The Capitalist Investor
Welcome to this week's episode of the Capitalist Investor podcast! Join Derek, Tony, and Luke as they discuss the latest updates in the stock market, including the performance of the Magnificent Seven (Google, Microsoft, Apple, Amazon, Nvidia, Meta, and Tesla), Seasonality, the current state of oil prices, WeWork's bankruptcy filing, and Jeff Bezos's move to Miami. Stay informed with expert analysis from the Dream Team.
The Magnificent Seven
The hosts dig into the performance of the "Magnificent Seven" - Google, Microsoft, Apple, Amazon, Nvidia, Facebook (now Meta), and Tesla. They discuss how these tech giants fared during the earnings season and analyze key factors such as cloud computing, AI, and consumer demand. Notably, Apple's decline in sales growth raises questions about its future as an innovative industry leader.
Declining Oil Prices
The team explores the reasons behind the 20% drop in oil prices over the past six months. They touch on the impact of reduced global demand, warmer winter predictions, and the increasing oil production in the United States. This conversation prompts deeper reflections on the state of the economy and the potential repercussions of declining oil prices.
WeWork Filing Bankruptcy
WeWork's rise and fall captivated the financial world. The podcast delves into the story of this co-working space company, once valued at $47 billion, that ultimately filed for bankruptcy. They analyze WeWork's business model, its inability to meet high demand expectations, and the concerns raised about valuations and profitability in today's market landscape.
Jeff Bezos’ Move to Miami
The hosts discuss Jeff Bezos' decision to relocate to Miami and its financial implications. They highlight the benefits of Miami's favorable tax environment, no state income tax, and proximity to Blue Origin's space activities. This move sparks conversations about wealth, lifestyle choices, and the different approaches taken by billionaires like Bezos and Elon Musk.
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Hello and welcome to this week's episode of the Capitalist Investor. As always, you got the Dream Team. Myself, Diamond Hands D. We got Tony the Tiger and Coolhand Luke. What's up, guys? How we doing? So you're diamond hands because you were like all into crypto and NFTs and now you're just diamond hands because you can't sell them, right? Exactly. I still got some JPEGs in the wallets. They're going to stay there for all eternity, right? I did get out of a lot. Of them, but, yeah, you never know, man. The next pandemic can bring light back to NFTs and Beanie babies. Just go with broke hands D. How about that, bro? Can, man. All right. Never seen somebody get shanked on the show before. All right, so today we'll do the same format, five minutes each. So big earnings season. So we'll talk about all the big boys. A magnificent seven. We'll talk oil. Oil prices have been down for some time now. So we'll talk about why WeWork was in the news for their bankruptcy, obviously. So kind of do a little debrief on that. Kind of talk about probably larger pictures there or a larger picture and then canceled. We'll talk a little. Maybe Jeff Bezos, maybe moving out of town. Wild times. All right, man. The Magnificent, magnificent seven. All right. The S and P seven. That's what I'll call them. Takeaway. So that is Google, Microsoft, Apple, Amazon, Nvidia, Meta and Tesla. Those are the seven players, all priced for perfection. How did they do? Anyone know? They all were pretty good. Yeah, except Tesla. Okay, well, Tesla. Yep. And then Navidea, I don't think reported yet. No, they're coming up, but they've been actually rocketing up higher with all the rest of the earnings. Yeah. All right, so Microsoft, it's all about. They just hit an all time high and it's all about AI in the cloud. As long as those two are in the news and upcoming. What do you. Want to call those? Just technologies. Upcoming? Yeah. Like hype around new stuff. Amazon. Right. Cloud again. Cloud storage strong, consumer strong. You know what? As I was looking up Amazon, I ran into an article. Do you know that Bezos rolled out a pay to quit program? He ended it in 2022. But if you didn't want to be here, here's a perfect reason to get the hell out of here. He was offering up to $1000 to$5,000. If you just didn't want to be here anymore, I will pay you to leave. Interesting. I know, they ended a program probably because they were having a hard time finding people. Navidea. It's still yet to report as of today, but AMD did well, so I expect them to follow footsteps. Meta the year of efficiency, they have doubled their profits, yet they cut 10,000 jobs. This year. They're up 140%. The stock is in 2023. Ads are up 30%. Why not? When you start slashing everything, I'm sure you're going to ramp up those profits, right? Yeah. And then the other thing is Google, they beat on the top line, and bottom line, they're 10% growth and they fell on cloud weakness. Microsoft's eating everyone's lunch and AWS. Amazon's eating everyone. Right? Yeah. They're not as big of a player or they're losing ground to some of the other people in the cloud space, but they're still Google and their revenues are up 10% year over year. That's crazy. That's insane. It really is. It's Google. And they grew 10%. I mean, I guess it was really bad. And