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Support of the show comes from Apple last

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come out seemingly every guy you can be

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And lashings, A I powered software can help

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A S as I am got

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Tom at Last in. This.

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Week's number four hundred and sixty one

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Fi that's the record French baker said

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for the world long. as big a

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true story after World War Two different

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for so embarrassed or thought about changing

1:01

the name of their country. Unfortunately Iran

1:03

was already taken Mats not fair. Use.

1:16

As read to scream Go Go Go

1:19

and I remember the wrong Podcast and

1:21

welcome to Property Markets Today. You.

1:23

Know they don't masturbate in France.

1:25

Daves shock off ad space Jag

1:27

as I better as good. Yeah

1:30

Eric I welcome to Property Market

1:32

Today We're discussing streaming earnings Trump's

1:34

media's auditing firm and robbers huge

1:36

loss Here at the news is

1:38

proxy media analyst add else and

1:41

add what is the good? What

1:43

are you basking in the glow

1:45

of Thirty Four? That's actually the

1:47

number we should had property as

1:50

of today. The property pod is

1:52

the thirty. Fourth most downloaded podcast

1:54

in the world where number

1:56

thirty four add property markets

1:58

are new podcast. And

2:01

we haven't even released our first episode. All we have as

2:03

a trailer is number 21 in the world. So

2:06

I think we're even better than that. Where'd

2:08

you get that 34 number from? I

2:10

use Chartable to think about just not

2:12

to diminish our achievement here, but I

2:14

think it's more about momentum than actual

2:16

downloads. That's probably right. And because,

2:19

I don't know if you know about this, Ed,

2:21

but I was actually at TED last week

2:24

where I gave what Chris Anderson described

2:27

as a scorching talk. But

2:30

since then, and since my appearance on, what's the name

2:32

of that show? Bill

2:34

Maher. Since I was on that, we have everything

2:37

as kind of like the flywheel is flying,

2:39

Ed. You're welcome. But

2:42

Prof G Markets is doing better than the Prof G

2:44

Pod, so I'm trying to think what the difference is.

2:46

I don't get that. How'd that happen?

2:48

We haven't had an episode yet. Yeah, it must be

2:50

something. I can't tell what it is, but it feels

2:53

like it must be me, right? We sexted up with

2:55

young Ed Elson. All right, Ed, enough of that. Get

2:57

to the news. I will do that. I

2:59

just want to remind everyone, if you haven't done so yet,

3:01

please go subscribe to Prof G Markets. It's

3:03

our separate channel. It's overtaking the Prof

3:05

G Pod, so please go subscribe.

3:09

Okay, let's start with our weekly review of Market Vitals. The

3:12

S&P 500 climbed. The

3:19

dollar was stable. Bitcoin declined. And the

3:22

yield on Tenure Treasury slumped, shifting

3:24

to the headlines. Microsoft is

3:26

investing more than $3 billion to

3:28

build AI infrastructure in Wisconsin. The

3:31

money will go towards a new data center

3:33

and training programs focused on AI manufacturing. Microsoft

3:35

said the new location would create more than

3:37

4,000 construction and data

3:39

center jobs. FDX's lawyers

3:41

announced that its creditors will receive all

3:43

of the money they lost plus interest.

3:46

Payouts will amount to 118% of

3:48

creditors' assets based on their November

3:50

2022 value when

3:53

the company filed for bankruptcy. In

3:55

its first earnings report as a public company, Reddit

3:58

reported a revenue increase of $14 88%

4:00

from last year and a 37% increase

4:02

in daily active users. That beat analyst

4:05

expectations. However, Reddit has yet to turn

4:07

a profit, reporting a net loss of

4:09

$575 million. Shares popped

4:12

as much as 15%. Airbnb

4:15

reported first quarter revenue that exceeded

4:17

analyst expectations, growing 18% year

4:20

over year. The stocks fell the most in

4:22

a year, however, after reporting lower than expected

4:24

revenue guidance for the second quarter. The

4:27

company is expecting international events like the Summer

4:29

Olympics to reaccelerate revenue growth and travel demand

4:31

in the second half of the year. And

4:34

finally, TikTok is suing the US government

4:36

over claims that the fourth sale or

4:39

ban violates the First Amendment. The company

4:41

is arguing that the government's national security

4:43

concerns are not a sufficient reason to

4:45

restrict free speech. The legal proceedings will

4:47

delay the timeline on the ban, meaning

4:49

it could take years to go into

4:52

effect. Scott, your thoughts? A lot

4:54

here, so let's start with Microsoft. It's

4:56

just staggering. The Infrastructure

4:58

Act at the

5:01

US government, largest economic

5:03

power in history, $1.2 trillion. Just the three or

5:06

four companies we talked about invested $32 billion

5:09

or an annual run rate of $120 billion.

5:12

So the Infrastructure Act is supposed to take place, I

5:15

think that's spending over probably the better part of a

5:17

decade. So you could argue that these

5:19

companies are kind of, at least

5:21

right now, and granted it won't

5:23

continue this way, but these companies

5:25

are essentially spending almost on pace

5:28

with the government is spending to try and

5:31

reinvigorate and upgrade America. It's

5:33

just staggering how much money these folks are spending

5:35

on. And it was this long winded way of

5:37

saying, it'd be very interesting to try and figure

5:39

out are there companies that make generators

5:42

that are especially good at cooling

5:44

data centers or specializing

5:46

in construction or selling

5:48

materials into the

5:51

types of infrastructure they're going to be

5:53

building? Because the amount of investment here,

5:55

I mean, it's just staggering.

