What's going on? What do you make of that disconnect between the way that people feel about the economy and that the higher prices they're paying at the pump and at the grocery store versus things like GDP growth that do show a healthy economy?

Well, I think part of it, Cabot, is that we're hearing it all the time, how bad everything is.

But if you look at, you know, are people working? The answer is yes.

Are they spending? The answer is yes.

Are they saving a little bit less than they were before? Are wages, you know, healthy? They're flat-ish, but still, you know, better than we've seen in previous periods.

But when you go to the store, it's not just the rate of change on inflation.

It's the cumulative effects of inflation.

This isn't as transformative as we hoped for and that there could be a bubble effect.

So I

wrote a piece called Things Will Never Be Chill Again.

That's the mantra of the effective altruist, which is Dario and his sister, Daniela.

And these people are sitting in, you know, cushy offices getting vegan meals brought in.

And and at the same time, figuring out how to stock iodine pills.

How to buy remote islands because they believe the world's coming to an end like it does in all the video games they play.

How to build a shelter with magnetic forces around it in the desert.

Does the anthropic IPO make any sense?

Nancy, what about you? I know you have some strong views on Tesla.

Yeah, well, I love the guy.

I don't know what we'd do without him.

A couple of things.

I think since the bull market started, technology's up over 200%.

So we have a lot of skeptics out there, and we've gone a year and a half without a correction in the overall market.

So I think right now we're tug of warring between fear and greed.

What do you think is going on here? And do you think that we're going to see any kind of reversal in this space?

W-what does value investing mean to you today, and, you know, how is that different than the way investors have traditionally thought of value?

Great question.

So, uh, I got into the business in the early, mid-1980s, and that was back when the yield on the S&P was about 4%, um, or, or between 3% and 4%.

I don't recall exactly, but it was, it was much higher than it is now.

Uh, we focused on price-to-book ratio.

Uh, we looked at price earnings ratios.

And a p- a value portfolio was a collection of consumer staples, REITs-- Well, not, not even REITs 'cause we didn't have them early days, but electric utilities, old line industrial companies, chemical companies, for example, uh, and energy.

How do you kinda handle situations like that where, you know, is this a, a growth company that's actually become a value opportunity or is it just a less expensive growth stock? You know, how does that fit your philosophy?

But what about even kind of those, you know, strongest, most high flying parts of the AI trade?

Well, I think you want to own some of that in your portfolio.

But if you want to be in a position, if the market slows, if we get a correction, which we haven't had in a year and a half, a real one, if you think those are coming, then this is a great way to play it.

I mean, I had three names for you.

One of them was NVIDIA.

They're all obvious.

None of these are secret names.

What's going on here? What's the larger story?

[laughs]

Um, and then a- add some color.

Um, well, first of all, stocks are cheaper now than they were at the beginning of the year.

Uh, so, so that's important.

We've seen multiple compression.

Uh, w- we're expected to see somewhere between 30, 32, 33% earnings growth in Q3.

Uh, and, and, and that's gonna be looking backwards.

[laughs]

Things are so bad, why are they good?

Good morning.

Good morning to David.

Listen, I think this was one of the quarters where we had the steepest wall of worry to climb, and yet stocks returned decent results in the quarter.

And, you know, a year-to-date return, as you pointed out earlier, 13% is a good year by any stretch historically.

So I think the battle is easing up on this whole question of AI and the end of humanity.

Remember that this group is really driven by the effective altruists.

You know, what's like what's wrong with this picture?

Why are they good?

Good morning.

Good morning.

Good morning to David.

Listen, I think this was one of the quarters where we had the steepest wall of worry to climb, and yet stocks returned decent results in the quarter.

And, you know, a year-to-date return, as you pointed out earlier, 13% is a good year by any stretch historically.

So I think the battle is easing up on this whole question of AI and the end of humanity.

You know, what's like what's wrong with this picture?

Is that something that could derail your bullishness here?

So I don't think so.

And here's why.

I mean, I have experience.

And we had, as I mentioned, we have had higher yields in the 90s and coexisted with robust stock returns.

