Transcription
Today's number, 1.5. That's how many tons of beans were delivered by GrubHub across America last year, with bean sales up 135% from the year before.
And in other news, investors are piling into what might be the hot new sector on Wall Street, air freshener. Welcome to Profy Markets. I'm Edson. It is April 30th. Let's check in on yesterday's market vitals.
The S&P 500 and the Nasdaq were flat while the Dow declined as the Federal Reserve held rates steady. The yield on 10-year treasuries hit a one-month high as traders gave up hopes for a rate cut this year. Brent crude hit the highest level since 2022 after President Trump told aides to prepare for an extended blockade and big tech shares were mixed as earnings started to roll in. More on that later.
Okay, what else is happening? Earlier this year, legendary investor Ray Dalio declared that the world order had broken down. Since he made that claim, the national debt surpassed $39 trillion to reach a new record. We've also gone to war with Iran, which has cost at least $25 billion so far and sent the price of oil soaring. And on top of that, new projections show that tariffs are expected to add another $1 trillion to the deficit over the next 10 years. In sum, the deficit is expanding. Inflation appears to be rising. And meanwhile, the Fed is stuck holding rates at a crucial time of transition.
So, we wanted to check in on all of these dynamics. So, we decided to check in with the man himself, Ray Dalio, global macro investor, founder of Bridgewater Associates, and New York Times best-selling author. Ray, thank you so much for joining us again on the show. I guess we should start with your main investment theme, which is the big cycle and the five main forces that drive the big cycle that you have been warning about for a long time. Could you just remind us what is the big cycle and what are those five forces that are moving markets?
>> Yes, thank you. Um, I think it's very important to step back from the day-to-day and see um these cycles and the orders and so on. So I appreciate your question. There are five big forces that create the orders where that we're talking about. There's a monetary order. There's a debt cycle. There is a political and social order within countries. There is an international geopolitical order. There is um acts of nature throughout history. Droughts, floods, and pandemics have uh been more disruptive, killed more people than wars and have uh can't be ignored as a factor. And number five, technology. And all of those are operating and they operate in a in a cycle.
So uh on the first um there is a debt cycle that I will describe and um uh people should consider the merit of that. I have done very well in a macro way of um anticipating the 2008 financial crisis, European debt crises and so on by understanding this. Okay. The way it works is that the credit system is like a circulatory system that brings nutrients, buying power to different parts of the economy. And if that money is borrowed and used to create productivity that produces income, then there's debt service and it's you make the debt service payments and you do better and you make profits and it's a healthy system. On the other hand, uh debt service, debts and debt service rise relative to income. It's um you see the debt service is like plaque in the um circulatory system in that it squeezes out spending. So in other words, income minus debt service becomes less and so as a result uh it squeezes out spending and there's a supply and a demand. In other words, uh right now we have a certain amount of debt. One man's debts are another man's assets. They have those holding them expect to have a good return. Um, and then you have to sell more. And when you have to sell a lot more, there's a supply demand issue. And when those two things happen together, uh it's like plaque in the system.
And then um number three is the uh world order. In other words, how countries deal with each other. And um throughout all history there are great conflicts, wars and then uh after the war there's a new order. The power in the United States for example 1945 created a new monetary order created a new world order and that was a multilateral world order that was designed um almost in to some ways replicate u the US approach to um representative uh democracy. The creating of the United Nations multilateral organizations including, can you imagine the World Court or the World Bank or the World Trade Organization or the World Health Organization? That's all over. And it was in some ways na uh naive because uh there was if there's no uh you take a vote and there's no enforcement mechanism, of course that's not going to work in the dominant power. So that's the uh the third. So we have changed the world order to a um world order that was analogous to pre-1945, which is a power rules um kind of world order. Number four, I told you about the acts of nature and then of course number five is technology. They all have uh great implications. Technology can greatly improve productivity and if those productivity um creates incomes and so on, it can help um greatly. And similarly, productivity use of AI and other ways can be used for war or can be used for other purposes. So that is the cycle.
