Solana tokenizes stocks with Anatoly Yakovenko, eVTOL stocks with Andres Sheppard, Oracle questions, BDC trouble

27:07And what do you personally monitor so that you have an understanding of what's happening, what the supply demand is? Just love to hear about your own creation directly from you. um so a lot of my kind of let you know none of this was something that i thought of before i started solana but through the ups and downs and through kind of the the crashes and the trauma that you know we got through the through building this the thing that i really care about is like basically team runway and whether they've been able to raise capital building a product in solana or they now have revenues and they never need to raise capital again.

27:49So these are kind of the KPIs that I started really caring about, I think about a year into. Because you quickly realize that teams can launch a token, but if there is no product market fit, there's no revenue behind that token, it will go to zero. If you cannot build a sustainable business around it and have some of those economics go to the token. I'm a traditional, you know, intelligent investor kind of person, like it's got to have something. Now, Bitcoin doesn't have any of this. And I think the trap that a lot of crypto founders fall into that Bitcoin doesn't have revenues. Therefore, I can build a better Bitcoin or, you know, a gadget that kind of is Bitcoin plus something.

28:33And it's going to work just have value simply because of that. And I think that's a really false premise because the reason Bitcoin has value is totally separated from the technology at this point in a lot of ways, outside of the simplicity aspect of it. So Solana has value being generated by way of staking fees and some of that is accruing to the token itself, which is what propagates that value. So not just staking fees. when if you stake a validator and you run like effectively think of it as a small business, you run a validator that is high performance and can make blocks. Transactions that submit it to your block producer pay a tip to that validator.

29:19So you can collect all the tips. And these are substantial. I think last year it was over a billion dollars and I think it pressed, if I'm not mistaken, you can go on blockworks.com on Solana and see the total revenue generated by tips. I think it's over a billion this year already. And similarly for applications, if you build a DAX, a decentralized exchange like Radium, you can collect fees for the Radium token and those are revenues that are going to those token holders. So it's a very, very boring, traditional, let's look at the revenues and the multiples and figure out is this a sustainable product and where is it going and growth and things like that.

29:59What do you think is the largest application right now of Solana in the real world? And then what do you think is the biggest opportunity in the future, either as a technology or as a currency or medium of exchange? Like what would you tell somebody is the bull case for Solana use? Not price, but use. The largest is probably trading. this is where most of the revenues come from. A lot of that used to be NFTs, but now it's meme coins. To me, that's like when I was working on those DAX and thinking about financial markets, my focus was let's get equities and real trading and compete with NASDAQ because we can offer an open, fair version of it.

30:49What took off was meme coins.

30:52Michael Batnick:Does that upset you or excite you? Like, are you like, I can't believe I did all this hard work and they're trading shit coins? Or are you like, all right, they're using it. As a founder, you know, I don't know if you've ever been a founder, but 18 months into any project, you either you're surviving, right? Your goal is still like you're just trying to survive, get to the next stage, wherever that is. So any kind of usage is good. Like you're almost forget about like your ego is totally stripped away at that point. But what about now? We're eight years later. So people are using Solana to create their own tradable assets.

31:31And many of those are other coins or meme coins. But that's right now a lot of the activity in the Solana ecosystem. Yeah, and again, BlockWorks has all the stats on how much of that. I think it varies 10 % to 40 % depending on the day. How I think of it is that if you look at iOS, the vast majority of applications are games, loot boxes. And that's stupid too. Those are stupid. Steve Jobs had to say, we don't need 10 more fart apps in the App Store. and I kind of think of it okay these are fart apps and that's fine because and you have fart coins yeah there's fart coins people can do whatever they want this is their you know up to them to build their own businesses or run their own activity they're adults our goal is to unblock whatever use cases that we you know we think are important and getting regulated equities and things like that on chain is like these big hurdles that the foundation can work on and like talk to regulators and companies and get them across the line.

32:43Can we can we ask you about that? So when Robinhood announced that they wanted to tokenize non-traded stocks, such as shares in SpaceX and Starlink and Databricks and some of these really sought after private companies that had not yet gone through the traditional securities IPO process. And Robinhood said, we've come up with a way using a layer two sitting on top of ETH where we will create liquidity for people who own those shares and people who don't but want to. We'll build this marketplace. Forget about the controversy around that. A lot of the startups weren't thrilled with that idea. But putting that aside, were you surprised that Robinhood opted to build via ETH as opposed to Solana, given Solana's obvious advantages toward high-volume transactions?

33:41Well, I think that same day that they announced it, X-Stocks launched on Solana and I think is 90 % of volume, I think, is going to X-Stocks right now. Okay. Tell us what is X-Stocks? It's a similar thing. It's a project that effectively gives you price exposure to equities like this. There's a bunch of them. So you can go buy an ex-Tesla stock on DAX right now on Jupiter or some other DAX on Solana and trade them. It'll mimic the price of Tesla, but it's a tokenized version. Yeah. So I think they're up to a few hundred million of volume per day, not per day, sorry, per week. at this point. So it's growing.

34:30I think in the initial launch, the first week, like 40 ,000 wallets interacted with them and like bought or sold X stocks. So there is demand for this. And to me, these are baby steps in terms of these aren't actual real stocks and all the problems that you guys are aware of between actually getting a person a real stock on chain. A hundred percent agree with you. That's really lame. Big part of that is regulation so slow. So, and the goal is to get rid of all these layers and, you know, just have a real stock. You think Solana will play a big part in the tokenization of stocks and bonds? That's my, yeah, a hundred percent.

35:07Like, I mean, that's my dream. Like this is what it was built for. And the difference between, I would say, I'll make, the difference between Solana and Ethereum is that you can just launch the product on Solana. On Ethereum, you have to announce an L2 for it first. Okay. Got it. You don't need all this extra infra. You can actually just go reuse all the smart contracts, everything else that's available, and go mint the asset, and it'll get usage immediately. And I think that kind of rapid innovation will accelerate products being launched on Solana much faster. Think about what happened with...

35:46You need a big company like Robinhood to first support NL2, then this product ID, and then go build a whole bunch of usage for it and acquire users and all of this. That's a much slower process than a small company like Xstocks just goes and creates these assets and mints them and gives users exposure. That cycle is just much, much faster in Solana. So to me, it seems like if you have financial innovation, it's going to happen much faster on Solana as we've seen. And yes, companies are going to want to own the entire stack for product reasons or revenue reasons or whatever. But I think if you're targeting kind of the rapid release and disrupting the incumbents, it's likely going to come on Solana.

36:35it.

36:37Michael Batnick:Anatoly, what's your take on the size of the market in terms of Solana? Like we, we were calling it a market cap because that's just shorthand. That's what we know. Number of shares outstanding times total price. And we're doing that with the coins. But the difference between the coins and real equity is that theoretically, if, if everybody wants to sell Apple, and I know that's, you know, this is make-believe, but there's a floor to the price where private equity, where a group of buyers would say, wait, wait, I want to buy the whole company. So like, it's not, so with Solana, theoretically, if everybody wants to sell it again, I know it's not, it's just, it's not equity is my point.

