00:00Dan, I'd be remiss in not pointing out when we talk about a lot of these big tech names, a lot of them are.
00:05Way far away from record highs. Apple hasn't hit a record high since early December, I believe.
00:10Microsoft since October and I think you have to go all the way back to August of last year, the last time.
00:15Was it a record high? Yet heading into this Ernie season, expectations still seem high.
00:20What they're going to post in terms of earnings, growth and revenue.
00:24Yeah, I mean, I think.
00:25It's going to be interesting to see how the market investors react to it because.
00:30There's pluses and minuses for all the names that are reporting this week and it's.
00:35One of the most difficult earnings seasons in my mind that we've seen over the last few years.
00:40Because there's no clear direction in my mind of how the stocks are going.
00:45A response, so let's take them, you know, one at a time.
00:49If you look at Tesla.
00:50You can say, well, we all know the numbers have got to come down because EV tax.
00:55It's expired at the end of September in the US, but you know that Elon Musk is.
01:00He's going to talk about robo taxis and autonomous robots and energy storage.
01:05And full self-driving.
01:06I picked up my new Tesla this Sunday.
01:08You know, I love it.
01:09But.
01:10The numbers are too high.
01:11So what does the market focus on, especially at these value?
01:15And you know, Microsoft, similar situation where, you know, the numbers are.
01:20Going to be good because open AI is growing so fast, but you know, the losses associated with opening.
01:25And I are also going to go up a lot and with Meta, similar situation numbers are going to.
01:30It's going to be fantastic, but the CapEx numbers you with Meta computer.
01:35You know, we're going to go up a lot and we've seen Oracle stock get destroyed.
01:40And be down 45% from its highs based on that.
01:43Well, let me stop you there.
01:45On Meta, too, because I mean, that's probably really emblematic.
01:47I mean, we saw this the last earnings.
01:50Three months ago when they reported, again, blockbuster numbers on the revenue side, even to a certain extent.
01:55We saw the shares plunge more than 10% because everyone was so hyper-focused.
02:00And I'm wondering if that is the real story over these next couple of weeks.
02:05When these companies report, it doesn't matter what the growth rate is of everything else.
02:09People are going to.
02:10People are going to be more focused on the growth rate of those costs.
02:12Exactly.
02:13And also, how do you monitor.
02:15Monetize that because if you look at names like a Google or an Amazon or Microsoft.
02:20You go, they already have big cloud businesses and that they can sell that.
02:25Capacity to other customers.
02:27Meta doesn't have that.
02:28They're going to have to build that.
02:29And then they're going to have.
02:30They're going to have to go up against those guys who already have big established business.
02:35And then you throw Oracle in on top of that.
02:38So you look at.
02:40Meta and you go, well, it's really they're in a tough spot because of it.
02:43But how much of that's.
02:45Discounted in the stock and you know the numbers are going to be really good where you think.
02:50I think the numbers are going to be really good based on the strength of the ad market and how well they're doing.
02:55And so it'll be, well, is this like the day Oracle.
03:00Reported when the stock was up a lot or is this like the next three months when the stock.
03:05It gets almost cut in half and I'd rather stay away and just see.
03:10Where the dust settles as the saying goes, the market has to keep pitching, but you don't have to swing.
03:15Well, Dan, outside of just Meta, when you think about all of this CapEx that's planned, I want to talk about.
03:20How it's being funded because you are seeing a lot of these hyperscalers really tap.
03:25The bond market and issue debt in order to fund some of these ambitions.
03:28That was a big story.
03:30This time three months ago, pretty much.
03:32How are you thinking about that dynamic as we await some of the.
03:35These key numbers.
03:36Well, I mean, I wrote about it this weekend, but I've got short.
03:40Positions and a basket of names associated with private credit because.
03:45I think what we saw a tricolor and first brands and the defaults there and the.
03:50pressures that caused, I don't think we're done yet.
03:52And I think you're going to see somebody before the end of the.
03:55Have a big problem with one of these data center deals because.
03:58For right now.
04:00All of these names are getting funding, I think by the time we get to the end of the year.
04:05You're going to find out that some of these names are not going to get the funding because.
04:09Not.
04:10Not everybody that's associated with AI is going to win.
04:13You started to see that change.
04:15The end of October, obviously, with kind of the Google ecosystem of companies up about.
04:2020% since then, whereas the open AI ecosystem of companies such as.
04:25Oracle or SoftBank, Nvidia, etc., they're down about 20% since the end of October.
04:30October, so that's why I worry that as we get towards the end of this year and.
04:35We figure out, well, these guys are winning in enterprise and those guys are not and vice.
04:39You know.
04:40And the same thing in consumer, I think you're going to see a continued shakeout in the AI trade.
04:45And that's why we have a basket on that and also Japan as well, where we.
04:50We've got some shorts around that because, you know, we've seen what can happen when the bond.
04:55Market goes into connections and, you know, up 41.
05:00We've got two basis points in two days with Japanese bond yields on the 40 year, that's certainly qualified.
05:05And, you know, it's something you need to think about and to snap elections on, I think, February 8th.
05:10Right.
05:11No, absolutely.
05:12We certainly saw the ripple effects coming from Japan for our bond.
05:15Market last week.
05:16But I want to go back to that that basket that you have when it comes to public and.
05:20private credit names and the short that you have on.
05:22It's interesting that you're, you know, focusing.
05:25On the credit names there, the credit providers, rather than the tech names themselves when it comes.
05:30When it comes to those short positions, talk us through the logic there.
05:33Well, I mean, I think the thing.
05:35One is that the credit side of it is more like.
05:40One is more likely to see pressure in my mind where you've seen, for example, look at
05:45media.
05:46It's trading at 25 times earnings and the S&P.
05:50It's trading at 22 times.
05:51Yet, you're looking at the company's, if you believe the estimates.
05:55Revenues are going to be up 57%.
05:57So, it is really big.
06:00It's been arguably beaten down in the sense that the revenues, earnings forecasts.
06:05have gone up, but the stock hasn't done much in, you know.
06:10Since late October.
06:12And so, I think you're seeing in some ways.
06:15More of that discounted in those names where the credit related ones.
06:20I think you could see a lot more damage being done.
06:23And so, some of it's, we've got some long.
06:25earnings in AI equities.
06:26We've got some shorts in AI equities, but the credits.
06:30The credit shorts and the Japan related shorts are what we're trying to use.
06:35To hedge the portfolio.
06:36And quite honestly, we're just trying to take down risk into these earnings.
06:39Yeah.
06:40Because as I.
06:40said earlier.
06:41You can make a case for them being up big on the other side of earnings or down big on
06:45the.
06:45the other side of earnings.
06:46And I'd rather see.
06:47Where the dust shakes out.
06:48And normally I have much.
06:50stronger, you know, views on how these things are going to trade.
06:53Yeah.
06:54But, you know, we saw with.
06:55Oracle, if it was all about the numbers, the stock wouldn't have been cut in half since
06:59almost cut in half since.
07:00Yeah.
07:01You know, September.
07:02Highs.
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