Guy, Dan and Danny are joined by Stuart Sopp, CEO of Current
0:00 - Intro
2:00 - Bank Bloodbath
18:00 - Jobs Data + State Of FinTech
31:30 - Gold
37:00 - Apple Earnings & Banking
45:30 - Semiconductors
48:45 - Lyft/Uber Price War
52:00 - Robinhood
About the Show:
On The Tape is a weekly podcast with CNBC Fast Money’s Guy Adami, Dan Nathan and Danny Moses. They’re offering takes on the biggest market-moving headlines of the week, trade ideas, in-depth analysis, tips and advice. Each episode, they are joined by prominent Wall Street participants to help viewers make smarter investment decisions. Bear market, bull market, recession, inflation or deflation… we’re here to help guide your portfolio into the green. Risk Reversal brings you years of experience from former Wall Street insiders trading stocks to experts in the commodity market.
Shoot us an email at contact@riskreversal.com with any feedback, suggestions, or questions
Key Links:
Listen on Apple Podcasts: https://apple.co/3UBZcBe
Follow On The Tape on Twitter: https://twitter.com/OnTheTapePod
Subscribe to our newsletter: https://riskreversal.com/sign-up/
Subscribe to our YouTube page: https://www.youtube.com/@RiskReversalMedia
#investing #stocks #stockmarket
Investing involves the risk of loss. Content is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Dan Nathan, Guy Adami and other guests featured in this show may maintain positions in the securities discussed in this video.
0:00 - Intro
2:00 - Bank Bloodbath
18:00 - Jobs Data + State Of FinTech
31:30 - Gold
37:00 - Apple Earnings & Banking
45:30 - Semiconductors
48:45 - Lyft/Uber Price War
52:00 - Robinhood
About the Show:
On The Tape is a weekly podcast with CNBC Fast Money’s Guy Adami, Dan Nathan and Danny Moses. They’re offering takes on the biggest market-moving headlines of the week, trade ideas, in-depth analysis, tips and advice. Each episode, they are joined by prominent Wall Street participants to help viewers make smarter investment decisions. Bear market, bull market, recession, inflation or deflation… we’re here to help guide your portfolio into the green. Risk Reversal brings you years of experience from former Wall Street insiders trading stocks to experts in the commodity market.
Shoot us an email at contact@riskreversal.com with any feedback, suggestions, or questions
Key Links:
Listen on Apple Podcasts: https://apple.co/3UBZcBe
Follow On The Tape on Twitter: https://twitter.com/OnTheTapePod
Subscribe to our newsletter: https://riskreversal.com/sign-up/
Subscribe to our YouTube page: https://www.youtube.com/@RiskReversalMedia
#investing #stocks #stockmarket
Investing involves the risk of loss. Content is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Dan Nathan, Guy Adami and other guests featured in this show may maintain positions in the securities discussed in this video.
Category
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NewsTranscript
00:00 (upbeat music)
00:02 - So typically I'll start these on the tape podcast
00:06 with a lyric from a song, but you know what?
00:09 I had a lot of time to think.
00:10 By the way, this is the On the Tape podcast.
00:13 I am Guy Adami, always joined by the very handsome
00:17 Danny Moses and the ever shrinking Dan Nathan.
00:19 Today we have the joy of Stuart Sopp, the CEO of Current.
00:24 He will be joining us for the entire podcast.
00:27 So we have a lot going on.
00:29 As I mentioned, a lot of time to think,
00:31 I was on the plane home last night from Omaha, Nebraska.
00:34 And if you've flown with me, which many of you have not,
00:37 you know that I basically sit in my seat and I stare forward
00:40 and by staring forward, I think about a lot of things.
00:43 And last night I was thinking about
00:45 how do we start this podcast?
00:47 And we're doing it today on Friday
00:48 because we had Apple earnings yesterday.
00:51 We wanted to get on the backside of that.
00:52 And we obviously had a jobs number this morning
00:54 that we will discuss, but it came to me knowing
00:57 that Stuart was gonna join us.
00:59 He reminds me of one of the 16th century English poets.
01:04 He's got the, what do they call those things
01:07 when you put it on your head?
01:07 - Man bun. - Bun, right?
01:09 The man bun.
01:10 He's very handsome.
01:11 He's got the beard.
01:12 He's got the accent.
01:13 He's bright as shit.
01:14 Like he's a poet, like he's a throwback from another time.
01:17 So I said to myself, all right,
01:19 what poet does he sort of look like?
01:21 And it dawned on me because I took poetry drama in college
01:25 that he looks remarkably like Sir Thomas Wyatt.
01:28 And then I said to myself, well,
01:29 Sir Thomas Wyatt has a very famous poem
01:32 and that's exactly the poem that lends itself
01:36 to this episode.
01:37 And just indulge me yet again for just a minute.
01:41 The name of the poem is "They Flee From Me."
01:44 They flee from me that sometime did me seek
01:48 with naked foot stalking in my chamber.
01:51 I have seen them gentle, tame, and meek
01:54 that now are wild and do not remember.
01:57 And Danny Moses, think about this for a second.
02:01 What has been fleeing?
02:03 Deposits have been fleeing from different regional
02:07 and smaller banks in record amounts.
02:10 They are fleeing from the people they sometime did seek.
02:14 And as we sit here today,
02:16 more and more banks are seemingly going by the wayside.
02:19 The bigger banks are getting bigger.
02:21 The whole too big to fail stuff
02:23 that we were sort of railing against for years
02:25 is alive and well.
02:27 Mark, it's a bit on its horse here today as we speak,
02:29 but there's so many things to talk about.
02:32 By the way, Stuart, welcome.
02:33 And what are your thoughts about me
02:35 comparing you to Sir Thomas Wyatt?
02:37 - That was fantastic, thank you.
02:39 It's always great to be here.
02:41 I have never been compared to a poet before,
02:42 so I appreciate that.
02:43 That was a new one for me, but obviously very flattered.
02:48 - So Guy, a little housekeeping.
02:49 So you were in Omaha.
02:50 It must've been what?
02:51 It was your high school reunion,
02:53 you, Charlie Munger, and Warren.
02:56 And what, you were a year behind them?
02:57 So they just kind of put a bunch of the years together
03:00 for Omaha High, is that what they did?
03:02 - I think when you get to a certain age,
03:04 they try not to do it by year.
03:05 They try to do it by those of us that are still alive.
03:08 So by the way, Charlie was four years ahead of me.
03:11 I think he was a senior my freshman year,
03:13 and I think Warren was somewhere in between.
03:15 But we had a great time in Omaha.
03:18 I got to see Creighton University
03:19 for the first time in a while.
03:21 It was a great trip, but I did a lot of introspection,
03:24 and there's no doubt that we can't bury the lead here,
03:28 Danny, I mean, banks are front and center.
03:31 We're seeing it each and every day, seemingly,
03:33 at least the equity of these banks are getting lambasted,
03:37 justifiably so, not justifiably so, it doesn't matter.
03:40 People say there's not a banking crisis,
03:42 maybe not a systemic risk,
03:44 but there's clearly a problem in terms of the equity.
03:47 And we'll have a conversation with Stuart
03:50 about how this manifests itself into the economy.
03:52 You don't think that Jerome Powell's a poet
03:54 when he says the US banking system is sound and resilient?
03:57 That was pretty poetic, of course.
03:59 But Guy, you know, we come on the show,
04:01 I say this all the time,
04:02 we don't know what you're gonna come out with.
04:03 I thought you were going Gordon Lightfoot today, for sure,
04:07 because you had to be a fan of Gordon Lightfoot.
04:09 So I had a lyric to sing that is about Jerome Powell.
04:12 Ready? Go.
04:14 ♪ If you could read my mind, love ♪
04:17 ♪ What a tale my thoughts could tell ♪
04:20 That's Jerome Powell, right?
04:21 He just re-disguised mine, right?
04:22 So let me talk about the banks for a second.
04:24 I think that the deposit outflow story is over.
04:28 I think the deposit changing within the bank
04:30 and interest bearing for non-interest bearing is not.
04:33 I think the Fed has basically implied
04:35 and the Treasury have implied
04:36 that they're not going to let people lose money
04:38 as depositors, even if you're over 250.
04:40 I think that's pretty clear.
04:42 So that part, I think of the quote, crisis is over.
04:44 Now we're on to, bring back 2008, blaming short sellers.
04:48 Let's do a, you know, short band could be coming.
04:51 That type of shit's flying out there right now, right?
04:53 All short sellers did was identify the problem
04:56 six months ago to tell people what was going to happen.
04:59 But did the regulators, did the San Francisco Fed
05:01 do anything?
05:02 Did the Fed do anything?
