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어제 미국 증시는 급격한 매도세를 보였다. 다우는 800~1,800포인트 가까이 흔들렸고, S&P500은 4.5%, 나스닥은 5.5% 하락했다. 출연자들은 AI 밸류에이션 우려에서 출발해 기관투자자들이 연초 수익을 지키려는 심리로 번진 흐름으로 봤다. 한 출연자는 이를 과잉 반응으로 평가했고, 다른 출연자는 개인투자자 순매수 자료와 레버리지 3배 반도체 ETF 거래 집중을 근거로 반박했다. 데이터센터 건설 자금의 레버리지 문제와 헬릭스(Helix) 등 자금 조달 구조도 함께 다뤄졌다. 고용지표는 예상을 크게 웃돌았다. 비농업 고용은 16만 5천 명 증가했고, 실업률은 4.4%에서 4.1%로 낮아졌다. 평균 시간당 임금은 전월 대비 0.4% 올랐으며 전월 수치도 상향 수정됐다. 출연자들은 이 수치가 연준을 다시 물가 중심 정책으로 돌려놓아 금리 인상 가능성을 높일 수 있다고 봤다. 주택시장은 거래량 감소와 높은 금리 부담 속에서 진퇴양난에 놓였다는 평가가 나왔다. KPMG의 다이앤 스완 수석 이코노미스트는 임금 상승이 여전히 물가 상승률을 따라잡지 못하고 있으며, 인플레이션이 저소득·중간소득 가구에 역진적으로 작용한다고 설명했다. 연준은 인플레이션을 한계선에서 천천히 식히는 방향을 택할 수 있고, 소비는 상위 가구의 자산효과에 크게 의존한다는 점에서 이를 K자형 순환으로 불렀다. 노동시장은 베이비붐 세대 은퇴와 이민 규제로 노동 공급이 줄어 구조적으로 낮은 실업률이 나타난다고 분석했다. AI 인프라 투자에 대한 대중의 반발이 넓게 퍼져 있다고 짚었으며, 약세 시나리오에서는 경기침체가 올 수 있으나 연준의 금리 인하 여력으로 회복될 수 있다고 전망했다. 후반부에는 헤지펀드의 '2와 20' 보수 구조와 하이워터마크가 손실 이후 운용 행태에 미칠 영향, 신용거래 융자잔고 증가, 레버리지 ETF의 위험이 논의됐다. 또 AI 인프라 투자의 지속 가능성, 앤트로픽(Anthropic) 등 대형 AI 기업의 IPO 환경, 테슬라와 스페이스X의 급락과 정치적 변수, 사이버트럭 생산 중단 발표, 웨이모와의 경쟁, 리프트의 실적과 자율주행 전략, 피아트 토폴리노 등이 이어졌다. 방송은 투자 판단에 대한 확정적 결론보다 시장 심리, 레버리지, 정책 변수를 점검하는 흐름으로 진행됐다.
다듬은 글
Hey guys, welcome to the A30. You know, I feel a little shell shocked here after yesterday, but we're going to power through here. Uh Steve Sausnik from uh Interactive Brokers is here and also my dear friend Adam Shapiro a invest guys. A lot to talk about. I'm glad you guys are here with me. But before we get so real quick, jobs work coming up.
That's happening any minute now, right? So looking at 65,000 jobs here. Uh unemployment rate 4.2% 2% holding steady, maybe some wage growth, 310 of a percent wage growth month over month. So that's that's interesting. But but yes, I talked about it just now. I'm still shell shocked. Yesterday yesterday sell was kind of crazy.
Absolutely brutal. The Dow shooting 800 point, 1800 points. S& down 4 and a.5% NASDAQ down 5 and a half%. Uh Steve, let me start with you first. Like what do you make of all this? First of all, when we were sitting here at this time yesterday, we had no inkling of this, right? It was basically the futures were flat.
they were they were trying to you know they were trying to lift their head up a little bit. So this came sort of out of the blue. I think what's going on now is you you've got a certain group of investors who are more worried about return of capital than return on capital. And I think that that that started sort of as a motif in terms of AI valuation that now became more of an existential question in terms of um institutional investors um you know who just really do not want to give back their year because they but the problem is if everybody's on the same side of the boat and they all want to rush to the other side it gets a little difficult and this is I think what we saw yesterday and I think the head fake was because the the VIX dropped so much I think you had algorithmic funds buying on Wednesday um into the VIX drop and then when VIX started to turn higher they they were they were induced to sell um by that same volatility control measure.
I'm going to pick up on his analogy about the boat. A very good friend of mine kind of a mentor described it as retail investors. Yahoo Finance writes about that this morning were all selling people overreacted and they saw that the house was threatened by a big potentially devastating storm. So to protect the house they burned it down.
I mean it it there was look there needs to be some deflation from the investments in the AI trade but yesterday was an overreaction. I'm curious to see who swoops in today and starts buying. I I will push back. Our customers bought. I know that I know the narrative is that retail got out. That's not the case.
Um actually our customers our customers were net buyers at least of the most act I haven't gotten into the full granularity of the 25 most active stocks that I glanced at. They were net buyers and the most active name on the day was socks L triple levered long socks. So these these are people who have been conditioned to hear the smoke alarm and run into the building.
The the other thing though that you mentioned that I thought is that people should pay attention to if you're going to invest is return on capital because lots of people if you speak to them about where this money is flowing. The issue isn't so much what's going to happen with AI and this whole kurfuffle over will it be regulated?
Will they slow down data center construction. It's the incredible high leverage that is being used right now for the potential buildout of the data centers. And I know the jobs report is coming. I don't want to hug up the time but I had I was really fortunate to interview Adam Sipsky who is the CEO of the new company Helix.
Uh it's part of KKR, Nvidia, Samsung. They have 11 billion dollars with which to finance data center construction. And I asked him what's going to happen because of the leverage issue. He said look for every four data centers that people talk about building. This was back in August. For every four they talk about only one is going to get built.
So already a lot of the people who were controlling some of the mechanisms to finance it knew there was a great deal of hype and a great deal of inflated talk about where all of this was going. And I would keep an eye on people like Adam Sipsky and and Helix and KKR. Where is the new money going to go?
because data centers are still going to be built. Only 40% and it's a big number. If 40% have paused on construction of data centers, that means 60% are still in the pipeline to be built. Follow the money. Yeah. You know, just real quick before we're waiting for you here, I want to talk you guys about, you know, you both have been around the game a long time, right?
