Third Quarter 2024 Review — ft. Aswath Damodaran
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number one point .

eight billion .

dollars that he estimated total amount american ult spent on their hallowing costumes this year history, I don't went to how many party dress is a chicken? And I met a girl dress as an egg. And we answered the age elle question the chicken and you'll get in about a minute.

You look confused.

and i'm seeing last traver he is, I assume it's good.

which comes first, the chicken of the again too. I really .

have .

to go.

You gotta really spell IT out for me and slower than I pear. Add what is a good word and do very well. Scot, another day in new york.

It's been lovely weather. My sister have visited at this weekend. Very nice. Hung out with her. Life is very good.

I know. Yeah, a sister. I think I did. I think you did that to shave kids. I don't care, i'm just asking, but I don't care to shave kids.

SHE does not have kids really. I have the questions.

I think you've an ice uncle.

How old is your sister? She's twenty eight.

Where to show?

IT h, she's at business school in a Virginia.

She's U V. A. She's a darden. That's right. An amazing school and it's the second most beautiful campus in nation.

I I would say decor, your air type for number one but or pepperdine, but i'm not sure I really counts but i'm going to hear IT from my father, I friends anyways. But, uh, I have this, i'm glad was asking about you. We could manage, bring this back to me.

I have this image of where I would retire and teach. And I was so stressed out about not making a enough money in new york. I thought that said, i'm going to leave, and I was going to go to college town and teach brand and right books and have a nice life, making a reasonable amount of money.

I want off this hams to will. And a darden was one of the place I was considering. Charlie.

have you been a Charles will be visited.

I haven't did IT is it's incredible.

beautiful camps, wonder, wonderful.

A great school to hard. There's something about printing that is bothers mountain of its you just the reputation they I know what IT is and was enough. I get to the.

In time to buy, I hope you have twenty .

telephone. You govern a govern. Newton wants to more than double the states tax and centres for movie production to seven hundred fifty million dollars per year.

If approved, the increased incentives would take effect in the summer of twenty twenty five. Boing raised twenty one billion dollars by selling common stock and convertible shares. The airplay manufacturing was looking to boost liquidity and prevent its credit rating from being downgraded to junk.

Robin hood has launched vetting contracts for the presidential election. Users will now be able to trade a trump or Harris contract as long as they are U. S.

citizen. The stock rose three percent on that news. And finally, shares of Donald trump's media company rose twenty one percent on monday alone as prediction markets favored him to win the presidential election. Trading was then halted for volatility multiple times on tuesday, with nearly sixteen million shares exchanged in the first ten minutes of a highly volatile session. Scot, your thoughts, starting with governing some decision to double tax and sentence for hollywood.

given the reality, the situation that everyone from canada, ireland, Albert key to atlantic to vancouver offering big and sand us for film production. This was a good move and IT was a needed move and IT was overdue and the analysis of this shows that for every dollar in um tax credits the california gives to the motion picture industry, the T V industry, they get a dollar oai back in tax revenues. It's net neutral.

It's not it's not in a positive. You do actually that someday have to charge corporations for doing business and you do need tax revenue from them. And when we couldn't have sectors that are just net neutral and taxes otherwise, we could not fun the naive or the parks.

But this is a really good idea given the situation, given that L A is really struggled with production last couple years by some estimates is down thirty or forty percent in addition of being net neutral in terms of tax revenue, every dollar of incremental a tax credits results in eight dollars of incremental wages and twenty four dollars and incremental economic activity. So IT really is stimulus that works. Also, I just think the identity of L.

A in california is so caught up in this industry and they don't even need to exceed the tax credits of other municipalities. They just need to match them because the talent pool around hollywood is so deep. And that is, if you're a senior that wants to go pursue, you're the star of drama club, and you want to go pursue your dreams in a hollywood, if you know how to make sets, if you are good with C, G, I, that talent, the first instinct is to get on a plane and come to L.

A. So L, A just has, I would argue, the greatest concentration of of T, V and the attract talent ever assembled. So to not take advantage of that and also create sort of desire gust and economic growth in L, A, which is struggle in this industry to last couple years, would be not leaning into your strength as no as a metro. So i'm a big fan of this. I think he was a really good idea of what your thoughts well.

that was extremely compelling because I looked to this, and I just hate to IT this to me, was sort of all of the worst criticisms of the democratic party come true, and means the idea of california using a government funded program to subsidize the production of hollywood movies. To me, that sentence could be basically like a billboard for the republican party on just how woke and dumb the democratic body has become.

But the case you you just made is actually quite compelling. The only push back I would give is that, you know, they're subsidizing an industry, which, to your point, is important and systemic to the culture. But IT is a dying industry. And I just wonder if that makes sense for a public sector strategic perspective to be trying to subsidize an industry that ultimately, over the long term, probably is on its lost legs.

