Investment Theme: The podcast discusses the emerging low-altitude economy, focusing on the development of electric vertical takeoff and landing (EVTOL) vehicles, which are essentially flying cars or taxis.
Market Insights: The EVTOL sector is gaining traction with significant advancements in technology and regulatory support, suggesting a potential transformation in urban mobility and a new investment frontier.
Companies: Key players in the EVTOL space include Joby Aviation and Archer Aviation, both of which are progressing towards FAA certification and have strong partnerships with major corporations like Toyota and United Airlines.
Opportunities: The EVTOL market presents a long-term investment opportunity, with potential applications in air taxis, military, medical, and cargo transport, despite current pre-revenue status and reliance on future FAA certification.
Economic Impact: The podcast highlights the significant wealth accumulation by the top 10% of Americans, driven by stock market gains, and its impact on consumer spending, emphasizing the wealth effect on the economy.
Sector Analysis: The discussion touches on the challenges facing Business Development Companies (BDCs) amid changing interest rates and economic conditions, highlighting potential risks and opportunities in private credit markets.
Technological Disruption: The podcast underscores the transformative potential of AI and its impact on hiring practices, with companies like Accenture leading in workforce optimization and retraining for the AI era.
Key Takeaway: The podcast suggests that while the EVTOL and AI sectors present significant long-term opportunities, investors should be mindful of current economic uncertainties and the evolving regulatory landscape.
Transcript
[Music] All right, gangsters. It's 5:00 p. p.m. Eastern time. Uh, tonight is going to be a special edition of What Are Your Thoughts? I'm so glad to see so many of you guys joining me live in the tra chat because I almost said live in the trap cuz I listen to too much hip-hop. Uh because I'm going to need your help. Tonight's edition uh will be the first time ever that I've gone live without uh my co-host Michael Batnik. Michael is in Texas doing actual work on behalf of Rholtz Wealth Management. Um so while he's on assignment, I basically said focus on that. I'll I'll I'll take care of the show. and I knew you guys would be here to back me up. So, we're gonna have a lot of fun. We're going to get to all of the biggest topics and things happening on Wall Street this week. Want to say a couple of quick hellos here. Um, and I'll do more obviously as the show goes on and you guys contribute. Uh, Matt Steic is here, Brian Grill, Chris Hayes, Rachel's back, East Bay Elitus, good to see you. Um, who else? The guys, say hello to Nicole. Nicole's in the chat, the chat, and she's got a link she's about to drop that she's very excited about. Dr. Horton, John Nem, good to see you guys, too. Cliff, what's up? Um, David Shoko is here. He says, "Let's go." I agree. Let's get on with it. Um, first things first, quick item of housekeeping. We are doing our next live from the compound recording before a live audience in New York City. Guys, I believe a graphic for who our special guest is. Oh my god. Can you believe Do I have any sound effects? Can we play? Can we do a horn or a bell? All right. I mean, uh, first time ever, guys. Jim Kramer and The Compound will be live from the Financial District in New York City. It'll be Friday, October 24th at 6 PM. Jim is so pumped to be part of the show. We are too. Um they said they would never see me and Jim on the same stage or in the same uh room. They're wrong. It's going to happen. Uh and uh we we we love each other. So uh it's going to be a really great event. If you guys want your ticket to come see Jim and I, Nicole's going to drop the link. Or maybe she already Oh, there it is. Wow. She dropped it 50 times. I don't know how I missed it. Um unfortunately, there's less than 120 tickets for sale. So, if you want to do this, you got to you got to act. Um, and I hope uh anyone that's going to be in New York that night is is able to join us. And we'll have a ton of fun. I promise. There'll be drinks, there'll be uh podcasting, there'll be food, there'll be Kramer. Would love to see you guys then. Um, it looks like somebody's at the door. I wonder who I wonder who that could be. All right, let's let's uh let's see who do we guys? It's Andre Shepard. Uh Andre is going to lead off tonight's discussion on a topic that I'm super excited about. He is the lead mobility equity research technology analyst at Caner Fitzgerald. Andre, welcome to the show. So happy to see you. >> Great to be here. Yeah, good to see you again. >> All right. It's epic for our audience that you're here because you have been covering the EV tall sector and what I'm calling many people are calling the lowaltitude economy for how long? uh about four years now. >> Okay. Um four years ago, what were we talking about? Blueprints on a drawing board or was was there some was there something here? It >> it was uh a very early uh and rudimentary uh start with basically an idea, a pen and paper to try to make the skies cleaner and more efficient and more accessible to just the everyday passenger. What started off I think as a dream is now coming closer and closer to uh fruition. Can we just say it out loud? It's literally flying cars. It's not helicopters. >> That's right. That's right. So, uh, EV toll, as you mentioned, right, that stands for electric vertical takeoff and landing. And so, these are electrified miniaturaturized aircraft that will take five people, one pilot, and four passengers of distances of up to 100 miles. So, flying cars or flying taxis is one way to describe. >> Okay. I like that description. And I know the early stages of this won't be flying cars. It's more likely that it'll be rescue vehicles um and things of that nature in the government sector. Maybe military, maybe cargo before we're ready to start loading tourists and fanny packs into these things. But that is where this is ultimately headed. You guys seem to have a pretty strong level of conviction that this is going to be an everybody technology at some point. Yeah, that's exactly right. So, if we maybe take a step back and sometimes people don't forget forget this, but Michael uh Leonardo da Vinci is basically the first person credited for designing the idea of a helicopter. We still have the the draws from his diary since then. Well, helicopters today have three fundamental flaws. Number one, they are obnoxiously loud. For anybody who's been inside a helicopter knows that the the noise can sometimes be unbearable. In fact, for just that reason alone, we don't have more helicopters in cities like New York because tenants complain about the noise profile. The second flaw, maybe their biggest flaw is that they are not ultimately that safe. Helicopters on average have two rotors, one at the top to go up and down and one in the back to steer. And if something happens to either one, let's just say it's not a good day for the people on >> No redund no redundancy. >> No redundancy. Single points of failure. Exactly. And then the third issue that they have, I would say, is that they're very costly both to build, to purchase, and to maintain. And so EV tolls addresses