April 5, 2024 • 48 mins
Steve Eisman became a famous name in the investing world due to his prescient bet against the US housing market before 2008, which led to his starring role in Michael Lewis' book The Big Short. These days his investing approach looks a little bit more conventional in his role as a senior portfolio manager at Neuberger Berman. But he still has big ideas. These days he sees three dominant macro stories for investors: AI, infrastructure and crypto. The last one he just fundamentally rejects. The first two, however, he sees as tailwinds that can potentially last a long time. He's been looking for companies that can capitalize on trends like nearshoring, the Inflation Reduction Act, and power-hungry datacenters. In this episode show, we he discusses where we are in this big cycle. He also tells us about his love of comic books, and what he sees as the core problem with the Marvel franchise.
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Speaker 1 (00:03):
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:20):
Hello and welcome to another episode of the All Thoughts Podcast.
I'm Tracy Alloway.
Speaker 3 (00:24):
And I'm Jolle Wisenthal.
Speaker 2 (00:26):
Joe, does it feel like we're at a turning point
of some sort? I feel like that's always a dangerous
question to ask on a podcast, because the tendency is
to call turning points or say we're at, you know,
the beginning of some new structural shift. Yeah, because that's
kind of what everyone wants to hear, Right, You.
Speaker 3 (00:44):
Don't have been thinking about That's like super meta and
maybe beyond the scope of anything that we talk about
on a podcast. But just since we're talking about big moments.
When I was a kid, probably my parents thought that
the future would look very different when I'm an adult,
you know. But now I think that for my kids
the future will look so radically different that that I
(01:07):
just can't imagine twenty or thirty years from now anything
being remotely similar to it is today, due to various
things that we're seeing with tech and geopolitics and things
like that.
Speaker 2 (01:17):
Particularly Ai, I don't know, back to the future promised
we'd have flying cars by now, and I'm still waiting.
Speaker 3 (01:23):
They did get video conference. I guess that's too right,
So that's one thing, but yes, you're right.
Speaker 2 (01:27):
All right. Well, there's obviously plenty that we could talk
about when it comes to the future, like what is
realistic and what is sort of pie in the sky
thinking like flying cars. I suspect we're not going to
have those for a while because of various reasons. But
one person we do like to speak to when it
comes to thinking big picture and kind of talking about
these potential paradigm shifts is Steve Eisman. Of course, he's
(01:50):
been on the show a couple of times. He's the
managing director at Newburger Berman and Steve, thank you so
much for coming back on all thoughts.
Speaker 4 (01:58):
Thanks for having me again.
Speaker 2 (01:59):
So big picture thoughts, what are you thinking at the moment?
The last time we had you on, you were talking
about a paradigm shift as interest rates got higher, And
it seems like investors are starting to ratchet down their
expectations for cuts right now, so we might actually get
that higher interest rate environment for longer.
Speaker 4 (02:18):
You know, let's just start with the FED so we
get that out of the way as quickly as possible.
I have felt for a long time. The FED is
extremely insensitive to its own impact on markets. You know,
last was it last week when Powell.
Speaker 3 (02:32):
Spoke, So we're recording this April second, but he spoke
on for I'm.
Speaker 4 (02:37):
Good, you know, when he said that he thought that
because rates are higher, financial conditions are tight. That was
a little weird. I mean, right, credit spreads are extremely narrow.
I've always felt that, like I said, the Fed's insensitive
to its own impact on the markets. It's clearly Fed
wants to cut rates. It once seems to want to
(02:58):
cut rates very very badly. Why wants to cut rates
so badly? I don't understand in that they've engineered something
that's really pretty fantastic. You know. Not only is there
no soft landing, there doesn't need to be any landing.
And as far as you know, the data that I
can see, there seems to be something of a reacceleration
in the economy right now. So why would you cut rates?
(03:19):
What's your rush? You know? The actual What I would say,
even though I think the FED is going to cut rates,
the fear that I think should be out there is
that if they do cut rates and be even more
of resurgence in the economy and there'd be a resurgence
and inflation. So what's why would you rush to take
that risk? I don't get it.
Speaker 3 (03:39):
It's funny you start off. You started off talking about
financial conditions. Actually I wrote about them a little bit
more a little bit this morning, and the question that
I have in my mind measures of financial conditions are
clearly loose, right, so the stock market is basically at
all time highs and put into financial conditions as you mentioned,
credit spreads are pretty tough, and then of course crypto,
(04:01):
which maybe you have thoughts about going to the moon.
So all kinds of measures of in liquid market loosening.
On the other hand, the IPO window still hasn't totally reopened.
It's not obvious that private investment is reaccelerating in some
dramatic way, hiring intentions. The labor market continues to at
least normalize. It's not falling apart by any stretch, but
(04:24):
it's nowhere near where it was. You know a couple
of years ago. Are those tight credit spreads and high
stock prices translating into the economic variables employment and inflation
that the federally cares about.
Speaker 4 (04:37):
Inflation, I can say I think it's too early to
say what's happening there. I mean, the other thing I
could say is that from the companies that I speak
to on the industrial side, things seem to have reaccelerated
this year. Orders it picked up, Supply chain problems aren't
as much of an issue. Nobody's really talking about firing anybody,
you know. Is it perfect? Yeah? What's perfect?
Speaker 3 (04:59):
Sure?
Speaker 4 (04:59):
But things are pretty good. Yeah.
Speaker 2 (05:02):
My framework for understanding this is that the FED basically
can look through loose financial conditions on the assumption that
if it does build out investment and a lot of
the inflationary pressures that we've seen have come about from
supply constraints, then it maybe is reducing inflation longer term
rather than leading to additional inflationary pressures. But one thing
(05:25):
I have to imagine they might not be huge fans
of is crypto. Crypto's back, right. I think bitcoins down
as we're recording this, but it surged to a new
all time high. I don't think anyone was really expecting
crypto to come back in this way when rates are
you still at the highest level in DEPA.
Speaker 4 (05:45):
That's because it has nothing to do with rates. Okay,
so well, let's backtrack first. Sure, here's my big uber picture.
You look, in bad times, people focus on balance sheets
and credit quality, and good times they focus on stories.
And there are three I think great stories of our
time right now, and those are AI and everything having
(06:07):
to do with it, infrastructure, and crypto. And I believe
in the first two and I don't believe in the third,
the thing about crypto. And here's me getting on my soapbox,
so everybody can take this with the grainess whole. I
have no position in crypto, and I never have. But
you know, there are two issues with respect to crypto.
Number one, is it a currency? And number two, if
(06:29):
it's a currency, why should you own it? So let's
bypass issue number one because that's kind of philosophical and say, okay,
it's a currency, why should you own it? And the
people who are advocates of crypto will say exactly the
same thing, which is that there's a problem with FIA currencies,
which is government currencies. There's been too much of it,
there's too much bonduitions, there's too much debt, blah blah blah.
(06:52):
And so if you want to hedge against FIA currency
by crypto, in other words, crypto is like digital gold.
If that's the case and the theory is correct, then
how should crypto act. Crypto should do well when on
days like today where people are starting to worry about
inflation again, interest rates are up and the market is
(07:14):
down and NASDAK is down, and crypto should do poorly
when interest rates are lower, nobody cares about inflation, and
Nvidia is up twenty five percent. And how does crypto
actually act. It acts exactly opposite to its own thesis,
which is the correlation between crypto and NASDAK is very,
very very high. So what does that say to me?
(07:34):
That crypto is just another way that people like to
speculate on because they like to speculate. That's all. That's all.
That's its only use. That and money.
Speaker 3 (07:43):
Laundering, which is a use. Okay, So the three big
stories of our time that people are into AI, infrastructure,
and crypto, two of which you believe in. We know
you don't believe in one of them. Let's go to
infrastructure for a second, because you mentioned that you talked
to a lot of industrial companies. Companies that would be theoretically,
(08:05):
I assume prime to take advantage of a lot of
the building out that's going on. So what are they
saying to you specifically right now? I mean you mentioned
that they're not talking about job cuts, But where are
we in the broader infrastructure cycle Because we saw all
of this money, we saw these various bill We're.
Speaker 4 (08:22):
At the beginning. So here's my soapbox again. I think
that there are several sort of themes that weave its
way into infrastructure. So one is on shoring. You know,
the world spent forty years creating global supply chain that
was incredibly efficient and inexpensive and deflationary and turned out
(08:47):
we all learned during COVID also very brittle. So you're
a CEO. You got a free pass the first time.
You know, if you had supply chain problems, nobody's going
to blame you that you had supply chain problems because
of pandemic. Nobody predicted you get one buy that apple.
If for some reason you have a supply chain problem, again,
that's on you. You get fired for that. So companies
(09:10):
are bringing parts of their supply chain back to the
United States. That's a ten year story and we're like
in year two. That's them one theme. Two is data centers,
which is AI offset offshoot, but it also has industrial
o implications because number one, the GPUs that Nvidia and
AMD is selling utilize three times more electricity than a CPU,
(09:33):
and they're also incredibly hotter, so they require a lot
more of the whole cooling systems that you have to
put into those data centers and brings us to theme three,
which is improvement in the grid. Now, the grid needed
improvement before because of all the pressure that we're putting
on it from electrification, etc. But now that you add
the GPUs on top of it, the pressure on the
(09:54):
grid is even higher. So you know all the industrial
companies that deal with utility that are spending a ton
of money to improve their grids. That's also a very
long term theme and also pretty much in its early stages.
And the last part is greenification, which has been a
long standing theme, but it's going to keep going. And
you take all four of those boxes and you turbocharge them.
(10:16):
By the fact that the United States has not had
an industrial policy in anyone's lifetime, and it has one now.
The combination of the IRA and the IIJA adds up
to about one point two trillion dollars over ten years,
So that'll turbocharge all the four themes that it just
spoke about. That's why infrastructure is so interesting.
Speaker 2 (10:35):
So I remember one of the last times we spoke
to you, you mentioned a specific company, Quantus Services, which
does electrification of the grids something like that.
Speaker 4 (10:45):
It's an engineering construction company, and one of the things
that it does is if utility wants to build a
new plant, et cetera, Quanta builds it for.
Speaker 2 (10:53):
Them, and that one is up. I think around forty
percent since we spoke to you, which has been like
less than a year or so. Are those the kind
of companies that you're trying to find?
Speaker 4 (11:03):
Yes, they're those. Then there are some, you know, materials
companies that are going to be building the roads, the bridges,
et cetera, and you know, everything basically that surrounds that world.
Speaker 2 (11:14):
Would you do pure commodity plays? I mean, copper was
a big one.
Speaker 4 (11:18):
I don't do commodities. These are the things I don't do.
I don't do commodities. I don't do oil, I don't
trade currency. I don't trade commodities and do any of
that stuff. I just buy stocks.
Speaker 3 (11:27):
Say more about some of these because everyone knows in video,
but you do see this in the sell side research
that's coming out, which is that everyone is looking for
these secondary and tertiary plays on AI and so quantus services.
Congratulations on the good pick there, But what are the
other types of companies that you're looking at as part
(11:50):
of this in areas like cooling, which is obviously going
to be huge, or you know, electrical component We got
ism manufacturing out yesterday, transformers can you to be in
shortage for basically three straight years? What is your process
and how are you going about identifying the secondary and
tertiary maybe AI data center plays out there.