5:57

What are your thoughts? Yeah, I just think it's fascinating. how

6:00

all of these big tech companies, which historically

6:03

we thought of as very different.

6:05

Amazon is e-commerce, Google search, Microsoft

6:08

is PCs. They're all basically turning into

6:10

the same company now. That

6:12

is, they're all Cloud service providers.

6:14

They all are building data centers and

6:17

they rent those data centers out to

6:19

smaller Internet companies. The

6:21

greatest evidence of that is just the

6:23

operating income of these companies. So just

6:26

as an example, 45

6:28

percent of Microsoft's business today, as

6:30

measured by operating income, is Cloud.

6:33

For Amazon, that number is 60 percent. It

6:37

feels like once you reach this level of scale,

6:40

like these companies have, it's almost

6:42

like the mission changes. The mission

6:45

today isn't, okay, we're going to

6:47

innovate, we're going to build great products. The mission is

6:50

we just need to own the rails. You

6:52

look at the history of markets and it feels

6:54

like exactly as you've said, that's always been true.

6:57

The largest companies have always been the ones that

6:59

have owned the rails, whether that means literally the

7:01

railroad, i.e. US Steel. But

7:05

in this case, I think they've identified that

7:07

owning the rails means we have to supply

7:09

and control the computing power.

7:12

I think that's why we're seeing all

7:14

of these massive tech companies morphing into

7:16

basically the same company. They want to

7:18

be the next US Steel, the next

7:20

Standard Oil of the next generation. So

7:23

they're just trying to own all of the

7:25

computing and processing power in America. The hard

7:27

part is, unless you

7:29

have the capital to invest, not

7:33

tens or hundreds of millions, not even billions,

7:35

but unless you have the capital to speculatively

7:39

invest tens of billions of

7:41

dollars, you can't play

7:43

in this. It's almost like there's

7:45

just no matter how bad you want to produce

7:47

or be an energy producer, it's very hard for

7:49

Japan in the 70s and 80s. They

7:52

just don't have the natural resources. You

7:54

have to sit on top of a sea

7:56

of oil somewhere. These guys essentially

7:58

sit on top of oil somewhere. on a sea of oil in

8:00

the form of intellectual property. They're very

8:03

smart. They have roots in cloud and AI,

8:05

and they sit on a reservoir

8:07

of capital. What I don't get is,

8:09

I was thinking about this, the

8:12

kingdom desperately wants to transition away from

8:14

fossil fuels to more of a services

8:16

or tech or tourism-based economy. I

8:19

would have thought that they would be the

8:21

second biggest investor behind Microsoft and AI, and be

8:23

trying to figure out a way to go all

8:25

in on tomorrow's energy,

8:27

and that is compute. Because not

8:30

only is the US currently the

8:32

biggest energy provider of traditional fossil

8:34

fuel and also renewable

8:37

energy in

8:39

the world, we're about to become

8:41

the largest producer by far of

8:44

the new form of energy, and that is compute. So

8:47

while we hate each other, and we

8:50

might tear each other apart from inside,

8:53

externally, in terms of our ability to produce

8:55

economic value, which unfortunately would be sequestered to

8:57

a smaller and smaller group of firms and

8:59

people, the US, it just strikes me at

9:01

an objective analysis when you zoom back and

9:03

look at the earth. The US is pulling

9:05

away from everybody. That's how I see it.

9:07

I think this has really

9:10

big implications geopolitically. I think it's fascinating

9:12

that these companies have this kind of

9:14

capital to make this type of forward-leaning

9:17

investment. And in general, where

9:20

I see, I'm almost saying, what's the investment opportunity?

9:22

I would want to look at everything that's

9:25

required to build a data

9:27

center and what companies sell

9:29

those products, what companies have

9:32

some sort of differentiation or distribution or

9:34

intellectual property or trademarks around that type

9:36

of product and find out if

9:38

they're public company. FTX,

9:40

well, and just the context, which is

9:42

you bought a bunch of FTX claims

9:45

ages ago. You basically called this, that you

9:47

thought that, I don't

9:49

think you expected 118 cents on the dollar, but

9:52

I think you were shooting for something like 70

9:54

cents on the dollar. I'm for 20. How

9:57

are you feeling about this? Well, all I can say is, hell.

10:00

Hello ladies, that's right.

10:03

This is the story. First off, let me, I

10:05

hate it when people just talk about their wins. And

10:08

last year I lost $15 million shorting

10:10

the market. That was a really

10:13

like a bad thing for me. I

10:16

am wealthy, but that kind of money was

10:18

like, very upsetting. That

10:20

was very upsetting Ed. This one,

10:23

I got this one right. It's super exciting.

10:25

And the learning here is the following. The

10:29

best investments I have ever made, first

10:31

and foremost, low

10:33

cost index funds, diversification, and then just

10:35

holding on and making sure you're diversified

10:37

and letting the American economy and

10:40

demographics and productivity take over and bring,

10:42

let the rising tide lift all boats.