those three flaws. For starters, they're electric. So that reduces the noise profile significantly. Then depending on the company, >> I want to pause there. All of this is all the the way has been paved for this by the start of the EV revolution. This the idea of like working toward eventually solid state batteries and having those have the power and the energy density needed to fit on board one of these things. Like none of that was possible until Elon um proved that you could do it with cars. So that's a really big the power and it being electric the E and the EV tall is a really big component of this conversation >> 100% completely and and and I think it's important to touch on that point and and so similarly when you now look at the technology right helicopters as I was saying they have two rotors these EV tolls depending on the company each company has their own design some of them have up to 12 rotors so there are no single points of failure additional redundancies In fact, these aircraft can both take off and land vertically or conventionally. And so there are these extra layers of safety which I think the consumers and the investors will ultimately appreciate. And then finally, and my last point there, sorry, is they are significantly more affordable to both build and to maintain. And you touched on that a little bit, the fact that they're electric, there's a a lot simpler components u and it just becomes a question of integrating the battery pack into these aircraft. simpler, safer, and quieter. And for us, that ultimately makes them a no-brainer to get adopted and to disrupt the mobility industry as we know it. >> Okay, I have a million questions and I know the live audience does too. And uh I'm monitoring the chat, so if somebody asks something poignant instead of what could possibly go wrong, lol, I'll I'll lob it at you. Um here's qu here's the first question. So this is where these things will differ from an electric vehicle on the road. They require a huge burst of electric power upon the takeoff itself and the landing. Whereas driving an EV, it's a much more steady I don't know if current is the right way to explain it, but it's a it's a much it's a much more steady consistent demand on the battery as you operate the car. This is like a burst and then if they're flying on a fixed wing, the battery power is still running but it's not as intense and then on landing it's another burst. That's an engineering challenge. Do you think that that that challenge has been solved by the companies that are now and we'll get into the companies in a second that are now in the process of completing the FAA certification uh the various stages. >> Yeah, I think that's a great uh question. You touched on a lot of points >> and very bright Let me try to address uh uh everything that you said. So in terms of the technology, you are exactly right. Once these aircraft take off, the amount of energy that they're using, not to mention powering the aircraft, which depending on the company can can weight between 6,000 and 4,000 lbs. It's a massive use of energy that's being used to ultimately elevate that aircraft. Once it transitions into its cruise phase or the fixed wing, then the energy usage is significantly less. But as a result of that takeoff requiring the amount of energy that it does, these vehicles today are being limited to up to 100 miles of range. And that's just the nature of the battery technology that we have available today. But as that continues to develop, so will the range and the payload capabilities uh uh of these companies. And so yes, the technology works. In fact, many of them have conducted several test flights over the last few years, some of them even in New York City with a pilot on board. Um, but so yes, it works. I think that as the batteries get better, we'll see extended battery range similar to what we've seen in the EV industry as well. >> Okay, viewer Theo Williams says, "This is a Joby versus Archer conversation." Look, the way that I think about it, I just go by the market cap of the companies, and that's who I tell you I think is in the lead. I know it's unsophisticated, but it's also helped me in a lot of other technological uh booms. Um, but I want to do some charts. Uh, John, can we roll through a couple of these just so we give people an idea of what we're talking about? All right, Joby, full disclosure, I am long the stock not for a trade, as an investment. I've talked about it here on YouTube as well as on TV for the last couple of months. I've been accumulating. The stock is about 19.5 bucks. looks like it wants to run up against the old high set earlier this summer and who knows what happens if and when it reaches that price. Next chart. This is Archer. Um this is what a lot of people consider to be the the runner up to Joby. I don't know if it's quite that simple. They seem to be not as far along in their commercialization as Joby is. Also, Job's made some bigger deals with companies like Blade. Um, Andre is going to explain that all to us. But as you can see, Archer up 315% over the last year. Full disclosure, I also own this one. And I think we have one more. This is a Andre, I don't know if this is in your coverage universe. This is a uh not quite a a flying car stock as as or EV tall stock. This is the satellites that are providing all the data to enable the low altitude economy, which we'll define in a minute. But Planet Labs is up almost 600% over the last year. It's a $15 stock. They want to be like the data provider, maybe the the alphabet or the I don't know the best way to phrase it, but they have a satellite uh constellation of a hundred, you know, low orbit craft that are monitoring the wind and geology and whatever else. Um very I'm very scientific. Um, so let's start with with We could skip Planet Labs if it's not in your universe. Let's start with Joby versus Archer. >> How do you I mean those are I Let me Let me just ask one final question. I almost view these as they It's an anomaly of history that they're even public companies. They probably wouldn't be if not for the bubble of 2021 in spaxs. >> That's right. They both were able to come public with no revenue pre-revenue because they were merged with spaxs at the height of the postcoid stock market mania. And if that hadn't happened, these might still be privately funded VCbacked companies. So it's almost like a gift. Like from my perspective, I don't know that the stocks will work, but they almost don't belong as public companies or haven't until recently. Would you agree with that premise? >> Definitely. I I think that is a very uh great point to your point even still today both these companies are pre-revenue and on that note they are contingent on receiving FA uh certification if they don't and our expectation is very much that they will and that they will soon and happy to expand on that but hypothetically in a scenario where they don't receive that FA certification these business could be deemed worthless to a degree and that they need that to enter commercialization So certainly you can make the case that it was early for them to enter but as you also said right they're here now and they can work as a >> for investors who are comfortable taking a medium to longer term view and who are comfortable with uh volatility but let's get into maybe some of