then the other one, last person that I'll just talk about. I want to make this. Sorry I'm stealing all this time from you guys. No, you're doing a great job. Apple. Keep going. Apple do any better? Tony, Apple is a massive company. They make up seven and a half percent of the S and P 500. But this is the fourth quarter of decline in sales growth, so they're not growing anymore. So have they peaked? I was on like, Schwab Network last week and I said this and the anchor laughed at me and I said, what if Apple is the next IBM where everyone needs them? No one's not really going to not use them, but they just don't grow anymore because they're completely saturated. Apple has not been innovative or revolutionary in anything they've developed in the last ten yearS, maybe. And do they just become a huge consumer staples? They provide a dividend. They don't really move. They don't go up, they really don't go down, and then they don't really move until they make another life changing technology like the iPhone. Well, that's my take is about the Magnificent seven as a whole. Like these technology stocks that were supposed to be kind of discretionary, that's my whole take, is they're more staples now, meaning that they're like necessities in people's lives. The whole cloud services is needed for businesses. Businesses need their technology to make sure their businesses operate efficiently. Consumers need to buy iPhones because you don't have a smartphone in today's world. You're behind, right. You can't keep up with what's going on in the world. So these are now necessities in our everyday lives. So that's why these kind of stocks are now perceived to be the safe haven, is because they can finance themselves. They have so much cash on the sidelines, and then at the same time, they're kind of perceived that people need them nowadays. That's why these stocks are holding up while the whole equal weight, SP 500 and small caps are getting absolutely hammered. Small caps were below the October lows. Yeah, small caps were below the October lows. The equal weight is flat. So if everyone was equal, no one's growing except these seven companies. I think that's real quick. I do want to say, though, even though that's kind of the perception, I think there's somewhat of a flawed way of thinking. The way of thinking now is even if recession happens, that these stocks will be able to hold up. I still think that's flawed. It will take the market down still. Oh, yeah. I read it somewhere that the equal weight, like, subtract out the top seven and the PE, of the 497 other 493 stocks, the PE is like 14. The S and P 500, on average, is around 16 and a half. Historically, they're, like, way undervalued. That's why there's a lot of talk about how maybe next year's players are mid and small caps. Right. Because they're so undervalued compared to everything else. So even the small caps rally and the big ones sell off a bit. The market will be down, but then you'll see all these other stocks rocketing higher. You won't even know that if you look at the S and P 500. That's why you can't look at just the market anymore. That's why you need active management, somebody who's watching these stocks, picking stocks, not mutual funds and ETFs, but trying to find the diamonds. The rough, it's like Starbucks. Starbucks is up, like 20%. The past, like, two weeks, you never. Would have thought, what are they? Year to date? They're probably flat. I don't know. But they've upped, like 20% and we own it now. We bought it more, and it's up 20% now. I'm just saying that's like an example. You never would think of Starbucks, but everyone's addicted to coffee. Yeah, I'm addicted to coffee. Don't get me. Do I need to rehash my French. Press every time we bring up coffee. Tony, you always talk about your damn French press. Yeah, dude. Yeah. I'm paying 80% less than the average person and getting a better cup of coffee. And I'm proud of that. You got to make changes today's economy. You should probably start taking the K cups out of my paychecks. Probably. Are you the one eating them all? I was, yeah. I took a hiatus for a little bit. Okay. Who else is drinking coffee around? Oh, yeah. I'm definitely. I'm probably two at least a. I get my. I make my coffee. I have my coffee on the way under the work. And that's all I just have. Tony took the majority of that. I took the minority D. What's the next one? Because we're going to give you this one because we talked all the time. Oh, you know, like I said, Tony was doing a great job, but, yeah, I think we got to move on because I think we didn't set the timer for the first one. We did, like five minutes. So let's do this one pretty quick because we touched on it last week, and I think we're all pretty much in agreement. But year end seasonality, I would say that's in our favor right now after this most recent rally over kind of last week or two, because typically things pick up during the holiday season, which is almost upon us. Yeah. And things pick up. There's a more holiday cheer and spirit. And also a lot of investors get sleepy at the end of the year because they got Thanksgiving coming and then they got Christmas, and it's just a sleepy season. But I don't want to be the guy that says Santa's delivering coal to all the investors out there this close out this year. So I'll just point