Chit Chat Stocks - Investing Power Hour #38: FTX Employees Flip on SBF; YouTube gets NFL Sunday Ticket; Is Tesla Toast?

Episode Date: December 25, 2022

The CCM Power Hour is a live-streamed show every Thursday at 3:00 pm EST. On the show, Ryan, Brett, and a rotating list of guests have an unscripted discussion on a variety of investing topics. You can watch the show on our YouTube channel here: https://www.youtube.com/c/ChitChatMoney Follow the show on Twitter: https://twitter.com/chitchatmoney Subscribe to our newsletter: https://chitchatmoney.substack.com/ ****************************** Interested in becoming a member of 7investing? Subscribe with code “MONEY” and get $100 off your annual subscription for life: https://7investing.com/checkout/ ****************************** Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Chit Chat Money. On this show, host Ryan Henderson and Brett Schaefer interview industry experts and riff on the world of investing. As a quick reminder, Chit Chat Money is a CCM Media Group podcast. Ryan and Brett are also general partners at Arch Capital, and Arch Capital may have positions in the securities discussed in this podcast. Anything discussed on Chit Chat Money by Ryan or Brett or any other podcast guests is not formal advice or a recommendation. Now, please enjoy this episode. This is the Investing Power Hour on Chitchat Money. My name is Brett Schaefer, and I'm here along with Ryan Henderson. Ryan, how are you doing today? I am in sunny Arizona,

which is quite lucky because this is the day while the rest of the country is under, seems like negative temperatures um so yeah yeah i am uh i'm not in sunny arizona like you uh unfortunately i am in the snow it's actually like probably the coldest day of the year here in washington so you got out of here at a good time um but i don't think anyone wants to hear us talk about the weather forever so uh we've got now we've got a lot on the slate today we We had terrible timing on our last power hour because we talked about SBF, FTX, the whole situation. And then during the power hour, he was arrested and we didn't see it. So we didn't get to talk about that.

We'll talk about that here in a second. We'll talk about why. That's one of my topics. But got to talk about our sponsor first. That's right. Seven Investing. We're about to hit the end of the year. I think this is our second to last or maybe last. I think it's our last one before New Year's. I think our next one for the New Year's comes out on January 1st. So, you know, 7investing, use promo code money. You get two things off right now if you use promo code money through the end of 2022. And that is a seven day free trial and then $100 off your annual subscription if you decide to stay with 7investing.

And right now, it's the absolute perfect time to do a seven-day free trial at 7investing because they just did a comprehensive year in review for all the active picks, research stocks, and everything that they really cover within the 7investing universe. And I think that is just a perfect time. So even if you don't end up sticking around, definitely go try it out. And if you do, make sure to tell them we sent you. Ryan, anything else? No, we're going to hit them. in the middle of the show as well no i don't think so i mean it is like if you've ever wondered like what's in their service you can literally log in use that code money it's free for the week and

you can see all of everything that's ever been recommended in their service and what they think about it today in one article so it's it's like really easy to just kind of like it's never been easier to i guess check out what they what they provide but that is code money as a reminder do We want to talk about SBF. That's right. Let's tease what we're going to be talking about. I know you just mentioned SBF, but what else are we going to be talking about today for the listeners? Bob Iger's ego and sort of the issues or the executive strife over at Disney.

There was a sort of a Wall Street Journal expose, which I think will be worth talking about. There's some really interesting quotes in there. And then you've got what? Sunday Ticket? NFL Sunday ticket moving to YouTube. And then I found a lot of smaller things that I think will be interesting. We're also going to talk, I made sure to include it, the collapse of Tesla's stock price this week. I think it'd be fun to discuss, although I don't know whether, a little spoiler, I don't know whether we're going to have any takes other than people wanted to sell shares.

Yeah, and probably Musk himself. That is correct. although he just said in a Twitter space that he is done selling through 2025, what would you put the odds on that? If you had to be a betting man, what would you give? Minus 1,000?

Or no, plus 1,000? That he won't do that? Would you take that? 10 to 1 odds? You get 10x your money if he doesn't do it by 2025? Yeah, I would probably take that. I mean, he said it twice this year. He said twice this year he's done selling.

For what? The next week? Yeah, and then he did it two months later. All right. Let me tweet out the link and then you can get going. Go ahead. All right. Yeah. Let's kick things off here. So Sam Bankman-Fried, the CEO and founder of FTX, was arrested last week. I'm not sure on all the details, but I believe he was arrested by... He's in the Bahamas, right? He was, yes. Yeah, so he was arrested by the police in the Bahamas, and then I think he was extradited to the US, I believe. I was reading something that the prisons in the Bahamas are not – I mean, I'm sure no prison is great, but they are particularly rough in the Bahamas, and people were speculating that he would probably want to be extradited. But anyway, he was brought to the US, I believe, and he just got bail posted, literally as we were speaking. That's not the point.