Talking to clients. You mentioned clients also. What do you tell them? You know, so you're saying that some of your clients are are buying. We saw some uh some Vander research that showed retail was net outflows. What do you tell, you know, clients saying, "What do I do here?" you know, in in the 10 seconds we have.
You got 10 seconds. Yeah. Yeah. Um, don't freak out. Just keep your head keep your head about you. There there's reasons to sell. There's reasons to There's reasons to buy on there's reasons to buy on dips, but we'll take it'll take a little more subtlety than that if if I if we'll talk about it after, I hope.
I was one of those freaked out clients yesterday. I was on the phone with the guy who does my managed accounts and I was like, "What the hell?" So, yeah, I understand freak out. So, we're waiting here. We're waiting here um for these numbers. Um one second here. Anything here. Have they crossed the wire yet?
Crossing. This is the the lock up is always I'm hearing 165 159. I see here. Private pay. Oh no. Non-farm pay was 165. Wow. Unemployment rate unchanged at 4 point sorry little ch one 4.1% little changed here. Um right. Uh number of unemployed people 7.1 million. year rate goes down to 4.1. Um we're seeing stuff that uh
average hourly earnings were up more than expected at point4 point4. Yes. Wow. Um I'm seeing any kind of revisions here which is the revisions are the revisions are higher. The revision is last month went from 29K to 60K. I and the three-month revision is 79K positive. What what are you going to pay attention more to here?
the the revisions, the overall number or the the income, the the the payroll number. First of all, the bond market. Let's see how that because the bond you know what the bond guys are are hyperfocused on this. I think I think what it does is it's going to turn us back into sort of the one mandate Fed.
You know, we talked we we've talked about this before that Worsh seems to just be putting aside labor as a concern. With a number like this, you can put aside labor as a concern. To your point, Adam, I think the the higher than expected average hourly earnings number, it's a good thing for people and, you know, people spoke on Tuesday.
They they they want they want a little more income as opposed to higher costs. Um, but I don't know that it's, you know, but that also then has to focus the Fed a little bit more on inflation. They were dismissive that there was labor market uh that the labor market was bringing inflation. They may have to pay attention to this but but this is you know remember also this is one number and there is a fair and as you know there's a fair amount of noise in these figures
I see the Fed watched uh uh percentage for a rate hike increase a little bit since this I mean really hot number here but doesn't so Steve you made the point we were doing this together two months ago and you made a point that it sticks with me today if the Fed raises rates again as they did in September
they're hurting uh the housing market which is already in recession. Yes. Do they really want to go there? I don't think they do. See, this is like this is the problem. So much of this stuff is they're damned if they do, damned if they don't, right? If housing gets weaker, that helps inflation. Now, but it hurts people that, you know, I I think at some level and it also makes it more difficult because I think part of the reason the housing market stinks is and Zillow numbers showed it.
president. I talked about this yesterday was that the volume of the volume of of of deals has gone way down because it's too expensive for people to buy and yet the people who have the uh the good mortgages don't want to sell. That that exacerbates the problem if if if rates continue higher. But remember that it's not the short-term interest rate that affects the cost of housing.
It's the long rate. So if the if they can manage inflation which which would flatten the yield curve and keep the tenure in check then the Fed is actually not not hurting the housing market necessarily and this this hotter print maybe complicates those those matters right so let's bring in Dian Swan KPMD US chief economist Diane I know uh thanks for joining us I know you're obviously watching these numbers very closely what is your initial take here I mean this is a big number here
it's a big number and remember it's not just even with that acceleration in wages is there's still average hourly earnings are going to be below the overall pace of inflation for the month of October as well. And that's why individuals don't feel good even though we're adding a lot more paychecks, which is Boing spending power and demand.
And that is a sticking point for the Fed. The Federal Reserve has been very moved with caution instead of conviction thus far in response to the inflation we've had. Yet we're almost 6 years into this inflation battle and there is nothing more regressive than inflation. It is a regressive tax. It's higher for lower and middle inome households because of what they spend on relative to affluent households.
And that's really important. The job of the Fed is to avert the kind of behavior we're now seeing from having repeated inflation and persistent inflation for 5 and a half years. They will always argue that inflation expectations are well anchored, but many of the hawks within the ranks of the Federal Reserve are talking to individuals who are anticipating the next shock before the last one abates.
That is the exact behavior the Federal Reserve is tasked to derail. And I'm very, this is very personal, but it's the way to understand inflation. If you allow inflation to metastasize, it is like a cancer. I'm a cancer survivor, so I choose my words very carefully. But it is incredibly destructive to people's lives.
And the longer it goes, the harder it is to derail. And what they're hoping to do is to cool inflation on the margins by going up more incrementally, not in the aggressive way they did in 2022 from a higher base on the Fed funds rate and with lower inflation than we saw back then. But they need to derail inflation because the longer we see average hourly earnings fall behind individuals are seeing their own living standards and purchasing power erode.
So does this sort of give the the Fed a bit more cover with this big jobsport number that it can start hiking more with the concern being it could affect Main Street. Right. Exactly. And at the end of the day, if you want to bring down mortgage rates more fundamentally, you have two tools at your, you know, that you can pull two levers.
One is debt consolidation. I don't see anybody doing that with our federal deficits and debt. The other one is to cool inflation. And so, if you really want to get back to lower mortgage rates, you need to get rid of this inflation. And yes, it adds insult to injury to the interestsensitive sectors that we need goods deflation actually to have offset the underlying service sector inflation which also accelerated last month.
Hi Diane, Steve Sausnik here. Um, one question I have regarding I I I loved your point about that that even though wages went up, it was below it's below inflation. One of the things that that struck me from the PCE report was was the continuation of the trend that spending was going up faster than income.
And I think it was I I don't have the numbers in front of me. I think it was 13 of the last 17 months that's been the case. Obviously, the voters 3.8% two quarters in a row in the second quarter and the third quarter at 3.8% spending gains after adjusting for inflation. Stunningly strong, the strongest two quarters since the back half of 2021.
