Nvidia Earnings are the Super Bowl of Business + Trump’s $5 Million Gold Card

0:00This episode is brought to you by On Investing, an original podcast from Charles Schwab. I'm Kathy Jones, Schwab's Chief Fixed Income Strategist. And I'm Lizanne Saunders, Schwab's Chief Investment Strategist. Between us, we have decades of experience studying the indicators that drive the economy and how they can have a direct impact on your investments. We know that investors have a lot of questions about the markets and the economy, and we're here to help. Join us each week as we explore questions like, how do you evaluate corporate bonds? And what sectors of the stock market are outperforming?

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1:35Or what that clunking sound from your dryer is? With Thumbtack, you don't have to be a home pro. You just have to hire one. You can hire top-rated pros, see price estimates, and read reviews all on the app. Download today. Today's number,$49 million. That's how much New York City's congestion pricing toll is brought in during the program's first month. This is an actual true story. Ed, when I first moved to New York, my first date was with a woman named Martha who took me to, no joke, a sex club. And one of us had sex, and it wasn't me, Ed.

2:19That's a true story. That's not a true story. No, it's a true story. The club was called Trapeze. You're going to have to elaborate. It's the final part that I'm really intrigued in. Met this woman, a really interesting woman, nice. It was very attractive to her. And I had this big deck. I lived at one Greenwich and I had basically this like 700 foot apartment with a 3000 square foot deck, see above single and desperate. And I used to have parties and people and I met this woman super hot, seemed super cool. and asked her out, kept asking her out. And finally, like, I've got nothing back here.

2:54And she's like, I have something I think you're going to like. And she showed up and said, I'm going to handle everything. And we went to this place in, I think it was a West Village or so, go underground. It's like 300 bucks for the dude and nothing for the woman. I'm like, well, that's going to be interesting. And they give you a towel and she changed into a towel. And anyway, she ended up making out and fooling around with a woman. It's crazy. That was my big New York story. NYU professor, would you let your kid take class with me? Yeah, you didn't do anything wrong. I mean, you shouldn't have pursued this woman specifically, clearly.

3:27Oh, I was so excited. I think I still probably text her, saying she'll give me another shot at trapeze. What happened in the basement, water under the bridge. Let's start over. Actually, also, my other New York joke. is just full of rats. I made actually friends with this rat and this ridiculously hot woman walked by and I'm like, did you see the ass on that woman? He said, well, actually, I'm a tit rat myself. I prefer the real stories. Ah, that's why you come here. This isn't CNBC. Agreed. Let's start with our weekly review of Market Vitals.

4:13The S &P 500 declined, the dollar rose, Bitcoin fell, and the yield on 10-year treasuries hit its lowest level since December. Shifting to the headlines. Tesla's market cap has fallen below$1 trillion, erasing nearly all of the stock's post-election gains. Shares are down more than 25 % so far this year, as investor concerns mount overgrowing competition and Elon Musk controversies. Warren Buffett announced that Berkshire Hathaway paid nearly$27 billion in taxes in 2021. That is the largest tax bill ever paid by a US company, accounting for roughly 5 % of all corporate income taxes collected in the country that year.

4:52And finally, BP announced it is shifting back to fossil fuels and scaling down investments in green energy. The company plans to spend around$10 billion a year on oil and gas to win back investors after its fourth quarter profit hit a four-year low. So despite that move, BP shares closed down about 1.5%. Scott, we'll start with Tesla. And I'm bracing myself for your victory lap here. You predicted on February 13th. I can't help it. I'm a broken clock here. Tesla is imploding. I think the stock is below$200 in the next six months. It was trading at$356 a share then. We're not below$200, but we're now at$286.