the similarities and differences uh between Archer and Joby. So um I would agree that both Joby and Archer are today the industry leaders. Um, we like to consider them kind of the Coca-Cola and Pepsi of the industry. In a lot of ways, they're similar. In some ways, they're different. In some ways, one of them is ahead and the other the other one is ahead. But Joby is partnered with Delta for its operations for with Toyota with its manufacturing and as well with Uber and the military for a few record of programs there which I >> Toyota owns a big chunk of stock too. >> Toyota and so does Uber, right? They're two of the largest investors and they're also working side by side with these companies to integrate their manufacturing efforts into Job's facilities which so Toyota in fact has employees that are based at Job's uh headquarters in California. >> This is significant. This is significant because 10 million automobiles made a year. Toyota makes 1 million of those 10 million. This is arguably the greatest scaled manufacturer of transportation vehicles the world has ever known. Um, so the fact that they're not only partnering with Joby, but they're an equity investor riding along, I think is I think is really critical. I mean, could be really critical. It's it's an incredible resource to have somebody of Toyota's expertise and degrees in manufacturing working side by side with your engineers and and and we're seeing that Joby is also leading the race in the amount of aircraft that they've manufactured today which is close to 10 whereas Archer is maybe still kind of ramping those up. But Archer on the other hand they're partner with United Airlines for their operations. Stalantis for their manufacturing who's also an investor similar to Toyota and then they're also working with the defense and with the military to expand programs there. So they both have I would say very strong partnerships. Um and both of them have the strongest balance sheets in the industry today. Archer's total liquidity is around two billion. Job's total liquidity is around 1 billion. Uh but >> uh have you seen the news? Well, I was just going to say except uh as of this conversation, they've just announced another 500 million equity rate. So, one point >> Joby secondary. Okay. All right. >> Um but still, right, both of them have the strongest balance sheets. Archer maybe has the slight uh um lead there and that they have more liquidity and also a slightly lower cash burn that Joby, but both of them very well capitalized and our view is that they're funded through their commercialization and certification uh efforts. Now, one of the big differences here, and sometimes people don't realize this, is their business model. Archers is very straightforward. They want to be an OEM, and so they want to build the aircraft and sell the aircraft. And so, for them, it's quick revenue recognition at scale over the years. They expect to manufacture each aircraft for around two, two and a half, $3 million. >> This is the Midnight Craft. Is that the Is that the one they're going to sell? >> That's right. Okay. Um Okay. That vehicle is still being tweaked because it's not uh to the FAA degrees of certification just yet, but it's a variant of that Midnight. Exactly. Right. Um and so Archer will sell their aircraft, whereas Joby, they're prioritizing wanting to be an operator. So rather than selling these aircraft, they actually intent on owning the aircraft and conducting the operating business similar to kind of how Blade was, which we can talk about since Joby just acquired uh uh Blade. So I think that's a subtle difference in the business model. Joby today has significantly more test flights under their belt. Archer is ramping up theirs. still have to transition their aircraft from a hover to a cruise which Joby has now been doing for a few months. Um but both of them again strongest liquidity closest path to certification strongest personnel in terms of management teams and partnerships and so we're confident that both of them are going to get to the finish line and commercialize. >> So I bought both for that reason. I don't know which business model is going to be the one that makes the most sense selling these craft to others versus being the taxi service. And then I also know that Archer wants to have a taxi service as well. So it's hard for me to I it's hard for anyone I would say to know two years from now who does what first and and more profitably. It just uh seems really difficult. >> That that's fair. and and a lot of this industry is still being developed. This is uh the first time the FAA has uh defined a new category in over 50 years. So, a lot of this is we're learning as we go. Uh which I think is is fair. >> Sorry, from the chat. Um someone's making the uh Mr. R570 is asking Archer equals Boeing, Joby equals Uber. It seems like an oversimplification. It's pro there's probably more overlap. I I would say >> I Yeah, I think that that's maybe an oversimplification, but I think the the the example applies, right? Because again, Archer wanting to be an OEM like Boeing in the sense hopefully a lot less uh issues and incidents than Boeing over the medium to longer term, but they want to while they are going to have an air taxi service and that they're going to be transporting passengers. Archer intends to basically partner with their airlines or their partnerships and have those companies conduct the operating business while Archer provides the aircraft. Joby wants to do both. Build the aircraft and also operate it. Now, I can't think of any air airline today that is both an OEM and an airline. In fact, Boeing tried it many, many years ago. It didn't work very well. Usually, either you are an OEM or an operator. Well, in Joy's case, they want to do both. We'll see how that uh ultimately shapes out. But you could argue that from an investor's perspective, that raises a lot more questions because now you have to consider things. Well, how many aircrafts, how many passengers, how many flights per day, what are you going to charge those passengers? And so, it's a lot more inputs and ultimately your valuation. Whereas with Archer, you could argue it's a much more straightforward model. They build the aircraft and then they sell the aircraft. So, from an investor's perspective, that one's easier and more straightforward to understand. But again, we'll see which uh business model ultimately ends up being the the more successful one. I think it's important though to realize that this is not going to be a winner take all industry, right? There are going to be >> it's too big. >> It's way too big and there's going to be several players across several uh geographies. Some in Europe, some in the US, some in South America, some in Asia, some in many places and also the business model is different. While some are focusing more on cargo, there's others who are focusing more on the air taxi, the passenger transport. But the reality is that there are several use cases. Military, medical, surveillance, policing, >> Hampton's >> Hamptons, transporting Josh to the Hamptons, you know, all of these things. >> Well, one of them, I think it was Archer, signed a contract to be the official EV tall provider to the Los Angeles Olympic Games, which is 2028. >> That's right. >> Was it Was it Archer or Joby? Which one? >> Archer. Archer