How does it the voters spoke that they don't like about it obviously. How does that how does this how do we break this? Um the point important part is that much of that spending is now due to wealth effects and so some of the volatility in the broader stock indices that actually can take off some steam and we saw it in the first quarter of this year when we had the initial drought and the the downturn in financial markets and we also saw a major slowdown in consumer spending.
So to the extent that higher rates also take a little steam off of equity prices, that can cool inflation by the most affluent households that are playing a disproportionate role in not only spending on discretionary items and paying for cash, things like cars and homes, which is a stunning kind of thing to be able to do.
They are also holding up discretionary inflation as well. We call that the K loop. It's a vicious cycle of these very affluent households being able to hold up a lot of service sector inflation that squeezes lower and middle inome households. Diane, it's Adam. Good to see you again. Um, help me understand something because when you said deflation, um, my ears always perk up having, as we all did, surviving 2008, 2009.
Are you saying that that the Fed might intentionally, as Paul Vulkar did a billion years ago when we were kids, take the economy into, I'm going to use the word recession, but into a slowdown because the economy looks really strong right now that they will intentionally slow things down and then as an investor, should I be fearful of that or should I just accept that's the roughly 12 month to 18month reset that happens when there is a pullback in markets?
What's been unique is that sort of not uh caution versus conviction right now by the Fed. They'd like to avoid a recession because how damaging inflation has been to so many and so they would rather slow things down to below the economy's potential which could be an increase in the unemployment rate although we face a structurally low unemployment rate because the break evens unemployment have fallen so low.
the kind of monthly gains that we just got close to 180,000 on you know payroll gains that is more like we saw in the 2010s and that was what was needed just to bring the unemployment rate down. Now we don't need as many gains because of the surge in retirements by aging baby boomers and curbs on immigration which have eliminated and slowed down the supply of workers out there and that's important as well.
So they see a structurally lower unemployment rate that may not feel as good. This is the longest period of time, 59 months, we've had unemployment below 4 and a.5% of the postw World War II era. The previous record was in the late 1960s to 1970, which was 57 months. And believe me, that unemployment rate felt a lot better than this one does to most consumers back then because we had women entering the labor force, the baby boom entering the labor force.
It was massive turnover in turn, healthy amount of turn and people able to jump jobs and be able to get a better pay if they wanted to. All of that is not what's occurring in this labor market today. Hey Dian, you know, kind of hanging over the top of all this is the AI buildout and sort of the implications of that.
I know you've been writing about that with your team. You see some a couple scenarios, one okay, but one really bad. Talk to me about how you see things play out potentially how you're gaming for it. So this is one something we had started um as the October sort of reality shock hit in the NASDAQ and we started to see some push back on AI debt financing and how much the cost is of these data centers.
We also have been tracking since the beginning of year and flagging how universal the backlash to AI is. It's every age group, every income strata and every party affiliation. And that's important because that means it's one of the few things that sort of galvanize the electorate and it is wrapped up into the affordability issue.
It's wrapped up into job insecurity issues. We have undermployment among new college grads at its highest level since 2020 right now. So all of that is showing up as this backlash. But you know the other part is that the AI buildout as important as it is to the sector it is dependent heavily on imports and crowding out other forms of investment.
So some cooling of that buildout and enabling other sectors. I mean there's no home builders in the most we've actually looked at this by state in the most states with the most data centers home builders can't even think about getting workers whatsoever because they cannot compete with the hyperscalers for those sca same skilled trades people which are in short supply and their wages are skyrocketing but it's a very small group of people so I think that's important we're looking at a barecase scenario which is not our base case if we were to get a much more broader market correction of 25% in the first quarter arbitrarily, another 10% in the second quarter, we would see a recession that hit consumption fairly hard because it hit both jobs and the wealth effects and it would hit much faster than the dot recession.
However, we would bounce out of it because I think the Fed would then feel very free with a recession. Oil prices would plummet on that and many other prices would come down as well. The Fed would feel very comfortable in cutting aggressively like by two percentage points to get the economy into a much sharper rebound in 2028 and housing for the first time in a very long time would really lead the economy out of that recession.
Diane Swan, US chief economist, KPG, thank you so much. A lot to chew on there. Really appreciate your time. Thanks again. So, so guys, you know, so guys, we're talking about, you know, we talk about this the AI buildout. We're talking about the market selloff. you know, you know, we mentioned, you mentioned about how some of your clients are are buying into here.
Uh, but we're also talking about, Adam, we've seen a lot of professional money, professional hedge funds, uh, getting sort of hit here. Uh, one in particular, Walleye, a couple others sort of, uh, you know, shedding assets or just shutting down in particular. How much of this do you think is is is that deleveraging from that from those the big professional money managers?
Well, I think a lot of people want to delever from the some of the professional money managers. I mean, the hedge funds, what is it 2 and 20? that's still in play. They make money whether if you're a client of one of them. They're going to make money whether they make you money or not. So, not if they fall below their high water mark.
Yeah. Well, that's the issue. And that's where that's the problem they're facing. Tell me again, what do you mean by this? Okay. What happens is they get hedge funds the the the hedge fund payout structure is you get a fixed fee two 1% 2% more if you're a superstar plus a percentage of your performance.
20 is sort of the the two and tw that's where the two and 20 comes from that could be you know it's negotiable if you're again a lot of it has to do with your track record and your and and how aggressive you are at getting assets. So that but that performance fee doesn't get paid unless you continue to go above what they call the high water mark.
So let's say let's say you you start your hedge fund's hedge fund you make 10% the first year. So, knock out your two, knock out your your knock out your 20, you're really at 106 at that point, but still um you earned your keep. This it falls back down next year to 90. The value of the fund next year is 99.
Well, you'll still get your your management fee, but you're not getting a performance fee until that fund gets back over the 106 level. So this actually puts them in a they really don't like this because the other problem is it's not it's when when you go down you have to go up by a higher percentage.
