How to Tune Out the Noise

27:29That's the point. Is DuckDuckGo, which promises they're not collecting your data while Google incognito browsers are. That's like how they're advertising themselves. There's nobody else. No one else left. All right. So let's put the pit back in that and get back to the AI spend. So Amazon, Andy Jassy wrote a letter this week. Let's hold this up on the screen, please, so I could read it. He said, and part of there, he said, there is also substantial capital investment required in AWS. The faster demand grows, the more data centers, chips, and hardware we need to procure. We spend this capital upfront, even though those assets are useful for many years.

28:05We only start monetizing this capital investment many months after we spend the capital and over many, many years, which leads to attractive long-term free cashflow and ROIC. Anyway, the point is like NVIDIA. That's where this led me to. Wait, can I see the end of that? I'm sorry. I hadn't read this. He said, we continue to believe AI. I'm sorry, I cut off way too early. We continue to believe AI is once in a lifetime reinvention of everything we know. The demand is unlike anything we've seen before in our customers, shareholders, and businesses will be well-served by our investing aggressively now.

28:38But read between the lines. He's talking about 15 to 20-year payoffs for these investments. Like he's telling you – So he's – and he might be right. He knows more than anyone. Nobody knows as much as Andy Jassy about the necessity of investing in data centers. Let's just put that out there. I'm not second guessing. I think what I'm saying is like read between the lines. What is he communicating to the sell side? It's going to take a while to get paid back. By the way, there's also a reason. You know, Walmart is trading at a higher forward PE than Amazon, like substantially so. Yeah, Costco. Which as an Amazon shareholder, that does not inspire confidence.

29:19I'm like, oh, great, Amazon's cheap. I'm like, why the f*** is it so cheap? Yeah. Well, I think because Walmart is not trying to spend a trillion dollars in data center. Yeah, not - They're not thinking as far ahead as Amazon clearly thinks they need to. Does not inspire confidence. All right, NVIDIA. So the announcement this week was within the next four years, NVIDIA plans to produce up to half a trillion dollars of AI infrastructure in the United States through partnerships with TSMC, Foxconn, Wistron, Amcor, and SPIO. Spill? I don't know who that is. I was impressed by the politically savvy move that this appears on this.

29:59Like it's not – they're not hiding like we're doing something for the optics for the White House. They're just like, yeah, this is what we're doing. And AMD followed up really quickly, which is not in the doc, but AMD is like, oh, we, for the first time ever, are going to contract with Taiwan Semi to use their Arizona fab to make some chips for us. Because AMD historically has made everything in Asia. So this is where the puck is moving. Everyone now wants in on this TSM fab that's in Arizona. Everyone's like calling them like, we really need an announcement. We really need to shift some chip production into the United States.

30:41Intel's not capable already. Can you do it? And Taiwan Semi's like, guys, it's not our biggest facility. It's just Arizona. Like, what do you want from us? None of these chips even have to get made, but the press releases have to go out. Dude, AMD is such a disaster. At the end of 2020, the stock was trading at$100. bucks. It rocketed up to a buck 60, then collapsed to 53. So 100, 160, 53. Uh-oh, there's AI. So 53 up to 230, and then from 230 back to 95. It's where it was in December of 2020 with an 80 % to a crash. What a disaster this stock is. The only bigger disaster is Intel. It's the two of them at this point.

31:30do you know but amd was supposed to be the number two it's supposed to be i never believed that i never believed that i don't buy the second best i don't buy the number two that's not how i invest um i know a lot of people that bought broadcom and that kind of worked and amd didn't but so fine so there's one and two but there's no number three uh i don't believe in this this i think tech i think tech telecom communications these are winner take all endeavors and you Don't buy number two. Do you know Intel turned down Apple when Apple was looking for somebody to make the first iPhone chips? Did you know that story?

32:09Can you imagine? Do you know, while NVIDIA was doubling and tripling down on GPUs for non-linear processing, Intel was acquiring a company called Altera. They just sold it to a private equity firm this week. They took a 50 % haircut. This is a purchase they made 10 years ago in 2015. I think they spent like$16 billion and sold it for$8 billion or something. Intel looks disastrous. It's like the worst. It's hanging on to$20 for dear life. A lot of questions about the puppy dog on the bed behind me. It's not Snoopy, although I could see why you might think it is. That is a jelly cat. You know about jelly cats?

