November 25, 2024 • 54 mins
Hello show notes readers!
This time we dive into markets, media, and misinformation. We discuss TSMC’s record setting Arizona fab and its impact on semiconductor production, national security, and the Pheonix water market.
I tell Dan why the Schiller PE ratio has been haunting me, as we ponder its historical significance and what today’s elevated levels might mean for the economy. Are we due for a downturn? Is it time to adjust your investments?
On the cultural front, I shares insights from Neil Postman’s Amusing Ourselves to Death, sparking a discussion on the perils of media overload, misinformation, and what it takes to inoculate ourselves against disinformation in the TikTok era.
Like the perception of their quality, we take a dive into the broken incentives at Boeing, the importance of innovation over shareholder value, and the role of corporate bonds in stormy economic skies.
What the AI Reviews are Saying:
"With humor, wit, and plenty of tangents, this episode is a must-listen for anyone curious about the intersection of markets, technology, and modern life." - GPT 4o
Companies Discussed:
- TSMC
- NVIDIA
- Apple
- ASML Holdings
- Boeing
- Airbus
- Embraer
- Bombardier
Books Recommended:
- Dark Matter by Blake Crouch
- Amusing Ourselves to Death by Neil Postman
- Wayward Pines Series by Blake Crouch
Chapters:
00:00 Market Movements and Economic Insights
04:15 TSMC's Advancements, Water Usage and Environmental Concerns
09:12 Literature Recommendations and Reflections
11:50 Media Consumption and Information Overload
14:51 The Role of Education in Critical Thinking
17:33 Misinformation vs. Disinformation
20:26 The Evolution of Television and Entertainment
22:52 Personal Reflections on Media Consumption
32:04 Understanding Market Indicators and Valuations
34:46 Investment Strategies in a High PE Environment
38:03 Debt vs. Equity: Navigating Asset Classes
41:43 Evaluating Corporate Bonds and Recession Risks
43:45 The Future of Major Corporations: Boeing and TSMC
48:34 The Disconnect in Corporate Incentives
52:10 Speculating on Future Trades and Investments
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(01:37):
Sean, how are you?
Hey Dan, how are you doing today?
Happy Friday to you!
A weekday recording.
A rarity for us.
I know it's risky.
We're to move the market.
Do it live.
maybe someday.
(02:00):
That's good question.
I've been pulling everything up and I hadn't actually looked specifically how the marketis doing today.
Up half percent on the S &P, NASDAQ up 1.23.
yeah, not surprised.
might not have to refresh that.
I think they've gone down a bit.
Might have to what?
Refresh?
Or maybe my stock rover is slow.
(02:21):
I don't know.
might be...
that's actually very possible.
I could be on not a fresh screen here.
I show up 30 bips on the SMP and 105 on NASDAQ.
That's where I'm at now.
Sorry.
Just hadn't hit refresh in a few minutes.
It was looking at a static screen.
Not a good idea.
(02:41):
Well, there you go.
There's you just, so, some interesting news I saw yesterday that I thought was a nice,just win for the U S in general.
Did you see what's going on at TSMC in Arizona?
(03:01):
No.
their chip projection yields surpass their Taiwan plant.
Wow, that's unexpected, yeah?
Yep, production yields on Arizona are four percentage points higher.
But I guess it's all just in kind of trial production.
Phoenix plant that it's saying the Phoenix plant began, you know, trial production earlierthis year.
(03:24):
But you know, that's a significant
the easiest chips in the world to make?
And they're like, yay.
Exactly.
don't think so.
think these are...
Yeah.
think it's like an advanced plant, right?
It's not, you know, 18 nanometer or something.
No, no, they're building some of their most advanced chips there.
I don't know if it's the top, but I think that was part of the deal of the funding, right?
(03:48):
Because they got Chips Act funding, so they had to...
Yeah, there's room for at least, this is just the first fab, there's room for six there.
So, you know, it's the first of, yeah, first of many.
So we'll see.
I don't know, I should do some more research on what their overall plan is there, but thatwas just, I was happy to see that.
That's, you know, chips are a very difficult thing to make, and that they're able toeffectively.
(04:15):
scale that knowledge across the ocean is pretty impressive to me.
It's difficult.
TSMC Arizona's first fab will operate its leading edge semiconductor process technology infor process.
I'm going to assume I'm going to go out on a limb and say that's four nanometer.
The second fab will utilize its leading edge in three and in two process operational in2028.
(04:39):
Yeah, I think that's their most advanced, right?
The two and three?
yeah, yeah, that's...
that's out there.
That's like moll- atoms.
You're dealing in atoms.
exactly.
So yeah, they're starting off with not quite their most advanced, I'm sure a lot of verygood reasons, and moving up the difficulty scale.
(05:01):
Where do they get their water?
It's very intense, like water intensive process, I think.
Colorado River, don't know.
wait, that's a good question.
Let's ask the interwebs.
No, the Colorado River.
There are four large underground pipes that transport water from the Colorado River intoTSMC's location in North Phoenix.
(05:21):
They also have water from the Salt and Verde Rivers coming in and a small amount ofPhoenix's groundwater.
So there you go.
They're getting it from all over.
Yeah, I gonna say, getting it from every source they can.
I wonder how much they go through.
Like we talked about that plant in Lebanon, Indiana, right?
And the controversy that that is causing.
(05:43):
Like my dad visited, or my parents visited, and I was talking to my dad, and it was on hismind.
Like he had read about it after talking about it with you.
did he have, what was his opinion of the matter?
I don't know that he had a strong opinion.
It was more like, wow, what's that gonna cause?
Right?
But it was kind of similar to like, you know, you're data driven, I'm data driven.
(06:07):
Most people are emotional beings, right?
Like they see a big number, they have no idea what it relates to.
And what we did live on the podcast was try to relate that number.
So I don't know, you get...
I wouldn't call it more comfortable, but you get more knowledgeable with like, whatexactly does that number mean when you ask some questions and pull up some data?
(06:28):
Whereas most people are just reading the head, like reading, reading that number inisolation and it not being computable in one's mind, you know?
That's true, yeah, because how do you, imagining the volume here, because I'm looking nowat the number of what TSMC's first fab uses, which is going to be, when it's at full
(06:50):
production, 4.75 million gallons of water per day, roughly 2 % of the Phoenix area's homesdemand.
But they're gonna be recycling about 65 % of their demand, so yeah.
Not so bad.
What will that take it up to?
Yeah, that will, so yeah, they'll be pulling down two million gallons a day and then takethat times six, so 12 million gallons a day at full capacity.
(07:16):
Did do that math right?
Somewhere in that range.
I mean, I don't know how that scales, because some of it's for cooling and things of thatnature that might scale differently.
So.
Yeah, there might be like one cooling plant for two fabs in the future, right?
We don't know.
So, that, you know, I don't think that's actually terribly unreasonable when you thinkabout it in terms of the, total area of city, you know, the total city of Phoenix is use
(07:45):
usage.
though I know city does the city of Phoenix does use a lot of water.
City of Phoenix does use a lot of water.
I'm getting all tongue, tongue tied today.
Sorry.
Sorry, y'all.
you know, there's gotta be people in Phoenix that still like water a yard, even thoughit's not a place to have a yard, right?
(08:06):
Yeah, one would think one would think.
Well,
Yeah, that was one interesting thing that came across my mind.
you read anything interesting lately, Dan?
Mmm.
A book is what's on my mind because I just finished it.
It's called Dark Matter.
And I would highly recommend it.
It was so much fun.
is that the guy that wrote Wayward Pines?
(08:26):
I know.
I haven't actually looked up any of his other books.
I was going to today because...
dark matter.
it's also, isn't it an Apple TV series?
I don't know.
Blake Crouch.
Yeah, that's him.
He also wrote an interesting series of books called Wayward Pines.
I think, wait, Wayward Pines?
Yeah, Wayward Pines.
I don't know if his writings evolved at all.
(08:50):
was okay, but the story was pretty interesting.
It might be worth a read if you like that.
But yeah, I've been planning on checking out that Dark Matter one, because I kind ofstarted watching the series, and I was like, ooh, this is really interesting.
Then I heard it was a book, and I decided to pause and go through the book first and thenfinish the series.
Yeah, I'd recommend picking it up.
(09:13):
It's fun.
Good to know.
Well, I blazed through, an audio book this week, on the commute of, Amusing Ourselves toDeath by Neil Postman.
the version I got, I didn't realize was the Abridged version, which was only about fivehours.
and didn't need to be any longer.
(09:33):
I'm glad that I'm, I'm glad I went with the Abridged.
I have a friend, in our friend group down here.
He's a retired.
school teacher, we call him the philosopher king.
But his commentary on nonfiction is that most of it could be about a third the length thatit really is, because there's a lot of filler.
So yeah, in this case, you're bit.
(09:53):
stories, like three stories to make one point.
exactly.
So sometimes the abridged version is a good way to go.
It was a very interesting take and it was very of the time as he literally disregarded thefuture.
(10:15):
the premise, let's talk about the premise.
he's talking about, it starts off comparing and contrasting Huxley and Orwell's vision ofthe future.
And basically their visions of dystopia and how they get there from two base premises.
One being one of
(10:36):
control and constriction of resources and information and the other being an absoluteapathy because you're flooded with too much.
Like there's just all the pleasure you could want, all the information, all the media.
Yeah, exactly.
And so people just become blase and give and seed control to whoever.
(11:01):
Or the dopamine reserves are gone because by the time 8.30am rolls around, you've beenblasted.
Your brain is toast.
Something like that.
yeah.
And so his argument is that, and this was written in 1985, let's, you know, almost 40years ago, you know, it published in 85, so he was probably writing it 40 years ago,
(11:22):
really.
Yeah.
in a bipolar world.
up.
So yeah, so he was writing this 40 years ago and saying how are we moving towards this?
Huxlian future and it his argument and thesis was that it was through the Throughtelevision essentially because everything we do is starting to had had essentially become
(11:43):
revolving around the television and the way we Learned and were fed information
you know, we're all about television and he had a really interesting, some reallyfascinating points around the way print media developed from being very programmatic to
(12:04):
being more, very slowly over time, more, emotional driven and, television because you, andthen you, started to print with the,
with the photograph and then you created even more emotion.
