Good morning everybody. Welcome back to another episode of the market open. We are live. It is Thursday, December 11th.

I am in a little bit of a different setting. Um, I know it looks like I'm in some random room in someone's basement, and that's because I am back in the mom's basement. Dude, I'm trying to get back to being that kid with that uh underdog mentality. I just needed to get back there. No, the apartment once again is doing some I pay way too much in rent for this to be happening for the third time.

But it's like some some they're they're moving on to a new generator for the entire building and they said this is the last time they have to do it, but it's uh it's requiring eight hours of no power for like pretty much every single floor.

And I was just I got I saw the email last night and I was like, goodness gracious, bro. All right. Well, show's got to go on. Show has got to go on.

So, we came back, but we will be live from here uh for the morning and for the afternoon. I hope this is the last time. This has happened two times. And I'm just like I think my conspiracy theory is that these freaking data centers in New Jersey, you know, Nebus bought some land in New Jersey that is taking up all the energy. And I'm like, I get it because I want my stocks to go up in the data center space, but goodness, it's annoying. So hopefully this is the last time.

But yeah, we are live. We got a lot to talk about. Oracle earnings big deal yesterday.

Uh we will talk about what happened with Oracle and where it went from there along with Adobe earnings. Two big companies in the AI space. Oracle obviously being the biggest one in terms of market perception.

You also had JPAL that had the FOMC meeting. We will discuss what happened with JPAL.

Now, overall, it was doubbish and we'll talk about why I thought it was doubbish.

Unfortunately, and I don't know why exactly, the markets are red right here and why they started puking last night. Oracle, as you can see right here, down 13% uh 193 and and Oracle, I can understand why it's red, and we'll we'll discuss why.

I don't know why Oracle has to take the rest of the market down with it, which it seems like started happening late last night.

It was not the 10-year bond. It was not Japanese bonds. It was not some random macro event. It was not yen carry trade. I really think at around 8, 900 pm Eastern last night, Oracle started just getting hit a little harder and then you saw everything.

Coreweave down 4%. Nvidia down 2%. Nebus down 3%. All the data center plays along with uh Oracle are getting hit.

Broadcom which has earnings today that's down 1.3%. S&P down.3%. Palunteer down 1.4 for not downside reversing a lot of the Rocket Lab was pushing 59 was very exciting for a lot of the market.

It seems like Oracle decided to take all that down which I don't think is warranted but nonetheless when the market opens today we're going to see how how they actually interpret what happened with Oracle.

Everyone was expecting a hawkish cut and so it was kind of baked in to be bearish.

We ended up getting a dovish cut and that dovish cut completely changed the trajectory of how the market was thinking about it which I thought was also very exciting and then unfortunately Oracle came back and ended up messing up everything.

I don't know if that's enough to destroy or make you know make the Santa Claus rally not be a thing. I guess we'll find out, but I I I wouldn't be excited to be owning Oracle stock right now, just from a perceptive perspective.

Now, again, Oracle, I mean, I don't know. Is this this thing bottomed at 185 a couple weeks ago? Is this really going back to 170, 160?

The Liberation Day lows were 120. So, it's already down from 350.

Maybe never deserved to be up at 350, but still I don't know if it really has to get hit that much further because the earnings were decent except there were certain elements of their debt that were not the best that we'll talk about.

Cor right there down about 5%. I ran down 2%. Neb is down 3%. All the data center names basically getting hit with Mr. Oracle as that one is down 13%.

All right, let's get into it. Thank you everybody for being here. Let's start up with JPAL because I think this was the most important thing and I think this kind of frames everything that played out.

So this was the clip that when JPAL said this yesterday. There's two clips. I'm going to play this one right here. Um my jaw dropped to the floor. I think a lot of you guys saw me live. Uh because I was like, "Wait a second." He just said something relatively bullish, something that we didn't expect him to say.

And it kind of framed how the market was thinking about the Fed's perspective on inflation.

Nine people voted for a cut. One person voted for 50 bips, nine people voted for 25 bips, and two people voted for no cuts at all.

To ask you, um the inflation expectations uh has has come down in your SCP report. Um do you see the tariff price increases as passing through in the next three months? Is it a six-month process that we're looking for that to end? And then because of that, is jobs the threat to the economy? So with with tariff inflation, you know, it takes there's the announcement of a tariff and then there's, you know, they start to take effect and then it takes some months. Goods may have to be shipped from other parts of the, you know, it may take, you know, quite a while for an individual tariff to take its full effect. But once it's had that effect, then the question is, isn't that just a one-time price increase?

So we've actually we actually look at all of the announcements and and and and what you get from all that you see sort of a for each one of them there's a time period and then then it's fully in. So if there are no new tariff announcements and we don't know that but let's assume there are no major new tariff announcements inflation from goods uh should peak in the first quarter or so right roughly you know we haven't been able he's saying inflation shouldn't be an issue next year.

Everyone thought the consensus view that he would say the opposite even I was like all right J Pal's going to be like hey we give you your cut but inflation is rising so don't expect one in January don't expect one in April now the chances for an April cut are actually 40%.

Which means you had pal go rather dovish on the idea that yes the labor market is declining but also inflation is not necessarily picking up as aggressively as people thought to predict this with any precision.

No one is but call it the first quarter or or so of next year should be the peak and from here it should be it shouldn't be big. It should be a couple ten or or even less than that. We don't really have precision on this but and after that again if there are no new tariffs that that are being announced that will take 9 months to get fully in 9 months is also an estimate um then you should start to see that coming down in the back half of next year.

So he goes on to say that inflation is coming in lower tariffs may not be running the economy hot.

He also then went on to say that if inflation or if tariffs weren't an issue we would already have inflation down at 2%. um which is basically him implying, hey, like tariffs are the only reason we're in this situation.

And then as you can see in the clip, he said tariffs should peak in Q1. He doesn't know that for sure. Maybe we have more tariffs, maybe we don't. Maybe we have significantly less tariffs because of the Supreme Court decision. But at its core, he's making the argument that inflation should not be the largest issue.

