in a glorified drone. Essentially I'm gonna say that are being used for sightseeing and tourism. So different business.
- [72:59]
A
I'm out. I'm from the old school. I need a pilot.
- [73:04]
D
Yeah, but, but so, but China has a huge emphasis on this low altitude explosion economy as you alluded. And, and so in a lot of ways that's the incentive. That's what's incentivizing the US and the FAA to try to move quicker. We don't want the US to lose the race in EVTOLs similar to what happened in drones where we maybe were leading it and then China eventually surpassed us. We certainly don't want that to happen. Which is why you've seen a lot of momentum from the current administration with two executive orders to accelerate the deployment of EVTOls. We don't want to fall behind China. Now they're not going to enter here and we're not going to enter there. But like with evs, Europe may be some battleground and so we need to accelerate that FAA certification process.
- [73:51]
A
So a lot of people are skeptical about this stuff. And you know, of course I am too. I understand. Like, like, just because you in the FAA certification process doesn't mean you get a yes. And just because you get certification doesn't mean the economics of the business are great. Like I understand there's a lot of hurdles between now and Jetsons, but when I try to think about like what's the next trillion dollar TAM industry over the next 10 years that people just don't fully believe in yet. Like where is the opportunity to have a stock go from being worth 10 billion to 100 billion or more? It like I keep coming back to this idea, this, this, this quantum leap in mobility, the low altitude economy. Last one for you. Low altitude economy. It's, it's anything taking place below 3,300ft in the air. So it's drones, it's drone delivery. It's eventually we think evtol probably military safety, law enforcement, and then eventually, you know, full blown consumer. This is going to be like a, I think it's going to be a big area within tech and people are really going to have to familiarize their name. So you seem to be as excited as I am about it. And I know you're an analyst, you're not a cheerleader, but like, is, do you think my enthusiasm is misplaced or do you think that like I'm, I'm the right amount of excited for, for the opportunity? What would you say?
- [75:24]
D
So, you know, I, I think the answer to that is somewhat subjective. You know, I don't know that there's a right answer, but I share your enthusiasm.
- [75:32]
A
Okay. That's what I'm looking for.
- [75:34]
D
I, I, if anything, I think your enthusiasm is a little bit more muted than it should be.
- [75:39]
A
Okay.
- [75:39]
D
If I want to be even more bullish, we, here's the bottom line. In our lifetime and possibly before the end of this decade, we are going to have flying cars. The regulatory environment is there, the administration is supportive. These companies are public. They're raised enough capital to go through that process, which takes years, and they are long underway in that process. And so this is going to happen. Then the conversation becomes, well, when, in what scale. And so that's where I would maybe warn investors and say, listen, let's be very clear. This should be considered a medium to long term investment. These companies are still pre revenue. They have a big risk which is that FAA certification, which again we think is a matter of when, not if. But that's certainly a risk which could be delayed. And so you should consider that in your investment decisions. But if you're looking for potential home run ideas over the medium to longer term ideas that could possibly disrupt mobility forever, then I share your enthusiasm here and I think we're looking in the right place. The reality is that the technology for these things is not all that revolutionary. It's the same electric, you know, batteries that you'd see on a, on an ev, except, you know, different combination of cells and size, but it's the same technology and it's just propellers that tilt. But the ability to take off and land vertically and then transition to a wing makes them significantly safer and better than helicopters. Helicopters are a dinosaur. They were designed by, like I said, da Vinci way back then. And so there has to be a better alternative. And that's what I think. EV tool will come in. It will take time to achieve scale. We're not going to see the same volumes that we'd see in. In the EV industry, where Rivian and Lucid are producing, you know, tens of thousands of vehicles in the first few years. This will start in the dozens, in the tens, in the maybe hundreds, and kind of ramp up from there. It will take some time, but we are going to have flying cars in our lifetime. They may not look like the Jetson or Back to the future. At first, they will start out as a piloted aircraft to transport you and I to and from airports or to and from city centers or surroundings.
- [77:57]
A
Montauk or Montauk.
- [77:59]
D
Well, just remember the 100 mile limitation. So Mon is about 100 miles exactly. So maybe to Southampton and then you can drive the rest or take a different one there. But. And so I share your enthusiasm. I think this is going to change the world, and I think it's just a matter of time.