(12:24):
And then the way that print narrative used to work was you would have a lot of contentlining out every point, working through every detail.
And then along came the teletype where it became much more economical to be able to breakyour message down much smaller into much smaller pieces.
(12:45):
but also then that people would just have the constant, feel the constant need and urge toshare information.
But what information does a guy in Texas versus a guy to a guy in Maine really have toconvey?
Like what's really important?
so we all then else.
Yeah.
So that's, so, so then, so then you start to get all this information overload coming in,in small chunks.
(13:08):
It's not enough to actually tell you a full story.
So you become.
informed, maybe more informed, but less learned or less.
it starts to change the way it started to change the way we were processing information,which, okay, I guess that's kind of a point.
you know, I'd also say literacy rates were probably worth examining, but he does actuallydo a good job of explaining how actually in, in, the Western world, Britain had a ton of
(13:34):
schools and there, and American ideal was to also try to keep up with Britain.
so, you know, literacy rates were actually really quite high.
exactly.
so, then, then you get to the television where it's basically, you know, the newscastversion of, of news comes around, you know, from newspaper to newscast where they're
(14:01):
trying to keep your attention and also sell ads and then, you know, in new ways and adsbecome a new
way of even teaching people, because they're teaching people about products and, and,know, kids actually learned that, I learned from ads in a weird way.
was one of his arguments.
And I don't know if I fully buy that, but it's kind an interesting concept.
(14:22):
and then it devolves into this, what he called, and now this culture where you go fromsomething that you, you know, should be a horrifying thing, like a, terrible war in the
middle East.
to a baseball game and it's like it's just entertaining you're not like you suppress theemotions you would feel because it's not you realize it's not there for the actually feel
(14:46):
and the information that you're being provided is not information you can actually actupon or do something with
Only be angered by.
only be angered by or yeah, or happy by.
exactly.
And so it's not really useful information.
It's information, of course, but it's become just pure entertainment.
that point there is one where I want to circle back to later, which we'll come to.
(15:12):
But then he goes on and where he kind of, he had some points to his arguments that I alsothought were a little weak.
And he completely at the end mentions the personal computer.
but completely discredits and blows it off and says, this won't be a thing.
So I'm just like, well.
So I'm like, well, maybe.
(15:33):
then, a lot of his arguments were in a way, I thought, I was thinking, well, actually, Ithink the computer in a lot of ways solves some of these problems because it allows you to
mix in video with text in other unique ways that can be more engaging for learners nowthan ever before.
more engaging.
not, I'm not saying better.
(15:53):
I'm just saying it.
think it's a step up.
So I, yeah, I think he.
think that's one of the problems through this whole thing is like it depends on the user.
That's Well, that's that's any class or room setting and some degree.
Yeah.
But if that's the right question, or if that is a writer question to ask, then wouldn'tthe, wouldn't you want to be chasing a solution to that question rather than trying to
(16:20):
like, I don't know, outlaw some sort of behavior from the media in a society with aconstitution that says free speech, right?
Like there's these competing forces at times.
Mm-hmm.
and attitudes by people who are like, you know, if you legislate something, then, youknow, it's going to be government overreach no matter what party does it.
(16:42):
And.
And now the genie's out of the bottle, right?
The institutions hold way less power.
Everyone's a publisher, or could be.
So the fringe voices are much louder and more easily accessed.
I don't know.
like, I keep coming back to the idea from in my mind around this problem.
(17:04):
And the word I keep coming back to is inoculation, right?
How do you come through an education system inoculated from
misinformation and disinformation.
How do you go and consume misinformation and consume disinformation and yet it doesn'tchange your ability to find actual truth?
(17:25):
Okay, and I like this line of discussion.
I also want you to define here for us, misinformation and disinformation.
No, because he actually discussed specifically disinformation in the text that I wasreading, or in the book.
(17:47):
I could get the, I could get this backwards.
This could be like a, need to swap out the things, but like misinformation is more like itwasn't done with intention.
It's just someone who believes something that's false and is repeating it.
And the disinformation is like an active campaign, right?
The KGB is, feeding information to a New York times journalist and the New York timespublishes it.
(18:09):
And it's all not actual.
but it's designed well.
noise.
It's noise designed to distract, a lot of times.
Perhaps I would, there's a lot of that in TikTok.
I would say it's more active.
to, to, I'm sorry.
I was just speaking over here.
ahead.
a narrative.
It's trying to move things in a particular way, which is a lot of how I think about TikTokand other avenues of, you know, Russian bots and that sort of thing, where it is actively
(18:36):
trying to tear the fabric of American community apart.
Because if we start fighting ourselves, American power and hegemony gets weakened andthat's good for China and Russia.
Sorry, we went there.
Yeah, no, hey, TikTok still on the clock.
Yeah, for years.
Yeah, the government moves slowly.
(18:58):
Yep.
They're coming up on, isn't it?
Is January.
We looked this up recently.
I think it's like early January or something early next year.
Anyway, no, think that's absolutely.
an excellent point about how, really education should be about parsing out the bullshit,you know, and for lack of a better word, it's like, how do I understand what is in front
(19:25):
of me?
How do I try to validate if it's, if it's good or bad or just noise or just, you know,what's it and what's its intent?
I think is also.
reasons I was attracted to history.
I really enjoyed that part.
And if you have a good history teacher, then it is brought to life and you get to see thetwo or three or four or five, six sides that are all at play at once.
(19:49):
And then, you know, if you write the, watch the right kind of documentaries or you see theright kind of pictures or whatever, again, going back to like having a teacher that really
brings it to life.
Then you get to see these campaigns.
get to see the propaganda.
You get to see the different tools at play.
And then you can understand your own world better versus the kind of history that I thinka lot of people get, which is boring.
(20:13):
And it's like basically memorizing dates and things that have occurred.
it's a theme that we've talked about before.
It's like information versus synthesis.
Right.
And we meet, we need more people capable of synthesis rather than the just like.
consuming and being able to repeat information.
Because you know, you can tell me that bird is neon yellow and I can repeat it to you.
(20:36):
Doesn't make it true necessarily.
That's a good point.
It's a very good point.
Well, yes, you're right.
Like we're, it is about that, ability to synthesize the ideas and things that are beingpresented to you into a viewpoint that, you know, makes sense and you can then do
(20:59):
something with again, like it.
So much the information we have coming our way is just, I don't need this.
Like I just, I wish I had better filters on some of it.
but then I seek some of it out, know, like social media, that right.
Yeah.
Like, you know, that's why us weekly exists or something like things like that.
(21:21):
You or I don't know anything on Bravo or a car magazine.
Yeah.
but I'll take one.
I'd love one.
Yeah, there you go.
Do you actually subscribe to any magazines?
The New Yorker via paper.
That's the only one anymore.
I used to have a good little collection, but that's all gone away or it's gone on myphone.
(21:42):
Actually where it's gone is like an Apple one subscription.
So now I get the news so I can access the Atlantic.
I can access a suite of places.
What can you get on that?
I've actually never checked that one out.
That's interesting.
I'll check that out after the show, I guess.
I'll make a note here.
Yeah, I've been happy.
Like, I don't know.
I don't know if it's quote unquote worth it, but you get music, you get news, you get, Ijust tacked it onto the family plan.
(22:09):
like all four of us, even though only two of us are literate, can, use it, you know,
Okay, okay, okay, I see.
What would families of 12 done back in the day?
Because I don't think Apple One's subscription includes 12.
yeah, I, they, they don't have the product because there's not demand for it, Dan.
(22:32):
guess.
Right?
And anybody that they assume is that that exists is either Amish who wouldn't be buyingtheir products or scamming them and they're like a dorm full of kids, you know?
Todd over here.
He's 46.
Ha!
(22:53):
so I know, I, I don't know.
I'm sure if there were had demand, if there was strong demand for that type of, anoffering that they do corporate, right.
calling Apple?
Well, that's probably true.
I don't know.
Phones are so personal now, right?
would work need to pay for Apple news, whatever.
(23:14):
so we went to, we took a little weekend in Steamboat Springs and in the hotel room, whilethe youngest was napping.
We turned the TV on to pass some time.
And I, this wasn't like a realization, but it was the first time when we really sat downand like consumed an hour of TV.
(23:34):
Not at home.
Not at home means we had cable in the hotel room.
Cable means you can't choose what's on.
Cable means commercials.
There was a basket full of tears because the commercials were taking so long and, youknow, couldn't watch the permit.
The only program that she wanted to watch.
so I don't know.
(23:54):
mentioned commercials during the Postman thing and I was like, it's wild to, know, you getto see the generational change when you have kids or to spend time with kids.
And, this was one of those where I'm like, wow, you know, I remember my dad,
saying things like, well, we only had three channels and sometimes it was just, you know,dust, no programming.
(24:15):
Right.
And, you know, for me, I was like, okay.
Not how it works for me.
But this one is like, it's just like, it's not computing, right?
Just tears.
it's, it's what I want.
It's infinite amount of what I want wherever I want it.
Like, yeah, I remember getting home after school and, putting on the TV and there would bewhat was on, one of three or four networks that I enjoyed maybe.
(24:43):
And I'd be lucky if it was something not that what I hadn't already seen a dozen times.
you know, so.
of Seinfeld episodes and I'm sure there are, there is like a distribution, right?
Of which episodes I've seen because which ones do they play on syndication on TBS orsomething.
also created a kind of a group mentality and like a lot of it was early memeification in away or, know, like not in the way we think about it now, because people would have
(25:13):
catchphrases from those shows that they would say at the water cooler, you know, so.
How many movie quotes did you have with friends in like high school or college?
Exactly.
Yeah.
How many times you just quote Monty Python back and forth at one another, just lapped eachother.
It's not even funny if you're like, you're like, yeah, if you're not in the group, it'snot funny, but
(25:34):
I don't know, you get kicked out of the group if you can't laugh at Monty Python.
Hahaha
So, so yeah, when you have so many different, like I was thinking about that today, nottoday, but recently.
Like YouTube is just going to be TV for kids in a way, right?
Yeah.
(25:54):
It already has become that way for me.
I don't really watch.
mean, occasionally a show will come across my radar now and I'll try to turn it on, but Ifind, I mean, part of this is probably like my bro completely speaking of Postman my
completely broken attention span.
but like I've got 45 minutes a day.