05:03 And one of the most telling things was when Powell
05:05 was pressed about from Leisman, I believe,
05:09 about what happened in February meeting
05:11 when you were alerted, basically,
05:13 that Silicon Valley may be quote, in trouble.
05:15 And he didn't answer.
05:16 And then Leisman pressed him again.
05:18 That was a very embarrassing moment, I think,
05:19 for the Fed in general.
05:20 But listen, you know, here's the thing.
05:23 When these banks go up for quote, sale,
05:25 the beauty pageant or the non-beauty pageant,
05:27 if you want to call it in this regard,
05:28 it's not just about the securities anymore.
05:31 Banks are getting a holistic look at the other little banks
05:33 where they're looking at.
05:34 They're looking at commercial real estate.
05:35 They're looking at loan loss provisions, looking at credit.
05:38 So it's not just about the transfer of these securities
05:41 onto a bigger balance sheet.
05:42 And that's actually what's happening right now,
05:45 in my opinion.
05:46 So when JP Morgan had to look at First Republic
05:48 or these other banks, we're going to see more and more
05:49 of this potentially happening.
05:51 It's not just about the securities anymore.
05:52 It's buying this franchise.
05:54 And I think that's more telling.
05:55 And again, we know there's bigger issues at the bank,
05:58 which are slower moving.
05:59 They're elephants, so to speak, in commercial real estate.
06:01 So I think we're in the early innings,
06:03 but I do feel like the crisis of depositors being at risk
06:08 is kind of past us at this point.
06:09 - Yeah, so interesting.
06:10 You know, Stuart was on CNBC's Fast Money last night.
06:13 That was Thursday.
06:14 One of the first questions he got from Melissa
06:16 was about PacWest and really about some of the things
06:19 that you guys both just discussed here.
06:21 And it's interesting, Guy, you mentioned the too big to fail
06:23 that all of this regulation since the financial crisis
06:27 in the years after was really meant to kind of diversify risk
06:31 across the banking system.
06:33 And now it's coming back up into it, right?
06:35 And it's coming with a bit of moral hazard.
06:38 Stuart, that was a term that you used last night.
06:40 When you think about the company that you and Trevor built
06:43 in the wake of the financial crisis,
06:45 you were squarely looking at
06:47 some of these large institutions.
06:49 Help us think about this through your lens, right?
06:51 Because to Danny's point,
06:53 the regional banking equity is literally,
06:56 I mean, it's like a rounding error right now, right?
06:58 They took out the biggest ones for all intents and purposes
07:01 over the last month and a half.
07:02 Now we're looking at ones that have
07:03 sub-billion dollars in equities.
07:05 They still have, obviously, huge assets and liabilities
07:09 on their balance sheets, right?
07:11 And those are the things that are being backstopped.
07:13 Consumers' money deposits at those institutions
07:16 are being backstopped.
07:17 What does it mean to you and to FinTech?
07:20 FinTech has been this massive theme
07:22 trying to disintermediate,
07:23 trying to actually serve customers
07:25 that were not well served,
07:26 whether maybe it was by a really small bank
07:28 or a really large bank.
07:29 What does it mean now that all of these major money centers
07:32 are just getting way big here
07:34 and they're really gobbling up everything below it?
07:37 - Yeah, I think with FinTech specifically
07:40 compared to regionals, right?
07:41 If you can make that comparison,
07:43 it's a business model differentiation,
07:46 which is what I was kind of bringing up yesterday.
07:47 So banks, obviously, long duration,
07:49 there's a duration mismatch.
07:51 It's kind of surprising that the market broadly
07:54 is surprised by this.
07:55 Maybe they're surprised by their risk management.
07:57 I think that's probably where we're all surprised.
07:59 And also the lack of regulation or regulatory oversight
08:03 from this massively accelerated rate hikes
08:09 has obviously signified that maybe their treasury departments
08:12 or whatever it is, their risk management is not as good
08:15 as it should have been.
08:15 And then for FinTechs like us,
08:18 we conflate banking in the sense
08:20 of providing banking services,
08:22 but we don't really have this duration problem.
08:23 We have a payment solution, right?
08:25 And so you're really seeing the highlight
08:28 of those two business models
08:29 and the fact that we're probably a lot safer.
08:31 When it comes to, like, when I back things up a bit,
08:34 I think, you know, really high level,
08:37 the FRC that there's now gone under,
08:39 that was identified back in March, right?
08:42 So when SVB went under, everyone was like,
08:43 okay, FRC is in trouble.
08:45 The regulators knew it, the banking fraternity knew it.
08:48 And I think that that was basically a tale.
08:50 But what we're seeing right now,
08:51 this sort of smaller, low market cap,
08:54 low float regional banks,
08:57 they're being attacked from the equity side first,
08:59 and then the deposits are fleeing.
09:00 And that's a new phenomenon that we're seeing right now.
09:03 And I think it's like slightly unhealthy, right?
09:05 Because these other banks like Signature, SVB, Silvergate,
09:10 they were basically serving a more affluent,
09:14 more wealthy community, right?
09:16 That was way over the 250K FDIC, more digitally savvy.
09:20 These regionals are very local.
09:22 They're basically part of the GDP of the mom and pop shops,
09:26 the franchisees, your dental, or your vet, you know,
09:31 that's how they get their credit.
09:32 And that's where credit creation and growth
09:33 is really coming from.
09:35 And so attacking these banks to make a quick buck,
09:39 I think is obviously not great,
09:42 but in terms of like, you know, the concept of that,
09:46 but it's actually going to affect the way
09:50 that this country is gonna grow going forward.
09:52 - Let me just say that the Fed, let's go back here.
09:56 This is really about quantitative easing,
09:59 becoming quantitative tightening.
10:00 And in late 2021, Powell told the market that QE was over
10:05 and QT was gonna begin.
10:07 These banks decided at that point to plow in
10:10 to these securities ahead of a $9 trillion potential unwind,
10:15 or at that point, $8 trillion potential unwind
10:17 in the marketplace.
10:18 And so we knew, right, that if you front run that legally,
10:22 if you're these huge funds that buy these securities,
10:24 why would you step in and buy?
10:26 These banks decided to do that, right?
10:28 So I'm not, you know, this whole thing about short sellers
10:31 causing anything to me is nonsense
10:33 because if the banks don't need to raise equity,
10:36 then the stock price should matter over time
10:38 and it should recover,
10:39 but they missed their window of potential
10:40 to raise the equity.
10:41 And yes, I agree, it's self-fulfilling.
10:43 And let's think back to the global financial crisis.
10:46 Yes, did hedge funds, were there hedge funds out there
10:48 that may have shorted Bear Stearns
10:51 and subsequently pulled their assets
10:53 from the bank potentially?
10:55 There was certainly some of that going on.
10:56 This is very different in my opinion.
10:58 So you just said this was known for months.
11:00 This was known for two or three quarters
11:01 that this was gonna happen.
11:02 So, I mean, I have a real problem with people out there,
11:06 quote, blaming short sellers.
11:07 Of course, there's gonna be people
11:08 that manipulate over time,
11:10 but that's, you know, I think that's a one-off here.
11:12 So again, this is forewarning.
11:14 And let me just say that QT, they can pretend,
11:16 yeah, they got the balance sheet down another $60 billion
11:19 last night or whatever, when I saw the report.
11:22 That thing is done
11:22 because that will be the most disruptive factor
11:24 going forward 'cause that makes the situation
11:27 even worse for these banks, in my opinion.
11:29 Yeah, I don't disagree with you, Danny.
11:31 And I think when you look at where we are
11:34 with these smaller regional banks,
11:35 there's about 550, 600 of them
11:38 that are publicly listed in the country.
11:40 I just think that we're gonna,
11:42 we're slowly starting to see the tail end of this.
11:45 I think we'll have a few more,
11:47 but, you know, I think as Guy already said,
11:49 it's not systemic and we'll probably see this sort of
11:53 a halo of this over the next few months,
11:55 you know, as the short sellers sort of do their job.
11:58 I think higher level, we're seeing a duration bubble burst.
12:02 And I think that's really important.
12:03 In 2008, you know, we saw the banks being attacked,
12:06 but it was a credit problem then.
12:07 And that's a very different problem that we're seeing today.
12:10 I know Danny and Dan have thoughts on this too,
12:12 but I'm gonna ask you and they can chime in on the back end.
12:15 So we talked about what does this mean longer term
12:18 and here are my thoughts on it.
12:20 And I'm curious as to what you think.
12:21 So obviously in terms of what we're seeing
12:25 with these small and regional banks,
12:28 the equity is getting sold off.
12:29 I understand that.
12:30 I think many more of these banks
12:32 are gonna go by the wayside.