37:14Michael Batnick:Like, how do you think about the size of it? Is market cap the right word or is that, are we sort of confusing the two things? And just for context, before you answer, as of this month, the market cap, whether it's appropriate or not, you're about to tell us is considered to be$127 billion in US dollars. Basically, the price,$234 times 545 million tokens. But yeah, but people would compare this with the market app of a company. It's like, these are not the same things. Yeah, we'd love to get your take on how appropriate that comparison is. So this is where proof-of-work store of value is separate from proof-of-stake is because you need to have the underlying coin in a proof of stake network like Sol or ETH to create blocks.

38:00And creating blocks is a normal revenue generated business. People pay you to add their transactions to the blocks you create. You actually have revenues that you can tie back to the underlying coin. And to me, proof of stake networks should be valued just like any other company. You can look at revenues. There is no central corporation that can make decisions for it because it's purely defined in software. The entire protocol is defined in software. How you interact with other block producers and you agree on this is defined in the software that you download. It's all open source. You have full control over that.

38:38You can fork it at any time and do whatever, make changes to it, which is different from Apple. I can't go say I'm going to take my iPhone, completely change a business model on it and now it's part of its mind, right? You don't have that capability because it's a closed system that Apple completely controls or even Google, even though they released some of the software, their stack is fully controlled by them. This is the decentralization aspect where there's no essential person or company that can actually make changes to the business models in the network. That doesn't exist in Solana. But you do still have revenues.

39:18Michael Batnick:So is the revenue of the network the right way of phrasing that question? To compare that to the market cap? This is how I think of it. I think the Blockworks guys were the first ones to actually start listening to me or maybe thought the same way. And they've done a lot of work on data collection to figure out what are actual revenues, what happens if you buy a bunch of soul, you stake it and you run your own block producer. There's costs associated with that. How much revenue can you actually capture? That's a cost of goods sold. It's like, how much does it cost us to mint a block relative to how much revenue are we taking in?

39:57It's almost like a profit margin calculation. Yep, totally. And this is very different from proof of work networks where you have to spend electricity to make blocks. and generally those don't generate enough revenue to even be substantial or to cover the cost of the electricity. They're purely running on the inflation. And you have like, I think it's important for people to understand that like stake, like proof of stake, staking rewards, and you think of inflation, you have to separate that from revenues because this is just tokens moving around in a black box. So pure network rewards and pure network inflation is not actual revenue.

40:39It is effectively an incentive for people to stake and run these businesses, but it is a fee on people that don't. This is the best way to think of it is like if you don't do it, you're actually like losing money. You're being diluted by people that do. So you're forced to go make the – do the work effectively. Is the token scarce or becoming more scarce? Are the units being created faster than they can be burned? because I think a lot of our viewers think like investors. So if somebody wants to have some money quote unquote invested in Sol and they have no intention whatsoever of transacting with it, what is the bull case for why Sol tokens will appreciate value over time?

41:26Not a prediction, but like why would they? If the network activity grows and more tips are generated on the network, then more people are going to, people are willing to pay more dollars, right? You're making your Kelly optimized portfolio. Some amount of it's going to treasuries at risk-free rate. And there is this other thing you can go and run a validator that has revenues. What percentage of that portfolio should go to that? You do your own calculation, right? So as the tips increase, you will allocate more towards that business versus treasuries. Okay. Right. So, but is the, are we still growing the amount of tokens in the world as fast as we were a few years ago?

42:08Or has the growth of the amount of tokens slowed so that people can start thinking about this as an accumulation asset? I think so. If you're just, if you're not staking and not running a validator, then inflation is a cost to you. So you can think of it as a fee. Okay. Right. So. So if you're running a validator, it's like you've got a cash flow coming as a result of tips and staking fees. Correct. OK, got it. You think we'll see an ETF based on Sol at some point in the next few months or year? Why do you think there isn't one yet? I mean, there's been like a bunch of filings with the SEC, and it seems like they're very receptive to the idea.

42:56But I don't know inside their head, right? But everything that I know about the CureNet SEC administration is that they were extremely frustrated that the process was so bad in the last administration. I just kind of want to simplify it and make it faster and simpler. So it looks like the rules that they're proposing for kind of these standard rules for how a crypto asset becomes an ETF seem pretty normal to me and like pretty straightforward. Do you get calls from the ETF, like the asset managers who would love to have you attached to a fund product that they launch? Not anymore. I mean initially they did and like – Okay.

43:41This isn't like – it's not – this is all – You want to be an engineer, not a mobile, not a financial. Exactly. Good for you. Hey, Natalie, this has been so much fun for us and Michael and I have learned so much. We really appreciate it. Is there a specific place that you would send our viewers and listeners if they want to learn more about the mission of Solana? Is there a URL or a social media account? Solana.com. Super easy. That simple? All right. Thank you so much for doing this. We appreciate it. Guys, thank you for watching and listening. If you want to learn more, go to Solana.com. We'll talk to you soon.

44:38All right, gangsters. It's 5 p.m. Eastern time. Tonight is going to be a special edition of What Are Your Thoughts? I'm so glad to see so many of you guys joining me live in the chat. I almost said live in the trap because I listen to too much hip-hop. because I'm going to need your help. Tonight's edition will be the first time ever that I've gone live without my co-host, Michael Batnick. Michael is in Texas doing actual work on behalf of Ritholtz Wealth Management. So while he's on assignment, I basically said, focus on that, I'll take care of the show. And I knew you guys would be here to back me up.

45:17So we're going to have a lot of fun. We're going to get to all of the biggest topics and things happening on Wall Street this week. I want to say a couple of quick hellos here, and I'll do more, obviously, as the show goes on, and you guys contribute. Matt Stevik is here. Brian Grill. Chris Hayes. Rachel's back. East Bay Elitist, good to see you. Who else? Guys, say hello to Nicole. Nicole's in the chat, and she's got a link she's about to drop that she's very excited about. Dr. Horton, John Needham. Good to see you guys, too. Cliff, what's up? David Shoko is here. He says, let's go. I agree. Let's get on with it.

45:54First things first, quick item of housekeeping. We are doing our next live from the compound recording before a live audience in New York City. Guys, I believe the graphic for who our special guest is. Oh, my God. Can you believe it? Do I have any sound effects? Can we play? Can we do a horn or a bell? All right. I mean. First time ever, guys. Jim Kramer and The Compound will be live from the Financial District in New York City. It'll be Friday, October 24th at 6 p.m. Jim is so pumped to be part of the show. We are too. They said they would never see me and Jim on the same stage or in the same room.

46:43They're wrong. It's going to happen. And we love each other. So it's going to be a really great event. If you guys want your ticket to come see Jim and I, Nicole's going to drop the link or maybe she already, oh, there it is. Wow. She dropped it 50 times. I don't know how I missed it. Unfortunately, there's less than 120 tickets for sale. So if you want to do this, you got to act. And I hope anyone that's going to be in New York that night is able to join us and we'll have a ton of fun. I promise. There'll be drinks. There'll be podcasting. There'll be food. they'll be Kramer. I'd love to see you guys then.