Yes.
Where I can turn the TV on and, that doesn't, it's not a lot of, you know, I might watchone episode of like,
(26:20):
slow horses or something.
And then the next day rolls and I'm like zapped and I forget.
I forget about slow horses.
I just turn on YouTube and like kind of shuffle around.
And oftentimes I've been using it to like explore topics that I'm interested in.
So I like feel less bad about my own screen time, but I don't know.
(26:41):
That's a little bit of word, word dumping on you there.
No, that's much, much healthier relationships.
And a lot of people have with the, with the television, I think in a way, 45 minutes a dayis, think a very reasonable amount and varying it like that is good.
but, but yeah, just, but it's just, it's an interesting dynamic, like of being able tohave that, what you want when you want it all the time.
(27:05):
And, know, other than skip ads, no commercials.
Well, here's another admission.
I think we borrowed a Hulu account for a while and this account had whatever it was the itwas the level of with which they were commercials.
Mm-hmm.
We borrowed it because there was like one show we wanted to watch.
So we started and we found that like as soon as the commercials came on, especially me,I'd be up out of the couch moving around.
(27:32):
I'd find a chore to do.
I could not watch it.
I couldn't do it.
I never finished that show.
If I want to, I'll have to pay for a non-commercial or no commercial Hulu account.
to that point in my life where I just cannot tolerate commercials at all.
And if we're watching the music, we're just like, Nope, I'm like, I'll go rent it onAmazon.
(27:55):
I don't care.
I'll pay the 15 bucks.
you don't understand like it's just it's just insanity so
it's a little bit, it's definitely like a place of privilege, but also there was part ofme that was like, maybe this is the only kind of Hulu subscription I should ever have,
because I get up out of the couch and then I'm like, screw it, I'm going to bed, I'llread.
(28:22):
45 minutes gets cut down to like 15.
That's a, you know, I think again, healthy life choices, I'd say.
Healthy life choices overall.
but sometimes you just want to lay on the couch.
That's true.
That's true.
It's, it, it, there is something very, I don't know.
It, it, it, it's restorative in a way to just sit there, zone out, zone out and just bekind of conscious, entertain, you know, kind of aloof.
(28:53):
I don't know.
It's a nice feeling sometimes, but.
if it's like, one of those, staring at your phone.
It's one of those things that feels good but it's actually not good for you.
Well know laying on the couch isn't good for you, but like maybe it is in small...
whatever.
I mean, and yeah, like a couple hours or like an hour a week, you know, or two hours aweek.
(29:13):
Like there's probably some level of just base level of chillness that people need.
I mean, what did they used to do when the, were no lights and it was night, you know, theywere just.
Well...
There was little bit more squatting on the ground, which included like a really niceposterior chain stretch, right?
(29:34):
Which we're all like decimating our posterior chains by sitting in chairs.
That's true.
I don't know.
I only have like, sniffs of information here of people like reading, reading or listeningto people who like studied what's the tribe, there's a tribe in like Eastern Africa or
something like that, that's still hunter gatherer.
And they kind of like record how their time is spent and different things.
(29:55):
I just think there's some interesting tidbits there.
But it's a lot of rest.
It's a lot of hanging out.
It's a lot of not doing anything.
But you know, they don't have chairs.
So like, it's standing, it's walking.
squatting I'm sure like I don't know what their life expectancy is because of hospitalcare and disease care and medicine and all that kind of stuff, right?
(30:15):
But if you put if you put those yeah, yeah, if you put those controls in then You knowwould a current like would their occurrences of back pain be like Nears way nearer to zero
than ours for example
Like, I just, you know, end up with questions.
Yeah.
(30:36):
that is rather, that's an interesting question because I definitely know I sit on my buttway too much throughout the day.
in an office chair, in the evening, you know, at end of the day,
but it's, yeah, it's just not healthy.
Yeah.
(30:57):
And at this point being, you know, 40, I'm kind of just, like, am I just programmed thisway for the rest of my life?
Maybe.
I don't know.
There's always time to change, Sean.
I guess so, I guess so.
Speaking of time to change, no, don't have a good transition.
Yeah, broken segue.
(31:18):
I did want to dive into, circle back to something from the Postman book.
It was the idea of news.
That's good for you.
like news that you can act on, right?
That you actually can, can use to make a decision with.
so it's got me back to also thinking about, a conversation that you and I were having.
(31:41):
I'm going to pull up a chart here.
So this, this part of the podcast might get a cutout for the listening audience, on thepod catchers, but,
tune in on YouTube.
Yeah, exactly.
But please do feel free to hop over to YouTube and I will even take this part out and dropit into a short so that you don't have to go listen to stuff you've already heard if you
(32:04):
don't want to.
Anyway, so Dan and I were chatting via text and something just had been on my mind becauseI hadn't checked it in a while.
And every once in while there's a number of kind of indicators.
Also, for lack of a better tab, I like to follow, check in on occasionally.
And this is...
one of them.
(32:24):
Yes.
Sorry.
It's from just a crappy website called multiple.com, but it has reasonably decent data.
So this is called the Schiller priced index ratio Schiller PE, which is actually
it's actually a cyclically adjusted, price to earnings.
it's factoring in inflation and, some other trends into, into the data to kind of smoothit out.
(32:51):
but we're at 37 right now.
And actually it was a little bit higher when I was texting you this week, I think it waslike 30, close to 38.
but this is, they, they just report monthly.
So we're in the middle of October.
So it's moving on us.
but no, so just overall, I was thinking about it in just the
I noticed like a sentiment change on Twitter where everything ever starts talking aboutthings are feeling expensive.
(33:16):
And I come over here and I'm like, yeah, things are looking kind of expensive.
And it makes me wonder what the next 12 months truly do bring.
Because I...
so it's a price to earnings ratio, right?
So.
what's effectively means, yeah, let's talk about this, right?
Is if I buy something at a $37 average price to earnings, that means, you better hopeearnings is going up.
(33:42):
Yeah.
Because it's going to take, what is that?
So, basically 37 years effectively to get paid back.
That's not the right math.
Yeah, it would be.
Yeah, it's gonna take you effectively, yeah, 37 years essentially to get paid back,something like that.
That current earnings, yeah.
So you're not ever gonna get your investment back if earnings don't.
(34:09):
Exactly.
If you're 50.
So, and also you'll notice here, this is all time.
We've really only been a
above this current level a couple of times.
One was during the dot com bubble and the other was back in 2021 before things reallystart to fell off.
And I went ahead and pulled the table version of this with comes in Monthly, did a littlebit of math and found out it's, let's zoom in and let's take a closer look, shall we Dan?
(34:38):
Five years, was, yeah, it was late 21.
Yeah, we were up above 30.
stuff.
Yeah.
only been above 37, 2 % of the time in the history of this index.
Less than 2%, 1.896 % of the time.
We're in rarefied air on the price front is what I'm saying.
(35:02):
Yeah, absolutely.
So now the question is that I've given you this information, Dan, what's the trade?
puts one day puts.
head was at.
That's exactly where my head was.
I started this week going in cost and some, SPY puts, for, right.
So, so if, the entirety of the market is showing a really, really high PE ratio, wouldn'tyou then want to go and look at the stocks with the highest PE ratio and target them?
(35:33):
that's exactly.
so just, so just underweight your index.
could take a, take a, do a custom index here, underweight it with the ones with super highPE ratios at a much lower percentage, right?
Because there's still a chance to keep going up.
And I think if you're just being totally quantitative about it, that's where you couldstop lots of diversification built in and whatever.
(35:58):
or if you want to get a little picky about it, go in there and decide like, well, thiscompany is a true rocket ship and I do expect earnings to keep inflating over the next
however many years, right.
And throw that one out of the basket and so on.
be the argument of for Nvidia, like the one that where you look at their earnings thatthey have kept up with that, that ridiculous, I mean, with the price, like it makes sense.
(36:23):
every time they release earnings, think they had, they just released a forecast, didn'tthey this week?
And it was something where their previous forecast, they were projecting 2025 revenue tobe like 75 billion.
And now it's going to be a hunt, not revenue.
that would have been, I think it's towards, yes, I think earnings like 75 billionearnings.
(36:46):
And now it's going to projecting 150 billion.
Like it just doubled from the last time they did a forecast.
It's insane.
those numbers aren't exactly right.
Don't quote me on that, but, Hey, we're giving that lovely ad space to these toilets.
I'm also going to hop over here to, something a little more, less visually stimulating.
(37:07):
We'll say.
anyway, so just looking at some other macro indicators, again, thinking about, somethingelse that came across my mind this week was, Howard Marks, put out another lovely memo.
but he had a really simple idea that I thought was worth discussing is that there's reallyonly two asset class asset classes.
(37:28):
We talk about.
And in, a lot of the investment management world, the different types of, you know,
foreign stocks, domestic stocks, small cap, large cap, corporate bonds.
But really when it comes down to it, there's fundamentally just two asset classes, debtand equity, right?
(37:48):
So looking at what's been going on in rates lately, it feels like it finally might be timeto start buying up some debt.
Just thinking about as rates have started to un-invert finally.
looking here, at the St.
Louis federal reserves, economic database, AKA Fred, we're sharing on the screen,Currently the 10 year treasury rate minus two year treasury rate, which you see for most
(38:17):
of history, the 10 year, is a, is above zero because the 10 year implies a term riskbecause something could happen between now and 10 years versus now in two years that you
would want to
be paid back at a higher interest rate for.
So this chart is taking the interest rate of the 10 minus the two.
When it's negative, the 10 year is giving you less interest than the two year, which is anunusual situation, but one we've been in for the last couple of years.
(38:46):
And often, as you notice on this chart, the gray areas being periods of recessions, oftenthose periods can proceed periods of recessions, but not always.
there's been some false positives on that trend being true as well.
But we're finally starting to the un-invert.
And all this is making me think, yeah, it's time to take a little bit out of the SPY andput a little bit into maybe some sort of credit vehicles, possibly high yield bonds or
(39:15):
even some government securities.
now the 10-year start and trade above 4 % again.
My high yield.
because I still like yield.
That's a good point though.
My question is like, okay, so if you're going into an environment where PE is too high,the yield curve is un-inverting, which is sometimes not always followed by a recession.
(39:39):
Right?