32:54No? No. Your little boys don't play with stuffed animals anymore. They're too old, right? I don't know what a jelly cat is. Jelly cat. All right. What else are we doing in this? I'm good. Yeah, no, that's – look, you're asking the right question. Could a slowdown be pronounced enough where all of this AI spending not only looks insane, which I think to a lot of people it already does, but looks downright dangerous? Like is that the question? Yeah, I think if we go negative GDP in the second half of this year and this tariff confusion is still with us and we're going to talk about in the next topic the way people are pulling back on their spending, it's going to look nuts.

33:40People are going to tell them to stop. I think it has to get really bad before they slow down. People are going to tell them to stop though if that's the case. If we're in legit recession – Well, their shareholders will tell them. Well, they're going to tell them by selling the stock. Yeah, that's what I'm saying. That's what they told Zuckerberg about the metaverse. They said, can you please stop? No? Okay. Sell it at any price. So I think that's the risk. All right. Reverse wealth effect. So we talked about negative wealth shock on a recent episode. This is a little bit different. I only want to look at the high, high, high end of – I want to look at – not the high, high end.

34:18I want to look at the top 20 % of consumers because that's where the action is right now. Did you watch Your Friends and Neighbors? No, not yet. Is it good? These are the type of people. These are the type. It's only two episodes, but these are the people. Okay. There's a Wall Street Journal story over the weekend about people canceling seven-figure home purchases. I have been waiting when this component of the market would finally break down. So just to chart off one second, just to bring people up to speed. So over the last couple of months, there have been a lot of stories and a lot of CEO commentary from Target and others saying at the low end, the consumer is like pulling back.

35:02Okay. And then it migrated. It was like, yes, the everyday consumer is now being way more cost conscious. People that were shopping for clothes at Macy's are now at Walmart. like there was like, but the high end, the commentary was like, they don't give a shit. They just keep spending, right? Especially on travel, on experience, like concert tickets, like no problem selling at the front row of everything. No problem selling first class tickets. No problem selling$10 million condos in Miami. That's starting to break now. And that to me is the most notable sign. And this is not noise. So let me read this.

35:41In the US, The richest 10 % have 36.3 % of their total assets in stocks and mutual funds. 18.7 % is real estate. This is total assets. Until recently, luxury sales were on an upswing. Agents said high Wall Street bonuses indicated a strong year ahead. This is like as recently as January. Overall, the median sale price for U.S. luxury homes defined as the top 5 % of sales rose 8.8 % during the second quarter of 2024, more than twice as fast as non-luxury homes. So that was the environment that we were in. Now, people's behavior is materially changing. The article opens up with an anecdote, as most do, of somebody named Peter Ocean, who was a real estate agent.

36:33His clients accepted an offer of 10.25 million for a four-bedroom co-op in Lenox Hill. That's like the E70. in Manhattan. And then the buyer's just like, no. And the reason is the client stocks were down 25%. That'll do it. Okay. That'll do it. That'll make you change your mind real quick about - Especially when they're using their portfolio for a loan. And the thing is, all of these wealthy people are affected by the same thing. It doesn't matter what line of work they're in. The stock market is universal. And when the stock market - Okay, markets lost$6.6 trillion in an epic two-day route, April 3rd and April 4th.

37:15Fallout in the high-end real estate market has been swift. And then the tariff announcements, and then all of a sudden, they're getting all these quotes from all these realtors at these highfalutin firms. And it's like, yeah, people are backing away. Prices are being cut. And this is that negative or that reverse wealth effect in action. And it doesn't take long, which I think is the salient point that I want to make here. Are you surprised by any of this or not really? Not really, but I kind of want to see what happens actually in the data as opposed to the anecdotes. I believe what they're saying, but we need more time.

37:54Here's data. They quote a guy, Stephen Shane of Compass, who's like the big wheel in Aspen real estate. So you assume the Aspen real estate market is fairly insulated from pretty much anything. It's like all moguls and, okay. This guy said he saw$100 million worth of real estate return to the market since April 2nd. It's a week ago, including one of his listings, a 7 ,900-square-foot house that was asking$52.5 million. It was listed in December. was marked pending on February 24th. We listed on April 8th. So that's a sale that fell through. Like, I don't know if that's data. It's another anecdote.