So now as we come into it, we see um these things happening. They cannot be should not be looked at individually. In other words, in focusing something like Iran on the war with Iran, we can lose sight of the fact that while it's very important, it's part of a world war. In other words, there are sides: China, Russia, Iran, and other countries, Korea, North Korea, and the like. And then there are other sides to that and that there are conflicts. And so the implications that this has are very profound.
>> It's very helpful because I mean with each force, very, very obvious examples come to mind. I mean, with the first force, the thing that comes to mind is the fact that, as I said, the national debt has surpassed $39 trillion. We're sitting at a record high in the US and our annual deficit spend so far, at least in the first half of of the fiscal year, was $1.3 trillion. So, it's clear where we're headed on a debt perspective there. In terms of the internal order, it's clear for most to see that there is more and more polarization both between the left and the right, but also between the rich and the poor. We've seen some pretty disturbing attacks on CEOs lately, which I believe is at least somewhat indicative of of sentiment within the US starting to fray. Uh, and then, I mean, you talk about on an international scale, we have a war with Iran, which is also coming off of uh a moment at Davos where most of the leaders got together and said the thing that you said and have been predicting for many years, which is that the world order as we know it is coming apart. This era of globalism is coming to an end, and even its proponents were the people who said outright, yes, this era is coming to an end. So I guess my takeaway is the big cycle is happening. The things that you have been talking about, they are occurring. And the question for me then becomes, well, where are we in the big cycle? What stage are we actually at? And what are the, what are these events that we have seen in the real world actually say to us? And what does it mean for investors?
We are um on the brink. Now, the brink might be, I would say, a particularly risky period um is between the uh two next two elections. So between after the '26 midterm election and the uh '28 presidential election is a riskier period, and this is a very risky period. What I would say if I take the um monetary order risk, uh we have debt service problems where they have big changes and you know, we'll get into this, who is earning a lot of money, how this, who is not earning money, how wealth has changed. For example, it's very interesting and very important that um to to observe that the Chinese are making a tremendous amount of money and accumulating, they're running very large surpluses with the rest of the world and accumulating a lot of uh dollars. And what does that mean in terms of how those are handled? And then what does that mean for our balances and so on? But if I'm back to your um to try to be on point, I would say in the midterm elections, there's a likelihood that the Republicans will lose the House and that there will be um a great conflict, ICTS, including um, you know, impeachments, uh investigations, and so on. That the conflict is going to be um material. I think that um um the monetary situation will be more threatening. Um, in other words, there's um itself, the uh supply demand that we're referring to. You know, the United States um basically, the US government spends $7 trillion. It takes in about $5 trillion. So it has, it's 40% overspending. It has a lot of debt, and the demand for that debt is falling. And it's falling not only because of the supply demand situation, the regular supply demand, but we're now in a world where even um wars, their worries of those who are holding dollar-denominated debt that they could be sanctioned. Right? Imagine if you're holding, if you're Chinese and you're holding it, and you could have a conflict. So these, there are these shifts that are happening in terms of that. So that plays a role. And of course, there is the international conflict. Um, and of course, technology is changing at an incredible rate. And so I think that as we take the next two to three years, it will be like going through a time warp. That we're going to have a riskier period, but also a period um of um great changes that we um, you know, are difficult to um to deal with. Particularly, I think the question is how do you deal with that and to have a well-diversified portfolio? But in an answer to your question, it's a sort of long-winded answer, but I think that um we're going to, we're on the brink of some of these problems. And uh we are um I would say uh you know, particularly um in the vicinity of you know, two years away from what obviously is a confluence of more, more risks.
>> Yes. Yeah. I mean, my next question is, what does this mean for portfolio management? Just thinking long term, if we are seeing a decrease in demand for US debt, if we're also seeing more US debt issuance, if we're also seeing more global conflict around the world generally, these are very, very large forces that are very difficult to sort of wrap your head around. What does it mean for an investor? What is an an investment thesis or investment decision that you can make that might protect you from a portfolio perspective?
