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- [00:00]
A
Foreign children of the Internet. Welcome to another trends with friends. I am Havad Lindsen wearing dressed as Jewish Steve Jobs. We've got the AI whisperer, Micah Parak probably in Houston. Phil who was dropped into a sweatshirt from a helicopter doing the Steve Martin plays an Egyptian. Then we have Mike Dudas who's joined us from fighting on the Internet and eating nicknamed foodis joining us. Timely, who's been all over Solana and crypto for, for years and years before that. Google wallet. We'll let him introduce himself. And then upward to the right. J.C. peretz, hot hand, early caller of market bottoms and he's having a good run. This kid from Cuba and I know, but that's. We like to let people know that we have an ethnic bent and very diversified.
- [01:06]
B
You got the white guy whose parents are from Cuba. Really?
- [01:09]
C
No JC's. JC's had a great market rodeo run.
- [01:14]
A
Oh my God, guys, listen, you know you're representing white youth. You, you're the whitest guy on this podcast. So you're representing white America. Phil necklace. Phil. Take it away.
- [01:27]
D
Judas. It's great to have you here. We're just going to jump right into it, man. Crypto's going ballistic. It's going insane. You tweeted the other day your dentist isn't going to notice until a hundred thousand. Love this. That's when things get really silly. Just, just, just talk to that a minute. Talk to the psychology of that, the attention of that, everything.
- [01:51]
E
Yeah. So, you know, thank you for having me, guys. Always a pleasure. From, you know, every previous market cycle, there's kind of like some sort of psychological number and then bitcoin just goes wild once it hits its new all time high or that, that psychological number. I mean many, many years ago it was 20k. Then it was hitting an all time high last cycle and this time we've kind of hit the all time high. But one of the metrics folks look at is where is Coinbase in the App Store? And last week Coinbase in the App Store I think was sub 100 in total. Apps moved up to 70 by late last week and I think it's in the 30s as of today, you know, it's still buy time. Not that I can give financial advice here until Coinbase hits number one in the App Store. And that usually happens after a big round number. It's the psychology, it's reflexivity. The higher the number goes, the more enticing these absolutely risky speculative assets seem to people. They're just attracted like a magnet. But it actually makes sense because what we've seen in historical cryptocycles is not only bitcoin, but actually the assets further out in the risk spectrum tend to go higher into silly season and silly numbers than anybody believed. People were literally buying digital real estate in the metaverse for more than a Manhattan one bedroom last cycle and digital JPEGs for more than any modern art last cycle. So I think that the point there is, is that if you're not hearing about it from your Uber driver, your dentist, then we haven't really permeated new, new people. And it really feels like that. And I think the first sign that we might be permeating new folks into the crypto market were the ETF inflows this week. You today I think Yesterday we were above 4 billion in cumulative BTC inflows. Even ETH, which hasn't caught a bid since I was a youngin, it was, was up, was up 33% this week.
- [04:02]
C
Anyway, yeah, just a great update on where we are given the post election crypto honeymoon phase, the trade cycle that you're talking about. There is another contrast signal that I'm just curious your thought. Warren Buffett is probably long more cash than he's been in a long time, 300 billion plus etc. On a secular basis. The other thing I think about crypto a lot, I spend a lot of time on AI stuff and one of the biggest issues on AI is getting enough data center compute and power. And a lot of people may have forgotten that crypto and bitcoin still needs a lot of compute. In fact, a lot of data centers I'm looking at are basically conversions from crypto site mining to AI data centers. How do you think about some of these secular companies counter signals to this tremendous run?
- [04:57]
E
Yeah, so I mean I think Warren Buffett, one of the most influential sort of investors and signals but clearly Donald Trump is a bigger signal. The market said that this week. Bitcoin since his victory is up 30%, gold is down 5%. So they've decoupled something that hadn't really happened before. And I think a large part of that is actually Trump like specifically and deeply embracing the asset class which by the way he had the same negative things to say about the asset, you know, five years ago as as Warren Buffett did.
- [05:33]
C
And a quick follow up I one of the thing has been talked about post election is Republican Cynthia Loomis talking about a bitcoin reserve, strategic reserve for the US and then potentially other countries following suit. And that may be Another set of tailwinds, potentially.
- [05:53]
E
Absolutely. It was something that I think many of us maybe were cautiously excited about, but maybe didn't take tremendously seriously. But then to hear the day after the election or the night of the election, Cynthia alumnus, sitting senator, talk about that being something that she wants to push forward, I think that makes it more tangible, especially when you combine it with a Senate majority. Now, that was in large part due to a significant amount of money and support from the crypto lobby and crypto companies and also Republican House is what we're looking like. So it does seem like that's a realistic possibility. So that's big news, obviously, and would.
- [06:38]
B
Be, I wanted to just mention on Michael, with Warren Buffett. Warren Buffett, the last time he had this percentage of his portfolio in cash, the market went on to have the greatest 52 week period in American history. And the time before that that he had this percentage cash, the bull market lasted for three more years. And if you look at the past decade, the time that he had the least amount of cash was actually when the market peaked in 2021. So Warren Buffett's cash levels are not only a negative for the market, like a lot of people seem to think, it's actually the exact opposite or has nothing to do with the market. Which is what I think.
- [07:20]
A
I think it has nothing to do with the market. So let's just drill in here for a second. People are fascinated by this number. If you look at, it's not how much cash he has, it's how well he's done despite the cash he's always had. Right. Like, and people need to understand that. Every single person. I'm too conservative, obviously for my skill level. No. But I'm too conservative. But like people try and he's the only guy who gets. No one yells at for holding cash. Right. And I think people need to understand this more. It's not how much cash you have, it's what you do with your investments. Right. There's this mantra that you have to be fully invested all the time and you should be shamed if you don't. I think people need to look at Warren Buffett and say, hey, how did he like, let's backwards into how he's done this. And, and he's done it always in profitable, in businesses and holding cash. Go ahead, Mike.
- [08:12]
C
No, and he's always said he's not a top market timer. He's a voting, he's, he's a weighing machine, not a voting machine. And we're, we're fascinated by the voting machine dynamic. Ironically speaking, both selection for crypto, but Warren's a storyteller.
- [08:28]
A
So I think people who are investing in crypto is a storytelling business, 90% of it obviously, because the fundamentals are hard to describe. So I think the thing that is he's built community, meaning he's a currency in his own right. People travel to see him once a year. He can get away with holding 300 billion in cash and no one judges him. And that's just part of what makes crypto so. And the fact that he called it rat poison or his partner did rest in peace. So Mike, how do you think about all that? And let's just time do this. How we feel about people chasing dreams as they did with JPEGs and art. How do you know what's real and how do you see the world? Just you and your firm's six man capital. I mean six man Ventures.