47:20It looks like somebody's at the door. I wonder who that could be. All right, let's see. Who do we have? You guys, it's Andre Shepard. Andre is going to lead off tonight's discussion on a topic that I'm super excited about. He is the lead mobility equity research technology analyst at Cantor Fitzgerald. Andre, welcome to the show. So happy to see you. Great to be here. Yeah. Good to see you again. All right. It's epic for our audience that you're here because you have been covering the EVTOL sector and what I'm calling, many people are calling the low altitude economy for how long? About four years now.

48:01Okay. Four years ago, what were we talking about? Blueprints on a drawing board or was there something here? It was a very early and rudimentary start with basically an idea, a pen and paper to try to make the skies cleaner and more efficient and more accessible to just the everyday passenger. What started off as a dream is now coming closer and closer to fruition. Can we just say it out loud? It's literally flying cars. It's not helicopters. That's right. That's right. So EVTOL, as you mentioned, that stands for electric vertical takeoff and landing. And so these are electrified, miniaturized aircraft that will take five people, one pilot and four passengers of distances of up to 100 miles.

48:51So flying cars or flying taxis is one way to describe. Okay, I like that description. And I know the early stages of this won't be flying cars. It's more likely that it'll be rescue vehicles and things of that nature in the government sector, maybe military, maybe cargo, before we're ready to start loading tourists and fanny packs into these things. But that is where this is ultimately headed. You guys seem to have a pretty strong level of conviction that this is going to be an everybody technology at some point. Yeah, that's exactly right. So if we maybe take a step back, and sometimes people don't forget this, but Leonardo da Vinci is basically the first person credited for designing the idea of a helicopter.

49:40We still have the draws from his diary since then. Well, helicopters today have three fundamental flaws. Number one, they are obnoxiously loud. For anybody who has been inside a helicopter knows that the noise can sometimes be unbearable. In fact, for just that reason alone, we don't have more helicopters in cities like New York because tenants complain about the noise profile. The second flaw, maybe their biggest flaw, is that they are not ultimately that safe. Helicopters on average have two rotors, one at the top to go up and down and one in the back to steer. And if something happens to either one, let's just say it's not a good day for the people.

50:20No redundancy. No redundancy, single points of failure. Exactly. And then the third issue that they have, I would say is that they're very costly both to build, to purchase and to maintain. And so EV tolls addresses those three flaws. For starters, they're electric. So that reduces the noise profile significantly. Then depending on the company - I want to pause there. All of this is, the way has been paved for this by the start of the EV revolution. Just the idea of like working toward eventually solid state batteries and having those have the power and the energy density needed to fit on board one of these things.

51:04None of that was possible until Elon proved that you could do it with cars. So that's a really big, the power and it being electric, the E and the eVTOL is a really big component of this conversation. 100%, completely. And I think it's important to touch on that point. And so similarly, when you now look at the technology, right? Helicopters, as I was saying, they have two rotors, these EV tolls, depending on the company, each company has their own design. Some of them have up to 12 rotors. So there are no single points of failure, additional redundancies. In fact, these aircraft can both take off and land vertically or conventionally.

51:45And so there are these extra layers of safety, which I think the consumers and the investors will ultimately appreciate. And then finally, and my last point there, sorry, is they are significantly more affordable to both build and to maintain. And you touched on that a little bit, the fact that they're electric, there's a lot simpler components. And it just becomes a question of integrating the battery pack into these aircraft. So simpler, safer, and quieter. And for us, that ultimately makes them a no brainer to get adopted and to disrupt the mobility industry as we know it. Okay. I have a million questions and I know the live audience does too.

52:23And I'm monitoring the chat. So if somebody asks something poignant instead of what could possibly go wrong, LOL, I'll lob it at you. Here's the first question. So this is where these things will differ from an electric vehicle on the road. They require a huge burst of electric power upon the takeoff itself and the landing, whereas driving an EV, it's a much more steady, I don't know if current is the right way to explain it, but it's a much more steady, consistent demand on the battery as you operate the car. This is like a burst. And then if they're flying on a fixed wing, the battery power is still running, but it's not as intense.

53:11And then on landing, it's another burst. That's an engineering challenge. Do you think that that challenge has been solved by the companies that are now, and we'll get into the companies in a second, that are now in the process of completing the FAA certification at various stages? Yeah, I think that's a great question. You touched on a lot of points. I'm very bright. Let me try to address everything that you said. So in terms of the technology, you are exactly right. Once these aircraft take off, the amount of energy that they're using, not to mention powering the aircraft, which, depending on the company, can weight between 6 ,000 and 4 ,000 pounds, it's a massive use of energy that's being used to ultimately elevate that aircraft.

53:57Once it transitions into its cruise phase or the fixed wing, then the energy usage is significantly less. But as a result of that takeoff requiring the amount of energy that it does, these vehicles today are being limited to up to 100 miles of range. And that's just the nature of the battery technology that we have available today. But as that continues to develop, so will the range and the payload capabilities of these companies. And so, yes, the technology works. In fact, many of them have conducted several test flights over the last few years, some of them even in New York City with a pilot on board.

54:34But so, yes, it works. I think that as the batteries get better, we'll see extended battery range, similar to what we've seen in the EV industry as well. Okay. Viewer Theo Williams says, this is a Joby versus Archer conversation. Look, the way that I think about it, I just go by the market cap of the companies. And that's who I tell you, I think is in the lead. I know it's unsophisticated, but it's also helped me in a lot of other technological booms. But I want to do some charts. John, can we roll through a couple of these just so we give people an idea of what we're talking about. All right, Joby, full disclosure, I am long the stock, not for a trade as an investment.

55:13I've talked about it here on YouTube as well as on TV for the last couple of months. I've been accumulating. The stock is about 19 and a half bucks. Looks like it wants to run up against the old high set earlier this summer. And who knows what happens if and when it reaches that price. Next chart. This is Archer. This is what a lot of people consider to be the runner up to Joby. I don't know if it's quite that simple. They seem to be not as far along in their commercialization as Joby is. Also, Joby's made some bigger deals with companies like Blade. Andre is going to explain that all to us. But as you can see, Archer up 315 % over the last year.

55:57Full disclosure, I also own this one. I think we have one more. this is a Andre I don't know if this is in your coverage universe this is a not quite a a flying car stock as a eVTOL stock this is the satellites that are providing all the data to enable the low altitude economy which we'll define in a minute but Planet Labs is up almost 600 percent over the last year it's a 15 dollar stock they want to be like the data provider, maybe the alphabet or the, I don't know the best way to phrase it, but they have a satellite constellation of a hundred, you know, low orbit craft that are monitoring the wind and geology and whatever else.

56:42I'm very scientific. So let's start with, we could skip Planet Labs if it's not in your universe. Let's start with Joby versus Archer. How do you, I mean, those are, Let me just ask one final question. I almost view these as they – it's an anomaly of history that they're even public companies. They probably wouldn't be if not for the bubble of 2021 in SPACs. That's right. They both were able to come public with no revenue, pre-revenue, because they were merged with SPACs at the height of the post-COVID stock market mania. And if that hadn't happened, these might still be privately funded VC backed companies.