- [78:14]
A
Andre, this is so great that you came and did this with us. We really appreciate it. Know you're busy. Thank you so much for your time. Put me on your distribution list and we'll check back in with you as. As the space progresses. And thank on behalf of all of us at the compound. Thank you for answering our questions. We appreciate it.
- [78:32]
D
Our pleasure. Great to be here. Quite an honor. Speak to you soon.
- [78:35]
A
All right, cheers. All right, so that. So that is topic one tonight. And we went long because I think the subject matter is deserving of that. And if you. You listen to what Andre has to say, where we're going, we won't need any roads. And it's a. It's a really interest. Look, if we have a recession, all these projects will get pushed off. So I understand it's a bull market and we're talking about flying cars, but nevertheless, these companies have raised real money. They're partnering with Serious Siri, Sirius, OEMs, and something's going to happen here. The timetable might be longer than we think, but it's a very exciting time to be an investor. All right, we have a lot more to do tonight. Thank you guys for. For being here. Once again, I want to get into BDCs because I think this is a topic that's going to become more relevant in the fourth quarter. I don't know how many of you guys are familiar with BDCs. It's a really, or it used to be a really small, obscure corner of the stock market. But basically these are like publicly traded lenders. And the BDC is a designation that they earn by paying out almost all their income in the form of a dividend. And the dividends aren't like rock solid. They, they rise when these companies have made a lot of good loans that are paying and unfortunately they have to get cut when either there's a buildup of non accruals or borrowers who stop making payments, which is really bad, or the rates at which they're able to lend come down because of prevailing rates in the industry. There's a lot of talk in social media over the last couple of days about the declines in some of these Publicly traded Business Development Corps or bdc. And look, it's warranted because this is that shadow banking that you keep hearing about. This is that shadow banking that Jamie Dimon sneers at and that people have always said is like a hidden risk to the, the economy or the markets that you know, we're not correctly pricing in. It's not that these companies are melting down by any means. They were trading at a premium to nav and historically they have in the past tended to trade at more of a discount. Typically you'll see these stocks sell at a, at about 92% of their net asset value, which is warranted because not every loan they make is a good loan and there should be some, some risk priced in the fact that they had been trading at a premium is a, is a historical artifact of how quickly interest rates went up and how fast the. I don't know if earnings is the right way to phrase it, but the profits that these companies were able to go up, the higher interest rates are obviously the higher the revenue. If it's a lending business. The problem is that works in reverse and these companies are very leveraged. So not only do, do you see with rates coming down now, do you see lower prevailing rates at which they can make loans at. But because it's leveraged, you see people rapidly start to price in a discount to the prices. So rather than just blather on, let's do some charts. I want to show you guys what I'm talking about. Okay, so the first one, this is, this is just Blue Owl Capital. This is like considered to be the gold standard and one of the most experienced companies in the space. They've obviously made people a lot of money over the years in these types of vehicles, but this is like private credit and Blue Owl is considered like a main, a mainstay in the space. This is technically speaking a very obvious head and shoulders. You do not want to see that neckline break. I know we're not talking about the fundamentals when we're looking at a chart, but just Conceptually, a breaking neckline here would mean that this stock has violated support that's been in place for almost two years. And what that tells you is that the sentiment on companies in this space has very quickly changed. So this is again private credit, but it's a publicly traded company operating there. Now I'm going to show you some of the BDCs themselves and we're going to look at one year price charts. And I'm just trying to give you a sense of the recent chatter about something going wrong with these companies and people being a little bit concerned. So this one, and by the way, not all of these are created equal. Some of these are much higher quality lenders who are much more serious about their covenants. So I don't want to give you the impression that like these are all subprime lenders. That's not what's happening here. All right, but so here's Main Street Capital Corp. So the stock is in a drawdown from its all time high. It is not catastrophic. Actually had a really good recovery off the April Liberation Day lows. But this is one of the names that people are pointing to because it's very well known company in the space. Here's Aries, Aries Capital Corp. Specifically, this is their BDC 13% drawdown below the all time high. And now back to those Liberation Day lows or close to this one is also closely followed. Again, Aries is one of the most respected companies in private credit. And you know, again, drawdowns are normal when there's concern about