Speaker 4 (12:12):
Well, I mean there are it's you know, it's all
the offshoots of the four boxes that I mentioned. There
is the cooling part, there's the grid construction part that
there are the utilities that are more on the green
side than on the not green side. I mean, there's
just a lot to do. I mean, the other thing
that people are that we're trying to figure out is, Okay,
(12:32):
there's Nvidia, there's a MD There's there's Microsoft, you know,
one of our newer stocks. There's Oracle, you know, anyone
who has a huge database of anything consumer businesses. You know,
in the world of AI is probably sitting on a
gold mine. Whether the question is whether they can monetize it.
(12:54):
And then then the next level, which I don't have
an answer to, is Okay, everybody's trying to invent apps.
Whose apps are going to do well? Although my guess
is that one of the bigger beneficiaries is probably going
to be Apple, because at the end of the day,
the consumer I can't possibly predict what apps are going
to do well. But let's assume they're a bunch of them,
(13:17):
and let's assume that a bunch of them are for
the consumer. I have no idea what those are, but
let's assume that they exist, they are created, people are
going to use them on their phone, so AI is
going to have to be on the phone, which so
you know, assume what I'm hearing is that Apple is
talking to every AI creator in the world to say,
(13:37):
you know, come on our platform because we'll make your
app more efficient. They'll probably roll something out in June
when they have their I don't know if it's an
investor day or tech day, but you know, Apple potentially
eventually is going to be one of the bigger beneficiaries
in the second wave.
Speaker 2 (13:53):
Speaking of waves, This is one of the reasons we
wanted to talk to you. How do you separate the
hype around owned AI versus the reality the real opportunity
there because we are seeing this dynamic in the market
now where you know, companies are just mentioning AI in
their press release. Right, everyone's doing AI, everyone's looking into AI.
(14:15):
And again, one of the reasons we like talking to
you is because you are well known for the due
diligence that you do on various things, most famously on
the housing market before two thousand and eight. So how
are you separating the sort of fact from fiction here?
Speaker 4 (14:31):
Well, I mean, the facts are that AI at this
point is really only benefiting a very small number of companies,
most of whom were very, very very large. So that's
we have focused our attention on everything else at this
point seems to me to be hype or potential, and
(14:52):
we don't own those companies. We own the ones where
what's obvious. After that, we'll sing.
Speaker 3 (14:57):
It, you know. Tracy asked about the due diligence process,
and I sort of want to keep driving at this
(15:18):
because you mentioned one company, but like, there are a
bunch of companies out there that probably sell some component
that is useful for utilities. There's probably various companies out
there that sell cables that connect those and video chips
from one to another, and there's various companies that sell
cooling solutions, et cetera. And so in that due diligence process,
(15:40):
like how do you start that, Like what is your
sort of open up the window of like what does
it look like the process of identifying them?
Speaker 4 (15:47):
Well in terms of let's talk on the infrastructure.
Speaker 3 (15:49):
Yeah, yeah, yeah, that's the part of it.
Speaker 4 (15:51):
I have narrowed down that world to where I think
it's significant to about eighty company Okay, And of those eighty,
I would say about thirty are very very interesting. The
(16:14):
other fifty or not so interesting at this point?
Speaker 3 (16:18):
Is that a function of when it's the eighty or
the thirty? Is that about talking to people in the
space and saying, hey, what products do you use?
Speaker 4 (16:25):
No, I mean it's I mean, I've been doing research
on this for the last two years.
Speaker 3 (16:29):
Yeah, so what does that look like.
Speaker 4 (16:31):
It's a lot of work, It's a lot of reading,
you know, it's going to a lot of meetings. You know.
The area that I find is not interesting, for example,
is residential solar Resisolar, I think is just an area
that did very, very well during COVID, but was actually
a major beneficiary of zero rates because people who put
(16:52):
a you know, it costs about thirty thousand dollars to
put a solar system on your roof, and ninety nine
percent of people finance it. And when they were financing
it during COVID, they were financing it at three percent,
and today, if they need to finance it, they're going
to need to fancy it at around nine And one
thing I learned in great school is that nine is
a lot more than three, and so sales are negative.
Now how long they'll stay negative, I don't know, but
(17:14):
I'm not interested in speculating about it, because the fundamentals
right now are poor. On the other hand, you know,
just from a pure fundamental perspective, some of the solar
panel companies that sell stuff to utility they're doing quite well.
Speaker 2 (17:28):
So the other thing that's happened since we last spoke
to you is that we are about ten or twelve
months closer to a presidential election in the US. Does
the infrastructure thesis take a hit if we were to
get Trump in office?
Speaker 4 (17:43):
This perception is reality, so the perception would be that
a Republican administration would be less positive on gratification, and
so maybe some of those stocks would take a hit
because of rhetoric. I think the reality is number one,
and the states that benefit for most of this stuff
are actually red states, including on the solar side. And
(18:06):
number two. You know, one of the reasons why US
solar panel companies, like a coupley like First Solar doing
so well is because there are major tariffs against Chinese
solar producers. Those tariffs were created by President Trump, not
by President Biden. President Biden just reaffirmed them. So at
the end of the day, I don't think it's gonna matter,
(18:28):
although there'll be a lot of noise.
Speaker 3 (18:31):
On the near shoring. You know, this is one of
those things where it's always hard, at least from my
perspective to disentangle like what's talk. You know, you see
a lot of like there might be like a McKinsey
white paper about the benefits of near shoring, and it's like, okay.
Speaker 4 (18:46):
But oh I don't care about stuff.
Speaker 3 (18:47):
Yeah no, no, I know, I know. So I'm trying
to like understand like the what are they doing specifically
the companies, the industrial companies that you're talking to, what
actually is being built either in the US.
Speaker 4 (19:00):
You know it is a long like, you know, two
hour conversation kind of Look, there's some factories that are
being built here. There's some chip factories being bilit here.
There's some other kinds of factories being built here. You
know they All you need to do is listen to
let's say the Eaton conference call when they report, to
understand that they're doing very very well, and they'll do
very well for a long time because of those trends.
(19:21):
Eating corp Yes, etn etn'. I don't own it, but
I done a lot of research on it. You can't
own everything. And they're a company saying what, that's a
company that does electrification for factories.
Speaker 3 (19:34):
Yeah, this stalks on well, and they're saying what specifically on.
Speaker 4 (19:36):
Their calls, they got a lot of orders.
Speaker 3 (19:38):
Okay, that's what they're saying. I'm looking at those share
Eating Corporation, POC manufacturers engineered products for industrial vehicle construction,
commercial on aerospace markets.
Speaker 4 (19:49):
Or take a company right products, fluid connect Take a
company like a newer company. It's not it's an older company,
but it's a new company listen called CRH which is
a materials company. The headquarters is in Ireland, but seventy
five percent of the business in the United States. They
do roads, cement, all that stuff. And on the commercial side,
(20:10):
things are picking up, and they're partially picking up because
of the IRA and the IgA. Money just starting to
be spent. And one of the things that was sent
on the conference call by the CFO was that this
is this is now golden age for infrastructure. I never
heard anybody say I call this a golden age for
their industry, but he said it.
Speaker 2 (20:32):
Yeah, some of the stocks they look a little ai
ish when you look at the charts.
Speaker 3 (20:36):
Street line yeah, straight line up.
Speaker 4 (20:38):
So CRCH is funny because this is a perfect example
of why the thesis that markets are efficient is sometimes nonsense.
So CRCH was a Irish listed UK listed company with
seventy five percent of its businesses in the US. So
materials companies in Europe sell it literally half the multiples
(20:59):
of US companies for whatever reason. And of course all
the cell side analysts who covered CRCH were European analysts,
and the people who cover Volcan materials, let's say, are
US analysts. So crch and September relisted in the US
under thesis said hey, we might get a better valuation
(21:20):
because we're seventy five percent US, and all of a
sudden people are And that's what we started to buy
it because we said to ourselves, this thing sells it
less than half the multiple of its US comps because
it has a different audience.
Speaker 2 (21:34):
That's so funn that's like cell side analyst arbitrage.
Speaker 4 (21:36):
That's exactly what, exactly right, it was cell side analyst arbitrage,
and all of a sudden you had US analysts pick
it up and say, wait a second, this is seventy
five percent US. What am I missing? Huh?
Speaker 2 (21:47):
So one thing that comes up in infrastructure conversations is
this idea of crowding out. So the government is spending
billions and billions of dollars through various programs on building
out infrastructure, I identifying new opportunities, and you know, we
speak to people like Jiggershaw from the Department of Energy's
Loan Office program about how he makes his investments as
(22:10):
a private investor. Do you ever feel like you're competing
with the government in this area in things like renewables
or green energy, or innation.
Speaker 4 (22:18):
I mean, I don't do private investing, so it's not
my problem. I just do public equities.
Speaker 2 (22:24):
Okay, But as a non government investor, do you feel
like it's harder to identify opportunities because the government is
in the mix now more than they used to be, or.
Speaker 4 (22:34):
It's just another part of the story.
Speaker 2 (22:35):
Huh, how do you take it into account?
Speaker 4 (22:38):
They're spending money just trying to figure out who's benefiting.
Just follow the money, follow the money.
Speaker 3 (22:43):
On electrification, you mentioned the grid, and there seems to
be this incredibly wide consensus that the grid is not
currently sufficient.
Speaker 4 (22:52):
That is what in Silicon Valley and the tech world.
That's what they're worried about. They're all talking, they're all
petrified of it.
Speaker 3 (22:59):
Who's going to pay for it?
Speaker 2 (23:00):
Is?
Speaker 3 (23:00):
This was not something the IRA spent a lot of
money in a lot of areas, but it did not
really do anything for the grid itself. And there is
even a lot of acknowledgement.
Speaker 4 (23:10):
Well, there's five hundred billion dollars in tax credits for
green energy stuff. Sure, absolutely, And so you know a
company Lightinexterra, which is will build let's say a solar field,
gets a tax credit to do it. Yes, so that
(23:32):
does that does help.
Speaker 3 (23:33):
Then there's the lines and the wires, and so there's
all these questions about regulations, and there's the question about money,
et cetera. Who's paying for basically the I mean you
mentioned generation on the solar field side, who's paying for
the lines that will connect all these solar fields?
Speaker 4 (23:51):
All the utilities are doing that. Okay, So if you
look at the end of every year, when all the
utilities are put their fourth quarter, at least most of them,
they put out their three year capex budget projections, so
they only comes out once a year. So we just
went through that period. So of the twenty companies that
(24:13):
are very good Newburger Bermam Utility Analyst covers, the average
increase in the three year capex budget is twenty percent.
Speaker 3 (24:23):
Over the last year over the last year.
Speaker 4 (24:25):
In other words, a three year combined forward is twenty
percent higher than than last year's three year budget. That's
basically twenty percent because you're adding one more year or
something like that. That's a lot of money, you know,
and it's been going up and up and up and
up and up every single year because utilities keep spending
money to improve their grids.
Speaker 2 (24:46):
What's the investment opportunity there though? Do you buy the
actual utilities or do you buy the sort of like peripheration.
Speaker 4 (24:52):
You can buy some of the utilities, you know, Unfortunately,
utilities are very interest rate sensitive stocks. So and you know,
in a day life today, probably I'm guessing because rates
or op utilities will go down.
Speaker 3 (25:04):
But the market opens in two minutes.
