Transcription
All right. All right. 5:00 Tuesday. You know what that means? It's time for an all new edition of What Are Your Thoughts? First time viewers, first time uh listeners, my name is Downtown Josh Brown. My co-host's name is Michael Batnik. Michael, say hello to the folks.
>> Hello, folks.
>> Can we explain the t-shirt? Cuz I'm I'm loving it.
>> All right, so I got an email uh a couple of weeks ago. Hey, why no Grand Rapids Hedge t-shirt?
>> I don't know. Why not? So, I went to Chat GBT. I said, make me a t-shirt with a title wave and the word Grand Rapids Hedge over it. So, initially started out as a wave for the rapids.
>> Yeah.
>> We replaced it with the Bush. So, now we've got a hedge, Grand Rapids.
>> But why is it Grand Rapids hedge for the people that don't know?
>> Oh, all right. So, Ben is a beta male. He doesn't give opinions. He 50/50s everything. He's on the one hand, on the other hand. We call it like Grand Rapids Hedge. When you say a lot, you say nothing. Shout out to Ben Carlson. It's a Grand Rapids.
>> He lives in Grand Rapids.
>> Yeah, that too.
>> That's awesome. That's so great. Does he have one?
>> Yeah, he does.
>> He has one.
>> Yeah. All right, guys. On tonight's show, as we do every week, we will go through the biggest uh events and happenings in the market. Right now, I'm super excited for today's show. Um, we have a uh sponsor, but before we get to the sponsor, I want to let everybody know August is portfolio review month at Rholtz Wealth Management. To be very clear, uh, listen to the giraffe, folks. um portfolio review month. Basically, it's almost impossible for us to find time to speak to um you know, as many people as we would like to during the course of the year. Things get a little bit slower in the summer, but not really to be honest this summer. Um, but we are carving out some time to talk to some of you who have been sitting on a portfolio for a long time, not really sure what's happening, not really getting advice or maybe getting advice, but not sure if that is good advice. Um, and we want to give you an opportunity to reach out, talk to a CFP, and see if you could be doing things differently with your financial plan, with your portfolio. So, now is the time. Um, you can go ahead and hit the link that Nicole will put in the chat or the link that I believe will be uh in the show notes or in the video description. And uh we're standing by. We're ready to talk.
Okay. Uh we got a full house in the chat tonight. Chris Hayes is here. Magnus, John Carlo, Cliff is here, Georgie, all the regulars. Also have some new folks and some new faces here um that I would love to say hello to. Uh, Steve Z, Micro GX, uh, who else is in the house tonight? Michael Whitam, welcome. Good to see you, dude. Uh, A32K, Sebass23. It's, uh, it's a veritable rogues gallery. Doc, I see you. Um, all right. Everyone's, uh, Jay Luther. Everyone's good.
All right. So, uh, Public is the sponsor. I use the Public app personally. So does Michael. It's on the home screen of my phone. public is for people who take investing seriously. Do I have that right, Mike?
>> Deadly serious. This is not a game. This is real business, not funny business. This is serious stuff we're talking about.
>> Look, you can do very basic stuff like a 4.1% APY on your cash with no fees or minimums. You can transfer uh a rollover IRA in uh from a 401k. You can open a brokerage account.
>> Wait, can you get a match? Could you get a match?
>> Uh, you can earn a 1% match on IRA deposits, transfers, and 401k rollovers. And the reason I like the app so much is how easy and fast it is. Like, you could be up and running in minutes. And, um, in 2025, that's an important thing. So, uh, go to public.com/wt to learn more. Tell them Josh sent you. Tell them Michael sent you. Paid for by public investing. Full disclosures in podcast description.
All right. Uh, we got a lot of housekeeping out of the way. I feel pretty good about that. Oh.
>> Oh.
>> Who could it be? It appears we have a surprise.
>> There she is.
>> Ladies and gentlemen, say hello to uh Cali Cox. Uh, Callie's the chief strategist at Rholtz Wealth and uh, one of the finest investment bloggers currently in the game. um published something awesome this week that everybody read and her site is called Optimistic Calie which is perfect. Um, if you know Callie, you know that's uh that's her jam. Welcome to the show.
>> What's up? I want you to know that I literally pushed the doorbell on my side of the camera.
>> Well, I mean, how else will you make it ring, right?
>> I know. Exactly. I know.
>> All right. We don't have a Ring Cam, so we would have let you in no matter what. We uh It's It's awesome to It's awesome to have you here. So, we're gonna start with the earnings season, Cali, because um this has been a pretty good one. Not unbelievable, but like better than expected. And uh a lot of look there's there's definitely punishment for companies that miss earnings. I don't think that's like novel. I think that's pretty much the way it always is, but we always point it out. Um, but by and large, at at a headline level, this is a pretty good earning season. What do you think?
>> Yeah, I think you have to hedge that a little bit. Or Grand Rapids Hedge. I'll throw an O to Michael shirt there.
>> Let's do it.
>> Uh, by the way, is Ben a Grand Rapids hedger or is he just a research analyst? Let's be honest.
>> Uh, okay. So, this earnings season,
>> the bar was low heading in. Uh, I think so. Bloomberg estimates that we look at uh showed that S&P profits probably grew like 2.5%. If you think of the average over the past five years is like seven or eight%. That's pretty darn low. Uh, but it's also a lower bar for companies to beat. And I know I've said this on what are your thoughts before, but the best recipe for market gains is when you have low expectations and moderately good news. That seems to be what we're getting right now. But I also think you have to look at it on a sector level because tech is performing in a whole different league than the rest of the market
>> on the profit side, but obviously on the breadth side as well.
>> Uh, seven of 11 sectors though had a year-over-year increase in profits. So, it's not just tech that's got earnings growth. Um, we all know the highest growth rates came from. Comm services and technology. Financials were a standout. And, uh, I think if you ask most people where do you think the lowest growth rates were, they would nail it without even looking. Energy, materials, and staples. So, it feels familiar. I don't know. Mike, what do you think? This is pretty much in line with the last few quarters that we've lived through. Uh we were talking about stock market reactions with I think it was with Adam Parker talking about was it with Adam who said like financials haven't really done too too well after beating and part of the reason was because they had already done so well but
>> I was looking today at some of the stocks that I own uh in the capital markets CME on fire on fire NASDAQ. Do you still own that Josh?
>> Yeah.
>> Uh, no, I'm out. Unfortunately,
>> S&P S&P Global, all of these names and JP Morgan is is back near 50 all-time high. The banks are acting fantastic.
>> Um, Cali, the Beats are seeing a one-day out performance of 1.12% versus the uh versus the S&P index on average. Um, that's the highest since the third quarter of 2024. All right, not that not that amazing. Um, in the tech sector, it's closer to 2% above the S&P. Um, so that's that's good. When I when I mentioned the misses being punished, misses are seeing a one-day underperformance of negative 5.7%. And we talked about this last week, it was minus 5.2%. So, it's actually uh it's getting worse. They are obliterating companies that don't come in at least in line. Um, should we read more deeply into that or is that just, hey, this is what it is. You got to do the number.