12:34 I think what we're seeing, what we'll continue to see,
12:37 Danny doesn't think we're gonna see
12:38 that much more deposit moves,
12:40 but the bigger banks are gonna get bigger.
12:42 But here's my sort of premises to this whole thing.
12:45 And this is how I wrap my head around it.
12:47 If you think about the lifeblood
12:49 of the United States economy,
12:51 it's access to credit and banks are obviously
12:53 at the forefront of that.
12:55 Regional banks are sort of at the epicenter
12:58 because small business is such a huge driver
13:02 of employment in this country.
13:03 And they have their finger on the pulse of local businesses.
13:06 Almost by definition, they're immersed
13:09 in the communities that they serve.
13:11 If those banks are compromised,
13:13 which I think we all agree that they probably are,
13:16 almost by definition,
13:17 the customers that they serve will be compromised.
13:20 So those customers, their access to credit
13:23 is gonna get more difficult.
13:24 It would have been more difficult in the first place,
13:27 given all the regulation, more so now.
13:29 So if their access to credit sort of gets difficult
13:33 or almost entirely goes away,
13:36 there's gonna be a, the brakes are gonna be put
13:38 on the economy in a meaningful way.
13:40 Now, we're not gonna feel that tomorrow, Stu.
13:42 It's not gonna happen next week.
13:44 But to me, that's the real danger of this entire thing.
13:48 Not necessarily that some of these banks are going away,
13:51 but what the knock-on effects are gonna be.
13:53 Thoughts on that?
13:54 - Yeah, I couldn't agree more.
13:55 That's really where my main worry is,
13:58 that this is indicative of credit creation slowing down
14:02 in a significant way to the backbone of America,
14:06 of where the real production and productivity is.
14:08 Blue collar workers, people that,
14:10 current services, you know,
14:13 from a payments and banking point of view.
14:16 And that's really where my main worry is.
14:19 I think we went from a liquidity crisis
14:21 to a solvency crisis from this duration bubble bursting.
14:24 I think with Powell saying,
14:25 I think he did a good job, by the way, yesterday.
14:27 I thought he, or on Wednesday, he was pretty good.
14:30 And I think he sort of threat,
14:32 I know it's not popular to say that,
14:34 but I think he threaded the needle, you know,
14:36 in an okay way.
14:38 But unfortunately, they're gonna need to see something break
14:41 and then they're gonna, you know,
14:43 they're driving the car with the rear view mirror
14:45 the whole time.
14:46 And I think at this point, we've raised so quickly,
14:48 so, you know, so fast.
14:50 And when you pop a duration bubble,
14:51 you don't know where things are gonna break.
14:53 And I think when you talk about the main,
14:56 the people that you just talked about, Guy,
14:58 we're talking auto loans, credit card debt,
15:01 with, you know, the normal things that get you to work,
15:04 that keep your family going and all that other stuff,
15:07 I think is, you know, is harder to service,
15:10 it's more expensive.
15:11 And there's, you know, when credit creation comes down
15:14 and all these banks are going away
15:15 and getting rolled up into JP Morgan,
15:18 they're not gonna service those clients in the same way.
15:20 So we're seeing like material,
15:22 I would say medium to long-term destruction here.
15:24 - Yeah, I'll just say this.
15:25 I did not think Fed Chair Powell did a good job.
15:28 I thought he seemed very, very uncertain.
15:31 And I'm just gonna give you one example of it.
15:33 So there was, I think it was Matt Boesler
15:35 from Bloomberg News asked him about the way, you know,
15:39 Q1 GDP had been tracking.
15:41 And he's just wondering, this is his question,
15:43 if you can kind of elaborate on how and why
15:45 you're optimistic that a recession can be avoided
15:47 given that the Fed's staff's forecast,
15:50 possibly also the broader committee's forecast,
15:52 as well as, and also of course,
15:54 most private sector forecasters are for a recession.
15:58 And he just kind of bobbled around a little bit
16:01 and he said, this is the quote, okay?
16:03 He said, "It's possible that it's different this time."
16:06 I mean, that was part of his answer.
16:08 So Danny, when you heard him,
16:10 and really I felt he had far less of a command.
16:14 And Guy, you mentioned this on many occasions, okay?
16:16 I mean, he's got a tough job right now, no doubt about it.
16:19 We don't have to get into why the job is so tough.
16:21 But like, again, I think he mentioned it.
16:23 Obviously we know what their dual mandate is,
16:24 price stability and maximum employment.
16:27 The problem is, and we can talk about the jobs report
16:30 from April right now, you know,
16:31 there is too much demand for jobs.
16:33 That has been the stickiest part of inflation right now.
16:36 The way, if you were to look at commodities
16:38 and you'd say to yourself, they're actually signaling,
16:41 you know, a recession, right?
16:43 But on the jobs front, it's a very different story.
16:46 I just don't know how he could use those words.
16:49 It's possibly different this time.
16:51 - What are we expecting from the guy
16:53 who thought inflation was transitory?
16:54 I don't understand the expectations for people.
16:57 I feel bad for him 'cause he's in a really tough spot,
16:59 but I think the Fed now is a sideshow.
17:01 And people that are complaining, not necessarily you Dan,
17:04 about his performance, just accept the fact,
17:06 no one wants to accept the fact
17:07 we're going to a period of sustained higher rates.
17:10 We're gonna have a real economic cycle
17:12 that we haven't had for 13 or 14 years.
17:14 And I think that adjustment,
17:16 people wanna make excuses and blame the Fed.
17:18 People need to be prepared for this.
17:20 And I've told you before that when you listen
17:22 to these conference calls, be very attuned to the CEOs
17:25 that blame the Fed or even talk about the Fed.
17:28 The ones that just manage their business through it,
17:30 you know, I think are gonna be obviously
17:31 in much better shape.
17:33 And the CEOs that have been through this type of thing.
17:34 So I do think the only Fed,
17:36 I think the Fed's now a sideshow.
17:38 It's a real fundamental take from here.
17:40 I do think though that the balance sheet issue
17:42 with QE and QT will come back to the forefront.
17:45 I think that's where the Fed's gonna be very, very involved.
17:47 And I do think that's gonna reverse at some point,
17:49 but I have no expectations for them, you know,
17:52 at the Fed at this point,
17:53 given everything that's happened in the banking system.
17:55 And then with all the misguided forecasts on inflation.
18:00 - As we said earlier,
18:01 we waited till Friday morning to do this
18:03 'cause we wanted to get through app earnings.
18:04 And as they say on CNBC, the all important jobs number.
18:08 I just love saying certain things like,
18:11 smash the like button
18:13 and subscribe on your favorite podcast stories.
18:16 For some reason, I just think of it and I smile,
18:18 but that's sort of the idiosyncrasies of G-Swiss.
18:23 But the jobs number came out 235,000,
18:27 which was better than expected.
18:28 I think a lot of people had like 170,000 handle on it.
18:31 Not that that matters
18:32 because Danny will speak to the revisions,
18:35 but the unemployment rate is still 3.4%.
18:37 So I look at this and say, my God,
18:40 it's good news for the economy, I think.
18:43 I mean, it's great that people are employed.
18:45 It's great that there's still almost twice as many
18:48 job openings as there are people looking for jobs,
18:51 although that's coming down as well.
18:53 The market, Danny, seems to be applauding this for now.
18:57 Maybe it's on the back of the revisions
18:59 that you're gonna talk about.
19:00 I'm not sure because to me, a 3.4% unemployment rate
19:05 continues to make their job,
19:07 they being the Federal Reserve, exceedingly difficult.
19:10 - Yeah, I mean, obviously it's backwards looking
19:15 to a degree, if it goes without saying,
19:16 and you did get a revision lower.
19:18 So the economy proved that GDP that was revised
19:21 kind of lower, makes more sense now at the 1.1%,
19:23 which is what jobs were actually doing.
19:26 I think the Fed has done.
19:27 I think this is actually, if you're a bull in the market,
19:29 probably not a bad number.
19:30 You know, there's a great article in the Wall Street Journal,
19:33 I believe last night about operating margins
19:36 have come in a little bit better than expected in Q1, right?
19:39 Which means the earnings revisions may not be as bad
19:41 as people have thought going forward into 2023.
19:44 Those are bright spots.
19:45 But to your point, Guy, people that are waiting
19:47 or believe the Fed's gonna be cutting,
19:49 if that gets pushed out, to me, that's a negative
19:52 because with the S&P at 18 or 19 times
19:54 and Apple at 26 times, yes, I know we can talk about it.
19:57 It was a quote, it was an okay quarter.
19:59 I mean, down revenues, down earning,
20:02 down operating income year over year, whatever it might be.
20:05 It's still a quote, safe name to own.
20:07 And why did people like the Apple story?
20:08 Because their quote, bank is doing so well,
20:10 which is Goldman Sachs, by the way.