So everything's frothy and bubbly.
have a big indicator showing that recession should be like right around the corner.
Wouldn't there be more corporate defaults in an environment like that?
Absolutely, you're absolutely correct where high yield would absolutely imply more risk.
(39:59):
I wonder what's a good high yield index?
HYG?
Sounds familiar.
I can't say that I've ever really looked.
Boom, iShares high yield growth index site chart.
All right, so let's think about that.
Yeah, I'm probably off base here, and thank you for pointing that out.
So if we are expecting, we have some possible recessionary flags that have...
(40:25):
If you're trying to protect, if you're trying to find some yield in a stormy seas.
yeah, find yield in stormy season and just, and.
One thing, know, the reason that, that yields are going up is because demand has gonedown, right?
That's, that's what it's inverse.
It's inversely correlated to the demand.
People are willing to not, not willing to pay as much.
(40:47):
So the yields are rising, which makes certain things seem more of a value option.
But yeah, if we look here from in the, in going into a recessionary period, a HYG, theiShares high yield corporate bond ETF.
which I'm just using as a proxy for all high yield corporate bonds, because that'sessentially what it is.
(41:10):
we see it, it performed just as shit as everything else, during the, 2008 recession.
and didn't do terribly.
No, it did exactly what I'm sorry.
It was what am I thinking here?
That's 22 It was a pretty much exactly correlated here along with what the S &P would havebeen actually let's let's drop in the S &P.
(41:32):
Why don't we?
I'm gonna have to go to time period.
So yeah, even during, it's been very much correlated right with the S &P.
So yeah, you're right.
Not gonna be a good proxy for defensiveness.
Hmm, okay.
So what kind of credit insurance would you be looking at?
I mean, the really, really classics are like gold.
Mm-hmm.
It acts a little better.
feel like that's like a default answer, right?
(41:54):
It's everyone, everyone with half an interest knows that particular answer.
More or less the same shape though.
let's play out, let's play out, let's do stories instead of math for just a hot minute.
no, I'm sorry.
If we're, if we're moving into this environment that we're playing around with.
What does it look like?
Is it?
an almost soft downward pressure.
(42:17):
where everything that's been cooking kind of keeps cooking and there's some pruning aroundthe edges.
Really mild.
Or...
Is it pronounced enough that
There are some real pockets of,
Heat.
Meaning there is more incentive in the world for conflict or people taking advantage,countries taking advantage of a weaker.
(42:40):
United States or something like that.
then particular sectors find themselves.
moving strongly in particular directions.
Consumer discretionary down hard, defense and aerospace up, stuff like that, right?
Like playing out scenarios.
Hmm.
So this is a good question.
So do you just want to buy the bonds of Apple?
(43:02):
TSM?
Well, I worry about TSM at that point.
Hot commodity.
Is it the debt for the US factories or the Taiwan factories?
Well, OK, so put it this way.
Other examples.
I might have a not totally accurate here, but it was something along the lines of likeChrysler was going bankrupt and this is like late seventies, early eighties or something
(43:23):
like that.
But they were the ones making.
Tank engines or something, right?
so the government saved them because they were an asset, a company that did stuff for thegovernment that could absolutely not fail for national security reasons.
Same with TSMC, right?
So if you've got,
(43:45):
half a Taiwan on fire and you're building this other facility in Arizona.
You've lost a significant portion of your talent probably from a total organizationviewpoint.
You've lost 85, 99 % of your capacity.
But in any other situation, you could look at a company like that and be like, well, theybit the dust.
(44:11):
But this particular company would not bite the dust.
Yes.
So holding the bonds could be good.
Mm-hmm.
And I would actually say the same for Boeing right now.
I think Boeing is in.
Unions are a real problem.
Longshoremen, Boeing.
I mean, don't get me wrong, Boeing executives are a real problem too.
(44:32):
Real problem.
Yeah.
I wonder what it is like inside of their engineering organization.
cause you hear a lot of stories from the outside of, know, and that's what, you know,anecdotes from, from people that are willing to share information about how they view
that, you know, their, their review processes and engineering processes have declined overthe years.
(44:54):
And I wonder, you know, what the driver of that was, was it
added bureaucracy from becoming a, mean, there's always been an extra level of paperworkrequired to do aviation.
know, the FAA has a lot of more standards than most, most other industries.
(45:14):
Probably the only thing that I can imagine having much tougher standards is healthcare,really.
possibly chip making on certain cleanliness specs.
Very few things, but very few things in terms of process though, I think are as dictatedas aviation in terms of what kind of testing things must go through.
(45:35):
And for good reason.
And that's also why, you know, we hear about plane crashes once in a while, but you lookat how few of them are compared to how many people travel, it's microscopic.
One of the safest modes of transportation, despite a lot of people's but, but yeah, butBoeing just seems like they've had serious quality issues.
(45:57):
You know, I don't know how to describe it.
And that to me implies that there's internal breakdowns in their systems and that, youknow, either they're going to have to be broken up or saved.
don't know.
it just seems like things.
something, don't you want it fixed?
Yeah, no, that's what I'm saying.
(46:17):
So so like, so it would be coming in and saying we're going to wipe some of this slateclean and I don't know and I don't know who you hired to bring into Yeah.
I think there's a real, like there's a common argument that's real pernicious with thisthat is partially right and partially wrong, in my view.
(46:39):
Is that shareholder value and the pursuit of it is what destroys companies like this.
And I think some of that's right.
And I think some of that's wrong.
Shareholder value should be like, you know, a pursuit.
Otherwise, like what's a company doing necessarily, unless it's like part of thegovernment or a nonprofit or something, right?
However, you know, everything's a gradient.
(47:02):
And when too much of that gradient is towards shareholder value in an engineering driven.
workplace, business, product.
I think you give you, you're giving up way, way, way, way too much because R and D isexpensive.
R and D is exploratory.
R and D has failure.
and you should be inviting these kinds of things in, in order to produce and find the bestsolutions of the future.
(47:28):
and also like having a single point of failure in a newly designed plane.
is stupid and a lesson that was learned decades and decades and decades ago.
And you see these things and it's really easy to point to, you know, cost cutting,business driven stuff rather than engineering.
That's it.
I think culturally it's a misbalanced organization and they've had a CEO who is very muchjust a, not an engineer, but maybe a financial engineer.
(47:58):
And it seems that they're trying to hire another one of the same ilk.
I, I would, I would very much agree with that.
And like you think about, you know, the generation of planes and how they were evolving.
It's like, they just kept trying to like copy the last one and just make it a little bitbetter, but without actually ever innovating.
they'd try to add new features, but actually that, you know, it wouldn't think through thewhole portion of the design that was required on, a, on a more system wide level, I think.
(48:25):
And.
It just feels like there's yeah, again, like I think I said earlier, but I feel likethere's a disconnect.
within the organization.
think we've been circling around that exact thing.
Yeah.
the incentives that the business.
should be pursuing and working toward aren't the incentives that the executives worktowards.
There's the break.
Yeah, I mean, I'm looking for numbers on their R &D spend actually.
(48:47):
Their overall capex spend is down substantially over the last decade.
You know, almost 50%, I'd say.
Recently uptick for I think obvious reasons.
But yeah, I mean, they were clearly not investing back in themselves in the way.
And I'm sure because of, you know, financial considerations too.
Also,
Do we, how many airplane companies does the world need?
(49:09):
You know?
Well, we have two, right?
Or three, if you include Bombardier.
Yeah, that's true.
feel like you need more than one.
Yeah, you do.
You need more than one.
gonna get complacent and lazy and you're gonna continue having executive teams like wehave at Boeing.
Are we, is it that people aren't willing to pay more for air travel?
(49:29):
Because it seems like Boeing would have some pricing power.
Or is Airbus just that much more efficient?
Out over my skis at this point.
don't know what the cost per cost per mile.
No, I mean, I think these are interesting questions, but you'd have, you know, we couldspit ball, but we, we, we'd quickly go off course, you know, the cost per mile of
(49:50):
ownership and stuff like that.
It all, you know, that those numbers change.
So for example, like a plane that goes from Honolulu to Hilo four times a day goes undersignificantly more stress.
than the plane that goes from LAX to Sydney because of the pressure changes.
(50:10):
Mm-hmm.
Interesting.
and take off and landing, right?
so the plane in Hawaii that does these short little half hour trips or half 45, whateverthey're, won't have the lifespan that, that LAX Sydney plane could have.
Of course, they're going to be, they're going to end up being completely different planes.
And this is not a perfect example, but these are the kinds of like data points that you'dhave to kind of pull together to try to figure out.
(50:37):
Or you know, you look at Bombardier and they make particular planes for a different marketwithin air travel.
is Ember?
Embraer, Brazilian, yeah.
That's another one, My LaGuardia Indianapolis flights.
Yeah, fun is one way to put it.
(50:58):
As long as you get the seat that's by itself.
Yeah, the whole industry, yeah.
Except that I can't stand up in those planes.
Fair, fair, I don't mind tipping my head over like this as I walk down the aisle, it'sfine.
(51:18):
This is worth having both an aisle and a window.
No.
I do.
I did always appreciate being able to snag that seat, even if it was further back.
Yeah, yeah, exactly.
Don't care.
Don't care.
I don't mind sitting and sitting on an extra two minutes.
What's the big deal?
Everybody's always in such a hurry to get off.
mean, I get it.
I do want to get off but yeah, please move but but it most of your wait time is justgetting like the the them to open the dang door once that once that happens and starts to
(51:46):
move.
Anyway, we've meandered.
Yeah.
But yeah, 2 % of the time or less we've been at this level on the SMP and that just I justwonder where we're going over the next 12 months because it's something's got to adjust
something's got a something's got a some somewhere
Yeah, the whole bet is whether it's the P or the E.
Mm-hmm.
(52:07):
Yeah.
the point of a ratio, but.
Okay.
Are you going to place any?
Should you, should you say?
what's the trade here?
That's what I'm trying to say.
What if we're going to place a bet?
What's our trade?
Cause we got it.
We got ourselves a paper trading account so we can, we can go, we can go place a bet hereand just see how it plays out.
(52:28):
I'm trying to think what the play is.
If it's just, if it's spy puts or gold.
or spy puts and Nvidia calls.
That's an interesting call.