And so the bond market, which you know, yields were spiking in the morning last yesterday at at 4.2, yields are down, at least on the tenure and on the Japanese tenure. 4.125. I mean, it's the lowest it's been in the past uh week. And the tenure yield also coming down for Japanese bonds. So, it's not like the credit market is screaming that they don't believe the easiest way for the credit mark to say we don't believe PAL and we think inflation is going to be an issue and we think they shouldn't be cutting rates because if they're cutting rates, then the yield they're getting on the uh bond would also hypothetically go down. which means, you know, like the credit market would be selling off those bonds to give a signal to the Fed that we want a higher rate or we want you to control inflation for you to get our money in the bond market. But the fact that they're buying bonds says the opposite, says they're going along with the plan.

So like anything you could possibly imagine for uh the the sort of setup for a really nice Santa Claus rally, which was very contingent on JPAL being doubbish.

And I think all of us expected him to be hawkish. So, we were all like, "All right, at least we'll get the cut and we'll figure out what happens later, but like we just need to get the cut."

And we saw that the S&P 500 got within 30 cents of an alltime high or like 40 50 cents of an all-time high.

So, I mean, when you think of it from that perspective, it's very exciting to see what happened yesterday. But then came Oracle.

I guess that which I don't think should be enough to like completely reverse all that momentum because it's freaking Oracle. Like Oracle, like look, Oracle's important, but they're not Nvidia. They're not Broadcom important, you know? They're not Google or Amazon important. They're Oracle. It's like, okay, fine. Like cloud computing, database, like yeah, that's cool. But I guess that was more important than what the street thought. And then unfortunately that got hit.

And yes, and then and last point on the Fed and then we'll get into Oracle. As Chris says right here, they are buying short-term bonds to boost um to boost liquidity. So, this is not necessarily massive quantitative easing.

You had a little bit of debate yesterday on X on if this this is officially quantitative easing or not. And it's closer to QE than QT, right? So, is it the type of QE that we saw in 2020 when the Fed was just buying, you know, hundreds of billions of bonds on the balance sheet? No.

But they're buying 40 billion. That's the number going into the end of the year. They're going to be starting to buy bonds in two uh two days. So, one day, December 12th, and that 40 billion is going to be in short-term T bills, that essentially will start the end of quantitative tightening.

So, look, the the fact that they're not selling bonds off their balance sheet is close to QE, even if it's not explicitly QE in terms of the level of quantitative easing that we had years ago, because, you know, I don't know if we're going to get back to that anytime soon. That was during a pandemic. rates were at near zero, but it's also not bearish.

So, you have the Fed buying treasuries. You have JPAL incredibly bullish on the frame of reference for inflation.

I mean, you had nine pe remember in November that one day. I mean, the last week of the last the second to last week of November sucked. But during that second to last week after Nvidia earnings, Nvidia went up 500 billion, then it went down 500 billion literally within an hour. And they it took the entire market down with it.

And it wasn't only because of Nvidia earnings. was cuz two Fed presidents came out and said, "We don't think we should have a cut." And like Fed speak was enough to create that much pain in the market.

You just had the biggest Fed speaker in the Fed yesterday give us very very strong Fed speak around the idea of inflation not being a concern. And you had eight other people agree with him.

So it is a bit confusing for why markets are not making larger move right here.

Now obviously could there be a sell the news? of course, right? There there could definitely be sort of a component of, hey, let's sell the news because maybe this stuff was priced in, even though I do think we got a bit of a surprise yesterday.

But I think what actually happened yesterday after all the momentum, I I don't think it's a carryen trade. I don't think it's Japanese bonds. I I really do think it ended up being Oracle.

So, let's get into Oracle and see what happened right here. Oracle down 13%. And because I think it's Oracle, I think it can also easily reverse, aka the market can wake up and be like, it's freaking Oracle. Who cares? Like, this is not that serious.

But the problem is the implications that Oracle is setting for the broader data center trade is what the market is upset about and that's why I think it's really important to to discuss them.

All right, Oracle. So, what happened? So, first of all, I listened to the Oracle call. I'll be live with Sam today, by the way, listening to Broadcom. So, for those that are on um for those that want to listen to Broadcom, then uh I'll be live today for the market close. Sam will join me and we'll try to see what Broadcom says and what they do. Broadcom basically up like 80% year to date. So they are they are priced to perfection. They've got to deliver a very good quarter. Yes. 78%. So we'll see what they end up saying later today. Um in terms of Oracle, I was listening to the call. The call was horrendous. Let me just say that right now. The call was absolutely horrendous.

If anyone was there listening to me, I don't understand how you have a $650 billion company and the mic doesn't work. There were five moments where the audio just completely cut out.

Like I I thought for a second it was my Wi-Fi. It wasn't my internet. It was just like Oracle's call not working. Someone was texting. If you have an iPhone, you know exactly what it sounds like when you receive a text or send a text. Three times you could hear someone getting a text or sending a text during an earnings call for a $650 billion company that tens of thousands of people are listening to.

The biggest issue I had with the call that I think a lot of people agreed with is that there was no excitement.

This is a company that increased RPO by 68 billion, 15% quarter quarter. They now have 523 billion. Last year was 423 billion in remaining performance obligations.

300 billion of that is OpenAI, which when they were asked on the call, hey, like you know, what do you guys think about one of your customers not being able to pay you? They didn't, you know, the person asking the question didn't mention OpenAI, but they basically implied it was OpenAI. And I think the co-CEOs didn't really have a response. So, there was no real response to the remaining performance obligations being substantial, but not necessarily being strong enough to warrant uh a massive multiple.

And the number two is just like the stuff they were talking about in AI had to do with retrieval, augmented generation, rag pipelines, securing your data on their servers. They're talking about how they were multiloud within their database and now they're trying to incorporate customer data within those clouds, which is fair. It's a growth opportunity. It makes sense. It's trying to do a lot of the stuff that the software companies are doing are doing in in the context of like uh operationalizing data with the LMS. They mentioned how they can use the LMS to make sense of your data. The problem is it was very boring.