Speaker 4 (25:09):
But I think some of the utilities that are more
on the greenish side are an interesting opportunity.
Speaker 2 (25:16):
So you've been looking at the infrastructure space for two
years now, as you mentioned, what was the surprising thing
you learned or how does this particular industry vary from
other areas that you have looked at previously.
Speaker 4 (25:31):
I think the big change is that if you take
all the eighty companies, most of them are what would
traditionally be considered very cyclical companies, very traditional cyclical, cyclical
companies with no good secular story other than how's the
economy doing. And for the first time and since I
(25:55):
can remember, this whole group now has a real secular story.
You know, not that they're not sick, they are cyclical,
but they have secular tailwinds that they've never really had before,
and those tailwinds are going to last quite a long time.
Speaker 3 (26:07):
That's the change the xcel u E t F has opened.
It's down a little bit, but down about a tenth
of a percent. There you go. You can count that.
Count that count for me. Yeah, count that as a
w So. Sticking on this theme of the grid and electrification,
actually you mentioned oh now it's up, it's up, so
(26:29):
I'm taking it all. Okay, now it's flat.
Speaker 4 (26:33):
Well, you know what they say about our business. Peacock today,
feather duster tomorrow.
Speaker 3 (26:37):
That's a good one. No, this is the question I
want to ask those three year projections that the utilities
are coming up with, and you sort of talk about
this shift from cyclical industries to secular, how did those
three year projections compare us a five years ago and
no one was talking about AI and no one was
talking about the elect or very.
Speaker 4 (26:55):
I wish I wrot my charge, okay, and I don't
have my chart, but my guess is that the cap
the three year CAPEX budget today versus five years ago,
it's probably fifty percent higher at least. Yeah.
Speaker 3 (27:07):
This is something that Jiggershah who Tracy mentioned, has talked
about which is then basically for the first time and
forever actual there's growth, and then demand which there basically
wasn't before.
Speaker 4 (27:19):
Correct.
Speaker 2 (27:20):
Wait, can I ask something slightly off topic, but I
think is of interest. So we recently had the sentencing
of Sam Bankman freed, and he was the subject of
a Michael Lewis book, as were you in a very
different capacity. Have you heard from Michael Lewis at all?
Do you keep in touch with him?
Speaker 4 (27:40):
We haven't spoken in a couple of years now.
Speaker 2 (27:42):
Did you follow the SPF trial very marginally?
Speaker 4 (27:45):
I have really an opinion about it.
Speaker 2 (27:47):
Did you read the book?
Speaker 4 (27:48):
I did not read the book.
Speaker 2 (27:49):
Okay, this isn't a very interesting line.
Speaker 3 (27:51):
I like that was a good line of questioning, Tracy.
Speaker 1 (27:54):
I try.
Speaker 3 (27:55):
It had the potential, had.
Speaker 4 (27:56):
The potential to go somewhere. Unfortunately it's not going on.
The guest shot it down.
Speaker 2 (28:01):
Yeah, all right. So I hear all this stuff about
excitement about data centers, and as far as I can tell,
like part of the play is investing in I guess
data center reads something like that, Well they're only two.
Speaker 4 (28:14):
Yeah, right?
Speaker 2 (28:15):
Or you invest in like HVAC and the companies that
do the cooling around them. Yeah, so how do you
actually play that thesis? That's what I don't get.
Speaker 4 (28:25):
Well, I mean, like I said, you can own everything,
So I mean, I'm not gonna talk about what I
have a position at these things. You know, Verdive is
the sort of the pure play to sell cooling stuff
into data centers. The stock has gone stratispheric. You know,
the multiple is really high, so you're playing there's a
lot of risk in that, not that the fundamentals are bad.
(28:47):
Equin X and Digital Realty are a more steady eddy
kind of play. You know, what you're dealing with is
that the whole AI story is coming and so the
demand is going to go up, but you're still dealing
with CAPEX budgets having come down in tech, so the
growth is still not great or as good as people
(29:09):
would hope, but it's coming. So that that's seen and
yang on the data centers and they are only two
of them.
Speaker 3 (29:15):
One of the things that we've seen with data centers,
and I think it was a few weeks ago, there
were some headlines about Microsoft wanting to have on site
nuclear power generation and we've talked a little bit about
on this show about the hope the promise of small
modular reactors, which haven't really taken off, but maybe that
(29:35):
could be a solution for some of these huge CAPEX data.
Have you looked at nuclear at all?
Speaker 4 (29:41):
I haven't looked at nuclear. The regulatory situation there is
just so complicated, you know. The one kind of I
think it was a Constellation Energy is the utility that's
done incredibly well because it has nuclear, but it's not creating,
as far as I know, more nuclear plants. It's just
that the value of its existing nuclear plants have gone
up a lot.
Speaker 3 (30:00):
That is a nice looking stock. On the other hand,
New Scale who's tickers literally SMR standing for small modular reactors,
That stock has not done so well, though it did
get a pop. I guess on that Microsoft headline.
Speaker 2 (30:15):
It is interesting. One of the things that's sort of
emerging from those conversation is even though we're talking about
new technologies and things like that, a lot of the
benefits seem to be accruing to the biggest players in
the market. So like the big companies, I don't think
this time last year anyone would have expected Microsoft to
emerge as a leader in AI, and yet that's exactly
(30:37):
what's happened. Is that what people should be focused on, Like,
who's going to dominate these CAPEX heavy tech plays. It's
going to be the guys with the money and the
like existing connections.
Speaker 4 (30:48):
I mean, that's two parts to this. There's no question
at this point the dominant players are the big boys
and they're going to be spending the money. And then
you know, they'll be interesting smaller companies that create apps,
and we have no idea who those are at this point.
None one day they'll show up on your phone.
Speaker 3 (31:05):
Something I'm curious about with the data center reads is
that their reads. I mean, I'm sure, I know they
talk about the AI opportunity and the demand for compute
that's going to in theoretic theoretically keep exploding for years.
But on the other hand, like they're not Google, they're
not Amazon with AWS, they're not in Nvidia. Is there
(31:26):
a risk that like they just can't compete with the
sort of like specialized, more tech forward companies that are
at the very cutting edge of this.
Speaker 4 (31:35):
I mean, you know, the hyperscalers want to build their
own data centers, but you know, an Equinex for example,
services everybody who's not a hyperscaler, So they will do
really well when all the apps that are going to
be created get created and people need to put their
stuff in the cloud, they'll do it through equinex. So
(31:56):
it really Digital Realty is more of a hyperscaler.
Speaker 3 (32:14):
Can you see more about Oracle? For a long time
I sort of thought of that. They always seem to
be straddling in my mind where it's like, and I
don't know that much about the company, but they always
seem to be sort of on the cusp of like,
are they in the category of the hyperscalers. Are they
sort of a legacy software database business that you know, well, they.
Speaker 4 (32:35):
Are legacy software database business that's moving to the cloud. Yes,
they're an AI play. You know. The problem with the
stock has been that every couple of quarters they have
a really bad quarter and they say sorry by this
most right, But in this most recent quarter it seems
to have at least for now gotten their act together.
Speaker 3 (32:52):
And what's working for them.
Speaker 4 (32:55):
You know, the demand because of AI or moving stuff
into the cloud, to move their database into the cloud,
seems to be increasing. Their problem, they say, is that
they haven't been able to buy enough chips to satisfy
the demand. You know, when you think about that, that's
probably it's a better problem to have than the alternative.
And they seem to be getting their act together, so
(33:16):
you know, they finally announced a good quarter and people
got excited about it, which is why the stock finally
did well. That's a more recent purchase of ours.
Speaker 2 (33:23):
Have you tried any of the AI chatbots yet? Chat gpt,
you're too old? You know you can make you can
make comic books on some of them.
Speaker 4 (33:32):
Yes, that you should make a comic book on a
chat chat Joe.
Speaker 2 (33:35):
I didn't realize Steve's a comic book fan.
Speaker 3 (33:38):
Yes, so is there what's the comic book play?
Speaker 4 (33:43):
There's no comic book investing plan that I know of
comic You know, the comic bit is a small.
Speaker 3 (33:47):
Business, but you're really into comic books totally.
Speaker 4 (33:49):
I own the one of the largest digital comic book
collections in the world.
Speaker 3 (33:52):
What does it mean?
Speaker 2 (33:54):
What is that.
Speaker 4 (33:57):
Way?
Speaker 3 (33:58):
What is it?
Speaker 4 (33:59):
Instead of buying a physical book, you now read your
book on your kindle. So comic books became the same thing.
There was an app called Comicsology where you would buy
your comic on Comicsology and you read it on your iPad,
and Amazon bought it, and so my comic book collection
is now in my kindle. So the size of my
(34:20):
comic book collection, I'm very proud to say, as of
this morning, was ten eight hundred and sixty three comics,
on which I have read every single one, for real,
for real, I'm doing this since twenty twelve.
Speaker 3 (34:34):
You know, I imagine, like, I don't know, I mean,
what's the attraction, what's the attraction spending so much of
your time here in life?
Speaker 4 (34:43):
I like to read.
Speaker 3 (34:44):
I read a lot of books, read non comic books.
Speaker 4 (34:48):
I read a tremendous number of books, books, nonfiction and fiction,
and I've always enjoyed reading comics, and the comics have
actually gotten very, very sophisticated in terms of literature, and
I enjoy reading them.
Speaker 2 (35:02):
What's your favorite?
Speaker 4 (35:03):
Oh, that's easy. The greatest comic book ever written is
Sandman Oh by Neil gam Yeah.
Speaker 2 (35:09):
I used to have a Sandman themed tarot card deck
for some reason, even though I know.
Speaker 4 (35:14):
The first season on Netflix was actually quite good.
Speaker 3 (35:17):
What's it about? I don't know anything about.
Speaker 4 (35:19):
Salmon is the god of dreams.
Speaker 3 (35:20):
My son is into Spider Man, so I'm trying to
like bond with him by like getting him.
Speaker 4 (35:25):
I could write a dissertation on Spider Man.
Speaker 3 (35:27):
Oh literally, what would.
Speaker 4 (35:29):
You actually have a little might have a literary theory
of Spider Man.
Speaker 3 (35:32):
Good, tell me this. I need some stuff to like
bond with my son over this.
Speaker 4 (35:36):
Well, you should get your son to read the newer
Spider Man who's called Miles Morales. Oh yeah, he loves
Lyles Miles. So my literary theory on Spider Man is
that Peter Parker was actually Jewish.
Speaker 3 (35:49):
Metaphor keep going, see here's why.
Speaker 4 (35:51):
So first of all, the guy who created him, Stanley
is Jewish or was Jewish. Who is Peter Parker? So
Peter Parker is raised by his elderly, kindly aunt who
looks like your Jewish grandmother. He marries the girl next door,
(36:12):
who's who's the gorgeous non Jewish girls every Jewish boys fantasy,
and and and he and he's consumed by he's a
science geek nerd. And he's consumed by a sense of
guilt and social responsibility. So who is that? That's that
Jewish kid? This is this that's my literary theory. I've
had it for a very long time.
Speaker 3 (36:33):
Do you think Superman is Jewish.
Speaker 4 (36:35):
Definitely not, absolutely not, although he was created by Jewish guys.
Speaker 3 (36:41):
Yeah, because I thought he was Jewish because some of
the other names of his like relatives, and I don't Again,
I'm not a big comic person, but like they have
sort of I thought they sounded sort of Niskay, you're
way off.