>> I think it's a product of the low bar that we saw. If you're missing this low bar, then we have no patience for you. That's what investors are thinking. I do think last week changed a lot because heading into last week, I think that narrative of uh companies beating weren't necessarily performing that well past the index and then companies that were missing were getting obliterated. Last week we had like a third of S&P companies reporting including I believe four of the mag seven seven companies. So I think there was just like a sample size uh there is a sample size thing that we needed to get across the line there. But I think what you can read into it is this. If you're missing the low bar, and to be clear, most sectors had a quite a lower bar than what uh was expected even like three, four months ago because of tariffs, because of everything that has happened since April. And look, if you can't make that low bar, then there's probably something seriously wrong. That's what that's what's what's going through investors heads. I mean, I want to say too, technology, I was astounded at how little tech expectations have changed. So, think about that 2.5% year-over-year bar at the beginning of this the season that came along with the 20% uh earnings growth expectation for tech. So, you had really low bars in like the energy consumer discretionaries and materials of the world. And if you can't meet that, something's wrong.
>> That's a good segue. Um, going into last week, the estimates for the MAG 7 was 4 and a.5% year-over-year growth for this quarter. And um at the end of last week, according to Chartk Kid Matt, that number has doubled. It's now uh 9.08%. Um the MAG7 delivered. They didn't all get they didn't I mean even Apple had a good earnings report. They didn't all get you know outside of Tesla, they didn't it you you basically if you're in these stocks, if you're in Alphabet, if you're in Apple, we all understand the negative narratives around what's going on with these companies um just in terms of where they're at. But like the numbers were the numbers and they were good. They were strong across the board.
>> Yeah. And I want to clarify one thing. So that 4.5% that you mentioned was actually the blended like actuals versus estimate uh estimated growth for the S&P. So MAG seven mag seven stocks that reported last week actually boosted the bar for the overall pushed it all up four percentage points which is insane to think about.
>> I have three comments. Number one, a lot of the stocks that are, excuse me, that are getting hit um are stocks that have had a monster bounce off the April lows. A lot of these stocks are up 40%, 70, double. So, all right, a stock like Netflix, for example, very good earnings. The stock is up a gazillion%. It's now given back 14% kind of quietly. Good. That's healthy. These stocks should not go up and up uninterrupted forever and ever and ever. Uh and on Apple specifically, Apple had a beat. pretty surprisingly strong numbers. The stock has been red for the last six days from the open to the close. Uh because it's not getting rewarded for what it did on the hardware side or anything. It's It's the open question is the AI story. I know we're going to talk about Apple later, but that's it. And they're not in the game and the market does not like that.
>> Well, it's the AI story. So, I think Apple's a funny example because yes, Apple was getting hit for for falling behind on the AI front, but Apple had a lot a lot to say about tariffs in the post uh earnings release commentary as well. I know they said that tariff costs were uh supposedly going to go up by I guess like 300 mil or sorry, not tariff costs uh explicitly, but operating costs were going to go up by like 300 million through the end of the year. So, I I find that there's a little more dispersion when it comes to mag seven companies. like there's a little bit more going on beneath the surface than AI. But I mean, I think you bring up a good point. We've seen a really strong rally since April and now investors are asking companies to prove it.
>> Yeah, I think that's the perfect point. Like when Meta reports, the only tariff impact conceivably that you would see in a meta is maybe like an advertising pullback related to tariff like general uncertainty, but they're not manufacturing anything at scale. It's not an important part of the company's business. Apple is very different than Meta. Apple's got to make physical things in one part of the world, ship them to another. They have to source components from everywhere. So like um the t like the tariff conversation being heavily featured during the Apple call is exactly what I think people should have expected if they didn't. Um, because that's where that hits.
>> Um, you wrote about the AI capex spending versus the human economy, which uh, so one is gang busters and the other is slowing. And I thought, uh, you did a really good job smashing those two themes together and giving people some food for thought. And we're going to roll through a couple of your charts. And I'd just love to have you comment as as we go. Um, let's put up this first one. robots are pulling the economy along this year. So this box that you have around 2025 is showing the yellow bar is AI and tech investments which for um for this year 152 billion in AI related spending which you could explain to us and consumer spending 77 billion and um obviously consumer spending is at least according to this looking to be way down from the prior two years and AI spending is uh mushrooming. So what's what's the what's the takeaway from what you looked at here?
>> So I think with this you have to remember that there are two moving parts that we're watching in this chart. There's the AI spending which I quantify and the industry quantifies as uh spending on or business spending on uh information processing equipment, computers and software. And look that's a proxy, right? Like there are probably a few line items here and there that you could throw into that AI line item, but we'll just go with it, right? Information processing, equipment, and software. And consumer spending is a main component of GDP. In fact, it's 70% of GDP. It's a$16 trillion line item when you look at the components of what make up this economy. And what you're seeing here is that consumer spending has only grown by 77 billion this year. I mean, consumer spending has pretty much stalled out if you compare that to the $16 trillion base that we're talking about. And business investment in AI alone, again, that info processing equipment and software has grown by 152 billion. So, you could take this two ways. You could say, okay, AI is propping up the economy. Clearly, it's adding more than this this component of the economy that is so large um and so dominant, especially over different periods in history. Or you could say consumer spending is really setting a low bar. It's stalling out. Um, you know it's not it's basically not growing and that's why you know little line items like AI spending little little line items like AI spending are exceeding it. I think the latter is right. I think this is more a reflection of how poor or how stalled out consumer spending has been over the last two quarters. And look AI capex is going gang busters. Can it prop up the economy though? I'm not so sure. I don't think you have a thriving US economy without the consumer.
>> It's not big enough. Uh, it's big enough to move the stock market, but 1.4 trillion is is not 16 trillion to to your earlier point.
>> 26 trillion, which is total GDP that we're talking about here. I mean, the stock market's different, right? The stock market's not the economy. You can work in expectations there. You have a little bit of I mean, you have a little bit of future prospects that's baked in. And look with with tech too, I mean tech is the profitability golden child of the S&P 500, but valuations are still quite high, fairly high, because we're baking in the AI story, which hasn't really rolled into profits yet. But, you know, it's there's a bit of a back and forth between expectations and reality here that I think investors are still really trying to juggle and understand.
>> New Lon in the chat is asking if you're factoring in uh the Sydney Sweeney component to to any of this. I don't know how much you've you've thought about that or or not.
>> Did Sydney Sweeny Sweeney do an ad for Meta Met?
>> Sydney Sweeney is going to do AI. Did
>> I miss that?
>> Um, the jobs report. Uh, what' you guys what' you guys think? 73,000 last month and then they uh they revised lower the prior two months or three months. What was the
>> two months?
>> The prior two months. So, we're I don't know. I don't I don't know if like stall speed might be too much. I don't think it's Is it stall speed or is it just like way moderated down versus some of these months we were seeing before?
>> I like the precision of way moderated down. So, let's go with that.
>> Way moderate. I'm just kidding. So, I would hesitate to say stall speed because stall speed, the standard that we're setting here is actually a lot lower because the labor supply,
>> the workforce, the number of people out there uh employed or looking for a job is actually shrinking at the moment, which is not something you see often. It's shrink for the labor supply has shrunk for the past three months.
>> This is immigration. This is the effect of uh
>> mainly immigration. Yeah. Okay. based on what we can see from the data and of course boomers leaving the workforce, aging out of the workforce. You can't ignore the demographics, but the labor supply is shrinking. That means that there are fewer people out there needing and looking for jobs, which means that there are fewer positions out there that are needed or fewer hires that are needed to soak up those unemployed that unemployed population. So, you have to remember that the game has changed a little bit for the job market, but that's not a healthy dynamic. I wouldn't consider a shrinking labor supply as something that I'd put in the thriving job market bucket.