That's not what we're talking about. Apparently, Caroline Ellison and Gary Wang ratted on him. So they were two of the other people running FTX. Caroline Ellison was technically one of the co-CEOs of Alameda which was the hedge fund associated with FTX and basically

they both came to the SEC and gave an insider's account of everything that happened and this is all public now so you can go and you can read the insider's account it's 38 pages I think it's well worth it I forget what I googled I kind of find an easy link but

maybe we'll Contact Ryan. Yeah, if you really want, just look up Insider's account or look up SEC versus Caroline Ellison Insider's account, and I'm sure there's a PDF of it somewhere. Anyway, this basically exposed everything that kind of happened for the most part. Not specifics on where the money was spent,

but generally they know where the money was spent. So as it turns out, Gary Wang, SBF had him write the code that would allow Alameda to divert FTX customer funds directly to themselves. So he was asked by SBF to do it. And then Ellison was in charge of basically using those misappropriated funds for Alameda's trading activity. However, trading activity is kind of a loose term here because apparently a lot of those customer funds, so the software is written for those customer funds to just be redirected straight to Alameda's account. I believe they were literally depositing. The FTX accounts were basically direct deposits to Alameda's bank account. When did that start, this year?

No. Earlier. The quote is brazen multi-year scheme. This was started earlier. It kind of hit its peak this year because of borrowers or lenders asking for money back. But basically, there was a whole lot of stuff they were doing with it. So SBF apparently used it to make undisclosed venture investments. He used that money to buy lavish real estate and make large political donations. And then Ellison said that SPF directly told her to take customer funds in exchange for the FTT token and purchase more of it, so purchase more of FTT on other exchanges so the price of FTT would rise, and that would artificially raise their collateral that they could quote to lenders, and so they were able to borrow even more money. And so on top of this, they were also borrowing money from external lenders, even though technically they were borrowing – you could call it borrowing, stealing money from customers. They were also using the customer funds to show that they had that money, which wasn't theirs, to raise money from borrowers – or sorry, lenders. But then there's kind of this good quote here, which says, when prices of cryptoassets plummeted in May 2022, Alameda's lenders demanded repayment on billions of dollars of loans. Despite the fact that Alameda had, by this point, already taken billions of dollars of FTX customer assets, it was unable to satisfy its loan obligations.

SBF, with defendants' knowledge, defendants in this case is Ellison and Wang, directed FTX to divert billions more in customer assets to Alameda to ensure that Alameda maintained its lending relationships and that money could continue to flow in from lenders and other investors. Ellison then used FTX's customer assets to pay Alameda's debts. So that is, I mean... Not all of them, apparently, but... Well, not the... I mean, if you think about the customers as lenders, which they aren't, they were, I mean, basically just, you know,

they were never able to pay them back, which this is, and we're going to get to this, but this is why it really irks me now that SBF went on this whole press rampage where he's like, I just want to make customers whole. Like, he took it. He personally took it, and he's making it sound like

it's just like an unfortunate circumstance. Like, he was doing this very intentionally. So that's the part that really kind of pisses me off. It says the height of illegal activity peaked in 2022. However, it started way earlier. This, I believe, started essentially in 2019. And then the other part was there was this whole idea that SBF wasn't involved with Alameda, that that was Caroline Ellison and Sam Tribucco were the co-CEOs that SBF named. But SBF had 90% ownership of it, and he apparently was the ultimate decision maker on everything. Well, he 100% did that to make it seem right. He definitely did that to make it seem like he wasn't doing the scheme and he was probably trying to frame it on them.

And it turns out they were the rats. Yeah. I don't know. That was sort of when it kind of started. And then obviously, most people kind of know what happened when Binance sold their FTT tokens at kind of imploded prices. And then there's sort of a run on the exchange or run on the bank in this case, if you want to call it a bank. And they were unable, all those redemptions, they weren't able to pay for because the cash flow really didn't exist anymore. So I don't know.

The bummer here for me is that this is kind of – minus the buying extra FTT tokens with customer assets to drive up the price of FTT, the rest of it is exactly what I thought. When I heard that this was collapsing, this is kind of exactly what I thought was happening. It's basically what everyone was speculating. My question is – Go ahead. I guess my big question is, how many other exchanges or token issuers are doing this exact same thing? I guarantee most of the tokens that are issued, that they are not backing those assets one-to-one. I would not be surprised if you are correct there.

Guarantee might be a strong word. Okay, yeah, yeah. But highly, it seems likely, it seems plausible, it seems like they should be investigated if possible, especially if they are, which all of them are. offshore. You have to ask why they're offshore for a reason. I wonder if SBF, because he seems to be intent on not going to prison, and I'm stealing this idea from some journalist, someone else out there in the world. What if he flips on the bigger whales, Binance and Tether, who have even more, they're a bigger part of the crypto industry. Now, that would be interesting because of tether and binance are doing the exact same thing as ftx which not guaranteed they are but

there's suspicions that they are i i just wonder what the fallout of that would be it'd be a nice end to the we're gonna have to make this into not it's not gonna this is gonna be way too long to be a movie now well here's what i have to make this into it's gonna have to be a trilogy of whenever they make this movie michael lewis's book is gonna be 800 pages the thing that's i guess kind of frustrating is that he was using he was building these play tokens so that he could get cash and do things in the real world with real cash make political donations invest in younger stage companies or venture those venture investments buy lavish real estate so it makes me Like he was just coming up with these bullshit tokens and it gives – maybe it's like a sense of confirmation for me, but it gives no validity to the industry.