Speaker 2 (36:53):
Okay, I'm desperately trying to think of some sort of
finance or markets related.
Speaker 3 (36:58):
Comic book, some way to bring this.
Speaker 2 (37:02):
We could just talk about comic books.
Speaker 4 (37:04):
Well, the only thing you could bring it up to
is I have no opinion on Disney, Okay, but I
can tell you what I think is wrong with the
Marvel comic book movies.
Speaker 2 (37:11):
Tell us Disney owns.
Speaker 4 (37:14):
Disney owns Marvel, and that's been a big source of
their profitability. So I think the problem with Marvel is
that they've lost their story. And they are two parts
of this. So part one was they had a great story.
It was a very complicated story where the villain only
got revealed years after they started the whole process. You know,
it was multiple stories with tangents, but in the end
(37:36):
all wolve it's way back into the last two movies.
And then it was over, and they have not been
able to find a new story, and they've been basically
floundering because they don't have one. And the other major problem,
which is even more serious than the first, is that
there's a concept in comics called the trinity. So in
(37:57):
DC it's Superman, Batman, and Wonder Woman. That's the core,
And in Marvel it's Captain America, Thor and Iron Man.
And at the end of the last Marvel comic, iron
Man's dead. Captain America is over ninety years old, and unfortunately,
since then, Thor has been made into a comedic joke.
So you've lost your trinity. So even if you had
a story, nobody, I don't who's going to care because
(38:19):
because people care about those three characters with anything else
and they're gone, can't make thesis.
Speaker 2 (38:24):
They you just start the whole thing over. Well, you
can read both Spider.
Speaker 4 (38:27):
Man, but you know you have to get new, Uh,
you have to start for fresh. I don't know if
they're willing to do that yet.
Speaker 3 (38:32):
This is such a refreshing, interesting take. We could just
talk about this because I do know like as someone
who I kind of like going to the movies, but
unlike you, I was never a big comic book reader
during that sort of Marvel era of movies, when it
just seemed like the only movies that were in the
theaters were just these endless superhero movies. I just like
totally tuned down, and so I was there religiously.
Speaker 4 (38:55):
Yeah.
Speaker 3 (38:55):
So, but I for one was like kind of I
am relieved and sort of the idea of Hollywood's are
going post superhero and maybe making movies again like Oppenheimer
with normal people.
Speaker 4 (39:07):
By the way, Dune Part two was very good.
Speaker 3 (39:09):
I've been meaning to.
Speaker 2 (39:10):
I haven't seen it yet.
Speaker 3 (39:11):
No spoilers, I haven't seen it yet either, but I
don't know. I for one am excited about a sort
of post superhero.
Speaker 4 (39:18):
That's that's fine. I'm just talking about the problem with Marvelers. Yeah,
but it's but it's a big connect to Disney.
Speaker 3 (39:26):
But right, but it's connected.
Speaker 4 (39:27):
Right.
Speaker 3 (39:27):
So it's like these stories have just gotten tired for
people because there's nowhere to go for them.
Speaker 4 (39:32):
Well, you you need a new story, you need and
they haven't found one, you know. So if I go back,
you know, and I'll show you how into this. I
Am Loki. Season three was terrible. The Marvel's movie, which
is recently was awful. Guardians of the Game, Like, what
made it awful? Because they all look awful. It was
just stupid. The story was dumb, it wasn't interesting, and
(39:53):
they tried to make it too much of a They
have a tendency to try and make the movies too funny,
and it doesn't translate very well anymore. And then the
Guardians of the Galaxy Part three was so boring. I
almost walked out three times.
Speaker 2 (40:06):
Was that one disturbed me because there's a lot of
animal cruelty in that one and it was just kind
of sad to watch.
Speaker 4 (40:13):
There was a lot of animal cruelty to it. They
tried to make it relevant. Yeah, it was just a
bad story.
Speaker 2 (40:18):
Yeah. Has the market for comic books changed in the
sense that so everyone knows if you have a really
successful comic book. Nowadays you can get a franchise attached
to a film franchise. Does anyone come up with characters
based on the idea of like what will play well
on screen? Overall? It feels like you don't actually get
(40:39):
that many new characters in new comic books.
Speaker 4 (40:41):
That many new comics there really.
Speaker 2 (40:43):
Are seems a shame. It seems like it would solve
the story problem if we were actually coming up with
new stories.
Speaker 4 (40:49):
Well, there's new stories, and then there's new characters. There's
always new stories. But you know the problem with Marvel
is they don't have a story. They just don't have
a story.
Speaker 3 (40:58):
I didn't realize that. I didn't anything about this. I
just sort of assumed that there every superhero thing was
just sort of this endless story that could go on forever.
Well it does.
Speaker 4 (41:08):
But when you're making movies, yeah, you know, they what
they had was this They had all these different origin stories.
But then at the end of the day, all the
movies were going towards this one central story, which was
the last two movies, and then it was over. So
now you got to like start again, and they haven't
been able to find how to start again.
Speaker 2 (41:28):
Here's my desperate attempt to bring us back to our
core content. If you could come up with a comic finance,
investing markets economics crossover, what would it be?
Speaker 4 (41:43):
Oh, boy, I don't know, I don't know.
Speaker 2 (41:45):
That's that's that's super portfolio.
Speaker 4 (41:48):
No, no, you know. I used to joke when I
was Halloween, I'd take my kids around just as me
and they'd say, who I say, I'm a hedge fund manager.
I'm the scariest person.
Speaker 2 (42:00):
That's low effort.
Speaker 3 (42:02):
Should we go back to some of your big themes?
Speaker 4 (42:04):
Sure? Why not? Okay, this was more fun though.
Speaker 3 (42:08):
I mean, actually, this has been a true light bulb
moment because all I knew is that people weren't really
watching the Marvel movie is the way they were three
or four year old. And now for the first time
it took me.
Speaker 4 (42:19):
Especially now that one of my favorite characters has always
been four h huh and the last movie was so bad.
I was offended. Really, yes, it's like, how dare you
do that to my character?
Speaker 3 (42:30):
Interesting? God, I really don't know exactly where to take this,
but let's I want to let's just maybe go back
to some of the infrastructure sure questions. It sounds to
me like and maybe this is a sort of investing
philosophy question. And you mentioned the sort of the cell
side analyst arbitrage with that one company that got listed here.
(42:52):
You mentioned the fact that even if there's a change
in administration, that doesn't necessarily change the underlying stories. It
sounds to me like, from a philosophical perspective, your view
is there are big long term trends and don't count.
Don't presume they're all priced in immediately. Even if we
can all agree that there's ten years of growing electricity demand,
(43:14):
there's ten years of demand for greater cooling solutions or
whatever it is, or more cement or more copper.
Speaker 4 (43:21):
I'm not a great believer in it's all priced in. Yeah,
that's I don't subscribe to me.
Speaker 3 (43:26):
Yeah, that's sort of one that I wanted to get
you on, Like, how do you think about that question?
Because I have, like the way I think I have
journalists brands, so I assumed if I know about it,
it's already priced in.
Speaker 4 (43:36):
I mean, you know what people say, it's all priced in.
My question to them is always how do you know?
Did you get the old planet Earth into group therapy?
And ask everybody like is it priced in?
Speaker 1 (43:45):
Like?
Speaker 4 (43:45):
How would you know that? Look, this is a story.
It's a story that's going to last a long time,
and as long as it keeps going, people are going
to want to own it. I mean it gets back
to what I said before. In good times, people traffic
and stories and as long as the story is there
by the stock. I mean, if you go back to
you know the Internet bubble. What killed the Internet bubble?
(44:06):
It wasn't valuation. It wasn't that it was all priced in.
What killed it was that the US engine to a
recession and these companies' fundamentals fell apart. That's what killed It.
Wasn't that that they were very expensive. Well obviously they
were in retrospect. So this, you know, they have this
infrastructure store. I think it is just going to go
(44:26):
on for a very very long time. And as long
as that's the case, people want to own so many stocks.
Speaker 2 (44:31):
All right, Steve, it was so good talking to you again.
We talked about infrastructure, AI, crypto, and of course comic books.
Slightly unexpected, but a lot of fun. Thank you so
much for coming back on our thoughts. Thank you, Joe.
(44:56):
That was really fun. I did not expect us to
spend twenty minutes talking about books, but I enjoyed it.
Speaker 3 (45:01):
No, I'm really excited tonight. Like I said, I'm going
to go home and tell my son that like him,
Peter Parker is Jewish, and see if that mean. Like
I said, I got a bond with my son over
his Spider Man affinity. So that'll be a line.
Speaker 2 (45:13):
You got to develop a literary theory of Spider Man,
just like Steve. That's what you need to do. No,
there is a lot of interesting stuff in there. I
thought the point about stories, so you know, in good
times people are into stories, and then what really tends
to knock those theses are when the bad times start,
and that's when things start crumbling. So far, you know, again,
it is now April of twenty twenty four. We do
(45:36):
not seem to be on the immediate cusp of a recession,
so you can see why people continue to get excited
about these stories. The other thing I thought was interesting
was the idea that like, okay, well, a lot of
the infrastructure programs have been started under the Biden administration. Yeah,
but there are aspects and themes that emanated from the
(45:57):
Trump administration, so things like the subsidy for solar panels
in the fact that we're not importing as many Chinese
solar power panels as we used to and that would
be expected to continue. So yeah, that was interesting totally.
Speaker 3 (46:12):
In general, I liked his point at the very end
about his belief that things aren't just priced in immediately
and as long as things are good, people will write
the story I mean, look, so a year ago. By
a year ago, so April twenty twenty three, it was
unambiguously understood that in video was a key player in AI, right,
(46:33):
it was everyone had used Chad GPT by that point,
everyone knew was trained on in video chips. Everyone's like, oh,
this is crazy, And in that time, in video is
up over fourfold. And I don't think there's like some
new information that about in video or AI that's come out.
It's basically like, oh, just the storage is very good.
And maybe some of the numbers and the degree to
(46:54):
which other companies have piled in or wanted to buy
chips is true. But to his point, these this idea
that it's all priced in the moment we're aware of
the situation is probably a good thing to internalize.
Speaker 2 (47:05):
Yes, And I always think life would be so boring
if you went around just assuming that everything was priced
in immediately, right, Like, what are we even doing here?
If we really believe that?
Speaker 3 (47:16):
Yeah, why do we have a investment industry at all?
If everything I kind of still believe that, but.
Speaker 2 (47:21):
I don't take I refuse to believe it.
Speaker 3 (47:24):
Well, you would be a better investor than I would, No.
Speaker 2 (47:27):
I wouldn't okay, shall we leave it there?
Speaker 3 (47:29):
Let's leave it there.
Speaker 2 (47:30):
This has been another episode of the Odd Thoughts podcast.
I'm Tracy Alloway. You can follow me at Tracy Alloway and.
Speaker 3 (47:36):
I'm Joe Wisenthal. You can follow me at the Stalwart.
Follow our producers Carmen Rodriguez at Carman Arman dash Ol
Bennett at Dashbot and kel Brooks at Keil Brooks. Thank
you to our producer Moses Ondam. For more odd Lots content,
go to Bloomberg dot com slash odd Lots, where we
have transcripts, blog and a newsletter and you can chat
about all of these topics in the discord twenty four
(47:57):
to seven with fellow listeners dot gg slash oud Lots.