20:12 How about that for irony?
20:13 But, you know, again, I think, you know,
20:15 we're gonna plow ahead here.
20:16 And I think it's gonna be slow going
20:18 on the economic data going forward.
20:19 So I believe that the Fed has done,
20:21 but it was fine if you're a soft landing person,
20:23 that's kind of what you wanted to see.
20:24 - Let me tell you what's not plowing ahead,
20:26 the S&P 500 right here, okay?
20:27 So we had that February 2nd high, it was 4,200.
20:30 We're at 4,100 right now.
20:31 We're opening up a little bit as we record this.
20:34 I think we're up, you know, 75 basis points,
20:36 which brings us a little bit above 4,100 in the futures.
20:39 And I'll just say this,
20:41 I don't think there was anything this week
20:43 from the Fed chair pal, it wasn't,
20:44 it was a hawkish hike, okay?
20:47 Let's just be clear on that, okay?
20:49 If you look at today's jobs data,
20:50 it doesn't make me feel like there should be anything there
20:53 that should be perceived to be dovish, Danny.
20:55 So like, I get it, if you were a bull, those revisions,
20:58 maybe they kind of help a little bit there.
21:00 And then I think of just the last earnings
21:03 that we just got from Apple.
21:04 I mean, they just had their second consecutive
21:06 revenue decline, okay?
21:08 This was year over year as far as revenues,
21:11 and they just guided down the current quarter in revenues.
21:13 And I get what you're saying on margin,
21:15 I get where the US dollar is,
21:16 I get the exposure that lots of US large multinationals have
21:21 and so the dollar might start to be a tailwind
21:24 as it had been a headwind in the year prior here.
21:27 But I just think a little bit about valuation to your point,
21:30 we quote John Butters, our friend over there
21:32 at Earnings Insight at the FactSet blog.
21:35 And you know, if you look at the forward PE of the S&P
21:38 at about 18 and a half, it's in line
21:40 with the five year average,
21:42 and it's above the 10 year average.
21:43 And the biggest differentiator here,
21:45 I think we all agree that the only way Fed funds
21:48 is gonna come down meaningfully
21:50 is if this crisis in the regional banks
21:52 turns into something bigger, right?
21:55 If the economy slows quicker than most people think,
21:58 if a recession starts and it ends up being deeper
22:01 than we kind of think, I think the base case now
22:04 is that we maybe avoid back to what Powell said
22:07 is possibly different this time,
22:09 where we have a very shallow sort of recession.
22:12 I just look at stocks and I say to myself,
22:14 okay, the VIX got above 20 briefly yesterday,
22:17 it's gonna get kind of creamed today,
22:19 especially Friday into the close
22:21 if the S&P can stay up.
22:23 We talk about this move index,
22:24 it is picking up a little bit.
22:25 Danny, before we got on, you just mentioned
22:27 the volatility that we've seen in treasury yields.
22:30 And I just look at the sequencing
22:31 that our friend Carter Braxton Worth from Worth Charting
22:34 has mentioned on numerous occasions
22:35 over the last couple of months.
22:36 If you look at the start from January 2022,
22:40 these moves that we've had to into and out of earnings,
22:43 these big rallies over about a month or two,
22:46 and then they've come off
22:47 and they were making new lows last year.
22:49 The first time we didn't make a new low
22:52 was the retest after the October.
22:54 So now it looks like we're making a series
22:56 of higher lows in the S&P,
22:58 but I'll just point you again towards 4200.
23:01 I'll point you again towards the VIX where it is.
23:04 I'll point you again to the debt ceiling
23:07 that is only gonna get dialed up.
23:08 And I think we're gonna have a 25 to 30 VIX
23:11 in the not so distant future.
23:12 And I think that this disconnect,
23:14 this spread between Fed funds,
23:16 which is gonna stay stuck here at 5%,
23:18 if you're looking at the CME Fed tracker
23:20 for the June meeting,
23:21 it doesn't look like there is small chance
23:24 of a hike implied.
23:25 And so I just say to myself,
23:27 this is actually a perfect cocktail
23:29 of complacency right now.
23:31 - Don't mistake my comments for bullishness.
23:35 I'm just trying to be a little bit-
23:37 - Totally.
23:39 But can I make, Danny, can I make one other point?
23:40 This is, I think, one of the most important things
23:42 that happened in the equity market this week.
23:44 Okay, so this is Friday.
23:45 Last Friday, ExxonMobil reported their Q1 earnings.
23:50 The stock made a new brief all-time high.
23:53 It traded like $120.
23:55 It traded as low as 105 yesterday.
23:58 It dropped like a lug.
24:00 And we've been quoting this,
24:01 and this goes back to Butter's guy.
24:02 He has been telling us in his Earnings Insight blog
24:06 for quarters now that the contribution to S&P earnings
24:10 by the energy sector,
24:11 which basically kept things afloat
24:13 for all intents and purposes
24:15 with a two-handle or 200-handle for S&P earnings in 2022,
24:19 was gonna start to drop off mid-year this year.
24:22 And so you better have operating margins
24:25 start to improve a little bit
24:26 in some of these other bigger names.
24:27 And I would just mention this,
24:28 is that when you see a name like Exxon drop like that,
24:32 and it is so well-liked by the investment community,
24:35 it makes me very nervous about an Apple
24:38 and a Microsoft and Nvidia.
24:40 All of the risk in the stock market
24:41 has been transferred to a half a dozen names.
24:44 And I know we did the carry the weight a couple weeks ago,
24:47 but it gets more acute now the longer we get into this,
24:50 and the more complacent some of the readings that I see,
24:53 some of the inputs that I focus on are.
24:55 And I think we are in for a down 3% to 5% day
24:59 in the NASDAQ in the not-so-distant future,
25:01 and it's gonna be led by some of the largest names
25:03 that I think the investors have just been hiding in.
25:06 - I don't disagree, and I said on February 2nd,
25:08 hi, that I'll just use the spy at 418.31
25:11 that we wouldn't hit that again.
25:13 I was holding on for dear life on May 1st
25:16 when the spy hit 417.62 and then quickly reverted,
25:19 so it did not make a new high for the year.
25:21 I still stand by, at least in the first half of the year,
25:23 we will not get back through that.
25:25 But your boy Butters was the same one
25:26 that was quoted to your point, Dan,
25:28 operating margins a little bit better than expected
25:30 with 70% of the companies having been reported.
25:32 That does not set up well, potentially going forward
25:35 when you start to compare second quarter
25:37 versus first quarter to your point, Dan.
25:39 - Sir Thomas, I'm sorry, I mean, Stu.
25:43 And it really is remarkable.
25:44 I don't know if we can put in the show notes
25:45 a picture of Sir Thomas Wyatt,
25:47 who clearly is no longer with us,
25:49 side by side with Stuart Sopp.
25:51 It's remarkable.
25:53 Sort of like Val Kilmore in that movie with Elizabeth Shue,
25:56 but I digress.
25:57 - The same. - That was a good movie,
25:57 by the way. - The same, we were talking
25:58 about that the other day. - Yeah, it's good.
25:59 - Were you really? - Yeah, we were.
26:01 - Look at you, I'm in your head.
26:03 So you obviously look at all this stuff.
26:05 Now, when you're in charge of a large organization,
26:10 you have your head down, you're doing your thing,
26:11 you're focused, every single day you grind.
26:14 But at a certain point, you sort of take a step back,
26:17 look at the world from 30,000 feet.
26:19 And since last we spoke, the world's changed considerably.
26:23 So on the margins, in terms of current
26:26 and what you're doing, is all this a good thing
26:29 or a bad thing?
26:30 And I'm not trying to equivocate here.
26:31 I mean, I think we all agree it's not a great thing,
26:34 but sometimes you have to look at it
26:36 through the lens of your business
26:38 and what opportunities it creates.
26:40 We have a new credit product,
26:42 credit building product coming out in about four weeks.
26:45 And then we have a cash advance product
26:46 coming out in a couple of months.
26:48 We look through things from a macro lens,
26:52 guilty as charged.
26:53 And the way we look at it is like,
26:56 okay, inflation's high for longer,
26:58 interest rates are high for longer,
27:00 unemployment is at maximum, is at the maximum level.
27:05 And so going forward, things can only get worse,
27:07 really, from this point, right?
27:09 So things can only get worse as we draw down savings
27:12 and credit creation is lower and all the rest of it,
27:15 and the regional banks get rolled up
27:16 and all the things we just mentioned.
27:18 So from a consumer point of view,
27:21 that blue collar worker person
27:23 who is backbone of America,
27:26 they're gonna need to build or rebuild their credit.
27:28 They need access to cash that is fair and transparent.