38:39But like, these people are, realtors do not want to get quoted in the Wall Street Journal about the market being soft. This does not help any of what they're trying to do. So this is where we are now. And I think it's material. I don't think it's noise. Two more things. This, at the Javits Center this week, 32 ,000 hairdressers, colorists, salon owners, beauty technicians, they did their annual, like, you know, industry convention where they, I don't know, unveil new shampoo. Here's a quote. It's feeling a lot like 2008, said Christy Powers, who's worked through three economic downturns since 1999.

39:26So this is a salon owner in Maryland and saying our worker – now, there are probably a lot of federal workers coming in to tell me how stressed they are, halting services to save cash. Another quick quote from here. So again, this is the salon customer. These aren't coal miners, guys. This one owns a salon in Massachusetts. It's a quote, people don't like to walk around with roots showing clients who previously got color every two or three weeks are stretching it to four or five, citing the political situation and implying they've lost money in the stock market. They're cutting back in other areas as well.

40:05So it's not just us. And she's been in the business, it says, 28 years. So that's a thing. Last, Louis Vuitton. Did you see this? I did. I have some stuff to say about this. Okay. Not disastrous, but also not what it was last year when they couldn't keep - The stock is disastrous. Yeah, the stock is disastrous. They could not keep luxury goods in stock. Two summers ago, I was in Italy. I was in Amalfi Coast. People were lining up in the morning. The boat would come to Capri, drop off all these luxury goods. They would bring it all the way up the mountain into the store. The store would be empty two hours later.

40:43and everybody wants to leave Italy with something leather. I mean, Prada, Gucci, Fendi. These stores would get cleaned out by lunchtime. You had to get in line before they opened and there was nothing left in the store. That is not what's going on. Louis Vuitton just said, other than champagne, everything is down. They own Louis, they own Dior, Bulgari, Hennessy, everything is down. Sales down 3 % and they don't see any sign of recovery in sight. They have stressed customers. Let's put this chart up. So the stock is down 45%. There's another thing going on in here. So yeah, organic sales down 3%.

41:22Not great at all. Wines and spirits down nine. Fashion and leather goods down five. Watches flat. Perfumes down 1%. Not great. There's another part of this though. Show that luxury tight ends chart by quarter. Next chart, please. There we go. For the first time ever, Hermes has a larger market cap than LVMH, which is kind of nuts considering the next chart.

41:47So yes, Louis is not in a great shape. I don't know if this is more about Louis specifically. It's probably a combination of factors, but it's also Hermes eating their lunch. Look at the head start that Louis had on this company. It's remarkable. Well, there's another company that reports earnings called Kering. What do they have? I don't know if their report is out yet for this quarter, but they own Gucci. I think they own Cartier and Montblanc. They own the luxury brands. They own the luxury brands that Louis doesn't. It's like four European luxury companies and they own everything. And then here in the United States, I guess we have like, I don't even know, Ralph Lauren.

42:28But my point is the chart for Hermes looks healthy. So I don't know if this is just a Louis story. We'll find out. All right. My opinion is it might just be it's not disastrous. It's tough comps. Last year and the year before, these luxury retailers shot the lights out. Yeah. So right now it doesn't – look, the stock is down 45%. It's a lot. So it's a lot. But again, this like feeds into this idea that something has materially changed. Even Michael, even Cathie Wood. Cathie Wood is out with a recession call. I'm not going to read the whole quote. She does this thing about the tariffs and GDP and capitulated to the interest rate.

43:12She's saying one sector of the economy after another since 2022 is falling like dominoes because of that interest rate shock and that now it's going to be like it could be economy wide. And here, this is the last sentence. Now that much of the economy is seized up in response to the fear of tariffs, the drop in activity is likely to be more severe than otherwise would have been the case. And then she calls for tax cuts, deregulation, and lower interest rates, which I believe all three are on the way. Last thing, why is this so important? This is a Warren Pies chart. We were batting it around in the slack yesterday.

43:51Guys, it's binary. After the S &P 500 falls 10%, you either have a recession or you don't, if you don't have a recession, you should just be buying every stock you can get your hands on. That's that teal colored line. Warren says, keep it simple. No recession means correction is a buying opportunity. This is an amalgam of all of the 10 % S &P corrections that did not coincide with a concomitant recession. The purple line is when there is. And as you can see, that's a nightmare scenario. Just absolute torture. Every dip, every rally is sold. So that's why this is so important. Are we in a correction that's just a buying opportunity or are we in a recession correction, which is a much different thing?