cutting dividend yields, which is what, what's happening across the space, not just at Aries. This is Blue Owl Capital. So this is blue owls BDC. I mean this looks bad. This is in a 15% drawdown from its all time highs. You can see it's right at the, the April lows when the market was getting absolutely creamed. And again, this is another one that's trading down as people are concerned about dividend cuts in the future. And part of that is because rates are coming down. And part of that is people are now starting to get concerned about the underlying loans and some of the borrowers which I think in the case of most of these we're talking about middle market companies, not mom and pop companies, but just companies that are not quite big enough to tap the traditional Wall street debt markets. Got another one, Blackstone Lending Fund. I mean this one looks worse than the others. This is in a 19% drawdown below its all time high. And again, I'm just Pointing a price at a chart, not telling you the fundamentals are that much worse than the others. Each one of these warrants, if you know, if you're looking at these as potential investment, what you're probably seeing is that yields are really high now. That's because the prices have come down but the dividends haven't yet been cut. So the risk here is you look at something that's like a 10 or 11% distribution or dividend yield and you're like, why wouldn't I buy this? It's 20% off its high yielding, 11%. It's Blackstone. That looks like a great opportunity. The problem with that is that if rates continue to come down and, or the economy gets worse and there are more defaults, naturally there will be more skepticism about these vehicles. Whether or not, whether or not these companies as lenders did anything wrong is not the question. It's suspicion in the marketplace and they will go lower. They will trade at deeper discounts to their navy. It's going to happen if again, if people view these as, as an avatar of the economy getting worse. So through no fault of the issuer is one, we have one more. This is kkr. This is their bdc. Okay, this is like, this is crashy. No disrespect, this is in a 33% drawdown. Now it could be that the ones in the deeper drawdowns are the ones that have been more realistic with their shareholders about the need to either mark down the value of some of these loans or cut their dividend or both like that. That could very much be the case here. And if that's the case, then the ones that are down more aren't necessarily the worst ones to be in or to look at as potential buy. So I want to, I want to be open minded here and not present myself as an expert on all of these companies. But like, these are pretty substantial drawdowns in an economic expansion. In other words, like that's happening with GDP growth printing between 2 and 4% each quarter and almost full employment. Not a great sign that these names are in that big of a drawdown. So there are the macro bears. And as we all know, they very much want these to crack because it will feed their need to present the recession story and call them a canary in the coal mine and say it's the next subprime. Those people are out there. They might end up being right. They've said it about a lot of other things before and they weren't right. Maybe this time they'll get lucky and the meteor will hit Earth, which is what they've been rooting for for the last 15 years. And that's okay. Or some of these will just cut their dividend yield, shareholder base will turn over. Nothing really big will rupture and they will prove to have been buying opportunities. It's. I won't be the one that will know. I just wanted to present you guys the story so that you're not freaked out when you hear people talking about things and you haven't looked at them yourself. All right, we're going to put a pin in that. But I think that topic is going to come up later in Q4 if we get another rate cut because that could be another leg down for, for, for the space. And it would make sense if it is. I just want to, I want to play a video from, I want to play a video from my friend Robert here because the ultra. Well, sorry guys. I think it really sums up this moment in the stock market slash economy story. Let's let Robert Frank tell us what's going on.
- [89:03]
E
Well, the ultra wealthy just got ultra wealthier. I'm CNBC's Robert Frank. The top 10% of Americans added over $5 trillion to their wealth in the center second quarter. That was driven mainly by the stock market. All wealth groups saw gains in the quarter with the bottom half of Americans adding about $150 billion to their wealth. But the fastest growth is at the very top, the top point, 1%. Those are folks worth $46 million or more. They have seen their wealth nearly double since 2020 to over $23 trillion. Stocks were the main reason for all of that growth. The top 1% own half of individually held corporate equities and mutual fund shares. The top 10% own 87% of all the stocks. That's remained fairly consistent over time. But that top heavy wealth creation has led to a top heavy consumer economy. The highest earning 10% of Americans accounted for a record 49% of total consumer spending. That according to Mark Sandy at Moody's. Now, any deep or prolonged decline in the stock market could have a large reverse wealth effect on all those big spenders and pose a threat to the economy. For the full breakdown of the changing wealth population and the winners in the luxury economy, check out the Inside wealth newsletter on the link below.