Like it just shows that they – like on the other side of these shit coins are exactly who – are people who you think they are. Like they are doing something with the real money. This is a new economy. Yeah, sorry, sorry. I keep trying to interrupt you for some reason, but they are who we thought they were. And look, we're just in our 20s, so we're not seasoned at all. But if you're someone who is extremely confident that crypto is the future, you're betting on Coinbase. We covered Coinbase on one of our not-so-deep dives before, and I think that was probably right around a year ago. And that was because there was a hedge fund that wrote a really long research report on them. You see it constantly, people saying, well, this stuff is a fraud, but crypto is underlying as the future, and blah, blah, blah, blah, blah. And I think, look, there are some things that both of us in the investing world really, truly believe in.

it would be hard for us to give up those beliefs say buffett style that's kind of our camp value investing stuff i think if that's you know if you're that if that's your true belief you really have to ask yourself in this moment are am i wrong is it the thing and this again comes back to the the quote from the big short movie which i always get wrong and the first three times i watched that movie i didn't understand what the quote meant which the one of the opening scene yeah the mark twain one it's the it's not what you know it's not what you don't know it's what you know for certain that uh just ain't so which means it's what you know for certain or what you believe is certain that's actually wrong and i think there could be some of that here and

yeah it's just there's just no evidence that points to the contrary because it seems like anyone here in the industry and i wouldn't look i'm not this is not an allegation against coinbase or one of the quote-unquote reputable crypto places like Robinhood that are audited, I guess. I wouldn't be surprised if they're doing stuff nefarious as well. We saw a tweet this week that was shocking from someone that works on Coinbase's legal team that said, basically they said,

what's nice about crypto is that you make up the law as you go along. And I read that and said, if you have money in coinbase i would be a little bit concerned just slightly as they seem to think that the law does not apply to them and that they're just making up and i i i want to be certain that the government you know for better or worse is the ones that are applying the laws here at least with coinbase they it is public and it is audited so it's like i mean that gives me a better sense of they still might be screwed but at least they're honestly screwed not like lying and screwed um i don't know i mean i i read those financials

and i still kind of laugh but the uh that's right they might still they might still be totally screwed especially they're doing their own stable coin which they're big questions about there's some investigative reporting out there on it not going to pretend like i know it for sure uh but yeah all right let's move on to the next stop yeah ask the question in the chat and then we can move on to the next topic yeah mark says happy holidays chaps what's your favorite portfolio tracking tools using yahoo finance as a beginner but now looking for something more flexible well that leads into our uh who's going to be our next sponsor in the in early 2023 right Yeah. I guess Stratosphere is one. It's kind of new, actually pretty new. And stratosphere.io, there's a lot of cool tools in there. Basically, you can track a whole bunch of different elements of the business, so the financials as well as other reporting metrics.

So things like, you know, I guess company specific stuff. So like Costco's warehouses or Spotify subscribers, Netflix subscribers, stuff like that. Yeah, you can build a nice watch list. It's very fundamentals based. If you're a fundamental style investor, this is not going to have any technicals. If you're technicals, if that's your cup of tea, which I don't think our audience is, I would definitely try Coifin as well. but stratosphere if you're fundamentals oriented i mean it's been perfect and that's you can track your portfolio fairly easily in that regard and yahoo finance is not

i don't think it's been updated in 15 years and it's fine for the basics but stratosphere they have a free tier and again we don't need to start doing an advertisement for them we're going to be talking about them for the next few months at least they have some great stuff if you are i would try to yeah especially if you're a beginner yeah um all right yeah let's talk about the next item uh so disney's former ceo and now current ceo bob eiger um well he was a former ceo he recently i swear he basically like announced himself as ceo again um well he was except he graduated himself up to executive chairman right before or actually right before the covid crash and the world shut down so yeah he's a nice guy he he doesn't think about it sorry i'm

spoiling your topic you you go ahead yeah yeah i mean that was that was part of it um but basically he passed the torch on to bob jpeg and there was always kind of this concern that jpeg maybe didn't have the true um he didn't really run the company like ever like even though his title said he should have um and then this week the wall street journal uh i think it was the last week actually sorry we've been uh we did our last power hour like a week and a half ago but uh last week wall street journal had an expose essentially saying that bob eiger never really gave up a like management his his responsibilities so there's a couple of quotes i want to share there's one that says that mr i that that mr on that mr eiger was unhappy with mr chapok

was well established. Less well known is the depth of his antipathy and the lengths he went to deflate Mr. J. Beck behind the scenes.

It says, as executive chairman, Iger wouldn't move out of the office that he had at Disney's headquarters, which I think that's maybe one sign

that, you know, if you're no longer the CEO and you pass on the CEO's office. Think if, yes, exactly. Think if you're a VP

and I'm sure Disney has approximately 100,000 vice presidents. Think if you are in like a VP role of whatever, and you're like, you see that, how confused would you be? Yeah, the other thing is like, let's say you're sort of, you know, you're in the same office. I know it's weird that this is like a part of the bureaucracy within companies or like the unnecessary steps. But if you're in the office and then you're promoted to – let's say you're in a bland office just like every other VP, and then you're promoted to CEO and you stay in that same office, and because the other guy wouldn't relinquish it, that guy is obviously still in control, especially if he's coming in every day and running the company. or he wants the illusion of control or he wants not the illusion the he wants everyone to see