- [09:13]
E
Yeah. So the, the way, so we view, we view the crypto markets now as, as very real. And you know, I think that perhaps wasn't the case, you know, in the, in the 2017, 2018 ICO era when you know, basically you could have a, you know, a slide deck and, and a few socials and raise, you know, $50 million in ICO. There's a significant amount of professional capital now. Some of the best firms in the world for the past couple of cycles have been investing in real companies and real companies across serious segments. So things like stablecoins and stablecoin infrastructure, things like business and consumer payments that are actually starting to see real adoption, like stablecoin volumes are almost at the peak from last cycle and we're still very early. But clearly norm, we are using US dollar denominated assets outside of the United States because it's a fantastic asset to hold relative to a lot of other currencies. The other areas that we're looking at are real world assets. So bringing things like Treasuries and increasing bonds and other things on chain so that they're composable, can be used as collateral, can be accessed by anyone, anywhere in the world who, you know, many cases haven't been able to access those assets. So that's kind of the serious side. And there's other things, you know, deepen we can, we can talk about decentralized physical infrastructure. Hive mappers, a decentralized mapping network that competes with Google Maps and Apple Maps. You know, Helium is a decentralized mobile network that competes, you know, with the big, big mobile carriers. You know, Verizon at&t. And also take some of their excess capacity off when they, you know, need it and.
- [11:10]
A
Or JC's favorite. That's JC's favorite. So I mean, it makes the most intuitive sense. Hive Mapper. And I'm biased because I, I indirectly own them through you and through Multicyle is they make the most intuitive sense, like mapping changed the world. You know, I was in L, I'm in London, and it's just amazing what I can do with Maps. And it is, you know, I go back and forth between Apple Maps and Google Maps. But Hive Mapper is really interesting in that it's decentralizing that theoretically and then obviously with helium. It's the same thing for your phone network. Yeah.
- [11:43]
E
And we just backed a company called Dawn Internet that's doing it for WI fi now. You know, put a WI fi signal up on an apartment building and it can broadcast signal out to like 80 buildings in the surrounding area. It's extremely powerful and real people are starting to use it. So those models are working. They're real use cases. And that adds to defi, you know, which are sort of like decentralized or permissionless. Borrow, lend markets, money markets, et cetera. And then you got the fund stuff. And I know some people are resistant to this, but our fund is pretty serious about investing what I call business in the front stuff I just described and then party in the back. Any economy needs a mixture of the serious stuff, the serious investments and the fun. And this cycle we have sort of a better form. You mentioned NFTs earlier, but a better form of that. Those were meme coins.
- [12:32]
A
Meme coins is the future.
- [12:33]
E
Exactly.
- [12:34]
A
Are not going away. NFTs still no 1 could make it easy for me. I was given them as gifts. I never, you know, JC wanted to buy. I'm sure they're doing well. Which one did you like? J.C. and I kind of liked them too. The.
- [12:46]
B
I own a crypto punk. But that's like the.
- [12:48]
A
Yeah, the punks have. The crypto punk have the punks run in this run. Are the punks running in this run last week?
- [12:54]
E
They have. Yeah.
- [12:55]
B
Yeah, they're up like 40%.
- [12:57]
A
And okay, that's a real number. But so. So where. Okay, so the fun. Is Internet supposed to be fun? And here's what I'm thinking. And you, Mike, you were on this. Or maybe it's because you were at Google Wallet. So. So you can, you can chime in how that helped you see the light here. But as one of the first guys who was Negative, kind of, because you're a real world businessman. You came into Google and you started your own companies. So I think it wasn't a moment for you. And then I remember you, you flipping. So describe that moment quickly. But then let's talk about fun. Because the Internet was supposed to be fun and Twitter was the funnest place on earth in the beginning. Right. It had the spirit. It was coming out of a bear market, long Internet, bear market. Then you had YouTube, Twitter, Bam, Bam, Bam and WhatsApp. You know, forgetting Facebook and LinkedIn and this stuff. Yeah, bam, bam, bam. Fun, fun, fun. And then we see the clap and the fun got squeezed out of the Internet. When I think of Meme Coins and I see this with your investment in Pump Top Fund, but more specifically in Spot Dog because I'm just friends with Nikki and you know, he's very New York and local and friendly. I cannot believe how easy it is to just have fun again. And it feels like football without contact.
- [14:15]
F
Right.
- [14:15]
A
Anything happens, the line of skirmish is a fucking mess. You're going to get your fucking pants pulled down or your, or your turtleneck pulled over your head and punched in the face. But that just feels like that's the rules of engagement and that's the way the Internet was supposed to be. So chime in on all those points.
- [14:31]
E
Yeah, so I was definitely a religious sort of zealot about bitcoin early on, what you would call a maximalist until probably about 2017. And I just believe that we weren't going to be taken seriously by the quote unquote, real world unless we had, call it better money that was outside of the existing financial system and government fiat money structure. And it was honestly, it was zealotry and frankly that was kind of necessary. I think to get to where we are today. You needed those people who just looked silly and stupid and were loud about it. And I was definitely one of them, but certainly not one of the chief ones. And I think there was a time that you kind of realized bitcoin made it and you could stop calling everything else a fraud and a scam and this, that and the other thing. And. And actually I started to see really good, you know, founders like coming from, you know, called traditional businesses and just young people was really seeing the youngest people. So I started a company in 2018 called the Block, one of the leading research and business, research and news businesses in crypto and kind of what. And I was still kind of a bitcoin maxi. But what turned me was just seeing what these Kids like I was 40 at the time and these kids, you know they were anywhere from a 19 to 28. It was a wild sort of generational gap for me. They were obsessed with things like Ethereum a decentralized stablecoin Makerdao on Ethereum really powerful. I thought bitcoin was the best money and then I saw this decentralized truly decentralized stablecoin and then playing fun games Uniswap. The first time I swapped coins on Uniswap and it's like any coin pump is sort of that on steroids but any coin magical it was just as good as a centralized exchange and I could do it from anywhere with my own money and not ask anybody. Not kyc just magic Seeing that again we can call those serious things but that was the unlock the stuff you talked about Meme Coins they're fun but it's money and it's markets is actually mixing my telegram groups. You can hear the excitement in my voice. My telegram groups, my slacks, my friends. In addition to betting on the jets game which lets me down every week I can have fun 247365 here was.
- [16:47]
A
My big problem and I'm biased because I hate discord. I hate everything about that company. I feel it's like was deliberately spamming good actors like stock twits and Twitter with spam and hid behind whatever bullshit I hope they go out of business. And again it's great for gamers but it was co opted by crypto and scammers to that's why I couldn't get into NFT if you make me go on a close into a closed network or whatever to talk about crypto And I think what what Meme Coins does it truly retails what even institutions don't take seriously are just starting to take serious. So it's truly ahead of institutions both in market cap because it doesn't have to be big. It's the true thing. Even though it's not a thing it's the true thing. I know. Hang on a second. I just want to get this thought through because Mike's here but it it truly allows it's like when BlackBerry allowed institutions were pinning each other right just before Twitter every trader was using BlackBerry at institutions because it was their way around the system to do insider trading. And I come along and Twitter comes along and I say listen people will do this in the real world on Twitter and stocktwit and now here we are with Meme Coins. All you fucking need is texting. You don't need any tech. You don't even. It takes two seconds to set up an account and you're man to man against the rest of the world, rug pulling and, and learning about the markets. And you know, fundamentals will come because they'll have to come. But this is like the beginning of the beginning. Finally, I think Stablecoins, Bitcoin and now Solana meme coins or whatever, whatever competitors to Solana is that like close to a real take?