>> I think the most important thing for most individuals is not to um market time a lot of these things. They're not going to be >> successful of it. They get excited if a war happens and you know, and all of that. >> But the most important thing is to have a well-diversified, well-structured portfolio and to look at um the assets in the portfolio in relationship to each other. For example, as an inclination, I would say um um how much gold do you have in the portfolio? You shouldn't have too much and you shouldn't have too little, but it is an effective diversifier to um other assets that you probably do have in the uh portfolio because um when you have a bad set of circumstances, gold tends to do well because of either the debt problem or the world war problems. And so on, so forth. Not to market time gold, not to, but to basically realize that it's a currency. It's a, not only a long-term currency, but today it's the second largest reserve currency held by central banks. First dollars, then gold, then euros, then uh Japanese yen. And to have, for example, somewhere between five and 15% of that portfolio in that diversifies the other parts of it. I would I would worry about uh debt and you should understand like cash, which people think is the safest investment, is the most assuredly bad investment in in most times normally because cash has a lower return, but it's particularly uh a bad investment in a period of stagflation. So we're dealing with um kind of a stagflation kind of environment or an uncertain, but to to achieve um and debt has its challenges. So I would say the most important thing is to know how to diversify well, and that also includes you know, outside of the United States as well as inside of the United States. That may seem very difficult to people because also right now, there's a lot of concentration in uh the areas like tech, in other words, and particularly AI. And one might figure, okay, that you're going to miss out on that. What? But still, the diversification is of very much importance because I think a lot of people make the mistake of thinking that because a technology is going to be a revolutionary technology. Throughout history, so many new technologies have been uh revolutionary technologies, and it's certainly the case that that'll happen. Such periods have also been periods of bubbles that because people think, I want to bet on that technology, so they buy stocks of that sort without looking really at the price. So to create a well-balanced portfolio, what I call an all-weather portfolio, um, I think is the most important thing that people can do.
Lots more we could get into, but we will have to continue it another time. Ray Dalio, founder of Bridgewater Associates and New York Times bestselling author. Ray, thank you so much for joining us again on Profy Markets. We always love having you.
>> Ed, it's my pleasure.
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We're back with Profit Markets. Many of the world's most valuable companies reported strong earnings yesterday, but investors didn't seem too impressed. Microsoft beat on the top and bottom lines with revenue up 18% year-over-year. However, the stock slipped 2% after hours. Amazon also topped expectations with stronger than expected cloud growth, but its shares fell around 1% after hours. Meta posted a standout quarter with revenue surging 33% from a year ago, but higher than expected capex and disappointing user growth set the stock down nearly 7% after hours. Google was the exception. Revenue beat estimates. Cloud sales topped $20 billion and the stock rose over 6% after hours. So, lots to unpack here. We're speaking with Gil Lurria, head of technology research at DA Davidson. Gil, good to see you again. Lots to get into here. Um, I mean, the thing that strikes me immediately is that these numbers, these growth numbers especially are just mind-blowing. Uh, I mean, Google, their cloud revenue is up 63%. Uh, Microsoft Azure revenue up 40%. Like, these are crazy numbers, but based on the after-hours trading, I guess investors aren't that excited about it. Uh, what do you make of these earnings and and how the markets have reacted?