It's actually a pretty simple mathematical formula. If you go down by 1 /x you have to go up by 1 /x -1. So if you go down by a quarter you have to go up by a third. If you go down by a third you have to go up by half 50%. So it the math gets the math gets tricky for a lot of these guys. So they are desperate not to go below not to go below a high their high water marks by by a large margin because it prevents them from getting paid and ultimately that's that's what they're in this for and you know how do you how do you how do you jack up those returns is leverage right and this is sort of the concern is it is leverage the problem right now with with these funds using a lot of it to to increase those returns you know Ken Griffin talked about you know don't look at
it's not just the the big funds that are that are blowing up it's not you got to dig deeper so is the deeper Is that just overall leverage in general or not? Well, leverage is a problem right now, especially with the AI trade. Can I get back to something you just said because I'm not sure I understood.
I just correct me when I get it wrong, which is my favorite phrase. What I heard you say, and I'm sure I'm wrong on this, or am I? So, are the hedge funds working potentially against their clients in order to protect their 20% growth? I I think in theory, no. I mean, in in real, you know, that that would be that would be
counterintuitive. That would be counterintuitive. It would be Yeah. I mean that that makes no sense. They they the client's best interests are also not for the fund to get to get throttled uh too hard. So that but but the point being that's that's in many ways why they they really get risk they you know they they all get risk very riskaverse at the absolute worst time is because there is that motive of not really wanting to go below the high water mark.
They they don't want to lose money for their clients. I'm not going to I'm not going to call them all nefarious. That's that's that's a bridge too far. But but but ultim you know because again the the the incentive structure in theory aligns them with their client's interest right you only make money when they make money which which is a fair way to do it.
Are the hedge funds though to the leverage question are they are they the fuel that created the fire that has led to the leverage. I mean there's so much I've always thought of Nvidia's part of the leverage problem because of the circular funding and it's opaque. Who really knows where the bodies are going to be lying?
There's a the leverage problem is is it's become very pervasive and and that's really the issue. Look at FINRA margin debt. It's it's it's skyrocketed. FIN it's a FINRA it's a FINRA published number. That's that's basically what brokers are extending to their clients. They don't really break out whether that's retail institutional what you know prime broker versus versus reggg margin.
Then you have all sorts of products that offer leverage without actually appearing levered. Right? So you've got all sorts of I mentioned Sockell at the top of the at the top of the show. So now you have not only you know you have basically um levered single stock ETFs that are very popular. So yesterday Micron was down I think what 15% or something.
There's an MU ETF which was down 30%. Now you can't margin the levered ETFs. That would be true insanity. But the but but the problem here is, you know, it's it's a very different scenar. It's bad enough if you're looking at a blue chip stock down double digits. It's it just makes it that much worse if you've got some derivative based on that stock that that is down even more so.
And those stocks they tell you in the perspectus we will m try do our best to match the daily performance of the fund. Over time we will underperform our benchmark because they have to buy options. People jump into them when options are are when the markets are volatile. options more expensive when the markets are volatile.
So, they actually underperform more when they get more popular. I I I I can't say enough that these products um are only suitable for very very active traders, not investors. So, we talked about this yesterday, you know, just taking the leverage part of out of the equation right now. We talked about how, you know, with the correction, with the midterm happening, the results happening, you know, oh, is this a reason to like slow down the buildout?
And isn't that a good thing for hyperscalers, right? And we see tech getting a little bit of a relief here. Stocks a little steady after the job report. Nothing really going on too crazy there. But is it time sort of, you know, do you hit capitulation and now is a time that maybe it's time to get in some of these names?
Um, I I would say yes, but you should know I can turn $1 million into 10 bucks like that. Um, but here's why it it is time to look at this because the buildout's not going to stop. Anyone who thinks that that data centers are not going to be part of our future is fooling themselves. We're we're using a data center right now to reach the people who are watching.
The second thing, look at what's already being built right now in the pipeline. The name is perhaps unfortunate because the movie was was a great horror kind of flick, but Prometheus is that the meta facility in Ohio, which is coming online as we speak. It's going to be one gigabyte. It's huge. It's a thousand megawatts um of compute power and it's coming online.
You have data centers. Yes, there's going to be they use the word moratorum, but it doesn't mean stop. And then you've got deals. We did an interview with the CEO of Hive. Hive is a very inexpensive stock. It's like a buck. It's a$16 right now. It's off tremendously from its high, but they're they're part of um Coher, which was going to go public and and they have deals with Coher.
But the bottom line is that what they pointed out is they've got the land and the power. This is what they're coming to their to market with, which kind of negates some of the concerns over data center construction and they're making a play in Paraguay. Now there was the kurfuffle with the politics of yesterday but but when you look at what's happening future data center construction this whole issue of in in um latency and inference that's why data centers need to be near big urban centers and yet there's still demand for stuff thousands of miles away because the latency is we couldn't even think it as fast as it's going to be.
You mentioned coher. Let's talk about another uh potential IPO on anthropic. Right. So, as this is all happening, the AI fueled selloff is happening. We have the one of the most biggest names in the frontier sort of AI startup world looking to go public. It's been it's been obviously their their S1 is out uh looking at a potential week before Thanksgiving um sort of public offering.
But here we have the Journal talking about how three major investors are are bing at that $ 1.5 trillion valuation saying one of them saying that it's be closer to 1 trillion. You know, talk about a haircut there. Now, the timing of it is just remarkable as to where we are right now. And there's this big this one of the biggest names in the space is looking to go public.
What I mean, what do you go? Can the market even handle this? Can the market even handle this? I'm going to take the wind out of you. I I'll answer because I interviewed I I interviewed Anna Rathbon and I'm a big fan of Anna. She's been on Yahoo Finance. She's on Bloomberg all the time. Used to manage I was like 80 billion.
Now she has her own firm, Grenadellia, out of Cleveland, Ohio. One of my favorites. Cleveland, huh? Out of love. I love Cleveland. Go east side, by the way. west side, we can get into the fight. Um, and I asked her about Anthropic, and I've pulled up some of her quotes from the interview we did with her on Anthropic.
She said, "We don't really have that uh intention with Anthropic. Uh, I don't want to call AI a bubble because it's overused and it's really depends on the company. But when a company that doesn't have a stable revenue and stable profit for IPOing, I have to scratch my head a little bit and take a few steps back.