out, historically, November, December on average produce outsized returns. So that is historically, you can jump on that train. But I do also want to point out there's some landmines out there. There are a few wars going out there. Never know when China is going to pop off and invade Taiwan. And then we get involved there. Oil keeps on dropping. That's not a good sign. We'll talk about oil, but that's not a good sign for world economic growth. Eight of the last nine job provisions have been revised lower. So they come out with a great print, and then no one talks about the revised lower. And then the Atlanta Fed has revised Q four GDP. And we had a good GDP print almost 5% this last time. They started at four. They went to two and now they're at 1.2. So growth is considerably declining. Bajambug. Sorry. Well, I know, Luke, you said last week that you were thinking we weren't going to see as big of a Santa Claus rally as we have in years past. Yeah, I don't. It goes against what everybody says. It goes against some of the best books out there about seasonality. I have a good friend, Jeff Hirsch, who, his father created the stock market Almanac, and he's carried it on year after year since his father passed away. And it's the same thing. October is kind of, you sell early October, then you buy late, you buy early, mid October, and you ride that wave till mid January, and then things are looking pretty good. But the fact that the S and P 500 is up 10% this year already, the fact that the Nasdaq is up still like 20% or whatever it be, we've had this outsized gains pulled forward. I mean, we tend to forget in good years. Typically six or 7% gains in a good year is kind of where you want to sit, right? And things still aren't looking pretty, and everyone's still calling for kind of a recession downturn next year. Companies are preparing. I want to say this. The fact that companies are preparing for a recession could actually cause a recession. And what I mean by that is if people are actually laying off people in preparation of a recession, that could snowball into actually creating a recession because people are getting laid off and companies are preparing. So it's like the concept and perception of there being a recession could actually cause us and put us into a recession. But weren't they preparing? Because in the beginning of 2023, every analyst under the sun was predicting a recession this year. And it was a huge whip. I don't think the companies were preparing that much. I think it was more analysts preparing. Now companies look like they're starting to lay off more people. You're seeing like Citibank, you look at laying off 10% of the workers, JPMorgans of the world laying off workers, more technology people. Companies are laying off workers. You're seeing bankruptcies. We're about to talk about WeWork. I think you're going to start to see that trickle in the economy as companies start actually preparing, rather than just the analysts. Just something to think about. So because of all that seasonality, I don't think is going to be as strong. I'm not calling a sell off, but I don't think we're going to rally as hard as people think we are into the end of this year. Yeah, it. All right, well, I think that's a pretty good segue into talking a little oil because that was supposed to be second, and I skipped over it, but. Texas tea. Yes. Black gold. So we're down 20% over the last six months. And I think it's a lot based on demand. Also saw the predictions for the wintertime has gotten more favorable. So it's supposed to be a warmer winter. I don't know how anyone even predicts that anymore, but, yeah. What do you think that is? Pretty sure it snowed two weeks ago. Oh, yeah. On Halloween. Yeah, I was there. All right, well, that would indicate to me that world growth is slowing if there's no oil demand. Plus, you tie in the fact that Russia and the Saudis and OPEC and everyone's backing down production, I would assume that that would create more demand and keep the price elevated. Yet it keeps on falling. It's down 20% over the last six months. And being that it's below 80, remember back in May of 2022, oil was $120 a barrel. So I found this very interesting conspiracy theory. You ready? Oh, yeah. And I'm trying to tie this together from one of our research. So the headline in one of our research, buried in one of our research papers was Us Weekly field production hit an all time high. Let me repeat that. US oil production is hitting an all time high. I thought we were green energy. I thought we turned off the spigots. This is the highest it's ever been. And the last highest was in February of 2020 when we were doing 13 billion or million barrels a day. We just hit like 13.2. We are doing our own oil. Maybe that's why it is so low, because we're not buying it from anyone else. I thought we were green. I didn't know this. I looked at this and, huh. Who's blowing smoke? Where? Well, it's an election year, so I think that has something to do with it. Has a lot to do with it. Drive down oil prices, create production. Here we now know whether Biden administration, whether or not they push it to get people to vote for them or not. It's not a national security threat to not produce our own oil because geopolitical events, possibly China, Taiwan, happening now know things like that. So we got to produce our own oil