I think the word dying is a little bit overdone because if you look at content spending across across film TV, it's actually up two percent this year. What happened is it's been globalized. The auto industry, uh, auto sales didn't go down in the eighties.

They just went down among american cars because they were making a shady product. And people started by japanese cars. And nefer x is actually globalizing itself and sending content offshore.

And what we're talking about here is, you know, it's real money. It's going, I think, from three hundred and fifty million to seven hundred and fifty. That's not big in our an economy.

That's the fifth bigelow economy in the world. And to your point, I hate this race to the bottom that are attacked, subsidies. And the result is corporations are paying less as a percentage of G.

D. P. And their tacks is since nineteen thirty eight. So lost level since nineteen thirty eight.

But at the same time, a lot of very republican states, the only way they get toiled to go to whether IT was all obama, whether they are in the south, is with subsidies. And these governments have to do the math. And o are the subsidies is worth that. In terms of economic growth.

you've convinced me I had a sort of red pilled reactionary take to the headlines, but I have convinced me this actually make sense. We should talk about boeing and this twenty one billion dollar share sale. Now we talk a lot about how you never want to be a forced seller in any transaction, in any negotiation.

This is essentially a forced sale. They're not doing this for any long term strategic reason. They're doing IT for one reason and one reason alone, that is, if they don't the ratings agencies like moody and S M P global sea, those ratings agencies will downgrade their credit rating from tribal bee minus to double b, which is the highest wrong in junk status.

So boeing really doesn't to be a junk bond. It's very bad for their reputation. More importantly, that means they're going to have to pay significantly more in interest payments. So this is a nogo.

So what are they doing? They are selling shares to basically alleviate that sixty billion dollar pile of debt on their baLance sheet and to make the ratings agencies happier. So from a shell, the perspective, I look at this, and this is just a nightmare.

They're not selling shares because they want to. They're selling shares because they have to. What is your view?

The reality is this is a company is not doing well and it's financially strained for a number of reasons, most recently the strike. So they're not producing plants. They had enough dead where essentially the market was starting to get jittery and was said, given the declining your business and your debt load, your dead is about to become more expensive.

So in order to give the dead holders some certainty, such as the interest rand go up, they decided that the cheapest source of liquidity was to issue more stock and maintain, you know, keep their bonds out of junk rating. So this was just a straight financials, and there's no there is no getting around that. They won't have to do this if their business was booming, but they decided IT was worth to take for shareholders to take the illusion to short their liquidity such that their deters didn't start massively increasing interest rate, which would again strain their cash lows.

So they had to make a bad choice between bad choices, and this was probably the least bad. And shares actually went up because the market said, okay, this company needed liquidity. IT got the second area the preferred to the share sale done.

And now they have a much stronger cash position on the baLance sheet to endure whatever both should happens. Or if the union reject the next offer and their debt, their debt remains out of junk territory. So this was the best of a series of bad decisions as a way I would think about IT.

Yeah, absolutely. But certainly some blame on management part for even being in that situation in the first place. The last thing you want us to be given a series of bad choices and have to choose the least bad one.

Your reactions to Robin hood getting into the best markets. We've talked about calta and Polly market and predict that all of these events contract markets that allow you to bet on various things, but most recently, they allow you to bet on the presidential election. Now robbin hood getting involved. What's review on this work?

Robin IT is not where you go to invest. It's not where you're going to learn. It's where you go to gamble and that's fine.

You allowed to. There's fan to all. There's draft kings. There are a gambling site and there's no reason they shouldn't be in this. I think this is sort of a non story. I think the two founders of indi ous fox um but I don't seen a reason why that shouldn't be and that I mean it's sica tobacco company says, I know let's make our logo even fucking cute some morita als want to smoke what .

do you think I think of IT as a little less monday chest. I think that you describe IT. Having said that, I ve just interviewed CEO of cause who sted throwed me round on that side.

right you around that he's a dasient person no .

to to to believing that actually it's not so bad. And you can check out that interview when IT comes out in a few and a few days that makes .

sense to take grandma's um money he gave you for junior college and bet on with thing trumper Harris going to win that they can end badly. That is a really good idea, really good idea.

Let me just throw out one one the interesting new piece of data. Um I mentioned earlier that I people say, you know the betting the betting markets are more accurate. There are a sort of more truthful because people have money on the line, they're Better than polling.

And you remember my thesis was actually the likely heard, given the fact that sixty percent of gamblers and sixty percent of stock market participants are men, likelihood is that most of the people betting on this election and betting on these platforms are likely men, which likely skews IT towards trump. So cost actually released their demographic ata. How many of the what percentage of the platform giving a men?