>> Guys, pop her chart up. Um, Cali, does it just based on history, we're looking back to 1970. The title of this chart is hiring grinds to a halt. This is a three-month average of non-farm payrolls, which you peg at 35,000 jobs per month. Um, just looking at history, does it seem likely that this is all of a sudden going to bounce off that zero line, or is that not historically what we usually see happen?
>> I don't know what turns us around, Josh. Uh, that's a really tough to say, but
>> housing,
>> you think so?
>> Yeah. Give me 150 basis points. I'll give you I'll give you more hiring.
>> Yeah. Well, too bad the Fed can't cut the 10 years.
>> All right. Here's what I would say. Here's what I would say. That's the only thing that's the only thing that that t like turns this on a dime is a is a housing boom. I don't know what what else is big enough.
>> Yeah, I mean, it's a good question. Um, I mean, I think a rate cut if I if I had to throw a story in there, I think a rate cut is it, but
>> more than one?
>> It's probably a lot more than one.
>> Yeah. Can you throw that chart back on? Even one can infuse enough confidence in the economy to maybe give us a little bit of a spark. It's hard though because what we've seen underneath the surface too is that hiring has come down
>> through a bunch of different sectors, especially on the private side. I mean, right now that the only sectors really net hiring over the past three months have been education and health services and state and local government. So, it's great if you're a nurse or a firefighter, but if you're in a white collar job, if you're in a manufacturing job, if you're in a trader transportation job, you've really been out of luck.
>> Back on.
>> All right. So, if we look at uh so there's no doubt the three-month average is coming into the into the danger zone, into the red line. But look what happened before it. So maybe an optimistic take on what we're seeing now is a normalization of an absolutely absurdly uh abnormal job market where anybody could get a job, where anybody could get a raise. Are we is is that a fair interpretation or is that too charitable? Chart off.
>> I think it was a fair interpretation up until a few months ago. Hiring is so weak. I think the like this the details that we've seen in the consumer confidence side with the labor differential have slipped below what is normal and like what is normal these days hard to say but I look back to the 2010s which was a pretty sluggish job market and we're even seeing some indicators drop below those points. So, I think you have a point, Michael. I think about that a lot because what we've seen over the past few years is slowing from a fiery hot job market, but from absolute levels and from the level of layoffs that we've seen this year, it is getting to a point where you should probably grit your teeth a little bit more about what's happening in the job market.
>> We got one more chart from you. Um, fewer employees, more robots. I'll just I'll paraphrase um what you said and then you can react to it. um is the robot economy cannibalizing the human economy? Hyperscalers are ramping up business spending but keeping their headcount steady. So most of these kind of tech explosion um uh capex booms are accompanied by hiring more developers and it seems like the only person trying to do that is Mark Zuckerberg by any means necessary. um in this particular boom the headcounts are not uh rising while capex is and uh I'm just curious like what else would you uh what else would you add to that uh or what do people need to know um about what you see happening there?
>> Well, first of all, this is a chart that you see on social media and you're like, "Oh my god, robots are taking all over the world. AI overlords, like please save us." It's not that. Um, it can seem like that at first glance, but what I'm trying to get across here is the fact that, you know, for all of the spending, this capex spending that we're seeing from the hyperscalers, it has to come out of one pocket or another. And if you think about business costs, so when we talk about where that money could come from, we have equity financing, debt financing, cost control, free cash flow, um, which is a which is a derivative of cost control. But costs, I mean, wages are the biggest cost for most businesses. And what we've seen on the big tech side, uh, outside of 2021 has really been this control on the workforce, this control in the headcount. Um, I don't think it was to, you know, eventually spend Buku's amount of money on AI, but I think it is one of the pockets that these tech companies are kind of fishing from in order to fund like 300 billion dollars worth of capex spending. And it's important for investors to remember this because it's really hard for companies to be the golden child of profitability, which is what tech is right now, but also these big big spenders and these um you know really ambitious future.
>> The money has to come from somewhere and they're not they're not taking on massive amounts of debt uh at least not directly. um the private credit guys are uh in order to fund the uh the data centers, but to your point like they have to spend the money from somewhere. If they're not spending it somewhere else, it's meaningful.
>> And I have to ask myself, I mean, do I think we live in a world where investors can swallow smaller smaller or even like stand still profit margins from big tech? I'm not so sure. Expectations are really high for that sector. So, it's this is my Grand Rapids hedge. AI is a very compelling story. I don't think you can argue against that. But the profile of a company that has to almost pivot to catch up to AI or to try to lead at the forefront of AI requires them to take money from somewhere requires them to spend from somewhere and that somewhere is still big question mark that some people might be ignoring.
>> What
>> I just pulled up a stock that we had spoken about a while back that uh reminded me of this. Remember uh Accenture, Josh? We spoke about that. They do like AI consulting and other sort of consulting.
>> Not well.
>> Holy mackle. The stock crashed.
>> Yeah.
>> I'm sure there's a story there, but wow. I was not expecting that.
>> Um, the opposite of that is IBM, which is much better at what what Accenture does.
>> Um, all right, uh Cali, we've kept you longer than uh than than than I promised you we would. I want to say thank you so much for joining us. For those of you who are not uh aware, Optimistic Cali is published, I think, at least weekly, probably multiple times per week, right?
>> Uh, can't promise that week.
>> No promises. Um, but check out >> optimistically.com. Cali, thank you so much for joining us. We really appreciate it. Great job this week.
>> I'm around whenever you need me.
>> All right.
>> Bye, Callie. All right, Cali Cox, ladies and gentlemen, um what what you think of that idea that, you know, we're celebrating all this capex spending and it's obviously fueling industrials and um electrification related stocks and obviously software companies, but like the spending is is coming from somewhere and we're basically it's looking more and more like a hiring standstill
>> um in in a lot of areas of corporate America. What do you think?
>> Yeah, I'm not worried yet about where the cash is coming from because it's coming from their balance sheets primarily, but I saw that Google did a debt offering or Alphabet did a debt offering for the first time in a couple of years.
>> Yeah.
>> So,
>> yeah. Uh and then Facebook was talking about uh the idea of maybe external financing for like a $30 billion expenditure, but listen, it's coming from them. They have all the cash. They could afford it.
>> Yeah. When we're So, we're gonna we're gonna talk about Palins here in a little while, so I don't want to go too ind depth on that. But when you hear them come out and say, "We're going to do 4.1 billion in revenue this year, and we have we now have 860 some odd commercial clients, non-government."
>> Um, all of those clients, what they would love to be able to do is spend the money on AI related projects that will enable them to not
>> hire the same amount of people they hired last year. Like, you have to understand that's part of the the the goal. without a doubt.
>> So, all right, last thing before we move along. We got a July ISM and just to put a bow on everything we've been talking about. There were not a lot of bright spots in the data. Um, but in the commentary here, here's a here's a sampling. Quote, "We continue to see strong demand driven by the buildout of artificial intelligence related data center capacity. Semiconductor industry expansion fueled by national policy and large-scale grid modernization projects. New orders for defense equipment also surged. Non-defense orders dropped. So like that's what that's what people are spending money on um at least according to uh the manufacturer survey. So
>> and uh yeah. Well, we have we have Nvidia. When does Nvidia report? A few weeks.
>> Yeah, they're the they're always last.
>> The last. All right. That will uh that will not not matter. Okay. Let's talk about the state of the market. Um, how would you describe the state of the market today?
>> Giddy. Giddy. I don't I I don't like the term bubbleicious because there were always bubbles and I don't think the whole thing's a bubble, but I do think the way people are behaving there's a giddiness. Um, I mean, whatever. It's fine. I It's un It's understandable uh given this rush that everyone's feeling coming off the April lows and, you know, seeing the market make new highs, but like that's I think that's kind of the vibes. I don't know. What do you think?