- [18:35]
E
So basically Discord plus NFTs the whole idea that we were talking about was like communities that anybody can access, but by the way, they're limited and exclusive. Meme coins are about abundance, right? It's about inclusivity, infinitely divisible, really, really small, like price numbers, you know, 0.0002 is the cost and it's a total mental change. And that's all about being public. Not exclusive, but inclusive. Putting memes on Twitter, doing the things you love, but now not doing them in these Reddit only forums, but bringing it out to a broader group. And you can see it's starting to spread like wildfire. Especially the last dude I opened, I opened an account.
- [19:12]
A
I actually am flying, letting 25 bucks, 50 bucks. I have friends that have turned 75 bucks into like 30 grand.
- [19:19]
E
Are you using a telegram bot for it? One of these?
- [19:22]
A
I'm not going to use anything if it's not textable or shareable on stock twits. I don't do that type of stuff. Everything I do is like public. But. But what's so fascinating about this is that I'm 60 years old and this is the first thing that I get. I know it's not there yet because of the fundamentals, because I don't understand non fundamental things. This is why JC loves it, because it's all technical pretty much for the. For the most part.
- [19:47]
B
And it's him again about the meme coins. Why do I like the meme coin so much? It's because that's where the relative strength is. Look across the crypto stratosphere. Bitcoin is a severe underperformer, as are many others. The relative strength has been in meme, by the way, before the election, the relative strength was in the memes. Just to be clear, it's been there.
- [20:06]
E
I'd argue, by the way, that the serious coins themselves are memes. Ando I mean it's like a serious finance company that's trading 10 billion.
- [20:14]
B
But yes, to be fair, yes.
- [20:16]
E
No, but I'm saying like, yes, exactly. I ask Founders, are you going to trade on fundamentals or on memetic value? And whatever you're doing?
- [20:23]
A
And by the way, what's memetic value? What's memetic?
- [20:26]
E
Oh, it's just. Oh, that's the AI coin. Oh, that's the world coin. The eyeball coin, the identity coin. You know, things like that that are easy to lay.
- [20:34]
B
You know what the fundamentals are. You know what the fundamentals are. It's very simple. Originally, PopCat was designed to be the next bonk. Not only did popcat become the next bonk, it exceeded the market.
- [20:45]
A
Oh, he's a bonk starter. He started blanc. He's Jesus of bonk.
- [20:48]
E
You're talking to people when Nicky Montana.
- [20:51]
B
Is talking about fwog is going to be the next dog with hat. That is legitimately the fundamentals of that particular meme token.
- [20:58]
A
So you're saying storytelling is the fundamentals.
- [21:03]
B
As opposed to what?
- [21:04]
C
That's not fundamentals. But I will let it go. I mean, you know.
- [21:06]
A
Well, it's fundamentals with. With capital. Fun. F U N dimental. You got to have fun and you got to be demental to play the game.
- [21:15]
B
I like that.
- [21:16]
C
Nicely played.
- [21:17]
A
I just made that up. I just made that up.
- [21:19]
D
Let's throw up. Chart, slide 8. This chart, this is a JC chart special. And it gets to the point that we're talking about here that all of a sudden we're seeing the altcoins waking up. We've had bitcoin outperforming. We've had bitcoin dominance increasing during a bull market, which you could say runs counter to previous bull markets in bitcoin. Now you're just starting. So we might just be at the beginning of the altcoin market waking up. Jc, just give us a minute on that.
- [21:52]
A
Hang on, jc before you go in here, jc, explain this to me. Is this psychologically because. And then Mike explained this technically. Is this because people feel rich and just reallocate out of bitcoin? Because more confident just take more risk.
- [22:04]
B
Nobody's. Nobody's moving out of bitcoin. Quite the opposite, actually. They're moving faster than ever. So no, this is. This is. This is a market breath. So while I was orange pilled at a Lindsay event a decade ago, I was. I. I'm a OG traffi bro, you know, through and through, you know, institutional technical analysis looking at market breath in the Russell 3000 S P500, a firm believer that it's a market of stocks, not necessarily a stock market. And so as Crypto markets have evolved and there have been more tokens. We have been able to aggregate the breadth of crypto. Is it just bitcoin? Is it just seven stocks? Remember that? You know, by the way, it never was just seven stocks. There's a lot more because we counted. So we do the exact same thing in the crypto markets. So this is what we call breath rust time. This is an expansion in participation. And these breath thrusts historically do not come at the end of cycles. They very consistently since the beginning of of time happened at the beginning of cycle. So maybe this time is different, but I doubt it.
- [23:11]
A
When you say breath thrust and I think breast thrust, what does that say about me? Phil, Psychology.
- [23:18]
D
Well, you can get away with that now. So you know, woke is.
- [23:22]
A
Thank God. Thank God Woke is over. So jc, I think we should start calling these breast thrusts just to attract the ladies.
- [23:30]
B
It's a free country.
- [23:31]
A
Okay. Just going off the rails. So, so, so Mike, talk to us a little bit about Solana then and how this, how this, how this moves, this moves with this chart. So, so let's just talk about Salon and potentially how you're thinking about Solana contenders or imitations or if there's just one Solana. Just walk us through that before we let you go.
- [23:52]
E
Yeah, so I mean, so we're very, very. We invest quite a bit in the Solana ecosystem everywhere from the application layer, everything from like gaming to infrastructure, things like Helios, which is one of the largest RPC providers and infrastructure providers to Solana. The token itself which we purchased in public and private markets. So the entire ecosystem and depends the run on Solana and then obviously you have pumped the Meme Coin factory and Launchpad on Solana. So there's a bunch that we're doing there. But the reason we're investing so much here is that it's really outpacing any other ecosystem in terms of economic value. Fees are significantly up. Application revenue Syncrecy, which is a liquid fund in the crypto space. You put out a great report today that you should share with the stock twits folks. But basically Pump is a top revenue producing application in crypto right now and there's like 10 out of the other top 20 apps are on Solana and the rest are spread out around ethereum and other L2s. So it's growing at a faster rate, but it's one third the price of Ethereum. And basically we look at Bitcoin in its own bucket. It's not yet a smart contract chain. You can't really build apps on it. There are folks building L2s, but that's still a ways off before it gets to scale. I view everything else as competition and it's just been clear since the bottom since SBF went to jail December 2022 when Sol was $8. Now it's at I think 210, 215 bucks and it's backed more than any other chain is by an improvement in metrics. And the only other chain that I think is growing at a similar rate is BAS, which is Coinbase's L2. Fairly centralized, centralized sequencer. Still no fraud proofs. But you know, you kind of have to trust Coinbase, which many people do and developers are building on it. But Base doesn't have a token right now. So Solanas, many people believe and the price action has shown is sort of the best way to play everything outside of bitcoin sort of in size and you know, staying out of call it, you know, the meme coins or the more speculative stuff.
- [26:00]
A
Dude, that's a good. Phil, any other questions? Mike Pere for Mike while we got them.
- [26:06]
C
No, just the since you talked about Discord and it's obviously very important for crypto, I just also want to point out it's important for apps midjourney. One of the leading photo AI apps, their prime source of distribution was Discord for a very long time until they went direct to the web. So discord is a big thing.
- [26:29]
D
I have one last question for you. Just like sort of a, you know, an end up question. 2025, what are you thinking about? What are you kind of loving and what, you know, where's your head at in 2025 on the investment side in crypto?