57:24So it's almost like a gift, like from my perspective, I don't know that the stocks will work, but they almost don't belong as public companies or haven't until recently. Would you agree with that premise? Definitely. I think that is a very great point. To your point, even still today, both these companies are pre-revenue. And on that note, they are contingent on receiving FAA certification. If they don't, and our expectation is very much that they will and that they will soon and happy to expand on that. But hypothetically, in a scenario where they don't receive that FA certification, these business could be deemed worthless to a degree and that they need that to enter commercialization.

58:05So certainly you can make the case that it was early for them to enter. But as you also said, right, they're here now and they can have as it gets for investors who are comfortable taking a medium to longer term view and who are comfortable with volatility. But let's get into maybe some of the similarities and differences between Archer and Joby. So I would agree that both Joby and Archer are today the industry leaders. we like to consider them kind of the coca-cola and pepsi of the industry in a lot of ways they're similar in some ways they're different in some ways one of them is ahead and the other the other one is ahead but joby is partnered with delta for its operations for with toyota with its manufacturing and as well with uber and the military for a few record of programs there which toyota owns a big chunk of stock too toyota and so does uber right they're two of the largest investors, and they're also working side by side with these companies to integrate their manufacturing efforts into Joby's facilities.

59:08So Toyota, in fact, has employees that are based at Joby's headquarters in California. This is significant because 10 million automobiles made a year. Toyota makes 1 million of those 10 million. This is arguably the greatest scaled manufacturer of transportation vehicles the world has ever known. So the fact that they're not only partnering with Joby, but they're an equity investor riding along, I think is really critical. I mean, could be really critical. It's an incredible resource to have somebody of Toyota's expertise and degrees in manufacturing, working side by side with your engineers. And we're seeing that.

59:53Joby is also leading the raise in the amount of aircrafts that they've manufactured today, which is close to 10, whereas Archer is maybe still kind of ramping those up. But Archer, on the other hand, they're a partner with United Airlines for their operations, Stellantis for their manufacturing, who's also an investor similar to Toyota. And then they're also working with the defense and with the military to expand programs there. So they both have, I would say, very strong partnerships. And both of them have the strongest balance sheets in the industry today. Archer's total liquidity is around$2 billion.

1:00:30Joby's total liquidity is around$1 billion. Have you seen the news? Well, I was just going to say, except as of this conversation, they've just announced another$500 million equity rate. So 1.5 more. Joby, secondary. Okay. All right. But still, right? Both of them have the strongest balance sheets. Archer maybe has the slight lead there in that they have more liquidity and also a slightly lower cash burn than Joby. But both of them very well capitalized. And our view is that they're funded through their commercialization and certifications efforts. Now, one of the big differences here, sometimes people don't realize this, is their business model.

1:01:10Archer's is very straightforward. They want to be an OEM, and so they want to build the aircraft and sell the aircraft. And so for them, it's quick revenue recognition at scale. Over the years, they expect to manufacture each aircraft for around two, two and a half, three million dollars. This is the midnight craft? Is that the one they're going to sell? That's right. That vehicle is still being tweaked because it's not to the FAA degrees of certification just yet, but it's a variant of that midnight. Exactly right. And so Archer will sell their aircraft, whereas Joby, they're prioritizing wanting to be an operator.

1:01:48So rather than selling these aircraft, they actually intend on owning the aircraft and conducting the operating business, similar to kind of how Blade business was, which we can talk about since Joby just acquired Blade. So I think that's a subtle difference in the business model. Joby today has significantly more test flights under their belt. Archer is ramping up theirs. They still have to transition their aircraft from a hover to a cruise, which Joby has now been doing for a few months. But both of them, again, strongest liquidity, closest path to certification, strongest personnel in terms of management teams and partnerships.

1:02:28And so we're confident that both of them are going to get to the finish line and commercialize. So I bought both for that reason. I don't know which business model is going to be the one that makes the most sense. Selling these craft to others versus being the taxi service. And then I also know that Archer wants to have a taxi service as well. So it's hard for me to, it's hard for anyone, I would say, to know two years from now who does what first and more profitably. It just seems really difficult. So that's fair. And a lot of this industry is still being developed. This is the first time the FAA has defined a new category in over 50 years.

1:03:10So a lot of this is we're learning as we go, which I think is fair. Sorry, from the chat, someone's making the Mr. R570 is asking Archer equals Boeing, Joby equals Uber. It seems like an oversimplification. There's probably more overlap, I would say. Yeah, I think that's maybe an oversimplification, but I think the example applies, right? Because again, Archer wanting to be an OEM like Boeing in the sense, hopefully a lot less issues and incidents than Boeing over the medium to longer term. But while they are going to have an air taxi service and that they're going to be transporting passengers, Archer intends to basically partner with their airlines or their partnerships and have those companies conduct the operating business while Archer provides the aircraft.

1:04:03Joby wants to do both, build the aircraft and also operate it. Now, I can't think of any airline today that is both an OEM and an airline. In fact, Boeing tried it many, many years ago. It didn't work very well. Usually, either you are an OEM or an operator. Well, in Joe's case, they want to do both. We'll see how that ultimately shapes out. But you could argue that from an investor's perspective, that raises a lot more questions because now you have to consider things. Well, how many aircrafts? How many passengers? How many flights per day? What are you going to charge those passengers? And so it's a lot more inputs in ultimately your evaluation.

1:04:41Whereas with Archer, you could argue it's a much more straightforward model. They build the aircraft and then they sell the aircraft. So from an investor's perspective, that one's easier and more straightforward to understand. But again, we'll see which business model ultimately ends up being the more successful one. I think it's important, though, to realize that this is not going to be a winner-take-all industry, right? It's too big. It's way too big. And there's going to be several players across several geographies, some in Europe, some in the US, some in South America, some in Asia, some in many places.

1:05:15And also the business model is different. While some are focusing more on cargo, there's others who are focusing more on the air taxi, the passenger transport. But the reality is that there are several use cases, military, medical, surveillance, police. Hamptons. Hamptons, transporting Josh to the Hamptons, All of these things. Well, one of them, I think it was Archer, signed a contract to be the official EVTOL provider to the Los Angeles Olympic Games, which is 2028. That's right. Was it Archer or Joby? Which one? Archer. Archer won the exclusivity for the LA Olympics. So what does that mean?

1:05:54So that means that in 2028 in LA, once the Olympics start, Archer intends to already be transporting passengers. That's nuts. That's nuts. That's like tomorrow. A few years from tomorrow. But to get to that point, that's the real question is how do we get to that point? And so Archer's expectation is that they will hopefully have received their FAA certification by 2027. Because by then, they'll give them a year to start ramping up. Now, I think it's important to be mindful of scale. We shouldn't expect thousands of these in 2008 at the Olympics. we should expect a handful of these, maybe tens of these at most.

1:06:36But the idea is to showcase them for America and for the world to see that this is ultimately going to be another vertical out there. So Archer won the exclusivity. Archer and Joby were both bidding for it. Ultimately, it was awarded to Archer. And so they are now kind of ramping up to start having enough aircraft and flight tests so that they can perform some sort of flight services during the Olympics. Okay, got a few more for you from the chat. A lot of people are asking about the Dubai connection here. So it seems as though Abu Dhabi and Dubai are really excited about being at the lead of this technology worldwide.