27:33 And so we are building those products as soon as possible
27:35 to get them out to help people in their everyday life.
27:38 So in one sense, it provides opportunity for us
27:42 to really fill a gap that is being left behind
27:45 through this crisis and will continue.
27:48 And on the other hand, you sort of go,
27:51 okay, it's not great for the world.
27:53 When I was last on here, when I was last on CNBC,
27:56 I was saying it's not systemic
27:57 and it's the sort of first innings of a problem.
28:01 I'm starting to get a little bit more worried here.
28:04 Like I've just said, I think the regional banking crisis
28:08 is a bit of a sideshow.
28:10 And I think it's going to highlight bigger problems
28:14 in the broader economy.
28:15 I think there's other things to look at.
28:17 - Let me just say this in conjunction
28:19 with you launching these new products and so forth.
28:21 And I know you're very careful and your banking partners
28:24 are very careful in building this company.
28:26 And Upstart, this quote AI lending company, right?
28:30 Was using Cross River Bank as well as Affirm.
28:32 By the way, I will note that Upstart and Affirm
28:34 both report earnings on May 8th.
28:35 Can't wait to hear what they have to say
28:37 about how that's going.
28:38 But Cross River Bank got a cease and desist from the FDIC
28:42 basically for unsafe or unsound banking practices.
28:45 And this whole AI using for lending,
28:48 which Vinny Daniel will talk about at length,
28:50 this goes back to lending club.
28:51 You cannot commoditize lending, right?
28:53 You gotta be very careful in how you build your book.
28:55 And Stu, I know you guys are gonna be obviously doing that.
28:58 And I think this brings up this whole other element
29:00 of these quote rent-a-banks, which are kind of out there.
29:02 We've talked about these regional banks,
29:04 but these rent-a-banks,
29:05 they grew during the PPP time era, right?
29:07 That's how a lot of these kind of banks grew.
29:09 So I just wanted to get that in there
29:10 because we've been negative on these companies
29:13 and these platforms for some time.
29:14 They tried to hide as quote tech companies,
29:17 but when you start to move into these banking services,
29:19 right, you have to acknowledge kind of the risks
29:21 that are inherent in there.
29:22 And Stu, I know you guys have thought long and hard
29:24 about that as you kind of build these products
29:26 in your company.
29:27 - Yeah, so we connect to a lot of these banks.
29:29 We connect to three of them.
29:30 So, and you mentioned one of them.
29:32 And so we're very careful about how we work with them.
29:36 When there's two sides to this story,
29:38 there's the bank side and how good they are at compliance
29:41 and regulatory capture and all that other stuff.
29:43 And there are internal controls.
29:44 Can they scale?
29:45 Because tech firms like ourselves, FinTech firms,
29:48 we can scale pretty quickly.
29:49 And then when you're dealing with a regional bank
29:52 that has only had local growth for a hundred years,
29:55 all of a sudden it gets really complex for them.
29:57 They're like, okay, this is really quick.
29:59 Can we hire enough people locally and all this other stuff?
30:01 And I think that those sort of,
30:03 as you call them rent-a-banks or rent-a-charters,
30:05 they've definitely gone through something.
30:07 It's not recent, but they've gone through something
30:09 over the last year to two years.
30:10 And I think they've got a lot better.
30:12 From our side, we get audited several times
30:15 through all our banks.
30:16 And there's third-party audits.
30:17 There's a visa audit.
30:18 Sometimes we do a Fed audit.
30:20 And so you can imagine because the nature
30:22 of how we connect to the banking industry,
30:24 we have to comply and be regulatorily
30:26 the best that can be out there.
30:30 Because of course, we're gonna be looked at in this way
30:33 because we can grow so quick.
30:35 When you talk about regulators,
30:36 you talk about the speed of asset accumulation
30:39 or deceleration and also customer growth.
30:42 What the regulators and the administration do not want
30:45 is a blind spot in the safety and security
30:47 of the banking system.
30:48 And so I think this is all good in the sense of
30:51 that the sort of top-down pressure that we're seeing,
30:54 I don't think it's that healthy when it comes to crypto
30:56 in my personal view.
30:57 I don't think that has been healthy at all.
30:59 But when it comes to traditional banking
31:02 and how we're being regulated,
31:05 I think it's good.
31:05 I think it's time for a lot of us,
31:08 the fintech community as well as the sort of
31:11 renter bank community to sort of grow up a little bit
31:13 and get with the program.
31:15 I would say this finally,
31:17 is that if you're starting a smaller fintech,
31:19 right, you're a seed stage or you're a series A,
31:23 it's gonna be really expensive
31:24 and really hard to get going now.
31:26 Because I think that window is closed.
31:28 - There's certain things you don't skimp on
31:30 when you go to the grocery store.
31:32 One of them is Saran Wrap.
31:34 Because if you get sort of the cheaper brand,
31:36 it's one of those things that once it sticks to itself,
31:40 it's impossible to make the roll work.
31:43 It's just one of those things you want to effing scream.
31:46 The other thing of course, is tinfoil or aluminum foil.
31:49 And I'm a Reynolds Wrap person myself.
31:52 But I do not buy the aforementioned Reynolds Wrap
31:56 to create a tinfoil hat for myself.
31:59 But I have been, as Danny Moses has been,
32:02 an ardent supporter of what's going on in the gold market.
32:06 So tinfoil hats notwithstanding,
32:10 there is something going on here in gold, Danny Moses.
32:12 As I've mentioned a number of times,
32:14 in 2022, central banks globally bought
32:18 $70 billion worth of gold, 1,131 tons.
32:22 That was a record.
32:23 They're on pace to probably duplicate that this year,
32:26 although there's still half a year or so left.
32:29 The gold price is finally showing some signs of life.
32:34 And what I'll tell you is,
32:35 in terms of the market being long of gold,
32:39 we're probably about a 60% level as where we were
32:43 the last time gold was at this level.
32:45 Point being, the market isn't long yet.
32:47 And I'm gonna tell you again, for the record,
32:51 everything that we've talked about for the last 32 minutes,
32:54 and all the things that we've been talking about
32:56 for the last six to nine months, year, 18 months,
33:00 is walking its way into the gold market.
33:02 And I said this, and you can use it
33:04 as a bumper sticker, Danny.
33:06 Central banks, by buying gold,
33:08 are hedging their own stupidity, their own inadequacies.
33:12 So with that, as the gold market continues
33:16 to sort of hover around this 2,000 level,
33:19 what are your thoughts, Danny?
33:20 Does this thing have legs?
33:22 - Yeah, I think every pullback,
33:23 and we're getting a slight one today,
33:24 is a buying opportunity, 'cause it's hard to see
33:27 any type of scenario other than a perfect soft landing
33:30 where gold doesn't perform.
33:32 And one thing's being lost in this last few days here
33:36 with Palin and everything is Russia.
33:38 This stuff's really heating up over there.
33:40 This drone, supposed drone,
33:41 that tried to attack the Kremlin, blamed the US.
33:44 There's all these reports I'm reading now
33:47 about Russia's scoping out our underwater cables
33:50 near our coast, and all this stuff.
33:51 Feels like things are brewing again.
33:53 And I bring that up because all the geopolitical stuff
33:55 that's still happened, it's getting worse.
33:57 We're just obsessed with what's going on here with the Fed.
34:00 Lends itself to gold, and I do believe you're right.
34:02 And I think if we're right on our assessment of the economy
34:05 and where we're headed, and QT quote ending
34:07 and some form of QE, which has been going on
34:09 with the bank's bailouts, so to speak,
34:11 lends itself to gold.
34:12 So every pullback guy is a buying opportunity, in my opinion.
34:15 I'm totally with you.
34:16 - I think also you're seeing something seismic
34:19 happen with gold and the treasury markets.
34:22 US treasuries used to be the best collateral
34:24 that everyone could buy in the world.
34:26 Given those geopolitical risks that Danny just mentioned,
34:30 they're continuing.
34:31 You've seen the BRICS nations all get together.
34:33 They want their own payment system.
34:34 They want their own currencies to deal with energy,
34:37 which is all fine.
34:38 I don't believe it's the end of the dollar
34:39 or anything like that yet.
34:41 But what I do see is a lack of demand for US treasuries,
34:45 and that is being replaced with gold.
34:47 And I think that is just this seismic thing
34:49 that's not gonna go away over decades.
34:52 - And Stu, you did this, we've talked about it before,
34:55 but for some new listeners,
34:56 and our audience continues to build on a weekly basis.
34:59 So folks that don't know, in a past life,
35:02 aside from being a 16th century poet,
35:05 you actually traded currencies,
35:07 and I'm sure you dabbled in the yellow metal.
35:10 So when you see this, obviously you're looking at
35:12 from a much different vantage point.