Speaker 2 (48:02):
And if you enjoy odd Lots, if you like it
when we talk to Steve Eisman about comic books, then
please leave us a positive review on your favorite podcast platform.
And remember, if you are a Bloomberg subscriber, you can
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Apple Podcasts. Thanks for listening
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:20):
Hello and welcome to another episode of the All Thoughts Podcast.
I'm Tracy Alloway.
Speaker 3 (00:24):
And I'm Jolle Wisenthal.
Speaker 2 (00:26):
Joe, does it feel like we're at a turning point
of some sort? I feel like that's always a dangerous
question to ask on a podcast, because the tendency is
to call turning points or say we're at, you know,
the beginning of some new structural shift. Yeah, because that's
kind of what everyone wants to hear, Right, You.
Speaker 3 (00:44):
Don't have been thinking about That's like super meta and
maybe beyond the scope of anything that we talk about
on a podcast. But just since we're talking about big moments.
When I was a kid, probably my parents thought that
the future would look very different when I'm an adult,
you know. But now I think that for my kids
the future will look so radically different that that I
(01:07):
just can't imagine twenty or thirty years from now anything
being remotely similar to it is today, due to various
things that we're seeing with tech and geopolitics and things
like that.
Speaker 2 (01:17):
Particularly Ai, I don't know, back to the future promised
we'd have flying cars by now, and I'm still waiting.
Speaker 3 (01:23):
They did get video conference. I guess that's too right,
So that's one thing, but yes, you're right.
Speaker 2 (01:27):
All right. Well, there's obviously plenty that we could talk
about when it comes to the future, like what is
realistic and what is sort of pie in the sky
thinking like flying cars. I suspect we're not going to
have those for a while because of various reasons. But
one person we do like to speak to when it
comes to thinking big picture and kind of talking about
these potential paradigm shifts is Steve Eisman. Of course, he's
(01:50):
been on the show a couple of times. He's the
managing director at Newburger Berman and Steve, thank you so
much for coming back on all thoughts.
Speaker 4 (01:58):
Thanks for having me again.
Speaker 2 (01:59):
So big picture thoughts, what are you thinking at the moment?
The last time we had you on, you were talking
about a paradigm shift as interest rates got higher, And
it seems like investors are starting to ratchet down their
expectations for cuts right now, so we might actually get
that higher interest rate environment for longer.
Speaker 4 (02:18):
You know, let's just start with the FED so we
get that out of the way as quickly as possible.
I have felt for a long time. The FED is
extremely insensitive to its own impact on markets. You know,
last was it last week when Powell.
Speaker 3 (02:32):
Spoke, So we're recording this April second, but he spoke
on for I'm.
Speaker 4 (02:37):
Good, you know, when he said that he thought that
because rates are higher, financial conditions are tight. That was
a little weird. I mean, right, credit spreads are extremely narrow.
I've always felt that, like I said, the Fed's insensitive
to its own impact on the markets. It's clearly Fed
wants to cut rates. It once seems to want to
(02:58):
cut rates very very badly. Why wants to cut rates
so badly? I don't understand in that they've engineered something
that's really pretty fantastic. You know. Not only is there
no soft landing, there doesn't need to be any landing.
And as far as you know, the data that I
can see, there seems to be something of a reacceleration
in the economy right now. So why would you cut rates?
(03:19):
What's your rush? You know? The actual What I would say,
even though I think the FED is going to cut rates,
the fear that I think should be out there is
that if they do cut rates and be even more
of resurgence in the economy and there'd be a resurgence
and inflation. So what's why would you rush to take
that risk? I don't get it.
Speaker 3 (03:39):
It's funny you start off. You started off talking about
financial conditions. Actually I wrote about them a little bit
more a little bit this morning, and the question that
I have in my mind measures of financial conditions are
clearly loose, right, so the stock market is basically at
all time highs and put into financial conditions as you mentioned,
credit spreads are pretty tough, and then of course crypto,
(04:01):
which maybe you have thoughts about going to the moon.
So all kinds of measures of in liquid market loosening.
On the other hand, the IPO window still hasn't totally reopened.
It's not obvious that private investment is reaccelerating in some
dramatic way, hiring intentions. The labor market continues to at
least normalize. It's not falling apart by any stretch, but
(04:24):
it's nowhere near where it was. You know a couple
of years ago. Are those tight credit spreads and high
stock prices translating into the economic variables employment and inflation
that the federally cares about.
Speaker 4 (04:37):
Inflation, I can say I think it's too early to
say what's happening there. I mean, the other thing I
could say is that from the companies that I speak
to on the industrial side, things seem to have reaccelerated
this year. Orders it picked up, Supply chain problems aren't
as much of an issue. Nobody's really talking about firing anybody,
you know. Is it perfect? Yeah? What's perfect?
Speaker 3 (04:59):
Sure?
Speaker 4 (04:59):
But things are pretty good. Yeah.
Speaker 2 (05:02):
My framework for understanding this is that the FED basically
can look through loose financial conditions on the assumption that
if it does build out investment and a lot of
the inflationary pressures that we've seen have come about from
supply constraints, then it maybe is reducing inflation longer term
rather than leading to additional inflationary pressures. But one thing
(05:25):
I have to imagine they might not be huge fans
of is crypto. Crypto's back, right. I think bitcoins down
as we're recording this, but it surged to a new
all time high. I don't think anyone was really expecting
crypto to come back in this way when rates are
you still at the highest level in DEPA.
Speaker 4 (05:45):
That's because it has nothing to do with rates. Okay,
so well, let's backtrack first. Sure, here's my big uber picture.
You look, in bad times, people focus on balance sheets
and credit quality, and good times they focus on stories.
And there are three I think great stories of our
time right now, and those are AI and everything having
(06:07):
to do with it, infrastructure, and crypto. And I believe
in the first two and I don't believe in the third,
the thing about crypto. And here's me getting on my soapbox,
so everybody can take this with the grainess whole. I
have no position in crypto, and I never have. But
you know, there are two issues with respect to crypto.
Number one, is it a currency? And number two, if
(06:29):
it's a currency, why should you own it? So let's
bypass issue number one because that's kind of philosophical and say, okay,
it's a currency, why should you own it? And the
people who are advocates of crypto will say exactly the
same thing, which is that there's a problem with FIA currencies,
which is government currencies. There's been too much of it,
there's too much bonduitions, there's too much debt, blah blah blah.
(06:52):
And so if you want to hedge against FIA currency
by crypto, in other words, crypto is like digital gold.
If that's the case and the theory is correct, then
how should crypto act. Crypto should do well when on
days like today where people are starting to worry about
inflation again, interest rates are up and the market is
(07:14):
down and NASDAK is down, and crypto should do poorly
when interest rates are lower, nobody cares about inflation, and
Nvidia is up twenty five percent. And how does crypto
actually act. It acts exactly opposite to its own thesis,
which is the correlation between crypto and NASDAK is very,
very very high. So what does that say to me?
(07:34):
That crypto is just another way that people like to
speculate on because they like to speculate. That's all. That's all.
That's its only use. That and money.
Speaker 3 (07:43):
Laundering, which is a use. Okay, So the three big
stories of our time that people are into AI, infrastructure,
and crypto, two of which you believe in. We know
you don't believe in one of them. Let's go to
infrastructure for a second, because you mentioned that you talked
to a lot of industrial companies. Companies that would be theoretically,
(08:05):
I assume prime to take advantage of a lot of
the building out that's going on. So what are they
saying to you specifically right now? I mean you mentioned
that they're not talking about job cuts, But where are
we in the broader infrastructure cycle Because we saw all
of this money, we saw these various bill We're.
Speaker 4 (08:22):
At the beginning. So here's my soapbox again. I think
that there are several sort of themes that weave its
way into infrastructure. So one is on shoring. You know,
the world spent forty years creating global supply chain that
was incredibly efficient and inexpensive and deflationary and turned out
(08:47):
we all learned during COVID also very brittle. So you're
a CEO. You got a free pass the first time.
You know, if you had supply chain problems, nobody's going
to blame you that you had supply chain problems because
of pandemic. Nobody predicted you get one buy that apple.
If for some reason you have a supply chain problem, again,
that's on you. You get fired for that. So companies
(09:10):
are bringing parts of their supply chain back to the
United States. That's a ten year story and we're like
in year two. That's them one theme. Two is data centers,
which is AI offset offshoot, but it also has industrial
o implications because number one, the GPUs that Nvidia and
AMD is selling utilize three times more electricity than a CPU,
(09:33):
and they're also incredibly hotter, so they require a lot
more of the whole cooling systems that you have to
put into those data centers and brings us to theme three,
which is improvement in the grid. Now, the grid needed
improvement before because of all the pressure that we're putting
on it from electrification, etc. But now that you add
the GPUs on top of it, the pressure on the
(09:54):
grid is even higher. So you know all the industrial
companies that deal with utility that are spending a ton
of money to improve their grids. That's also a very
long term theme and also pretty much in its early stages.
And the last part is greenification, which has been a
long standing theme, but it's going to keep going. And
you take all four of those boxes and you turbocharge them.
(10:16):
By the fact that the United States has not had
an industrial policy in anyone's lifetime, and it has one now.
The combination of the IRA and the IIJA adds up
to about one point two trillion dollars over ten years,
So that'll turbocharge all the four themes that it just
spoke about. That's why infrastructure is so interesting.
Speaker 2 (10:35):
So I remember one of the last times we spoke
to you, you mentioned a specific company, Quantus Services, which
does electrification of the grids something like that.
Speaker 4 (10:45):
It's an engineering construction company, and one of the things
that it does is if utility wants to build a
new plant, et cetera, Quanta builds it for.
Speaker 2 (10:53):
Them, and that one is up. I think around forty
percent since we spoke to you, which has been like
less than a year or so. Are those the kind
of companies that you're trying to find?
Speaker 4 (11:03):
Yes, they're those. Then there are some, you know, materials
companies that are going to be building the roads, the bridges,
et cetera, and you know, everything basically that surrounds that world.
Speaker 2 (11:14):
Would you do pure commodity plays? I mean, copper was
a big one.
Speaker 4 (11:18):
I don't do commodities. These are the things I don't do.
I don't do commodities. I don't do oil, I don't
trade currency. I don't trade commodities and do any of
that stuff. I just buy stocks.
Speaker 3 (11:27):
Say more about some of these because everyone knows in video,
but you do see this in the sell side research
that's coming out, which is that everyone is looking for
these secondary and tertiary plays on AI and so quantus services.
Congratulations on the good pick there, But what are the
other types of companies that you're looking at as part
(11:50):
of this in areas like cooling, which is obviously going
to be huge, or you know, electrical component We got
ism manufacturing out yesterday, transformers can you to be in
shortage for basically three straight years? What is your process
and how are you going about identifying the secondary and
tertiary maybe AI data center plays out there.
Speaker 4 (12:12):
Well, I mean there are it's you know, it's all
the offshoots of the four boxes that I mentioned. There
is the cooling part, there's the grid construction part that
there are the utilities that are more on the green
side than on the not green side. I mean, there's
just a lot to do. I mean, the other thing
that people are that we're trying to figure out is, Okay,
(12:32):
there's Nvidia, there's a MD There's there's Microsoft, you know,
one of our newer stocks. There's Oracle, you know, anyone
who has a huge database of anything consumer businesses. You know,
in the world of AI is probably sitting on a
gold mine. Whether the question is whether they can monetize it.