>> I think there's a lot of optimism. A lot of it peripheral to the S&P 500 itself. It's not like the It's like the S&P is going up every single day. You know what I mean? But there's just a lot of there's a lot of Yeah, gettingness is a good word. So, let's get to it. All right. Um, the DGEN DAO, I don't think we've referenced this in a while. Have we updated the components or are these what's what's the situation here, Josh?
>> I don't think we've updated the components, but just at a glance,
>> they still work.
>> There's nothing on here that I would take off. I don't think I I feel like now we might be
>> No, I I I would take Reddit out of here. That's not a That's not a DGEN stock, I don't think.
>> Well, no, no, no. It's part of the DGEN uh ecosystem because that's where they're all talking.
>> You're right. My bad.
>> You know what's missing? Uh, you don't have Joby on here.
>> Yeah.
>> And I think Palunteer is an obvious miss. Oh, yeah.
>> Oh, no. It's on here. It's on here. It's on here. I'm sorry. Um, do we have App Love on? Yeah.
>> Wait, what's on there? Joby. Where is it?
>> No, we don't have Joby.
>> Oh, there it is. You're right. Okay.
>> So, Joby definitely. That's a degen especially after this week.
>> Either way, the individual tickers are less important. just the direction because one ticker is not going to make or break this line. Uh, they're up 24% year to date and if you look at where they are from the lows, they've almost doubled from the lows. That's so that's the key takeway.
>> We should have just bought we should have just uh we should have just ETF this like people came to us and said some somebody came to us and said, "Were you guys serious? Cuz I'll I'll [ __ ] build that right now."
>> Yeah, we we cannot get conscious. Watch this. Um, all right, here's here's something. So I'm I'm all out of Nvidia, by the way.
>> I guess you're allergic to money, Mike. Yeah, I'm all out of Nvidia.
>> Um,
>> you're out.
>> I sold a little
>> just because I gave you permission to sell last week.
>> Thank you. I really I needed that. Um, I'm all out. I sold a little bit last week, a little bit more the end of the week and and the rest of it today. Um, all right. This chart helped push me over the ledge. Uh, chart on, please. This is from our friend Todd Srategus. All right. So, what we're looking at for the listeners is this. It's a line chart of Nvidia and its weight in the S&P 500 which is now about 8%.
>> Versus the weight of the industrials and I mean all of the industrials, every single one of them.
>> Keep saying that. We keep saying how crazy it is, but this is so ins.
>> Wait a minute. So for people that can't see the chart,
>> how many billion dollars is Nvidia's market cap away from being bigger than the entire industrial sector?
>> Right there. It's right there. It's less. It's 1%.
>> It's like 1%. It's like $5 billion.
>> So, let may I remind you these are these are not small names. Chart off please for a second. These are the top 10 names in the XLI. GE Aerospace, RTX, Caterpillar, Uber, GE Vernova, Boeing, Eden, Honeywell, Union Pacific, and Deer. Those are just the top 10. It just can't be. It just can't be this. And I'm long in video and I and I'm not planning to sell it right now, but um it it makes no sense. And I and you can't even argue that it's in part due to the fact that the industrials are cheap, cuz they aren't,
>> right?
>> It's not like you're talking about heavily discounted stocks in the industrial sector, at least in the healthc care sector. You sort of can make the case that those stocks are all selling at depressed valuations. Now they're caught up in the tariff [ __ ] Dude, be that as it may,
>> it's still crazy. Yeah, I'm with you. I'm with you.
>> So, these are the top 10 names in an admittedly depressed healthcare sector. Eli, Lily, Johnson and Johnson, Abby, Abbott Labs, United Health, Merc, Thermoffrofisher, Intuitive Surgical, Amgen, and Boston Scientific. Come on.
>> What?
>> One of those, one of these is wrong. uh may so but in the case of health care that could be wrong because those stocks are are way too depressed like they're those stocks are too heavily discounted in the case of industrials I what are we talking about is it how many companies in the S&P 500 industrials could be 80
>> how how much do you say
>> 50 I don't
>> I don't either but it's it sounds wrong
>> all right so that So that's some stuff on the public markets. Let's go to private markets.
>> Wait, so you looked at that and said and said, "I gotta I gotta I gotta sell this thing.
>> I gota I gotta sober up a little bit." Yeah. I mean, I was I was, you know, I had one foot out the door anyway mentally. Um, all right. Uh, in private world, uh, OpenAI just did a funding round at $300 billion. I think they released some of the
>> some of the growth numbers are truly outstanding. So, you know, this is what happens in in in what everybody is calling the biggest uh technological revolution of our lifetime. Literally everybody's saying it. Tim Apple. Well, maybe not Tim Apple. Uh, but they're all saying it. Um, anything here, Josh or can I keep going?
>> I'm using Open AI a hundred times a day, but I'm paying one subscription price.
>> It's like 20 bucks, right? 20 bucks a month.
>> Yeah. So, I'm not I'm not sure if that's going to be the long run business model for that company. Uh, I feel like it should cost at least as much as Spotify. Not to give them any ideas. Maybe it should cost way more just given the value that I'm getting from it. And you already know what I'm not using when I'm using chat GPT.
>> Uh, right. I am looking for I saw the It doesn't matter. I don't know if the numbers here are handy, but but uh there is this is it. Oh, here it is. Um, okay. Uh, OpenAI's annual recurring revenue has soared to 13 billion, up from 10 billion in June.
>> That's people like me that can now not live without it. Same. I started without it. I started paying in the last three months. Up 30% since June. Not bad. Okay, this is a really good one from Dave Nodig. Um, a bit wonky, but I still think it's it's, uh, important. So Dave said, uh, actually, let me just read this for a sec. So, Tidal Financial Group put out their ETF industry highlights of the week and key metrics at a glance. So, one-year open to close ratio is over five, which is
>> what does that what does that mean? Open to close.
>> For every for every closed ETF, there are five that open. Okay,
>> I'll throw this out. No,
>> I'll let you cook. I'll let you cook and then I'll tell you why it's it's not anything.
>> Dave said nodding said we've crossed the 5 to1 open to close barrier. I think we've only seen that one or two times before. It's literally launch it, we'll fix it live land. Uh, and then there's some other stuff in here just about the industry assets. But why is that garbage?
>> Because it used to it used to cost a lot to keep a zombie ETF trading on the public markets. And now maybe because of AI or maybe because of streamline compliance or whatever, the the cost of letting one of these things just live, even with $50 million sitting in it, you never know when a sector or a strategy or a theme is all of a sudden going to get hot. Fair.
>> And and it's like this is like roulette. If you're Pacer ETFs or or like like a second tier ETF issuer, you've got all the all these products out there. all of a sudden one of them could just explode.
>> Like why not? It's like roulette. Keep the keep the chips on all the squares. I don't I don't see this as an indicator anymore the way it used to.
>> Okay. However, all by the way, you mentioned second tier. Uh Baltrunis calls them indie issuers and they are on fire. So So you might say that. So I I'll see what you just said and I'll raise you this. Bunus tweeted new filing for a 2x Figma ETF.
>> The stock the stock that just had it IPO today with a $250 250% pop. Uh, which is the most ever by the way for an IPO that was over $500 million. So, throw that in there. How crazy is this?