won the exclusivity for the LA >> Olympics. What does that mean? >> So that means that in 2028 in LA once the Olympics start, Archer intends to already be transporting passengers. >> So it's nuts. That's nuts. That's like tomorrow. >> Well, a few years from tomorrow. But >> to get to that point, that's the real question is how do we get to that point? And so Archer's expectation is that they will >> hopefully have received their FAA certification by 2027 because by then they'll give them a year to start ramping up. Now I think it's important to be mindful of scale. We shouldn't expect thousands of these in 2008 at the Olympics. We should expect a handful of these, you know, maybe tens of these at most. But the idea is to showcase them uh you know for America and for the world to see that this is ultimately going to be another vertical out there. So Archer won the exclusivity. Archer and Joby were both bidding for it. Ultimately it was awarded to Archer and so they are now kind of ramping up to start having enough aircraft and flight test so that they can perform some sort of flight services during the Olympics. >> Okay, got a few more for you from the chat. A lot of people are asking about the Dubai connection here. So it seems as though Abu Dhabi and Dubai are really excited about being at the lead of this technology worldwide. They seem to be maybe a little bit less risk averse >> than Europe and the United States. A little bit more willing to try new things. And as a result, the center of gravity of this industry, yes, these companies are American companies, but like a lot of firsts are going to take place in the skies over um the the Arabian Peninsula. >> That's exactly right. And in fact, I should congratulate your audience because these questions are really uh uh you know, >> the compounders don't play. >> They don't play. Clearly, it shows and you you've taught him well. Um so that's right. So the UAE by now has almost proven itself to to be the first market to integrate and adopt this technology. Okay. They have developed their own regulatory agency separate from the FAA and from YASA in Europe. And so their goal is to be first. And so to that point, both Archer and Joby for that matter are targeting to first enter into commercialization in this part of the world prior to in the United States. So you nailed it. In fact, Archer is intending to sell uh one or two or a number of aircraft to that region this year and Joby is targeting to enter into service by Q1 of next year. both in the UAE, both in a small capacity, but you nailed it. That will be the first market to adopt this this new technology. >> Okay. I want to get into a name that we haven't brought up yet, but it's in your coverage universe. Um the what the company's called Vertical What's the Yeah. So that's Vertical Airspace. So >> it's called Vertical Aerospace. What's the ticker on that? >> Uh EVTL. Uh Echo Victor Tom Larry. And um and so that is another variant of this EV toll industry. In fact, vertical airspace is the only remaining European OEM that's looking to bring this EV toll to fruition. So they are in the same industry in Archer and Joey. >> Is that trading in the is that trading in the US market? >> Has has an ADR in the US market. This one is significantly smaller. Has a market cap sub one billion. They're a little bit maybe further behind in that process, but they're also building their own variant aircraft and their goal is to prioritize Europe. Europe, we don't need to get too technical, but Europe has a different and a higher degree of safety requirement in their certification process. 10 to the >> as we know. >> Yeah. Uh and so Vertical is pursuing that. And so they their goal is to be kind of the only or one of the only OEMs doing EV tolls. Well, they got to get like Benz or somebody. They got to like Daimler, like they got to get a European manufacturer. >> They used to be partnered with Rolls-Royce, although that partnership um ended up being dissolved. Um and they still need to raise a good amount of capital, whereas again Joby and Archer, you could argue maybe they're funded through commercialization or certification, but they are another player in this industry. The last one to consider is a company called Eve Holding and their symbol is EVX. That's maybe the fourth and last remaining public comp in the space. Now, their knowhow is that they are backed by Embraer. Embra is the largest owner. They own more than 50 60% of the stock. And so, they're leveraging Embraer's experience in certifying and building aircraft to build their own EV toll. But again, oh, sorry. >> Oh, two uh two more for you. Um Daniel McCarthy in the chat is saying, "I played rugby with Andre at Boston University." Do you remember him? >> I do. Yeah. Hi, Dan. >> Okay. All right. Shout out to Daniel. Um I wanted to ask you about people who are saying that China is going to leapfrog ahead of us on this one. The Chinese are hellbent on having EV tall taxis in Chinese cities for consumers and I think there's like a point of pride. They don't they don't want to be deepseek anymore. They don't want to be two years after everything we do. What what do you think of the I mean I know there was the Osaka air show, the Paris air show, the Dubai air shows coming up and at each these stocks because they have no revenue, they seem to be driven by headlines and partnerships coming out of these events. Do you see the Chinese being a a major factor here in the development of the technology? >> 100%. Um but what I will say is is there's a lot of parallels between the EV toll industry US versus China than with the EV industry US versus China. So what do I mean by that? So China is actually today ahead of the US in its EV tolls. They have a company a Chinese company which has an ADR that trades in the US. It's called E-Hang. Symbol is EH. And I'll just preface by saying we don't officially cover it but you know we are aware of them. Sure. >> They are the only company today in this industry who has already received their type certification. So they are certified. Now the big >> certified in China. >> Exactly. They're certified in China and not in the US. And get this though, their aircraft, remember Archers and Jobies are between five and 6,000 pounds. They take five passengers. Uh E-Hang's aircraft is a two-seater autonomous aircraft. So there are no pilots and it's just two people in a glorified drone essentially >> that are being used for sightseeing and tourism. No. So different business. >> I'm out. >> I'm from the old school. I need a pilot. >> Yeah. But but so but China has a huge emphasis on uh this low altitude economy as you alluded and and so in a lot of ways that's the incentive that that's what's incentivizing the US and the FAA to try to move quicker. We don't want the US to lose the race in EV tolls similar to what happened in drones where we maybe were leading it and then China eventually surpassed us. We certainly don't want that to happen, which is why you've seen a lot of momentum from the current administration with two executive orders to accelerate the deployment of EVOs. We don't want to fall behind China. Now, they're not going to enter here and we're not going to enter there, but like with EVs, Europe may be some battleground and so we need to accelerate that FA certification process. >> So, a