Transcription
There's really nothing new under the sun. And that's because human nature doesn't change. The characters change, the names change. But it's fear and greed. We can go back to the South Sea bubble. Dutch tulip bulb mania. History repeats itself over and over again.
Put I into that context here because people have been positioning ie other than electricity, there's been nothing more important than I. How do you think about just this whole concept writ large? I'm not bearish on I per se. Um, I'm sure we're all going to use it. Many of us are using it already. The question is, what's the ROI on the eye?
It starts out the way these bubbles all start. They there's a there's a kernel of truth that captures the imagination of the individual, whether it's the South Sea bubble or it's Dutch tulip bulbs or it's dot com, which I've lived through. Um, and it starts out as a good idea, but what happens is the price changes immeasurably. And the best definition I've actually heard of a bubble. There are many definitions. The best one I've heard is something that changes human behavior, that people do things that they wouldn't do otherwise, whether it's because of FOMO, fear of missing out or otherwise. And I think that's kind of where we are. We're there. I mean, I'm happy to change my mind, but show me the money. Where's the where's the ROI? And I don't see it. And I don't see it coming either.
It doesn't seem to be deterring capital from flowing to that business. We've seen extraordinary amounts of equity raised. Now we're seeing tech companies, and everyone thought about the bond market raising tens of billions of dollars in investment grade bond market. We've got a Korean company listing its ADR today here in the U.S.. I mean that I've been on Global Wall Street for 30 years. I've never seen this amount of money flow. The things I read, the same sources you do. I find that under my category on index of things you don't see at the bottom. Mhm. Um, we've seen this movie before with Japanese subtitles. Housing subtitles. Text subtitles. Go back to.com. I actually think this is much worse than.com, simply because the sums involved are not much greater.
This is really important because, you know, the fossil sitting around the table. You know, we talked about Will Danoff a couple days ago. I remember being in meetings at 60 State street.com and all that. What's the distinction right now versus 98, 99? And then what we enjoyed in oh one. Um, again, I want to elaborate on the sheer magnitude of this. Um, Julian Garrett of Micro Macro Strategy Partners in the UK, erudite economist of many years, has made a calculation that this, uh, bubble, uh, this, this mal investment is 17 times, 17 times what we saw in the er Ofcom. And what's a light that what's really important is the, the sums involved are so much larger relative to the, to the real economy. The fallout from this could really be much more significant for global Wall Street on this Friday. A real treat George Noble with us of course definitive already with Mr. Lynch a few years ago at is Noble Capital Advisors. He's been on fire and on LinkedIn and Twitter. With his criticism of the moment in hand, Paul Sweeney with George Noble again, another definitive part in this market was the IPO of a company called space X. Oh my thought you thought you'd never ask. What do you make of that? I mean, I can't imagine sitting in a fedora office conference room. And, you know, the bankers bring Elon Musk in to make this pitch. I would have loved to be a fly on the wall. What do you make of that? History shows that buying companies that over ten times revenues usually ends very badly. We all recall Scott McNealy, famously in Sun Microsystems. What happens when you have to when you return is going to be number ten. This is 120 times revenues. And you know, it's even if you look at companies projects, I mean they're already borrowing money. A lot of the company's projections may be cash flow negative for years to come. And here's the worst part of SpaceX, which I don't want engaged in the captain Obvious thinking. But the thing that everyone should consider, and that is the staggered lock up that we're now we unlock that we're looking at. Okay, starting from next month when the quarterly earnings come out. You're 20% of the shares come unlocked shortly thereafter. And then there's a whole series of unlock 7% every 20 or 30 days by December. 100% of the shares will be freely floating the point. The important point that investors should understand is even without any change in the fundamentals, when you go from a 5% float to 100% float. In the old days, when you would take a two hour lunch lock overs and you used to hold court there off the bar. But in the old days when a company went public, it like took its shares public, and maybe they had a little stub they kept private. Now we're unloading 5% of the public. To me, it's manipulative. Should regulators step in and get the initial public offering market back to a normal segmentation? 100%. It's not a question of what's legal or illegal. It's just not right. Society is not well-served by allowing this. Grandma's 401 K is an excellent liquidity for this manipulation. And I think the regulators are asleep at the wheel. They only usually jump in action after the car crashes occur. Gensler has sat in this chair recently. And I said to Gary Gensler, I said, okay, you let Bitcoin in, I get it. It's a free market and all that. But what do you say to retail that enjoyed that dog at 110. And it's not done at 60 space. It's okay. It's back to 150. I'm watching the depth of space. To be blunt. It can't find a bid. And allied to that term I promise you that once it goes under the offering price and the unlocked shares come to market, the gut, the insiders who ran it, a 10th of the current price, they're going to hit the bid. So that's going to be great. But I got to make some news here. To be honest, fidelity was way out front. Mr. Musk on this. Would you recommend that Abbey Johnson and the team sell their space? They know the company better than I do. Let's just say if I was handed a portfolio, Philly were to rehire me, I would sell it right away.