10:45

The individual best

10:47

returns I've ever had that have been

10:49

just incredibly outsized have been

10:52

what I'll refer to as old people. And

10:55

that is what I've noticed is

10:57

generally speaking, that people have

10:59

a huge bias against old people. What

11:01

is the most successful small

11:03

business in the world that has the lowest failure

11:05

rate? There was just a study on this, senior

11:08

care facilities, because

11:11

nobody wants to be around

11:13

seniors. They don't wanna invest in them.

11:16

The whole idea sounds depressing. And

11:18

I can see why a lot of people think, oh

11:20

no, I wanna invest in a members only

11:22

club or artists and models or whatever, right?

11:25

But here's the thing, you wanna run into the fire. You

11:28

wanna run to the least sexiest things possible.

11:30

And FTX, people don't remember this. When

11:33

I bought these things in June or July of last year,

11:36

FTX stank.

11:39

I mean, nobody wanted near it.

11:41

People thought, I'm gonna lose everything.

11:43

This is fraud at Sam Bankman

11:45

Freed, crypto. The

11:48

narrative is this asset class at this

11:50

company is just awful and going to

11:52

zero. Look at it and look at

11:55

it hard and say, what if

11:57

they're wrong? Because if they're wrong, the

11:59

upside might be. four, five, eight fold.

12:01

And you can afford some zeros if

12:03

you do enough of those, because

12:05

the returns can be so outsized. But anyways,

12:08

the existential question this brings up is

12:10

the following. If everyone's getting their money

12:13

back, then should Sam Bankman

12:15

Freed still go to prison for 25 years?

12:18

And the answer is absolutely yes. What

12:20

he did was fraudulent. He took money

12:23

from depositors who did not think they were investing in

12:25

a hedge fund. He then probably

12:28

went on the worst from

12:31

a legal perspective, handled

12:33

his prosecution, his defense, I

12:36

should say, worse than any defendant I

12:38

have ever seen. A

12:40

poor person who does not have access

12:42

to top legal counsel, who

12:44

gets a public defender, the public defender

12:46

would have advised him much better

12:48

than his parents or his lawyers, or maybe

12:50

he wasn't listening to everyone. But running around

12:53

the world saying, shrugging his shoulders and saying,

12:55

oh, I didn't know. I'm just this sloppy

12:58

eight-year-old that just got out of bed.

13:00

I didn't know where all those billions

13:02

went. But wait, weren't you

13:05

sleeping with your co-founder and doing

13:07

drugs and setting up, incorporating

13:10

purposely in the Bahamas? Didn't

13:12

you hire a shady auditing firm? I mean,

13:15

all of these things just added up to your lying.

13:17

If he had gone to the authorities and said, you know

13:19

what? I fucked up. I'm guilty. I'm going to try and

13:22

get you all your money back. I want a cop-a-plea deal.

13:24

He probably would have gone to prison, but he would have gone to

13:26

prison for one to three years. I mean, this

13:28

might be a life sentence for the guy. So

13:31

I find it fascinating. There's going to be a big story

13:34

on him, but it doesn't in

13:36

any way exonerate or

13:38

make it less illegal what he did.

13:40

We've got to move through quickly here. Between

13:43

Reddit, Airbnb, TikTok, any initial

13:45

thoughts? The biggest question surrounding

13:47

Reddit is will they be able to monetize

13:49

their user base? By the way, their user

13:51

base is now bigger in America than Twitter

13:53

or Pinterest, and their average revenue per user

13:56

is now greater than Snap. Revenues

13:58

up 48%. I

14:00

mean and at 37% increase, I

14:02

mean they're firing on all cylinders

14:04

right now So this was and

14:07

I'm a small shareholder full disclosure not a

14:09

big shareholder. I'm a small shareholder here Reddit

14:12

is delivering and the question they needed

14:14

to answer is can you monetize this

14:16

incredible user base the answer is yes

14:18

in addition they get a

14:20

higher multiple because people are wondering if their

14:24

Content is especially rich like,

14:26

you know light sweet crude oil the

14:28

best kind of information for LLMs and they've

14:31

only monetized it to the extent of 50

14:33

million but people People think this might

14:35

be kind of an option They're

14:37

read it might end up being able to garner

14:39

or grow an exceptionally profitable revenue stream Selling

14:42

their data into LLMs Airbnb. I

14:45

got whacked and I'm a I'm a

14:47

shareholder I have a large position in

14:49

Airbnb and I got whacked and I

14:51

think that what's happening here is that

14:54

there was a bit of a post COVID bounce and travel

14:57

people were sick of being locked up so they were

14:59

traveling a lot and There's

15:01

fear in the market or general consensus

15:03

that that post COVID travel surge is

15:07

beginning to moderate is the way I would describe it because

15:09

if you look at the numbers they grew 18% and It

15:14

was their guidance that took them down. So still

15:16

a great company still trading at a solid multiple

15:18

It just felt like the air

15:20

got let out here and then tick-tock. This

15:22

is essentially an argument between

15:24

really powerful legal

15:28

constructs or orthodoxies one is First Amendment

15:30

and one is national

15:32

defense and The

15:34

First Amendment says that you need to

15:37

find other remedies first before you inhibit

15:39

someone's free speech But

15:42

at the same time occasionally national defense

15:45

or defense concerns Trump First

15:47

Amendment For example, we

15:49

didn't want foreign ownership or an individual to own

15:51

more than 25% of a broadcast

15:53

company So Rupert Murdoch had to become a citizen.