Now, the pushback on that is that we had less debt.

We were globalizing as opposed to de-globalizing.

Are these companies that you would get into right now at the current levels, and also are you expecting a run from these names?

And now tell me why, I'm going to ask you too, Jed, but why is the NASDAQ leading the way right now? After all the controversy about AI or now super intelligence, how do you reckon that the NAS is leading the way?

Well, I don't think the market believes Dario Amadeus.

I protest too much.

Please help me stop developing my models.

They released a new model today.

Oh, really? Yeah.

Five point five.

Really? I mean, that's a big thing.

Your reaction to his remarks?

I mean, I, I do think they're important, Ed.

Good to be with you.

Um, he has taken a position.

Um, I actually support that position because I don't think government has been effective at, at regulating crypto, for example, or even go back to internet days.

So I think self-regulation from the companies, solutions around the problems, uh, allow us to continue to grow and continue to, to see disinflationary growth in the US economy, not to mention, uh, potential defense applications, et cetera.

So I, I thought it was a, a good comment for him to make, and superintelligence may in fact catch.

Has anything changed for you?

Do you get comfortable with that or are you getting nervous with that?

I mean, when you're going through a technological revolution, which we are, an economy in transition, I think, I mean, if they're not spending, I'm concerned, but cre- free cash flow's started to hook up again.

Uh, it's, it looks like it's just NVIDIA and Apple at the moment.

Uh, but I, I think, you know, I think Amazon's gonna get it right.

I think Google's gonna get it right.

So I, I, I'm more interested in the established providers-

Yeah.

It's been in our 12 best ideas.

You

know, the manufacturing PMI at 54 plus.

It's driven by the right factors.

You look at earnings growth, got earnings up 25% year to date.

But stock prices have only gone up 12%, which means stocks are actually cheaper than they were at the beginning of the year.

And multiples are not out of line with the kind of earnings growth we're seeing at all.

Technology companies, I think the multiple is 21 times.

Simplify your infrastructure and keep your business connected online at yournetworkhandle.com. That's yournetworkhandle.com.

You

know, the manufacturing PMI at 54 plus is.

It's driven by the right factors.

You look at earnings growth, got earnings up 25% year to date.

But stock prices have only gone up 12%, which means stocks are actually cheaper than they were at the beginning of the year.

And multiples are not out of line with the kind of earnings growth we're seeing at all.

Technology companies, I think the multiple is 21 times.

You've got to be in stocks, not bond stocks.

You

know, the manufacturing PMI at 54 plus.

It's driven by the right factors.

You look at earnings growth, got earnings up 25 percent year to date.

But stock prices have only gone up 12, which means stocks are actually cheaper than they were at the beginning of the year.

And multiples are not out of line with with the kind of earnings growth we're seeing at all.

Technology companies, I think the multiple is 21 times.

You've got to be in stocks, not bond stocks.

So, um, Do you think it's the same thing here or something different going on?

Well, I do think it's different.

And that is not a, it's different this time.

It's really just that this is real technology that, as I earlier said, will change the way we live.

So if you look at, well, first of all, the CFO from NVIDIA, Colette Kress, said, Um, she, she addressed it head on the whole notion of circular financing.

And she said, look, we get paid twice.

We sell the hardware and then we get a portion of the rental income.

So there's certainly the nineties as a good analog, but, um, Anything else that you're looking at in terms of that historical comparison to what we're seeing right now?

Yeah.

Uh, it has been our poster child of an old economy company that has pivoted to the new technologies.

Now, that's not just AI, it's, it's ro- uh, robotics.

Digitization was the first technology that, uh, they embraced and, um, and, and they of course use AI and, and, uh, leverage the cloud.

Um, but this, this company has, uh, I guess we've seen the, the fruits of that in the stock price performance, and it's been flat since the fall.

Uh, it's underperformed Target, but the fundamentals are much better in my view.

I mean, you have a, you have kind of a C+ player in Target, so the, the expectations were pretty low.

Talk to us about Eaton Corp.