>> Well, you had to sell that. Um, you had to sell that. You had a second. All right. Robin reported last week uh equity notional volumes are up 112% year-over-year. Of course, some of that is price, but up 25% quarter over quarter. Options contracts are up 32% year-over-year. So, people are just going wild. And I want you to throw up this transactionbased revenue. The second Robin chart, please. Look how much freaking money they're making from options.
>> This is Robin Hood's transaction revenue um up 65% year-over-year to 539 million. And what's the options?
>> That's the That's the neon.
>> Oh [ __ ] Yeah.
>> And green, for example, is equities. And we know that that's just payment for orderflow because there are no transactions there. But my god, are the options profitable.
>> So right, green is not stock trading commissions. That's that's
>> that's P5. That's That's P5. And then um what's the top gray other? What do you think's in there? It's tiny, but
>> uh maybe some I is that is that like
>> margin margin balances?
>> Maybe margin loans probably rolls up into it. Uh, all right. Uh, Goldman from Goldman Sachs. We spoke about this last week with Adam. I think
>> speculative trading hits record high. I mean, obviously, uh, you know, just across the board, call option activity has surged to its highest since 2021. IPO spack issuance is at a multi-year high. Uh, even Arc, even Arc, uh, Baltunis tweeted, "How back are we, you ask? We are so back that Arc just took in $800 million in one day. It's the biggest
>> God bless her.
>> It's the biggest one day inflow ever."
>> She's doing good. She's doing good again, though. This is like her This is her market.
>> Yeah. So, we mentioned we mentioned Figma. Uh, Vlad Bastion tweeted a chart of the market cap of the top hundred information technology stocks with their forward PE and Figma of course at the IPO price was number one. And then just to put a bow on this all the way on the other side of the market are insiders who are not participating. They are not buying. Next chart please. So Bloomberg ran a story. I didn't have time to read it yet but I pulled the chart. Insider buying dries up. insider buy trails sales by the most since July 2024. So that's the market. That's where we are. So uh maybe take
>> Okay, so to to so to sum up, Robin Hoodesque, ARCesque activity is back at highs. People are doing the most speculative things they can think of to do. And um corporate insiders are using this as an opportunity to sell um
>> or at least not buy. Yeah. And like Figma is not even getting the market cap it's getting because it's Figma. They're getting it because there's scarcity of IPOs and people just love You know what IPOs are for people in their 20s? Do you have any idea how big the baseball card pack uh uh pack breaking thing is on the internet? Do you know about this at all?
>> Not as well as he did, but yes.
>> All right. My friend's kid um he's out of college now. just barely out of college now. He's doing these auctions on the internet with like a sealed pack of baseball cards and he's doing a pack break like and people can bid on this thing before he opens it and then he opens it and wherever the highest bid is, you can kind of see like did people overestimate or underestimate how valuable the cards in there might be. But now it's at another level where they're taking loose baseball cards like some of them are are like $20,000 cards. They're repackaging them and resealing them and starting all over again
>> like as a scam or or
>> No, it's not a scam. People just want to bet on pack breaks. Tech IPOs are pack breaks.
>> Like in other words, everyone put in their allocation at Robin Hood. They got one share. That was like the meme last uh last week like, "Oh, thanks Robin Hood for my one share." That's a pack break. You don't, nobody has any [ __ ] idea what Figma is going to be worth on its first day of trading or it second. No, no idea. Here's my evidence. They priced the IPO at like 20 something, then they raised it to 30 something, then they open it and it goes to 100 cuz people have no idea what these things are worth.
>> I'm so glad you said that. Nobody has any idea. I made this analogy. It's like drafting NFL quarterbacks. They want to get it right. The bankers don't want to [ __ ] the companies. If they get if they get that reputation, who would hire them? People like, "Oh, this for their rich clients." Like, no, they want to price it right. But who could see the future?
>> Who could possibly who could possibly? Now, it's hard.
>> Now, there are some telltale signs that a deal is going to be great. One of them is they keep the share amount, they keep the share count, you know, relatively low. Um, you know, people are looking for companies that don't have a lot of debt. They're looking for companies that have explosive growth rates. They're looking for companies that use a lot of AI stuff in their prospect eye. Like there are some indicators, but in the end,
>> in the end, it's a but it's a pack break.
>> Yeah.
>> So the same people that are willing to bet on a resealed package of baseball cards, and by the way, the way that works is you're guaranteed 45% of your money back.
>> So no matter what cards are in there, you're not going to take a total loss. If you bid if you bid $2,000 on a on a pack
>> and there aren't any special cards in there, you're guaranteed to get at least like a grand back.
>> Uh, anyway, that's what this activity is. It's lotteryesque. You're you're putting in an allocation for Figma, not because you have any clue of where they're going to put the stock when it opens, but because oh my god, imagine if it figs.
>> Right. Josh, there's another aspect to this. The day that it IPOs is very important. It came public on Thursday at an all-time high. What if it came public on Friday on a day that people didn't want to buy stocks
>> on a tariff day? I got one more. I got one more on this and we can move on.
>> Um, this is an amazing story. I love it so much. Fenwick and West is a law firm that did all or most of the legal work for Figma, not just for the deal, but prior to. And they handled all the going public stuff for the company, right? They made a very big bet. They said, "Let's get equity in this client and not just take our I don't know, God, can you imagine $3,000 an hour legal fees?" They took equity. I don't want to
Say instead, but in lieu of some of the money that they ordinarily would have gotten. Talk about, uh, speculative. They took the ultimate bet on a client. Um, Fenwick, I think, was paid the equivalent of $30 million worth of Figma shares, um, for that, for the right to do that. Those shares, um, as of July 31st, were worth, uh, well, it says right here, it says 900,000 shares. 900,000 shares times $85. That's $71 million bucks for where it is right now. Not bad. Can you imagine? Like, what an amazing, what an amazing decision. And this is a law firm. So, pretty, uh, pretty, pretty impressive.
Um, all right. I have nothing more other than to say that I agree with you. Things have, we are so all the way back, and things have gotten absolutely crazy. They could get crazier, though. Oh, yeah. Cuz I've seen it. There's no, I know they can. You've seen, we saw it in '21. I was honestly, this doesn't feel that crazy. I'm saying there's, there's a lot of speculation, but it doesn't feel, it doesn't feel like all the way bonkers. '21 was way nuttier. If we get like, if we get like 10 more Figmas, you know, or we get a super Figma, like, you know what I'm saying? Like, if we get a Figma, but where it's like, instead of $70 billion, it's like $700 billion.
All right. So, that's a good segue to Palantir. Yeah. All right. Um, okay. Is Alex Karp the new Elon Musk? Um, there's, there's similarities. I listened to the call as well. Elon Musk is not, is not hot right now. Alex Karp is, is very galvanizing. He's messianic. Um, he's, look, I think what people love about him is he's delivering. I don't think he could have the same level of swagger if his results were just whatever. His results are insane.
Did you listen? Did you hear Dan Ives? Yo, Dan's like, one of my favorite human beings in the world. I texted him a picture of his question. Dad said, like, I'm sorry also that the haters are unsatisfied. This is on a quarterly conference call. I love him so much. So, there, the Alex Carpenter and I, uh, were trolling the, uh, the haters of which, well, one of the things the haters said was that the business model where they don't hire direct salespeople, um, was not going to work. And, um, Dan Ives asked him a question about that, like, uh, the decision to continue down this road. And, um, look, he, Dan, say whatever you want. Dan has been bullish on Palantir since it went public and has never changed his tune. And, uh, he's been really, really right on the stock.