I would think that it's eighty nine.

nine. You are going to a ninety .

ninety .

percent of the users on the platform on, man. So you think about how seriously people have taken these betting markets and trumps up sixty percent. The one thing you do have to remember is that nine out of ten people betting on that outcome. R, indeed. Man, well.

the calls data, if you type in castle presidential action, that has trumpeted sixty two percent in her and thirty eight, I don't know how that works. So does that mean if you've got a buck, you get a buck fifty back? I don't know how that that works. I know how you actually bet on these things.

Two into first time found is on sunday to find out. I'll final headline, Donald trump dia rose twenty one percent on monday. Your thoughts.

this thing is filariasis not worth more than twitter. You want to my vegas. I mean, if you look at the options market, if you wanted to buy a call way out of the money, like sixty five, that expires this friday.

So only what three days left from here. And let's pick let's pick a call to say, I don't know, let's say way out of the money like at sixty five box, you have to pay, get this three books. So I mean, this thing is, is so void, the opens market is telling you that this thing is gonna go, you know, either seventy or third.

And what that would be really interesting, as I found wednesday morning, I wake up in london and I put on the new radical, you get what you give and I start dancing around, which will have meant that Harris looks like Harris is one. If that's going to be really interesting to see what happened. What either way, that is going to be really interesting to see what happens at the stock.

But you could see this stock, assuming that hold where IT is of fifty four bugs. If he wins on wednesday, that I can imagine that thing's not in single digits within forty eight hours. I mean, I just start for the day saying if he doesn't win, he, he may, if not go to jail, come very close to go to jail.

Is the company losing hundreds of million of dollars on two or three million and revenue? What what is the home where the outcome for this company? If he is not present, it's, it's.

it's worth the zero. I don't even understand what the home of the outcome for the company is if he does win.

Well, the assumption is that I think that he's a and that he will figure out a way to mate government contracts or funding revenue to the company the same way, funding revenue to the hotels the next time, seven days, eight days, this is going to be the most. You're going to see trading halt IT here over and over. You're going to see the same.

Absolutely insane. And there's can be a lot of money made and lost in the options on this thing, but it's this kind of i'm kind of ready for this company to go away. This feels me like the playboy brand.

I would really like. I would really like have a dual execution of both of these brands and say, okay, it's time to just stop talking about these companies. They're not real companies.

Will be right back after the break for a conversation with professor assy h. demode. If you're enjoying the show so far, be sure to get property markets a follow wherever you get a pod costs.

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Welcome back. Here's a conversation with professor asked what to murder in the question of family chair and finance education and professor finance that N Y. You done school of business professor demote. And thank you very much for joining us once again and projects.

Thank you having me.

So last time we talked and we had you on for our quarterly review, we were discussing some of these fAllen heroes in the market. So companies like nike and starbucks and intel, these once iconic companies that have been struggling recently. And i'd like to just get your update of view on some of these companies as there have been some very interesting new developments.

And we will start with nike, who recently hired this new CEO, elliot hill, his been a long time employee of the firm. Give us you a headline thoughts on nike at the moment. Their struggles and the chAllenges is ahead .

for mister hill. I mean, part of the problem nike faces is, I mean, theyve had a long run as an a paro slash true company with brand name. Brand names in this business tend to fit quickly. I mean, look at great brand names are here today, gone tomorrow. Nike had a long run.

In fact, I read A, I read the book shoe dog as a pre, I wrote a piece of nike, and I read the book shoe dog to kind of prepare myself because IT kind of talks about the process by which nike got to wear IT gotten the accidental choices had made, including its the switch, and just do IT how they would chose. And without a great deal, I mean, I think they pay thirty five dollars to design this wish, you know. So it's an amazing set of coincidences that are built one of the great brand names, the world, but it's a brand name that we built around people, right?

That the choice of signing Michael Jordan and one thousand nine hundred and eighty four when he was not a super star yet, but writing that wave of NBA, Michael Jordan found him to success. That is always a tRicky, tRicky place to be because you got to find new celebrities and celebrities, human beings. They live and die with those human foibles that come at the sign.

So I think that I know what nike hit, seventy two, which was, I think, pretty close to its low. I said, look in other markets, building in the expectation the nighest best days are done, that that girl is not coming back, that marches are going to continue to slide. And I agree with part of that said, I don't think you're going to see double digit growth from nike for the next decade, but I still has the most recognizable so brand name in this business. IT still has no great margins even on its voice days. It's a very good company, but it's not gonna a great growth company anymore.

Is what put for this says that we've talked about on this part cast. We hear a lot about this time brand as mote in business, this idea that if you have a strong brand, that's one of the best protections against competition. But now I look at all of these iconic brands, especially nike, that have fall out of favor.

I am sorry to believe that maybe that phrase is outdated because where IT looks like is happening as these companies are becoming too reliant on their brand that sort of resting on their laurels in their convincing themselves that the brand is the mote. And then as a result, maybe they get lazy and the brand sort of depletes in value. So i'd love to get your reaction to that thesis, especially emulation to nike, that perhaps brand as mote in twenty twenty four is maybe less true than I used to be.