15:56

We do on a regular basis Let

15:59

national defense or concentration of

16:01

ownership, Trump First Amendment. I

16:04

think that as we get closer and

16:06

closer to the DC Circuit trial, if

16:08

in fact it goes to trial, I

16:11

think the odds, right now the odds are 70-30.

16:13

If you look at, you

16:15

can bet on anything now, you can bet on

16:18

this trial, they're saying it's 70% likelihood that the

16:20

government wins this case, 30% the TikTok

16:22

wins. Now, the thing

16:25

that I think will trump to be

16:27

the deciding factor here that will result

16:29

in the DC Circuit

16:31

winning if it goes to trial is the

16:33

following. The court

16:35

is typically very remiss to

16:37

overturn a decision that has the

16:40

backing of a bipartisan law passed

16:42

in Congress. Now,

16:44

having said that, and this is the

16:46

interesting part, does the

16:48

government win or does China win? The answer

16:51

is yes. And that is, this comes right up to

16:53

the date and I think you're going to see the

16:55

likelihood of a government win go from 70 to 75

16:57

to 80. And

17:00

then I think Beijing is going to decide

17:02

to negotiate directly with the White House, which

17:05

is a much easier way to negotiate than trying to

17:07

figure out public policy or laws or

17:09

negotiate through the courts. They will call the White House

17:12

and they will come to some sort of accommodation

17:15

that satisfies the White House and

17:17

that the CCP, not by dance, let's

17:19

be honest, the CCP is comfortable with

17:22

as the notion, the idea, the

17:24

threat that they're about to be

17:27

banned if they don't divest becomes a

17:29

more and more stark reality that that threat

17:32

comes into sharp relief. I think this is

17:34

similar to Twitter that when

17:36

Musk gets closer and closer to actually

17:38

having to get on the stand and

17:41

go to trial, his lawyers say, you

17:43

realize you're going to lose here, right?

17:45

And the day before he decided to close,

17:48

same thing's going to happen here. We're going to come right

17:50

up to the trial date. I don't think

17:52

it's going to go to court. I think they're going to

17:55

come to an accommodation because there's

17:57

two things here. There's the use as the

17:59

ultimate propaganda And then there's

18:01

two, hundreds of billions of dollars at stake. And

18:03

I think the CCP was hoping to hold on

18:05

to both of those things. When

18:07

it becomes increasingly clear they can only have number two,

18:09

they're just not going to have number one, they will

18:12

opt to hold on to number two and they'll come

18:14

to some sort of accommodation with the White House. What

18:16

are your thoughts on that? I just find it funny

18:18

that a Chinese company is suing the US government for

18:20

violating free speech laws. Well, you know, I don't know

18:22

if you know this ad, but in China, they have

18:24

free speech because no one has ever said otherwise. That's

18:28

good. It'll geopolitical humor.

18:32

We'll be right back after the break with a look

18:34

at Disney and Warner Brothers Discovery. Support

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19:55

We're back with Prodigy Markets. For

19:58

the first time ever, Disney streamers turned

20:00

a profit for the quarter. That is, if

20:02

you don't count ESPN+. Hulu

20:04

and Disney Plus together made $47 million

20:06

in profits, but the sports platform dragged

20:08

the streaming segment to a combined loss

20:10

of $18 million. Still,

20:13

that's a huge improvement from its $659

20:16

million loss a year ago. Disney also

20:18

offered weak guidance for its Parks and

20:20

Experiences unit, citing the moderation of post-COVID

20:22

travel demand. The stock fell 10% its

20:24

worst day in more than a year. Meanwhile,

20:27

Warner Bros. Discovery reported earnings that

20:29

missed expectations on the top and

20:31

bottom lines. However, the streaming unit was

20:33

profitable and subscriber growth beat

20:36

expectations and outpaced last year's quarter.

20:38

The stock rose about 1%. Scott,

20:41

Disney and Warner Bros. were two of your stock picks

20:43

for 2024. Disney's up

20:46

15% year-to-date. Warner

20:48

Bros. is down around 30%

20:50

year-to-date. What do you make of their

20:52

performance so far? What I make of it is

20:54

my co-host is cherry picking. I had a third stock pick, bitch.

20:57

Why didn't you bring that up? You're

20:59

literally like Twitter right now. You're just

21:01

cherry picking something that makes me look bad. Oh,

21:04

no, no, no. We're discussing the two companies that

21:06

released their earnings. Anyway, I also

21:08

picked Google. What's Google up year-to-date? Let's

21:10

type that. Typing into Google. Okay,

21:14

year-to-date. Oh, it's

21:16

up 23%. Oh, but we

21:18

conveniently didn't mention that. Yeah, because we

21:20

covered Google last week. It's

21:23

up 30% since I picked it. Anyway, look,

21:27

I think it's somewhat related to Reddit because now

21:29

there's even a new ... If you

21:31

look at advertising as a share of GDP globally,

21:33

it's remarkably consistent. It's like

21:35

1.5% of GDP globally

21:37

and it hasn't been for the last 40 or 50 years.

21:40

The massive ascent of

21:43

digital platforms has come at the

21:45

cost of traditional platforms. If you

21:47

think about Reddit, if Reddit grossed

21:49

revenues 48%, that means they're increasing

21:53

their top line every year, 500 million.