Um, let's go through some of the highlights here so people understand the extent of, of what's happening. And then we'll talk about the valuation. Um, Q2 2025 revenue hit a billion dollars for the first time. That's a 48% year-over-year number. Just, it's, it's incredible. Uh, and 14% over the prior quarter. It's being driven by not just government contracts, which I think is a lot of people look at Palantir and they're like, "All right, great. So, the Army, right?" And the CIA. No, dude. Commercial client revenue growth was up 90 something percent versus only 50% for government spending growth. So, Palantir is now has like almost 900 customers. They'll have a thousand customers.
Josh, in that vein, so they said during the second quarter they closed 100. Cuz I, that was my impression too. I was very new on this company. They closed 157 deals of at least $1 million. 66 were $5 million, and 42 were at least $10 million.
Yeah. Um, chart off and it reminds me a lot of, uh, CrowdStrike. Like they highlight some, without using some of the names, they highlight like, um, a large US, um, wireless carrier or phone company. You can imagine it's either T-Mobile, AT&T, or, uh, Verizon. But like talking about the way that they're building these, um, building these, uh, KYC tools for banks where you can open an account in seconds that normally would have taken nine days worth of human processing of information. Like the, the breadth of the business and the amount of verticals that they're selling into now, I think is really what catches captures people's imagination. They're basically becoming the business AI layer that they claim is substantially stronger than just a plain LLM. And they talk about it in terms of ontology, um, meaning like learning and, uh, understanding mistakes that an LLM would make that a human never would and building accordingly, um, because, you know, you can't make a, you know, haha, stupid AI, you can't do that with some of the, the projects that they're working on. So, uh, net dollar retention up 128%. Uh, operating cash flow for the first six months of the year, $849 million. They're projecting $4 billion, uh, of, of full-year revenue or more. And let's do this rule of 40 thing really quickly.
Wait, hang on before we get to the rule of 40. He said that he was going to 10x that [ __ ] in five years. Did he say? He said 10x revenue in five years. All right. So, they spoke, 40 billion. They spoke a lot about the rule of 40, and it's the first thing that they have in their deck. So, let's run through a few of these charts. All right, this is impossible to see, but this is a very important metric for enterprise software companies. Um, and what you're looking at is on one axis, it is, hold, let, let me just pull this up. It's, it's the margin and the revenue, right? So, a good company will have over 40, and they are so far off the charts, it's insanity.
Yeah. And rule of 40 is about like, uh, revenue growth and margins and just the ability to, you know, CrowdStrike talks about this a lot. I think like ServiceNow, Workday, like the, the types of companies that are selling enterprise software are, are the ones that you'll most frequently hear this rule of 40 idea. And why it's so important. It's how they think of themselves. Profitable growth. And, uh, and Palantir's score, it, it just, they're playing, it looks like they're playing a different sport entirely, um, just based on this dot plot. It's really impressive.
The next one compares them to the top 25 market cap companies globally, and the only one that bests them on this metric is Nvidia. Um, uh, some of the gray bars are, or circles, are Meta, uh, Broadcom, Microsoft, Mastercard, Google. I mean, they are, they are executing. So they've got, uh, and then the next one shows the growth of, of the world of 40. So the valuation. Yeah. 94%. 94%. 40 is considered good. Um, but the valuation is insane. Sorry, sorry to interrupt you. Bob Sacramento in the chat says, "I prefer the rule of 69." I just, I didn't think you would see it, so I wanted to just surface that for you. I, so do I. Yeah, me and Bob. Me and Bob both.
Okay. Um, let's do this valuation stuff really quickly. Chart on. Great job on this one, Sean. No. Uh, what is this? This is, That's the market reaction. Yeah. I mean, needless to say, record highs. Um, we're going to do Palantir versus everyone else. Yeah. All right. This is the, This is the thing. All right. So, it's a $400 billion market cap on $4 billion in annual revenue. Granted, he granted he said he wants to 10x revenue in the next five years. And let's say he can actually do it. Obviously, can't have a recession. Um, that'll, that'll probably hurt his chances of getting there. But even if he comes close, um, maybe that, maybe in that scenario, you could understand the $400 billion, but not if it goes to $800 billion, right? Um, right. Palantir's market cap at $407 billion. Home Depot is $385 billion. Coca-Cola $297 billion. Salesforce $240 billion. So, this company is now worth one and a half Salesforces. McDonald's $215 billion. Nike $110 billion.
A bit, a bit, a bit rich. But I guess to Dan's point and to Alex's points, that's what people have been saying, uh, for the last, you know, $300 billion in market cap. Good for them. They're executing, you know. Oh, 100%. It didn't make more sense at a $250 billion market cap. Right? It's, it's such a great point. Which is why just use charts, throw everything else in the garbage. But that's a, that's another, that's another conversation. Uh, put up this next one. I asked Sean to just quantify the company's fundamental performance because I mean, it really is epic. Um, on the left side, less impressive, uh, just like on the surface, but the growth rates are really, no, the market isn't dumb. Like obviously they've galvanized the share base and the business is executing. So, you know, this is what it is. Look at this revenue, uh, quarterly year-over-year revenue. It in Q4 of 2023, which might have been their first quarter as a publicly traded company, or I, I don't know, 20%. It's accelerating. It's at 48% is the fastest pace of quarterly year-over-year revenue growth that they have reported so far. And, it's AI. That's that AI. That's that.
All right, we have, uh, we have AMD numbers. Let's get that in here. Maybe this will make you feel good or bad about having sold Nvidia. I don't know. Oh, look in their, uh, look at their gaming segment revenue. Yeah, everyone's very excited about the gaming segment. Um, but dude, it's up 69% year-over-year. Nice. As of this, uh, as of this conversation, AMD is off 4% in the, uh, in the post-market, but the stock has been ripping all year, or, or at least since April, I should say. It was a $75 stock that ran to around $180. Oh, yeah. You know, this gets back to the conversation we had with Cali. This, I mean, I don't own the stock and it's easy for me to say this doesn't bother me, but just as an objective observer. All right. The stock went from freaking 75 to 180 and it's given back a few bucks. Big deal.
These numbers aren't that impressive on the surface. I don't know the story well enough to to say anything negative, but, um, I guess they beat on, they beat on revenue by, I don't know, looks like, uh, $200 million, and earnings per share was in line, 48 cents. I guess, uh, revenue up 32% year-over-year is impressive. Gross margin fell to 40% from 49% year-over-year, and data segment revenue was up 14%. I don't. Does that sound like blow me away numbers? No. Not really. Right. I guess that's why this isn't Nvidia.
Um, all right. And we got a report from Toast, which for longtime viewers, listeners know, this is one of my names. Stock is not really reacting in the post. It's down 71 cents. Uh, but it looks like Toast was good. Um, ARR up 31% year-over-year to $2 billion. That's for the quarter. So, uh, this is becoming a pretty big company. That's, uh, if you could do the math, you're talking about an $8 billion annual run rate with a, what's the market cap? Uh, $27 billion market cap. So, not bad. Um, gross payment volume up 23%. I doubt the whole restaurant, uh, sector is is growing its, uh, spend. So, you can see them making big inroads.