- [90:22]
A
All right, Robert's the man. By the way. This is what I want you guys to take away from that couple things. The first one, the really big one, you were probably taught in school that the stock market is a Function of how the economy's doing that might used to have been true. Is that good grammar? Maybe that used to be true in the 60s and 70s and 80s. Listen to me now and believe me later, that's backwards. The economy is a function of how the stock market is doing. It wasn't always thus it is flipped. And this is how it works now. It's the wealth effect on steroids. Basically we've created a situation where everyone is a forced investor in the market and everyone's mood is affected by what their retirement account looks like. And when it looks really great, like it does right now, you get tons of spending. And when it looks less great, you will see spending moderate. If in this case, as Robert just explained to us, 50% of consumer spending is now coming from the top. I think he said 10% of households. Think about how insane that is to have an economy balanced precariously like an upside down pyramid where like flip the pyramid over, the whole thing is balanced on that top 1%, 10% consumer not dropping the ball here. And the thing that will make them drop the ball is if their stock portfolio loses 10 or 15% in a quarter, which could totally happen that point. One percent doubling their wealth in 90 days is obviously sick. I mean we wish, we wish everyone well. We don't hold it against anyone for making a lot of money. But that's insanity. And all of that is AI. All of it. 100% of it. It's AI. It's the biggest 50 stocks, 30 of which are AI companies and 20 of which are big consumers of AI to run their businesses like Walmart and blah blah, blah. So this is what's happening right now. It's very K shaped. All the airlines are going to. Delta reported today. Every airline is going to come out and tell you no problem selling out the front of the cabin. Back of the cabin is so, so you'll hear that reiterated with hotels. You hear that high end restaurants versus low end. You'll hear, you'll hear it everywhere because that's the reality that we're in right now. And I just wanted to reinforce the idea of that with Robert's commentary there because, or Robert's reporting there because it's as clear as day. To me, the biggest risk to the stock market is not the economy. The biggest risk to the economy is the stock market. Or, or the NASDAQ will just go up 40% every year from here on out. We have nothing to worry about. So I really want everyone to take away from me that that's how it works now. And look, people would say otherwise, and I'd love to agree with them, but then we'd both be wrong and nobody wants that. So. So, so that's, that's that. I also want to get into this thing about hiring plans from US Employers because feeds directly into this idea. This is. There's a news article. Hiring plans among US Employers for the year through September were at their lowest since 2009. This is challenger Gray and Christmas put this out in a report. And the weaker planned headcount was largely fueled by a steep drop in seasonal hiring announcements. Yeah, okay. I don't think so. I think there's something bigger happening here. And I think while companies are not laying off workers that quickly, they have stopped hiring because they're not sure what the impact of AI will be both on their business and inside of their business. I think there's a lot of hesitancy to just let a lot of people go, but there's also a lot of hesitancy to add headcount as though we're not in the midst of this transformative technology revolution that could literally change everything about the way companies run their businesses. I want to share something that happened at the end of September that we didn't talk about here, but I thought you talk about a canary in the coal mine. Accenture, which is this global consulting company that is supposed to be at the forefront of helping other companies implement AI, announced that they laid off 11,000 of their own workers in just the third quarter. So CEO Julie Sweet said, as advanced AI becomes, quote, a part of everything we do, and the global professional services company continues to invest significantly in the area, it expects employees to retrain and retool at scale. Quote, we are investing in upskilling our reinventors. That's what they call their like, employees, which is our primary strategy. The company is exiting on a compression timeline people for whom reskilling isn't a viable path. Sweet said Accenture had already reskilled 550,000 workers on the fundamentals of generative AI and outlined a six month, $865 million business optimization program. Listen to these euphemisms. Business optimization program, which detailed costs associated with severance and headcount reductions. So firing people and the $865 million is like, here, here's money. Last thing on this quote, we expect savings of over a billion dollars from our business optimization program to reinvest in our business and blah, blah, blah. So, so basically the only people they're interested in hiring are AI. Experts. An AI expert is somebody that woke up an hour earlier than