It's nothing ex you know it's not like some magical new workflow inside of the agentic enterprise that I think will get people excited and and so there was just no excitement on a you know you would think if you have half a trillion dollars of RPO you would have a lot more excitement for how you're talking about it and just in general if you listen to the call there was zero excitement there was zero energy for how they were speaking about this stuff.

And the number two is that they didn't really shake off the the the uh the fears of debt and I think that's why the street is really getting upset right here.

So They increased capex by 15 billion which is super bullish right because they're going to be spending more on capex. The problem is when they had to explain you know how they're they're navigating that capex. This is the only thing that they had to say. So the CEO said we've been reading a lot of analyst reports and we read quite a few that show an expectation of upwards of 100 billion for Oracle to go out and kind of complete these buildouts. Based on what we see right now we expect we'll need to see less if not substantially less. So they said, "Hey, like we're not going to have to spend a hundred billion dollars."

But then you had some analysts come out. Uh in particular, you had city analysts Tyler Radkkey come out and said, "We think Oracle will have to spend 20 billion over the next three years each, which means 60 billion."

Now, they already issued 40 billion. So if you put 60 and 40 together, that's 100.

So maybe they're not going to have to issue a new hundred billion of debt, but they're assuming there will be a minimum of a hundred billion over the next three years in total, which is still a lot of money that Oracle is going to be putting out there. And they didn't really calm those fears of kind of what's going on.

On top of that, the operating cash flow for Oracle, uh, last year was 20 billion. This year 22.2 billion. Okay, that's up by 2.2 billion. Reasonable growth.

The problem is the capital expenditures went from 10 billion to 35 billion. So their capex is growing at a pretty exponential rate which in the market of AI you've been rewarded for that.

The problem is the companies that have been rewarded for that Meta not as of recently but over the past couple years Google Amazon Microsoft have grown their operating cash flow faster than their capex because their businesses are more diversified than Oracle.

Oracle's growing two billion a year, which is amazing, but their capex growing at 20 billion a year is not amazing.

So there there's a 10x leverage between the amount of money they're spending, which they don't have that money because they only have two billion in cash flow. So they have to go to the debt markets, which is why their credit default spikes are spiking or credit default swaps are spiking again in the pre-markets in order to finance this entire buildup.

So, I think the reason all the data center stocks are down and I think the reason Oracle is taking down a lot of the AI narrative right now is because the market does not believe that there's anything exciting or innovative in terms of what uh what Oracle is doing, which is fair because if you listen to the call, it was, you know, not something that would get you super excited.

And so that's why we're seeing this take place right now. You know, I was thinking of playing Oracle before the earnings. I really was. And then this was the number one reason I didn't do it. Earnings are always a gamble. Like you just never know what's going to happen.

But the number one reason to not have played it yesterday is because if they don't explicitly address two things. If they don't explicitly address the debt situation, which they didn't, I mean, they really didn't give investors any calm here. Or they don't have another customer that increases RPO by like some massive 300%, which they didn't again because, you know, the only time they did it was from OpenAI, which no one even knows if that's going to be real. Then this stock was probably headed down.

I didn't expect 13%. Five, six% I was like, okay, that's fine. 13% I think is a bit aggressive. So I do think there should be a rebound here, but that is the fear that we're having on Oracle as well.

Free cash flow also is negative, which is another thing to remember, and it's looked like it's going to be negative for a long time.

And capex is now 75% of their revenue. Not most hyperscalers have capex being 75% of the revenues, but Oracle does, and that's why we are seeing some of the pain right here from Oracle.

But I mean the actual growth itself on the earnings they beat EPS by 40%. A lot of people wondering why isn't the stock up because of that.

They bought a company so the two billion gain they got from the companies was factor. So it was more like a tax thing accounting thing versus like a they're growing super fast which fooled me as well because when it was up 40% on EPS I was like goodness like why is the street down 7% on this? Unfortunately you know it wasn't necessarily the most exciting exciting uh EPS growth.

I don't think this is bearish AI though, like like the point here is that Oracle's in a precarious situation. It does not have a contagion effect in my opinion across the entire industry.

It might have some implications of contagion in certain areas obviously with OpenAI but uh it is not like hey the AI trade is done and that's how people were talking about it last night and I'm like no the call sucked they didn't give that much clarity this is probably going to be a three to four year story it's not going to back to 350 anytime soon but this is still Oracle I mean they're still generating billions of free cash flow there this is not a company that should be you know back to like $80 like four years ago unfortunately it's just uh a situation where the street now is going to be thinking a little bit more deeply about the financing of capex and that's why a lot of these data center names are getting hit.

Yeah, Oracle's 5-year credit default swap spreads have surged their highest level since the 2008 financial crisis, rising about 128 basis points.

Now, again, this to me is not bearish. This to me is if you're issuing 40 billion of debt. Of course, the bond market is going to hedge your debt with credit default swaps.

But the problem is, um, we just don't know how the market's going to interpret the overall argument around their AI capex buildup.

Disney to get warrants to buy additional OpenAI equity.

The Walt Disney Company and Open Eye reached landmark agreement to bring beloved customers or characters from across Disney's brands to Sora.

Wow. We're going to be able to make AIS of Mickey Mouse. Oh, that's not going to be good for anybody.

Disney's investing a billion in Open AI and receive warrants to purchase additional equity.

As a part of this three-year licensing agreement, Sor will be able to generate short user prompted social videos that can be viewed and shared by fans drawing on more than 200 Disney, Marvel, Pixar, and Star Wars characters. Agreement will make a selection of these fan-ins inspired short form videos available to stream on D. Wow, hold on. That is a big deal. That is the beginning of AI generated content on these streaming services.

There will be a day 10 years from now where you will just be able to prompt to Netflix that you want a season 7 of Dawson's Creek. Lord knows I've been waiting for that day. That day looks like it's coming sooner than later.