- [26:45]
E
Yeah, absolutely. So we're pretty optimistic that, I mean retail hasn't really come yet. Just starting, you're just starting to hear, you know, your friends. Yeah. Thanksgiving, it'll be the classic Thanksgiving talk to the family about crazy crypto again and you won't be embarrassed for the first time in what, three years that's truly going to happen and we just hit all time high in market cap. You can see what happened from that last small bump, the first one left to the next one. We think we're pretty optimistic that this isn't going to be a cycle that ends in the next three to six months. I know there are liquid funds. There are some folks who do think that, you know, we're going to have a shorter cycle but for whatever reason, you know, based on I think the electoral climate, the regulatory climate in the US that looks like it's going to be favorable. The fact that we've seen this movement with a relatively small number of market participants, but moving significant amounts of dollars. You know, rumors that governments are potentially purchasing Bitcoin, and frankly, these chains work now. I mean, they would break down every time you try to use applications. You know, Ethereum fees would spike into the hundreds of dollars per transaction. Solana used to go down every couple months, and those things have changed in the last two years. You actually build real applications that will keep people interested. So we're looking at very much at the consumer layer, at the app layer, as are other VCs. And I think we can now invest with a lot more certainty than we could six to nine months ago. We've actually invested a fairly slow pace in 2024 relative to our historical investment pace, and that's picking up once again, a couple term sheets just this month. And I know that's true of other firms at both early and mid stages. So I think that's good for developers also. Developers can now get things to market much more quickly. You have entities like Alliance Dao, which is kind of the Y combinator for crypto, and they're really stressing now that we have the tools here to get rapid iteration and get apps in the market in a month and weeks. And it's happening. So you're seeing a lot more experimentation, which I believe is bullish and is going to prolong the cycle and actually start to attract normal people. Lastly, you know, I know, so we're sort of maybe contrarian and still thinking crypto gaming is going to be a thing. And there's a couple really big Games launching in 2025 and some that just launched in 2024. Crypto Game and Avalanche just went to number one on the Epic Store last month.
- [29:01]
A
So, and what, what makes it, why do they need, so why, why will it finally happen if the, if, if the Internet isn't broken for gaming?
- [29:10]
E
Yeah. So it's like, it's basically the notion that, you know, if I'm playing, you know, Fortnite all day and, you know, purchase, you know, buying these assets, I'm leveling up, I'm spending a ton, you know, V bucks, but I'm not actually owning anything. And, and there are, you know, obviously markets for skins in certain games, but now that, you know, imagine, you know, I can have ownership of the, of the mod that I build or, you know, ownership of the assets that, you know, I, I, I acquire by doing better in a game. We're already seeing this, by the way, with some games, you just haven't caught mass popularity. It just takes one. You know, when Yuga. Yuga Labs was that one that captured the Imagination Board, API Club and NFTs. Unfortunately, that exclusivity, that Dow structure on.
- [29:53]
A
The VCS, there was just so much BC money. It was the opposite of what we were supposed to get.
- [29:57]
E
Exactly. So I think folks have learned from that. There's some games breaking out, parallel tcg, which is a card game, and these things. Again, there are still VCS involved, but you don't have like these, you know, these daos and this high futin. Like, you know, feeling that we're better than you and we're reinventing the world. It's just adding some fun money and, and ownership to. To things you're already doing. And so that's proven to work. You know, step in last cycle, move and earn. Earn a couple coins for going to pick up a bacon, egg and cheese, you know, down the street. That really resonated with people. Unfortunately, that economy got cooked too fast. They didn't have a good enough sync for the token. And. And so I think our teams are learning from that. You know, we backed a sleep and earn company called Sleep AI that we're really excited about and think it's going to be different this time.
- [30:42]
A
Very cool. Phil, what else we got for him?
- [30:45]
D
No, that was great.
- [30:48]
E
I'm.
- [30:49]
D
I'm just blown away by the resilience of the asset. Like, every time bitcoin comes back, it just tells me it's like the Lindy effect. Is that. Is that a thing? Yeah, it's like every time it comes back, it's telling you this is real. That's my biggest takeaway. So hearing you talk about it, Mike, I can't appreciate it enough. I know. We all do.
- [31:10]
A
I feel it's like, Phil, it's like the NFL. You can't kill the NFL. You know, it's like. And like I said, you can't kill the NFL. And coins are finally the NFL of like, every human being can just go attack each other and try and make the other guy a bag holder. It's kind of like the global game of chicken attached to a change purse. I just find it to hold on.
- [31:31]
B
But listen, for me, as an outsider, as somebody who. I feel like an outsider, like, I'm not one of these, like, crypto builders or whatever, like, just trading it. I don't really give a whether they all go to zero or a million. Like, I'm Good either way kind of guy.
- [31:42]
F
Right.
- [31:43]
B
I see really smart people that could be doing anything they want with their time and they're allocating their time and resources and energy to this space. And I keep seeing that over and over and over again and it doesn't stop. And it keeps getting bigger and more of them, and I keep getting more impressed by them. That doesn't stop. So as an outsider, I don't think it's going anywhere.
- [32:05]
A
And you think it calms down, Mike, do you think? I know it seems like crypto people take everything personally, but they deserve all the attention they get. Right. Whether it's laser eyes or, you know.
- [32:16]
E
And.
- [32:18]
A
I think it is important that laser eyes aren't back. And all the silliness is not even caught on the silliness. It's like more people want to keep stuff quiet. It feels like with meme coins. I've never heard of any of this shit. And so I feel like that's part of the charm this time around is no one needs to hear your nonsense and I don't have to hear about it. If I want to play, I play. I don't have to download Discord or be in a Telegram group. It just feels more accessible and fun.
- [32:42]
E
Yeah. And there's more than you know, to. To what you were mentioning earlier. There's more than one cult that's real. That's. That's Lindy now too. Right. First it was Bitcoin and then it was the Ethereum ecosystem. Now you have Solana and Swee and Aptos and some other ecosystems. Telegram we haven't even talked about, but you've got hundreds of millions of users who now, you know, primarily outside the United States can have a crypto wallet. And we have portfolio companies that are using that for top of funnel acquisition and can literally get millions of people, real people using their applications and you know, a couple of months. So it's just a distribution channel that's never existed and it's easier than ever for people to get involved. So I'm pretty bullish.
- [33:22]
A
Distribution everything all right? Hang in there, Mike. We're going to switch topics to the real world world. Well, not that you're not in the real, but the true real world of tasering people and Josh, Josh joining us, I think from Scottsdale today. Josh.
- [33:36]
F
That's right.
- [33:36]
A
Yep.
- [33:37]
E
Nice to see.
- [33:39]
A
Josh is, I'd say, president at Axon. I can't.
- [33:42]
F
That's right, Yep.
- [33:43]
A
So just walk up, just give everybody, that's live streaming here, just two minutes on Axon you know, Axon's. You and I, we met on the Internet. I, I, I smashed into you complaining about the brand change. So tell everybody a little bit about Taser and Axon.