you, basically because nobody knows anything yet, but that's like the whole game. And so they looked at all their employees and they were like, if we can't retrain you for the AI age, we have to let you go. I'm telling you that Accenture will not be alone in doing this. They are the front. They are at the vanguard of a movement that we're going to see repeated in every segment of the economy all over America and probably all over the world. So I do not think that hiring plans being at a multi year low has anything to do with Christmas seasonal hiring. I think it's a much bigger story and anyone that just wants to whistle past the graveyard is free to do that. We're not going to do that here. We're going to chronicle this stuff for you guys on an ongoing basis. Couple things left. Capex questions is probably the big theme of the week. You saw Oracle just get absolutely picked over on multiple occasions over the last couple of weeks about like, all right, they're doing all these $500 billion deals and announcements with Nvidia and OpenAI. But what does all this shit really mean? The information. Let's put the stock up real quick. This wasn't that bad, honestly. The stock had a huge spike higher and then it's given back, let's say half of that. That spike higher is from an earnings report where they just completely shocked the stock market. So, you know, in fairness, fundamentally, companies had a lot of great news. But today, here, this is CNBC quoting the information because I don't have a subscription to the information. The report raised questions about the company's plan to buy billions of Nvidia chips to rent as a cloud provider to clients like OpenAI. So OpenAI pays Oracle. Oracle makes access for OpenAI to all these GPUs that they've bought. That's the, that's the business. Oracle had 14% gross margins on $900 million in sales in its Nvidia Cloud business in the three months ending in August, according to the report, which cited internal documents. Somebody saw something they weren't supposed to see. That's significantly lower than Oracle's overall gross margin of around 70%. Look, I'm, I'm not the one to tell you that this is an anomaly or this is like the way it is. More people will look more closely at this sort of thing. If this is a 14% profit margin business, it doesn't look very different than I don't Know, Abercrombie and Fitch selling sweatpants in the mall. That might change a lot of people's opinions about what multiple they want to pay for the ISPs and the cloud providers and the hyperscalers and whatever, whatever you want to call them. So look, this is not one of those things where I just want to say, yeah, it's a bubble, throw the whole thing out. But I, I'm just pointing this out because the volume at which people are now shouting these questions is starting to be heard in the stock market. Stocks are reacting to this stuff, rightly or wrongly. But it was not just. Adam in the chat points out Oracle crash, NASDAQ today. There were a lot of NASDAQ stocks, chip stocks that were down 7, 8, 9 and 10% on, on this report. And it is not going to be the last report. One positive thing I'll say on this is thank God somebody is writing and reporting skeptically on all this spending. Because if not, if we're all in 100% agreement that this is just all rational, it takes The NASDAQ to 30,000, it takes the Dow to 60,000. It's not healthy. You must have skepticism, you must have people on the other side of some of these things so that it doesn't feel like we're just going to bubble up vertically until there's a crash. So I actually think it's healthy that we're having these debates. And look, as Jeff Gundlach says, this is the bloodless verdict of the market. Anyone's allowed to have any opinion they want. Price decides, you know what, where the market's beliefs are. So I don't hate and I don't think it's negative. All right, we're in the home stretch, guys. We did it. And I want to thank everybody in the chat for helping me make this happen. I'm going to do a make the case and then a mystery chart and we'll get out of here. I want to talk about Netflix. I don't know, do we have a chart, guys? Yeah, we have this. This is Netflix performance and it's 200 day moving average. Let's say you knew absolutely nothing about technical analysis, right? Let's just say like you don't believe in it. You sort of can see, you sort of can see that the junction we're at now should be support for the stock you saw like just on a trend basis. If the buyers are going to come in and rescue this from a three month downtrend, which is what's been happening, it should be like sort of now or never, right? So technically I like that it's kind of fallen into support and the buyers started to show up today on a red day. The company was defended at Seaport, which is a brokerage firm I barely know, but I'll read you what. I'll read you what the analyst thinks. This went from a neutral to a buy. The stock's been controversial this summer and it's. And it's been in a downtrend. The research firm Seaport now says the momentum on Netflix shares, which has moderated lately. Lol. Nice way to put it. Could be digesting the year to date. 30% gains ahead of the advertising infrastructure build related