21:56

That's not new economic activity. That's all coming

21:58

out of the hides. traditional

22:00

advertisers. So yet there's another player

22:02

sucking oxygen out of the room.

22:05

In Disney, I was shocked. This

22:07

was one of Disney's worst trading

22:09

days in the last decade. And I

22:11

think the thing that scared them was

22:13

the same thing that spooked Airbnb investors.

22:16

And that is, one, it looks like

22:18

the travel surge is a little bit over and people

22:20

were starting to take the parks and the $10 billion

22:22

in EBITDA that the parks create for Disney a little

22:24

bit for Grant. And then they thought, oh shit, if

22:27

the parks are going to not be the

22:29

gift that keeps on giving, we really don't

22:31

like this company. And that seemed to overwhelm.

22:33

I was surprised. If I had saw this

22:35

earnings report before the release of the market, I would

22:37

not have thought that stock would have been taken to the

22:39

woodshed. But people were really

22:42

disappointed. I also wonder if they look

22:44

at their ABC and they

22:46

look at ESPN and they say things are

22:48

only going to get worse here. And did

22:50

you see what Bob Iger said after

22:52

the opening bell the next day on Disney?

22:55

He said the following, fuck. That's

22:59

a joke. This was

23:01

a really bad day for Bob

23:04

Iger. Because you know who might

23:06

be back in about six months?

23:08

Nelson. Because the bottom

23:11

line is with activist investing, the

23:13

incumbent management team always

23:15

wins at the first election, unless they've done

23:17

something illegal. They usually win at the

23:20

second, but if the stock isn't up, they

23:22

get bounced at the third. And

23:25

if his stock goes back into the

23:27

double digits or gets down to like

23:29

80 bucks again, which

23:31

it may or may not, I actually don't think it will,

23:33

see about one of my stock picks. But if it does,

23:36

he has to fly down to Florida, kiss Nelson's ass, give

23:38

him a seat on the board, and

23:41

all of a sudden that succession plan gets

23:43

sped up. Because if the

23:45

stock underperforms, if the stock were to

23:47

go down from here, there's

23:50

then going to be new calls to break up

23:52

the company. And I don't entirely

23:54

understand why it was taken down this much. I

23:56

think it's related to Reddit. I think it's related to the same

23:59

things around. Airbnb, but I would

24:01

not have thought that Disney would have had one of

24:03

its worst days because as you pointed

24:05

out, the streaming service has great

24:07

momentum right now. But basically how this company

24:09

reforms over the next two or three quarters,

24:12

this is the crowning or

24:15

not crowning achievement on Bob's career.

24:18

He's not a young man. He's got

24:20

to announce a succession strategy probably in the next

24:22

24 months and it's either going to

24:24

be done. He's either going to take a victory lap or it's

24:26

going to be done under duress,

24:28

under the cloud of like, okay, Bob didn't figure

24:30

it out. So I

24:32

think he was crazy to come back. I mean,

24:34

literally fucking crazy to come back. He

24:37

was thought of as one of the most

24:39

talented, successful executives in history and

24:41

instead he's come back. I

24:44

just don't get it. It's like Mike Tyson

24:46

fighting again. It's all downside. It's all downside.

24:48

The other news that we should bring up

24:50

is that Disney and Warner Brothers Discovery have

24:53

announced that they're creating a new streaming bundle

24:55

that includes Disney Plus, Hulu and

24:57

Max, formerly HBO Max. It's

25:00

going to include content from

25:02

ABC, CNN, Discovery, Disney, HBO,

25:05

Hulu, Marvel, Pixar. The

25:07

list goes on. In other words, this

25:10

is cable, but on

25:12

a streaming platform. What are your thoughts on this? I

25:14

think the streaming, what's happened to the streaming market over the

25:16

last 15 years is the

25:19

only industry you'd need to look at to kind of

25:21

understand economics. The future

25:23

attracts way too much capital. The

25:26

unbelievable, the over investment results

25:28

in an unbelievable, but unsustainable

25:31

consumer value proposition, grows the

25:33

market substantially, but

25:35

unless you have cheap capital, you can't keep up. So

25:38

Netflix just basically use capital as a weapon,

25:41

outspent everybody. And then

25:43

all of a sudden the market said, okay, fun times

25:45

over. We're not just going to give you money to

25:47

acquire customers. You have to show that this is economically

25:49

viable. The company begins

25:51

to modulate and consolidate. It's consolidating everybody, but

25:53

kind of the big two or three is

25:55

looking for a dance partner real fast. They're

25:58

either going to go out a bit. or

26:00

they're going to sell to someone else. And

26:03

Netflix has not only cut its content budget,

26:06

it's raised prices, which creates cloud

26:08

cover for the other survivors to

26:11

raise prices. And you're seeing the

26:13

market just modulate, but it's

26:15

just fascinating that these

26:18

companies are basically now distressed assets. If

26:20

you look at their multiple on, Disney

26:23

still trades a decent multiple on Evita, but

26:26

people are sort of looking at Warner Brothers as

26:29

if it's going out of business. I think that's

26:31

right. And I think we haven't seen the political

26:33

advertising kick in yet. I mean, the TV network

26:36

revenue is down for Warner Brothers. I think that

26:39

scared a lot of people, but I think

26:41

it's going to come back up. The one thing I

26:43

will end this story with is a quote by Jim

26:45

Bockstahl, who is the former CEO of Netscape. So

26:48

there's only two ways to make money. You

26:50

can make money bundling and you can make

26:52

money unbundling. And it's just funny

26:54

that that's exactly what we've seen in the streaming industry.