that he has the aura of oh i'm the executive chairman but i'm still really the visionary here yeah it also goes on to say he called strategy meetings with mr chapex underlings without inviting the new ceo i mean that's that's just this is an episode of succession right here this is self-explanatory this is i mean yeah and then it says mr chapek told friends that mr eiger's attitudes seem to be they work for me not for you so it here's what i don't understand why was eiger so he voluntarily stepped down right in february he was looking for a successor in February 2020 if you're going to voluntarily step down

why are you so reluctant to relinquish control come back and feel like a hero I think my conspiracy theory is he knew that COVID was going to screw them right plus he did that double

like I'm retiring right as COVID hit and then he's like well I can't alright I'll come back and then he's like actually I'm out yeah no and he came back as the executive chairman and then he's like oh no i can officially leave now and the business you get anyone into that business in

2020 it's gonna be awful you have cruises you got theme parks you got giant china exposure you got uh movies in theaters they're the biggest movie theater business uh or movies that go into theaters in the world who's gonna succeed in that and they're in a giant transitional period that's really they were too late to it's yeah maybe he just wanted to read this is almost like resetting stock options where he had such a great reputation because the launch of launch of disney plus was so successful in that first year they executed pretty strongly right and then things were looking great for the company and covid happens right before that he leaves and he's like oh yeah covid happened and then all the problems they have right now with unprofitability complaints at the theme

parks workers and stuff china uh movie theaters aren't back and he's like all right now i come in the expectations are extremely low and i can and fix quote-unquote fix this company again even though we do know that the majority of the blame should be faced on him yeah i don't know if i'd call it disney plus on like an incredible success the first year was pretty strong although you know in terms of in terms of sheer numbers yes oh but yeah i forgot about the price but he launched uh they launched or what was it like five bucks a month or seven and they kept giving it away for free yeah so i don't i mean i felt like he was doing anything just to bump the user numbers up and then he the hard part is having to

raise prices, which he waited for JPEG. Yeah, he's like, I launched at $5. Our unit economics are not going to work unless we go to $10. You're going to have to do that and then see what churn happens with people with uneconomical streaming

services like Amazon and Apple TV and the continued rise of YouTube. You're going to have to compete with that as well. And yeah, good luck with that. I mean, it's just a... I thought I liked Iger

three years ago I've done a complete 180 here I don't I'm not fond of him at all he's the king of managing his reputation like that's

to me seems like his primary goal above all else it worked for us back when we were less skeptical I think or maybe we didn't know about him as much i yeah i and i think i've said this before on the show i'm mad i said it the two or three times ago i i don't know if disney is ge but i would not be surprised if we look at him like we look at jack welch now where you know really built up the business to success but it made it a bit fragile

that the consequences came home to roost and i doubt disney is going to be like ge because it's been a dominant business for so long, but I would not be surprised if 20 years from now we look at Iger in a similar light because that's what it seems like the stories are extremely

there's a lot of correlation to what he did and what Welch did. Yeah. It's not exactly the same. Welch had a pretty long tenure there and then you start to revere him and think, oh, wow, he's done so much, so well.

Especially if the stock does well during that time. The stock price makes you believe that he's the perfect CEO, perfect manager, but you don't see. A perfect manager has a great successor. And they're able to pass. The business is able to do really well beyond them. So I would say he doesn't pass the test in that regard. in the other part not yet not yet the story's not done but so maybe maybe he maybe the next one is

is successful and we're totally wrong 10 years from now i'd say schultz is probably the same way yeah well schultz what has he done he's done what eiger's done twice right where he's come back i think twice i don't know if he's come back i know he came back after gary johnson did he come back I think he, yeah, before that, I think he had already. Yeah. I think they just probably love the feeling of like, don't worry, I'll rescue the company. And then it's like, we're going to start by cutting the dividend or it's like, we're going to start without, what did he do?

We're going to stop share repurchases and we're going to focus on employees. And then like a year later they restart the repurchase program. Yeah. And there's a giant labor strike or brewing labor strikes at the company. so you're not i think and i was listening to someone that said this almost all i think ceos are bad or not up to par all right so no not bad almost all see there's not there's very very few great executives that are worth what they're getting paid might just be buffett really maybe the only one no

Mark Leonard fair yes yes there's other ones there's other ones that's a joke but

Bezos I guess not anymore but yeah he did a good job and I would say I mean even though retail suffered

I would say Jassy is still generally done pretty well in terms of improving the business yeah the narrative

on that company is a lot different than what the financials actually look like And people are just worried about the underlying earnings right now. Yeah, what's interesting about Bezos and Amazon is that compared to all the other big tech companies, and I think you can probably exclude Apple because they're older, but some of the newer big tech companies, their original business model was so hard. They went after an extremely hard game that had an extremely low likelihood of success, and they pulled it off.

and it's kind of the opposite where google don't you think that makes it makes it a bigger moat now yes the likelihood of success like if you look at that looked at say google in 2002 when they're doing less than a billion in revenue way way less than a billion in revenue and you're like wow they came up this crazy business model the likelihood of success seems higher maybe they wouldn't you could not predict the 90 dominance in search but they had created such a good business model was so easy, unit economics, that the founders and the co-CEOs or whatever they were, Page and Bryn, didn't even care about advertising. And the business model was so good that they actually neglected it.