Elon Musk, you have to. I'm not sure we've seen anything like this in terms of the value that gets ascribed to Mr. Musk relative to the earnings, relative to the cash flow we've seen a year for years in Tesla. Um, and you look at the Tesla analysts, the auto analysts all have holds or sells on it, and they've been wrong. And the tech council part of all been saying, just buy it, it's Elon, it's Elon, it's him. It's an autonomous robots and all that kind of stuff. Have you seen that in the past where one individual can have such an influence on valuation? No, I think Tesla's probably the biggest misallocation of capital at scale in the history of stock markets, perhaps only surpassed by SpaceX. I was one of those wrong analysts. I'm a fossil. I happen to be the auto analyst for Peter Lynch. In 1981, we went to Detroit to visit Chrysler, Ford and GM. So I know of what I speak. Fundamental work does not has not guided one in the case of Tesla. Um, I think however, though, uh, he's bitten off more than he can chew now. everyone speculating whether or not, uh, SpaceX may merge, take over Tesla. I have no special insight on that. But if I had to gamble, if I had to speculate, and I never speculate, I would say it's a reasonable speculation.
Let me reintroduce here world wide, including overseas and across America, George Noble, with us for years definitive in the business of over seas investment at fidelity. Thrilled. He's in our studio today. Controversial, to say the least. And the euphoria at hand. Paul Sweeney. So, George, where do you see opportunity these days? Um, I'm sure you look various markets, various geographies. Where do you see value these days? You know, it's a market of stocks, as, uh, Peter Lynch always used to say, don't try to call the market. I think there are outstanding opportunities right now in energy. I'm actually quite concerned about the energy picture. I think we're sleepwalking into the biggest energy dislocation in history. Um, you look at the disparity between the divergence between the financial market for oil and the physical market for oil. Um, we're between a rock and a hard place. The energy stocks Crude is sold off significantly the last few weeks, as have the energy stocks. Um, you know, I think the risk reward is very appealing. There's very little downside and potentially a lot of upside. I like reflation. Generally speaking. Gold stocks I think are a huge buy right here. Uh SRM as an example seven times earnings not cash flow seven times earnings right. So gold stocks energy stocks uh other commodity names like some of the copper copper names um they're all they're all very interesting to me. Part of this AI story, to the extent people are looking for other ways to buy it other than the chips, has been some of the picks and shovels. One of them has been energy. Yes. How are we going to power all of these data centers that are being built in everybody's backyard? I mean, stick little nuclear reactors next to each one. How are you going to do that? It took thermodynamics exactly. Well, the one the one thing you shouldn't do is buy Okla, which is one of the biggest frauds out there on the market right now. But that's a whole nother story. Okay, so, um, we've been short that for for a year. Um, you know, The problem was some of the names you mentioned. I mean, utility stocks. It was the I trade comes on stock and I believe it will. I think a lot of those derivative plays are going to take on water crudes a little different. So slightly different orbit. But a lot of the derivative power plays I think are going to have a big problem. One last joke that was great when someone you used a few weeks ago on me talk about, well, you know, you got to buy the picks and shovels and said, yeah, well, what happens if you buy the picks and shovels and there's no gold in them hills?
George, I got to get two things in here that I think our audience is really interested in and overseas, in the huge ups and some of the challenges you added to ton as well. Are you correlated on overseas to what the dollar does? Like do you have to have a weak dollar to make overseas work? No you don't. The the but it's a very good question. You don't need a weaker dollar. What you what you need to keep in mind is that economic cycles across different geographies varies enormously. And that's what you're trying to anticipate. You need to have somewhat of a top down perspective, not just bottom up. We're investing internationally. However, one thing I will say the dirty secret they don't tell you anymore. Way back when, when I was a young and in the early 80s at fidelity, it was much less correlation between the markets. Now, given the increasing inter linkages between markets, the correlation is much higher. I like to joke. Why do I need to be up at 10:00 at night trading the Japanese mark, or get up at 5 a.m. to watch the London market? I can lose money just as well between 9:30 a.m. at 4 p.m. eastern time, and I and I can get and I can get high ground on that and of course, on private credit I. And I know you've been in the dump known as the Saint Regis. The old Saint Regis in Beijing was an absolute dump, folks. I'm sitting there in the 90s listening to CDOs squared stuff in banker's Kitty, in the whole thing. Are we doing the Redux there on private credit and private equity, where there's some shadows, to say the least. You couldn't have said it better. My father always used to like to say, there's two ways of learning things, either by precept or by experience. It's more or more economical to live by precept. We're all human. We all think this is brand new. It's deja vu all over again, as Yogi would say.