- [33:58]
F
Yeah, sure. So, first of all, thanks for having me, Howard. And you know, Axon is the preeminent technology company in public safety. We apply disruptive technologies that we see in our lives as consumers to public safety in ways that promote safer outcomes and keep both officers and civilians safer. And so, you know, it started in 1993 with the Taser business, you know, and I'm sure everybody's seen the, the, the police carrying the yellow Taser. Essentially, it shoots out darts, connects to the skin, and conducts a waveform between the darts that mimics your brain waves to your muscles. And so what happens is you really tense up and, and then, you know, you're incapacitated for five seconds as the police take you into custody. So that was kind of how we got started. And then it's a story of kind of one thing leading to the next. So there were questions about how Tasers were being used. So we put a camera on the bottom of the Taser to show the incidents unfolding, you know, in the real world. And we say, hey, this is working pretty well. Maybe we should take the camera and put it on the police officer instead. And thus the body camera was born. And then all of a sudden, we're pumping out all of this content saying, oh, actually the bigger issue here is going to be how do you store and manage all of this content? And at this point, we store about 30 times the amount of storage in the Netflix library on our product called evidence.com, which is the biggest data set for police on Earth. And then from there, AI, you know, is, is the, the name of the game right now. And with this, you know, big data set, it's a question of what tools can we provide our customers to make them more efficient. And we've launched a couple of those in the last year here that we're really excited about. And, you know, now we're, we're moving, you know, doubling down really, in our investment in public safety, but also investing a lot in the enterprise space. Retail workers wearing body cameras, for example, logistics professionals wearing body cameras. So we're really excited about, you know, our opportunity to, you know, number one, build new products for our current public safety, you know, customer base. And number two, take those existing products and apply them to other customers around the world.
- [36:09]
A
And when did you join Exxon?
- [36:11]
F
You joined very early 2009. 2009. So.
- [36:15]
A
And what was the market cap then? They, they went into, they were the Qualcomm poster child. The bubble in 99. Taser was, it was like ballistic. It was kind of like dogecoin but with the real product. Then you went through the dark years. So you joined in 2009. What was the market cap that it.
- [36:30]
F
Was tiny, probably about 300 million or 400 million.
- [36:33]
A
300 million guys talk about small cap. Today it's 4:40 fucking billion dollar company that no one has still heard about. And every time I hear about evidence.com which you guys don't promote, it's really, you have a Netflix and an Oracle. I kind of look at Exxon. I don't look at the financials that much. I just break out the revenue from your kind of the security side of the business. And that was obvious. But it feels like a Netflix and an Oracle means not a consumer product. But like how, why the name like so, so how do you manage all three of these things going on at once? The consumer, not the consumer part, but the actual product of Taser and the cameras and obviously the software and cloud and AI and all this?
- [37:17]
F
Yeah, absolutely. Look number one, how we need really smart people and we're, we're very unapologetic about the fact that we are trying to build the most talented team in technology and that's the only way it works. Our founder is genius level is. I don't know that any individual has, has contributed to more lives being saved in policing than, than Rick Smith, our CEO and founder. And you know, we got to have people that can hang with him and can execute on his vision. And so we're, we're relentless about trying to find the best people on earth here that, that are not only good at what they do, but capable of taking the company to the next level and the next level and the next level. And you know, we look up, you know, after, after a decade or so and, and we see the kind of returns that we've been able to generate for our investors. And so that's really where it all starts. Got to have, got to have a team that can, can do a bunch of things at once.
- [38:10]
A
I'll let some other people ask questions. We got a thousand questions. Go ahead, Mike.
- [38:14]
C
So I, this, this is amazing chart and amazing track record of the company just evolving. Obviously data is a big thing for the company. You mentioned Netflix and obviously there are privacy issues with that in terms of being leveraged for AI type of applications. But as you move to non Policing applications, retail, these other segments. How do you think about AI and data as part of the business model for the company?
- [38:39]
F
Yeah, I think one of the things that at least I believe about AI is everybody talks about it to the kind of max extent like self driving cars or altering DNA or all these other kind of of pie in the sky things. To me, AI the thing it's best at right now is just automating very mundane processes that nobody wants to actually do themselves. And so the, maybe the poster child of that for us is police reporting where if you have a police officer week to week, they spend 50% of their time writing reports. So they're in the field actually being police officers for about half their time.
- [39:17]
C
Every TV show, every TV show, every.
- [39:19]
A
The Wire, NYPD Blues, they all hated their job.
- [39:23]
C
They all, they have to write reports and they give it to the youngest police officer on this, on the right, sorry.
- [39:28]
B
Right.
- [39:29]
F
And so we've, we've come out with a product called Draft one which essentially analyzes the transcript of the body camera video and writes the police report for the officer. Now it doesn't write the whole thing. It gets you about 80 to 90% of the way there's. But then all of a sudden the officers just editing the report, adding more color where needed and you know, if we can give police back even half their time, that's very creative administrative type of jobs. Obviously we need to safer communities, less stress on recruiting police officers, etc.
- [40:03]
A
Yeah, this was a mike, this a light switch for me. When I was at our LP event we had Josh come to speak and I think the stock was, you know, it's not about the stock, it was just a story. And so, so I got to ask you this Josh. In a world where Palantir, Alex Karp's the best retailer at the right time, in the right place, I, I consider if they're at a hundred billion for a software company or whatever the number they got to. I still put it on, I would still put it on you that your boss, founder is underselling this company. Again, it's his, it's, it's Wall Street's job to find these things. Right. So I've been lucky. I found it before other people found it. Like how do you think about that? In a world where Alex Karp's on TV every day telling the story about he's co opting the story, which is he saved more lives than anybody when. And they're talking about it in theory really, because they can't really talk about who they're saying, whereas the founder at Taser really has saved lives. And it really is an amazing story.
- [41:06]
F
Yeah, it's interesting. I think for us there's a couple things at play. Number one, like internally, the things we focus our energy on. Number one, growing revenue profitably. And we've done that. You know, this is our third year, third quarter in a row of over 30% growth, 11 straight of over 25 growth. And in doing so profitably, without sacrificing R D investment, which means we've got to be, we've got to get leverage out of our SGA functions to make this work. The second thing we do really well is we relentlessly invest in our customers. So top of the list every year in terms of where we're going to put headcount. It's things that directly affect our customers. Building new products, customer success, customer support, etc. And the third is, you know, fulfilling our mission of protecting life. And when we do those things over and over, we kind of feel like the rest just takes care of itself. We have a customer base at this point of all public safety professionals and government professionals. So, you know, advertising outwardly to consumers, let's say, that doesn't really. Yeah, it might promote some more interest in the stock, but in terms of the calories of effort, like, we'd rather do the things that are going to lead to better results, you know, as a business and, and getting in front of our customers and earning their trust and then frankly, letting them tell our story. I think, you know, the, the best moments over the last 15 years for me are when you hear customers say, hey, I didn't have to take someone's life that day, or, hey, this body camera saved my career, or I'm having fun being a police officer again because I don't spend all my time writing reports like, those are the things that ultimately I think matter in the marketplace. We're in far more than, you know.
- [42:47]
A
No, they, they do. I just joke with you because in a world of meme coins we were just talking about, in a world where Palantir is a meme stop, even though it's a great company per se, like, you know, I haven't dug into the financials, but in a world where Palantir is a meme stock, Dogecoin, even Tesla is a meme stock, you guys are such an undervalued again, forgetting the financials, but it's such an undervalued company when you truly are protector of this degeneracy economy and everybody's on the list. So, so what does the day to day for you look like? Is it international? So, so what percentage of the company is us and like does, you know, and seeing what happened in Amsterdam or seeing what's happened in the streets of Europe, like where does Taser fit into that?