And, um, we don't have to go through the rest. Uh, oh, this one's, this one's good, though. Total locations up 24% year-over-year. They now have 148,000 restaurant clients. When I first started buying the stock in the teens, they had like 60,000. So, they are just rapidly, and there's only, I think it's 600,000 restaurants in the country or 700,000. Like, it's not that big of a number. A lot of people would guess it's in the millions, and it just isn't. So, if they're at 148, they have now crossed over to the point where like they are the, the category king. And, uh, they're not the only player out there, but like, uh, some of the legacy players like Micros, which I think, uh, Oracle owns, and, uh, Clover's out there, but I think this is like, this is the, the Uber of, of, uh, of restaurant payments. So, uh, I don't know. I got to spend some more time on this overnight, but, uh, looks like a good report. So, for those who have followed me into the stock over the years, uh, here we are, looking, looking pretty good.
Um, I would say so. Yes. Uh, all right, let's play a game, uh, to catch a falling knife. I'm going to run through, I brought five charts for us, Josh. I'm going to run through the charts and then we'll reset and I'll get your thoughts. Okay. Well, we're going to pick one each. Um, or force rank them. Yeah. All right, let's go through the charts. So, first we have Lululemon. The stock peaked in the be, at the beginning of 2024 at $511. It's now $197. I brought you UPS, which has just been going, pretty much, pretty much straight down from $232 in 2022 to $87 today. I brought you Sweetgreen, which is a bit of a newer issue. Peaked at $44, uh, not even a year ago, and it is now down to $12. That's pretty bad. You know, I own, I owned this for 15 minutes. Oh, I didn't know that. All right. I brought you NFA Energy, a stock that I owned for a cup of coffee. My bad. I made the case for that on this show. It is $330. It was, it peaked at $336. It's now down. It's now $32. Oh my god. And then we couldn't not do, uh, United Health. Stock was $625 bucks, uh, yesterday basically, and it's now $251. So, I will say first that I, the only falling knife I would catch is like the bluest of blue chip type of names. Um, stocks that are going straight down. These are, these are ugly. So, if you had to, Two of them are in the Dow Jones. UPS. Oh, is it UPS? United Health and UPS are Dow 30 components. Now, UPS does not belong with the Dow. Holy [ __ ] Holy [ __ ] Is Amazon in the Dow now? Yeah. So, you don't need, you don't need UPS. It's UPS is an e-commerce thing at this point.
So, what do you think? Would you take a flyer on any of these? Yeah, I would, I would take a flyer in UPS. I would wait till they get kicked out of the Dow, and I would, and I would buy it. Um, they figured out that Amazon is literally the worst customer they could ever have. And in January, they announced a substantial restructuring plan where they are going to minimize their their business with Amazon to, I don't want to say the bare minimum, but substantially lower. They had become extremely reliant on Amazon. Amazon for UPS means high volumes of packages and extraordinarily low profitability on each delivery. And it just, it's, they're much better off doing things like small and midsize business or international. So, they are trying to transition the business. The problem is the company has to shrink to do it.
So, dude, it's almost like stock market participants aren't stupid. I'm looking at the free cash flow of UPS, and it was $10, it was over $10 billion in 2022, and now it's $3.5 billion, and it's just gone straight down. Do you know they just reaffirmed the dividend and and they're going to pay it out of negative cash flow for the, that's not, that's not great. But I don't think if you're UPS, I really don't think you can cut the dividend. And, uh, a corollary to that is, uh, Pfizer. Like, Pfizer got to the point where the dividend was like six or 7%, and they refused to cut it because I think these companies know it, like unless it's an emergency, like GE, or what, like even Schwab, I think Schwab never cut its dividend. Like these companies, they intuitively know that's game over. That's where you lose your whole shareholder base for forever when you do that. And I think they get a lot of pressure from institutional shareholders that intimate to them like, if you guys cut your dividend, I am definitely selling. And, uh, so, so UPS wants to soldier on. I think I would buy that one, though, just not, just not right this second. I want one more really nasty, uh, news, uh, announcement to come out. Maybe they get kicked out of the.
So, Lulu is getting their lunch eaten by Alo? Is that the story? Yeah, I would. And everyone else. The truth is, the quality of the clothing is not as good as it used to be. When you talk to their customers, talk to women who their entire wardrobe was Lulu three years ago. Now it's Alo. They, yeah, they will tell you that they are, um, much more willing to buy Vuori or Alo even though the prices are higher than than trust Lulu. And I don't know how you turn that around. It seems like it's a really tough thing to do. This Lulu is the Gap, 20 years later. That's tough. The Gap, the Gap has spent 20 years basically bleeding relevance, still to this day. And that's what this reminds me of. So, um, I, Nothing there. Um, what about Sweetgreen? Operational issues. They're not, they're just not good at running this business. At Sweetgreen. Yeah. So, not, um, and I think they get [ __ ] up with, uh, prices and tariffs and, um, and also there, that's, it's a, it's a lunch spot, and who's, you know, it's an office thing. Yeah. That that didn't matter though. In 2024, I was in the stock. It was one of the hottest stocks in the market. And they had a really great story to tell about, um, how robotics would ultimately, uh, take over the preparation of salads and on and on and on. But they're just, they're not executing. They're not hitting their numbers. They're guiding lower. Um, they're not marketing well. It's a, it's just a, it's a tough story. I, I don't need that in my life. And I still don't know what they do.
United, I'd buy United if I had to buy one of these. There's not, I don't even know who number two is. All right. All right. So, fine. Would you put United up against UPS at today's prices? So, the reason why, now, in the end of the year, the reason why I would be more inclined to buy United is because this went straight down, where you can make the case that whatever is driving the price action isn't overreaction. You can make the case just based on how violent it is. Whereas UPS, it's just a slow bleed, which is matching the free cash flow, and is nothing but lower highs, and it is just the cleanest downtrend. So, to me, I, I draw a distinction between a falling knife, which is something that's going straight down, which is the other four, versus UPS, which is like a slow bleed. To me, that's just heinous.
Um, yeah, we don't have, we don't have Nike in here, because Nike is not, Nike is not a knife. There's no way. It's just not. Look at the, look at the chart. It's still a little, I know it, it popped after its earnings, but it's still knify. No, it's not. Nope. All right. It's gross. It's gappy. Let's revisit, let's revisit these, uh, uh, in the winter. We'll see how they did. Okay. Um, my bet would be UPS, even though I think there's another leg lower. I think United Health might have permanent impairment to their business model. Uh, UPS has already acknowledged that and is actively trying to turn, turn to a different. It doesn't matter. Who cares? All right. Uh, Apple, uh, what will Apple do to find growth in the second half is the question. So, um, let's put up this chart. The last quarter they reported last week was actually not bad. Phone, phone, phone demand was high. I have a friend who's, uh, in the cell phone business, and he pointed out that they're talking about switching from titanium back to aluminum, um, which means more broken phones, which means a faster replacement cycle. Um, with titanium, the only stuff that breaks is the screen or the battery. To force people to upgrade. Um, and nobody's upgrading for a better camera because the cameras at this point are like sci-fi. They're so good. Um, Chat GPT is better than AI Siri. So, no one's going to upgrade for Apple's AI. So, how do you get people to buy phones faster and not hold on to an iPhone for five years? Make them break easier. Um, so I know that's a really cynical take, but it also happens to be true. So, if they actually go through with this and go back to aluminum, you will know the reason why they need the phones to break. Um, another thing they can do, though, is triple the size of their ad business. It's $7 billion a year right now. Think about that.