27:00

The SEC charged the

27:03

accounting firm that

27:07

audited Trump Media with quote, massive

27:10

fraud. The agency found that

27:12

the firm BF Borgers failed

27:14

to actually order its clients before

27:16

putting its stamp of approval on

27:18

1500 public company regulatory filings. The

27:21

firm is now permanently barred from auditing public

27:23

companies, and it must also pay a $14

27:25

million fine. Trump

27:27

Media, along with all of Borgers' other clients

27:29

are now forced to find new

27:31

auditors. Scott, I'm

27:34

shocked that Trump's

27:36

auditing firm is fraudulent, what

27:38

do you think? This guy is literally a

27:40

crime boss. Everyone around him is either in

27:43

jail or has

27:45

a reputation. I mean, trying to think.

27:47

Who hasn't been, he's the definition of

27:49

toxic. Who comes in contact with this

27:51

guy and doesn't end up in

27:54

jail with a reputation ruined?

27:57

I mean, he's the definition of toxic. And

28:00

this firm, what a shocker, is

28:03

being massively accused of SEC. I was trying to

28:05

think of opportunity. The opportunity here is to get a

28:07

list of those firms that were

28:09

audited and create a basket

28:11

of shorts, because at some point in

28:13

the next one, two, three

28:15

weeks, Hindenburg or one of these short

28:18

players is gonna come out with a

28:20

research piece showing that they don't

28:22

believe a company's numbers and they're gonna highlight

28:25

that this company's auditors are BF

28:28

Borgers or Borgers or Borges or

28:30

hi, we're going to jail soon.

28:32

Big fucking deal, we lied about

28:34

everything, these guys. I

28:36

mean, my favorite status between 2019 and 2021, they

28:40

doubled their client list, but didn't

28:42

hire anybody. So they were just saying,

28:45

congratulations, send us over what you

28:47

want us to sign. And I

28:50

had, as someone who's served on a bunch of

28:52

boards and has served on the audit committee, we

28:56

work with blue chip firms, usually a Deloitte

28:59

or, wait a minute, see,

29:01

there's Deloitte, there's Deloitte. You know what I'm saying? This

29:03

is such a consolidated market. They

29:05

are so worried about getting sued that

29:08

they come back with the most ridiculous request for

29:10

disclosure and it's like, okay, aren't we being a

29:12

little overboard here? And they charge you

29:15

so much money. We keep

29:17

talking about your return

29:19

on your vested capital, it's

29:21

gonna be inversely correlated to

29:23

how sexy an industry is. A

29:26

really decent business to start

29:28

is an accounting firm or an auditing firm.

29:31

The tax code keeps getting more and more complex,

29:34

hardworking, smart, honest people to make a lot

29:36

of money in that business. Because

29:38

there just isn't a lot of competition as far as I can

29:40

tell. Yeah, I find this such

29:43

an interesting dynamic here because I think

29:46

what regulators are increasingly realizing about

29:48

Trump and honestly,

29:50

what makes him great, in my view, is

29:53

they basically realize that he is a honeypot for

29:56

criminals. I'll bet what

29:58

probably happened here is the SEC said... Hey,

30:00

I wonder what accounting firm in their

30:03

right mind would decide,

30:05

yeah, let's associate with Trump, let's associate with

30:07

Truth Social, and let's represent them as

30:10

their auditing firm. And so the SEC

30:12

investigating, and what do you know, 75% of the audits this firm

30:14

has ever

30:16

produced over its 15-year history

30:18

have been fraudulent. And

30:20

it has the eighth largest client list in the

30:22

US, yet it only employs, I mean, you kind

30:25

of made this point earlier, it only employs 10

30:28

certified public accountants across the whole company,

30:30

and operates out of this random

30:32

little one-story building in a suburb in Denver.

30:35

So this is a huge deal. There are

30:37

170 public companies that now need to find

30:39

a new accountant. But the

30:42

thing we should remember is that none of

30:44

this would have been possible if it weren't

30:46

for Donald Trump. I mean, whether

30:49

you like him or not, he has basically

30:51

been a phenomenal servant for the US justice

30:54

system, because he acts as a mousetrap for

30:56

all these other fraudsters and criminals, which are

30:58

now coming to light. It's also part of

31:00

a larger theme that's a really unfortunate thing

31:02

in America, and that is the

31:05

new superpower is shamelessness. And

31:09

that thread that sort of struck my eyes was

31:11

a woman

31:13

is giving testimony under oath outlining

31:16

the sexual encounter and graphic detail he had

31:18

with a porn star and then paying her

31:21

off. And it's like not

31:23

even that interesting news today, because there's so much other

31:25

shit going on. This is a guy running for president.

31:28

Gary Hart had an affair in

31:31

the election I had of 20, 30 years

31:33

ago, and basically it dominated the news every day.