1:07:15They seem to be maybe a little bit less risk averse than Europe and the United States, a little bit more willing to try new things. And as a result, the center of gravity of this industry, yes, these companies are American companies, but like a lot of firsts are going to take place in the skies over the Arabian Peninsula. That's exactly right. And in fact, I should congratulate your audience because these questions are really, you know. The compounders don't play. They don't play. Clearly, it shows. And you've taught them well. So that's right. So the UAE by now has almost proven itself to be the first market to integrate and adopt this technology.

1:07:59They have developed their own regulatory agency separate from the FAA and from YASA in Europe. And so their goal is to be first. And so to that point, both Archer and Joby, for that matter, are targeting to first enter into commercialization in this part of the world prior to in the United States. So you nailed it. In fact, Archer is intending to sell one or two or a number of aircraft to that region this year. And Joby is targeting to enter into service by Q1 of next year, both in the UAE, both in a small capacity. but you nailed it. That will be the first market to adopt this new technology.

1:08:43Okay. I want to get into a name that we haven't brought up yet, but it's in your coverage universe. The company is called Vertical? Yeah. So that's Vertical Airspace. It's called Vertical Airspace. What's the ticker on that? EVTL. Echo Victor Tom Larry. And so that is another variant of this EVTL industry. In fact, vertical airspace is the only remaining European OEM that's looking to bring this eBitol to fruition. So they are in the same industry in Archer and Jowry. Is that trading in the US market? It's trading. It has an ADR in the US market. This one is significantly smaller, has a market cap sub 1 billion.

1:09:29They're a little bit maybe further behind in that process, but they're also building their own variant aircraft. And their goal is to prioritize Europe. We don't need to get too technical, but Europe has a different and a higher degree of safety requirement in their certification process. Yes, we know. Yeah. And so Vertigo is pursuing that. And so their goal is to be kind of the only or one of the only OEMs doing EV tolls. Well, they got to get like Benz or somebody, they got to like Daimler, like they got to get a European manufacturer. They used to be partnered with Rolls Royce, although that partnership ended up being dissolved.

1:10:10And they still need to raise a good amount of capital. Whereas again, Joby and Archer, you could argue maybe they're funded through commercialization or certification, but they are another player in this industry. The last one to consider is a company called Eve holding and their symbol is E V E X. that's maybe the fourth and last remaining public comp in this space. Now their know-how is that they are backed by Embraer. Embraer is the largest owner. They own more than 50, 60 % of the stock. And so they're leveraging Embraer's experience in certifying and building aircraft to build their own EV toll.

1:10:48But again, I'm sorry. Oh, two more for you. Daniel McCarthy in the chat is saying, I played rugby with Andre at Boston University. You remember him? I do. Yeah. Hi, Dan. All right. Shout out to Daniel. I wanted to ask you about people who are saying that China is going to leapfrog ahead of us on this one. The Chinese are hellbent on having eVTOL taxis in Chinese cities for consumers. And I think there's like a point of pride. They don't want to be deep seek anymore. They don't want to be two years after everything we do. What do you think of it? I mean, I know there was the Osaka air show, the Paris air show, the Dubai air show is coming up.

1:11:35And at each, these stocks, because they have no revenue, they seem to be driven by headlines and partnerships coming out of these events. Do you see the Chinese being a major factor here in the development of the technology? 100%. But what I will say is there's a lot of parallels between the EV toll industry, US versus China, than with the EV industry, US versus China. So what do I mean by that? So China is actually today ahead of the US in its EV tolls. They have a company, a Chinese company, which has an ADR that trades in the US, it's called Ehang, symbol is EH. And I'll just preface by saying we don't officially cover it, but we are aware of them.

1:12:19They are the only company today in this industry who has already received their type certification. So they are certified. Now, the big - Certified in China. Exactly. They're certified in China and not in the US. And get this though, their aircrafts, remember Archers and Jovies are between 5 ,000 and 6 ,000 pounds. They take five passengers. Ehang's aircraft is a two-seater autonomous aircraft. So there are no pilots and it's just two people in a glorified drone, essentially, that are being used for sightseeing and tourism. So different businesses. I'm out. I'm from the old school. I need a pilot.

1:13:03Yeah. But China has a huge emphasis on this low altitude economy, as you alluded. And so in a lot of ways, that's the incentive. That's what's incentivizing the U.S. and the FAA to try to move quicker. We don't want the U.S. to lose the race in eVTOLs, similar to what happened in drones, where we maybe were leading it and then China eventually surpassed us. We certainly don't want that to happen, which is why you've seen a lot of momentum from the current administration with two executive orders to accelerate the deployment of eVTOLs. We don't want to fall behind China. Now, they're not going to enter here and we're not going to enter there.

1:13:42But like with EVs, Europe may be some battleground. And so we need to accelerate that FAA certification process. So a lot of people are skeptical about this stuff. And, you know, of course, I am, too. I understand like like just because you in the FAA certification process doesn't mean you get a yes. And just because you get certification doesn't mean the economics of the business are great. I understand there's a lot of hurdles between now and Jetsons, but when I try to think about what's the next trillion-dollar TAM industry over the next 10 years that people just don't fully believe in yet, where is the opportunity to have a stock go from being worth$10 billion to$100 billion or more?

1:14:28I keep coming back to this idea, this quantum leap in mobility. The low altitude economy, last one for you, low altitude economy, it's anything taking place below 3 ,300 feet in the air. So it's drones, it's drone delivery, it's eventually, we think, eVital, probably military safety, law enforcement, and then eventually full-blown consumer, I think it's going to be a big area within tech, and people are really going to have to familiarize their names. So you seem to be as excited as I am about it. And I know you're an analyst. You're not a cheerleader. But do you think my enthusiasm is misplaced, or do you think that I'm the right amount excited for the opportunity?

1:15:22What would you say? I think the answer to that is somewhat subjective. I don't know that there's a right answer, but I share your enthusiasm. That's what I'm looking for. If anything, I think your enthusiasm is a little bit more muted than it should be, if I want to be even more bullish. Here's the bottom line. In our lifetime, and possibly before the end of this decade, we are going to have flying cars. The regulatory environment is there. The administration is supportive. These companies are public. They've raised enough capital to go through that process, which takes years, and they are long underway in that process.

1:16:00And so this is going to happen. Then the conversation becomes, well, when and in what scale? And so that's where I would maybe warn investors. I said, listen, let's be very clear. This should be considered a medium to long-term investment. These companies are still pre-revenue. They have a big risk, which is that FAA certification, which, again, we think is a matter of when, not if, but certainly a risk, which could be delayed. And so you should consider that in your investment decisions. But if you're looking for potential home run ideas over the medium to longer term, ideas that could possibly disrupt mobility forever, then I share your enthusiasm here.

1:16:43And I think we're looking in the right place. The reality is that the technology for these things is not all that revolutionary. It's the same electric batteries that you'd see on an EV, except a different combination of cells and size. But it's the same technology. And it's just propellers that tilt. But the ability to take off and land vertically and then transition to a wing makes them significantly safer and better than helicopters. Helicopters are a dinosaur. They were designed by, like I said, Da Vinci way back then. And so there has to be a better alternative. And that's what I think EV2 will come in.