lot of people are skeptical about this stuff. Um, and you know, of course, I am too. I understand like like just because you in the FAA certification process doesn't mean you get a yes and just because you get certification doesn't mean the economics of the business are great. Like I understand there's a lot of hurdles between now and Jetson's. Um, but when I try to think about like what's the next trillion dollar TAM industry over the next 10 years that people just don't fully believe in yet, like where is the opportunity to have a stock go from being worth 10 billion to a hundred billion or more? It like I keep coming back to this idea, this this um this quantum leap in in mobility. Um the lowaltitude economy. Last one for you. low altitude economy. It's it's anything taking place below 3,300 feet uh in the air. So, it's drones, it's drone delivery, it's eventually, we think, EV tall, probably military safety, um law enforcement, and then eventually, you know, full-blown consumer. This is going to be like a I think it's going to be a big area within tech, and people are really going to have to familiarize their name. So, um, you you seem to be as excited as I am about it. Um, and I know you're an analyst. You're not a cheerleader. U, but like is do you think my enthusiasm is misplaced or do you think that like I'm I'm the right amount of excited for for the opportunity? What would you say? >> So, um, you know, I I think the answer to that is is somewhat subjective. You know, I don't know that there's a right answer, but I share your enthusiasm. Okay. And to me, >> that's what I'm looking for. I I I if anything I think your enthusiasm is a little bit more muted than it should be if I want to be even more bullish. We here's the bottom line. >> In our lifetime and possibly before the end of this decade, we are going to have flying cars. The regulatory environment is there. The administration is supportive. These companies are public. They're raised enough capital to go through that process which takes years and they are long underway in that process. And so this is going to happen. then the conversation becomes well when and in what scale and so that's where I would maybe warn investors and say listen let's be very clear this is should be considered a medium to long-term investment these companies are still pre-revenue they have a big risk which is that FAA certification uh which again we think is a matter of when not if but that's certainly a risk which could be delayed and so you should consider that in your investment decisions but if you're looking for potential home run ideas over the medium to longer term. Ideas that could possibly disrupt mobility forever, then I share your enthusiasm here and I think we're looking in the right place. The reality is that the technology for these things is not all that revolutionary. It's the same electric, you know, batteries that you'd see on a on an EV except, you know, different combination of cells and size, but it's the same technology and it's just propellers that tilt. But the ability to take off and land vertically and then transition to a wing makes them significantly safer and better than helicopters. Helicopters are a dinosaur. They were designed by like I said Da Vinci way back then and so there has to be a better alternative and that's what I think EVO will come in. It will take time to achieve scale. We're not going to see the same volumes that we'd see in in the EV industry where Ribian and Lucen are producing, you know, tens of thousands of vehicles in the first few years. This will start in the dozens, in the tens, in the maybe hundreds and kind of ramp up from there. It will take some time, but we are going to have flying cars in our lifetime. They may not look like the Jetsons or Back to the Future at first. They will start out as a piloted aircraft to transport you and I to and from airports or to and from uh city centers or surrounding >> Monttok >> or Mont. Well, just remember the 100 mile limitation. So, Montton is about 100 miles exactly. So, maybe to Southampton and then you can drive the rest or or take a different one there. But, um and so I share your enthusiasm. I think this is going to change the world and and I think it's just a matter of time. Andre, this is so great that you came and did this with us. We really appreciate it. I know you're busy. Uh, thank you so much for your time. Put me on your distribution list and we'll check back in with you as uh as the space uh progresses and uh thank on behalf of all of us at the compound. Thank you for answering our questions. We appreciate it. >> Our pleasure. Great to be here. Quite an honor. Speak to you soon. Thank you. >> All right. Cheers. All right. So that so that is uh topic one tonight and we went long because I think the subject matter um is is deserving of that and if you you listen to what Andre has to say um where we're going we won't need any roads and uh it's a it's a really interest look if we have a recession all these projects will get pushed off so I understand it's a bull market and we're talking about flying cars but um nevertheless these companies have raised real money they're partnering with Sirius um uh ser serious OEMs and uh something's going to happen here. Uh the timetable might be longer than we think, but it's a very exciting time to be an investor. All right, we have a lot more to do tonight. Uh thank you guys for uh for being here. Once again, I want to get into BDC's because I think this is a topic that's going to become more relevant in the fourth quarter. Um I don't know how many of you guys are familiar with BDC's. It's a really or it used to be a really small obscure corner of the stock market, but basically these are like publicly traded lenders and the BDC is a designation that they earn by paying out um almost all their income in the form of a dividend. And the dividends aren't like rock solid. They they rise when these companies have made a lot of good loans that are paying. And unfortunately they have to get cut when either there's a buildup of nonacrruals or borrowers who stop making payments which is really bad or um the rates at which they're able to lend come down because of prevailing rates in the industry. There's a lot of talk in social media uh over the last couple of days about the declines in some of these publicly traded business development corps or BDC's. And look, it's warranted because this is that shadow banking that you keep hearing about. This is that shadow banking that Jaime Diamond sneers at and that people have always said is like a hidden risk to the the economy or the markets that you know we're not correctly pricing in. It's not that these companies are melting down by any means. They were trading at a premium to NAV and historically they have in the past tended to trade at more of a discount. Typically, you'll see these uh stocks sell at a at a about 92% of their net asset value. Um, which is warranted because not every loan they make is a good loan and there should be some some risk priced in. The fact that they had been trading at a premium um is a is a historical artifact of how quickly interest rates went up and how fast the I don't know if earnings is the right way to phrase it, but the profits that these companies were able to go up. The higher interest rates are