44:45Do you agree with that? Yes and no. Two things. So Warned is another chart that breaks out those lines individually, and it's not as binary as it looks, but it's still a valid message. If we don't get a recession, more or less buy everything. The other point that I want to make is there are some shades of the end of 2022 or the beginning of 2022 in here where everybody knows. Now, there was extreme uncertainty about ultimately what the levels of tariffs are going to be, but corporate America and Main Street is getting a warning sign, prepare for X. Now, it would be helpful if we could actually prepare for X.

45:21But the point is that everybody in 2022 put their head between their legs and brace for impact. And just by nature of doing that, it changed the outcome. Now, I'm not saying that it's going to be the exact same thing that we're going to avoid a recession because everyone knows one's coming. But when you have this sort of forewarning, it might help dampen the impact of what could otherwise be a disastrous outcome. I agree. Like you could get so cautious and then if there is no recession, the exhale is like a new bull market. Exactly. Exactly. So I know that that's possible because we just lived through it.

46:00You're exactly right. But I do worry about another externality is if everybody thinks there's a recession and they stop spending, you will have one. Yeah. Yeah. So I don't know. I don't know how you – I think it has to do with employment. Like if everyone thinks there's going to be a recession, but there aren't any layoffs, you probably don't get one. If everyone thinks there is a recession and they think it long enough for the hiring to slow and then go into reverse, you will get one. I think it's a duration of pessimism. You're 100 % right. If we don't see layoffs. Now, what's the timeframe?

46:34Like what if we just don't see them for the next eight weeks? That's a great question. You know what? Dubrovko-Lakos came on halftime report today. He's sort of bearish, JP Morgan, macro, whatever. And he said the longer this uncertainty persists, the more of like a fait accompli this is just going to be. The recession becomes unavoidable if this uncertainty lasts long enough for it to force a recession. Yeah, but we will get announcements for better or worse. My point is we had that scare in March of 23. the FDIC came in, resolved two banks, saved three others and sold them off. Too fast for that panic to A, infect other financial institutions, B, change anyone's buy the dip behavior.

47:27And as a result, that panic didn't turn into a full-blown bear market or a recession. If this continues for six weeks, and the message just keeps reverberating amongst CEOs. Stop hiring. No, nightmare. Stop hiring. Start cutting. That's why the shit coming out of this administration has got to get more on point and cohesive. Yeah, we need some clarity, even if it's not great. Like we just need some finality of what it's going to be. Almost like every tariff I've announced is now on and there will be no nuance. Live with it. the market would like that the market would like no tariffs I understand but that's probably not going to be the outcome here so this is the new environment I'm not making changes get acclimated to it I think we could escape without the real thing without the real recession six more weeks of this I don't think so so I hope somebody's listening Duncan just said Nvidia is down big after hours no it's not yeah I'm seeing that in the chat is it 107 it's down four and a half percent i mean it's not no that's not all right we can't see this is the noise that we're talking don't don't don't don't down big is like down 13 down 5 as a flush wound all right let's talk banks um so i listened to jp morgan i listened to blackrock gullman and morgan stanley and uh i didn't listen to bank of america but that's the only one i that's the only one I listened to.

49:03They're all saying like ish the same things. Uh, I think it's, I think it's, it's noteworthy that JP Morgan just continues to be the winner in terms of its share price. Try it on please.

49:15This is year to date down a measly 1 % just absolutely lapping the competition. It's pretty remarkable. You know, this is back to what I said earlier. I buy number one. Yeah. Yeah. I look, I know that there are, there are trading opportunities in these bank stocks and over any given three-week period, Wells Fargo rallies more or whatever. That's fine. That's somebody else's sport. I don't play that sport. I've owned JP Morgan since the London Whale. You understand? And the dividends are buying me more stock. I want it to go down. So that's what I'm doing in these banks. I thought the Moynihan commentary was notable.

49:57He's just like, look, we're on watch like everybody else, but it's just not showing up. I think they said credit card spending was up 4 % year over year. Now, I don't know how much of that is because prices are up and it's just people doing the same transaction but spending more dollars. But that was as of March, meaning that it's like decent. Sam Nowak is telling me, telling us, NVIDIA says the government has banned them. What? From selling H20 chips to China. They're taking a$55 billion charge. No, no, no, no, no, no, no, no, no, no, 5.5. 5.5. 5.5. All right. Not nothing. That sounds more realistic.