1:17:20It will take time to achieve scale. We're not going to see the same volumes that we'd see in the EV industry where Rivian and Lucid are producing tens of thousands of vehicles in the first few years. This will start in the dozens, in the tens, in the maybe hundreds and kind of ramp up from there. It will take some time, but we are going to have flying cars in our lifetime. They may not look like the Jetsons or Back to the Future at first. They will start out as a piloted aircraft to transport you and I to and from airports or to and from city centers or surrounding Montauk or Montauk. Well, just remember the 100 mile limitation.

1:18:01So Montauk is about 100 miles exactly. So maybe to Southampton and then you can drive the rest or take a different one there. But so I share your enthusiasm. I think this is going to change the world. And I think it's just a matter of time. Andre, this is so great that you came and did this with us. We really appreciate it. I know you're busy. Thank you so much for your time. Put me on your distribution list and we'll check back in with you as the space progresses. And on behalf of all of us at the compound, thank you for answering our questions. We appreciate it. Our pleasure. Great to be here.

1:18:33Quite an honor. Speak to you soon. All right. Cheers. All right. So that is topic one tonight. And we went long because I think the subject matter is deserving of that. And if you listen to what Andre has to say, where we're going, we won't need any roads. And it's a really interesting... Look, if we have a recession, all these projects will get pushed off. So I understand it's a bull market and we're talking about flying cars. But nevertheless, these companies have raised real money. They're partnering with serious OEMs and something's going to happen here. The timetable might be longer than we think, but it's a very exciting time to be an investor.

1:19:16All right, we have a lot more to do tonight. Thank you guys for being here once again. I want to get into BDCs because I think this is a topic that's going to become more relevant in the fourth quarter. I don't know how many of you guys are familiar with BDCs. It's a really, or it used to be a really small, obscure corner of the stock market. But basically, these are like publicly traded lenders. And the BDC is a designation that they earn by paying out almost all their income in the form of a dividend. And the dividends aren't like rock solid. They rise when these companies have made a lot of good loans that are paying.

1:19:59And unfortunately, they have to get cut when either there's a buildup of non-accruals or borrowers who stop making payments, which is really bad, or the rates at which they're able to lend come down because of prevailing rates in the industry. There's a lot of talk in social media over the last couple of days about the declines in some of these publicly traded business development corps or BDCs. And look, it's warranted because this is that shadow banking that you keep hearing about. This is that shadow banking that Jamie Dimon sneers at and that people have always said is like a hidden risk to the economy or the markets that we're not correctly pricing in.

1:20:48It's not that these companies are melting down by any means. They were trading at a premium to NAV and historically they have in the past tended to trade at more of a discount. Typically, you'll see these stocks sell at about 92 % of their net asset value, which is warranted because not every loan they make is a good loan and there should be some risk priced in. The fact that they had been trading at a premium is a historical artifact of how quickly interest rates went up and how fast the, I don't know if earnings is the right way to phrase it, but the profits that these companies were able to go up.

1:21:32The higher interest rates are, obviously the higher the revenue if it's a lending business. The problem is that works in reverse and these companies are very leveraged. So not only do you see with rates coming down now, do you see lower prevailing rates at which they can make loans at, but because it's leveraged, you see people rapidly start to price in a discount to the prices. So rather than just blather on, let's do some charts. I want to show you guys what I'm talking about. Okay. So the first one, this is just Blue Owl Capital. This is like considered to be the gold standard and one of the most experienced companies in the space.

1:22:14They've obviously made people a lot of money over the years in these types of vehicles. But this is like private credit. and Blue Owl is considered like a mainstay in the space. This is technically speaking, a very obvious head and shoulders. You do not wanna see that neckline break. I know we're not talking about the fundamentals when we're looking at a chart, but just conceptually, a breaking neckline here would mean that this stock has violated support that's been in place for almost two years. And what that tells you is that the sentiment on companies in this space has very quickly changed.

1:22:56So this is, again, private credit, but it's a publicly traded company operating there. Now I'm gonna show you some of the BDCs themselves. And we're gonna look at one-year price charts. And I'm just trying to give you a sense of the recent chatter about something going wrong with these companies and people being a little bit concerned. So this one, and by the way, not all of these are created equal. Some of these are much higher quality lenders who are much more serious about their covenants. So I don't want to give you the impression that these are all subprime lenders. That's not what's happening here.

1:23:32All right. But so here's Main Street Capital Corp. So the stock is in a drawdown from its all-time high. It is not catastrophic. Actually had a really good recovery off the April Liberation Day lows. But this is one of the names that people are pointing to because it's a very well-known company in the space. Here's Aries, Aries Capital Corp. Specifically, this is their BDC. 13 % drawdown below the all-time high. And now back to those Liberation Day lows or close to. This one is also closely followed. Again, Aries is one of the most respected companies in private credit. And, you know, again, drawdowns are normal when there's concern about cutting dividend yields, which is what's happening across the space, not just at Aries.

1:24:23This is Blue Owl Capital. So this is Blue Owl's BDC. I mean, this looks bad. This is in a 15 % drawdown from its all-time highs. You can see it's right at the April lows when the market was getting absolutely creamed. And again, this is another one that's trading down as people are concerned about dividend cuts in the future. And part of that is because rates are coming down. And part of that is people are now starting to get concerned about the underlying loans and some of the borrowers, which I think in the case of most of these, we're talking about middle market companies, not mom and pop companies, but just companies that are not quite big enough to tap the traditional Wall Street debt markets.

1:25:08Got another one, Blackstone Lending Fund. I mean, this one looks worse than the others. This is in a 19 % drawdown below its all-time high. And again, I'm just pointing a price at a chart, not telling you the fundamentals are that much worse than the others. Each one of these warrants, if you're looking at these as potential investment, what you're probably seeing is that yields are really high now. That's because the prices have come down, but the dividends haven't yet been cut. So the risk here is you look at something that's like a 10 or 11 % distribution or dividend yield, and you're like, why wouldn't I buy this?

1:25:44It's 20 % off its high, yielding 11%. It's Blackstone. That looks like a great opportunity. The problem with that is that if rates continue to come down and or the economy gets worse and there are more defaults, naturally, there will be more skepticism about these vehicles, whether or not these companies as lenders did anything wrong is not the question. It's suspicion in the marketplace, and they will go lower. They will trade at deeper discounts than their NAV. It's going to happen if, again, if people view these as an avatar of the economy getting worse. So through no fault of the issuer. We have one more.

1:26:32this is KKR this is their BDC okay this is like this is crashy no disrespect this is in a 33 % drawdown now it could be that the ones in the deeper drawdowns are the ones that have been more realistic with their shareholders about the need to either mark down the value of some of these loans or cut their dividend or both like that that could very much be the case here. And if that's the case, then the ones that are down more aren't necessarily the worst ones to be in or to look at as a potential buy. So I want to be open minded here and not present myself as an expert on all of these companies.

1:27:19But like, these are pretty substantial drawdowns in an economic expansion. In other words, like that's happening with GDP growth printing between 2 % and 4 % each quarter and almost full employment. Not a great sign that these names are in that big of a drawdown. So there are the macro bears. And as we all know, they very much want these to crack because it will feed their need to present the recession story and call them a canary in the coal mine and say it's the next subprime. that those people are out there. They might end up being right. They've said it about a lot of other things before and they weren't right.