So far, oh, the curse of high expectations. Yes, Microsoft's growing a hundred billion dollar business, 40%. Amazon's growing 140 billion dollar business, 27%. And Google's growing an $80 billion business, 63%. So, uh, incredible growth rates. And really important to point out, they're all doing it at higher margins than previously, which which means that that concern that we had of, oh, the AI business isn't as good of a business and because of all this investment and the depreciation, the margins won't be as good. No, they're all managing this growth so well that they're accelerating growth with higher margins. And this will go very importantly to this notion of return on investment. Right? If these companies can accelerate growth at the same margin, that means they are getting a return on investment on AI. But to your point, Google's the one that's the the star of the show today because they're doing so much better than anybody else. Not just in Google Cloud. They're also still seeing acceleration in advertising revenue. Their search business accelerated to 19%. That's a massive business. Still accelerating. It's catching up to Meta. If Meta's growth in ads used to be twice as high as Google, now they're converging. And Google also started talking about selling TPUs. This is something we started talking about a year ago as a wild idea. And uh, and now Google's actually doing it. So, so their chips are so good that they have demand for those chips. So, Google's the star of the show. It's just making everybody else look not quite as good in comparison.
I mean, it seems as though you have to just bet on these companies. Like, just to sort of take a step back, I mean, when I think about all of the things that we were kind of worried about, and we were worried about the AI buildout, and we're worried about the capex, and are they going to see the ROI on their investments? And it seems as though we're getting to the point where it's just like, yeah, the ROI is there. These businesses are growing at absurd rates, and you don't really have a choice. It's like you have to bet on these companies. And which sort of adds to my confusion a little bit in some of those after-hours moves. And I wonder if that will probably change, maybe during the day, uh, maybe during the rest of the week. I mean, it's sort of a simple question. I mean, can you, how could you not bet on big tech at this point, at this stage in the game?
>> No, that's exactly right. So let's, let's, let's first of all, just treat the three, Microsoft, Amazon, and Google as one category. Again, they're getting, they're getting terrific returns on their capex. They're probably going to increase capex. Google has already said they will. And so that's one category. Meta is different. Meta doesn't actually sell its its uh data center capacity. They're all using it for internal purposes. And part of what investors don't like about their report is that Meta is again increasing its capex without showing the corresponding uh acceleration in revenue. So they're increasing capex without acceleration in revenue, while Google, Microsoft, and Amazon have much better case for why they're expanding their capex. But to your broader point, yes, the big techs are the ones that are capturing all the value. First and foremost, not not reporting today, but the chip companies, Nvidia, uh, Broadcom, AMD, Intel, Micron, they're capturing a lot of the value. And then the big providers of AI compute because Microsoft, Amazon, Google, they're the ones that provide everybody compute, not just OpenAI, Anthropic, but any company that wants to do AI in-house is using capacity from one of those three one way or another. So, yes, the returns there are good. That's that's uh coming across clear today. Again, expectations were super high for Microsoft and Amazon, and they didn't quite achieve them. For Meta, it's a little different. The results weren't great, and they're again increasing capex.
One of the things that we saw when we launched this war in Iran was a lot of these names fell. I mean, basically the markets as a whole fell, but a lot of that pain was seen among the tech companies, and then they started to to rebound as I, it seems as though investors started to realize like this probably doesn't matter for these companies. This is the first time where we've gotten to see what those impacts actually were. It seems like there's been no impact. Is there any relationship between what we're seeing in terms of the war in Iran and the broader impacts that that's having on the on on the global economy versus big tech, or is big tech just completely insulated? It's its own thing.
>> They're very insulated, right? Oil is not an input for these companies. The their exposure is only the second-order exposure. If the global economy was to slow down, then ad sales to Meta and Google would slow down, retail and Amazon would slow down, and some aspects of Microsoft's business would slow down. But there's no direct impact on these companies. Their driver again, by a mile, is the growth in demand for AI compute, and that seems to have very little to do with the conflict uh in the Middle East. And so they are mostly insulated from this unless we have a big deterioration in the overall economy, which doesn't look like it's in the cards right now.
>> Are there any of these companies that stand out to you from a valuation perspective at this point? Do these earnings maybe give any detail or color on how we should feel about the valuations?