The AI future, earnings goes down.
Nvidia becomes the most important company in the world right ahead of TSMC because they'remaking all the chips.
(52:49):
in ASML because they're making all of today's SMC's equipment.
Yeah.
Although AASML got knocked the other day.
Yeah, because their forecast was down for 25, right?
Or 26?
One of the two?
Then I'm always like to the executive team, just like, hey employees, we're going to saysome stuff.
Buy the stock.
(53:09):
Well, I think some of it, I think it was trying to impact, China reducing.
I think being restricted on what they're supposed to sell to China too.
Right.
Like that sucks for ASML because they have a customer base that just basically gotwhacked.
I don't know what to say, but I mean, for the better, think.
Exactly.
(53:29):
So, that there probably is a limit on their upside, which is probably be again why theygot whacked this week.
But I think they're still now that after the discounting, they're moving up upward again.
Yeah, long term.
think that's all good.
Anyway, the last half of the show is getting brutally edited.
That's okay.
Alright, should we sign off?
coming through on this episode.
(53:50):
feel it.
Sean, how are you?
Hey Dan, how are you doing today?
Happy Friday to you!
A weekday recording.
A rarity for us.
I know it's risky.
We're to move the market.
Do it live.
maybe someday.
(02:00):
That's good question.
I've been pulling everything up and I hadn't actually looked specifically how the marketis doing today.
Up half percent on the S &P, NASDAQ up 1.23.
yeah, not surprised.
might not have to refresh that.
I think they've gone down a bit.
Might have to what?
Refresh?
Or maybe my stock rover is slow.
(02:21):
I don't know.
might be...
that's actually very possible.
I could be on not a fresh screen here.
I show up 30 bips on the SMP and 105 on NASDAQ.
That's where I'm at now.
Sorry.
Just hadn't hit refresh in a few minutes.
It was looking at a static screen.
Not a good idea.
(02:41):
Well, there you go.
There's you just, so, some interesting news I saw yesterday that I thought was a nice,just win for the U S in general.
Did you see what's going on at TSMC in Arizona?
(03:01):
No.
their chip projection yields surpass their Taiwan plant.
Wow, that's unexpected, yeah?
Yep, production yields on Arizona are four percentage points higher.
But I guess it's all just in kind of trial production.
Phoenix plant that it's saying the Phoenix plant began, you know, trial production earlierthis year.
(03:24):
But you know, that's a significant
the easiest chips in the world to make?
And they're like, yay.
Exactly.
don't think so.
think these are...
Yeah.
think it's like an advanced plant, right?
It's not, you know, 18 nanometer or something.
No, no, they're building some of their most advanced chips there.
I don't know if it's the top, but I think that was part of the deal of the funding, right?
(03:48):
Because they got Chips Act funding, so they had to...
Yeah, there's room for at least, this is just the first fab, there's room for six there.
So, you know, it's the first of, yeah, first of many.
So we'll see.
I don't know, I should do some more research on what their overall plan is there, but thatwas just, I was happy to see that.
That's, you know, chips are a very difficult thing to make, and that they're able toeffectively.
(04:15):
scale that knowledge across the ocean is pretty impressive to me.
It's difficult.
TSMC Arizona's first fab will operate its leading edge semiconductor process technology infor process.
I'm going to assume I'm going to go out on a limb and say that's four nanometer.
The second fab will utilize its leading edge in three and in two process operational in2028.
(04:39):
Yeah, I think that's their most advanced, right?
The two and three?
yeah, yeah, that's...
that's out there.
That's like moll- atoms.
You're dealing in atoms.
exactly.
So yeah, they're starting off with not quite their most advanced, I'm sure a lot of verygood reasons, and moving up the difficulty scale.
(05:01):
Where do they get their water?
It's very intense, like water intensive process, I think.
Colorado River, don't know.
wait, that's a good question.
Let's ask the interwebs.
No, the Colorado River.
There are four large underground pipes that transport water from the Colorado River intoTSMC's location in North Phoenix.
(05:21):
They also have water from the Salt and Verde Rivers coming in and a small amount ofPhoenix's groundwater.
So there you go.
They're getting it from all over.
Yeah, I gonna say, getting it from every source they can.
I wonder how much they go through.
Like we talked about that plant in Lebanon, Indiana, right?
And the controversy that that is causing.
(05:43):
Like my dad visited, or my parents visited, and I was talking to my dad, and it was on hismind.
Like he had read about it after talking about it with you.
did he have, what was his opinion of the matter?
I don't know that he had a strong opinion.
It was more like, wow, what's that gonna cause?
Right?
But it was kind of similar to like, you know, you're data driven, I'm data driven.
(06:07):
Most people are emotional beings, right?
Like they see a big number, they have no idea what it relates to.
And what we did live on the podcast was try to relate that number.
So I don't know, you get...
I wouldn't call it more comfortable, but you get more knowledgeable with like, whatexactly does that number mean when you ask some questions and pull up some data?
(06:28):
Whereas most people are just reading the head, like reading, reading that number inisolation and it not being computable in one's mind, you know?
That's true, yeah, because how do you, imagining the volume here, because I'm looking nowat the number of what TSMC's first fab uses, which is going to be, when it's at full
(06:50):
production, 4.75 million gallons of water per day, roughly 2 % of the Phoenix area's homesdemand.
But they're gonna be recycling about 65 % of their demand, so yeah.
Not so bad.
What will that take it up to?
Yeah, that will, so yeah, they'll be pulling down two million gallons a day and then takethat times six, so 12 million gallons a day at full capacity.
(07:16):
Did do that math right?
Somewhere in that range.
I mean, I don't know how that scales, because some of it's for cooling and things of thatnature that might scale differently.
So.
Yeah, there might be like one cooling plant for two fabs in the future, right?
We don't know.
So, that, you know, I don't think that's actually terribly unreasonable when you thinkabout it in terms of the, total area of city, you know, the total city of Phoenix is use
(07:45):
usage.
though I know city does the city of Phoenix does use a lot of water.
City of Phoenix does use a lot of water.
I'm getting all tongue, tongue tied today.
Sorry.
Sorry, y'all.
you know, there's gotta be people in Phoenix that still like water a yard, even thoughit's not a place to have a yard, right?
(08:06):
Yeah, one would think one would think.
Well,
Yeah, that was one interesting thing that came across my mind.
you read anything interesting lately, Dan?
Mmm.
A book is what's on my mind because I just finished it.
It's called Dark Matter.
And I would highly recommend it.
It was so much fun.
is that the guy that wrote Wayward Pines?
(08:26):
I know.
I haven't actually looked up any of his other books.
I was going to today because...
dark matter.
it's also, isn't it an Apple TV series?
I don't know.
Blake Crouch.
Yeah, that's him.
He also wrote an interesting series of books called Wayward Pines.
I think, wait, Wayward Pines?
Yeah, Wayward Pines.
I don't know if his writings evolved at all.
(08:50):
was okay, but the story was pretty interesting.
It might be worth a read if you like that.
But yeah, I've been planning on checking out that Dark Matter one, because I kind ofstarted watching the series, and I was like, ooh, this is really interesting.
Then I heard it was a book, and I decided to pause and go through the book first and thenfinish the series.
Yeah, I'd recommend picking it up.
(09:13):
It's fun.
Good to know.
Well, I blazed through, an audio book this week, on the commute of, Amusing Ourselves toDeath by Neil Postman.
the version I got, I didn't realize was the Abridged version, which was only about fivehours.
and didn't need to be any longer.
(09:33):
I'm glad that I'm, I'm glad I went with the Abridged.
I have a friend, in our friend group down here.
He's a retired.
school teacher, we call him the philosopher king.
But his commentary on nonfiction is that most of it could be about a third the length thatit really is, because there's a lot of filler.
So yeah, in this case, you're bit.
(09:53):
stories, like three stories to make one point.
exactly.
So sometimes the abridged version is a good way to go.
It was a very interesting take and it was very of the time as he literally disregarded thefuture.
(10:15):
the premise, let's talk about the premise.
he's talking about, it starts off comparing and contrasting Huxley and Orwell's vision ofthe future.
And basically their visions of dystopia and how they get there from two base premises.
One being one of
(10:36):
control and constriction of resources and information and the other being an absoluteapathy because you're flooded with too much.
Like there's just all the pleasure you could want, all the information, all the media.
Yeah, exactly.
And so people just become blase and give and seed control to whoever.
(11:01):
Or the dopamine reserves are gone because by the time 8.30am rolls around, you've beenblasted.
Your brain is toast.
Something like that.
yeah.
And so his argument is that, and this was written in 1985, let's, you know, almost 40years ago, you know, it published in 85, so he was probably writing it 40 years ago,
(11:22):
really.
Yeah.
in a bipolar world.
up.
So yeah, so he was writing this 40 years ago and saying how are we moving towards this?
Huxlian future and it his argument and thesis was that it was through the Throughtelevision essentially because everything we do is starting to had had essentially become
(11:43):
revolving around the television and the way we Learned and were fed information
you know, we're all about television and he had a really interesting, some reallyfascinating points around the way print media developed from being very programmatic to
(12:04):
being more, very slowly over time, more, emotional driven and, television because you, andthen you, started to print with the,
with the photograph and then you created even more emotion.
(12:24):
And then the way that print narrative used to work was you would have a lot of contentlining out every point, working through every detail.
And then along came the teletype where it became much more economical to be able to breakyour message down much smaller into much smaller pieces.
(12:45):
but also then that people would just have the constant, feel the constant need and urge toshare information.
But what information does a guy in Texas versus a guy to a guy in Maine really have toconvey?
Like what's really important?
so we all then else.
Yeah.
So that's, so, so then, so then you start to get all this information overload coming in,in small chunks.
(13:08):
It's not enough to actually tell you a full story.
So you become.
informed, maybe more informed, but less learned or less.
it starts to change the way it started to change the way we were processing information,which, okay, I guess that's kind of a point.
you know, I'd also say literacy rates were probably worth examining, but he does actuallydo a good job of explaining how actually in, in, the Western world, Britain had a ton of
(13:34):
schools and there, and American ideal was to also try to keep up with Britain.
so, you know, literacy rates were actually really quite high.
exactly.
so, then, then you get to the television where it's basically, you know, the newscastversion of, of news comes around, you know, from newspaper to newscast where they're
(14:01):
trying to keep your attention and also sell ads and then, you know, in new ways and adsbecome a new
way of even teaching people, because they're teaching people about products and, and,know, kids actually learned that, I learned from ads in a weird way.
was one of his arguments.