obviously the higher the revenue if it's a lending business. The problem is that works in reverse and these companies are very leveraged. So, not only um do do you see with rates coming down now do you see lower prevailing rates at which they could make loans at, but because it's leveraged, you see people rapidly start to price in a discount to the prices. So, rather than just blather on, let's do some charts. I want to show you guys what I'm talking about. Okay, so the first one, this is this is just Blue Owl Capital. This is like considered to be the gold standard. um and one of the most experienced companies in the space. They've obviously uh made people a lot of money over the years in these types of vehicles. Um but this is like private credit and uh Blue Owl is considered like a main a mainstay in the space. This is technically speaking a very obvious head and shoulders. You do not want to see that neckline break. Um, I know we're not talking about the fundamentals when we're looking at a chart, but just conceptually, a breaking neckline here would mean that this stock has violated support that's been in place for uh almost two years. And what that tells you is that the sentiment on companies in the space has very quickly changed. Um, so this is again private credit, but it's a publicly traded company operating there. Now, I'm going to show you some of the BDC's themselves, and we're going to look at one-year price charts, and I'm just trying to give you a sense of the recent um chatter about something going wrong with these companies and people being a little bit concerned. Um, so this one is, and by the way, not all of these are created equal. Some of these are much higher quality lenders who are much more serious about their covenants. So, I don't want to give you the impression that like these are all subprime lenders. That's not what's happening here. Um, all right. But so here's Main Street Capital Corp. So, uh, the stock is in a draw down from its all-time high. It is not catastrophic. Uh, actually had a really good recovery off the April Liberation Day lows. Um, but this is one of the names that people are pointing to because it's very well-known uh, company in the space. Here's Aries. Aries Capital Corp specifically. This is their BDC. 13% draw down below uh the all-time high and now back to those liberation day lows or close to uh this one is also closely followed. Again, Aries is one of the most respected companies in uh private credit and uh you know again draw downs are normal when there's concern about cutting dividend yields which is what what's happening across the space not just at Aries. This is Blue Owl Capital. So, this is Blue Owls BDC. I mean, this looks bad. This is in a 15% draw down from its all-time highs. Um, you can see it's right at the uh the April lows when the market was getting absolutely creamed. And again, this is another one that's trading down as people are concerned about dividend cuts in the future. Um, and part of that is because rates are coming down. And part of that is people are now starting to get concerned about the underlying loans and some of the borrowers. Um, which I think in the case of most of these, we're talking about middle market companies, not mom and pop companies, but just companies that are not quite big enough to tap the traditional Wall Street debt markets. Got another one, Blackstone Lending Fund. I mean, this one looks worse than the others. This is in a 19% draw down below its all-time high. And again, I'm just pointing a price at a chart. I'm not telling you the fundamentals are that much worse than the others. Um, each one of these warrants, if you know, if you're looking at these as potential investment, um, what you're probably seeing is that yields are really high now. That's because the prices have come down, but the dividends haven't yet been cut. So, the risk here is you look at something that's like a 10 or 11% distribution or dividend yield and you're like, why wouldn't I buy this? It's 20% off its high, yielding 11%. It's Blackstone. That looks like a great opportunity. The problem with that is that if rates continue to come down and or the economy gets worse and there are more defaults, naturally there will be more skepticism about these vehicles. Whether or not whether or not these companies as lenders did anything wrong is not the question. It's suspicion in the marketplace and they will go lower. They will trade at deeper discounts to their NAV. It's going to happen if again if um people view these as as uh an avatar of the economy getting worse. So um through no fault of the issuer. There's one uh we have one more. This is KKR. Uh this is their BDC. Okay, this is like this is crashy. No disrespect. This is in a 33% draw down. Now it could be that the ones in the deeper draw downs are the ones that have been more realistic with their shareholders about the need to either mark down the value of some of these loans um or cut their dividend or both. Like that that could very much be the case here. And if that's the case, then the ones that are down more aren't necessarily the worst ones um to be in or to look at as potential buy. So, I want to I want to be open-minded here and not present myself as an expert on all of these companies, but like these are pretty substantial draw downs in an economic expansion. In other words, like that's happening with GDP growth printing between two and 4% each quarter and almost full employment. Not a great sign that these names are in that big of a draw down. Oh, there are the macro bears and as we all know, they very much want these to crack because it will feed their need to present the recession story and uh call them a canary in the coal mine and say it's the next um subprime that those people are out there. They might end up being right. They've said it about a lot of other things before and they weren't right. Maybe this time uh they'll get lucky and the meteor will hit Earth, which is what they've been rooting for for the last 15 years. And that's okay. Or some of these will just cut their dividend yield. Shareholder base will turn over. Nothing really big will rupture and they will prove to have been um buying opportunities. It's I won't be the one that will know. I just wanted to present you guys the story so that you're not freaked out when you hear people talking about things and you haven't looked at them yourself. Um, all right. We're going to put a pin in that, but I think that topic is going to come up later um in Q4 if we get another rate cut because that could be another leg down for for for the space and it would make sense if it is. Um, I just want to I want to play a video from uh I want to play a video from my friend Robert here. >> Well, the ultra >> Oh, sorry guys. I think it really sums up this moment in the stock market/economy story. Um, let's let Robert Frank tell us what's going on. >> Well, the ultra wealthy just got ultra wealthier. I'm CNBC's Robert Frank. The top 10% of Americans added over $5 trillion to their wealth in the second quarter. That was driven mainly by the stock market. All wealth groups saw gains in the quarter with the bottom half of Americans adding about $150 billion to their wealth. But the fastest growth is at the very top, the top.1%. Those are folks worth $46 million or more. They have seen their