No brand names, even though the long term computer advantages need nurturing, need, need being taken care of. I mean, remember great roads and know how quickly that brand name, one of the most recognized names, and grocery stores, kind of faded away because they didn't take care of the brand ant. The other reason there is nothing to do, the laziness and not taking care of IT.

You, your brand name is recognized by a segment of the population. If your market is aging, your brand named by its very nature is going to become less valuable over craft times. And it's not that they were lazy, that people don't particularly care for craft cheese.

And the fifty seven depth catch up, if the twenty five or thirty years old, you've lost a large segment of the population because your brand is aged. So sometimes it's it's it's neglecting your brand name. Sometimes it's a brand name aging.

And as IT ages, your market gets smaller. And sometimes it's that the world has moved on, that what used to be a valuable brand name no longer works. I mean, I think the automobile, the business, if you think about the great brand names of the twenty century, none of them has been successful in the electric car business, none other. So maybe what made you successful in a business can become actually a problem as the business itself changes a lots of different reasons, brand names faded. But if if you look at brand name as a standalone competitive vantage, IT remains one of the strongest and longest lasting competitive advantages a company can help.

IT sounds like perhaps one of the things you think and let hell should be going after is Young people. Would you say that would be sort of the number one on the agenda for this new .

plan for for nike while taking care? The the one thing you cannot do is go after a new market and forget about the existing market. Remember, the gap in the ninety nineties decided to go Young and ignore the fact that the core market was, you know, thirty five to forty years old, walked in, requiring a cache and just another color shirt.

So they were, they went Young. And in the process, they forgot to take care, the core market. So why is going after the Young market? He's going to make sure is not going over. But it's one thing for an on Young company going after this market to go after the Young. It's another thing for nike, the largest company in this space, to go after the Young market without in some way risking the core market.

So as well, those good to see you when I got out of business school. We love the top to follow those. The best job you could get in one hundred ninety two in the barrier was going to work for and it's twenty twenty one was were three times more than in video.

Now in video were thirty three times what until is Johnson honga sea of of the videos is worth more than intel. That to me, I wonder if it's been oversold because I do think there are some motes there around I P manufacturing facilities. And then the other one where I would also says a great american icon that has fAllen really far is boeing. And I wonder if that's been oversoul given that it's a do opi thoughts on entel. And boy.

and I know again, I was one of the companies I did write about a few weeks ago. I think the the preferences is they were at the top for so long that their stories were the biggest wear the best. And when that slipped, they wanted to go back to the top.

And we think about what they have done over the last ten years. It's not that they haven't tried to do the things that would make them successful. I think they would ve tried too hard, tried too hard, and what sense they tried.

doubt. T S M C, T, S, C, with the tire foundry, huge investments in manufacturing ships, saying we too can be like the m. They even theyve invested, I think, after in video, perhaps even more than a very theyve thrown in billions of dollars into developing.

The next day I check, because they convinced that taken out in video, in video. And I think in the process they've overreached. I call IT me two is a monster's s basically, what intel is done for the last five years is me too. I can do that, and I can do IT five times more expensively than you can.

Now I remember going and didn't tell six, six, seven years ago, I went to their offices and is talking to their, you know, did they ask me to come in and speak to their as a general audience? And when I noticed about intel as a company was the absence of energy. You don't get that sense of excitement and energy wasn't there anymore.

And it's tough to be in the business of intelligence without that driving the choices. I do think though that it's been oversold. I think that no, especially when they drop, allow twenty dollars per share.

You are effectively assuming that intel would drink over time and its margins would go away. Intel has a couple of advantages still that can work in its favour. One is the inflation reduction act.

As you know, put as a priority, no chips made in the U. S. T, S, M, C has built a factory in the U.

S. But intel is supremely well should to take advantage of the subsidies that come out of that. So if intel can find its feet on the foundry business, there's a way back.

And I think that as long as they don't try too hard and accept the fact that they will not dominate a that, that battles lost in video will, but they have each portion the high business they can go after. I think there's a path way back to middle age, not great growth, but middle age for each out. And IT listened to any dollars per share.

I I thought IT was IT was a pretty good bargain as investment I own until now. I've got to be quite like, quite open about that. I did IT after I wrote the peace, and I looked at, know what would happen if they became a three percent growth company in the margin slip by three or four percent, and they were two thousand eight dollars per share.

With those assumptions built in, I can live with those assumptions. I think the odds are, in fact, in your favourite up boing, there is an entirely different story. I mean, i've never seen a company blow up its reputation as thoroughly in his completely as boeing has done over the last twenty years.

I mean, one of the great engineering companies, the world and the company that was, you know, people went to because IT is so, is sub superb engineering and technology knowledge trusted in many dimensions? The only reason boeing is a float is because it's not to Operate. I mean that that that's a reality is this company is so thorough, trashed its credibility in market that do any other market we'll be talking about wrap in out, winding up the story and selling the assets were to others.