And I don't know if I fully buy that, but it's kind an interesting concept.
(14:22):
and then it devolves into this, what he called, and now this culture where you go fromsomething that you, you know, should be a horrifying thing, like a, terrible war in the
middle East.
to a baseball game and it's like it's just entertaining you're not like you suppress theemotions you would feel because it's not you realize it's not there for the actually feel
(14:46):
and the information that you're being provided is not information you can actually actupon or do something with
Only be angered by.
only be angered by or yeah, or happy by.
exactly.
And so it's not really useful information.
It's information, of course, but it's become just pure entertainment.
that point there is one where I want to circle back to later, which we'll come to.
(15:12):
But then he goes on and where he kind of, he had some points to his arguments that I alsothought were a little weak.
And he completely at the end mentions the personal computer.
but completely discredits and blows it off and says, this won't be a thing.
So I'm just like, well.
So I'm like, well, maybe.
(15:33):
then, a lot of his arguments were in a way, I thought, I was thinking, well, actually, Ithink the computer in a lot of ways solves some of these problems because it allows you to
mix in video with text in other unique ways that can be more engaging for learners nowthan ever before.
more engaging.
not, I'm not saying better.
(15:53):
I'm just saying it.
think it's a step up.
So I, yeah, I think he.
think that's one of the problems through this whole thing is like it depends on the user.
That's Well, that's that's any class or room setting and some degree.
Yeah.
But if that's the right question, or if that is a writer question to ask, then wouldn'tthe, wouldn't you want to be chasing a solution to that question rather than trying to
(16:20):
like, I don't know, outlaw some sort of behavior from the media in a society with aconstitution that says free speech, right?
Like there's these competing forces at times.
Mm-hmm.
and attitudes by people who are like, you know, if you legislate something, then, youknow, it's going to be government overreach no matter what party does it.
(16:42):
And.
And now the genie's out of the bottle, right?
The institutions hold way less power.
Everyone's a publisher, or could be.
So the fringe voices are much louder and more easily accessed.
I don't know.
like, I keep coming back to the idea from in my mind around this problem.
(17:04):
And the word I keep coming back to is inoculation, right?
How do you come through an education system inoculated from
misinformation and disinformation.
How do you go and consume misinformation and consume disinformation and yet it doesn'tchange your ability to find actual truth?
(17:25):
Okay, and I like this line of discussion.
I also want you to define here for us, misinformation and disinformation.
No, because he actually discussed specifically disinformation in the text that I wasreading, or in the book.
(17:47):
I could get the, I could get this backwards.
This could be like a, need to swap out the things, but like misinformation is more like itwasn't done with intention.
It's just someone who believes something that's false and is repeating it.
And the disinformation is like an active campaign, right?
The KGB is, feeding information to a New York times journalist and the New York timespublishes it.
(18:09):
And it's all not actual.
but it's designed well.
noise.
It's noise designed to distract, a lot of times.
Perhaps I would, there's a lot of that in TikTok.
I would say it's more active.
to, to, I'm sorry.
I was just speaking over here.
ahead.
a narrative.
It's trying to move things in a particular way, which is a lot of how I think about TikTokand other avenues of, you know, Russian bots and that sort of thing, where it is actively
(18:36):
trying to tear the fabric of American community apart.
Because if we start fighting ourselves, American power and hegemony gets weakened andthat's good for China and Russia.
Sorry, we went there.
Yeah, no, hey, TikTok still on the clock.
Yeah, for years.
Yeah, the government moves slowly.
(18:58):
Yep.
They're coming up on, isn't it?
Is January.
We looked this up recently.
I think it's like early January or something early next year.
Anyway, no, think that's absolutely.
an excellent point about how, really education should be about parsing out the bullshit,you know, and for lack of a better word, it's like, how do I understand what is in front
(19:25):
of me?
How do I try to validate if it's, if it's good or bad or just noise or just, you know,what's it and what's its intent?
I think is also.
reasons I was attracted to history.
I really enjoyed that part.
And if you have a good history teacher, then it is brought to life and you get to see thetwo or three or four or five, six sides that are all at play at once.
(19:49):
And then, you know, if you write the, watch the right kind of documentaries or you see theright kind of pictures or whatever, again, going back to like having a teacher that really
brings it to life.
Then you get to see these campaigns.
get to see the propaganda.
You get to see the different tools at play.
And then you can understand your own world better versus the kind of history that I thinka lot of people get, which is boring.
(20:13):
And it's like basically memorizing dates and things that have occurred.
it's a theme that we've talked about before.
It's like information versus synthesis.
Right.
And we meet, we need more people capable of synthesis rather than the just like.
consuming and being able to repeat information.
Because you know, you can tell me that bird is neon yellow and I can repeat it to you.
(20:36):
Doesn't make it true necessarily.
That's a good point.
It's a very good point.
Well, yes, you're right.
Like we're, it is about that, ability to synthesize the ideas and things that are beingpresented to you into a viewpoint that, you know, makes sense and you can then do
(20:59):
something with again, like it.
So much the information we have coming our way is just, I don't need this.
Like I just, I wish I had better filters on some of it.
but then I seek some of it out, know, like social media, that right.
Yeah.
Like, you know, that's why us weekly exists or something like things like that.
(21:21):
You or I don't know anything on Bravo or a car magazine.
Yeah.
but I'll take one.
I'd love one.
Yeah, there you go.
Do you actually subscribe to any magazines?
The New Yorker via paper.
That's the only one anymore.
I used to have a good little collection, but that's all gone away or it's gone on myphone.
(21:42):
Actually where it's gone is like an Apple one subscription.
So now I get the news so I can access the Atlantic.
I can access a suite of places.
What can you get on that?
I've actually never checked that one out.
That's interesting.
I'll check that out after the show, I guess.
I'll make a note here.
Yeah, I've been happy.
Like, I don't know.
I don't know if it's quote unquote worth it, but you get music, you get news, you get, Ijust tacked it onto the family plan.
(22:09):
like all four of us, even though only two of us are literate, can, use it, you know,
Okay, okay, okay, I see.
What would families of 12 done back in the day?
Because I don't think Apple One's subscription includes 12.
yeah, I, they, they don't have the product because there's not demand for it, Dan.
(22:32):
guess.
Right?
And anybody that they assume is that that exists is either Amish who wouldn't be buyingtheir products or scamming them and they're like a dorm full of kids, you know?
Todd over here.
He's 46.
Ha!
(22:53):
so I know, I, I don't know.
I'm sure if there were had demand, if there was strong demand for that type of, anoffering that they do corporate, right.
calling Apple?
Well, that's probably true.
I don't know.
Phones are so personal now, right?
would work need to pay for Apple news, whatever.
(23:14):
so we went to, we took a little weekend in Steamboat Springs and in the hotel room, whilethe youngest was napping.
We turned the TV on to pass some time.
And I, this wasn't like a realization, but it was the first time when we really sat downand like consumed an hour of TV.
(23:34):
Not at home.
Not at home means we had cable in the hotel room.
Cable means you can't choose what's on.
Cable means commercials.
There was a basket full of tears because the commercials were taking so long and, youknow, couldn't watch the permit.
The only program that she wanted to watch.
so I don't know.
(23:54):
mentioned commercials during the Postman thing and I was like, it's wild to, know, you getto see the generational change when you have kids or to spend time with kids.
And, this was one of those where I'm like, wow, you know, I remember my dad,
saying things like, well, we only had three channels and sometimes it was just, you know,dust, no programming.
(24:15):
Right.
And, you know, for me, I was like, okay.
Not how it works for me.
But this one is like, it's just like, it's not computing, right?
Just tears.
it's, it's what I want.
It's infinite amount of what I want wherever I want it.
Like, yeah, I remember getting home after school and, putting on the TV and there would bewhat was on, one of three or four networks that I enjoyed maybe.
(24:43):
And I'd be lucky if it was something not that what I hadn't already seen a dozen times.
you know, so.
of Seinfeld episodes and I'm sure there are, there is like a distribution, right?
Of which episodes I've seen because which ones do they play on syndication on TBS orsomething.
also created a kind of a group mentality and like a lot of it was early memeification in away or, know, like not in the way we think about it now, because people would have
(25:13):
catchphrases from those shows that they would say at the water cooler, you know, so.
How many movie quotes did you have with friends in like high school or college?
Exactly.
Yeah.
How many times you just quote Monty Python back and forth at one another, just lapped eachother.
It's not even funny if you're like, you're like, yeah, if you're not in the group, it'snot funny, but
(25:34):
I don't know, you get kicked out of the group if you can't laugh at Monty Python.
Hahaha
So, so yeah, when you have so many different, like I was thinking about that today, nottoday, but recently.
Like YouTube is just going to be TV for kids in a way, right?
Yeah.
(25:54):
It already has become that way for me.
I don't really watch.
mean, occasionally a show will come across my radar now and I'll try to turn it on, but Ifind, I mean, part of this is probably like my bro completely speaking of Postman my
completely broken attention span.
but like I've got 45 minutes a day.
Yes.
Where I can turn the TV on and, that doesn't, it's not a lot of, you know, I might watchone episode of like,
(26:20):
slow horses or something.
And then the next day rolls and I'm like zapped and I forget.
I forget about slow horses.
I just turn on YouTube and like kind of shuffle around.
And oftentimes I've been using it to like explore topics that I'm interested in.
So I like feel less bad about my own screen time, but I don't know.
(26:41):
That's a little bit of word, word dumping on you there.
No, that's much, much healthier relationships.
And a lot of people have with the, with the television, I think in a way, 45 minutes a dayis, think a very reasonable amount and varying it like that is good.
but, but yeah, just, but it's just, it's an interesting dynamic, like of being able tohave that, what you want when you want it all the time.
(27:05):
And, know, other than skip ads, no commercials.
Well, here's another admission.
I think we borrowed a Hulu account for a while and this account had whatever it was the itwas the level of with which they were commercials.
Mm-hmm.
We borrowed it because there was like one show we wanted to watch.