- [43:29]
F
Yeah. So right now international comprises about 15 to 20% of our revenue in a given quarter. We have, I'd say probably about 10 to 15% of our employees are internationally based. My day to day is, you know, I have the best job in the world because Rick is our product visionary. He figures out what we're going to do next in terms of product. And I run the company data today. And so for me, I think a lot of companies struggle with like, hey, what's the next product? How do we find product market fit oftentimes for us? Like on my right here, I've got a quote from Steve Jobs that say, hey, the best companies say no to good ideas. And that's what I kind of feel like, you know, that's the environment we're in where it's like we got a lot of good ideas from Rick and it's about prioritizing them and then running the machine, making sure that we've got people capable, like I said, of doing all those different things at once. And so I spend most of my time just day to day running the business, holding everyone accountable to the talent we have, making sure we're investing in the right places and, and holding the line in the right places as well. And you know, it's, it's a really great combination because I get to do what I'm passionate about every day and, and Rick really gets to do what he's passionate about. And it's a, it's a great combination.
- [44:46]
A
What's the worst part about being, because you're run the day, that being a public company is not pleasant. So what's the worst part of that.
- [44:53]
F
Worst part of being a public company? I don't know. I, I think in general it's just frustrating. You know, we've, we've had some, some quarters where we're, we were really excited about our results and, and you know, you, you, you, you know, if it, if it doesn't meet, you know, the, the issue of the day for investors at times like in Q1 of this year, we announced an awesome quarter, but our RPO didn't grow that much. Our remaining performance obligations, and that's simply because seasonally Q1 is not a great bookings quarter for us. We're kind of laying the groundwork for the year and, you know, you kind of get. You kind of take your lumps during those moments. And, you know, the kind of, you know, the talk track starts of, oh, is the growth slowing down? Have you guys lost momentum? It's like, no, it's just, you know, we. We look at the full year and we got to execute and do what's right to deliver, you know, an awesome 12 months and not an awesome three months. And so those are the moments where you're like, man, you know, that's. I wish. I wish people, you know, appreciated the story a little more or understood what we're trying to build for the long term here. But hey, there's a lot of great things about being a public company as well. Certainly the recognition that comes with great execution and a lot of success, you know, is amplified when other people can participate in that, in that value creation as well.
- [46:10]
A
And the taser itself, like, what's it like? Have you been shot?
- [46:15]
F
Oh, yeah. Yep. Absolutely.
- [46:17]
E
One.
- [46:17]
A
One week into the job, guys, we gotta do it. I mean, so I'm not doing that. What do the. Mike, have you been shot? Dude, it's. You've definitely been tased.
- [46:30]
E
I can neither confirm nor deny.
- [46:32]
A
Okay, you've never been taped.
- [46:34]
D
One video of the guy running on the front lawn who gets tased and just falls down. It's a cl. It's. I mean, it's horrible, but it's funny forever.
- [46:43]
A
No. And then what's the name of the movie where it became famous? Did that had to help the.
- [46:47]
E
Which.
- [46:48]
A
The Hangover. Oh, my God, what a scene. That had to be like. Were you. Did you guys know you were in that?
- [46:56]
F
We. We did not know on the front end. I found out the same way everyone else did when I was kind of in the movie theater laughing my ass off when. When that scene came up. But yeah, that was. That was kind of a cool moment for sure. The don't tase me bro movement in the mid-2000s. Remember that? The kid at University of Florida. There's been a few of those. But in reality, I think the way, you know, these are serious things. This is a. This is truly a weapon that's used in policing to. To subdue and de escalate. So we try not to make too much light of it. But because we have such an intense mission, it's also fun to smile once in a while about some of those.
- [47:35]
D
You guys have saved. Plus, you guys have saved countless numbers of lives.
- [47:40]
B
Yeah.
- [47:41]
D
So you can have a Little fun with it. It's not serious.
- [47:44]
A
So question. If I tased in a pool, what would happen to me?
- [47:48]
F
We got some videos of that, actually. You know, it's the circuits within the skin. So we've. We've seen people tase and then maybe fall into a pool. You know, the only issue there is the person's incapacitated, so they can't swim. Someone's got to go in and.
- [48:03]
A
Okay, bad idea. Bad idea. That's like. That's like trading on leverage meme coins.
- [48:07]
E
Oh, there.
- [48:08]
A
Here's one of the great. I mean, this movie was the last time I laughed out loud. That's how bad movies have become. Sadly, is like, that's probably the last movie I laughed out loud. Oh, yeah. And there's a group of people. Oh, my God.
- [48:23]
F
Yeah. And Rob Rickle, actually, that scene he presented at our user conference last year. And so he's a big fan. Favorite policeman, former military, great guy. And, yeah, he's been part of the Axon story along the way.
- [48:39]
A
Okay, so now let's just talk about the enemy. Do you have. So where do we look at. I mean, listen, where does the NRA stand on tase? Do they hate you? Have they. Was that the enemy in the 2000s? Like, how does. How does. Again, you probably can't say, but in a world where the NRA is so powerful, where Taser had to have them as their enemy for the first 15 years of business.
- [49:01]
F
Yeah, I don't know that we've actually ever looked at it that way. Like, in reality, the reason guns exist in policing is because they're effective. Right? Like that. That lead ball will penetrate anything and fly right through. And, you know, in reality, it's a necessary part of policing today. We look at it as, hey, if we can, through technology, create something with that, that has the same kind of, you know, incapacitating effect without taking a life, we feel like everybody should support that. And. And so we're not. You know, we've got huge, huge gun fanatics at work, and we've got people who have never fired a gun at work. I think, you know, our job day to day is just how do we focus on using technology to provide an alternative to. To blowing a hole in somebody, frankly.
- [49:49]
A
And I'm stealing the story. I rarely get this time with Josh, so. And we do have to play golf. Josh, a great golfer. Guys, just chime in over me if you have to. I'm just. I'm taking every shot I got here. The. The other thing I want to Say is the world that we live in today, right? That's not the world that you want or designed. So we, you know, I call it the degenerate economy. You're a huge benefactor of the tailwind of misbehavior and whatever we call it. How, how, how does Axon see that world? Is it, is it a body camera? Is, is, is it, is it a body camera world? Is there anything that the company's working on that like dealing with this kind of chaos that we have?
- [50:31]
F
You know, the thing I, one of the products I get most excited about, and it's not our biggest product today, but it's one of our fastest growing products is our virtual reality training for, for comps. And we think, you know, in terms of, you know, that when we look at our mission of protecting life, there's really two ways to get there. We can keep iterating on the Taser over time, make it more and more effective to where it can finally outperform a firearm. And that's, we believe we can get there. But the second thing that goes with that is you got to be able to simulate the types of environments that police officers are going to see in the field. Because if you don't have those at bats and you get into a really stressful situation, your ability to make really critical life and death decisions, when your heart rate is beating at 160, 170 beats per minute, your body temperature is rising, that's like really hard if you're not prepared for that moment. And so we think virtual reality is a major, major part of preparing police officers better for what they're going to face. You know, historically police training is like, hey, let's go fire at a stationary target. Or let's have someone in a Velcro suit and we have these Velcro darts. You could shoot at them as they're moving around, but that doesn't simulate the same type of stress as when you put a virtual reality headset on and you are feeling and seeing the things unfolding that, you know, that are so much more realistic. And we're seeing about 30 to 40% better retention when a police officer is training in VR versus just, you know, kind of the more legacy types of training. So you know, for us I think that's, that's a big part of it. And you know, we celebrate every time a Taser doesn't have to be used because the officer has used other de escalation techniques along with the Taser. And so, but, but the training element I think is a, is a big one for us over time.