35:14 There's a lot of interesting things going on.
35:16 Now forget about the gold market
35:17 and the precious metals market.
35:19 The currency market is fascinating.
35:21 And the moves that we're seeing,
35:22 think about what's going on with the ECB.
35:25 Think about the decisions that they're forced to make.
35:28 They probably have a bigger inflation problem than we have,
35:31 and they have economy that's sort of grinding to a halt,
35:34 and they have to decide whether or not
35:36 they're gonna continue to sort of tamp down their economy
35:38 by fighting inflation, and they've chosen to go that route.
35:41 Very difficult decisions now globally,
35:44 and that has impact not only on the commodity market,
35:47 but the currency market, a seat that you used to occupy.
35:50 - Yeah, that's right.
35:51 So I still do a cheeky look every morning
35:54 and look at the whole 50 currencies or whatever it was
35:57 I used to know to the pip.
35:58 I think we look very nationally or very sort of at the US
36:04 for like what's going to break.
36:07 I think it's important to sort of look at
36:10 the international community, right?
36:11 So you just mentioned Europe.
36:14 Like maybe the Fed doesn't see too much risk here.
36:17 Maybe they are right, right?
36:19 And so if Deutsche Bank goes under,
36:20 we already saw Credit Suisse go under, right?
36:22 Is it a Deutsche Bank thing?
36:23 Is it a European banking contagion
36:25 that then forces the hand of the Fed?
36:28 I think that is really important to look at,
36:29 and in those kind of cases, it looks like Eurodollar,
36:32 I mean, I don't wanna give any investment advice,
36:33 but Eurodollar looks kind of toppy up here, right?
36:35 Like 110, 111, 112.
36:38 If I was a Eurodollar trader like back in the day,
36:40 I would be sort of scaling into shorts here
36:42 because I see material risk in the US,
36:46 but also which means the dollar tends to go up
36:49 in those liquidity breaks.
36:51 And then there are sort of secular or sort of banking risks
36:55 that I think haven't been totally played out yet in Europe.
36:58 And I think that's something, I think you're right, Guy.
37:00 I think that is something that we should all be looking at,
37:02 and that's potentially what sort of triggers
37:05 the next wave of equity selling, I think.
37:08 - Dan, whilst I was flying home from Omaha, Nebraska,
37:12 it is beautiful, by the way,
37:14 the Apple earnings report came out.
37:16 You obviously discussed it on CNBC's "Fast Money" last night.
37:19 By the way, that's five o'clock Eastern time.
37:22 That show is now 16 and a half years old,
37:25 which is quite remarkable.
37:27 I saw the numbers, I went through them,
37:29 obviously on a very sort of tertiary level, I guess.
37:33 They didn't seem all that impressive to me.
37:35 And Apple's become more expensive
37:38 on the back of that earnings release,
37:40 and with the stock appreciation, more so now.
37:42 I think I understand to a certain point
37:46 what the market's looking at.
37:47 Danny mentioned the fact that they're getting rewarded
37:50 for quote-unquote being now part bank,
37:54 which is really mystifying to me.
37:56 Services continues to be a driver,
37:59 but this is not a cheap stock,
38:00 especially in light of the fact
38:02 that you continue to see declining revenues.
38:04 So people obviously don't want to focus on that, Dan,
38:07 but it's out there if you want to just take a look.
38:09 - Yeah, so when you think about services being a driver,
38:11 I mean, it came in at 5% year-over-year growth.
38:14 So when this stock got re-rated, right,
38:15 so this was trading below a market multiple for years
38:18 before this service component kind of came into the mix,
38:21 because the mix shift of their margins
38:23 was gonna be a lot better away from their hardware margins.
38:26 And again, in the smartphone industry,
38:28 where they have like 20% market share,
38:31 I just want to be really clear about that globally.
38:33 I mean, a lot of people think,
38:34 because everyone you know in America has an iPhone,
38:37 that is not the case in other parts of the world.
38:39 And so when you think about their market share,
38:42 but you also think about their margin,
38:43 they also take about like 85% of the gross margin
38:46 in the entire smartphone industry.
38:48 So they better be able to maintain those margins,
38:51 reshoring a lot of manufacturing
38:53 and reorienting their supply chains away from China,
38:57 should be put some pressure on margins.
39:00 Some of the takes I heard
39:01 is that they guided for flat margins,
39:02 and we know that India,
39:03 and they talked about India a lot,
39:05 is gonna be an important market for them.
39:06 So they're gonna shift a lot of manufacturing
39:08 away from China.
39:10 Over there, they talked about a 2 billion plus
39:12 installed base that's growing.
39:14 And I think about the services,
39:15 and I say to myself,
39:16 well how is services only at 5%
39:18 when they had more than 5% installed base growth, right?
39:22 And so if the services just goes flat, okay,
39:26 or like X growth here,
39:28 I think that's a really big problem for this multiple
39:31 at about 28 times year point guy revenues and sales.
39:34 This year expected to be low to mid single digits,
39:37 at best next year maybe mid to high,
39:39 trading about 25 times next.
39:41 You know, the stock just opened at $171, okay?
39:44 The high, I think, of the year is 175.
39:47 The high, all time high is $183.
39:50 It feels like it's a foregone conclusion
39:52 that it's gonna go there.
39:53 This is a 2.45 trillion dollar market cap company
39:57 that is not pricing in, in my opinion,
40:00 at this valuation, any likelihood of a recession.
40:03 And I think those are the things
40:04 that I think are really important.
40:06 Microsoft is another one, you know,
40:08 two plus trillion dollar market cap
40:09 where there's so much excitement about OpenII
40:12 and their investment and their integration of that
40:14 into their products.
40:15 And that's why I'll just come back to the fact
40:16 that I think there's a lot of risk
40:18 and a handful of names that have unusual excitement about it
40:22 where the fundamentals might be as good as it gets right now
40:25 especially relative to their valuation.
40:28 So I don't know, man, I said this,
40:30 I don't know if you were watching on the plane
40:31 on the way home, guy.
40:32 My final trade was Apple sell in May and go away.
40:37 And then I actually name checked you as the kids say
40:40 'cause I knew that if you were sitting in 26B
40:43 in the middle seat as he does looking like Private Pyle,
40:48 remember Private Pyle?
40:49 Just staring ahead, staring ahead that if I had said that
40:53 and you had your direct TV on
40:55 that might have really twerked you.
40:57 - Full metal jacket without question, Arlie Ermey.
41:00 And speaking of Arlie Ermey, somebody about as old as he,
41:03 by the way, he was fantastic in that movie.
41:07 So Stu, it's interesting, obviously,
41:09 Dan spoke to what Danny did as well in terms of Apple
41:12 and what they're getting themselves into.
41:14 Obviously they wanna sort of, I guess,
41:16 immerse themselves in as many businesses
41:18 as they see viable, but banking seems now to be one of them.
41:22 And we've talked about this before,
41:24 but how do you view Apple?
41:26 Competitor, are they somebody you can sort of coexist with?
41:29 How does that sort of line up
41:30 with what you're doing at current?
41:32 - Yeah, I think it's interesting what they're doing here.
41:34 Obviously banking is not a primary business for them.
41:37 They're in the business of shilling iPhones globally,
41:41 as Dan already mentioned.
41:43 And I think when it comes to falling sales of iPhones,
41:46 we've already hit peak iPhone
41:48 and now it's a market share game
41:49 as everyone has already sort of identified.
41:51 And so they're using banking
41:53 and they're using a traditional banking tool,
41:55 which is like show a really high interest rate, a high yield
41:58 and you'll get a bunch of customers.
42:00 And I think it's just this weird juxtaposition
42:03 where they're using this sort of blunt tool
42:05 to go and get iPhone sales.
42:07 So I'm really interested,
42:08 they sort of rolled this out in Q1
42:11 into the early part of Q2.
42:12 I'm interested to see if that is effective
42:15 for Q2 and Q3 iPhone sales.
42:18 Did people get iPhones?
42:19 'Cause they wanted to get 4.15% interest rate yield.
42:23 And so we should be looking at that as a framework,
42:27 I think, or as a lens to understand
42:29 if they're really gonna build upon
42:30 their financial services products.
42:32 I don't think this is meant for them to make money.
42:35 Why are they showing such a high interest rate
42:37 even compared to the 3.9% of markets?
42:40 I think the reality and the sort of sobering reality
42:43 for the banking fraternity
42:44 is that they don't need to make money.
42:46 This is CAC, this is customer acquisition costs,
42:48 this is engagement.
42:49 And so it's a really interesting dynamic
42:51 that has come through.
42:52 It is not directly competitive to us
42:54 for all the reasons that we've said over the years.