>> Yeah, Microsoft really stands out. I mean, Google by the time it opens uh for trading tomorrow, and Amazon uh are trading at at high 20s or even in the 30s on on an forward multiple, while Microsoft is trading in the low 20s, in spite of the fact that they overall have comparable growth rates. They're all growing in the high teens, and Microsoft is not getting the credit for it. Part of it is that there's a software business there. People are very down on software, as you've discussed many times on your show. Um, and then there's the all the the capex concerns, but from a valuation perspective, Google and Amazon trading at at relatively high multiples. Microsoft still at a low multiple. That's why I prefer them. Meta's also trading at a low multiple, but again, part of it is this lack of discipline around spending, which uh which investors u are reluctant to embrace, especially right now.
What do you make of Microsoft actually, uh, the capex coming in lower than expected? It seems like Microsoft might be pulling back or at least compared to Meta in terms of investments in AI, or is that the wrong read?
>> It's more likely has to do with the bottlenecks of building out data centers right now. Uh, there's so much competition for resources. We heard from Intel last week that they had to take some CPUs out of the trash in order to to meet demand. Uh, we can look at memory prices quadrupling within a year, and and we're seeing all these bottlenecks, turbans, and and and power generation, and advanced packaging. There's all these bottlenecks. There's states that have this NIMBY approach of, we don't want a data center here, and we're not going to allow data centers. All these companies are encountering it at one level or another. For Microsoft, it just ended up uh slowing down the rate of uh of data center construction. But given the size of demand, given the growth in demand, it's probably just a matter of pushing those data centers into future quarters as opposed to reducing capex as a policy.
>> All right, big week. Gil Lurria, head of technology research at DA Davidson. Gil, always appreciate your time. Thank you.
>> Thank you.
>> We'll be right back. And if you're enjoying the show, be sure to subscribe to the Prof Markets YouTube channel at the link below. We're back with Property Markets. Well, the big story for investors this week is, of course, big tech earnings. The four companies we just discussed make up for nearly a fifth of the entire S&P 500. So naturally, it's those four companies that we care about. But there is another company that is also proving to be systemic to the stock market. A company that actually isn't even traded on the stock market. And that company is OpenAI. Indeed, the AI startup that is yet to go public is proving to be one of the most structurally critical companies in the market to the point where even small details about the business are eliminating hundreds of billions of dollars of market value. Yesterday, for example, the Wall Street Journal reported that OpenAI had missed its revenue target in 2025. And as a result, we saw huge declines not in OpenAI stock, which isn't public, but in other stocks, some of which are the most important companies in the world. Nvidia, for example, fell 4% on the news. Oracle fell 6%. Coreweave fell 7%. And SoftBank fell 12%. In fact, when you add up the market value that was erased, it comes out to nearly $400 billion. All because of one report about one company that isn't even publicly traded.
Now, that is somewhat concerning, but it raises a more concerning question, and that is, what will happen to the markets when OpenAI is publicly traded? How will investors react when they are say, required to report their revenue every quarter, or when they do have to tell us how much they actually plan to spend on compute over the next five years? Will investors be more excited than they are right now, or less excited? That is the trillion-dollar question, which will determine not only the value of this company but also the value of many other companies from Nvidia to Oracle to Microsoft. Now, I don't know the answer to that question, but so far, each time we've gotten just a peek under the hood of OpenAI, such as this week, the reaction has been pretty negative. And yet, despite the CFO's concerns, the plan is still for OpenAI to go public this year. And when they do, investors won't just get to have a peek under the hood. They will conduct a full-scale examination of the company. They will inspect the business and all of its flaws from every single angle. So, that will be a critical test for OpenAI, but more importantly, it will also be a critical test for the rest of the stock market. If OpenAI passes that test, then we are in the clear. Markets will inevitably rip higher. But if they fail that test, well, this week's events should make it quite clear. The stock market as we know it today could start to come apart.
Thanks for watching Profy Markets from Prof Media. If you like this episode, subscribe to our YouTube channel and tune in tomorrow for our conversation with Reed Hoffman.