monetization momentum. That word salad, that word salad sentence that I just read. Here's what that's about. Seaport increased the ad revenue estimates for Netflix to more closely track TV viewership share quote is the analyst. We think advertising could double to 3.1 billion this year and could grow at 48% annually through 2030 to reach $16 billion. Just ad revenue. Channel checks indicate same store ad buying could be tracking better than 16% for the third quarter of 2025. Also noted engagement on Netflix is strong with at least a couple of quote, cultural zeitgeist titles driving viewership share. I think that's Hunt Hunting Wives. I think that's the cultural zeitgeist show that's on Netflix right now. That's right. Rachel's pointing out K Pop Demon Hunters, which I still don't know what that is, but I know it's a really big deal. So they have those, they have those big shows that drive new signups also right now. So Seaport thinks it could be a better than expected quarter. Their targets 1385, which be upside from here of 20%. Full disclosure, I am long Netflix. I've been long for a while have not sold any during this recent downturn and I'm hoping the stocks finally found support. All right, we did it, guys. Now you're gonna. Now you're going to be play the role of Michael Batnik. I'm going to give you the mystery chart and whoever gets it in the chat, Nicole's going to find you and we'll send you a T shirt or something. This is. Okay, this is a sector versus the S&P 500. I'm not going to tell you which is which. You could probably guess. So It's. You have one out of 11 chances. It's a. It's an S&P 500 scepter. ETF versus the S&P 500. Let me say I'm going to give you guys like a couple seconds here. All right? I got healthcare, financial, xle. Somebody guessed smh. Energy, financials, smh. Another Healthcare, another Energy. Very concentrated to the just a few. Here's the communication services. Somebody saying utilities. No. Utilities look way better. Tech. Of course not. All right, let's do the reveal. John, let's show them it is healthcare. I know a couple of people guessed healthcare. We'll hook you. We'll hook you guys up. Nicole will try to get in touch somehow or you can get in touch with us. Here's what I want to tell you. Savita Subramanian, who is one of my favorite people on Wall street, one of the smartest people on Wall street, just upgraded the entire health care sector. Let's do this xlv, the regular chart real quick. I want to show you how shitty. Not this, the next one. Yeah. I want to show you how shitty this sector has been. This is a three year look at the xlv. It's in the middle of the range. It's basically gone nowhere. While the S and P has obviously launched into space. It's just been really tough sledding. Got some really big market cap companies like UNH that look like shit and have very company specific problems. But Savita is pointing out that this is the, this is the moment where everything turns around. Let's put her chart up. She's showing you valuation support. This is the relative forward PE for health care stocks versus the S&P 500 in blue, dark blue. And that line running across in light blue is the average. So this, and this is back to 1986 by which Savita is showing us these stocks have never been cheaper. The health care stocks relative to The S&P 500 never been cheaper. I feel it's a 40 year chart. I feel like we have to pay attention to that. Right? So let me quote her. This is important. This is Savita. Pharma overhangs dissipating still early in the obesity opportunity, investors boycotted Pharma shares for most of the year because of U.S. policy uncertainty with pricing and tariffs. These seem to be one and the same being the key overhangs. The Washington overhang was partially lifted after the Pfizer deal. Pfizer just got out of tariffs with Trump. I'm not going to spend any time on that today. It's pretty benign overall in Tim Anderson's view. That's a Merrill health care analyst. If this is all drug companies have to do pretend they're going to build factories in the US Then that's much better than the headlines from earlier in the year suggested for the investor ready to dip their toe in the water. Tim Anderson highlights Eli Lilly and Gilead, blah, blah, blah, blah. So there are a lot of viable tickers in that space. And I wanted to make that the mystery chart because part of what we try to do here on the show is turn your attention to things that maybe others aren't focused on that have potential. So if you want to read more, you could track down what Savita wrote for bank of America. It's, it's a really interesting take. All right, that's it for the show. Once again, want to remind you guys, live compound and friends in New York City, Friday evening, October 24th. Make a weekend out of it. I have no idea if there are tickets still left. So excited to be hanging with Kramer and Michael on stage. Jim's got a new boy book out. He may or may not be signing copies that we may or may not have purchased for you. So it's going to be an epic night and would love to see you guys there. Thanks so much for listening. Shout out to Michael Batnik. We'll see him back next time and like and subscribe. Talk to you soon. Sat.