42:58 But I think for maybe a JP Morgan
43:00 or one of those money center banks,
43:02 it's kind of worrying.
43:03 - Yeah, well, you know what's interesting about it?
43:05 So when I think about this is that
43:06 if you have an iTunes account associated
43:08 with an iPhone or any hardware,
43:11 it likely have your credit card in there.
43:13 So they've already financialized this relationship.
43:15 And then they also know that this growth
43:18 that they've had in services,
43:19 I think they look at this offering
43:21 as just another service, right?
43:23 They're gonna be pushing harder into healthcare.
43:25 They're gonna have AR/VR headsets, wearables has been.
43:29 So I think they're moving towards this recurring model
43:32 because they have this financial relationship with you.
43:35 And so this is something actually,
43:37 I just said the sell in May and go away bit
43:39 as it relates to Apple.
43:40 I'm actually, if there was ever like a reset in this stock,
43:44 and again, as we get, let's say,
43:45 to the other side of this economic period that we're in,
43:48 I actually think because of that 2 billion installed base,
43:51 they are primed to do a whole host of things.
43:53 And I actually think it will grow back
43:55 into this sort of multiple,
43:56 but there needs to be a little bit of fear in it.
43:59 I just don't ever think that they're gonna be
44:01 a financial behemoth.
44:02 I think that they see it around the edges
44:05 as a really good place to be because it does,
44:07 when you have a bank account
44:09 or you have some sort of financial relationship,
44:11 it makes that relationship that much stickier.
44:12 - Everyone wants the ecosystem.
44:14 Everyone is going after the ecosystem.
44:16 There is revenue diversification,
44:17 there is customer engagement benefits.
44:19 And so you're seeing that from the hardware.
44:21 You look at Tesla, you look at Apple.
44:24 - You look at it.
44:25 I look at, as you said earlier, cheekily every morning,
44:28 I look at it.
44:28 - I'm also in your account with that one in the short term.
44:32 But what we're seeing here is exceptional valuations
44:37 and exceptional valuations from these companies
44:42 because people have already priced in these ecosystems,
44:45 sort of dominating everything in every vertical.
44:47 And I just don't think that will happen,
44:49 but it will be pretty good for those companies.
44:50 They should trade at a premium.
44:52 It's just probably not at the premium
44:53 that they're currently priced in.
44:54 - Yeah, and one other thing I think it's important,
44:56 to kind of end the week here with Apple.
44:58 This was the last big tech company.
45:00 There is actually one more.
45:01 So Nvidia is going to report on May 24th.
45:04 And I thought what we heard from Semis
45:06 and some of the competitors in Nvidia this week,
45:08 there was actually some really big news.
45:09 We started the week with Arista Networks
45:11 and some of their biggest customers
45:13 are some of the cloud operators,
45:15 Meta, Amazon, Google, Microsoft.
45:18 And they had a big warning actually.
45:20 And they said they see softness here.
45:22 And so I think if you're trading a lot of these techs
45:24 on what was reported for the last three months
45:27 versus what they're saying right now,
45:29 it's probably incorrect in my judgment.
45:32 Also, we had AMD results this week.
45:34 They talked about weakness in data center.
45:36 Qualcomm, we talked about weakness in handsets.
45:39 When I look at the handset numbers in Qualcomm is,
45:41 Apple's a 20% customer of Qualcomm.
45:44 You know, Apple told us that China was okay.
45:46 Okay, it was up year over year,
45:48 but there was a lot of pull.
45:49 Like, I guess they recaptured some sales
45:51 that they missed in the last quarter.
45:53 And I put together what China did
45:55 relative to the recapture and the reopening.
45:58 And then what service is telling me,
45:59 I'm not that optimistic about the current quarter.
46:01 And this June quarter is always a weak one for Apple.
46:04 The last thing I'll just say about Apple on June 5th,
46:06 they have the Worldwide Developers Forum,
46:07 and they're going to talk about AI.
46:09 They're going to talk about every buzzword you can think of.
46:12 They're going to talk about the financial products.
46:13 They're going to talk about AR/VR.
46:16 They're supposed to announce some sort of high-end handset.
46:18 So those are all bullish things.
46:19 I just don't know how you buy the stock
46:21 going into new 52-week highs,
46:23 up 40% from the January lows.
46:26 And just the last point, Guy,
46:27 and I got to get your take on this,
46:28 'cause this happened yesterday afternoon,
46:30 that Microsoft and AMD had an announcement,
46:35 or I don't know if it was an announcement,
46:36 but it was something that leaked,
46:38 that Microsoft is going to help finance
46:40 at least the build-out of AMD's advanced AI chips,
46:45 which is basically, we know one of the reasons
46:47 why Nvidia is up 90% on the year,
46:50 up almost 200% from its lows,
46:52 is the excitement around the chips and the platforms
46:56 and the services that they have geared towards AI,
46:58 and there is a shortage of them.
47:00 Nvidia barely sold off.
47:02 AMD rallied 10% at its highs on that news,
47:06 and it just seemed a bit shocking to me.
47:08 I just feel like this Nvidia bubble
47:10 is probably close to bursting.
47:12 I have a position playing for that in the next month,
47:14 month and a half or so.
47:16 But this has been a really dicey trade here,
47:18 and Nvidia looks like the new widow-maker in the market.
47:20 - Yeah, no question.
47:21 I mean, that's been my thought as well,
47:23 but I've been thinking about that Nvidia
47:25 probably for the last 30%, so that's clearly been wrong.
47:28 But that Microsoft-AMD announcement or headline
47:33 is clearly a shot across the bow to Nvidia,
47:36 for whatever reason.
47:37 Maybe there's a collective fear that Nvidia
47:40 has sort of gotten itself off and running in this race
47:43 and are just sort of not looking back,
47:46 and everybody else is sort of an afterthought,
47:48 and maybe Microsoft and Nvidia, excuse me,
47:51 Microsoft and AMD needed that type of partnership
47:54 to stem the tide.
47:55 But in terms of semis, the have and the have-nots,
47:58 it's stark, actually.
47:59 You look at Nvidia on one side of the equation,
48:02 AMD finds itself sort of in the middle,
48:04 and that 10% move to the upside
48:06 basically offset the move we saw post-earnings.
48:09 But then on the other side of the spectrum,
48:11 you see a Qualcomm trading at about 106 or so,
48:14 and that's within an earshot of its 52-week low,
48:17 I think we made in November.
48:19 So the juxtaposition, a lot of these semi-companies
48:22 are just fascinating, and if you've tried to play
48:25 the valuation game and the pair trade game,
48:28 it's been a tough slog over the first five or six months
48:32 of this year, and that seems to wanna continue.
48:35 Before we get out of here, this Lyft-Uber stuff, Dan,
48:38 I think is interesting.
48:39 It's sort of coming across as we've been speaking.
48:43 What are your thoughts on potentially,
48:45 bit of a price war potentially going on
48:47 with these two guys?
48:48 - Yeah, so Lyft founders are out as CEOs.
48:50 That was announced, I think, about a month ago,
48:52 and they have a new CEO, and he just lowered the bar.
48:55 I mean, the stock's down 18%,
48:57 it's trading at a multi-year low here,
48:59 and again, this company that I think,
49:01 from an EBITDA standpoint, the story was
49:05 how can they get to profitability, okay?
49:08 So that's kinda out the window.
49:09 The new CEO said basically they have to reengage
49:11 some market share, both in drivers,
49:14 and then obviously customers.
49:17 Uber had a great week.
49:18 I mean, Dara is, I think, continues to prove
49:21 to be just an A+ CEO.
49:23 He's basically hit all of the targets
49:26 since the pandemic that he said he was gonna do.
49:28 They were gonna get to EBITDA profitability,
49:29 they were gonna get to free cash flow positive,
49:31 they were gonna get to GAAP profitability,
49:33 which they're making progress.
49:34 The stock, I think, was up 15 to 20% on its results
49:38 and the guidance that it gave this week,
49:40 and so it's down a little bit today
49:42 because of that Lyft price war.
49:44 I look at Lyft, and I'll just say this.
49:46 When you think about all of the data that they have
49:50 and all that we hear about autonomous taxi fleets
49:53 and this and that or whatever,
49:54 and this is also something I think Apple
49:55 is likely to get into at some time
49:58 in the not so distant future,
49:59 or something as it relates to autos
50:01 is probably more of the infrastructure software,
50:04 if you will, but this has a $2.5 billion enterprise value.
50:07 This is Lyft right now, and I just say to myself,
50:10 you know, 3.3 billion market cap, 1.8 billion in cash.
50:13 Yes, they're losing a little money, 1 billion in debt.