I do think they're thinking about telling their space division now, and that's the first face in company saying we're in trouble. We're gona sell off a crown jewels because we have to survive. They're complete survival more. And I don't know, an easy pathway back to credibility because once people get the perception that you cannot be trusted, that your products are not safe, which for aircraft manufactured is diabolically dangerous, it's very difficult to find a pathway back. So boeing, I would not buy at any Price simply because I. And I think there are too many things that can go wrong here that can cause the company, if not to go bankrupt, at least to be taken into receivership by somebody that might maintain the assets and running. But I know the company is in serious, serious trouble.

So two other foreign Angels that i've been kind of leaders in their category held up as icons uh of management um first S A laughter uh which made some of the best acquisitions in the odds with mac consistent in this growth. Great performer are really strong in china.

And then disney, which was always seen as this talk about modes between the intellectual property, the parks, diversify business that owned family and imagination to see incredible brand associations. S A lot is off thirty eight percent year to date. It's been cut in half of the last five years.

Disney is up six percent year today, but is off twenty seven percent in the last five years. Think it's trade and kind of work was about ten years ago. I stay in disney.

I i'll take the disney Price because I think disney is if you are writing a case study about how not to transition man top management, this will be the case study, I think now because let's facit two thousand and twelve in barb egg, o went to the board and said, you know, i'm ready to leave. I mean, I I actually rode a very complementary piece about him then saying this is the way top C E O should behave, is theyve made themselves dispensable and he said, and I blame the board of directors of disney, which I think has to rank up there among the ten worst boards of directors in terms of corporate governance. You know, they convinced bob beggar that the company could not make IT without them.

I mean, I in my class room, my using example of julio scissor and the in the shape point version where he says, no, where they tried to crown of king, he says, no, no, i'm not the king in second time, they try the third time and around he says, okay, i'm the king and in the sense, either initially resisted, but there was so persistent that finally said, you're right. This company cannot make IT without me when he came back in two thousand and fifty thousand is set in motion an entire set of events that disney drill trying to live done. That second layer of management that was waiting to move upside when not waiting around.

You think about tom. I basically go down and look at the people who we're supposed to step in. They all left and moved on, which left disney with an empty cobol in terms of top management skills.

So of course, bob ager became in dispense because there was nobody else left. And I was surprised when he left in twenty twenty to be quite on as because there was really nobody ready to step in. But I think this in his the problem that out of their control as well, the entertainment business is broker.

I mean, I haven't talked to a single persons entertainment to feel secure about what the future will deliver. We know who broke IT netflix dead with trip with the streaming model, but even netflix hasn't benefited from breaking the business. And and that's why, you know, one of the things I often say is disruption is easy, but making money of disruption is really difficult at this point.

The one thing we know is nobody in the entertainment business is healthy, healthy in the sense of you can look at the company said, this company has a business model that's going to deliver sustained profits for the long term. Netflix can do IT. Disney cannot do IT one or cannot do IT paramon definitely cannot do IT.

But this consolidation coming in this business, you're going to see the business consolidate as they order. I have less strong feelings about is a business that i'm not that comfortable. You know, I don't quite understand the movements ads of fashion and drive that business.

I mean, I think that too, there might be a governance issue that we've got to deal with sooner rather than later of you know is with change is needed, is is likely to come with the people running the business. I'm not sure IT is. And I think almost both these big companies, I think, reflect the fact that the underlying businesses they were in for a long time of predictable businesses, that they learned how to Operate. Those businesses have changed. These companies are struggling with an entirely new business that they ran and how to make make their way to success.

On what just a sort of general question about succession planning over on the subject as well. Philosophy on hiring insiders versus outsiders. Hope as a lauder, they've just said they are going to hire where they are going to promote an internal executive to CEO.

We saw the same thing at nike. Starbucks brought in the triple ta guy disney. Sort of balancing that question, what's you you of view on internal external?

I think the question is why are you in trouble? If you're in trouble because of mechanics, logistics, something that in inside the business, and I think IT makes sense to go inside the business, you want to bring somebody you want to start. If your trouble is with story line, you've lost your narrative as a company, you have to go outside.

You have to bring in fresh thinking into the this, I mean, I you know my views and starbucks are it's it's the starbuck story is broken. It's broken because the original starbuck story was to bring the european coffee shop experience to the us, a country which never had that experience and IT succeeded beyond its wild's damaging ation coffee shops, where people came and hang hunger three, four, five hours, and they brought the laptops. That was the starbuck story.

And I hate to bring cover into IT because we blame covered for everything, but cover, in a sense, set the framework for the starbucks story breaking. why? Because IT created the online ordering system. And today, when I walk into a starbucks, I noticed two thousand, five people standing around picking up their online orders, and three people's for lonely, sitting in the coffee shop drinking their coffee. The coffee shop experiences broken.