31:36

Bill Clinton had an affair

31:38

with one of his interns and it dominated the

31:40

news every day. And this

31:42

barely even registers as news, because

31:45

shamelessness is everyone's new superpower. Oh, you killed

31:47

your dog and buried it in a gravel

31:50

pit and claimed you met with Kim Jong

31:52

Un and you actually didn't. Just

31:54

continue to lie. Don't back down. I'm

31:57

totally shameless about it. I

31:59

don't know entirely how to label it. It's literally

32:01

the toxic

32:03

shamelessness, but the market

32:06

seems to be rewarding it. So

32:08

it's an unfortunate thing that shamelessness

32:11

has become the superpower. And any one

32:13

of these things would have taken down any

32:16

other presidential candidate and anything. But again,

32:18

because there's so many of them, it

32:21

just gets lost in the noise of this

32:23

conspiracy that everyone's out to get them. No,

32:26

no, everything this guy

32:28

does is usually has

32:30

some connection to some

32:33

sort of criminal activity. It's just, it's

32:36

crazy. I don't, I don't, I

32:38

don't, I should move to London. We'll

32:41

be right back after the break. We're going to look at Uber's earnings.

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a-t-l-a-s-s-i-a-n.com We're

34:32

back with Frofft markets. First

34:34

quarter bookings at Uber rose 20% from a year

34:36

earlier. However, that

34:38

number was below analysts expectations and the

34:40

stock fell 9%. The

34:43

company also posted a $654 million

34:45

loss for the quarter. Analysts had expected

34:47

a profit and that loss was largely

34:49

due to the revaluation of Uber's venture

34:52

investments, which were marked down by $721

34:55

million. Scott, this

34:57

is a huge hit to earnings and it's coming directly

35:00

after one of Uber's best ever quarters. What do

35:02

you make of this? I think Dara Kastashahi is

35:04

a great CEO. I think Uber is one of

35:06

the great turnarounds you could argue. They've

35:09

done an amazing job. The whole space

35:11

seems to be getting

35:13

better. They're paying their drivers more. Revenues are

35:15

up. I love the fact that the

35:17

number two looks like it's going to survive. Lift

35:20

is doing really well. On the whole, I

35:22

think ride hailing is doing great. This just

35:24

seems like a quarter. It feels like a

35:26

lot of these things, whether it was Airbnb

35:30

or Meta or Uber. Just their

35:32

stocks have gotten out a little

35:35

in front of their skis, if you will. The

35:38

reason that they're having this massive loss is

35:40

because of this $721 million

35:42

loss from revaluing

35:45

their investments, their equity investments,

35:47

i.e. DD, Aurora, Grab, Karim,

35:49

all these other

35:52

taxi-esque startups. That's

35:54

huge. That's basically their entire net

35:56

loss this quarter. I want to

35:58

talk about that. for a

36:00

moment because you compare that to last

36:03

quarter's earnings. They turned a

36:05

huge profit, and the

36:07

main reason for that profit was, again,

36:10

revaluing their equity investments. They

36:12

posted a $1 billion gain from

36:14

the value of their

36:17

venture investments. I just find

36:19

this kind of suspicious that

36:22

we're seeing these wild swings in

36:24

the value of their investments. $1

36:26

billion gain, one quarter to

36:28

a $720 million loss

36:30

the next quarter. Those

36:32

investments are ultimately dictating whether

36:35

their earnings, whether the bottom line is

36:37

positive or negative. Well, they couldn't have

36:39

done anything wrong here Ed, because they're

36:41

accounting from BF Borscher's signed off

36:43

on it. By the way, I don't

36:46

think that's true. I don't think Uber's

36:48

accounting firm is BF

36:50

Borscher's. I imagine

36:53

a bunch of French guys are

36:55

like, oh, they're stupid. Just

36:57

send them a bill. Yeah, whatever you

36:59

want. We're signing off on it. Jacques

37:01

Borscher. Jacques Borscher. Okay, so

37:04

technically what you're stating is this

37:06

all comes down to the mark. Private equity

37:08

firms and VC firms have been accused consistently

37:10

of fucking around with their marks, because

37:13

when they go into fundraising, they want to have good numbers

37:15

to raise a bunch of money or to

37:17

pay themselves. Now, typically a

37:20

firm that does responsible marks and has

37:22

them signed up by an auditor, the responsible auditor will

37:24

go, well, what are you basing your mark on? For

37:27

example, I donate stock to nonprofits and I have

37:29

to hire a third party firm to

37:32

value that stock. They do a

37:34

pretty good job and they come back and they say the stock is

37:36

worth this and this is why we think. They're not afraid to come

37:38

back and say it's worth less than it was last

37:41

year. Typically, with these kinds

37:43

of companies, the mark should be pretty obvious, because

37:46

they just look at a recent round of

37:48

financing, then they look at how the publicly

37:51

traded companies compare in terms of marks.