50:15 It's just too cheap of an asset,
50:17 and we also know this, and Stuart,
50:18 I want to get your take on this,
50:20 is that we know here in America,
50:22 even when there is a dominant player like an Uber
50:25 as it relates to market share, and they're getting stronger,
50:27 and they're getting towards profitability,
50:29 which is only going to let them flex more and more,
50:31 it is favorable to have a number two,
50:34 no matter how weak it is or so.
50:35 So how do you think about the potential for a price war?
50:38 Do you think it's the thing that drives Lyft to zero,
50:42 or do you think it has any meaningful impact on Uber,
50:46 and how do you think that Dara is looking at this
50:48 and saying, "We got this"?
50:49 You know what I mean?
50:50 I'm just curious how you think about it,
50:51 because customer acquisition and market share,
50:53 those are all things that are always top of mind for you.
50:55 - Yeah, absolutely.
50:56 Well, I hope there's a price war.
50:57 - As a consumer, you mean.
50:59 - As a consumer, you know, if you've taken an Uber
51:02 in New York City over the last couple of years,
51:04 it's only gone one way.
51:06 So from personal consumption, that would be great.
51:09 I think here you're sort of looking at the ecosystem
51:13 versus the vertical, and we can sort of tie this back
51:16 to like the Apple talk and the Tesla talk,
51:18 is Uber has an ecosystem, right?
51:20 And so they don't just do consumer.
51:23 They also do B2B, they do Eats.
51:25 Their Eats product is a phenomenally successful product.
51:28 When you look at Lyft, they're just a vertical, right?
51:31 They do ride share only.
51:32 And so because they don't have that revenue diversification,
51:36 because they don't have that ecosystem
51:38 that Dara has really built out,
51:40 he's executed on, like you've just said,
51:41 he's a real class player.
51:43 You know, they're gonna struggle.
51:46 They've got one lever, right?
51:47 They've got one lever and it's price.
51:49 And so I think this continues.
51:51 I think the price war from a Lyft point of view will continue
51:53 but the ecosystem of Uber, I think ultimately wins
51:56 unless Lyft can get the investment
51:59 and the product build out to really compete.
52:02 Also, fun fact, founder of Uber gave Current its first check.
52:06 - No way.
52:07 - Yeah, that's right, Gerrit Kamp.
52:08 - Cool, all right, fair enough.
52:09 All right, here's one other question for you.
52:11 This one reports next week.
52:12 This is Robin Hood
52:13 and I think this is kind of also in your wheelhouse.
52:16 And you know, this thing got,
52:17 I was looking at it last night on Fast Money
52:19 'cause we were talking about Coinbase's earnings.
52:22 And you know, obviously they're 100% exposed
52:24 to crypto assets, right?
52:26 And they also have this SEC investigation
52:28 as well as notice was issued to them.
52:30 I think it was in March about some of their staking products
52:32 and some of the other like,
52:33 and you know, my answer to Melissa Lee is like,
52:37 if you're interested in potential upside in, you know,
52:40 exposure to crypto coming back as like a trading,
52:43 you know, kind of vehicle,
52:44 and it was hugely profitable for Robin Hood back in the day,
52:49 I'd say, why wouldn't you just go to a Robin Hood?
52:51 The sentiment couldn't be worse.
52:53 You know, we know a lot of those retail traders
52:55 have been taken out.
52:55 We still know that they have, you know,
52:57 a pretty decent customer base at a demographic
53:00 that I think a lot of financial services companies like you
53:04 are happy to serve because as you layer on more products
53:08 and services, you want to get those customers early.
53:11 I look at Robin Hood and Guy,
53:12 I definitely want your take here too.
53:14 $7.8 billion market cap, $6.2 billion in cash.
53:19 Remember, this was one of the biggest IPOs in 2021
53:23 and only one and a half in debt.
53:25 And I say to myself, they got exposure to anything
53:28 you want to YOLO as far as stocks, ETFs, options,
53:32 commodities, you know, like, so I look at this thing
53:35 and I say, okay, they're still losing money.
53:37 That's not a great place to be
53:39 in this sort of environment, right?
53:40 But, you know, revenue growth, I think is probably,
53:44 or at least the deceleration in revenues from 2021 to 2022
53:49 were back near the expected peak.
53:53 It was $1.8 billion.
53:55 I just say to myself, this is kind of a cheap-ish asset
53:58 and it gives you exposure to the retail trader
54:00 coming back to traditional markets, but also to crypto.
54:05 And I'd rather be there, I guess, than Coinbase
54:07 given the regulatory overhang
54:08 and some of the fee issues that they have.
54:10 - Yeah, I think that's fair.
54:11 I think it's a, you know, it's a well-run company.
54:14 They've taken a different angle.
54:15 Obviously they're under a different regulatory authority
54:17 with the broker dealer and all that other stuff.
54:19 And so I think your comparison to Coinbase is fair.
54:23 I think the regulatory capture in the US is brutal,
54:28 I think is the right word.
54:29 And so if it's your primary business,
54:31 you've both seen like the Gemini, the Winklevoss twins
54:34 and Coinbase start offshore entities
54:37 the last two or three weeks.
54:39 I think that says everything.
54:40 They're sort of saying, okay, America is not the home
54:43 for Bitcoin and some of these currencies, cryptocurrencies.
54:47 And so when you look at Robinhood,
54:49 it's primary businesses, obviously, retail investing,
54:52 you know, synced up to Citadel.
54:53 And I think that's not going away.
54:54 It's well-positioned for a bounce, as you say,
54:56 all those numbers like look pretty good to me.
55:00 I would say this,
55:01 they need to start building that ecosystem.
55:03 Maybe they need to start getting into banking
55:05 or other things like that, content, things like that.
55:07 And, you know, they got all that cash,
55:09 so they should get going.
55:10 - 52 week low in the stock was I think $6.81,
55:13 trading eight and three quarters right now.
55:15 I mean, the stock is effectively flat lined,
55:17 which was a great movie, I think,
55:19 with Kiefer Sutherland and Julia Roberts
55:22 back in my day since January of 2022.
55:25 But in terms of risk reward,
55:27 it probably sets up pretty well.
55:28 - So in 2021, when they had $1.8 billion in revenues,
55:31 they lost $3.7 billion.
55:33 Last year, they had just under $1.4 billion in revenue
55:37 and they lost about 1 billion.
55:38 This is in gap net income.
55:40 This year, expected to get back to 1.8 billion,
55:43 but only expected to lose, I know this sounds crazy,
55:46 600 million.
55:47 Next year, they could be gap profitable, okay?
55:51 So like to me, what I want to do
55:53 is take a small position into this thing.
55:55 If there is a gap lower, that would be GAP, not GAAP, okay?
56:00 Then I'm gonna load the boat.
56:01 And if it ever got guy towards those lows,
56:03 think about this, this was like a bell ringing moment.
56:06 There was a lot of companies that lost 80%
56:09 from their highs from 2000 into the lows in 2002.
56:13 And one of the really interesting indicators for me
56:16 is that some of those companies did a great job
56:18 raising cash at the highs.
56:20 And when their equity value got close to their cash value,
56:23 it was almost a bell ringing at the bottom.
56:25 And some of those companies were up
56:26 to 300% over the next year or so.
56:28 And that's kind of how I would be thinking
56:30 about a Robinhood right here into its print next week.
56:33 - I think with Robinhood,
56:34 you're playing the interest rate curve, right?
56:36 So a lot of broke dealers, when the market goes sideways
56:39 and interest rates go up as rapidly as we've seen,
56:41 they become net interest income machines
56:44 rather than sort of fee-based machines.
56:48 And so if you think it's high for longer,
56:50 I agree with you, Dan.
56:51 I think that they're gonna make a lot of money.
56:54 - Interesting play here.
56:55 As we sit here before we 5,000,
56:57 402 S&P names have printed, 71% of them beat on EPS,
57:02 78% beat on sales and 58% beat on both.
57:07 So the S&P is now tracking at a 4.1% EPS beat
57:11 versus the consensus expectations.
57:14 That's coming from our friend Savita Subranian
57:18 at Bank of America.
57:19 Just something to keep in mind.
57:20 Next week, the two biggies, I think,
57:22 in terms of earnings, Disney on one end,
57:26 PayPal, which can't get out of its own way,
57:28 on the other side of the equation.
57:29 I wanna thank Stuart Sopp for joining us.
57:33 Thanks for indulging me with my Sir Thomas Wyatt,
57:36 but I'm telling you, the more I think about it,
57:39 the more I am onto something.
57:41 Dan Nathan, you're the man, the great Danny Moses as well.
57:44 As they say, smash the like button,
57:47 check us out in your favorite podcast store,
57:50 and we will no doubt be back next week
57:52 with another episode of the "On the Tape" podcast.
57:55 (upbeat music)
57:58 (upbeat music)
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