There's just way too much leverage that is built in a very, very short period of time." her bottom line on anthropic was step back overvalued too much hype is what she was saying. I mean I I I have to imagine there's people that on both sides of the bell you're hear you're hearing more of this side more these days about how is it just worth it you know Steve I know you your clients talking about other IPOs like potentially open AI coming out you know what do you tell your clients about just sort of you know give it give it some time give let it wait a little bit you know is the AI trade just sort of too hot to handle right now
um without discussing specific names uh that I can't do the the the IPO environment has been somewhat challenged, right? We we had the Ferras in Australia. Uh that was actually right around the top tick for the NASDAQ 100, but Fermas that Fermas IPO, which was Nvidia linked uh got postponed or uh so it it's difficult in general uh to the market told you yesterday it's very difficult to price things.
It's very difficult to get people to assume risk. And so uh you know I would say I don't advise investment bankers but I think that they have to be un recog has to be some recognition that um a a a very dislocated after a market dislocation event. Um it might not be you know maybe you don't want to go rushing into things but again this that's this is not anything specific.
That's very broad-based. you know, a lot of lot of uh round the dinner table, Thanksgiving dinner discussions here about this. You know, Adam, you know, we're talking about, you know, if Anthropic does delay that IPO, you know, does that sort of jumpstart or re re-energize this AI sort of selloff or is it, you know, actually this is a good thing.
I I want to go to your Thanksgiving dinner because at ours it's going to be yelling at each other about politics. Everybody Well, actually, maybe we'll maybe they'll yell at each other about AI because they're intertwined at this point. Yeah. But could it be a good thing if we if they delay the IPO?
Uh again, a million dollars to 10 bucks like that. I personally, if I'm anthropic, I think the whole reason they come to market is because the people who have equity stakes in this, they want to get their money and they want to get it now. So the question they have to ask themselves is if we delay this, are we going to be in a better position in three to six months to a year,
right? Uh I personally think yes, they will be in a better position, but it's going to be a year, maybe 18 months. It's not going to be a quick delay. That's where what I would think. Not okay. God. And we'll be like a couple weeks, right? So, uh, look, let's let's, uh, take a quick break here. We're going to talk more about all the AI stuff.
Talk about SpaceX, Tesla. The Lyft CEO is on with us later. That should be interesting. Back after this. Heat. N. Heat. Heat. N. Heat. Heat. Down. Heat. All right, welcome back here with Adam Shapiro and Steve Sausnik. Guys, uh, a lot going on today. We saw that big jobs number. Uh, you know, seemingly talking about Main Street doing okay here, even though we're seeing pricing pressure and high rates.
So, that's good. Stocks, I think, a little a little uh a little evenish here. Nothing really much going on here. I haven't seen a big move either way at the at the moment. We're still sort of treading water. Dows down a little bit, but NASDAQ up a percent and a half and S&P a little flat. But talking about some stock movers here, I got to talk about I got to talk about Tesla and SpaceX cuz last two days for them have not been pretty especially yesterday really getting hit there.
You know I think a combined 420 billion in market cap kind of loss. Now this isn't atypical for Muskled companies. They have sort of big swings back in the you know both negative and positive here. uh you know obviously the Musk angle and his political gambits are maybe in play because Dem Dem's now charge and they're going to kind of maybe potentially you know wind him down a little bit or kind of pull him in a little bit.
I don't know if it's going to happen. I think I'm my question is I think there's an overreaction here. You know I think that we've seen people like Senator Tel Rico or Senator Tel Rico uh governor elect uh uh you know talking about we'll play ball. We'll play ball. So is there an overreaction? We're seeing the stocks bounce a little nicely here today.
Could it be the problem is everything was an overreaction yesterday to some extent. So it's hard to say how much of it was specific to you know to to the Muskled companies versus the market to to your point about these stocks move around a lot. Elon Musk is volatility personified. So to some extent it it one should expect that.
Now, you know, the on the other the certainly, you know, the idea that you spent, you know, a few hundred million dollars to get the other guy elected um probably is going to have is probably going to have some ramifications for your business. Uh but I I will say but but you know, I think that the senator elect and the governor elect, which is bottom line is he's got he's got a lot of money invested there.
He's got a lot of jobs there. I I don't think you want to, you know, I think they're smart enough to know, let me let's not antagonize any further. Let's not drive away um one of our state's biggest employers, but you know, maybe we can put a maybe we can try our best to put a little uh guide guard rails on this on him.
We were talking about this during the break and perhaps the greatest thing that could happen is if the federal government finally steps in and the calmer voices, not the the far left and the far right on this one with AI, it's like stop the data centers, stop the data centers. But if you can get some kind of comprehensive framework for regulation to allow data center construction throughout the country on the same parameters, then you can reignite the AI trade from that standpoint.
So sure, I think that the DSA and the left-wing Democrats want to destroy Elon Musk. I think there are people on the right who want to destroy Elon Musk and there are things that he has to answer to regarding actions uh in the past. he'll be called before Congress. But SpaceX is a going concern and the best thing that could happen is for there to be an understandable playing field so that the AI trade can go forward.
I do think that politically this is not as big of a reach either. You know, yes, there was there was a certain amount of like pitchforks and torches out there during the election cycle, but when the dust settles, the there's going to be a significant majority for the Democrats in the House and the Senate.
They clearly want AI guardrails. I think a lot of Republicans want well-crafted legislation that provides AI guardrails. There's really only one prominent voice who doesn't. Um he unfort that's basically veto proof. You know, we were conveniently not mentioning Mr. Zuckerberg. Um, I mean, you know, Elon Musk is the everyone's the lightning bolt striking Elon, but you know, Mr.
Zuckerberg is no saint in a lot of ways. Now, he might not have spent hundreds of millions of dollars to try to defeat people in Texas, but when you're talking about AI, you've got to bring in meta. You've got to, you know, what what role will they play? He Mr. Zuckerberg just won, as did many people with the defeat of the billionaire tax in California.
So, what happens there? Again, it just comes back to you have all of these very wealthy, very influential influential people controlling companies. If the we've done this before in this country, Standard Oil, you know, we we can do this in a way that doesn't uh capital capitalism and growth, but it brings into line.
How do we do this in a way that benefits more people? I want to bring so I mentioned the governor elect enoosa in Texas talking about how permitted data centers will go up right there that that's fine it's already been permitted going forward I want stuff like you know unionized labor we want uh environmental protections we want other things with materials and stuff to be sort of under certain conditions not that we're going to say no um and Musk responded to that positively on on x.com also want to note that SpaceX just announced a new a new potential data center in Arizona 6 gawatt there across nine buildings and they're saying no industrial water use, no gas turbines.