Disney and opening I affirm a shared commitment to responsible use of AI responsible respons the amount of short form videos we're about to get that are not necessarily going to be responsible.

Remember OpenAI had to had to shut down the use of Martin Luther King Jr. because people were prompting uh his like estate to to you know his his his character to to say like really crazy stuff and they had to literally ban people from using MLK in their prompts because the estate was like dude this is like horrible.

I don't know if people are going to have the friendliest responsible safe prompts for for Mickey Mouse.

Alongside the licensing agreement Disney will become a major customer for OpenAI using its API to build new products tools and experiences including for Disney Plus and deploying ChachiBT. As part of the agreement, Disney will make a $1 billion equity investment in OpenAI.

I know it sounds like I'm kind of bearish on this. I not even from a stock. I mean, I I I really don't care that much about Disney stock. I don't think there's much to save on Disney stock. I don't know why anyone is like meaningfully excited about this for the next five years. I just think from an AI perspective, this is not going to go well.

Because you've got a lot of people that are going to have a lot of random prompts on some beloved characters that we all know that are going to end up saying and doing some wild stuff. Like, it's inevitable. I mean, this is like the human imagination is going to go crazy on this stuff.

Now, this is for Sora, which look, Sora is just AI slop at the end of the day, right? I I think it's probably the worst use of our data centers. Like, I mean, if Tik Tok is garbage, then Sora is just like garbage 2.0, but it's AI garbage.

Disney investing a billion dollars into open. I mean, good for open eye. They get a billion dollars. I mean, this is super bullish open. get a billion dollars and they get to use the best IP on the planet in Disney Plus to AI generate content.

Elon Musk basically confirmed that SpaceX is going to IPO.

So, someone wrote an article and the article was t titled, "Here's why I think SpaceX is going public soon." And then Elon Musk commented, "As usual, Eric is accurate."

This was his first official comment on the idea of SpaceX going public.

Wall Street Journal is talking about how the space data center, which has now become the biggest thing that everyone is talking about in the AI space, is part of the pitch to private investors on how uh Elon Musk is justifying a $ 1.5 trillion valuation.

And uh that is why you're seeing a lot more people get excited about the space names. That's why Rock Lab was pushing $60 yesterday as well.

Would you buy SpaceX at a $ 1.5 trillion valuation?

If you own SpaceX in the private markets, I think you probably don't sell in in in into the IPO because it's, you know, it could go from 1.5 trillion to two trillion given how crazy retail piles in on this.

But I was thinking about it last night. Why the hell are you buying a $ 1.5 trillion IPO? What is your upside?

SpaceX, Anthropic, and OpenAI are three of the most liquid private stocks.

SpaceX, you know, has been there for the past 10 years. And you got a lot of people that are probably going to want to sell and take some profits, right?

But they're going to be taking profits and they're going to get the ability to take profits from people like you and I. Theoretically, they'll be like, "Oh, SpaceX, I finally get to be part of Elon's, you know, space mission." But if you're buying it at 1.5 trillion, I mean, let's just say you expect to double on SpaceX. I think that's reasonable, right? You're not being you're not being insanely greedy, but you're also, if you're buying it for a 10% return every year, you buy the S&P. I mean, is this thing going to three trillion anytime soon? Probably not.

And then number two, I mean, from what I saw yesterday, and these aren't officially uh audited numbers, but but this is like what has been reported so far. SpaceX does 15 billion in revenue. I'm sorry, but I'm not paying 1.5 trillion. Like I I don't care if this thing pumps to 2.5 trillion. 1.5 trillion for 15 billion in revenue. Even if Elon is pitching this whole data center and space fantasy that that might end up becoming real, 15 billion. Most of that being from Starlink.

Come on, bro. That's that's like like and that also to me the other reason I'm bringing this conversation up is because that feels toppy. That feels like peak bull market euphoria when you're putting out a public company at 1.5 trillion only doing about 15 billion in revenue.

I don't know. It's hard for me. I'll make the poll and you know I might end up just like trading it on the earnings day because there's gonna be so much hyper momentum. realistically buying a company at 1.5 trillion, you know, it's not like Nvidia, Google or Amazon that have this massive massive level of growth that's baked in doing hundreds of billion dollars of net income. Forget revenue. Um I I just feel like it's a bit aggressive to pay that much.

It's not even about trusting Elon, dude, because I love Elon. I'm a I mean, I'm an Elon Stan. I I I respect Elon deeply. I supported Doge all through January, even though that [ __ ] didn't work out. But like, it's it's it's not it's not about trusting Elon or not. It's just like, dude, like at some point, we're talking about a massive massive valuation that we're paying.

And for Elon, it's great because they'll probably have a ton of buyers that that want to pay. And that's why it seems like you're getting all these leaks about him pitching this new because look, in the private markets, he's probably trying to raise some money in the short term. And for him to raise money, he needs to get people to believe in SpaceX even at a I think it's $800 billion valuation.

Well, they've got to believe in a new story. And Starlink is a great story, but it's an old story. Data centers in space is a new story. Is that enough to get people super excited in this?

Yeah, some people already have a little bit of SpaceX due to to Robin's tokenization. But look, it does seem like it's going to happen and it is very exciting because if SpaceX goes public, you know, Anthropic and Open AAI are going to be looking like, wait a second, the public markets are there uh for accessibility. And if the public markets are there and you know people are ready to engage in paying these types of valuations then you're probably going to get a lot more people that want to want to invest in these companies.

I Okay, so the one thing I forgot to say during the SpaceX conversation is that if SpaceX is too expensive at 1.5 trillion, I think Rocket Lab becomes a sympathy plane. I really do think Rocket Lab becomes a sympathy.

People are going to look at what's in space. They're going to look at what quality is in space and they're going to say, "All right, I can't own SpaceX, but I can own a 30 billion if I'm willing to pay 1.5 trillion for SpaceX."