(12:54):
And then then the next level, which I don't have
an answer to, is Okay, everybody's trying to invent apps.
Whose apps are going to do well? Although my guess
is that one of the bigger beneficiaries is probably going
to be Apple, because at the end of the day,
the consumer I can't possibly predict what apps are going
to do well. But let's assume they're a bunch of them,
(13:17):
and let's assume that a bunch of them are for
the consumer. I have no idea what those are, but
let's assume that they exist, they are created, people are
going to use them on their phone, so AI is
going to have to be on the phone, which so
you know, assume what I'm hearing is that Apple is
talking to every AI creator in the world to say,
(13:37):
you know, come on our platform because we'll make your
app more efficient. They'll probably roll something out in June
when they have their I don't know if it's an
investor day or tech day, but you know, Apple potentially
eventually is going to be one of the bigger beneficiaries
in the second wave.
Speaker 2 (13:53):
Speaking of waves, This is one of the reasons we
wanted to talk to you. How do you separate the
hype around owned AI versus the reality the real opportunity
there because we are seeing this dynamic in the market
now where you know, companies are just mentioning AI in
their press release. Right, everyone's doing AI, everyone's looking into AI.
(14:15):
And again, one of the reasons we like talking to
you is because you are well known for the due
diligence that you do on various things, most famously on
the housing market before two thousand and eight. So how
are you separating the sort of fact from fiction here?
Speaker 4 (14:31):
Well, I mean, the facts are that AI at this
point is really only benefiting a very small number of companies,
most of whom were very, very very large. So that's
we have focused our attention on everything else at this
point seems to me to be hype or potential, and
(14:52):
we don't own those companies. We own the ones where
what's obvious. After that, we'll sing.
Speaker 3 (14:57):
It, you know. Tracy asked about the due diligence process,
and I sort of want to keep driving at this
(15:18):
because you mentioned one company, but like, there are a
bunch of companies out there that probably sell some component
that is useful for utilities. There's probably various companies out
there that sell cables that connect those and video chips
from one to another, and there's various companies that sell
cooling solutions, et cetera. And so in that due diligence process,
(15:40):
like how do you start that, Like what is your
sort of open up the window of like what does
it look like the process of identifying them?
Speaker 4 (15:47):
Well in terms of let's talk on the infrastructure.
Speaker 3 (15:49):
Yeah, yeah, yeah, that's the part of it.
Speaker 4 (15:51):
I have narrowed down that world to where I think
it's significant to about eighty company Okay, And of those eighty,
I would say about thirty are very very interesting. The
(16:14):
other fifty or not so interesting at this point?
Speaker 3 (16:18):
Is that a function of when it's the eighty or
the thirty? Is that about talking to people in the
space and saying, hey, what products do you use?
Speaker 4 (16:25):
No, I mean it's I mean, I've been doing research
on this for the last two years.
Speaker 3 (16:29):
Yeah, so what does that look like.
Speaker 4 (16:31):
It's a lot of work, It's a lot of reading,
you know, it's going to a lot of meetings. You know.
The area that I find is not interesting, for example,
is residential solar Resisolar, I think is just an area
that did very, very well during COVID, but was actually
a major beneficiary of zero rates because people who put
(16:52):
a you know, it costs about thirty thousand dollars to
put a solar system on your roof, and ninety nine
percent of people finance it. And when they were financing
it during COVID, they were financing it at three percent,
and today, if they need to finance it, they're going
to need to fancy it at around nine And one
thing I learned in great school is that nine is
a lot more than three, and so sales are negative.
Now how long they'll stay negative, I don't know, but
(17:14):
I'm not interested in speculating about it, because the fundamentals
right now are poor. On the other hand, you know,
just from a pure fundamental perspective, some of the solar
panel companies that sell stuff to utility they're doing quite well.
Speaker 2 (17:28):
So the other thing that's happened since we last spoke
to you is that we are about ten or twelve
months closer to a presidential election in the US. Does
the infrastructure thesis take a hit if we were to
get Trump in office?
Speaker 4 (17:43):
This perception is reality, so the perception would be that
a Republican administration would be less positive on gratification, and
so maybe some of those stocks would take a hit
because of rhetoric. I think the reality is number one,
and the states that benefit for most of this stuff
are actually red states, including on the solar side. And
(18:06):
number two. You know, one of the reasons why US
solar panel companies, like a coupley like First Solar doing
so well is because there are major tariffs against Chinese
solar producers. Those tariffs were created by President Trump, not
by President Biden. President Biden just reaffirmed them. So at
the end of the day, I don't think it's gonna matter,
(18:28):
although there'll be a lot of noise.
Speaker 3 (18:31):
On the near shoring. You know, this is one of
those things where it's always hard, at least from my
perspective to disentangle like what's talk. You know, you see
a lot of like there might be like a McKinsey
white paper about the benefits of near shoring, and it's like, okay.
Speaker 4 (18:46):
But oh I don't care about stuff.
Speaker 3 (18:47):
Yeah no, no, I know, I know. So I'm trying
to like understand like the what are they doing specifically
the companies, the industrial companies that you're talking to, what
actually is being built either in the US.
Speaker 4 (19:00):
You know it is a long like, you know, two
hour conversation kind of Look, there's some factories that are
being built here. There's some chip factories being bilit here.
There's some other kinds of factories being built here. You
know they All you need to do is listen to
let's say the Eaton conference call when they report, to
understand that they're doing very very well, and they'll do
very well for a long time because of those trends.
(19:21):
Eating corp Yes, etn etn'. I don't own it, but
I done a lot of research on it. You can't
own everything. And they're a company saying what, that's a
company that does electrification for factories.
Speaker 3 (19:34):
Yeah, this stalks on well, and they're saying what specifically on.
Speaker 4 (19:36):
Their calls, they got a lot of orders.
Speaker 3 (19:38):
Okay, that's what they're saying. I'm looking at those share
Eating Corporation, POC manufacturers engineered products for industrial vehicle construction,
commercial on aerospace markets.
Speaker 4 (19:49):
Or take a company right products, fluid connect Take a
company like a newer company. It's not it's an older company,
but it's a new company listen called CRH which is
a materials company. The headquarters is in Ireland, but seventy
five percent of the business in the United States. They
do roads, cement, all that stuff. And on the commercial side,
(20:10):
things are picking up, and they're partially picking up because
of the IRA and the IgA. Money just starting to
be spent. And one of the things that was sent
on the conference call by the CFO was that this
is this is now golden age for infrastructure. I never
heard anybody say I call this a golden age for
their industry, but he said it.
Speaker 2 (20:32):
Yeah, some of the stocks they look a little ai
ish when you look at the charts.
Speaker 3 (20:36):
Street line yeah, straight line up.
Speaker 4 (20:38):
So CRCH is funny because this is a perfect example
of why the thesis that markets are efficient is sometimes nonsense.
So CRCH was a Irish listed UK listed company with
seventy five percent of its businesses in the US. So
materials companies in Europe sell it literally half the multiples
(20:59):
of US companies for whatever reason. And of course all
the cell side analysts who covered CRCH were European analysts,
and the people who cover Volcan materials, let's say, are
US analysts. So crch and September relisted in the US
under thesis said hey, we might get a better valuation
(21:20):
because we're seventy five percent US, and all of a
sudden people are And that's what we started to buy
it because we said to ourselves, this thing sells it
less than half the multiple of its US comps because
it has a different audience.
Speaker 2 (21:34):
That's so funn that's like cell side analyst arbitrage.
Speaker 4 (21:36):
That's exactly what, exactly right, it was cell side analyst arbitrage,
and all of a sudden you had US analysts pick
it up and say, wait a second, this is seventy
five percent US. What am I missing? Huh?
Speaker 2 (21:47):
So one thing that comes up in infrastructure conversations is
this idea of crowding out. So the government is spending
billions and billions of dollars through various programs on building
out infrastructure, I identifying new opportunities, and you know, we
speak to people like Jiggershaw from the Department of Energy's
Loan Office program about how he makes his investments as
(22:10):
a private investor. Do you ever feel like you're competing
with the government in this area in things like renewables
or green energy, or innation.
Speaker 4 (22:18):
I mean, I don't do private investing, so it's not
my problem. I just do public equities.
Speaker 2 (22:24):
Okay, But as a non government investor, do you feel
like it's harder to identify opportunities because the government is
in the mix now more than they used to be, or.
Speaker 4 (22:34):
It's just another part of the story.
Speaker 2 (22:35):
Huh, how do you take it into account?
Speaker 4 (22:38):
They're spending money just trying to figure out who's benefiting.
Just follow the money, follow the money.
Speaker 3 (22:43):
On electrification, you mentioned the grid, and there seems to
be this incredibly wide consensus that the grid is not
currently sufficient.
Speaker 4 (22:52):
That is what in Silicon Valley and the tech world.
That's what they're worried about. They're all talking, they're all
petrified of it.
Speaker 3 (22:59):
Who's going to pay for it?
Speaker 2 (23:00):
Is?
Speaker 3 (23:00):
This was not something the IRA spent a lot of
money in a lot of areas, but it did not
really do anything for the grid itself. And there is
even a lot of acknowledgement.
Speaker 4 (23:10):
Well, there's five hundred billion dollars in tax credits for
green energy stuff. Sure, absolutely, And so you know a
company Lightinexterra, which is will build let's say a solar field,
gets a tax credit to do it. Yes, so that
(23:32):
does that does help.
Speaker 3 (23:33):
Then there's the lines and the wires, and so there's
all these questions about regulations, and there's the question about money,
et cetera. Who's paying for basically the I mean you
mentioned generation on the solar field side, who's paying for
the lines that will connect all these solar fields?
Speaker 4 (23:51):
All the utilities are doing that. Okay, So if you
look at the end of every year, when all the
utilities are put their fourth quarter, at least most of them,
they put out their three year capex budget projections, so
they only comes out once a year. So we just
went through that period. So of the twenty companies that
(24:13):
are very good Newburger Bermam Utility Analyst covers, the average
increase in the three year capex budget is twenty percent.
Speaker 3 (24:23):
Over the last year over the last year.
Speaker 4 (24:25):
In other words, a three year combined forward is twenty
percent higher than than last year's three year budget. That's
basically twenty percent because you're adding one more year or
something like that. That's a lot of money, you know,
and it's been going up and up and up and
up and up every single year because utilities keep spending
money to improve their grids.
Speaker 2 (24:46):
What's the investment opportunity there though? Do you buy the
actual utilities or do you buy the sort of like peripheration.
Speaker 4 (24:52):
You can buy some of the utilities, you know, Unfortunately,
utilities are very interest rate sensitive stocks. So and you know,
in a day life today, probably I'm guessing because rates
or op utilities will go down.
Speaker 3 (25:04):
But the market opens in two minutes.
Speaker 4 (25:09):
But I think some of the utilities that are more
on the greenish side are an interesting opportunity.
Speaker 2 (25:16):
So you've been looking at the infrastructure space for two
years now, as you mentioned, what was the surprising thing
you learned or how does this particular industry vary from
other areas that you have looked at previously.