But, uh, to your point, if something, some kind of lasting peace or whatever were to be accomplished and oil went back down to 70, 65, whatever number it is, you think that's just a net add for the equity market?

I do.

I mean, we saw the, the impact when, uh, oil prices receded, uh, in the previous month.

We saw what it did to inflation, and we had a negative print, and then we had a flat print.

So I, I think, um, it will get resolved.

This has been a lot harder on the economies in the Middle East, obviously Iran, but all the surrounding economies.

So I, I think it will get resolved.

It sounds like you would ag- I think you would agree with Rick Santelli that, you know, th- this was an announcement from Treasury, but the bond market kinda shrugged it off.

Mm.

So it, it, it could have easily been one of those stocks that people talked about...

Well, I did in, in the early days, "They don't have any earnings.

What is, what is this about?" Um, but, but that, that is the nature of what we're experiencing now, uh, in this new technological revolution.

So that's point number one.

And then secondly, I would say that if you look at earnings growth and you look at the multiples that these stocks are trading at, not all of them, some are lofty.

I mean, I, I, I love, uh, Elon Musk companies, but they don't trade in, in a valuation that, uh, most people are comfortable with.

Mm

Mm-hmm.

And so what we're doing, or hearing from managements, we sit on all the calls.

Uh, across sectors we're hearing things like, uh, Chevron saying, "We're gonna spend 25% less on CapEx to, um, produce the same amount of oil," or Goldman saying, "You know, we're gonna, we're seeing improvements, productivity improvements about 27%, 25% with flat head count." And it goes on through industrials where they're automating work, um, flows and automating factories.

That's physical AI as well as general AI.

So there are a lot of ways to, um, look at how this is really impacting, uh, not retailers, uh, healthcare, financial companies, industrials, and we're seeing it in the earnings reports.

Mm-hmm, mm-hmm

... through the whole decade, and yet w- it coexisted with robust stock returns.

Why? Because, uh, because of productivity.

Ah.

We're hearing it across sectors, Larry.

We sit on all the calls, and we're hearing, you know, 25% greater, um, production of, or spending 25% less-

Mm

... automating factories.

And, you know, to Steve's earlier point, a county, uh, a parish in Louisiana gave, um, their teachers a $55,000 bonus-

with interest rate threats and oil threats and inflation threats, but it's holding in very well.

Yeah.

Well, I don't know what Jack just said he's doing for a living, but it sounds super duper impressive.

I'm just like trying to take notes.

But I think we agree.

So I guess I'd say a couple of things.

He's absolutely right about situational awareness.

But anyway, what does this stuff mean? What do I make of these headlines?

with interest rate threats and oil threats and inflation threats, but it's holding in very well.

Yeah.

Well, I don't know what Jack just said he's doing for a living, but it sounds super duper impressive.

I was like trying to take notes, but I think we agree.

So I guess I'd say a couple of things.

He's absolutely right about situational awareness.

It really...

But anyway, what does this stuff mean? What do I make of these headlines?

with interest rate threats and oil threats and inflation threats, but it's holding in very well.

Yeah.

Well, I don't know what Jack just said he's doing for a living, but it sounds super duper impressive.

I'm just like trying to take notes.

But I think we agree.

So I guess I'd say a couple of things.

He's absolutely right about situational awareness.

But anyway, what does this stuff mean? What do I make of these headlines?

Do you look at those or, or d- does it still just fall to AWS overall?

We, I mean, effective...

W- well, we look at all the segments, uh, and, and the one that always gets overlooked is, is the retail side, maybe even advertising.

Uh, we, we certainly look at all of them, but what we're, we're concerned about as investors is the management pivoting, and that was the reason we got out of Adobe because you had a CEO who missed kind of...

Now the stock's recovered some, but it's still half of where we got out.

Um, so we're looking for management teams that, that really are driving into the future and, and that is the case at Amazon.

You know, Jassy's cut costs in m- in pretty much all the right places, invested in the right places, and he keeps a low profile, which I think is also very important as, as an investor.

What did you make of that?