And I know SpaceX is vastly different than Rock Lab in terms of their scale, but am I willing to pay a hundred billion for Rocket Lab? Right now, it's at 30 billion. Yeah, I think people will say that's not crazy.

President Trump rolling out his gold here. Um families have been here for years as as immigrants, mind you. But how do you get beyond that optics, Mr. Secretary? Well, look, the whole the whole idea is we're the only country we're the only great country that lets other people just come in without vetting them and deciding whether they're really going to help the economy of America. So, you know, in our current visa system, why shouldn't we expedite the people who are willing to step up, give a million dollars to the United States, go through the most rigorous vetting process that the United States has ever done, $15,000 of vetting to make sure they're the right people, and let's bring in the top of the of the best. And let's bring those people in. Let's help them grow America and build America. Why should we take people who are below average? It just doesn't make any sense. Let's think this through. Let's pick the best. Every other country does. It's time for America to do it correctly. The Trump gold card officially rolled out yesterday. So, I guess we'll see if it has any implications on the um on the immigration situation, but you can pay a million or five million for the platinum to get access to to the United States. I know they launched it like five different times, but yesterday they like officially put it out there.

Vidia and the president of the United States, they spoke together. They talked about it a lot. I mean, I would say more than a dozen times. And the idea from the president's perspective is that the technology, the American technology stack, he wants the developers in China to also be using the American technology stack.

If you let all the developers in China, and this was Jensen's argument, if you let all the developers in China just use Chinese technology, they're going to get used to it. They're going to get better at it, and they're going to go faster.

So, let's break break them apart. let them use the American technology stack and therefore you split their developers. That was Jensen Wang's argument.

The president decided that he was willing to go with that for certain parts of this technology and and that's the business deal.

No, the I think the 25% is a sideline. the the choice was do you sell them those chips or not where what development process are they in where are they and how does the H200 fit that was really the analysis and the 25% is really the president always ends up saying and how can we help America how can we do better for America but that the 25% was not a driver it was a sideline.

Well, if you're going to give like we were giving the Biden administration gave 11 billion dollars like like a shareholder Christmas card to Intel. Why? So why shouldn't if you're going to give them the money, why shouldn't we at least get a stake?

I mean, you know, TSMC is different, right? They gave them a $6 billion to build 60 billion worth of plants. Now, we thought that wasn't right. They went up to 160 billion. I think we're going to get them up to 200 plus billion in plants in America. 30,000 jobs, that's what we're supposed to do.

There is one reason that the Trump administration approved Nvidia to go to China and it's called 401k. That's it.

Like, it's either a security issue or it's not when it comes to selling chips to China.

And he didn't answer the question. It's not a security issue. Apparently, if we're selling chips to China, why? Because we care more about Nvidia's market cap. We care more about Nvidia's growth.

Like, if you don't want China to have access to AI chips, you can't be like, "Oh, well, let's give them the the crappier chip, not the best chip."

Because the crappier chip, H200, is still pretty damn good.

So, if you're not going to give them uh Blackwell, but you're going to give them the H200, which by the way, a lot of the reports that came out yesterday uh say that Baba, Tencent, these guys are screaming for the H200, like the Chinese government came out on Tuesday and said, "Ah, we don't really want it." They tried to seem like, "H, we don't need it." And then the Chinese tech executives came out and said, "Please, can we get our hands on these chips?"

So, there's plenty of demand for the chips. The only reason we're selling them those chips is because we want Nvidia to make money, because we want the American economy to continue sustaining itself.

If we really wanted Nvidia to make more money, we would let us do Blackwell.

But there is no logical argument for why we're giving them a worse version of the chip and how that's, you know, somewhat conducive with the administration's view on national security because at the end of the day, that chip is still pretty good.

And if you have any level of innovation in China, which we've seen with Deepseek, they're able to do a lot with little, you know, they can still use the H200 to do a good job on potentially training new models and potentially having more breakthroughs.

So, at the end of the day, this is a purely economic decision. no matter what the administration says. Um, and as a result, you know, I think that's how they should be upfront about it. But that is why Nvidia is going to be able to sell to China.

There's an overcount in the payroll job numbers we think continuing and it will be corrected. I don't have the exact month in my head right now but and that's just I don't again I think forecasters generally understand that. So and we think it's about aka JPA was saying we we overstated the amount of jobs which means the labor market is weaker than expected justifying the rate cut.

About 60,000 a month. though 40,000 jobs could be -20. I think a world where job creation is negative. I just think we need to watch that situation very carefully and be in a position where we're where we're not, you know, pushing down on job creation with our policy.

Going through the research this morning, I think that surprised a lot of people, guys, that he that he suggested that job creation is actually negative.

He basically said it's really tariffs that's causing most of the inflation overshoot. Overshoot means higher than our target. Tariffs likely create a one-time increase to prices. Our job is to make sure that it is. I think the hint there, David, is that, you know, as far as the overshoot, the fact that inflation is higher than they would like, the fact that he's pinning it on tariffs and saying that that's a one-time effect is actually code for we're not as worried about it.

And look, that might be just his own thing because we know that there were two descents that wanted to hold rates, and we know that there were a lot of dots that didn't move from this year, which suggests that there were a lot of other members, too, that didn't want to move rates. But the two statements from Powell that I thought were most notable were jobs are negative and inflation is tariffs.

Right. Well, a lot of people think that the peak is coming either in this quarter or the next quarter because you know a lot of the retailers hoarded inventories and they're just starting to pass on some price increases.

But also what happens next year, the next decision January 28th from the Fed, there'll be new voting members. And so, this matters because the composition of those changes. And I just wanted to highlight Rocket Lab hit 60, just below 60 right here, 5970, but it hit 6017. this AI space trade. I mean, I don't know if it's a fad, but it looks like it's becoming very real and people are front running it, especially after Elon confirmed last night that SpaceX is thinking of going public. So, who's going to be added to the voting committee because it's important. Here's the four districts, okay? Because all the regional districts, those are the ones that rotate. Dallas, Cleveland, Philadelphia, Minneapolis. Let's take Dallas and Cleveland. Those two ladies have been some of the most hawkish voices. both of them saying we do not need to be cutting in December. So, doesn't sound like they were in favor. They didn't get a vote this time, but guess what? They get a vote in January. So, the committee is going to become a little bit more hawkish.