That shocked me, by the way. That number shocked me. I had no idea. Should be way higher. Should be way higher. Amazon decided to focus on its ad business and within a few years became the third largest advertising platform on Earth. There's no reason Apple can't do this. And they're already in the business. It would not be from a standing start. Um, think about all the opportunities Apple has to put ads in front of you. Your eyes never take themselves away from their screens. Um, so that's a, that's a thing. Um, But wait, it wouldn't be, it wouldn't be on the phone. You don't want ads popping up on your phone. No. In their, within their services business. Within their services business. Um, Apple has a huge opportunity in advertising. We'll just, we'll leave it at that. We won't go deeper. Um, but like just look at Netflix. They said in calendar 2025, their ad business will double. Half of Netflix's subscribers are now in the ad-supported tier. Michael, that took three years. And there's, this is a chart from a really good piece by Julia Alexander at Puck. Um, but just the gist of it is, if Apple decides they want to talk about advertising to Wall Street and get really seriously focused there, that's a good answer to the question of where will Apple find growth. Um, because they're basically, they're in it, but they're not trying that hard, and it could be way bigger, and, um, globally, and, um, I just thought that was an interesting idea, and we'll see if they actually do it. What are your thoughts?
I think in the short term, the stock is so relatively depressed to its peers, and just the sentiment, nobody's bullish on Apple, that I think it wouldn't take much to change sentiment and get the stock to pop. Problem is, they really do need a growth engine because the stock is not cheap, and that's, that's like the bigger overhang. So, they need either an AI play, which is I think seeming increasingly unlikely. I guess they could make an announcement, surprise us, or they go in, they lean into what you're talking about, and if they were to go from $7 billion to $20 billion, that would be significant even for them. There's no ad-supported tier for Apple TV, right? You're telling me if they launched an ad-supported tier, they wouldn't pick up millions and millions of more subs who just don't want to pay the full freight for, like, like this is not new. Everyone's already done this. In fact, Amazon now defaults you. Amazon Prime members are defaulted to the ad-supported tier, and you have to pay a premium to have no ads. Paramount is showing you ads. Yeah, they want you. They want to show you ads. Yeah, Netflix is showing you ads. Like Peacock is showing you ads. Hulu is showing you ads. What, what are you waiting for? Ad-supported Apple TV. Do it. Do it. The Cardi Cola. Just make it happen. Um, all right. Anyway, uh, we're, we're into Make the Case. Okay.
I pitched, I pitched this on CNBC today. It's a really interesting story, so I wanted to rehash it. And we almost never talk about high dividend payers in this section. Um, but I have one for you. Oh, the stock looks sweet. Okay. Dominion Energy is a utility that's become a growth company. If I asked you, what is the capital of the internet geographically, what place in the world, you would probably say something like Menlo Park or Cupertino, um, or San Jose, or you'd say like somewhere in Asia. But the truth is, it's in Virginia. It's in a place called Loudoun County. This is where AOL was based 30 years ago when they invented the consumer internet. And that's where the first data centers were built to serve as AOL, and then ultimately Yahoo, and now Google and Amazon and, uh, Microsoft Azure. Um, this is, uh, Loudoun County is called Data Center Alley. It is the largest cluster of data centers on the planet all in one place. The Wall Street Journal says 70%, listen to this number, 70% of the entire world's internet traffic passes through this Northern Virginia data center cluster every day. No, like, it's an unbelievable thing. If you happen to be the local utility that is covering Loudoun County and Northern Virginia, it's like discovering oil in your backyard. So that's exactly what's happened here. Um, all of this AI capex [ __ ] that we talk about night and day involves, uh, electrification and spending on the grid and blah, blah, blah, blah, blah. And, uh, Dominion is the company benefiting more so than any other, uh, company in that area. So, it's a boring, sleepy utility that realizes it's, it's in the middle of a, of a gold mine. And, um, what's, what's happening going forward? Because everything I just told you is in the stock. What's happening going forward is they, in July, formerly proposed a rate increase to their regulator. The regulators will respond in September. Um, this is called the rate case. And if they win their rate case, meaning it's a regulated business, they'll be able to charge more. And the reason why they need to charge more, they've explained, is capex and spending related to this opportunity with all the data centers. So, basically, you've got a stock technically breaking out above $61. It's a 4.42% dividend. It's not just electricity in Virginia. It's also natural gas in South Carolina and a whole bunch of other stuff. Building one of the most massive offshore wind projects in the world off the Virginia coast. And, um, you got a shareholder base that is largely there for the dividend yield, but now all of a sudden, you've got a lot of growth tied to this AI story. And the AI story doesn't end anytime soon. The amount of electricity need, I feel like it's forever.
So, yeah, so I like the story. I wanted to pitch it to you. Let's put this chart up. Last but not least, you know what I, you know how I love these golden crosses. Like, what the hell else do you need to see? Today we broke above, uh, resistance dating back to last October. You got that 50-day rising above that 200-day, which will be rising soon, and, uh, not crazy overbought. So, um, this is, uh, this is I think my one of my better Make the Cases this year. I like it. If you are bullish on AI, and why wouldn't you be? The capex is not slowing down, but you're like, but $4 trillion, like, you know, I get it, we all, we all get it. It's $4 trillion there. This is a, this is a maybe a safer, less, less risk way to play it. I like it.
Yeah. Look, look, I'm saying $50 is the pivot point. Um, uh, $50, $50 has been support for a while. So, like, if you're wrong, you risk 11 points. I don't, I really don't think it'll get there. I mean, it certainly could. There's like a market-wide event. Yeah. But I think so long as it stays above $50, you're getting, uh, a 4 and a half percent yield. And I think the story stays intact. You can, you can stay long. Okay. It's not going to double. It's a utility. Yeah, I like it.
Um, all right. I brought a chart. The first chart is Daniel, if you would. All right. This is the revenue, the quarterly revenue since the beginning of 2019. You could see that it's more than doubled. Of a, this is a company's quarterly revenue. Yes. Okay. There's only a handful of companies this could be at this dollar amount. That's correct. Okay. It is significant. It is not a small company. And the next chart shows that over the same time period, uh, you've got in more larger swings, slightly larger return, but really nothing to speak of. The orange line is the S&P 500. So, 2019 to today, that's, you know, it's a long. Oh, so this is the share price versus the S&P. Yeah. And the chart before was the revenue. I want to say, I'm just, I'm, I'm looking at 2021 as my clue. I don't think it's a, a Mac 7 because it didn't. Oh, wait a minute. 2022 it did crash, and it bottomed on every other Mac 7. But it is, Is it Meta? No. Is it Microsoft? No. Maybe go [ __ ] yourself. I don't. It's Amazon. It's Amazon. Why didn't I know that? Oh, $176 billion should have been the tell for me. But it's just kind of wild, like the, the company's not, not working. You know, the business has grown over the last six, six plus years. But, Dude, the chat all guessed. Everybody guessed, uh, everybody guessed Amazon except for me. Um, but it's hard. The stock business is not, it's, it's no easy, no easy thing.
I think that's my cue to shut up for the night. Uh, hey guys. Thank you so much for joining us on the, uh, the live. It was great to see so many familiar avatars. We miss you guys when we're not here. We really appreciate it. For those of you listening to us out in podcast land, hey, a review goes a long way. It's a signal to the algorithm at Spotify and Apple that what we're doing is high quality, and, uh, this is how you support the show. Tomorrow is an all-new Animal Spirits because it's Wednesday. We'll do another, uh, Ask the Compound. Wait, this goes live. of itshop.com 9:00 a.m. tomorrow. Oh, I like that. Limited number, very few. Onshop.com will have the, uh, Grand Rapids head shirt. Um, and at the end of the week, an all-new edition of the Compounded Friends. So, keep it locked. We'll see you soon. Thanks again.