5:38So it's down 20 % since your prediction. Take it away. I hate this motherfucker. I really, I don't know if you've sensed that. Really? Yeah. I have no emotional distance here. I'm changing my prediction. I think this thing goes below 150. Oh, keep it. Keep the original. I can't help it. It's at a P of 180 and its sales are off 75 % in Germany. And across Europe, they're off dramatically. I think the car line is really stale. To be fair, the stock is still up 50 % over the last 12 months, right? It had a huge run up. And the market, you could say, you could also make this, you could also steel man and be a weak steel man and be more like an iron man or a hay man.

6:22It's clear his activities have really hurt him in Europe and in California, but probably the market was looking for an excuse to take this stock down. I think what will be the real interesting test here in terms of the association or affiliation of an individual's brand and their company is if Starlink starts to have contracts canceled. What do you make of this, Ed? Yeah, I mean, I think the question that we've been trying to ask is like, what started this slide with Tesla stock? I mean, it's pretty dramatic what happened. It's down around 20 % in five straight days, falling below a trillion dollars.

7:01It's now down 34 % since its peak in December. I think the thing that really triggered this is this data that came out from Europe. Tesla's vehicle sales are down almost 50 % across Europe. Meanwhile, overall EV sales across Europe are up almost 40%. So clearly, people just hate Tesla's. And it's not very surprising why. I mean, you just look at the UK, for example, where, you know, Elon is talking about how he wants to put the British Prime Minister Keir Starmer in jail. Like, it's not very surprising that the British public is now saying, hey, we're down with electric vehicles, but we're not going to buy Teslas anymore.

7:39And so it's finally being reflected in Tesla's financials. I think the thing that I've been thinking about a lot when it comes to Elon and when it comes to Tesla, I've been waiting for what I would call his Wellington moment. And I'll explain what I mean by that. As I've said to you before, I think the similarities between Elon Musk and Napoleon Bonaparte, and you're going to call me a history nerd, but I don't care. Just a nerd. I think the similarities are very striking in that you have Napoleon, who was this like miraculously successful guy who took over all of Europe and tried to take over the world.

8:17And at the same time was also pretty universally disliked. But people never really did anything about it because they thought, you know, this guy is so talented. He's so powerful. He conquered the Russians and the Prussians and the Spanish. He installed himself into office. He crowned himself emperor. Like, how could we ever bet against Napoleon? You never bet against Napoleon. And that's basically why people went along with this guy who was acting, honestly, very irrationally and kind of insane. But it was only when he suffered this crushing defeat at Waterloo against the Duke of Wellington that people realized, actually, maybe this guy isn't untouchable.

8:55Actually, maybe he isn't a god. and the whole world turned on him at the exact same time, including the French, by the way. And he was banished to this remote island where he died sad and alone. And I believe that that moment is coming for Elon. I believe it's gonna take some big loss and suddenly all of this mystique and this intrigue and all of our glorification of his leadership abilities and his character and his genius, it's all just going to disintegrate in a second. And at that moment, I think the citizens start to turn on him. We've seen that happening already. But more importantly, I think the markets will turn on him too.

9:40I think that moment happened 48 hours ago. I think it was Bill Burr. He's probably my favorite comedian. I think the guy's just a genius and he's fearless. And he's been known for being just incredibly politically incorrect. And he's a favorite of what I'll call sort of the intelligent manosphere. And that is, he just mocks the shit out of Democrats and political correctness. And, you know, basically, every viewer of MSNBC was grabbing their pearls every time they watch a Bill Burr clip. And he was just totally unafraid to be totally politically incorrect. And he went on a rant, and we should play that.

10:13We'll find the clip now. I'll tell you what's funny. I made fun of the fucking Twitter guy for fucking Sieg Heiling, not once but twice. And I never look at my emails. I was scrolling through my emails and it said my Twitter account had been flagged for inappropriate. I don't even tweet anymore. It had been flagged for, what a fucking baby, just like Hitler, a fucking baby. Because that's another thing, all of these people that are into fucking Hitler, you know what I mean? And like, like, like, look at this guy, like he was some sort of fucking hero. The guy's one of the biggest fucking cowards ever.