at this point. So know, of course we're going to turn on the spigots. Another thing is, I'm happy to hear it. Don't get me wrong. You're going to see the Biden administration, along with this push for lower interest rAtes, he's going to be calling up Jay Powell on his cell phone being like, hey, we got to lower rates because if we don't lower rates, I'm not going to get reelected. Trump would just directly say it into a public setting. This isn't even conspiracy. We know this happens now. We live in a world now where politics dominates our daily lives. Whether it's oil rate cuts, it's ridiculous. Yeah, that's what I was just about to say. When we talk about free markets and how they're supposed to work and then how our economy actually works. Yeah, we've seen a three year period now of price manipulation on oil. We saw it as day one of the new administration, or the current administration, it's just been artificially up and down, up and down for their whole time in office. If you take a look, the US had a GDP print of like nearly 5%, like 4.9 or something like that a few weeks ago. And every country around the world basically was negative. And the Saudis were, their GDP was negative four and a half. So if they want to ramp stuff up, I'd imagine they'd have to ramp up the oil production, which is going to create more supply and drive down the price cheaper. I mean, we could see oil go a lot lower. I'm very shocked. I do want to hammer this point, though. The fact that we're seeing all time highs right now with this current administration. All time highs on what? Oil production in the US. Yeah, the fact that we're seeing that should tell you a lot about what we're to expect next year. Yeah, I'm just saying with conflicts, with geopolitical conflicts, I think this is a telltale sign. Like I said, conspiracy theory. I want to hear them. Well, I mean, our reserve, no, our strategic, strategic reserve is essentially like the lowest it's been, I don't know, in 40, 50 years, something like that. And, I mean, the fact that we need to stockpile that up, no wonder why we're producing. What did he say the number was? That we were going to rebuild it because we might be there. Didn't he want to get back around when oil is like$70? Yeah, I was going to say 70. We're there and everyone's like, oh, you missed it. Well, he's back. Are they going to fill it? I don't know. They got a lot of other stuff. They're trying to give billions to everyone else, but whatever, back at the ranch anyway. All right, we got so number four, WeWork. I think one of the very interesting story on the overall economy. It's a company that was once valued at 47 billion, just filed for bankruptcy. And if you don't know, WeWork is basically a commercial office space that you can rent out individually. So if I was a single shingle entrepreneur, I can go rent space in one of these office buildings or floors or whatever they were doing, right? That's what it was, yeah. They'd lease these corporate buildings and then go find single dingle shops or people entrepreneurs, people that worked from home that didn't want to work from home. They wanted to actually go into some sort of an office space. They'd sublease it out to these guys. And so that's how they made the revenue. The problem was that the demand just wasn't there as much as they thought. People aren't working or aren't even though they're working from home. Why would you pay somebody to go work in an office space when you can just work from the comfort of your home? Right. It makes no sense. Right? Yeah. And I think a big part of the valuation was like, hey, the office landscape is changing. So a lot more people would want to have their own space when everything. Else costs 40% to 60% more in my life. Why would I want to go rent when I can work out of my basement? If I'm a single shingle person, I can put some money into a room in my house and make it an office. Well, most of these people want to work from home too. I don't mean this in any derogatory way. The people that want to work from home, though, they're somewhat more introverted. They just more introverted because they want to work from home. I mean, there's nothing wrong with that. They're just how they are as people. So why would you want to physically walk or go to an office and be around other of people when one of the benefits of you working from home is to not be around people? Yeah, I mean, well, hey, at least Adam Newman, the CEO, ripped at least a billion dollars through sales. Good for that guy. So that's the point I wanted to hit on, is that is completely explanatory of our environment from 2009 to 2022. The fact that these billionaires that became billionaires were able to make these companies that were not profitable at all and just basically grow top line revenue by borrowing a ton of money and leasing these corporations and subleasing them out, basically a horrible business model. The fact they were able to do this and just grow top line revenue at the expense of bottom line profitability is concerning how many other companies out there are like this. That's my concern. Yep. It's almost like a pseudo Ponzi scheme. It's like the SPACs. Remember that? Like, oh, my God. You getting that new SPAC. Like, what do they do? I don't just. They're gathering money. Where are they going to buy it? I don't know, but I want