Speaker 4 (25:31):
I think the big change is that if you take
all the eighty companies, most of them are what would
traditionally be considered very cyclical companies, very traditional cyclical, cyclical
companies with no good secular story other than how's the
economy doing. And for the first time and since I
(25:55):
can remember, this whole group now has a real secular story.
You know, not that they're not sick, they are cyclical,
but they have secular tailwinds that they've never really had before,
and those tailwinds are going to last quite a long time.
Speaker 3 (26:07):
That's the change the xcel u E t F has opened.
It's down a little bit, but down about a tenth
of a percent. There you go. You can count that.
Count that count for me. Yeah, count that as a
w So. Sticking on this theme of the grid and electrification,
actually you mentioned oh now it's up, it's up, so
(26:29):
I'm taking it all. Okay, now it's flat.
Speaker 4 (26:33):
Well, you know what they say about our business. Peacock today,
feather duster tomorrow.
Speaker 3 (26:37):
That's a good one. No, this is the question I
want to ask those three year projections that the utilities
are coming up with, and you sort of talk about
this shift from cyclical industries to secular, how did those
three year projections compare us a five years ago and
no one was talking about AI and no one was
talking about the elect or very.
Speaker 4 (26:55):
I wish I wrot my charge, okay, and I don't
have my chart, but my guess is that the cap
the three year CAPEX budget today versus five years ago,
it's probably fifty percent higher at least. Yeah.
Speaker 3 (27:07):
This is something that Jiggershah who Tracy mentioned, has talked
about which is then basically for the first time and
forever actual there's growth, and then demand which there basically
wasn't before.
Speaker 4 (27:19):
Correct.
Speaker 2 (27:20):
Wait, can I ask something slightly off topic, but I
think is of interest. So we recently had the sentencing
of Sam Bankman freed, and he was the subject of
a Michael Lewis book, as were you in a very
different capacity. Have you heard from Michael Lewis at all?
Do you keep in touch with him?
Speaker 4 (27:40):
We haven't spoken in a couple of years now.
Speaker 2 (27:42):
Did you follow the SPF trial very marginally?
Speaker 4 (27:45):
I have really an opinion about it.
Speaker 2 (27:47):
Did you read the book?
Speaker 4 (27:48):
I did not read the book.
Speaker 2 (27:49):
Okay, this isn't a very interesting line.
Speaker 3 (27:51):
I like that was a good line of questioning, Tracy.
Speaker 1 (27:54):
I try.
Speaker 3 (27:55):
It had the potential, had.
Speaker 4 (27:56):
The potential to go somewhere. Unfortunately it's not going on.
The guest shot it down.
Speaker 2 (28:01):
Yeah, all right. So I hear all this stuff about
excitement about data centers, and as far as I can tell,
like part of the play is investing in I guess
data center reads something like that, Well they're only two.
Speaker 4 (28:14):
Yeah, right?
Speaker 2 (28:15):
Or you invest in like HVAC and the companies that
do the cooling around them. Yeah, so how do you
actually play that thesis? That's what I don't get.
Speaker 4 (28:25):
Well, I mean, like I said, you can own everything,
So I mean, I'm not gonna talk about what I
have a position at these things. You know, Verdive is
the sort of the pure play to sell cooling stuff
into data centers. The stock has gone stratispheric. You know,
the multiple is really high, so you're playing there's a
lot of risk in that, not that the fundamentals are bad.
(28:47):
Equin X and Digital Realty are a more steady eddy
kind of play. You know, what you're dealing with is
that the whole AI story is coming and so the
demand is going to go up, but you're still dealing
with CAPEX budgets having come down in tech, so the
growth is still not great or as good as people
(29:09):
would hope, but it's coming. So that that's seen and
yang on the data centers and they are only two
of them.
Speaker 3 (29:15):
One of the things that we've seen with data centers,
and I think it was a few weeks ago, there
were some headlines about Microsoft wanting to have on site
nuclear power generation and we've talked a little bit about
on this show about the hope the promise of small
modular reactors, which haven't really taken off, but maybe that
(29:35):
could be a solution for some of these huge CAPEX data.
Have you looked at nuclear at all?
Speaker 4 (29:41):
I haven't looked at nuclear. The regulatory situation there is
just so complicated, you know. The one kind of I
think it was a Constellation Energy is the utility that's
done incredibly well because it has nuclear, but it's not creating,
as far as I know, more nuclear plants. It's just
that the value of its existing nuclear plants have gone
up a lot.
Speaker 3 (30:00):
That is a nice looking stock. On the other hand,
New Scale who's tickers literally SMR standing for small modular reactors,
That stock has not done so well, though it did
get a pop. I guess on that Microsoft headline.
Speaker 2 (30:15):
It is interesting. One of the things that's sort of
emerging from those conversation is even though we're talking about
new technologies and things like that, a lot of the
benefits seem to be accruing to the biggest players in
the market. So like the big companies, I don't think
this time last year anyone would have expected Microsoft to
emerge as a leader in AI, and yet that's exactly
(30:37):
what's happened. Is that what people should be focused on, Like,
who's going to dominate these CAPEX heavy tech plays. It's
going to be the guys with the money and the
like existing connections.
Speaker 4 (30:48):
I mean, that's two parts to this. There's no question
at this point the dominant players are the big boys
and they're going to be spending the money. And then
you know, they'll be interesting smaller companies that create apps,
and we have no idea who those are at this point.
None one day they'll show up on your phone.
Speaker 3 (31:05):
Something I'm curious about with the data center reads is
that their reads. I mean, I'm sure, I know they
talk about the AI opportunity and the demand for compute
that's going to in theoretic theoretically keep exploding for years.
But on the other hand, like they're not Google, they're
not Amazon with AWS, they're not in Nvidia. Is there
(31:26):
a risk that like they just can't compete with the
sort of like specialized, more tech forward companies that are
at the very cutting edge of this.
Speaker 4 (31:35):
I mean, you know, the hyperscalers want to build their
own data centers, but you know, an Equinex for example,
services everybody who's not a hyperscaler, So they will do
really well when all the apps that are going to
be created get created and people need to put their
stuff in the cloud, they'll do it through equinex. So
(31:56):
it really Digital Realty is more of a hyperscaler.
Speaker 3 (32:14):
Can you see more about Oracle? For a long time
I sort of thought of that. They always seem to
be straddling in my mind where it's like, and I
don't know that much about the company, but they always
seem to be sort of on the cusp of like,
are they in the category of the hyperscalers. Are they
sort of a legacy software database business that you know, well, they.
Speaker 4 (32:35):
Are legacy software database business that's moving to the cloud. Yes,
they're an AI play. You know. The problem with the
stock has been that every couple of quarters they have
a really bad quarter and they say sorry by this
most right, But in this most recent quarter it seems
to have at least for now gotten their act together.
Speaker 3 (32:52):
And what's working for them.
Speaker 4 (32:55):
You know, the demand because of AI or moving stuff
into the cloud, to move their database into the cloud,
seems to be increasing. Their problem, they say, is that
they haven't been able to buy enough chips to satisfy
the demand. You know, when you think about that, that's
probably it's a better problem to have than the alternative.
And they seem to be getting their act together, so
(33:16):
you know, they finally announced a good quarter and people
got excited about it, which is why the stock finally
did well. That's a more recent purchase of ours.
Speaker 2 (33:23):
Have you tried any of the AI chatbots yet? Chat gpt,
you're too old? You know you can make you can
make comic books on some of them.
Speaker 4 (33:32):
Yes, that you should make a comic book on a
chat chat Joe.
Speaker 2 (33:35):
I didn't realize Steve's a comic book fan.
Speaker 3 (33:38):
Yes, so is there what's the comic book play?
Speaker 4 (33:43):
There's no comic book investing plan that I know of
comic You know, the comic bit is a small.
Speaker 3 (33:47):
Business, but you're really into comic books totally.
Speaker 4 (33:49):
I own the one of the largest digital comic book
collections in the world.
Speaker 3 (33:52):
What does it mean?
Speaker 2 (33:54):
What is that.
Speaker 4 (33:57):
Way?
Speaker 3 (33:58):
What is it?
Speaker 4 (33:59):
Instead of buying a physical book, you now read your
book on your kindle. So comic books became the same thing.
There was an app called Comicsology where you would buy
your comic on Comicsology and you read it on your iPad,
and Amazon bought it, and so my comic book collection
is now in my kindle. So the size of my
(34:20):
comic book collection, I'm very proud to say, as of
this morning, was ten eight hundred and sixty three comics,
on which I have read every single one, for real,
for real, I'm doing this since twenty twelve.
Speaker 3 (34:34):
You know, I imagine, like, I don't know, I mean,
what's the attraction, what's the attraction spending so much of
your time here in life?
Speaker 4 (34:43):
I like to read.
Speaker 3 (34:44):
I read a lot of books, read non comic books.
Speaker 4 (34:48):
I read a tremendous number of books, books, nonfiction and fiction,
and I've always enjoyed reading comics, and the comics have
actually gotten very, very sophisticated in terms of literature, and
I enjoy reading them.
Speaker 2 (35:02):
What's your favorite?
Speaker 4 (35:03):
Oh, that's easy. The greatest comic book ever written is
Sandman Oh by Neil gam Yeah.
Speaker 2 (35:09):
I used to have a Sandman themed tarot card deck
for some reason, even though I know.
Speaker 4 (35:14):
The first season on Netflix was actually quite good.
Speaker 3 (35:17):
What's it about? I don't know anything about.
Speaker 4 (35:19):
Salmon is the god of dreams.
Speaker 3 (35:20):
My son is into Spider Man, so I'm trying to
like bond with him by like getting him.
Speaker 4 (35:25):
I could write a dissertation on Spider Man.
Speaker 3 (35:27):
Oh literally, what would.
Speaker 4 (35:29):
You actually have a little might have a literary theory
of Spider Man.
Speaker 3 (35:32):
Good, tell me this. I need some stuff to like
bond with my son over this.
Speaker 4 (35:36):
Well, you should get your son to read the newer
Spider Man who's called Miles Morales. Oh yeah, he loves
Lyles Miles. So my literary theory on Spider Man is
that Peter Parker was actually Jewish.
Speaker 3 (35:49):
Metaphor keep going, see here's why.
Speaker 4 (35:51):
So first of all, the guy who created him, Stanley
is Jewish or was Jewish. Who is Peter Parker? So
Peter Parker is raised by his elderly, kindly aunt who
looks like your Jewish grandmother. He marries the girl next door,
(36:12):
who's who's the gorgeous non Jewish girls every Jewish boys fantasy,
and and and he and he's consumed by he's a
science geek nerd. And he's consumed by a sense of
guilt and social responsibility. So who is that? That's that
Jewish kid? This is this that's my literary theory. I've
had it for a very long time.
Speaker 3 (36:33):
Do you think Superman is Jewish.
Speaker 4 (36:35):
Definitely not, absolutely not, although he was created by Jewish guys.
Speaker 3 (36:41):
Yeah, because I thought he was Jewish because some of
the other names of his like relatives, and I don't Again,
I'm not a big comic person, but like they have
sort of I thought they sounded sort of Niskay, you're
way off.
Speaker 2 (36:53):
Okay, I'm desperately trying to think of some sort of
finance or markets related.
Speaker 3 (36:58):
Comic book, some way to bring this.
Speaker 2 (37:02):
We could just talk about comic books.
