00:00To you, it's a positive sign that we're seeing Oracle getting punished after yesterday's earnings.
00:04Why?
00:05Well, because it indicates that the exuberance is rational, right?
00:08I mean, if you look at MAG-7, right, their positive cash flow, hugely positive cash flow.
00:14In fact, more cash flow is generated in MAG-7 than the rest of the S&P.
00:18And their proportion is going up over the next two years, not down.
00:22And their net cash.
00:23Now, take Oracle, for example.
00:25Well, that's a very different story.
00:26Your negative free cash flow, you've got a large amount of debt.
00:29And the market's punishing that.
00:31They're saying, OK, it's overspending because you can't afford it.
00:33It's not overspending for the other MAG-7 names.
00:36And so I think that discernment that you're seeing, that critical eye that you're seeing both on the bond market with the CDS and the equity market,
00:44that's evidence of a market that's acting rationally, not one that's acting irrationally.
00:49Bubbles are irrational, right?
00:51You reward bad behavior until it crashes.
00:54We're not doing that at this point.
00:55So does it encourage you to take more risk in the AI space?
00:59Or does it just convince you that you're not being reckless by investing in the broader tech-heavy index?
01:05So, look, you know, we've been on this idea of a broadening out for a while.
01:09So we were slightly underweight, large-cap growth for most of the last couple of years.
01:13We've used pullbacks, particularly the one that occurred around Liberation Day, to get slightly overweight there.
01:18We feel that that's good.
01:19You know, again, I think you're not going to get the kind of S&P returns that we're looking at,
01:24which is 10% or so over the next couple of years, unless these names are participating.
01:29And I think MAG-7 are strong.
01:31But that doesn't mean there aren't opportunities in cyclicals.
01:34That doesn't mean there aren't opportunities in small caps.
01:36And so we're overweight, but we don't feel like we're over our skis there.
01:39We feel like it's a good kind of healthy place to be.
Be the first to comment