- [52:22]
A
So, so people listen. So if I want to buy a Taser, what's the fastest way we sell?
- [52:27]
F
You can go to Amazon and grab one. There are retailers that carry them. Big Five Sports Authority. You know, you can order them directly off taser.com but yep, all those ways.
- [52:40]
A
And what about women to men ratio? Do women buy them?
- [52:43]
F
Yeah, certainly. We think, we think young women on college campuses, women in neighborhoods where they walk their dogs at night and so forth. It's small enough to carry in your purse. Yeah, certainly. We view, you know, frankly, a lot of male cops are buying them for them, for their spouses. And so, you know, that's certainly a market for us.
- [53:04]
A
All right, I'll open up to you guys if you have any question, then we'll let Josh go. But this is the most fascinating company that I've covered in.
- [53:10]
B
When's the, when's the meme coin coming out?
- [53:13]
D
You know, Coin, baby, come on.
- [53:15]
F
I'm sitting here looking at Bitcoin at 87, 000 and I just feel like an idiot. I think I've bought and sold bitcoin a hundred times in the last, in the last few years. And you know, as with most investing, just the, the go long and hold strategy would have served me a little better.
- [53:33]
A
Are you fascinated at all by it or is it just something Absolutely.
- [53:38]
E
I.
- [53:40]
F
The thing I'm most fascinated by with it is just the, the underlying.
- [53:44]
A
That chart is fascinating, J.C. go ahead.
- [53:48]
F
And it's just the thesis that, like, hey, there might be a time where currency should be less reliant on governments and, and having an independent asset here, I mean, I think, you know, I think that's, that could be good and bad. We'll see how it turns out. But certainly it's here to stay. There's no question about it. And just see governments make this their national currency. I think that happened in South America a year or two ago. I mean, it's just crazy to see this phenomenon and it's obviously driven by technology, but, but a lot of, a lot of independent thinking as well. So look, I'm here for the ride for sure. I'm not selling again. I truly believe this could be a million dollar asset at some point.
- [54:32]
A
At this point, wouldn't it be cool if your Taser could produce Bitcoin if you haven't fired it, if you haven't had to fire it in two weeks to get a little satoshi?
- [54:43]
F
We've got some powerful chips in the Tasers. I'm not sure they're powerful enough to mine bitcoin, but you know, maybe in the future.
- [54:50]
A
So semiconductor. So. So you guys obviously are semiconductor, but relying on semiconductors too. I didn't even think through that. Interesting. And, and when it was your cloud company or kind of consumer company or.
- [55:03]
C
E commerce company, where are the tasers made?
- [55:08]
F
I'm in Scottsdale, Arizona and they're made about five minutes from my house here.
- [55:12]
C
So no, but the components. The supply chain.
- [55:15]
F
The supply chain is, is highly diversified. Our new Taser 10 is, is a U S based supply chain. And we're, we're seeing the same things everybody else is with what's going on between China and Taiwan. And look, we're, we view that as an opportunity because we're going to be well prepared for that moment if it ever comes into fruition. We think that's going to be an opportunity for us to, to run fast while everybody else is kind of picking up the pieces. So we're getting ready.
- [55:42]
A
All right, beautiful. I'm gonna let Josh go and we can stay with us. Josh, Phil, what do we have next? I mean, just you and dudes. What, like, what a great combo because it's unbelievable. Go ahead.
- [55:54]
D
This was a great program. We have a couple other things to cover if we get to a time wise. Josh, thank you so much. I just want to say, I just have one little thing to say from a product development point of view. You guys are such just incredible machine. What you were talking about before about you have a pro, you know, the product founder, and then you're just sort of like the COO CEO, I mean the COO president. It's just such a beautiful thing to see because one, you have your, you know who your, you know who your customer is and just one banger. It's like bangers only one after the next. Next bangers, one banger after the next. Congratulations on that. It's really just incredibly impressive.
- [56:38]
F
I really appreciate it. And for us it's, it's a story of like, you know, for those of you who know the. The art of War, Sun Tzu's book and, and like, that's really, it's that simple. It's like, what do we, what can we do to play to our strengths most of the time and make our competitors play to their weaknesses and, and send them on their heels. And for us, playing to our strengths is our founder who's a product visionary, is doing that with all of his time and myself is passionate about running the business that's what I do. And I think companies start to run afoul when it's like you're asking people to do what they're not good at. So we've tried to be really disciplined about how we build out the org and build the product machine and so far so good. But we're, we're, we're not going to get complacent here.
- [57:25]
A
Well, the many lessons here is like we think about crypto, Bitcoin's 2010 maybe white paper. Right, Mike. So 2009 and we think about the long run at Taser 1993. There's so many founders, Web2 and beyond. That's like get rich quicker. I'm going to be a unicorn. And what it was 16 years into Taser's business, they were a $300 million company, much like Phil Knight's book. And Nike was $10 million company after 10 years with the, you know, until they got going.
- [57:55]
B
Right.
- [57:56]
A
So has he written a book? I know he does, yes.
- [58:00]
F
I got it somewhere in my, in my bookcase here. It's called the End of Killing. It's actually a really interesting book around what it would take for the long term to truly end killing amongst the human civilization. So highly recommend it. If you're interested in hearing some of his futuristic.
- [58:16]
A
Great title, great title. It applies to crypto digital killing the. All right, Phil, what else do we got?
- [58:24]
D
Let's go to Parak. Perfect segue before when we were talking about China and Time, specifically Taiwan Semiconductor. Let's just get an update on that, Michael, because they reported recently they had really good numbers. I mean, this thing is a juggernaut. And we're looking for, you know, my, my question, my first question to you is, is how does this relate to AI and how does it relate to Nvidia? Like, what's the relationship here? How does that all fit together?
- [58:57]
C
Yes, Taiwan Semiconductor. Again, we all here in the US focus on Nvidia as the fountain of all AI chips. And it's true, Nvidia basically is over 70, 80% of the AI chips that go into everything in data centers. And I'm fond of saying that without chips from Nvidia and actually from Taiwan Semiconductor, AI are just two letters in the English language. So it doesn't work without the chips. Taiwan Semiconductor makes the majority of the chips that Nvidia sells for AI, but that's a relatively small portion of what their business is. They supply over 80% of all the chips that make everything run, including, I dare say Josh's TASERS would be my guess. But everything that goes into our cars, our refrigerators, etc. Over 80% and obviously. So they are the at the crux of the US China geopolitical issue. And over the last couple of weeks the US even before the election results has been the Biden administration has been raising the ante in terms of trying to block off all chip access, especially AI chip access to China. And the latest target is Taiwan Semiconductor because a lot of their chips are showing up even after a lot of the curbs in Chinese chip making apparatus from companies like Huawei SMIC which is their TSMC etc. And so Taiwan Semiconductor this week got some additional instructions not to sell certain advanced node they called manufacturing capabilities. They're called nodes of semiconductors 2 nanometer and lower to China. And so now Taiwan Semiconductor also basically takes the same place as ASML which makes the equipment that companies like Taiwan Semiconductor use to make the chips, the most advanced equipment in the world. And ASML is a Dutch, Amsterdam, Netherlands company. And the US is putting pressure on both ASML and TSMC through the governments of Netherlands and Taiwan to preclude the sales into China. So this is you know, an ongoing football game and this is going to, you know, have implications to Taiwan Semiconductors prospects. Their founder CEO has said so in the last couple of weeks. I have several posts on this one a couple of weeks ago that you know, you should look at if you want a lot more detail. But this is a especially post election, this is a key issue. And then the last variable I'll say is Elon Musk now being an advisor to Donald Trump has big interest in China trying to get a full self driving permit for his Tesla cars. And so there is a prospect of a horse trading going on between Xi Jinping and President Trump at some point next year in terms of potentially easing some of the tensions on chips, curbs and imports. And we will see. And then the last complication is Donald Trump has also been accusing China of stealing US chip technology which you know does not have that much basis in fact. But that's another headwind for tsmc. So all of these things point to important headwind issues for U S technology companies.