50:42Not nothing. Okay. I pulled out a few quotes that I want to get to from the CFL of J.P. Morgan. Try on, please. All right. The main thing that we see there is what would appear to be a certain amount of front-loading of spending ahead of people expecting price increases from tariffs. So ironically, that's actually somewhat supportive, all else equal. But I think what it sort of highlights is that during this transitional period and this elevated uncertainty, you might see some distortions in data that make it hard to draw larger conclusions. Chart off, please. Josh, I mentioned this last week.

51:14That's the noise. The data is going to look very, very noisy. That's the noise. It's like, oh, there's a spending burst. No, this is people that need supplies before the tariffs go on. Dude, what if Apple just got an upgrade cycle because of this? I know. Apple disclosed today that they flew in. Six million planes? $5 billion worth of phones on three different flights or something like that. Yeah. I think they flew in a huge shipment from India. India is now making 20 % of their phones, which I did not know. I was not aware of that Cobbling the pieces together Right So if you need I don't know what people make Like one of the companies I was talking about today on TV, Fastenal They got stung bad They have to buy a ton of steel Fastenal is basically making Construction supplies And equipment And literally fasteners Anything you can think of They got hurt bad in 2018 And they resolved that if there's another trade war, if there's another tariff thing going on, they're going to be ready for it with a new and improved supply chain.

52:27You picture a company like that, they're like, oh no, we're not doing that again. There's going to be tariffs starting next month. Let's go to work. Let's pull in everything that we need. That's a really great point that you made. Some of the data that we're going to see is just irrelevant or pull forward. And we don't know what's what yet. Well, the funny thing is, It's like all of these earnings seasons that we're entering, throw them out the window. Who gives a shit what these companies did the first three months of the year? Completely irrelevant. I know it's always forward-looking, but now it really is forward-looking.

52:59The results don't matter. Yeah, now it really doesn't matter at all. That's why last week, one of the themes we were talking about that's dangerous is yanked guidance. Right. Because it's all we have to go on that matters. All right. Next quote from Jeremy. He talks about the low-end consumer. I thought this was interesting. When we look at our car data and also our cash buffers and people's checking accounts, of course, it is true that it is relatively weaker in the lower income segment. But when you take a step back and you ask, are we seeing signs of distress in the lower income segment? The answer is no.

53:29So sure, the margin cash buffers are lower and you see some rotation of spend and spending is a little bit weaker than it was in the peak spending moments. But actually, some of the increases in spending that we're seeing in April are actually coming from the lower income segment. So no evidence of distress, I would say. Very important, I think. Who is that? That's Jeremy. Yeah. Yeah. Yeah. I mean, there are signs of distress, but not like extreme. Like some of the stuff about like car loans and delinquency, it's like just barely lifting off the bottom. It was bumping along the bottom for so long, like an L shape.

54:08and now it's just starting to lift off, but it's not big enough to say that there's true stress in that segment. I know people are stressed out. We mean financials. We mean like an economic term. You don't really have stress there yet. So DJ Solomon from Goldman Sachs was, in the opening remarks, was very much dancing around the ire of Trump, talking about the need for some sort of reform, but also like we got to be careful. So the important thing there was their investment banking fees were down 7 % quarter over quarter, like every other investment bank. But their fixed income and currency and commodities trading was up 61%.

54:50Smash. Tons of trading. The problem, of course, with that is that Wall Street doesn't really give you a multiple on your trading profits because they don't believe they're real. No, it's temporary, for sure. Morgan Stanley Wealth Management. This was interesting. I didn't get any color on this on the call, but chart on, please, so I could take a read this. Total client assets at the end of the year was$6.2 trillion, give or take, and fell to$6 trillion, down 3 % quarter over quarter. That's interesting. How? Especially considering the fact that last time we spoke about them might have been, I if it was last quarter or a couple of quarters ago, 20 % of their assets, client assets were in cash.

55:39So I'm curious as to what it was that led to that big of a hit. I got some highlights on the Citi call. They actually said - They're killing it though, by the way, Morgan Stanley Wealth Management. Yeah. Citi said investment banking revenue increased by 31 % to 934 million, I guess that business is small. And so it can post a growth rate like that. It's like, well, I mean, small relative to Goldman Sachs. Well, Goldman Sachs was decent and they did the giant Google deal. And there was another giant deal that they did there. So if you pull those out, it's probably way weaker. Yeah, same thing. Equity's trading strength, trading revenue jumped 32 % year over year, 6 % decline in fixed income trading.