in. I want in. How much of this world is a Ponzi scheme? I think that's a big question we have to answer. Yeah, man. Very. What do they call that? I'll think of the name. Anyway, moving on. Number five canceled. All right. So our boy Jeff Bezos going to know. He kind of looks like Pitbull a little bit. So he's going to Miami, I guess. Take advantage of no state income tax. Yeah, who can blame? Anyone know? Ridiculously loaded to move to? That's. That's the move. Will Smith made the best, like, Miami song. I love that song, man. Classic. You should sing it right now. And then you got flow Rider. He came up with some stuff. I would move to Miami, too, obviously. The things I started looking up, I mean, the guy's got 150,000,000,000 net worth. He bought an $80 million mansion. But here's the thing. So there are lower, believe it or not, there are lower taxes in Florida than there are in Washington. They actually have no federal or they have no cap gains tax in Florida, where in Washington they have 7%. So think about this. For every billion dollars you have that you would have to liquidate and pay capital gains on for every 100 billion. To just put that in. Or, I'm sorry, for every billion. You have to keep numbers simple. 10% of a billion is 100 million. So let's call it, if it's 7%,$70 million for every billion he wants to liquidate. Remember, he's got 150,000,000,000. That sounds like a lot of money. See, to me, if you're worth $100 billion, I think it's less about the money. I think it's just more about the. Yeah, like, I think it's more about him. Like saying, I'm getting out of this damn cold weather in Seattle. Yeah. Why was he getting out of, like, there's nothing much to do when I'm going to go be on my yacht. I just paid a billion. I think he paid a billion dollars. For this super yacht. I'm going to go my super yacht every day in Miami. Go to the clubs. Go do whatever I need to do. I'm 59 years old. I don't know how much clubbing, but I would be hanging out on my 100 million dollar yacht. I'm sure he's going to the clubs. But no, in the article. So bringing it back to real life, Luke, he wants to be closer to his parents. He's got the blue Origin. So Cape Canaveral launching rockets and stuff, he's got that going on in his life. He grew up in Miami. I didn't know. Yeah, but he does have a new life. He's got $80 million mansion, 100 million dollar boat. He's got a new lady. He's bicking his head pit bull style. Is that what you said? He's putting it all together. You look at Bezos and Elon Musk. I think they're just two totally different people with their musk. Like, does not care. It's more about, let's see how I can keep growing this do better for the world. Bezos is like, now I'm going to go enjoy my life as much as I can because I've done enough. Yeah, he's got blue Origin, I think, and a couple others that he's still pumping money into, but I think he's way less involved. It's just interesting, the different philosophies around wealth when you get to that level. Some people are just like, I'm going to disconnect a little bit more. Some people are like, I don't care about this wealth. I just want to keep growing business and making more money. Remember that five minute rocket ship ride he did? And he jumped in. He got to like, whatever they call that, whatever space is. And then they came back down and they were just high fiving each other. I haven't seen that in a while. Are they still doing that stuff? Yeah, that's a good point. They went away pretty quick, right? I guess. What happened to$250,000 rides that Sir Branson was offering for Virgin Galactic? Yeah, what happened to those? Yeah, they went up there, too. I think some part of Virgin Galactic went bankrupt. I'm pretty sure they just went bankrupt. I don't know if it was actual Hanzi scheme. Tell you what, man, the economy, the world, it's crazy. I mean, you can hop in a sub and go down and see the Titanic. You can hop in a rocket ship and go see the stars, man. What can't you do these days? Jeff Bezos has it right. Going down to Miami, spending time with. Family, family, getting back to his roots, watching. He understands what life's actually about. That's right. And it's about avoiding 7% capital gains tax. That's right. So virgin Galactic actually is starting up in February. You can book right now. February 16 costs 450,000. Wow. I was way off. That's at 250. It was out at 250 for sure. Inflation. Inflation. Why did I tell you, man? 40% to 60% is. That's almost 100%. But we're there. Four to 50. Yeah, 450. Damn. Yeah. That's a lot. Yeah. These jet fuel is not cheap anymore, man. And I'm just trying to put $450 in my 401K. All right, well, good show, actually. That was a really good show. Really good topics this week. Yeah, thank you. No, it was excellent. Excellent. Just kidding. That was Tony's. These are all Tony's. But yeah. Thanks for listening this week. We appreciate you. If you guys have any questions, comments, hit us up at email@example.com and we'll talk to you next week. The opinions expressed in the podcast are for general informational purposes only and are not intended to provide specific advice or recommendations for any investment, legal, financial, or tax strategy. It is only intended to provide education about the financial industry. Please consult a qualified professional about your individual needs.