- [62:47]
B
The the market is agreeing with everything Michael said.
- [62:50]
A
Yeah, it's just funny as Mike goes through that story, pull up the divergence there. It seems like some people are saying.
- [62:55]
B
I mean technology in general, it's not just semis, but technology in general has provided negative alpha this year, so has been an underperformer and semiconductors really since, since the summer have been underperforming and money's just being made in other areas. So it's interesting all the things you're saying. The market's clearly agreeing, but yet when.
- [63:15]
A
We talk about divergence, JC how's that? What does that mean when stocks are going up and. And just explained in layman's terms. Yeah. So just what do you like, what do you, what do you see are stocks going up? But there's a divergence in that because these, I love these. When I see these red lines, I.
- [63:32]
F
Wouldn'T buy the stock up here, but 21.
- [63:34]
B
Right. And then you had the decline into 22 as we know. And then things got going again in 23 for technology. And so once we exceeded those levels last year and earlier this year, the extension level. Right. It's just math is the 161.8 extension of that entire decline. So when you look and you see that Taiwan Semi has been struggling at that extension level, that's actually very common. So that's not a surprise at all. But what's interesting is that momentum down below is rolling over with prices making new highs, which is symbolic of exhaustion, maybe not forever, but at least temporarily. And then when you look at semiconductors, which is the blue line, this is semiconductors as a group relative to the rest of the market putting in lower highs also. So reiterating that not only has semiconductors lost momentum, but now they're also underperforming other stocks in the market. None of those things are bullish things. The question is how bearish is it? It's still a bull market. I don't think it's that bearish. It's just there's just better places to be. That's all it is.
- [64:41]
C
That's a great point. And JC makes a great point about technology, Big technology in particular, Apple, Nvidia semiconductors and small cap technology too.
- [64:50]
B
Michael.
- [64:51]
C
And small cap being the canary in the coal mine. But keep in mind that as and when Taiwan Semiconductor runs into these kinds of headwinds, its semiconductors all the way down the chain. So it's in our refrigerators or cars, et cetera. We may have forgotten pandemic. When it happened, used cars jumped 50, 60, 100% because the car companies couldn't get chips, the very mundane 1 $2 chips that they needed, not AI chips, not fancy things, they couldn't get them in supply. And that all comes from Asia supply chains around Taiwan Semiconductor. And so this is a longer term issue for the broader market because nothing we Buy at Costco or, or Walmart etc. That has anything with a battery does at all has chips. And most of that sees its sourcing at the, the fab fabrication factories, the fabric where the chips are made and that's TSMC and its ilk of companies.
- [65:59]
A
All right, good. I mean I think that that'll cover where we think. I mean there's so much opportunity. Shopify is breaking out today. Alts are breaking out. So tech is everywhere. I mean I think it's hard to say tech is underperforming. I know what JC means to be honest but I mean for the average listener, they just were never going to dig in this deep.
- [66:18]
B
Technology on a large cap basis has been underperforming for most of the year. Since the Q1 technology. Small caps have been underperforming for 18 months. Actually just hit new 18 month lows or over the last like couple of weeks. So small cap tech underperforming the indexes which is hard to do because the small cap indexes haven't been doing very well. So small cap tech underperforming and mega cap tech also underperforming.
- [66:44]
A
Yep.
- [66:44]
D
All right, you want to spend a minute on shop Shopify they reported.
- [66:48]
A
I mean if we pull up the chart quickly. I got to do a shout out because I know a lot of, I know a lot of people there. It's my home, home country. I'm long the stock forever. I've kind of suffered through Canada. Yeah, shout out Canada. Here's what, here's my take on shot like I just. VCs hate e commerce. Good reason. They spent billions buying customers and you know, throwing up websites on Shopify and everybody had a holy grail for acquiring customers. We're all guilty at some point but and so Shopify was the poster child of that. And we see the crash in 21 and and their bounce back has been much slower than the rest of tech. But I've been waiting for this in the sense that the, the companies that aren't supposed to survive, the ones that were slapping together Alabama arbitrages and putting up a website and getting their and Alibaba and selling them during the bout, you know, kind of the gig economy of Shopify store that's a wipeout. And so this time back, you know, if E Commerce is let's say 18 to 20% it ain't stopping. Malls may not go away but E commerce is going to be 40 to 50% of how we shop. And Shopify is a much stronger company this time. Let's take out valuation and technicals for a minute. But what I'm happy to see is this isn't a darling this time. Much like we were talking about crypto and no one cares. Then the press. But people don't know it, Granny doesn't own it and everybody's still making fun of it. In the real world, Shopify has been forgotten. Why? Because VCs are not going to fund anything in E commerce. I know this because I'm involved in a few. And from Thrasio on down, it's been wipeout after wipeout after wipeout. But the companies that build on Shopify have learned, as has Shopify. So any new bull market will be fantastic for this company because it'll be a much richer bull market with companies being founded in the e commerce space that have margins and are meant to survive. And Shopify is a great product to power all this stuff. So that's, that's all I wanted to say is like, I love the VCs. Hate it. Customer acquisition costs are through the roof, obviously, because the pipes are owned by four or five companies. But you know, it's kind of like Jurassic Park. People want their products, America consumes, the rest of the world consume. Shopify is the home of this. They're kind of like the front page for e commerce. And you know, anybody starting a e commerce company now knows they're not going to be able to raise venture capital. So they're going to have to have a good business model. They're going to have to be good at customer acquisition. This all just bodes well for the, this is why, you know, this, this recovery is stronger and faster than the last one because software and because people get smarter. Go ahead.
- [69:46]
C
And I'll just add one other point. The e commerce companies like Amazon has already become, they have already become the third largest advertising company after Google and Meta. And Shopify is also following this trend. They're aggressively using AI ad targeting and AI revenues. So that's another element which is much more higher margin revenues through the regular e commerce parts of the business. So they are a huge beneficiary as a big aggregator of e commerce sites out there.
- [70:21]
D
Okay, superb guys. This was a great program. On that note, we're gonna wrap it up. We'll see you next week. Thanks everybody. And special thanks to Mike and Josh. Adios.
- [70:34]
B
Adios.
- [70:35]
C
Thank you everybody.