And it's also created logistical chAllenges, because at eight thirty, the morning, either you live in lay on york or any big city walk with starbucks, like a hundred online orders that come in at the same time, and the brush just can't handle them. You don't have the old mechanism of the line slowing you down. It's created both the story and a logistical prom. The supported guy might be able to solve the logistical prom, but I don't know whether he has a capacity to solve the story problem. And that's going to be the test.

I went into a, starbuck said the day, and I tried to order a coffee and I said, so you can only order your phone, sorry, just time to away and I went back in to the kitchen. I be and .

maybe there's a different story line. Maybe we need to shut down all these expensive lisles of big stores and just have key os's. Maybe that's a Better that's a difference. I'm not saying it's IT. IT is what they .

will do more .

than uber story exactly right? In a sense. That's what it's become. And for Better, was that the reality that c of starbucks will have to face?

absolutely. I was going to shift us over to tech. We've got some big tech earnings rolling out over the next few days. Is there anything you're paying particular attention to in .

these earnings reports i'm looking for, for patterns? If if you see all of them under perform, then that that's a signal that my guess is you going to see what you've seen early, which is, you know you take the max seven, four will be the earning, three will fall. It's almost like if you have all seven in your portfolio, like I do, disappointment on one or offset by gains on the other.

One of these days, that's going to end. They're all going to go down at the same time, but that's going to happen because market correction occurs, which is large, not what you're saying. So I expect the usual pattern. I do think that expectations have been lowered for some of the tech companies in particular, you know for for made in alphabet, expectations are low, are set lower than they used to be. I think it's going to be easier for them to be those expectations. In video, af last earnings report was a crap shoot mean their expectations said so high that even though they beat their estimate by five percent, the stock, of course, to competing IT will be interesting to see if people have adJusting expectations reflect the new reality or not because that's that's you seeing the expectations came and that's i'm watching the expectations came a lot more than the actual gait.

Seems like a lot of I I will see micros, alph, amazon, A A lot of the story there is interestingly actually about in video because their capex is basically in videos top line .

that's spending for those companies revenues. At the same time, the server businesses for all these companies are going ganging busters because the same A I zl that's causing them to spend the money on these A I chips is also causing demand for clouds. So look at microsoft today.

And I was looking at IT last week. IT gets about half its revenge from from the cloud business is more cloud business than software company. Now I never thought I would see that day ten years ago, but still standing how big IT is and how incredibly profitable that businesses. In fact, if you're an ata trust person, you should probably go after the cloud business. Terms of dominance, not the business, is you're going after a smart phone's advertising because that's really where I think you see the dominance play out.

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You can get closer to everything you love about city life in the all new we imagined on cakes. Learn more at W W W D, non U, S, A dog com lashed twenty twenty five dash cakes available feature both is a registered trademark of the boast corporation. Candidate trump, as you've likely heard, Jimmy, the overton window up a few inches at a rally in medicine square garden on sunday with racist, sexist VGA wasn't even a particularly good joke and its seta commentary from speakers. But did you hear the really weird part, the speaker of the house, mike Johnson.

part a nice looking guy, a little beautiful face with a glasses?

Get a little. Yeah, that was also weird. But that's not actually what i'm talking about. Just a little later, truck turned to speaker Johnson.

and he said this, we can take the senate pretty easily. And I think with our little sequent, we're going to do really well with the house, right? Our little seat is having a big impact. And I have a secret. I'll tell you what IT is when the races is over.

That comment is making people nervous because trump does have a plan for if he loses this election. A reporter did some digging into IT we're gonna talk to him today, explained little secrets every weekday, wherever and whenever you get your podcasts.

Back with property markets.

So let's talk about tesla, the most recent ing skull. You saw substantial pop in the stark Price and goes twenty one percent growth of six percent. But the revenue mix was um an improvement.

Some of the higher margin categories ies grew faster than the core business, but IT still seems to be a kind, kind of a hybrid stock. It's it's a company with rock h lows. But IT also feels like IT has some me much qualities to IT your thoughts on the most recent a tesla learnings.

As a tesla owner, I like the learnings because about the talk. I I do think to jump, I on the Price.

the vehicle test .

stock or right? O K. I know hundred civic, a two thousand and ten hand civic, that okay, that basically nobody would steal. So but as a tesla stockholder, IT was good news for me, but I did think I was out of proportion to the good news in the report.

It's almost was a relief rally because we've had so many bad surprises with tesla earnings reports that people have decisive relief ing. Thank you for not seeing the margins drop even more and reporting more bad news because that's what people were would. So it's almost like the consensus numbers of the commission story.