So we started and we found that like as soon as the commercials came on, especially me,I'd be up out of the couch moving around.
(27:32):
I'd find a chore to do.
I could not watch it.
I couldn't do it.
I never finished that show.
If I want to, I'll have to pay for a non-commercial or no commercial Hulu account.
to that point in my life where I just cannot tolerate commercials at all.
And if we're watching the music, we're just like, Nope, I'm like, I'll go rent it onAmazon.
(27:55):
I don't care.
I'll pay the 15 bucks.
you don't understand like it's just it's just insanity so
it's a little bit, it's definitely like a place of privilege, but also there was part ofme that was like, maybe this is the only kind of Hulu subscription I should ever have,
because I get up out of the couch and then I'm like, screw it, I'm going to bed, I'llread.
(28:22):
45 minutes gets cut down to like 15.
That's a, you know, I think again, healthy life choices, I'd say.
Healthy life choices overall.
but sometimes you just want to lay on the couch.
That's true.
That's true.
It's, it, it, there is something very, I don't know.
It, it, it, it's restorative in a way to just sit there, zone out, zone out and just bekind of conscious, entertain, you know, kind of aloof.
(28:53):
I don't know.
It's a nice feeling sometimes, but.
if it's like, one of those, staring at your phone.
It's one of those things that feels good but it's actually not good for you.
Well know laying on the couch isn't good for you, but like maybe it is in small...
whatever.
I mean, and yeah, like a couple hours or like an hour a week, you know, or two hours aweek.
(29:13):
Like there's probably some level of just base level of chillness that people need.
I mean, what did they used to do when the, were no lights and it was night, you know, theywere just.
Well...
There was little bit more squatting on the ground, which included like a really niceposterior chain stretch, right?
(29:34):
Which we're all like decimating our posterior chains by sitting in chairs.
That's true.
I don't know.
I only have like, sniffs of information here of people like reading, reading or listeningto people who like studied what's the tribe, there's a tribe in like Eastern Africa or
something like that, that's still hunter gatherer.
And they kind of like record how their time is spent and different things.
(29:55):
I just think there's some interesting tidbits there.
But it's a lot of rest.
It's a lot of hanging out.
It's a lot of not doing anything.
But you know, they don't have chairs.
So like, it's standing, it's walking.
squatting I'm sure like I don't know what their life expectancy is because of hospitalcare and disease care and medicine and all that kind of stuff, right?
(30:15):
But if you put if you put those yeah, yeah, if you put those controls in then You knowwould a current like would their occurrences of back pain be like Nears way nearer to zero
than ours for example
Like, I just, you know, end up with questions.
Yeah.
(30:36):
that is rather, that's an interesting question because I definitely know I sit on my buttway too much throughout the day.
in an office chair, in the evening, you know, at end of the day,
but it's, yeah, it's just not healthy.
Yeah.
(30:57):
And at this point being, you know, 40, I'm kind of just, like, am I just programmed thisway for the rest of my life?
Maybe.
I don't know.
There's always time to change, Sean.
I guess so, I guess so.
Speaking of time to change, no, don't have a good transition.
Yeah, broken segue.
(31:18):
I did want to dive into, circle back to something from the Postman book.
It was the idea of news.
That's good for you.
like news that you can act on, right?
That you actually can, can use to make a decision with.
so it's got me back to also thinking about, a conversation that you and I were having.
(31:41):
I'm going to pull up a chart here.
So this, this part of the podcast might get a cutout for the listening audience, on thepod catchers, but,
tune in on YouTube.
Yeah, exactly.
But please do feel free to hop over to YouTube and I will even take this part out and dropit into a short so that you don't have to go listen to stuff you've already heard if you
(32:04):
don't want to.
Anyway, so Dan and I were chatting via text and something just had been on my mind becauseI hadn't checked it in a while.
And every once in while there's a number of kind of indicators.
Also, for lack of a better tab, I like to follow, check in on occasionally.
And this is...
one of them.
(32:24):
Yes.
Sorry.
It's from just a crappy website called multiple.com, but it has reasonably decent data.
So this is called the Schiller priced index ratio Schiller PE, which is actually
it's actually a cyclically adjusted, price to earnings.
it's factoring in inflation and, some other trends into, into the data to kind of smoothit out.
(32:51):
but we're at 37 right now.
And actually it was a little bit higher when I was texting you this week, I think it waslike 30, close to 38.
but this is, they, they just report monthly.
So we're in the middle of October.
So it's moving on us.
but no, so just overall, I was thinking about it in just the
I noticed like a sentiment change on Twitter where everything ever starts talking aboutthings are feeling expensive.
(33:16):
And I come over here and I'm like, yeah, things are looking kind of expensive.
And it makes me wonder what the next 12 months truly do bring.
Because I...
so it's a price to earnings ratio, right?
So.
what's effectively means, yeah, let's talk about this, right?
Is if I buy something at a $37 average price to earnings, that means, you better hopeearnings is going up.
(33:42):
Yeah.
Because it's going to take, what is that?
So, basically 37 years effectively to get paid back.
That's not the right math.
Yeah, it would be.
Yeah, it's gonna take you effectively, yeah, 37 years essentially to get paid back,something like that.
That current earnings, yeah.
So you're not ever gonna get your investment back if earnings don't.
(34:09):
Exactly.
If you're 50.
So, and also you'll notice here, this is all time.
We've really only been a
above this current level a couple of times.
One was during the dot com bubble and the other was back in 2021 before things reallystart to fell off.
And I went ahead and pulled the table version of this with comes in Monthly, did a littlebit of math and found out it's, let's zoom in and let's take a closer look, shall we Dan?
(34:38):
Five years, was, yeah, it was late 21.
Yeah, we were up above 30.
stuff.
Yeah.
only been above 37, 2 % of the time in the history of this index.
Less than 2%, 1.896 % of the time.
We're in rarefied air on the price front is what I'm saying.
(35:02):
Yeah, absolutely.
So now the question is that I've given you this information, Dan, what's the trade?
puts one day puts.
head was at.
That's exactly where my head was.
I started this week going in cost and some, SPY puts, for, right.
So, so if, the entirety of the market is showing a really, really high PE ratio, wouldn'tyou then want to go and look at the stocks with the highest PE ratio and target them?
(35:33):
that's exactly.
so just, so just underweight your index.
could take a, take a, do a custom index here, underweight it with the ones with super highPE ratios at a much lower percentage, right?
Because there's still a chance to keep going up.
And I think if you're just being totally quantitative about it, that's where you couldstop lots of diversification built in and whatever.
(35:58):
or if you want to get a little picky about it, go in there and decide like, well, thiscompany is a true rocket ship and I do expect earnings to keep inflating over the next
however many years, right.
And throw that one out of the basket and so on.
be the argument of for Nvidia, like the one that where you look at their earnings thatthey have kept up with that, that ridiculous, I mean, with the price, like it makes sense.
(36:23):
every time they release earnings, think they had, they just released a forecast, didn'tthey this week?
And it was something where their previous forecast, they were projecting 2025 revenue tobe like 75 billion.
And now it's going to be a hunt, not revenue.
that would have been, I think it's towards, yes, I think earnings like 75 billionearnings.
(36:46):
And now it's going to projecting 150 billion.
Like it just doubled from the last time they did a forecast.
It's insane.
those numbers aren't exactly right.
Don't quote me on that, but, Hey, we're giving that lovely ad space to these toilets.
I'm also going to hop over here to, something a little more, less visually stimulating.
(37:07):
We'll say.
anyway, so just looking at some other macro indicators, again, thinking about, somethingelse that came across my mind this week was, Howard Marks, put out another lovely memo.
but he had a really simple idea that I thought was worth discussing is that there's reallyonly two asset class asset classes.
(37:28):
We talk about.
And in, a lot of the investment management world, the different types of, you know,
foreign stocks, domestic stocks, small cap, large cap, corporate bonds.
But really when it comes down to it, there's fundamentally just two asset classes, debtand equity, right?
(37:48):
So looking at what's been going on in rates lately, it feels like it finally might be timeto start buying up some debt.
Just thinking about as rates have started to un-invert finally.
looking here, at the St.
Louis federal reserves, economic database, AKA Fred, we're sharing on the screen,Currently the 10 year treasury rate minus two year treasury rate, which you see for most
(38:17):
of history, the 10 year, is a, is above zero because the 10 year implies a term riskbecause something could happen between now and 10 years versus now in two years that you
would want to
be paid back at a higher interest rate for.
So this chart is taking the interest rate of the 10 minus the two.
When it's negative, the 10 year is giving you less interest than the two year, which is anunusual situation, but one we've been in for the last couple of years.
(38:46):
And often, as you notice on this chart, the gray areas being periods of recessions, oftenthose periods can proceed periods of recessions, but not always.
there's been some false positives on that trend being true as well.
But we're finally starting to the un-invert.
And all this is making me think, yeah, it's time to take a little bit out of the SPY andput a little bit into maybe some sort of credit vehicles, possibly high yield bonds or
(39:15):
even some government securities.
now the 10-year start and trade above 4 % again.
My high yield.
because I still like yield.
That's a good point though.
My question is like, okay, so if you're going into an environment where PE is too high,the yield curve is un-inverting, which is sometimes not always followed by a recession.
(39:39):
Right?
So everything's frothy and bubbly.
have a big indicator showing that recession should be like right around the corner.
Wouldn't there be more corporate defaults in an environment like that?
Absolutely, you're absolutely correct where high yield would absolutely imply more risk.
(39:59):
I wonder what's a good high yield index?
HYG?
Sounds familiar.
I can't say that I've ever really looked.
Boom, iShares high yield growth index site chart.
All right, so let's think about that.
Yeah, I'm probably off base here, and thank you for pointing that out.
So if we are expecting, we have some possible recessionary flags that have...
(40:25):
If you're trying to protect, if you're trying to find some yield in a stormy seas.
yeah, find yield in stormy season and just, and.
One thing, know, the reason that, that yields are going up is because demand has gonedown, right?
That's, that's what it's inverse.
It's inversely correlated to the demand.
People are willing to not, not willing to pay as much.
(40:47):
So the yields are rising, which makes certain things seem more of a value option.
But yeah, if we look here from in the, in going into a recessionary period, a HYG, theiShares high yield corporate bond ETF.
which I'm just using as a proxy for all high yield corporate bonds, because that'sessentially what it is.