And I'll come back to that when we talk about YouTube TV. But then Amazon's the opposite. So it was such a hard game where Google at one point, I don't think it was a ham sandwich because they had to make some really strong acquisitions. But Amazon was 100% not a ham sandwich and definitely still isn't. They had to plow every dollar and then some back into the business.

And come up with an extremely innovative subscription model that has one of the best business ideas of the last few decades is Amazon Prime. Yeah, just the conception of that that saved their unit economics. Yeah, I do think it having a harder path to being a tech giant has given them a much deeper moat. Yeah, what's interesting, though, is I was listening to the founders podcast and they went over Jeff Bezos's old letters or the person, just one person. And one of the things they talked about at Amazon was that they were and this is one of the early ones. And they said, our culture is frugality.

and i was thinking huh maybe they forgot about that one well hold on it it was never we're not gonna spend it was we're not gonna spend on stupid shit there was stuff stupid stuff but i think they may have forgotten that so we have some evidence from you think so yeah i don't i mean well they're not afraid to spend on stupid business ventures if it turns out to be stupid but i think they and i guess we we are not inside there they're definitely less you know 200 lunches per employee like a san francisco company but i think maybe some of that seeped in the last decade maybe i'd say relatively speaking like when you compare it against the the people they have to compete with for talent they spend

less on stupid stuff less on lavish stuff less luxuries i mean they'll waste a 10 billion dollars a year on alexa but that's i guess different yeah yeah all right uh i don't know that's pretty much it for my two topics what do you have uh before we do that let's talk about seven investing again the seven investing article of the week did you bring that one up um remember use code money get $100 off your annual subscription and check out that seven-day free trial using code money. Get that year in review. Perfect time to do it. Simon Roach, who is the founder of Seven Investing and the CEO, what the true meaning of investing is. And he kind of goes through how there's a lot of people that try to make just calls on financial media, which is basically just,

oh, I'm calling it long or short here, or on Twitter to boost their ego, talk about their performance and talk about calling a stock at a certain moment or bragging about something, which well, we do that to some regard. And he's right. It's not the actual reason to invest. And he says, and he thinks the better approach to investing, and this isn't going to be a novel idea by any means, but he says, quote, investing is meant to be a long-term journey that you personally embark on to improve your financial future. It isn't a one-size-fits-all approach

where we all blindly follow those who bark the loudest. I thought that was pretty smart or pretty eloquent there. And I agree. Any thoughts on that as we head into the new year? I think this is his.

Sorry, could you say it one more time? I was pulling it up right now. Investing is meant to be a long-term journey that you personally embark on to improve your financial future. It isn't a one-size-fits-all approach where we all blindly follow

those who bark the loudest i really like the bark the loudest part because you're gonna hear the loudest people and you have to know that those are probably the people that have done the reason they're loudest is probably because they've had the most success over the last say time period a couple years year something like that and in reality you should probably be not listening to them because they're going to be overconfident just because the price is driving their own narrative yeah i do like i'm reading that quote now i do like that and i think i used to be in the camp that was like it is one size fits all the only thing that matters is total return but like i think since at least over the last couple years and probably because the bear

market, I've grown to accept or be more in the camp that you have to find a strategy that you can weather. It might not be optimal in terms of total returns, but it will generate enough returns for you and allow you to do it for a long time. It's so much easier in practice or saying it in theory, than in practice to have the optimal total return portfolio. It just never plays out that way. So I don't know. Yeah, I do like that there is no one size fits all. Yep. Agreed. And 7investing isn't definitely not a service for everyone, but if it's your type, innovation type stuff, growthy, early stage- They got their rally picks. As well, but they definitely lean that. And they said, and Simon wrote in this article that there's

plenty of innovation on the horizon in 2023 and you can't wait to research it if that's your sort of investing i know there's tons of people out there that love that definitely try out the service try out that free trial using code money um but i totally agree the longer if you can go 50 years and it you generate well i guess it depends how much your nest egg is at the start but if you go your returns are greater than five percent a year in real terms for 50 years you're going to be fine no one's going to complain it's really about staying in the game for that long and yeah you'll be a lot happier i think with your freedom um if you go above 10 a year but in the long run it's really about the most important thing is not zeroing not not

zeroing your account because if you do 10 a year or five percent um and then the 10 of your person zeros by making a stupid bet on a company that's going to go bankrupt and putting 30 of their portfolio in that well yeah the uh we do have a timely comment in the chat and maybe this can help play into your second topic which we could probably just talk about right now he said matthias says i shouldn't sell my house to buy more tesla i believe that's sarcastic there is yes well we don't know matthias so i'm hoping that's sarcastic but no uh you should buy your you shouldn't sell your house to buy anything that's right there's a yeah i mean he's regardless of our opinions on tesla yeah and you can you can own it it's not you know a lot of people are

uh i've made money in tesla and we've been skeptical the whole time the and this is referring to a popular twitter account that's talking about doing that and it's just kind of sad to see because he the i don't want to say what the twitter account is but it's just not people are going to get hurt, and it's just not nice to see. It's kind of an interesting example of, I know the account we're talking about,