10:44All the pain and all the suffering that that guy's caused and the war crimes the the allies had to commit firebombing fucking cities to get that motherfucker when it came time for him to pay the price for all the suffering he caused millions and millions and millions of people did he face the music nope he gave himself a nice quick painless fucking death that's your fucking hero i think the worm has turned against this guy i think that moment you're describing happened 48 hours ago. I still think people think he's invincible. There's no such thing. I agreed. But this is what people believe, and this is what the markets believe.

11:28And so this is what I mean. I think you need a moment. You need to see that the God fall from grace. You realize he's mortal. You realize that actually he's not all he was chalked up to be. And suddenly that's when the world collapses in on itself. But we've been talking about Elon for way longer than we should have. So let's just move on to our second headline here, which is Berkshire Hathaway paying$27 billion in taxes last year. I think the thing that's interesting is what Warren Buffett said about this tax bill. Specifically, he was talking in his shareholder letter, in his annual letter to Berkshire Hathaway shareholders, he was explaining how proud he was of paying this tax bill and contributing this revenue to the US government.

12:14And I'll just quote one part of this because I'm supportive of what he said, but I also take some issue with it. So in the letter, he's describing the beginnings of Berkshire Hathaway and how they were struggling at the beginning. And then he says, quote, fast forward 60 years and imagine the surprise at the treasury when that same company, still operating under the name of Berkshire Hathaway, paid far more in corporate income tax than the US government had ever received from any company, even the American tech titans that commanded market values in the trillions. So he's basically saying, look how far we've come.

12:51Look what we're contributing to the government. But at the same time, he's kind of taking a shot at big tech and accusing them of not paying taxes, which is true and fair, and I agree with it. But I do find it a little bit rich coming from Warren Buffett, who has done a very good job of avoiding taxes himself. I mean, if you look at the history of Berkshire Hathaway, they have a long list of tax avoidance strategies, and they've had no problem taking full advantage of them. We could go through some of those examples, but what I would summarize this as, I respect the point, but I don't love this holier-than-thou attitude from Warren Buffett, who's kind of presenting himself as like the Jesus of taxes, which isn't necessarily true.

13:41But let's hear what you think of this. I assume you're a supporter of this. Yeah, but you got it right. They paid a lot of taxes. If he wants to take a victory lap for it and make a point, good for him. And he has said for a long time, there's no reason I should pay a lower tax rate than my assistant. But his obligation is to his shareholders. No one's going to disarm unilaterally. I believe tax rates should go up, but I engage in tax avoidance. I'm constantly thinking about strategies to minimize my tax bill. And there's a ton of ways you can do it legally when you're rich. And what we've seen is the tax code go from something like 400 pages to 7 ,000.

14:16And those incremental 6 ,600 pages are there basically to fuck people of your generation and transfer more wealth to my generation and to corporations. And cruise lines have weaponized various loopholes. They pay less than 2 % for all the tax rates. General Motors in 2023 paid a tax rate of 5%. And T-Mobile, which I would think was a very profitable company, pays an effective tax rate of 0.4%. Every company is going to do the best they can to pay as little as they can. That's their job. We're not doing our job. And that is there have been so many loopholes stuffed into the tax code. And the misdirect is people think it's about tax rates.

14:53It's not. It's about the tax code. And I believe that as a percentage of GDP, corporations are paying the lowest taxes since like 1938. 38. And at some point, you got to fund the government. And there's two things to do. There's either deficits, right? Or you got to charge more in different types of consumption taxes. And I've said this for a long time. There's some mythology in the tax code. The bottom half pays almost no federal income tax. They pay a lot of consumption and sales tax, but almost no federal income tax. The people who get most screwed in our tax system are actually most of the people work at Prop G Media, and that is you guys make very good livings, but it's all current income, and you live in a high-tax domain in New York City.