1:28:01Maybe this time they'll get lucky and the meteor will hit earth, which is what they've been rooting for for the last 15 years. And that's okay. Or some of these will just cut their dividend yield. Shareholder base will turn over. Nothing really big will rupture and they will prove to have been buying opportunities. I won't be the one that will know. I just wanted to present you guys the story so that you're not freaked out when you hear people talking about things and you haven't looked at them yourself. All right, we're gonna put a pin in that, but I think that topic is gonna come up later in Q4 if we get another rate cut because that could be another leg down for the space and it would make sense if it is.

1:28:46I just wanna play a video from my friend Robert here. Oh, the ultra wealth. Oh, sorry, guys. I think it really sums up this moment in the stock market slash economy story. Let's let Robert Frank tell us what's going on. Well, the ultra wealthy just got ultra wealthier. I'm CNBC's Robert Frank. The top 10 percent of Americans added over five trillion dollars to their wealth in the second quarter. That was driven mainly by the stock market. All wealth groups saw gains in the quarter, with the bottom half of Americans adding about$150 billion to their wealth. But the fastest growth is at the very top.

1:29:25The top 0.1%, those are folks worth$46 million or more, they have seen their wealth nearly double since 2020 to over$23 trillion. Stocks were the main reason for all of that growth. The top 1 % own half of individually held corporate equities and mutual fund shares. The top 10 % own 87 % of all the stocks. That's remained fairly consistent over time. But that top-heavy wealth creation has led to a top-heavy consumer economy. The highest-earning 10 % of Americans accounted for a record 49 % of total consumer spending. That, according to Mark Zandi at Moody's. Now, any deeper, prolonged decline in the stock market could have a large reverse wealth effect on all those big spenders and pose a threat to the economy.

1:30:12For the full breakdown of the changing wealth population and the winners in the luxury economy, check out the Inside Wealth newsletter on the link below.

1:30:4260s and 70s and 80s. Listen to me now and believe me later. That's backwards. The economy is a function of how the stock market is doing. It wasn't always thus. It is flipped. And this is how it works now. It's the wealth effect on steroids. Basically, we've created a situation where everyone is a forced investor in the market and everyone's mood is affected by what their retirement account looks like. And when it looks really great, like it does right now, you get tons of spending. And when it looks less great, you will see spending moderate. In this case, as Robert just explained to us, 50 % of consumer spending is now coming from the top, I think he said 10 % of households.

1:31:32Think about how insane that is to have an economy balanced precariously like an upside down pyramid. We're like flip the pyramid over. The whole thing is balanced on that top 1%, 10 % consumer not dropping the ball here. And the thing that will make them drop the ball is if their stock portfolio loses 10 or 15 % in a quarter, which could totally happen. That 0.1 % doubling their wealth in 90 days is obviously f***ing sick. I mean, we wish everyone well. We don't hold it against anyone for making a lot of money, but that's insanity. And all of that is AI. All of it, 100 % of it, it's AI. It's the biggest 50 stocks, 30 of which are AI companies and 20 of which are big consumers of AI to run their businesses like Walmart and blah, blah, blah.

1:32:31So this is what's happening right now. It's very K-shaped. All the airlines are going to come, Delta reported today. Every airline is going to come out and tell you, no problem selling out the front of the cabin. Back of the cabin is so-so. You'll hear that reiterated with hotels. You'll hear that high-end restaurants versus low-end. You'll hear it everywhere because that's the reality that we're in right now. And I just wanted to reinforce the idea of that with Robert's commentary there or Robert's reporting there because it's as clear as day to me. The biggest risk to the stock market is not the economy.

1:33:10The biggest risk to the economy is the stock market. Or the NASDAQ will just go up 40 % every year from here on out. We have nothing to worry about. So I really want everyone to take away from me that that's how it works now And look, people would say otherwise And I'd love to agree with them, but then we'd both be wrong And nobody wants that So that's that I also want to get into this thing about hiring plans from U.S. employers Because it feeds directly into this idea This is a news article Hiring plans among US employers for the year through September were at their lowest since 2009. This is Challenger Gray in Christmas, put this out in a report.

1:34:01And the weaker planned headcount was largely fueled by a steep drop in seasonal hiring announcements. Yeah, okay. I don't think so. I think there's something bigger happening here. And I think while companies are not laying off workers that quickly, they have stopped hiring because they're not sure what the impact of AI will be both on their business and inside of their business. I think there's a lot of hesitancy to just let a lot of people go, but there's also a lot of hesitancy to add headcount as though we're not in the midst of this transformative technology revolution that could literally change everything about the way companies run their businesses.

1:34:42I want to share something that happened at the end of September that we didn't talk about here, but I thought you talked about a canary in the coal mine. Accenture, which is this global consulting company that is supposed to be at the forefront of helping other companies implement AI, announced that they laid off 11 ,000 of their own workers in just the third quarter. So CEO Julie Sweet said, as advanced AI becomes, quote, a part of everything we do and the global professional services company continues to invest significantly in the area, it expects employees to retrain and retool at scale. Quote, we are investing in upskilling our reinventors.

1:35:29That's what they call their like employees, which is our primary strategy. The company is exiting on a compression timeline. People for whom reskilling isn't a viable path. Sweet said Accenture had already reskilled 550 ,000 workers on the fundamentals of generative AI and outlined a six-month,$865 million business optimization program. Listen to these euphemisms. Business optimization program, which detailed costs associated with severance and headcount reductions. So firing people. And the$865 million is like, here's money. Last thing on this. quote, we expect savings of over a billion dollars from our business optimization program to reinvest in our business and blah, blah, blah.

1:36:28So basically the only people that are interested in hiring are AI experts. An AI expert is somebody that woke up an hour earlier than you basically because nobody knows anything yet. But that's like the whole game. And so they looked at all their employees and they were like, if we can't retrain you for the AI age, we have to let you go. I'm telling you that Accenture will not be alone in doing this. They are the front. They are at the vanguard of a movement that we're going to see repeated in every segment of the economy all over America and probably all over the world. So I do not think that hiring plans being at a multi-year low has anything to do with Christmas seasonal hiring.

1:37:12I think it's a much bigger story. and anyone that just wants to whistle past the graveyard is free to do that. We're not going to do that here. We're going to chronicle this stuff for you guys on an ongoing basis. A couple of things left. CapEx questions is probably the big theme of the week. You saw Oracle just get absolutely picked over on multiple occasions over the last couple of weeks about like, all right, They're doing all these$500 billion deals and announcements with NVIDIA and OpenAI. But what does all this shit really mean? The information, let's put the stock up real quick. This wasn't that bad, honestly.

1:37:55The stock had a huge spike higher and then it's given back, let's say, half of that. That spike higher is from an earnings report where they just completely shocked the stock market. So in fairness, fundamentally, companies had a lot of great news. But today, here, this is CNBC quoting the information because I don't have a subscription to the information. The report raised questions about the company's plan to buy billions of NVIDIA chips to rent as a cloud provider to clients like OpenAI. So OpenAI pays Oracle. makes access for open AI to all these GPUs that they bought. That's the business.