Basically meaning they're going to go to the grid 3 miles away if not more from nearest homes. You just they're hitting the things that what people want to hear. Right. Right. Well, they first of all the data center industry, the AI industry needs to form some kind of consortium they're all part of and get some kind of person to be the face of, hey, we're going to talk to you.
Let's talk about what all this is. But last year's data centers are not next year's data centers. Um Turbaden is a company. They're not publicly traded, but they're part of Mitsubishi Heavy Industries. You just said get rid of gas turbines. Why would you do that if the gas turbines actually you can control for environmental for CO2 output, but then you can use turboden technology which will take if you're generating so much electricity, you can amplify it by 30%.
By using the turboden technology, which is proven and already in existence, it's heat recapture. Um, why wouldn't you use that kind of stuff? The other situation is that old data centers revi rely on evaporation for cooling, but now you have technology. We we use it in our cars, radiators. You have closed loop systems which minimize the amount of water that you need to do these things.
So the new data centers are not the ones that have raised understandably the issues that people are worried about. But the industry has done a terrible job explaining what's coming down. I think one of the issue with the turbines is this is the noise, right? If you can make that noise pollution less, then it's not as bad.
I mean, maybe turbine is is doing that. Uh and of course there's some emissions with natural gas whatever. Uh but yeah anyway you know from the SpaceX point of view this is all potentially positive for them as we talked about. Y we talked about this off air too. What happens if there is are fewer data centers out there?
Who benefits? Right. Well that's why you had the hyperscalers rally on Wednesday and that's why they outperformed yesterday. Nobody nobody really did well yesterday but they outperformed. They they were down by less. The reason being if you have if you have demand continuing to grow at the pace that's expected and you have supply constraints that were not expected well you know if supply goes if if demand goes up supply doesn't go up as quickly what has to do what has to happen to equilibrate the market prices have to go up who's got the available supply of data center of compute capacity the hyperscalers and so this could be very beneficial to the margins the you know at least the the cloud computing divisions of Alphabet, Meta to the lesser I don't know if they're selling it as much but Alphabet, Microsoft, Amazon certainly um and that's why they that's why they were out that's why they've been outperformers relatively speaking
right and we're we're going to touch on some other names later in the show on the data center space I may have jumped the gun here. I want to stick stay with Musk just really quick because one thing that also crossed here which is really interesting is is overnight like in a late night tweet Mus saying quote Tesla will be winding down production of the Cybert truck at Gigafactory Texas around the middle of next year.
Good to make room for increased cyber cab production. Now you know look Texas Gigafactory was going to hit a 250,000 unit run rate for cyber cab. That was the goal. They've been selling less than 10% of that a year. So it's no surp I mean look people were like no not surprised that this truck is going away look at it okay we're not surprised but it kind of gives Musk an excuse say oh the cyber cab production is going to take its place that's why we're getting
the truck was cursed we we were both working here at the time when he threw the hammer at the window and it shattered the unbreakable grass so it was cursed from day one it's the ugliest vehicle since the Pontiac Aztec which is the ugliest vehicle since if you watch the Simpsons the Homer I mean this vehicle It's just ridiculous.
Edel the Edel. Well, the Edel was another whole other issue. Thank you, Ford. Yeah. But, you know, part of it is the Cybertruck became a a a middle finger on four wheels on top of it. So, you you were make you were making a very uh distinct statement when you bought one. Now, but but to the Cyber Cap thing, that's classic Elon Musk.
There's always a bright shiny carrot at the end of a long stick that keeps investors happy. Cybert trucks, humanoid robots, but whatever. There's always there's always a future technology which which is why investors continue to pay a huge premium for Tesla over a car company because it he's not selling cars, he's selling his future.
Well, then be careful. I best experience I had we were in San Francisco and rode in a Whimo, which was a Jaguar by the way and it was wonderful. I was like, you know, why why would you need the the the robo taxi, the the cyber taxi, whatever Tesla calls it, it's already out there and so they better catch up.
Yeah. You know, and there's some a lot of lot of Tesla stands are talking about, oh, maybe they can use a cybert truck sort of workings and knowledge to make a cyber SUV. We want a cyber SUV. You know, there's the the the Well, Genesis makes a really great uh it's not cyber makes a great EV. Um, you know, it's
Well, it kind of made me think about if you just literally took that shell off of that vehicle. There's a lot of innovative stuff inside with four-wheel steer, uh, you know, uh, seemingly cable off off-roading, you know, not like a F-150, but seemingly okay with that kind of thing. Can tow a decent amount.
Um, it's got some stuff going on that's very interesting. Could you just put on a better body, right? Perhaps. But, but think about the amount of money, billions of dollars used for industrialization of this product that sold. I don't think it's sold more than 100,000. I think it's probably around 50,000 vehicles, 60,000 vehicles.
Like, what a massive vaporization of of cash. But you they say this stuff was used to help build Cyber Cap. So, and Musk will couch it that way. Investors will potentially buy it. Um, and then here we are with Tesla rebounding a little bit here. But if you think about it when when CyberCap's gone, all they're going to have is Model Y,
Model 3, Cyber Cab, and the Flying Roadster. Yeah, that was pretty cool. You got to give them that. Uh anyway, and I also want to note with Musk's company as well, one last thing here. SpaceX, a SpaceX employee who in charge of launch has said at a at a at a conference that they're going to launch Starship 15 next Friday the 13th.
The day the day another hammer at the unbreakable glass. Yeah. I I mean, let's but let's stay keep that out of it. you know, for us at Y Finance, we have our big invest conference on the 12th and we're going to be talking a lot about space and that's interesting to see this potential another new milestone.
Hey, will they catch that rocket in the in the little the chopstick hand, Mechazilla hands? Uh we'll have to see on that. Um I want to sort quickly pivot here. We talked about data centers. We were talking about that earlier. Uh iron, right? Oh. Uh so this company comes out here has a stock getting actually it's actually doing well here after it had earnings.
Now, this is because it was it's been down a lot, right? This Neocloud firm getting hit hard like a number of these names have been. Uh they talking about how 4 billion in annual recurring revenue projected for 2026 was now going to be pushed out till at least January. So, that's not necessarily good.