the difficulty in being too vocal about stocks you own. Because I remember when he talked, this account talked about how much he'd made. They. How much they made on Tesla. And everyone kind of championed

for it and he gained sort of this massive following and probably made a whole lot of friends online um by building this persona around one individual company which when things collapse like you feel like your reputation's at risk and then you feel like you have to do things that are probably not in your best interest so yeah it's kind of interesting because we're you know be a generalist yeah it was yeah we're trying to build a business around sort of this new age financial media stuff. And there are some cheat codes out there. We could become those type of people that basically, I don't want to speak for these people, but I think underlying some of their, not ambition, it's craziness or maybe what people would call absurd. It's for a reason

because those are going to get lots of views and they're hopefully going to build up an audience. But if you lose your savings in that regard, and then you just go, well, I got 500,000 followers on Twitter or on the YouTube audience, well, what was it worth? There's a formula you could go through. But let's talk Tesla, actually, because the stock is down, what, like 30% this week? There seems to be some margin calls on it. Elon was selling as well. And I think it's down like 70% this year now, something like that, maybe 60. i don't know any thoughts on on that because i know we're really in we're really anti the

camp of determining why a stock dropped but do you think this is a sign because this is what i think that this is the beginning of the end of the bear market not the end but the beginning of the end yeah i could see that the actually no i'd probably say we got a long way to go but the what it will a the average bear market lasts 1.4 years yeah but i'm just not i just don't see how it doesn't go on for a little bit but not all bear markets started with the biggest bubble of the last 100 years. Yeah.

Since 1929. There's still excess in places, and I think it's starting to get to the point where it's going to hurt. We're probably still going to see spending come down a little bit. Yeah.

Which makes me think it's going to trickle through all the company's financials. Oh, it will. Yeah. You know what? I hate speculating on that stuff. That's so, well, there's a lot of variables for sure. But I think we're definitely seeing this week is capitulation for the first time.

Yeah, and the other part that I find kind of fun to watch is watching people try to figure out, trying to find reasons that the price is dropping. Yeah. And coming up with whatever excuse they can, which, you know what? Ilhan might be right in why the stock is

dropping. It's probably a combination of things, but when he's like, the discount rate's higher. Yeah, that's I think that's hogwash, because if the discount rate mattered, why? It would have happened a while ago.

Long-term rates are down since Tesla started collapsing. yeah it might have just had a delayed effect for a lot of their sellers and that's the only stock it happened to I'm saying maybe that's the last stock that a lot of the people

that have sold lately were holding on to I think yes that could be correct they're hoping that could be the one salvage asset for the people that focus on quarterly stuff or annual stuff and they're really trying to hit their marks yeah i could see that but you know what there's probably something to the validity of him going kind of like

ultra conservative and kind of tarnishing his brand as well as tesla's yeah and here's what i think their backlog has collapsed from all the third-party estimates i think people are looking at the fundamental story and saying oh growth might be because against it might not grow it It might literally not, it might decline. Exactly. I saw someone discussing how a year ago, people looked at NVIDIA, what, $600 billion market cap growing 40% a year.

You could see just compounding, compounding, compounding, compounding, training at 40 times earnings. They're like, oh, 40 times earning is not that bad. It's growing 40% a year. And then it turns flat. And then it turns negative. It's so hard to imagine it. So I've done that. I'm sure we've all done it, but it's so hard to imagine something going from... It's a lot easier to say like, all right, it's growing 30% right now. Well, if it has a down year, maybe it'll only grow by 10% next year. But especially in these cyclical businesses, it could not grow. It could decline.

And if it's trading at 40 times earnings, the margins are going to go down and the multiple is going to go down. So that's just a recipe for... I mean, our biggest losers the last two years have been the ones where, well, they started out basically a break even, but there's been a little bit of either margin deterioration or not. Really, it was kind of the reverse. No margin expansion, which I think a lot of investors were expecting, and the growth de-sell, where that's what really hurt the two things. I think Tesla investors and the NVIDIA investors could really learn from that. We're trying to, at least. You know what else I think has caused probably a lot of the selling? The selling. Well, yes.

You're seeing people sell because… Well, the incremental buy. I'm seeing a lot of people go, what's happening? Why is it happening? I keep seeing the price go down. They're trying to rationalize why it's happening. Well, Elon keeps tweeting and it's ruining the brand and people are scared that people aren't going to buy Teslas anymore. But it's the price actually declining that's scaring people the most because they don't know what's happening. They don't know when it'll stop. If you buy something that repurchases a huge amount of their stock, then you don't have to worry about it. well they do not have the capacity to do that versus the size of their market cap but the yeah at the end of the day for every stock the reason a stock is trading at the price it's at is because the last buyer bought it there and the last seller sold it there so yeah that's it all right next topic this is a i think one that will spur some fun discussion and then that we

have some other ones i know you got some extras as well in case we have more time nfl officially or excuse me nfl sunday ticket is officially moving to youtube this is a pretty simple story pretty simple deal so youtube has signed a deal with nfl sunday ticket and that is the national football league's premium pass that gets you access to all game streams for an annual fee i think maybe all game streams except for your in market one costs around three hundred per season and it is yeah it's just one i think there's a few million subscribers a year it's kind of for the the ultra fan that wants to watch all the all the games now it's been at direct tv for a long time it's kind of held up direct tv for their subscribers but the distribution is

going to be interesting so you know it's it's 300 a year right um you'll be able to upgrade it through YouTube TV. And also, you'll be able to upgrade it using, if you don't have YouTube TV, through YouTube's primetime channels, which is the new place on the YouTube app where you can subscribe to streaming services and watch them through the YouTube app. I think it's a pretty smart move. The deal numbers are a seven-year deal. So I think, what is that, through the end of this decade at $2 billion per season. First thoughts, and then maybe I'll come back to my thoughts. I like the YouTube TV distribution channel.