15:36So even as young as you are, you make exceptionally good livings for people your age, even though you may not feel that way. You're probably paying 30 % to 40 % tax rates at this point. That's a lot of money for a young person. But once you make the jump to light speed and get really rich, you can leverage all these different loopholes, whether it's 1031 exchanges where you can take real estate and roll it into a new investment, a new real estate investment without incurring a capital gain, triggering a capital gain. Even thinking of yourself as a stock, you produce, I have stocks that produce, say, $100 ,000 a year in dividends or growth.

16:14That gets to grow, not the dividends, but the growth, gross tax deferred. Whereas if you're an individual making$100 ,000, you lose 20 % of it every year at least. So the tax code has basically said, all right, the bottom 99, we're going to basically fund the government with the kind of 50 to 99th percentile. And then once you get above the 99th, your tax rates plummet. And the reason why America puts up with it is that we're so optimistic that people believe at some point they're going to be in the 0.1%. But corporations, I mean, we just have two choices here. We either need to cut spending and raise taxes or have massive deficits, which are, and it's important that we communicate this to people, nothing but taxes on you and Claire and the rest of the young people of this organization just kind of laying in wait.

17:01So I find the whole – I think taxes are a really important conversation. I would like to see the best solution would be an AMT, an alternative minimum tax on corporations and the rich. and that is if you make over, say,$10 million, we want you to pay a 50 % AMT. Whatever loopholes you can come up with, great, but you're paying at least 50%. You know, well, that's a lot, Scott. It's not because every psychiatrist and psychologist and Daniel Kahneman specifically has shown that above a certain amount of money, you lose no happiness. Any more money doesn't make you any happier. So having a higher tax rate doesn't make you any less happy.

17:39And also, So these tax rates are lower than they were in the 50s, 60s, 70s, and even in the 80s at those income levels. So I think tax rates could actually come down if you forced everyone to pay those tax rates. And that is you could lower the top tax rates on people if everyone paid them. You could lower corporate tax rates if everyone paid that rate. I also think that there is something to be learned from Warren Buffett just being happy to pay his taxes. Like that's just on a personal, emotional level. I think if we can, you know, we clearly need to raise more tax revenue. If there is any way for Americans or people anywhere really to feel a little bit less resentful when they make their tax payments and to feel that feeling of actually having pride and it being a bragging point, how much you contributed to the U.S.

18:33government. Which it seems like, you know, everyone who pays their taxes is like, fuck this, I don't want to pay my taxes. but I do like that Warren Buffett is kind of changing the sentiment there and I will also shout out Andrew Yang who one of his great policy proposals when he was running for president was that we should basically have the government send out videos including local governments to taxpayers telling them here's what here's everything we did with your money this week or this month or this year and I think if you could sort of just change the the mentality when it comes to paying taxes.

19:07And it's a little bit of a soft point, but I do appreciate that Warren Buffett is leading that movement of, okay, paying a lot in taxes is not necessarily a bad thing. You're doing a service to your country. I guess you have to start off believing in your country and liking your country to begin with, which is becoming rarer and rarer in America. Let's talk about BP, they're deciding to shift away from renewables, investing more in oil and gas. I guess the first question I had reading this headline is, how much did Elliott Management, the activist investment firm, how much did Elliott have to do with this?

19:44Because two weeks ago, it was leaked that they had this stake in BP, roughly 5%. They wanted to clearly address BP's underperformance. It's down 8 % in the past year. Meanwhile, Shell is up 7 % and all the other energy companies are doing a lot better. And then suddenly two weeks later, we see this turnaround in strategy. So I guess my first question for you, Scott, to what extent do you think this was Elliott's doing? Oh, Elliott, they're smart people. And Jessica Owen, who runs her activist group, is a really smart guy. And marketing is important, but be clear, this is all marketing. I'm not sure.

20:20I think BP was actually, so I ran a brand strategy firm called Profit. And I think BP was a client. And the running joke around the office was beyond petroleum. And they'd like, you know, the ad team would hire an Asian dude, put him in a jacket and run a commercial talking about how algae is going to fuel the future automobile. Can 100 ,000 people in 100 countries come together to build a new brand of progress for the world? We think so. And now BP, Amoco, Arco and Castrol have come together to try beyond petroleum. They never spent a lot of money. I think right now, what is the research you guys did?