I would put Kashgari also in that kind of cautious camp. Didn't sound like he was too game to be cutting even though again he didn't get a vote, but will in in January. And then Philadelphia, I followed some of her recent comments. Pollson and she was she's kind of on the fence. sounds like she could go either way which is only to highlight that you know the bar is going to be higher next year I think for cuts if nothing else because of the composition of the committee so we so we will have to see weaker labor market data for I think Powell and the others to really sway the committee towards keep cutting.

He's got four meetings but if we don't cut rates again then this was his last rate cut. So, you know, JPAL was asked Rock Library right there 5982 about his legacy yesterday.

He just said he wants to leave the economy in a better spot than when he entered.

Look, the guy had inflation at 10%, brought it down to 2%. And one could argue that that's an amazing legacy. The bare case is that the guy let inflation get up to 10% because he didn't increase rates earlier in 2021, which I think is a fair point.

The problem is Trump and Biden printed a lot of money and I mean the guy kind of had to let it happen, right? Because we have this global pandemic.

So I mean like there are definitely ways to uh critique JPL's legacy, but if the ultimate argument is he he brought inflation down aggressively and he got a little bit of a a pickme up with Chachi and AI becoming as big of a thing as it did which allowed the market to thrive then I don't think that's the worst legacy in the world.

Jobless claims came in at 236,000. So 16,000 more than expected. Um not too bad and consistent with what the market's been thinking for the past couple weeks.

Google is launching Gemini on Apple's iPad. So the iPad app for Gemini 3 is launching. We have that announcement right here.

September trade deficit was 52.8 billion. That's the smallest is June 2020. You also had that data come out this morning.

The $165 billion data center that Open AI and Oracle are building in Abene, Texas will use as much electricity as 750,000 homes. One data center.

Meta is building a data center in Louisiana, the size of Manhattan, that will use as much electricity as 1,200,000 homes.

In community after community, Americans are fighting back against data centers being built by some of the largest and most powerful corporations in the world. They are opposing the destruction of their local environment, soaring electric bills, and the diversion of scarce water supplies. Nationally, how will continued construction of AI data centers impact our environment?

Now again the the the the the push back here is that if Meta was not spending on that data center if Open Eye and Oracle were not building out data centers, not even just over the next coming months as they start to build out those but over the past two years the American economy would be dead. 50% of our GDP since 2023 has been essentially data centers. I mean it's capex but capex is for what for the data centers.

So, you know, if we think we have a K-shaped economy, if we didn't have this data center buildout, which he's right about, it's going to increase electricity prices, and hopefully there's some way to navigate that, either by improving the grid, which is going to be very important. And I think there's a lot of opportunities there that will present themselves or by these companies potentially subsidizing the increase of prices which Google was thinking about in Ohio of just potentially like not a tax but them like giving more money to the I guess it's a functionally attack to the local community to to to help offset the electricity prices. But if we didn't have the data center buildout, we wouldn't have any GDP growth.

And so it's a tricky thing to balance, but it's like when you paint it as black or white and and you know the the base of people that just hate billionaires and then they see the data centers and they see their electricity prices go up and they get pissed off about it's like yeah, but when you look under the hood and you you kind of understand economics like we also need GDP growth for the economy to keep moving so we can have jobs and over the past three years the GDP has come from capex which I don't know if that's necessarily healthy or not but it is what it is.

And it's one of those things that we forget about a lot when we think about the increase of energy. I mean, the fact that I'm in my parents' basement right now is probably because Nebius's New Jersey data center took out the power in my apartment. So, I'm literally an example of this electricity stuff. But I'm not complaining about it. Shows got to go on. Got to keep moving.

But the point is, look, data center stuff is ramping up and we're going to need that if we want to get any level of GDP growth.

So that is we got that is what we got on Oracle in terms of um Adobe. Yeah, they had a decent earnings. Again, my thought on Adobe all year has been the narrative on this stock has hit bad. It is cheap. It is undervalued. I agree with everyone who says like if you look at it on a DCF basis, this thing should probably be worth closer to 450. I get it. I've looked at those numbers. A lot of it makes sense.

I've had a simple Peter Lynch type of narrative on this one. I don't use the product. I tried using it years ago. It's way too complicated for the average person in my opinion.

Canvas is easier. Canva has more monthly active users. Adobe has like 70 million. Canvas has 220 million. And Canva is cheaper. Canvas like 13 bucks a month. Adobe's like 30 bucks a month. So that's been my simple reason to not be in it.

On top of the fact that, you know, the growing 10% in the age of AI is just not exciting.

I do think the stock eventually will get back up, but nothing they said on the call yesterday, nothing they said in the earnings was like, "Oh my goodness, I have to be long Adobe. Maybe I don't have to sell Adobe, which is why the stock is flat, but I don't have to be long." And that's why I think you got Adobe that's flat right here in the in the pre-markets.

All right, so that is what we got. JPAL was bullish. Oracle and Adobe were not necessarily the most bullish. Uh and that's why you're seeing some of the red pre-markets that we are seeing right now.

I think SoFi is going to do well next year, guys. And like I'm actually starting to build a position in SoFi. It's it's been years since I've like legit built a real position in SoFi.

I think they're going to keep growing upwards of 30%. They're probably going to do 70 to 80% 70 to 80 cents of EPS.

And then I'm kind of just trusting not that all this money they've been raising is for a reason. I don't know what the reason is. Maybe it's acquisition. Maybe it's more loan originations.