I don't know how successful the primetime channels would be, but at least there's no reason for them not to add it there. if they're already buying the rights they you know put it in as many channels as they possibly can that they own so makes sense but the i would i feel like a lot more people would would pay up for a little higher priced youtube tv subscription with it included than people paying directly for it through youtube yeah maybe they will bundle it somehow what's interesting i think as well is that the complaints about buying Sunday ticket, canceling Sunday ticket, it's sort of like one of those newspaper subscriptions

where people have to call up DirecTV and they just had a terrible customer experience. I wonder if YouTube, and this is I think why the NFL said they want to go with a streaming partner now because the other competitor was Apple, I think, bowed out for various reasons. They want it to be super easy for people to sign up and I think, well, if anything youtube is the best at making things extremely easy and customer centric where no one's complaining about uh ui whatever customer experience um i honestly think i'm i think maybe i've underestimated youtube's ambitions their ctv ambitions are large here's what i think could seal the deal as just a

dominance in the united states and maybe internationally because there's local local sports rights. And again, these deals come up every, I don't know, seven, 10 years. So it's not going to be overnight. You can't just steal the rights. But a lot of the local sports rights are through these janky old school channels that are really hard to get. And I think they could, for not that much money relative to the size of Alphabet, get these deals and you can make even better bundle with youtube tv or make it free on youtube where the the advertising just the eyeballs the number of hours watched i mean you could get their ctv listening or viewing hours i mean they're already gaining market share uh of ctv viewing hours i think it'd just be

extremely smart to try to be one of the place to watch sports because that's the last you could really kill um traditional cable at a faster rate and the faster cable dies the faster more people are going to be watching youtube on their tvs i think that's going to benefit them in the long run even if the economics are break even i like a lot of sports deals are i think you're right but i also think you're you're partly just saying this because you're frustrated that you don't at the Mariners games on your stream. Of course.

I think, yeah. You go back to this all the time. You're like, why don't they do this? Yeah. Well, I think and not everyone's

it's a fair, I mean, I think tens of millions of people across the United States would be happy about this. I think a lot of people if that was right,

go ahead. Yeah, I think a lot of people would be would be happy. And I think a lot of people are probably looking and saying local sports viewership

viewership hasn't grown that much. But I think a large part of that is because it's not as accessible. Yeah, you're not going to pay 90 bucks just to watch that. People talk about how it's kind of a declining market

like the local sports viewership among younger demographics. Oh, it would soar if it got on YouTube. It would soar. What's the numbers of young people on YouTube? Isn't it 95% use it every day? 95% I'll say that again. 95% use YouTube every day. I don't know why the owners of, and we're not

talking NFL because NFL is larger than all the other sports leagues. If you're an NBA owner, if you're a hockey owner, if you're a soccer owner even, or you're a baseball owner in the United States, I think abroad, probably soccer for the local sports rights, why are you not clamoring to get on with one of these streamers, especially YouTube where everyone knows how to use it the streaming quality is fantastic and again 95 of people young people who you're trying to not lose use it every single day of their lives probably for an hour a day yeah i would think that that would be one of the premier destinations the other thing is they probably have a lot of bargaining power youtube does yes because of their viewership already if you're

the NFL and you're thinking about what streaming solutions you want to give your rights to, they've taken a risk with Amazon Prime. And from the stats I've seen, the Prime viewership

of Thursday Night Football was, at least in the first year, was significantly worse than when it was on Linear. Maybe that's changed a little bit. Yeah, I think... But it's also a smaller pool. It is a smaller pool. And I think what's tough, though, is I think we're going to have to wait for maybe five years to see if it was a failure because there's a lot of people, the older audience, that aren't going to be able to watch it.

So I think we'll have to wait and see. But yeah, that is a bit of a concern. YouTube would be a lot easier for people to fire it up. If you give it to someone who you know already has the scale and already has the eyeballs, I mean, Apple TV is kind of fighting an uphill battle with this. So is the Amazon Prime video. So if you give it to YouTube where it has a scale, you have less of a risk of losing some fans. Yeah, yeah, I think so.