Now the market seems to have as its own set of expectations for companies that if they don't meet or do meet, reflect in the Price. Now I I do think that this this automated driving thing is still very much in the mix, and i'm not sure it's a distraction or in addition to the story to be quite. I think that you know that, that took a lot of the publicity around you know around what happened around the only last earning report.

But I do think that um the the relief was, hey, in at least that going back to the products and services that deliver the highest margins, that's good news. They're not throwing A A turn of money after these businesses they chase in. But I think this is going to be one good earnings report followed by a second earnings report.

We get surprised again. I mean, with tesla, you'd never can rest these the on what you're sitting on. So i'm going to go earnings report, earnings report right now, i'm feeling okay, but who knows what the extra names report will deliver and what new businesses they will clam to be in before the extraordinary report?

The we robot event by most consensus IT was kind of a disaster no is sort of all all talk. No action is what I would say. But the thing that really stuck out to me was the fact that the A I humanoid robots, which are supposed to be the future, it's what's fueling this huge valuation of the company.

They were being controlled by people. They were being voiced by people. They were basically being pumped by people.

Um i'd love to get your view on that and how bad is that. Are we bordering on fraga? Not gonna that far.

but I think we're over promising in gently AI products and service. I think there's a lot of over promising along of these great new devices, which will not need any. You as you point out, many of these AI products and services require almost as many human beings behind them as they claim to replace.

And that's really going to be the test is whether A I I mean, somebody described AI the difference in A I and machine learning is is a different needs to classic in deterministic. Now machine learning is basically deterministic. It's rule driven in principle driven.

What makes A I different and perhaps Better than machine learning is is to cash. IT is just in the moment based on the data IT has and gives you. But we don't know how well IT does that.

I mean, that's I think still an unknown with the A I advocates claim al IT get it'll get Better that A I beings are going to be sentient in some sense and behave more like human beings. But I don't think we've seen any evidence of that happening yet. Maybe IT will, maybe IT will not but I think that um you're you're right what you saw in the robot in the in the robot dynamics face saying this isn't that impressive.

This isn't going to change the world, but it's still early. So i'm going to be am leaving the door open. But I think a lot of and it's not just tesler or crossed the board. I think the product and service part of a ee, i'm hearing a lot of promises, but i'm not seeing much in terms of delivery.

What are your thoughts on uber and potentially the vertical expansion travel? But with a potential acquisition .

of experience to me, big acquisitions are the death north for great companies. I mean, I I know I I just don't like them. I don't like them because you pay a premium on the market prize and you got to liver on those on that market Price.

So of a strategic standpoint, from a marketing standpoint, you might say this is great news, but may not the Price they have to pay to get IT, I don't think is worth IT. I mean, that and that's my body is playing that I do not like acquiring large public companies as part of my growth time because historically, it's almost never delivered enough returns to justify. I'll make a prediction if they do go for the expedia acquisition, that stock Price will drop and will drop prety substantially in the announcement of the acquisition because I think market are the same capacity.

M about growth through big acquisitions. I'd much rather the uber focus on smaller acquisitions, perhaps of private businesses that I put a platform, add to the technology and get them there. I am not sure buying expedience the way to get there.

So I go back to google. One of the big tech companies has been talk from the ftc about breaking up google. The courts have, of course, declared the monopoly.

And where entering into the remedy phase, you believe a break up is not the right remedy. Why are you against a breakup of goole? What kinds of remedies do you think it'd be more appropriate in your view?

Let's talk about the companies that have been broken up successfully. Wide work, stand at all. Easy to break up because I was geographic c you know, basically broke up up to thirty six different companies geographically, eighty against regional bells and long distance.

Microsoft, in two thousand close to break up. They never pulled IT off, but they said office on one side, windows and browsers on the other. I'm not sure where the break up lines would be an alphabet, you know, because alphabet business is not a platform, is an online advertising IT, is multiple platforms and being in the eco system increases their advertising revenues.

I think when I look at alpha about the two businesses that could potentially be broken up on youtube subscriptions, this youtube could argue the subscription model doesn't have to be at the cloud business. Youtube subscriptions, would they survive the stand alone business? I'm not sure they could because I think it's still very heavily subsidized by the advertising business in terms of the how much would cause them to maintain the platform and the crowd business even if you're able to separate IT out what advantage of benefit you get as the justice department IT doesn't take away the dominance, the core business.

I mean, the department justice is worried, is worried because google controls so much of online advertising that's so much float search box. It's would be very difficult to figure out a way to break that because that's IT. It's the natural economic, the business.

I don't like IT, but consolidation that you're seen online advertising is reflective of the networking benefits that you can't make go away through the justice department actions. So I don't think it's going to be affected. It's not that i'd like alphabet a company.