1:38:44Oracle had 14 % gross margins on$900 million in sales in its NVIDIA cloud business in the three months ending in August, according to the report, which cited internal documents. Somebody saw something they weren't supposed to see. That's significantly lower than Oracle's overall gross margin of around 70%. Look, I'm not the one to tell you that this is an anomaly or this is like the way it is. More people will look more closely at this sort of thing. If this is a 14 % profit margin business, it doesn't look very different than, I don't know, Abercrombie and Fitch selling sweatpants in the mall, that might change a lot of people's opinions about what multiple they want to pay for the ISPs and the cloud providers and the hyperscalers and whatever you want to call them.

1:39:39So look, this is not one of those things where I just want to say, yeah, it's a bubble, throw the whole thing out. But I'm just pointing this out because the volume at which people are now shouting these questions is starting to be heard in the stock market. Stocks are reacting to this stuff, rightly or wrongly. But it was not just Adam in the chat points out Oracle crashed NASDAQ today. There were a lot of NASDAQ stocks, chip stocks that were down 7, 8, 9, and 10 % on this report. And it is not going to be the last report. One positive thing I'll say on this is, Thank God somebody is writing and reporting skeptically on all this spending.

1:40:26Because if not, if we're all in 100 % agreement that this is just all rational, it takes the NASDAQ to 30 ,000. It takes the Dow to 60 ,000. It's not healthy. You must have skepticism. You must have people on the other side of some of these things so that it doesn't feel like we're just going to bubble up vertically until there's a crash. So I actually think it's healthy that we're having these debates. And look, as Jeff Gundlach says, this is the bloodless verdict of the market. Anyone's allowed to have any opinion they want. Price decides where the market's beliefs are. So I don't hate it. I don't think it's negative.

1:41:12All right. We're in the homestretch, guys. We did it. And I want to thank everybody in the chat for helping me make this happen. I'm going to do a make the case and then a mystery chart and we'll get out of here. I want to talk about Netflix. I don't know. Do we have a chart, guys? Yeah, we have this. This is Netflix performance and it's 200 day moving average. Let's say you knew absolutely nothing about technical analysis, right? Let's just say like you don't believe in it. you sort of can see that the junction we're at now should be support for the stock. You saw it like just on a trend basis.

1:41:53If the buyers are going to come in and rescue this from a three-month downtrend, which is what's been happening, it should be like sort of now or never, right? So technically, I like that it's kind of fallen into support and the buyers started to show up today on a red day. The company was defended at Seaport, which is a brokerage firm I barely know. But I'll read you what the analyst thinks. This went from a neutral to a buy. The stock's been controversial this summer, and it's been in a downtrend. The research firm Seaport now says the momentum on Netflix shares, which has moderated lately, LOL, nice way to put it, could be digesting the year-to-date 30 % gains ahead of the advertising infrastructure build-related monetization momentum.

1:42:48That word salad sentence that I just read, here's what that's about. Seaport increased the ad revenue estimates for Netflix to more closely track TV viewership share. Quote is the analyst. We think advertising could double to$3.1 billion this year and could grow at 48 % annually through 2030 to reach$16 billion, just ad revenue. Channel checks indicate same-store ad buying could be tracking better than 16 % for the third quarter of 2025. also noted engagement on Netflix is strong with at least a couple of quote cultural zeitgeist titles driving viewership share I think that's Hunting Wives I think that's the cultural zeitgeist show that's on Netflix right now that's right Rachel's pointing out K-pop demon hunters which I still don't know what that is but I know it's a really big deal so they have those big shows that drive new signups also right now.

1:43:57So Seaport thinks it could be a better than expected quarter. Their target is 1385, which would be upside from here of 20%. Full disclosure, I am long Netflix. I've been long for a while. Have not sold any during this recent downturn. And I'm hoping the stocks finally found support. All right, we did it, guys. Now you're going to play the role of Michael Batnick. I'm going to give you the mystery chart. and whoever gets it in the chat, Nicole's going to find you and we'll send you a t-shirt or something. This is, okay. This is a sector versus the S &P 500. I'm not going to tell you which is which.

1:44:40You could probably guess. So you have one out of 11 chances. It's an S &P 500 sector ETF versus the S &P 500. Let me see. I'm going to give you guys like a couple seconds here. All right, I got healthcare, financial, XLE, somebody guessed, SMH, energy, financials, SMH. Another healthcare, another energy. Very concentrated to the, just a few. Here's the communication services. Somebody's saying utilities. No, utilities look way better. Tech, of course not. All right, let's do the reveal. John, let's show them

1:45:27It is healthcare I know a couple of people guessed healthcare We'll hook you guys up Nicole will try to get in touch somehow Or you can get in touch with us Here's what I want to tell you Savita Subramanian Who is one of my favorite people on Wall Street One of the smartest people on Wall Street Just upgraded the entire healthcare sector Let's do this XLV The regular chart, real quick I want to show you how shitty, not this, the next one. Yeah, I want to show you how shitty this sector has been. This is a three-year look at the XLV. It's in the middle of the range. It's basically gone nowhere while the S &P has obviously launched into space.

1:46:08It's just been really tough sledding. Got some really big market cap companies like UNH that look like shit and have very company-specific problems. But Savita is pointing out that this is the moment where everything turns around. Let's put her chart up. She's showing you valuation support. This is the relative forward PE for healthcare stocks versus the S &P 500 in blue, dark blue. And that line running across in light blue is the average. And this is back to 1986, by which Savita is showing us These stocks have never been cheaper The healthcare stocks Relative to the S &P 500 Never been cheaper It's a 40 year chart I feel like we have to pay attention to that, right?

1:47:03So let me quote her

1:47:08This is important

1:47:12This is Savita Pharma overhangs dissipating still early in the obesity opportunity. Investors boycotted pharma shares for most of the year because of US policy uncertainty. With pricing and tariffs, these seem to be one and the same being the key overhangs. The Washington overhang was partially lifted after the Pfizer deal. Pfizer just got out of tariffs with Trump. I'm not gonna spend any time on that today. It's pretty benign overall. In Tim Anderson's view, that's a Merrill healthcare analyst. if this is all drug companies have to do pretend they're going to build factories in the u.s then that's much better than the headlines from earlier in the year suggested for the investor ready to dip their toe in the water tim anderson highlights eli lily and gilead okay blah blah blah so um there are a lot of viable tickers in that space and i wanted to make that the mystery chart because part of what we try to do here on the show is turn your attention to things that maybe others aren't focused on that have potential.

1:48:17So if you want to read more, you could track down what Savita wrote for Bank of America. It's a really interesting take. All right, that's it for the show. Once again, I want to remind you guys, live, Compound and Friends in New York City, Friday evening, October 24th. Make a weekend out of it. I have no idea if there are tickets still left. So excited to be hanging with Kramer and Michael on stage. Jim's got a new book out. he may or may not be signing copies that we may or may not have purchased for you so it's going to be an epic night and we'd love to see you guys there thanks so much for listening shout out to Michael Batnick we'll see him back next time and like and subscribe talk to you soon

1:49:39Transcription by CastingWords This isn't piece extra. Initial plan term only greater than 50 gigabytes may slow when network is busy. See terms.