56:23This is Citi. And then they said wealth management revenue you grew 9%. And I said, Citi does wealth management. Do you know about this? Is it like the legacy Solomon business? They sold Smith Barney to the joint venture with Morgan Stanley and Morgan Stanley took the whole thing over. They must have restarted. They must have restarted wealth. It's probably like in the branches. Yeah, it's got to be in the branches. All right, check this out from quarter. Tron on. This was sick. From Wells Fargo. I asked, how is the mortgage business doing? and they, through their AI bot, they gave you a million different things.

56:59And I clicked on one of them. What a large business. Mortgage loan originations actually increased 26%. But here's the, we continue to streamline the business. That's one way to put it. Oh boy. Streamline the business with headcount down 47%. Holy shit. So there is an absolute ice age in the mortgage origination business, obviously. By the way, I told you, Josh, I bought Rocket with you. Yeah, we're buying that stock at the very bottom. I don't know if there's a turn, but this is as bad as the mortgage business gets. I just think that, I don't believe that rates are going to stay high. I don't believe it.

57:34I think they're going to come down. I think there's going to be a refi explosion. You're not getting stagflation for an extended period. If the economy sucks, the price of everything is going to drop. That's it. Because demand goes away. Yeah. So I think the refi boom is probably more likely than a new origination boom in a bad economy. But I think the refi boom is good enough for some of the stocks that we're talking about. All right, this is mildly encouraging. So NVIDIA is down 6 % after hours. The Qs are only down 1%. That's a very NVIDIA-specific story, selling GPUs to China. It doesn't really affect anybody.

58:09All right, I want to do this thing with Uber and Waymo. We don't have to spend a lot of time on it, but I think it's an important story because we talk about autonomous vehicles and robo-taxis on the show a lot. really interesting thing happened. The guy from Waymo came out talking about the adoption rate in Austin. And Austin is now ground zero for the battle that's about to take place between Waymo and Tesla CyberTaxi. Austin is where Tesla is launching. They say they're launching in June. It's a really key city for tech people, for media people. All eyes are on Austin. And I thought this is really interesting.

58:54Waymo RoboTaxis made up 20 % of rides offered by Uber in the city of Austin during the last week of March. That's pretty nuts, dude. So in other words, Uber and Waymo launched in partnership. if you go to get a ride on uber on the regular uber app just like you always do they might send you an autonomous vehicle and not a human i wonder what they don't say is it more they let you opt out if you don't want the autonomous but they don't tell you to choose it in advance do you understand yeah it's a it's a negative consent it's a uh it's like a you have to say no no robot after they assign it to you in a place like austin everyone's drunk all day anyway.

59:39They're probably like, yeah, send the robot. I don't care. 20 % in the last week of March of all the Uber rides were Waymo on the Uber app. That's pretty dope. People want to try it. It's a faster adoption than the Waymo only, which they've done in San Francisco and elsewhere. So is that the bull case for Uber? That's the bull case for autonomous vehicle companies like WeRide, maybe someday Tesla, certainly Waymo, wanting to launch in cities with Uber rather than just all by themselves. And that's my thesis on Uber is that in the end, these companies are spending billions of dollars to put these things on the street.

1:00:24They want them to be used. I wonder what the economics are of the deal between Waymo and Uber. Well, one of the interesting things about that is there's a service component and Uber is in that business where you have to house these vehicles at night. You have to refuel them. You have to maintain them. You have to change the oil. You have to clean them. You do need human involvement. You do need what's called fleet services. And so Uber is in that business. And so that's another reason for a provider of the vehicles to partner with Uber. They do fleet management, fleet maintenance, and they'll make sure that there's a constant flow of people using the cars so that you don't have them just sitting out there on the street waiting.

1:01:04This is interesting. Alphabet's autonomous vehicle unit has racked up 80 % more driverless rides in its operating zone in Austin in the first 27 days than it did in the first 27 days of the San Francisco launch. So like Americans in general are just getting more comfortable really, really quickly. Oh, put this tweet up. This is Alex Immerman. He's from Waymo. And he's basically saying that working with Uber and Uber running fleet ops and is the first rideshare partner with the driver of the future. Or this is the guy that did the data collection, I should say. And then the guy from investor relations at Uber retweeted it.