The CEO Daniel Roberts talking about how that was that customer was Microsoft because they wanted to reconfigure some stuff with regards to the infrastructure of that data center, different types of connectivity. That's that's sort of what they're talking about. But then again, it kind of goes back to the fact that is it Microsoft that's really pulling the strings here, right?
You know, like there it's that it's the hyperscend and when we're not going to spend. When you look at this company for for investment advice, you should be going to someone like Steve Sausnik. What I tend to do is I try to break it down to the the six-year-old to comprehend. They have Bitcoin mining data centers, which they're converting to AI data centers.
To me, that's great. You've already got the data center established. the conversion is going to be no problem because you can't stop it. So I think that there is a business to be had there. But how they turned it into I mean they have huge net loss. Um how they and eventually you got to make a profit if you want me to give you some money.
Yeah. You know the the data the neoclouds whatever you want to call them they're sort of the they're sort of the the fringe players in all this. You're right because ultimately they're they're like the excess capacity you know uh absorbers of this industry. So, you know, they're the most susceptible, which is also why their their stock prices and their bond prices reflect that susceptibility.
But but the reaction today tells you a lot, not necessarily about iron, but about investor positioning and investor psychology when for for the most for the better part of the last several months actually, you've seen countless companies report good earnings and then get hit anyway. Now, if if the ear if it if the earnings were pretty good, they eventually kind of came back, but the market's first reaction was hit the sell button and then let's then let's play it out.
In the case of some other companies like like Intel, Alphabet, you know, was bad and they they kind of stayed down. But when positioning is light, look at some of the companies that everybody has fled and then they put out earnings that are even decent. They all have to come running back in. Look at today.
Look at Apploven yesterday. Yeah, Apple was insane yesterday because all because software had fallen so out of favor. No one, you know, all of a sudden they tell a good story. We got to rush back in. So there's still this like with the boat analogy, people still if everybody's left that side of the boat and they need to go back, they all rush into it as well.
So it tells us to the reaction in iron in a lot of these companies. It tells you that if you're much better off finding buying a company ahead of earnings that's out of or being position long if it's company that's out of favor before earnings then then that's in favor because the market has been rewarding uh if if they can manage a beat they come roaring back in.
If if on the flip side they they beat it's beat and yawn for a lot of the companies that are very popular. You know, uh it's kind of funny because I looked at that iron stock move and I'm like, okay, maybe there's some kind of short covering going on there. I'm not sure. It seems like a big move uh early in pre-market, but then the kind of there's two sides, right, to the irons of the world is cory's irons, Nebius of the world, like they have these they're tied to really like huge customers who are in charge of all almost all the revenue and that kind of goes back to this the circular revenue thing.
That whole thing is like if Nvidia is my biggest partner and they're invested in me, but then they're also my my biggest customer, what's happening here? On the flip side, I'm seeing that they are in doubled pricing on four-year-old H100 Nvidia chips. Like, because there's still a there's still a lot of demand, believe it or not.
I mean, we, you know, talking about AI is built out too much. It's who's using it? Is it just enterprise? And well, guess what? There's still demand for the compute. And that's a good thing. And that's a good thing for space. That's a good thing for the hyperscalers. Uh, so you kind of have to weigh these both these things and sort of what do we do?
Well, you said it at the beginning of this, which was who would you rather be in bed with? Nvidia or for lack of a better example, Enron. I mean, they don't exist anymore, but you know, Nvidia, one would believe, as much as there's opaque and circular financing and all this going on, still going to be around.
So, size matters in this case. And I think, you know, and market position, I should say really market positioning matters. If you're if you're if you're if you're in a market that's in a bit of turmoil, I don't care what it is, the Goliaths have the pricing pressure. The Davids the Davids are are are you know can do they get you give you get leverage with them because they got great appreciation potential when things go well, but you also but leverage hurts in the opposite direction.
Let's uh let's talk about another mover today and that's and that's Lyft, right? earnings last night here. Uh kind of, you know, little mixed results here. Q3 bookings ahead of estimates there. Surprise loss due to a due to a sort of a legal settlement there, but inline guidance of gross bookings and things like that.
Uh I want to bring in CEO David Richer. David, uh thank you for joining us here. Appreciate it. So I mentioned that guant decent underlying performance for the quarter was pretty good. Revenue up adjusted EBIDA doing looking well here. What do you think investors are maybe perhaps missing right now?
Yeah. So, I think what happens with a company like Lyft is, you know, may maybe I'll kind of step back. I worked for Jeff Bezos for a long time and one of the things that he was always so focused on is don't focus on what changes, focus on what stays the same. What stays the same is people are going to want to get out of their house.
They want to go to work every morning. They're going to go to party at night. they're going to, you know, see their mom as she's getting older, whatever it might be. So, we have now, I think it's the eighth consecutive quarter of double digit rides growth, which is amazing. You know, we grow our top line about 17%.
We grow our bottom line some 47%. We generated $1.1 billion of cash. So, what's happening there? That's a very strong business. That's a very, very strong core that's just kind of really um operating and operating well. Okay. So, what are investors missing? Well, I think what they're very focused on, of course, is the disruption.
And you know, AI shows up in all sorts of different ways. In our industry, it shows up as self-driving cars. My contention is that AI, AVs, self-driving cars are one of the biggest gifts I could have gotten as a CEO in my life because it is going to be a massive dislocation. It's going to be a huge tailwind for the industry because people love the product and has a good cost structure.
And then we think we're very very well positioned given the ride volume, given the expertise we have in fleet management, given the learnings we have with Whimo and so forth. So anyway, that's my contention. But I think you know investors sort of sit around and they see uncertainty and it kind of spooks them.
I see you know quarter after quarter after quarter of performance and a really great position for the future. Good to see you again. It's Adam Shapiro. We met I think it was about 8 months ago at a lift event in New York City. And just so you know you're my preferred ride share because it's always cheaper than that other company.
So when I'm coming from Laguardia I don't even know who you're talking there is another guy in the market. I don't remember who those guys the two things that that stuck out for me from the the discussion you and I had but also where Lyft is positioned now. You just brought up uh the autonomous vehicles, the self-driving and I was under the incorrect perception that you had not made a play into that where in fact you have but there's also the announcement uh and help me understand how Al Cove is going to play into the future with Lyft because this is the old what I when I what I understand about chauffeur driven uh cars is that this is more for the business client.