wealth nearly double since 2020 to over $23 trillion. Stocks were the main reason for all of that growth. The top 1% own half of individually held corporate equities and mutual fund shares. The top 10% own 87% of all the stocks. That's remained fairly consistent over time. But that topheavy wealth creation has led to a topheavy consumer economy. The highest earning 10% of Americans accounted for a record 49% of total consumer spending. That according to Mark Xandandy at Moody's. Now any deep or prolonged decline in the stock market could have a large reverse wealth effect on all those big spenders and pose a threat to the economy. For the full breakdown of the changing wealth population and the winners in the luxury economy, check out the inside wealth newsletter on the link below. All right, Robert's the man. By the way, this is what I want you guys to take away from that. A couple things. The first one, the really big one, you were probably taught in school that the stock market is a function of how the economy is doing. That might used to have been true. Is that good grammar? Maybe that used to be true in the 60s and 70s and 80s. Listen to me now and believe me later. That's backwards. The economy is a function of how the stock market is doing. It wasn't always thus. It is flipped. And this is how it works now. It's the wealth effect on steroids. Basically, we've created a situation where everyone is a forced investor in the market and everyone's mood is affected by what their retirement account looks like. And when it looks really great, like it does right now, you get tons of spending. And when it looks less great, you will see spending moderate. In this case, um, as Robert just explained to us, 50% of consumer spending is now coming from the top, I think he said 10% of of, uh, households. Think about how insane that is to have an economy balanced precariously like an upside down pyramid where like, flip the pyramid over, the whole thing is balanced on that top 1%, 10% consumer not dropping the [ __ ] ball here. And the thing that will make them drop the ball is if their stock portfolio uh loses 10 or 15% in a quarter, which could totally happen. That 0.1% uh doubling their wealth in 90 days is obviously [ __ ] sick. I mean, we we wish we wish everyone well. Uh we don't hold it against anyone for making a lot of money, but that's insanity. And all of that is AI. All of it. 100% of it it's AI. It's the biggest 50 stocks, 30 of which are AI companies and 20 of which are big consumers of AI um to run their businesses like Walmart and blah blah blah. So, um this is what's happening right now. It's very K-shaped. All the airlines are going to come Delta reported today every airline is going to come out and tell you no problem selling out the front of the cabin. back of the cabin is so so um you'll hear that reiterated with hotels. You hear that high-end restaurants versus low-end. You'll hear you'll hear it everywhere because that's the reality that we're in right now. And I I just wanted to reinforce um the idea of that with Robert's commentary there because or or Robert's reporting there because it's as clear as day to me. The biggest risk to the stock market is not the economy. the biggest risk to the economy is the stock market. Um or or the NASDAQ will just go up 40% every year from here on out. We have nothing to worry about. So, um I I really want everyone to take away from me that that's how it works now. And look, people would say otherwise, and I'd love to agree with them, but then we'd both be wrong, and nobody wants that. Um so, so so that's that's that. I also want to get into this thing about hiring plans from US employers because it it uh it feeds directly into this idea. Um this is uh this is a news article. Hiring plans among US employers for the year through September were at their lowest since 2009. This is um Challenger Gray and Christmas put this out in a report. And uh the weaker planned headcount was largely fueled by a steep drop in seasonal hiring announcements. Yeah. Okay. I don't think so. I think there's something bigger happening here. And I think while companies are not laying off workers that quickly, they have stopped hiring because they're not sure what the impact of AI will be both on their business and inside of their business. I think there's a lot of hesitancy to just let a lot of people go, but there's also a lot of hesitancy to add headcount as though we're not in the midst of this transformative technology revolution. um that could literally change everything about the way companies run their businesses. I want to share something that happened at the end of September that we didn't talk about here, but I thought you talk about a canary in the coal mine. Accenture, which is this global consulting company that is supposed to be at the forefront of helping other companies implement AI, announced that they laid off 11,000 of their own workers in just the third quarter. So, uh, CEO Julie said, um, as advanced AI becomes quote, a part of everything we do and the global professional services company continues to invest significantly in the area, it expects employees to retrain and retool at scale. Quote, we are investing in upskilling our reinventors, that's what they call their like uh employees, which is our primary strategy. The company is exiting on a compression timeline. People for whom reskilling isn't a viable path. Sweet said Accenture had already reskilled 550,000 workers on the fundamentals of generative AI and outlined a six-month $865 million business optimization program. Listen to these uh euphemisms. uh business optimization program which detailed costs associated with severance and headcount reductions. So firing people and and the $865 million is like here here's money. Um last thing on this quote we expect savings of over a billion dollars from our business optimization program to reinvest in our business and blah blah blah. So, um, so basically the only people they're interested in hiring are AI experts. An AI expert is somebody that woke up an hour earlier than you basically because nobody knows anything yet. Um, but that's like the whole game. And so they looked at all their employees and they were like, "If we can't retrain you for the AI age, we have to let you go." I'm telling you that Accenture will not be alone in doing this. They are the front. They are at the vanguard of a movement that we're going to see repeated in every segment of the economy all over America and probably all over the world. Um, so I do not think that hiring plans being at a multi-year low has anything to do with Christmas uh seasonal hiring. I think it's a much bigger story and anyone that um just wants to whistle past the graveyard is free to do that. We're not going to do that here. We're going to chronicle this stuff for you guys on an ongoing basis. Um, couple things left. Capex questions is probably the big theme of the week. You saw um Oracle just get absolutely picked over on multiple occasions over the last couple of weeks about like, all right, they're doing all these $500 billion deals and announcements with Nvidia and OpenAI, but what does all this [ __ ] really mean? Um the information uh let's put the stock up real quick. This wasn't that bad. Honestly, the stock had a huge spike higher. Um and then it's given back, let's