But the dude has half a billion dollars waiting for him on these PSUs by June of 2026. Now maybe he doesn't achieve the highest level of the target but at 35 he still gets like $200 million or something stocks at 27 27 to 35 on a company that we all know relatively well and the downside theoretically uh should be limited unless we get into like some massive recession like yes we could see it hit 22 23 but it consolidated in that range for over a year and then it broke out. I don't hate it here at all. I really don't. So I think this should be okay.

I am not interested in Netflix right here because I want to see what happens. If the acquisition doesn't happen and the stock recovers, it's like cool. Then I don't have this massive opportunity. Uh if the acquisition does happen and the stock gets hit because of just all the growing pains of actually being able to acquire uh a big entity like Warner Bros. then I think there's a better opportunity. But it is at close to liberation day lows.

So if you're really interested in Netflix, it's down from 130 to 92. You know, maybe it's where you nipple. I would want to see it closer to 80 to nibble. If not, then I don't own Netflix. And you know, it is what it is. I'm not dying to to be part of Netflix.

Riven AI platform four times performance of prior Nvidia system. Rivian system can do hands-free point-to-point driving.

Rivian develops their own chip to replace Nvidia chips in future vehicles.

Oh, that's not bullish in video. That's not the best thing to see. Rivian develops their own chip. What? These guys are a chip company. When did they become a I just said they were just a car company this morning. They're making me look stupid.

At the core of this platform our first in-house Rivian autonomy processor Now, the first iteration of our in-house inference platform includes a neural engine with 800 tops. It's optimized to support camera ccentric AI in the physical world and enables a dramatic expansion of Rivian's autonomy capabilities.

When integrated into what we call our Gen 3 autonomy compute platform, which video will go through later in detail, it will deliver 1,600 tops.

The effectiveness and efficiency of our in-house processor has been a core focus in its development. Our Gen 3 computer is capable of processing 5 billion pixels per second.

Now, you've heard me say this a couple of times. We've designed this entire architecture around an AIcentric approach where the data flywheel of our deployed fleet helps the model get better and better through reinforcement learning.

Later this month, we'll be issuing an overtheair update to our R1, Gen 2 uh customers, and that will dramatically expand the existing hands-free capability.

Um I mean, cool. They're building their own hidden house chip. They probably thought there was a different architecture they could use outside of the Nvidia chips.

It looks like they're using LiDAR, which is more in this sort of Whimo Google sense of way of thinking of autonomy versus Tesla.

Uh, Rivian down 4%. It did get a little bit of a pump to 17, still down on the day. We'll see how the street thinks of it.

Nvidia not really re I mean, at the end of the day, Rivian's a relatively small company even if Nvidia is not going to be having them as a customer.

Um, Nvidia does have a lot of other partnerships with car companies like GM for their synthetic Cosmos platform. But that is really cool to see. I mean, Rivian developing their own chip definitely changes at least my immediate perception of how they think of or how I think of them as a car company.

Howard Marx is live. We haven't heard from him in about a month. I guess let's take a little bit of a look of what he has to say. I mean, last time we talked to him, he said, "We are not in a bubble, but he did say valuations are aggressive." So, I guess we can see what he said. I enjoyed your interview with the young rapper, dude. He just text me this morning. He said, "You can let the chat know that I have now downsized to 60 positions from 250." So, we're we're getting him to consolidate. Hopefully, we get him down to 10 positions by the end of the year, but at least he's down to 60, which is not horrible. Um, okay, cool. So let's go to let's go to Howard Marks get his thoughts on current state of the economy right now and these actually push society ahead uh and change it irreversibly uh but in the process there's a bubble surrounding their implementation which is overly uh accelerated and overly financed and goes to excess and end up destroying a lot of capital but leave society uh greatly changed and I'm sure that AI is in the latter category in terms effect on society and the question is will the implementation uh prove to have been excessive in scope and in in the way it's financed. Just because something is excessive doesn't mean that you can't invest in it.

No, but but it it you know when when when investors hate everything and won't touch it with the 10-ft pole, chances are it's going to be on sale because nobody has pushed up the price. In fact, their disinterest has pushed down the price.

But when everybody likes something is excited about something, chances are it may be overhyped and overpriced. So you just have to be careful.

So you think right now in some circumstances the equity might actually be a better option than the debt because of that potential upside. Yes. Exactly.

Because the point is that if you if you go into some startup which has a a poss you know let's say a small possibility of a of a raging success uh you know you wouldn't lend to it because you have a high probability of losing all your money and no probability of participating in the success that.

Howard Marks continuing to not be super bearish. Now a couple months ago I know some of the headlines were saying that he thinks the market's in a bubble. I guess he's changed a little bit of his perspective here, but um his argument here is you'd rather buy the equity because the upside on the asymmetry of the potential of AI is actually more exciting than the the the downside of of financing the debt because the downside is zero obviously because these companies could go out of business. So, you'd rather take a risk on the equity itself than the debt because if if you finance the debt, like your upside is not massive. Like, yeah, you'll get like maybe five 6% return, but the equity could go up 5 600% if the whole AI thesis works out.

Palinger did launch the Neurode Divergent Fellowship.

Karp got a lot of flack. A lot of flack. Um, Chad says, "I was just looking at my bald eagle on my land right now." That's crazy, dude. The benefit of owning that much land. Um, he got a lot of flack for this for this for this interview. I'll play this 30 second clip. Um, and I thought it was unjustified, but this is the the clip that he's been getting a lot of [ __ ] for over the past week.

Okay, so for people who don't know Karp and for people who have never watched a single interview of Karp, I fundamentally disagree with people saying it's not a good look. I just disagree. It's okay for us to disagree, but I disagree. If you know Karp, you know this is who Karp is. He's going to be jittery. He's going to be jumping up and down. He's going to be saying uh between every other word.

Like I know his profile has increased dramatically. He's not your Jensen Huang or your typical cookie cutter CEO that's able to like speak in proper sentences and like, you know, barely stutter in between his words. This is Karp we're talking about. I mean, part of the reason I invested in Palunteer 5 years ago is because I saw his crazy hair and I was like, dude, this guy's this guy is different. So, the fact of the matter is his brand profile has increased. So, now his content starts to get more viral distribution. And so, the thing that people look at immediately is like, "Oh, this guy's got to be on drugs."