37:53

The best marks are from its valuation in the

37:56

public markets and if it's a private company, what

37:59

are the... the last round's

38:01

valuation of third party

38:03

investments, not related parties. And then they

38:05

look at what's happened in that time

38:07

to the whole sector. So

38:10

a responsible auditing firm will say,

38:12

okay, your mark is off, or

38:15

we're only signing off on

38:17

this valuation. But I don't

38:19

think, I've got to think that Uber with

38:21

the Dara and with the investors it has

38:24

is probably got as legitimate

38:27

a mark as anybody else has. The more, I

38:29

think interesting thing here is I think you're about

38:32

to see a massive

38:34

increase in venture capital investment from

38:37

corporate venture. I think you're

38:39

going to see a lot of this. I think a

38:41

lot of firms, especially this

38:43

size, are going to start buying

38:45

stakes or making investments almost

38:47

like a free option, not a free option. They're

38:50

going to start buying options in other companies. They

38:53

get access to information. They get an

38:55

inside track and acquisition. And sometimes

38:57

they say, we can help this firm grow

39:00

its value and recognize in the

39:02

upside. There's always a cycle here. Then

39:04

there'll be a bunch of losses and then external

39:07

shareholders or an activist will show up and say, what are

39:09

you, a VC firm or in the ride hailing business? But

39:12

I think we're going to see over the next three

39:14

to five years a surge in

39:16

corporate venture capital. We're already seeing

39:18

it 63% of venture funding

39:21

for Q3 of last year was corporate

39:23

VC. That's amazing. That's the

39:25

highest percentage in history for corporations.

39:28

I mean, think about that. Two

39:30

thirds VCs are only

39:32

a third of venture investment. I mean, that's

39:34

just the people are supposedly pros at

39:36

this. I mean, it's really interesting. You're probably

39:38

going to see a lot of what I see in the venture

39:40

capital, what I have a lot of friends who are venture capitalists.

39:43

The really big ones are raising enormous funds

39:45

and everybody else is struggling. I mean,

39:48

there's some niche firms that are very,

39:50

very focused, but for

39:52

the most part, fundraising has gotten harder and harder

39:55

for everyone but the biggest funds because big is

39:57

just better. I mean, there's literally a correlation between.

40:00

between returns

40:02

and the size of the firm right now.

40:04

The biggest firms are just doing better. And

40:06

that's also true in VCs and private equity

40:09

players, and they can diversify more, attract better

40:11

talent, they have the capital to defend their

40:13

positions, and on and on

40:15

and on. And they attract the best talent because

40:17

their management fees are bigger and they can pay

40:19

their people really well. So I

40:21

think you're going to see increased consolidation, which

40:23

isn't a good thing, but you're going

40:27

to see a lot of the players

40:30

from the smaller firms, really good firms, leave

40:32

and go run corporate

40:35

venture for General Electric or

40:37

for LVMH. I mean, LVMH actually has a

40:39

huge investment in a great firm called El

40:41

Catterton that has been very successful. But

40:44

I think you're going to see even more of that. I

40:46

think you're going to see firms that you wouldn't have thought

40:48

of being in the venture business have,

40:50

say, okay, we're going to take 100 million, a billion,

40:52

3 million, $5 billion, and

40:55

we're essentially going to start a

40:57

wing of Snowflake called Snowflake VC or whatever.

40:59

I think you're going to see a lot

41:01

of this. Which is going to bring up

41:03

a huge and interesting conversation for shareholders, which

41:06

is, do you want to be

41:08

a shareholder in Uber or do you want

41:10

to be an investor and a shareholder in

41:12

Uber Ventures? And those are two very, very

41:14

different things. And I think that's going to

41:16

be an important question for shareholders to

41:18

start asking themselves. But let's

41:20

move on to the week ahead. We'll

41:23

see earnings from Home Depot, Walmart, and Alibaba.

41:25

And we'll also see the consumer price and

41:28

producer price indices for April. Do

41:30

you have any predictions? Well, what I said earlier, my

41:32

prediction is that the case

41:34

filed by TikTok, I

41:36

think on the eve of the court case,

41:38

they come to a settlement. No

41:41

one loses their TikTok. A

41:43

ban doesn't happen and it never ends up

41:45

in court. And just

41:47

to follow on to that, the value

41:49

in the secondary market of ByteDance

41:52

shares skyrockets. And I predict Profft

41:54

G Market hits top 10 in

41:56

global podcasts. There you go. From

41:58

your words to God's ear. Oh

42:01

my god, I feel a date coming for

42:03

the little dog. That's right.

42:06

That's right. You should literally just have shirts

42:08

printed up that say, I'm 34. Ask

42:11

me why. That's

42:14

very exciting. Congratulations, Ed. We're two ahead of

42:16

Ben Shapiro. We're five behind

42:19

Andrew Huberman. We're two ahead of Ben

42:21

Shapiro. We're ahead of

42:23

Huberman? No, we're five behind Huberman. And

42:26

I think we're about 30 ahead of Pivot. Just

42:28

start saying you hate alcohol. You

42:30

hate alcohol. That'll get us up. Let

42:33

me just save you millions of hours of

42:35

Huberman lab. Don't drink alcohol.

42:38

Sunlight for 90 minutes. All right. This

42:41

episode was produced by Claire Miller and engineered

42:43

by Benjamin Spencer. Our associate producer is Jennifer

42:45

Sanchez and Alison Weiss. Our executive producer is

42:48

Jason Stavors and Catherine Dillon. Mia Silvera

42:50

is our research lead and Drew Burrows

42:52

is our technical director. Thank

42:54

you for listening to Prof G Markets from the Vox

42:56

Media Podcast Network. Join us on

42:58

Wednesday for office hours and we'll be back

43:00

with a fresh take on markets every Monday.

43:03

And don't forget to subscribe to the new

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Prof G Markets channel, wherever you get

43:07

your podcasts.

43:50

Support for the show comes from Atlassian.

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