(41:10):
we see it, it performed just as shit as everything else, during the, 2008 recession.
and didn't do terribly.
No, it did exactly what I'm sorry.
It was what am I thinking here?
That's 22 It was a pretty much exactly correlated here along with what the S &P would havebeen actually let's let's drop in the S &P.
(41:32):
Why don't we?
I'm gonna have to go to time period.
So yeah, even during, it's been very much correlated right with the S &P.
So yeah, you're right.
Not gonna be a good proxy for defensiveness.
Hmm, okay.
So what kind of credit insurance would you be looking at?
I mean, the really, really classics are like gold.
Mm-hmm.
It acts a little better.
feel like that's like a default answer, right?
(41:54):
It's everyone, everyone with half an interest knows that particular answer.
More or less the same shape though.
let's play out, let's play out, let's do stories instead of math for just a hot minute.
no, I'm sorry.
If we're, if we're moving into this environment that we're playing around with.
What does it look like?
Is it?
an almost soft downward pressure.
(42:17):
where everything that's been cooking kind of keeps cooking and there's some pruning aroundthe edges.
Really mild.
Or...
Is it pronounced enough that
There are some real pockets of,
Heat.
Meaning there is more incentive in the world for conflict or people taking advantage,countries taking advantage of a weaker.
(42:40):
United States or something like that.
then particular sectors find themselves.
moving strongly in particular directions.
Consumer discretionary down hard, defense and aerospace up, stuff like that, right?
Like playing out scenarios.
Hmm.
So this is a good question.
So do you just want to buy the bonds of Apple?
(43:02):
TSM?
Well, I worry about TSM at that point.
Hot commodity.
Is it the debt for the US factories or the Taiwan factories?
Well, OK, so put it this way.
Other examples.
I might have a not totally accurate here, but it was something along the lines of likeChrysler was going bankrupt and this is like late seventies, early eighties or something
(43:23):
like that.
But they were the ones making.
Tank engines or something, right?
so the government saved them because they were an asset, a company that did stuff for thegovernment that could absolutely not fail for national security reasons.
Same with TSMC, right?
So if you've got,
(43:45):
half a Taiwan on fire and you're building this other facility in Arizona.
You've lost a significant portion of your talent probably from a total organizationviewpoint.
You've lost 85, 99 % of your capacity.
But in any other situation, you could look at a company like that and be like, well, theybit the dust.
(44:11):
But this particular company would not bite the dust.
Yes.
So holding the bonds could be good.
Mm-hmm.
And I would actually say the same for Boeing right now.
I think Boeing is in.
Unions are a real problem.
Longshoremen, Boeing.
I mean, don't get me wrong, Boeing executives are a real problem too.
(44:32):
Real problem.
Yeah.
I wonder what it is like inside of their engineering organization.
cause you hear a lot of stories from the outside of, know, and that's what, you know,anecdotes from, from people that are willing to share information about how they view
that, you know, their, their review processes and engineering processes have declined overthe years.
(44:54):
And I wonder, you know, what the driver of that was, was it
added bureaucracy from becoming a, mean, there's always been an extra level of paperworkrequired to do aviation.
know, the FAA has a lot of more standards than most, most other industries.
(45:14):
Probably the only thing that I can imagine having much tougher standards is healthcare,really.
possibly chip making on certain cleanliness specs.
Very few things, but very few things in terms of process though, I think are as dictatedas aviation in terms of what kind of testing things must go through.
(45:35):
And for good reason.
And that's also why, you know, we hear about plane crashes once in a while, but you lookat how few of them are compared to how many people travel, it's microscopic.
One of the safest modes of transportation, despite a lot of people's but, but yeah, butBoeing just seems like they've had serious quality issues.
(45:57):
You know, I don't know how to describe it.
And that to me implies that there's internal breakdowns in their systems and that, youknow, either they're going to have to be broken up or saved.
don't know.
it just seems like things.
something, don't you want it fixed?
Yeah, no, that's what I'm saying.
(46:17):
So so like, so it would be coming in and saying we're going to wipe some of this slateclean and I don't know and I don't know who you hired to bring into Yeah.
I think there's a real, like there's a common argument that's real pernicious with thisthat is partially right and partially wrong, in my view.
(46:39):
Is that shareholder value and the pursuit of it is what destroys companies like this.
And I think some of that's right.
And I think some of that's wrong.
Shareholder value should be like, you know, a pursuit.
Otherwise, like what's a company doing necessarily, unless it's like part of thegovernment or a nonprofit or something, right?
However, you know, everything's a gradient.
(47:02):
And when too much of that gradient is towards shareholder value in an engineering driven.
workplace, business, product.
I think you give you, you're giving up way, way, way, way too much because R and D isexpensive.
R and D is exploratory.
R and D has failure.
and you should be inviting these kinds of things in, in order to produce and find the bestsolutions of the future.
(47:28):
and also like having a single point of failure in a newly designed plane.
is stupid and a lesson that was learned decades and decades and decades ago.
And you see these things and it's really easy to point to, you know, cost cutting,business driven stuff rather than engineering.
That's it.
I think culturally it's a misbalanced organization and they've had a CEO who is very muchjust a, not an engineer, but maybe a financial engineer.
(47:58):
And it seems that they're trying to hire another one of the same ilk.
I, I would, I would very much agree with that.
And like you think about, you know, the generation of planes and how they were evolving.
It's like, they just kept trying to like copy the last one and just make it a little bitbetter, but without actually ever innovating.
they'd try to add new features, but actually that, you know, it wouldn't think through thewhole portion of the design that was required on, a, on a more system wide level, I think.
(48:25):
And.
It just feels like there's yeah, again, like I think I said earlier, but I feel likethere's a disconnect.
within the organization.
think we've been circling around that exact thing.
Yeah.
the incentives that the business.
should be pursuing and working toward aren't the incentives that the executives worktowards.
There's the break.
Yeah, I mean, I'm looking for numbers on their R &D spend actually.
(48:47):
Their overall capex spend is down substantially over the last decade.
You know, almost 50%, I'd say.
Recently uptick for I think obvious reasons.
But yeah, I mean, they were clearly not investing back in themselves in the way.
And I'm sure because of, you know, financial considerations too.
Also,
Do we, how many airplane companies does the world need?
(49:09):
You know?
Well, we have two, right?
Or three, if you include Bombardier.
Yeah, that's true.
feel like you need more than one.
Yeah, you do.
You need more than one.
gonna get complacent and lazy and you're gonna continue having executive teams like wehave at Boeing.
Are we, is it that people aren't willing to pay more for air travel?
(49:29):
Because it seems like Boeing would have some pricing power.
Or is Airbus just that much more efficient?
Out over my skis at this point.
don't know what the cost per cost per mile.
No, I mean, I think these are interesting questions, but you'd have, you know, we couldspit ball, but we, we, we'd quickly go off course, you know, the cost per mile of
(49:50):
ownership and stuff like that.
It all, you know, that those numbers change.
So for example, like a plane that goes from Honolulu to Hilo four times a day goes undersignificantly more stress.
than the plane that goes from LAX to Sydney because of the pressure changes.
(50:10):
Mm-hmm.
Interesting.
and take off and landing, right?
so the plane in Hawaii that does these short little half hour trips or half 45, whateverthey're, won't have the lifespan that, that LAX Sydney plane could have.
Of course, they're going to be, they're going to end up being completely different planes.
And this is not a perfect example, but these are the kinds of like data points that you'dhave to kind of pull together to try to figure out.
(50:37):
Or you know, you look at Bombardier and they make particular planes for a different marketwithin air travel.
is Ember?
Embraer, Brazilian, yeah.
That's another one, My LaGuardia Indianapolis flights.
Yeah, fun is one way to put it.
(50:58):
As long as you get the seat that's by itself.
Yeah, the whole industry, yeah.
Except that I can't stand up in those planes.
Fair, fair, I don't mind tipping my head over like this as I walk down the aisle, it'sfine.
(51:18):
This is worth having both an aisle and a window.
No.
I do.
I did always appreciate being able to snag that seat, even if it was further back.
Yeah, yeah, exactly.
Don't care.
Don't care.
I don't mind sitting and sitting on an extra two minutes.
What's the big deal?
Everybody's always in such a hurry to get off.
mean, I get it.
I do want to get off but yeah, please move but but it most of your wait time is justgetting like the the them to open the dang door once that once that happens and starts to
(51:46):
move.
Anyway, we've meandered.
Yeah.
But yeah, 2 % of the time or less we've been at this level on the SMP and that just I justwonder where we're going over the next 12 months because it's something's got to adjust
something's got a something's got a some somewhere
Yeah, the whole bet is whether it's the P or the E.
Mm-hmm.
(52:07):
Yeah.
the point of a ratio, but.
Okay.
Are you going to place any?
Should you, should you say?
what's the trade here?
That's what I'm trying to say.
What if we're going to place a bet?
What's our trade?
Cause we got it.
We got ourselves a paper trading account so we can, we can go, we can go place a bet hereand just see how it plays out.
(52:28):
I'm trying to think what the play is.
If it's just, if it's spy puts or gold.
or spy puts and Nvidia calls.
That's an interesting call.
The AI future, earnings goes down.
Nvidia becomes the most important company in the world right ahead of TSMC because they'remaking all the chips.
(52:49):
in ASML because they're making all of today's SMC's equipment.
Yeah.
Although AASML got knocked the other day.
Yeah, because their forecast was down for 25, right?
Or 26?
One of the two?
Then I'm always like to the executive team, just like, hey employees, we're going to saysome stuff.
Buy the stock.
(53:09):
Well, I think some of it, I think it was trying to impact, China reducing.
I think being restricted on what they're supposed to sell to China too.
Right.
Like that sucks for ASML because they have a customer base that just basically gotwhacked.
I don't know what to say, but I mean, for the better, think.
Exactly.
(53:29):
So, that there probably is a limit on their upside, which is probably be again why theygot whacked this week.
But I think they're still now that after the discounting, they're moving up upward again.
Yeah, long term.
think that's all good.
Anyway, the last half of the show is getting brutally edited.
That's okay.
Alright, should we sign off?
coming through on this episode.
(53:50):
feel it.
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