20:57That basically BP is allocating somewhere between 3 % and 5 % of their total capex to renewables. That's just not a lot. They were never not in oil and gas. And this is basically saying, okay, get rid of all of it. Stop pretending. Stop running the ads beyond petroleum. Just say, petroleum, it's here. So, sorry, you basically think that they believe that the world wanted them to be a renewable company. So they said, oh, we're a renewable company. And now the world wants them to be an oil and gas company. So they're saying, we're an oil and gas company. Yeah, there's no substance here. This is them pretending for two decades deciding that the big sunflower beyond petroleum would make them seem warm and cuddly as they were belching more carbon into the air than anyone but maybe Exxon and Chevron.

21:45because there is nothing like the arbitrage you get from fossil fuels in terms of the ability to do work, move earth, create different substances based on this incredibly cheap supply where you get a barrel, an absolute barrel of this shit that can be made into almost anything or provide energy to make almost anything, and the barrel costs 70 bucks. I mean, it's just so cheap. and these guys these these companies are just cash juggernauts and basically elliot said stop the bullshit stop the virtue signaling stop the posturing you're a petroleum company you always have been they are putting 10 billion dollars a year additionally into oil and gas so i think i mean i think i'm sort of half with you and that this is probably what they thought the market wanted because the way the pendulum is sort of swinging back away from ESG.

22:42But I would also put forward the possibility that a lot of this has to do with AI and just the fact that they couldn't really predict what was going to happen in terms of how AI was going to explode over the next few years. And you've got billions of dollars being plowed into these data centers, which are already one of the biggest strains on power in our economy. And it's expected to double in just a couple of years, quintuple in maybe the next 10. So I do think at the same time, I'm sure there's probably a marketing element to it. I think at the same time, these energy companies are realizing like, shit, we've been investing in these renewables, which are probably pretty exciting over the long term, but the short-term demands of AI are way higher than we thought.

23:26And the reality is these renewables that we've been investing in, they won't cut it. And if we want to meet demand, we do need more oil and we do need more gas, especially gas. You know, liquid natural gas is like ideal for data centers. So I think I'm like sort of half with you there, but I do think there is some substance here in the fact that power demand is just going up and we're not going to power these data centers with windmills and solar panels. We're going to do it with oil and gas. And so if you're not investing in that, or at least maybe to your point, showing Wall Street that you're trying to invest in that and that you're being realistic about the demands of AI in the next few years, then you're going to get punished.

24:05And that's why we've seen BP down, or at least kind of flat, over the past year or so. It's up 37 % in the past five years. Chevron's up 109%. Exxon is up 183%. So they have been getting crushed. And I don't like to be the big energy guy, but I do support this move. We saw a lot of those energy stocks crash with DeepSeek when all of a sudden people thought, oh, we might not need as much energy. And what you're saying is that was a bit of a headache. We're still going to need a massive amount of energy. And I met with a guy who's an energy guy, and he said, you got nuclear wrong. He said, and Mia kind of confirmed this in her notes, that the lag to bring energy capacity nuclear online is 5, 10 years out at a minimum.

24:55and that the real play is liquid natural gas, LNG, and that you want to be looking at that space. And it'll be very interesting to see. There's the side note that really fascinated me. I don't know if you saw it, but the number one producer of wind power now is Texas. And we should do a deeper dive at some point on the economics of wind power because it's politically, quote unquote, incorrect or politically sober, whatever the term you want to use is, Texas is. the economics of wind have made it such that it is now in many ways a better bet than these dirty fossil fuels we'll be right back after the break with a look at nvidia if you're enjoying the show so far and you haven't subscribed be sure to give profg markets a follow wherever you get your podcasts support for profg markets comes from found does it ever feel like keeping up with your business finance is a whole second job.

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