How much potential growth is really with Alco? Yeah. So, uh, Adam, good to see you again. Um, look, here's how we think about our growth. We think about now that we have a stable core, again, a core that generates cash every quarter that grows quarter after quarter. So, that allows us to fund the next sort of the next wave, the next chapter.
And we think about it, and I'm going to see if I can do this kind of magic thing with my hand. I think about it as up. Think about it as out, and I think forward. No, that didn't quite work. Something like that. There we go. Up, out, and forward. See if you can do that. It's It's not as easy as it looks.
Okay, so up means up market. Uh, so Lyft was sort of the original innovator in the ride share space when it came to peer-to-peer ride share. You know, guy with a a Prius comes and picks you up. But what it's meant is we've been a little underindexed in the higher end. What you're referring to with Alco is a higherend chauffeur offering.
Uh, it's based on a company we bought called TBR, which they service, I think, 16 of the top 20 investment banks for road shows and such. It's very, very high-end chauffeur driven service. What's interesting about it, of course, is obviously very very high service levels, which is amazing. It's great for our our our, you know, our basic value proposition and we want to provide great service.
Frankly, the margins are also higher. You're talking about hundreds of dollars an hour type of thing. And maybe most importantly of all, you know, this is going to be an interesting counterbalance because on the one hand, you have AVs, but people are taking an al cove. That's not an AB client. That's a client that wants a chauffeur that comes and gets out of the car, greets them by name, gives them a coffee, you know, cleans up their white shirt when they spill the coffee on the shirt, the whole thing.
So anyway, so it's kind of a strategy that says we can we need to have something for everyone up and down the chain. Um, hi David. Uh, this is Steve Sosnik from Interactive Brokers. um we you know when I think about um in the ride share industry you know how much are you feeling the pinch let's say from the middle to the down from sort of the middle high middle income to down consumer because I I know that a lot of people you know who I talk to who are who you know some of them are quite who are affluent are just sort of cutting back on their ride share use they're just sort of saying this is getting expensive you know what I'll take the subway if if you're in a place like New York or something like that but or or you know or I may be cutting back on the amount of rides.
Are you seeing pressure from the bottom um in your bookings? Yeah, we're really not. I I do understand what you're saying and and of course, you know, if you hear the macroeconomic news, there's a a lot of stress, you know, sort of um uh up and down for sure. We I think are I don't want to say insulated because that's too strong a word, but we are such a basic part of so many people's lives right now.
You know, 31 million active riders just over the last quarter. And let me give you an example that maybe speaks to what you're talking about. We just had over the last week three new all-time highs. And it was on Halloween. It was on the day before Halloween, Friday night. It was on Halloween Saturday night.
We had a record high per, you know, per minute, per hour per day. And what that suggests to me is for at least most people in the ride share space, you know, we have products like wait and save to be clear. We have a lot of products that are sort of very very we call them high value products. And I think we're still somehow kind of meeting the moment.
Now I do believe as you're saying I think there's uh you know sometimes people talk about you know in New York City you know subway out and then lift home right so people do things like that people of course I call it rewards max sometimes where people stack other rewards programs on top of each other we just launched Lyft go yesterday which is a partnership with Door Dash you get 8% back on your rides you can spend on Door Dash so I think people are being careful of how they spend and smart and savvy but it hasn't shown up as really cutting back at least in our business which is accelerating you know quarter after quarter.
Hey Dave, so real quick I want to talk to you about autonomous. You mentioned it earlier. You know, you you talk about being a hybrid operator. You want to have a different kind of service for everybody. When does autonomous start kind of moving the needle? When do we see that really make a big sort of I'm going to see that everywhere?
Yeah. So, I think it'll be very city by city. Like if you're in San Francisco, you already see it today. You literally cannot walk five blocks without seeing, you know, one, maybe two, maybe three uh self-driving cars. Um, there'll be other parts of the country because of weather, because of policy, because of custom, whatever it might be, where it'll be years and years.
The way I think about it is if by 2030 it's 10% of our business, that would be an enormous enormous accomplishment. Remember, we're going to do about a billion rides this year. That'll be a 100red million rides on ABS, that would be enormous. But there's a lot that has to happen between the technology, the policy, and all the rest for that really to to take root.
And it'll be kind of lumpy depending on where you are. You know, a lot to kind of look forward to in that in that mobility space. Dave Richard, thank you so much. Lift C. I really appreciate your time. Of course. It's great to see you guys. All right, guys. We got a about 90. No, two and a half. Something like that.
90. John, should we do it or not? What do you think, John? Nah, let's do it. All right. Talk about cars. Got to talk about the Fiat Topolino. So, Adam, you're going to love this. I got a chance to ride this. This is considered a micro car. Fiat made this thing, you know, beautiful kind of retro looks.
Kind of hearkening back to the old Fiats of old school or the old Topelino back in the day. And they made a microcar because they thought it could be big in Europe for like you know resort towns and little small villages and people who want you know kind of like like a kind of a little you know whatever small property.
Turns out pretty popular here in the US. They brought about 300 uh to the US and they sold all of them $15,000 car. You know, look, it's not it's not a crazy looking it's, you know, max speed 25 miles per hour, you know, sub50 mi range. But in certain towns, like, let's say a beach town or a resort town or a retirement community, this thing I think is great.
I love it. It reminds me of the Fiat Jolly, the the the one that had like the little fringes on the roof and was strictly a resort car. I I I I think the idea is basically it's a it's a bigger golf cart. And for to that purpose, I mean, you're going to spend 15 grand for a golf cart. Why don't you go get a Yugo?
Me? No, people in Florida, in some of those communities, the villages, it'll be big at the villages. You're going to have to go off with Italian retirees. I drove it. It was actually, you know, very golf cart like. It's a little plasticky inside, but I it's still a great if you're looking for what it is.
I agree. $15,000 is a lot of money. We got to leave it there. Brian Sazzy, he's not a big golf cart guy. He's up next. He's unleashed. He's probably not going to be a fan of the Fiat. Heat. Heat. Heat. Down.
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