I I like the management. It's just that I don't think I would deliver what the department of justice wants to deliver, which is less dominance from the search box. I think that still going to remain .

couple years ago as well. You essentially said meta, distinct of the how blood man be now because of the hallucination around headsets, the massive investment they made there. You said, look, this is just a cash volcano that's been oversold. When you look at a lot some of these fAllen Angels in these eyelids that are trading a new attentive laws, is there any sector or specific companies that stand out to is being dramatically oversold?

If I look across sectors, I thinks, you know, I would be looking at entertainment, maybe a pair, because shake up happening. And perhaps in the shake up, there are companies that are now falling off the Cliff age don't deserve because it's being shaken up. So now right now, nothing catches my eye.

Is being incredibly cheap in terms of, you know, cash though. But I think that now, as I said, buying these these selectively buying these companies which have drop forty or fifty percent might actually be a pathway. In fact, the last four companies about of all being middle age declining companies with a market Price, I drop much more than I think it's shed.

So now I that's where I would look if our own n investors look at look at companies that are downed, companies which had glorious past. Don't just jump in to them and ask your service their pathway back to these companies. And I think they rise for intel and starbuck if they can find that battle .

are at the beginning of the year. I ask you, professor murderer, what you are most focused on in the public markets as an investor in twenty twenty four, and your answer was the election. We are now days away. The markets appeared to be pricing in a trump win. I love to know what is just generally on your mind right now, particularly as an investor as we approach november of fifth.

You know, IT, sometimes the data comes any after reaction. Your thinking the more I look at what markets are doing, the more I I am getting the impression the markets don't believe that high. The presidential candidate is serious about what they're saying on their plants because if they were, you see much bigger contortions in the market.

You might get a collective market expectation that trump win. But if you look at the sectors, that would be hurt by, let's say, a terf of two hundred percent, you're not saying that similarly, you can look at the companies that would benefit from a Harris when and you're not seeing those companies go up. So it's almost like the markets in these people are not serious about the economic plans as a lot of posture going on.

But the post ring, you might not as well just go back and make a collective judgment rooms going to away. And right now, tax rates are going to go down under trump. Push up the pricing a little bit more.

But I think it's um you know we'll see an insight whether that's true, whether this is a dangerous thing to do. But that's my impression. What markets have done this year, it's been they've been remarkably sanger. As um as both sides are put out the economic plans, but how those economic plans will play out in revenge owning satch flows and market Prices.

Are you thinking about the election in terms of your own investing strategy? Do you have any politically based theses that you're investing towards that you're trying to kind of compartmentalise what's happening in politics?

I tried to avoid politically based investing because i'm a terrible political pregnant ce together. So I i've i've learned to avoid doing things where I don't have any competitive advantage. So I and that is one reason why I never I I under invest in chinese companies because of talked about how china is part of every chinese company's story. I don't like mixing my politics with my investing, and I not prefer to keep IT that way. So the federal way i've stayed away from any bets.

professor modern, is the cost of family are in finance, education and professor finance and why you stone school of business, where he teaches corporate finance and valuation. As always, fascinating and a pleasure. Thank you so much .

for joining us. Thank you. Thank you.

Alza of wealth Scott professor demode oran said he does not like to mix the politics with his investing, where a few days away from the election, IT feels harder than ever to keep those two things separate. What would your advice be to listen to who are probably anxious about this election and what IT could mean for that money?

So my advice would be to do IT professor the motor, and says not what property did. And that is what what is likely to happen regardless of who ends, is that we're going to have more. And some people see that is a good thing, some people see as a bad thing.

And that is any big sweeping changes likely aren't going to happen. And so the notion that you should try and figure out a we don't know is going to win and then try and game like, which comes will do well or poorly based on their Victory is just not a good idea. And I have personal experienced in twenty sixteen, when trump on, I had some experience with trump, hilary companies, and I thought these people are fucking village idiots.

There were some of the worst business people I had ever encountered in business. And I thought, this guy is now running the country. That is really bad ness.

And I I think a week after the election, I sold most, if not all, of my stocks. I was convinced the market was going to crash. The market ripped the year because of tax cuts and other things.

And the fact that I took a tax hit on the sales and that had to buy back in one of the dumas investment decisions i've made. And it's a lesson, and that is your emotions or your enemy. I can't stand the catastrophes on both sides.

Hard core supporters on both sides of each decided that if the other canada wins at the end of america, that lacks historical context and IT doesn't appreciate to recognize how enduring, uh, the american experiment is. And also, I think that's true of the markets. I would not try to game the market here.

I would not try to make any sort of predictions about what impact it's going to have on your stocks or on your investments. So the bottom is stay the course and also recognize for your own mental health. Whatever happens here, make will endure.

This update was produced by celli and engineered by Benjamin Spencer. R. S. Produced is Alice and vice. Musa varia is our, Jessica is our research sociate.

True birds is a technical director, and Katherine delon is our executive producer. Thank you for listen the property markets from the evokes media podcast network. If you like what you heard, give us a follow and join us very fresh take on markets on monday.