Also, what I think needs to be compared, though, for the numbers is that there are still a good chunk of households that do not have internet-connected TVs, and they're just going to struggle to watch Thursday night football on Amazon Prime. and that'll slowly fix itself over say the next five years it'll kind of become a negligible number but what you know well how's that going to affect it this is kind of that awkward period in like connected tv streaming where it's like at least for sports for sports yeah well a lot

of the like property right owners so whether it's like sports leagues or like content owners they have to take if they want to do an exclusive deal they have to take a risk especially since it's basically like 50-50 CTV versus linear viewing right now in the US they kind of have to take the risk to go towards connected TV knowing that

a lot half their audience isn't going to be able to watch it over time that's fine but they have to take the risk now yeah I think why not take the leap because it's a cash cow the linear

streaming is a cash cow yeah the advertising have you seen you've watched local sports at some point the advertising technology they got running on these local sports channels is I mean what do they got

they got a hamster back there I see the same ads same five ads the entire season streaming's bad too sometimes they just don't even have ads yeah but think of think about how beautiful it would be from an advertiser's perspective

or even just an ad inventory if YouTube offered local sports and they had those streaming ad insertions. I mean, that would be great. So much inventory. This conversation reminds me of, I had to rent a car on my trip last week. And for some reason, this car didn't have an aux cord.

And so, or any sort of input. And so I had to listen to radio. that is a market that not not should be must be disrupted the experience the most janky like scammy ads i've ever like just the worst ads and the quality is awful from a sound quality and there's so many ads the the user experience is it's like all law firms it's horrendous yeah it's horrendous anyway the uh you got one more thing here we got a couple minutes so you want to talk about that yeah let me i gotta click the tweet here what was it uh uh this is some doordash fraud it's too long of a twitter thread

let's click the other one spoiler alert doordash is a scummy company who knew okay here's one that thing is interesting. And that is the personal savings rate in the United States during the pandemic for two reasons. One, the stimulus, and two, the fact that people weren't spending on going out to eat and travel. The savings rate shot up to 30%. And typically, and this is for individuals, typically the savings rate hovers between 5% and 10%. United States, we don't like to save money. Over the last year, or two years, actually, would it be three years now? Oh, in between two and three years. After the savings rate shot up to 30%, it slowly trickled down and has actually gone way below 5%. We're at like 2% now. And I guess some of that makes sense

because there's more, as they're saving more earlier, the balance sheet of individuals was higher. So they're going to be able to deplete it more with having the same savings as they had pre-pandemic on their personal balance sheets. Here's the question I had, and I guess didn't get very much interaction, but I think I wanted to ask this question to you. What stocks are potentially over-earning due to this dynamic? And do you think maybe it's just a basket of consumer discretionary? My guess would be the consumer discretionary. But right now, I don't think they're over-earning right now because when you look at the grocery commentary or the commentary among department stores, Target, the retailers, stuff like that, it's the consumer discretionary items that are now hurting. I think they were over-earning.

Right. So I want to know what forward earnings are, say, the next 12 months from now, this holiday season plus the next three months versus last holiday season and the three months preceding this. I want to know if those are going to be materially different. My thesis is, and this is not a real thesis that I'm going to make any investment decision on, is that they will be a lot different. It's interesting. China, I'm pretty sure, is like the inverse right now. Savings rates have kind of climbed up, household bank savings. They generally save more. Actually, the country, for better or worse, has struggled to turn themselves into a consumer economy. And one of the factors is that people in general in China save more, which I think is probably smart. What's this DoorDash thing? Okay, so apparently there's a lot of fraud. Okay, so some guy ordered a burger on DoorDash,

and there was a, basically, the Dasher did a fraud where they did a proof of delivery, sent a photo of the house, which is just a screenshot of the house from Zillow, and got their payment. And then it was clearly fraud, but DoorDash won't refund them. Um, so these dashers are doing fraud on the, um, by faking orders, right? Getting order volume, keeping everything. And yeah, it's not, um, it, it wasn't a good look for DoorDash because he went to his bank,

he went to DoorDash and DoorDash was like, no, yeah, it's all legit. Um, what was interesting is that the tweet got so popular that there was a, uh, developer or maybe product manager at DoorDash who said hi at this person. I work for DoorDash. I want you to know I flagged this internally and it's being reviewed, both this order in particular

and the errors you highlighted more broadly. And it's quite interesting that when someone does a viral online post, it can actually have some effect in the real world. But again, I said this earlier, they are who we thought they were, DoorDash. they talk about supporting local businesses they have all this narrative and i really think it's propaganda and all the evidence over the last five years is that they are an extremely selfish

and extremely scummy company that i don't think anyone should be associated with that's how they act so i mean i would say this is more on the well it's generally for starters it's more on the Dasher, but their customer support here was a failure. So, unsurprising. Initially, when I was reading this, I thought it was worse. I thought it was like DoorDash was pretending to have Dashers

and then it would just screenshot something. Screenshot their Zillow house and just like... That would be bad. Yeah, that would be pretty crazy. Alright. I think it's 5. I think it's, yeah. 5 p.m. Pacific. It's been an hour. You want to sign off or you want me to? I'll sign off.

let's hit the disclosure. Remember, we are not financial advisors. Anything we say on the show is not formal advice or recommendation. We are general partners at Arch Capital and clients may hold securities discussed in this podcast. If you'd want to watch these, we go live on YouTube every 4 p.m. Pacific time on Thursdays. That's 4 p.m. Pacific, 7 p.m. Eastern on Thursdays. You can also watch the replays on YouTube as well, although it's just two guys on a Zoom call. give us a five-star review on spotify and apple podcast and subscribe to our free podcast newsletter that is in the show notes thank you all for tuning in and watching we will see you next time and and uh and thanks to matthias houghton or hooten for uh the questions in

the chat who's keeping this conversation alive so uh props to everyone for the chat Bye.