1:01:57Oh, this guy's an Andreessen Horowitz partner. That's who tweeted this. Last thing on this. So my take is Uber is going to be a great partner for companies that want to launch autonomous vehicles into a given city because they have the ridership. They have the fleet maintenance operation, and they know all of the data about who gets picked up when, how much money you make in each neighborhood. They have all of that work done. So coming into the market with your own autonomous vehicle is great, but plugging with Uber is probably the cheat code. And they're going to launch together in Atlanta now.

1:02:41That's the next city of the combined Uber, Waymo thing. And we'll see how that goes. If that looks similar to Austin on the East Coast, that's going to be really interesting, I think, for shareholders. You know what's good we haven't seen yet is people get hysterical, understandably so, when there's an accident with a driverless car. You haven't really seen many of those headlines, which speaks to the advancements in the technology. Can I have this chart, John? This is the adoption speed. This is the cumulative Waymo ride volumes in Austin were 80 % higher than San Francisco in the first 27 days.

1:03:15You see the black line, Michael? Yeah, it's remarkable. So that's the Uber Waymo combo. The pink line is Waymo by itself in San Francisco. So that's what we're – anyway, Uber is selling – I'm loing the stock in case you couldn't tell. Uber is now selling at 15 times the next 12 months earnings expectations. They're expected to grow earnings 36%. not a lot of 15 multiples on 36 % growers in the NASDAQ. And the only reason it's not 25 times earnings is because of this fear that they're going to get boxed out of their own dominance. I also own Uber with you. And it's funny because every time they talk about Waymo, the company drops as if it's a threat.

1:03:59But your point this whole time has been, no, it's an asset. They're working really well together. We'll see. You're up. Okay. I'm going to make the case for the following. It's a bit long way, but bear with me for a second. All right. This is from Jay Kapil of Sentiment Trader. I believe we touched on something similar to this last week. It says risk on risk off indicator. I don't know what exactly is in here. It oscillates. It's noisy, of course. But this is some sort of fear metric, OK? And we hit an extreme last week. And one, two, three, six, and 12 months later. Now, careful, because N equals one, two.

1:04:36N equals like seven, all right? So 100 % hit rate on an equal seven. Take that for what it's worth. Point is, people bought the panic. And so for every data point like this, I can show you the next one. There's a yin to the yang, which shows following its largest 15 daily gains. Next chart, please. The US stock benchmark was higher six months later, only 43 % of the time. All right. So hardly a slam dunk. But obviously, last week, people did a lot of buying. You saw that in the leveraged ETF flow space. But there are stocks, not but, and also there are stocks that are making a lot of 52-week lows.

1:05:1852-week lows, as we know, are a dangerous spot to buy, but people love to buy it. I love to buy some of them. I wish I didn't. Can't help it. But this is where we are. This is a great chart from Grant Honkridge. He tweeted, the stock market, 52-week lows, 52-week new lows, excuse me, expanded to its fourth highest level over the past 17 years. So we got a hell of a washout, okay? Here's a point that I want to make. You have to know what you're buying, obviously, but you have to know why you're buying. When you are buying into a panic or when you're buying a 52-week low, you really have to have a game plan.

1:05:57meaning, all right, am I buying this because it's a piece of shit that is so stretched that I'm going to sell the snapback and get out at 20 % rally? Or am I buying something that has held up really well, that has shown relative strength, that has dipped because I've always wanted to own it and now I'm in this and this is not a trade? So for example, last week, I bought CrowdStrike. Chart on please. CrowdStrike divided by the S &P. So CrowdStrike has outperformed over the last couple of years, it's shown really great relative strength into the sell-off. And so I bought CrowdStrike with no plans of selling into the rally.

1:06:37Conversely, last week, I bought Apple. Apple has been a piece of junk compared to the market. It's gone nowhere, literally. It has gone nowhere relative to the market for the past three years. It's not a leader. It's gone up. It's at good runs. It's at bad runs. But last week, I showed this chart. The worst rolling four-day period of all time since the dot-com bubble burst for Apple was down 23 % in four days. I bought the Panic, and I sold the bounce. I was in it for the bounce, and that was that. So you're saying like you had a different thought process about what you were doing with CrowdStrike versus what you were doing with Apple.