Speaker 4 (37:04):
Well, the only thing you could bring it up to
is I have no opinion on Disney, Okay, but I
can tell you what I think is wrong with the
Marvel comic book movies.
Speaker 2 (37:11):
Tell us Disney owns.
Speaker 4 (37:14):
Disney owns Marvel, and that's been a big source of
their profitability. So I think the problem with Marvel is
that they've lost their story. And they are two parts
of this. So part one was they had a great story.
It was a very complicated story where the villain only
got revealed years after they started the whole process. You know,
it was multiple stories with tangents, but in the end
(37:36):
all wolve it's way back into the last two movies.
And then it was over, and they have not been
able to find a new story, and they've been basically
floundering because they don't have one. And the other major problem,
which is even more serious than the first, is that
there's a concept in comics called the trinity. So in
(37:57):
DC it's Superman, Batman, and Wonder Woman. That's the core,
And in Marvel it's Captain America, Thor and Iron Man.
And at the end of the last Marvel comic, iron
Man's dead. Captain America is over ninety years old, and unfortunately,
since then, Thor has been made into a comedic joke.
So you've lost your trinity. So even if you had
a story, nobody, I don't who's going to care because
(38:19):
because people care about those three characters with anything else
and they're gone, can't make thesis.
Speaker 2 (38:24):
They you just start the whole thing over. Well, you
can read both Spider.
Speaker 4 (38:27):
Man, but you know you have to get new, Uh,
you have to start for fresh. I don't know if
they're willing to do that yet.
Speaker 3 (38:32):
This is such a refreshing, interesting take. We could just
talk about this because I do know like as someone
who I kind of like going to the movies, but
unlike you, I was never a big comic book reader
during that sort of Marvel era of movies, when it
just seemed like the only movies that were in the
theaters were just these endless superhero movies. I just like
totally tuned down, and so I was there religiously.
Speaker 4 (38:55):
Yeah.
Speaker 3 (38:55):
So, but I for one was like kind of I
am relieved and sort of the idea of Hollywood's are
going post superhero and maybe making movies again like Oppenheimer
with normal people.
Speaker 4 (39:07):
By the way, Dune Part two was very good.
Speaker 3 (39:09):
I've been meaning to.
Speaker 2 (39:10):
I haven't seen it yet.
Speaker 3 (39:11):
No spoilers, I haven't seen it yet either, but I
don't know. I for one am excited about a sort
of post superhero.
Speaker 4 (39:18):
That's that's fine. I'm just talking about the problem with Marvelers. Yeah,
but it's but it's a big connect to Disney.
Speaker 3 (39:26):
But right, but it's connected.
Speaker 4 (39:27):
Right.
Speaker 3 (39:27):
So it's like these stories have just gotten tired for
people because there's nowhere to go for them.
Speaker 4 (39:32):
Well, you you need a new story, you need and
they haven't found one, you know. So if I go back,
you know, and I'll show you how into this. I
Am Loki. Season three was terrible. The Marvel's movie, which
is recently was awful. Guardians of the Game, Like, what
made it awful? Because they all look awful. It was
just stupid. The story was dumb, it wasn't interesting, and
(39:53):
they tried to make it too much of a They
have a tendency to try and make the movies too funny,
and it doesn't translate very well anymore. And then the
Guardians of the Galaxy Part three was so boring. I
almost walked out three times.
Speaker 2 (40:06):
Was that one disturbed me because there's a lot of
animal cruelty in that one and it was just kind
of sad to watch.
Speaker 4 (40:13):
There was a lot of animal cruelty to it. They
tried to make it relevant. Yeah, it was just a
bad story.
Speaker 2 (40:18):
Yeah. Has the market for comic books changed in the
sense that so everyone knows if you have a really
successful comic book. Nowadays you can get a franchise attached
to a film franchise. Does anyone come up with characters
based on the idea of like what will play well
on screen? Overall? It feels like you don't actually get
(40:39):
that many new characters in new comic books.
Speaker 4 (40:41):
That many new comics there really.
Speaker 2 (40:43):
Are seems a shame. It seems like it would solve
the story problem if we were actually coming up with
new stories.
Speaker 4 (40:49):
Well, there's new stories, and then there's new characters. There's
always new stories. But you know the problem with Marvel
is they don't have a story. They just don't have
a story.
Speaker 3 (40:58):
I didn't realize that. I didn't anything about this. I
just sort of assumed that there every superhero thing was
just sort of this endless story that could go on forever.
Well it does.
Speaker 4 (41:08):
But when you're making movies, yeah, you know, they what
they had was this They had all these different origin stories.
But then at the end of the day, all the
movies were going towards this one central story, which was
the last two movies, and then it was over. So
now you got to like start again, and they haven't
been able to find how to start again.
Speaker 2 (41:28):
Here's my desperate attempt to bring us back to our
core content. If you could come up with a comic finance,
investing markets economics crossover, what would it be?
Speaker 4 (41:43):
Oh, boy, I don't know, I don't know.
Speaker 2 (41:45):
That's that's that's super portfolio.
Speaker 4 (41:48):
No, no, you know. I used to joke when I
was Halloween, I'd take my kids around just as me
and they'd say, who I say, I'm a hedge fund manager.
I'm the scariest person.
Speaker 2 (42:00):
That's low effort.
Speaker 3 (42:02):
Should we go back to some of your big themes?
Speaker 4 (42:04):
Sure? Why not? Okay, this was more fun though.
Speaker 3 (42:08):
I mean, actually, this has been a true light bulb
moment because all I knew is that people weren't really
watching the Marvel movie is the way they were three
or four year old. And now for the first time
it took me.
Speaker 4 (42:19):
Especially now that one of my favorite characters has always
been four h huh and the last movie was so bad.
I was offended. Really, yes, it's like, how dare you
do that to my character?
Speaker 3 (42:30):
Interesting? God, I really don't know exactly where to take this,
but let's I want to let's just maybe go back
to some of the infrastructure sure questions. It sounds to
me like and maybe this is a sort of investing
philosophy question. And you mentioned the sort of the cell
side analyst arbitrage with that one company that got listed here.
(42:52):
You mentioned the fact that even if there's a change
in administration, that doesn't necessarily change the underlying stories. It
sounds to me like, from a philosophical perspective, your view
is there are big long term trends and don't count.
Don't presume they're all priced in immediately. Even if we
can all agree that there's ten years of growing electricity demand,
(43:14):
there's ten years of demand for greater cooling solutions or
whatever it is, or more cement or more copper.
Speaker 4 (43:21):
I'm not a great believer in it's all priced in. Yeah,
that's I don't subscribe to me.
Speaker 3 (43:26):
Yeah, that's sort of one that I wanted to get
you on, Like, how do you think about that question?
Because I have, like the way I think I have
journalists brands, so I assumed if I know about it,
it's already priced in.
Speaker 4 (43:36):
I mean, you know what people say, it's all priced in.
My question to them is always how do you know?
Did you get the old planet Earth into group therapy?
And ask everybody like is it priced in?
Speaker 1 (43:45):
Like?
Speaker 4 (43:45):
How would you know that? Look, this is a story.
It's a story that's going to last a long time,
and as long as it keeps going, people are going
to want to own it. I mean it gets back
to what I said before. In good times, people traffic
and stories and as long as the story is there
by the stock. I mean, if you go back to
you know the Internet bubble. What killed the Internet bubble?
(44:06):
It wasn't valuation. It wasn't that it was all priced in.
What killed it was that the US engine to a
recession and these companies' fundamentals fell apart. That's what killed It.
Wasn't that that they were very expensive. Well obviously they
were in retrospect. So this, you know, they have this
infrastructure store. I think it is just going to go
(44:26):
on for a very very long time. And as long
as that's the case, people want to own so many stocks.
Speaker 2 (44:31):
All right, Steve, it was so good talking to you again.
We talked about infrastructure, AI, crypto, and of course comic books.
Slightly unexpected, but a lot of fun. Thank you so
much for coming back on our thoughts. Thank you, Joe.
(44:56):
That was really fun. I did not expect us to
spend twenty minutes talking about books, but I enjoyed it.
Speaker 3 (45:01):
No, I'm really excited tonight. Like I said, I'm going
to go home and tell my son that like him,
Peter Parker is Jewish, and see if that mean. Like
I said, I got a bond with my son over
his Spider Man affinity. So that'll be a line.
Speaker 2 (45:13):
You got to develop a literary theory of Spider Man,
just like Steve. That's what you need to do. No,
there is a lot of interesting stuff in there. I
thought the point about stories, so you know, in good
times people are into stories, and then what really tends
to knock those theses are when the bad times start,
and that's when things start crumbling. So far, you know, again,
it is now April of twenty twenty four. We do
(45:36):
not seem to be on the immediate cusp of a recession,
so you can see why people continue to get excited
about these stories. The other thing I thought was interesting
was the idea that like, okay, well, a lot of
the infrastructure programs have been started under the Biden administration. Yeah,
but there are aspects and themes that emanated from the
(45:57):
Trump administration, so things like the subsidy for solar panels
in the fact that we're not importing as many Chinese
solar power panels as we used to and that would
be expected to continue. So yeah, that was interesting totally.
Speaker 3 (46:12):
In general, I liked his point at the very end
about his belief that things aren't just priced in immediately
and as long as things are good, people will write
the story I mean, look, so a year ago. By
a year ago, so April twenty twenty three, it was
unambiguously understood that in video was a key player in AI, right,
(46:33):
it was everyone had used Chad GPT by that point,
everyone knew was trained on in video chips. Everyone's like, oh,
this is crazy, And in that time, in video is
up over fourfold. And I don't think there's like some
new information that about in video or AI that's come out.
It's basically like, oh, just the storage is very good.
And maybe some of the numbers and the degree to
(46:54):
which other companies have piled in or wanted to buy
chips is true. But to his point, these this idea
that it's all priced in the moment we're aware of
the situation is probably a good thing to internalize.
Speaker 2 (47:05):
Yes, And I always think life would be so boring
if you went around just assuming that everything was priced
in immediately, right, Like, what are we even doing here?
If we really believe that?
Speaker 3 (47:16):
Yeah, why do we have a investment industry at all?
If everything I kind of still believe that, but.
Speaker 2 (47:21):
I don't take I refuse to believe it.
Speaker 3 (47:24):
Well, you would be a better investor than I would, No.
Speaker 2 (47:27):
I wouldn't okay, shall we leave it there?
Speaker 3 (47:29):
Let's leave it there.
Speaker 2 (47:30):
This has been another episode of the Odd Thoughts podcast.
I'm Tracy Alloway. You can follow me at Tracy Alloway and.
Speaker 3 (47:36):
I'm Joe Wisenthal. You can follow me at the Stalwart.
Follow our producers Carmen Rodriguez at Carman Arman dash Ol
Bennett at Dashbot and kel Brooks at Keil Brooks. Thank
you to our producer Moses Ondam. For more odd Lots content,
go to Bloomberg dot com slash odd Lots, where we
have transcripts, blog and a newsletter and you can chat
about all of these topics in the discord twenty four
(47:57):
to seven with fellow listeners dot gg slash oud Lots.
Speaker 2 (48:02):
And if you enjoy odd Lots, if you like it
when we talk to Steve Eisman about comic books, then
please leave us a positive review on your favorite podcast platform.
And remember, if you are a Bloomberg subscriber, you can
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Apple Podcasts. Thanks for listening
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