Which look, I understand why people immediately have that gut reaction. But that's why I think it was very important for Pounder to counteract that because he's not on drugs. He's just different.

And if for anyone who read the the book that came out on him, I again I interviewed the the uh the author of that book a month ago, Karp is dyslexic. And he talks a lot in the book about being dyslexic and what that has done for him as an individual.

And one of the things he talked about deeply is that when you're dyslexic, you have to think for yourself. you cannot think in the conventional way because when you think because you literally when your mind is reading the text on the screen it's unconventional.

So I think he saw a lot of the [ __ ] that was going on online about people making fun of someone who in his own words is a bit neurode divergent and he said you know what screw this we're going to launch a new neurode divergent fellowship pounder said if you find yourself relating to him in this video unable to sit still or thinking faster than you can speak we encourage you to apply the final round of interviews will be conducted by Dr. car personally.

2,000 people have applied for this. 2,000 people.

Like I look, the internet is an ugly place. The internet is a weird place. The internet is a mean place. And given I've been on social media for the past couple years, you get people that know nothing about you, know nothing about who you are, but just like want to take shots at you and jab at you and like it's a very nasty place. And you have to protect your mental health when you see that stuff.

But at the end of the day, he has built a $450 billion company over the past 20 years, taking it from 0 to 450 billion, one of the most important companies in the world. And he's does it he he did it and Paler did it without conforming to the rest of the world standards.

And for people to see that, which means you're obviously going to get someone who's a little weird, just like Elon, right? Elon is a little weird to say the least, but nonetheless, he's freaking Elon for a reason. that weirdness, that difference in his personality is his superpower.

And I I just thought it was fascinating that the majority of X over the past week was like, "Oh, this guy's on drugs." It's like, first of all, like, have you built anything as substantial as he has in his life? Have you even tried? And if you haven't, and your first gut assumption is he's on drugs, it's like that it's just a loser take in my opinion. It's just a loser take. So, I thought it was a phenomenal idea to be like, "Oh, you think I'm crazy? You think I'm on drugs? Great. We're launching an application for people who are just like me, who are not crazy, who are not on drugs, but are different from the mainstream way of how tech entrepreneurs or people in general operate. And we're going to make a fallacy just for them. I thought it was a phenomenal idea and I think it was something very strong for a pounder to lean into. And again, this is why I love this company. They lean into their differences. They don't apologize for how Karp acted. He didn't do anything wrong. Being jittery on the chair is not doing anything wrong.

Also, yeah, dude, there's a reason the stock trades at 100 times sales and Adobe can barely get a multiple. People are inspired by Palanteer.

And like I think part of of of of building any mission or movement, I mean as the CEO's job first and foremost for shareholders is to get that stock to go up. The job is to make the stock go higher at its core. And in order to make it go higher, yes, the company has to perform, which counter has obviously done very well in terms of their top and bottom line growth, but they also have to paint a story.

I mean, what is Elon doing right now? He's painting a story about data centers in space, which none of us knows if is even possible or not. But guess what? There's probably a lot of sovereign wealth funds and institutional investors saying, "Hey, you know, maybe that's a $10 trillion business." And and and that story is getting them to be excited to invest.

Like, you've got to be someone who can inspire and motivate people. And that requires passion. And by the way, Karp's rich. Like, he's been rich for the past couple years. Like to still have that type of passion to care about what you're doing on a day-to-day basis means it's not really about the money. It's about actually implementing a mission.

That's why the employees at Palunteer tend not to leave. That's why their turn rate is the lowest in the tech industry because people are actually inspired by what they're doing and the purpose they have, not not by the check that they're getting.

Okay, I think we got a Sofi going green with a mid. It's homoscada. Oh my goodness. I hate you guys. That's a good one though. That's a good one though. Oh my gosh. I don't want to watch a freaking ad, bro. Dude, this is We need ChatBT to just have audio stuff here to say this. Let me I think there's a YouTube video instead. Let me go here. Okay, let's see what we got. Let's see. Heteroscadasticity. Heteroscadasticity. Okay. Heteroscadasticity. Okay, there you go. heteroscadasticity today with Adobe and Lulu we will be seeing and Costco maybe not Costco that much because it's not as volatile but definitely with not Adobe Broadcom we are going to be seeing some heterosexisdasticity which I still butchered and we'll see how that ends up playing out.

All right, word of the day. I don't know how to say this [ __ ] What is this? Heteroscadasticity. When the variance of returns changes over time, instead of saying constant, a core concept in volatility molding. During earning season, stock returns show clear heteroscadacity as volatility clusters around major announcements. Okay. So basically when you are going through a volatile time and an asset is uh reflecting that volatility, earnings obviously is one of the the core times where that'll when that'll happen. That is heterodasy. Okay, let's see how to pronounce this. Has anyone heard this word before? I've never heard this word before. Okay, hold on. We had an ad pop up. Let me see how to pron This is a good word, though. This is like a It's one of those words you pull out and people are just like, "What did you say?" Okay, let's see right here. Okay, I think we got a Sofi going green with a mid. It's homoscada. Oh my goodness. I hate you guys. That's a good one though. That's a good one though. Oh my gosh. I don't want to watch a freaking ad, bro. Dude, this is We need ChatBT to just have audio stuff here to say this. Let me I think there's a YouTube video instead. Let me go here. Okay, let's see what we got. Let's see. Heteroscadasticity. Heteroscadasticity. Okay. Heteroscadasticity. Okay, there you go. heteroscadasticity today with Adobe and Lulu we will be seeing and Costco maybe not Costco that much because it's not as volatile but definitely with not Adobe Broadcom we are going to be seeing some heterosexisdasticity which I still butchered and we'll see how that ends up playing out.

During earning season, stock returns show clear heteroscadacity as volatility clusters around major announcements.