1:07:17So my point is if you are one of these people – and listen, in an environment like this, you have to have a good reason to buy an individual stock, right? Especially if the index is giving you a 20 % sale, right? You could buy the NASDAQ down 25%. There better be a good reason why you're buying an individual stock and not the index. So if you are going to be buying individual stocks, you have to have some sort of a strategy. Know your timeframe, know what you're buying and know what you're going to do. Like in other words, if this goes lower, am I going to panic? Well then don't buy. Like you have to have some sort of a game plan going.

1:07:48And this is, this is the type of stock that I like it at a hundred and I'll love it at 90. Did you have a stop on that Apple purchase or you were going to stay long no matter what because it was so oversold when you bought it? I would have continued to add if it crashed more. Okay. What about CrowdStrike? CrowdStrike, I'm not selling. No, no, no, no, no. All right. So you had no mental stop. You had no downside protection in either of these names. Nope. One of them you would have kept adding to. Yep. Okay. All right. And you knew that going in. Would you have honored it? Kept buying down. Yeah.

1:08:20You bought Apple at$170? I bought it at$170. I sold it at$210. At$150 you're adding to it? Yeah. Or$120? Oh, yeah, yeah. Yeah. Yeah. Okay. All right. I mean, that would have been – listen, I don't – I always have to say that would be my preferred outcome because obviously there's a lot more bigger things on the line than me adding to a trading position. So I'm happy that it worked out this way. But my bigger point is you have to know what you're buying and why and what your game plan is. And this has been another edition of Balding Alpha. Make the case. Thank you. Thank you, Michael. I have a mystery chart for you.

1:08:49By the way, I also bought an NVIDIA. Now I'm not sure what to do. So I guess I need a better plan. Yeah, maybe get off the podcast and go manage risk. Put this chart up for me, John, if you would. No hints. What is it? No, I'm just kidding. Well, all right. As you can see, I left the Y-axis intact. So you can see this has a percentage attached to it. I'll just tell you. Yeah, I know what it is. Straight up. It's an interest rate. It's 6.62%. What am I? Five. I'm looking. We're looking at it. It's a 10-year look. What am I? These mortgage rates. Look at you. Wonderful job. I knew you'd get it, but I didn't think you'd get it that fast.

1:09:30We have a one-year look at this too. Let's keep this up. This is a 30-year mortgage over the last year. Gun to your head. Gun to your head. Lower. This sees six before seven, right? Yes. This is the most obvious thing in the world to me. Are people out of their minds? In fact, by the way, it would be kind of hilarious if we're wrong because what I'm about to say is pretty ridiculous. I don't know what would have to happen for it to go to seven. It would have to be just – It's not going to seven. It would have to be just a dump of treasures, which would be awful. The risk here of us being wrong and mortgage rates not falling is that even if the 10-year falls, mortgage originators don't feel comfortable making loans.

1:10:15No, it's nonsense. That's nonsense because Fannie and Freddie are backing conforming loans. Like 95 % of the market for mortgages is federally backed. Nonsense. So I don't even think that's a real risk. I think this is almost – there are a few things in life that are a guarantee. I think it's a guarantee that the next 50 basis points in 30-year mortgage. I wouldn't go that far. I would. Okay. Here's what I'll say in conclusion for the show. So we had the VIX spike to what? Do the wrap-ups now? I'm wrapping up. Chill out. We had a VIX spike to 60. It's now back to 30. The ability for tariffs to shock the market is probably behind us.

1:10:59It definitely doesn't mean that the bottom is ultimately in. I have no idea. But I think that the grand pronouncements that have spooked the shit out of investors is probably not going to happen again next week. Yes. Now we're just left with the garden variety. Will we or won't we have a recession debate? I'll take that. The ability of tariff announcements to shock the market may be lessened, but the ability of tariffs to damage corporate earnings, very much still with us. Now let's see reality. Totally agree. Guys, thank you so much for tuning in. This has been a supersized edition, not on purpose.

1:11:33We just had so much to say. We love you guys for coming to the live. We'll see you next week and every week, hopefully. for what are your thoughts live at 5 p.m. on the East Coast. For those of you listening out in podcast land, we appreciate you too. Please leave a rating and review. Remember, tomorrow is Wednesday. All new edition of Animal Spirits with Michael and Ben. We'll do Ask the Compound live on YouTube later this week. And an all new edition of the Compound and Friends with a very special guest. You are definitely going to want to hear from this week. Keep it locked on the Compound all week.

1:12:08We love you. We appreciate you. We'll talk to you soon.

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