say half of that. Um that spike higher is from an earnings report where they just completely shocked uh the stock market. So, you know, in fairness, fundamentally, companies had a lot of great news. But uh today here, this is uh CNBC quoting the information cuz I don't have a subscription to the information. Um the report raised questions about the company's plan to buy billions of NVIDIA chips to rent as a cloud provider to clients like Open AAI. So OpenAI pays Oracle. Um Oracle makes uh access for OpenAI to all these GPUs that they've bought. That's the That's the business. Um, Oracle had 14% gross margins on $900 million in sales in its Nvidia cloud business in the 3 months ending in August, according to the report, which cited internal documents. Somebody saw something they weren't supposed to see. That's significantly lower than Oracle's overall gross margin of around 70%. Look, I'm I'm not the one to tell you that this is an anomaly or this is like the way it is. Um, more people will look more closely at this sort of thing. If this is a 14% profit margin business, it doesn't look very different than, I don't know, Abbercrombie and Fitch selling sweatpants in the mall, that might change a lot of people's opinions about what multiple they want to pay for the ISPs and the cloud providers and um the hyperscalers and whatever whatever you want to call them. Um, so look, this is not one of those things where I I just want to say, yeah, it's a bubble, throw the whole thing out. But I'm just pointing this out because the volume at which people are now shouting these questions is starting to be heard in the stock market. Stocks are reacting to this stuff rightly or wrongly. Uh but it was not just uh Adam in the chat points out Oracle crashed NASDAQ today. There were a lot of NASDAQ stocks, chip stocks that were down 7, 8, 9, and 10% on on this report. and it is not going to be the last report. One positive thing I'll say on this is thank God somebody is writing and reporting skeptically on all this spending because if not if we're all in a 100% agreement that this is just all rational. It takes the NASDAQ to 30,000. It takes the Dow to 60,000. It's not healthy. You must have skep skep skepticism. you must have uh people on the other side of some of these things so that it doesn't feel like we're just going to bubble up vertically until there's a crash. So, I actually think it's healthy that we're having these debates. And look, um as Jeff Gunlock says, this is the bloodless verdict of the market. Anyone's allowed to have any opinion they want. Price decides, uh you know, what where the market's beliefs are. So, um I don't hate it. I don't think it's negative. Um, all right. We're we're in the home stretch, guys. We we did it. And I want to thank everybody in the chat uh for helping me make this happen. I'm going to do a make the case and then a mystery chart and we'll get out of here. Uh I want to talk about Netflix. Do I don't know. Do we have a chart, guys? Yeah, we have this. This is Netflix performance and it's 200 day moving average. Let's say you knew absolutely nothing about technical analysis, right? Let's just say like you don't believe in it. You sort of can see you sort of can see that the junction we're at now should be support for the stock. You sort like just on a trend basis, if the buyers are going to come in and rescue this from a three-month downtrend, which is what what's been happening, it should be like sort of now or never, right? Um, so technically I like that it's kind of fallen into support and the buyers started to show up today on a red day. Um, the company was defended at Seapport, which is a brokerage firm I I barely know. Um, but I'll read you what uh I'll read you what the analyst thinks. This went from a neutral to a buy. The stock's been controversial this summer. Um, and it's and it's been in a downtrend. Um the research firm S uh Seapport now says the momentum on Netflix shares which has moderated lately lol nice way to put it could be digesting the year-to-ate 30% gains ahead of the advertising infrastructure build related monetization momentum that word salad s uh uh that word salad sentence that I just read here's what that's about increased the ad revenue estimates for Netflix to more closely track TV viewership share. Quote, this is the analyst. We think advertising could double to 3.1 billion this year and could grow at 48% annually through 2030 to reach $16 billion just ad revenue. Channel checks indicate same store ad buying could be tracking better than 16% for the third quarter of 2025. um also noted engagement on Netflix is strong with at least a couple of quote cultural zeitgeist titles driving viewership share. I think that's hunting wives. Uh I think that's the cultural zeitgeist show that's on Netflix right now. Um that's right. Rachel's pointing out K-pop Demon Hunters, which I still don't know what that is, but I know it's a really big deal. Um, so they have those they have those big shows that drive new signups also right now. So, um, Seapport thinks it could be a better than expected quarter. Their target is 1385, which be upside from here of 20%. Um, full disclosure, I am long Netflix. I've been long for a while. Uh, have not sold any during this recent downturn, and I'm hoping the stocks finally found support. Um, all right, we did it, guys. Now you're gonna Now you're going to be play the role of Michael Batnik. I'm going to give you the mystery chart and uh whoever gets it in the chat, Nicole's going to find you and we'll send you a t-shirt or something. Um, this is okay. This is uh a sector versus the S&P 500. I'm not going to tell you which is which. You could probably guess. So, it's you have one out of 11 uh chances. It's a It's an S&P 500 sector ETF. Um, versus the S&P 500. Let me see. I'm going to give you guys like a couple seconds here. All right. I got healthcare, financial, XLE. Somebody guessed, SMH, Energy, Financials, SMH, another healthcare, another energy. Very concentrated to the just a few. Here's a communication services. Somebody's saying utilities. No. Um, utilities look way better. Tech, of course not. All right, let's do the reveal. John, let's show them. [Music] It is healthcare. Uh, I know a couple of people guessed healthcare. We'll hook you. We'll hook you guys up. Nicole will try to get in touch somehow or you can get in touch with us. Um, here's what I want to tell you. Sevita Subermanian, who is one of my favorite people on Wall Street, one of the smartest people on Wall Street, just upgraded the entire healthc care sector. Let's do this XLV, the the regular chart real quick. I want to show you how shitty uh not this the next one. Yeah, I want to show you how shitty this sector has been. This is a three-year look at the XLV. It's in the middle of the range. It's basically gone nowhere while the S&P has obviously launched into space. Um, it's just been really tough sledding. Got some really big market cap companies like UNH that look like [ __ ] and have very company specific problems. But Sevita is pointing out that this is the this is the moment where everything turns around. Um, let's put her chart up. She's showing you valuation support. This is the relative forward PE for healthc care stocks versus the S&P 500 in blue, dark blue. And that line running across in light blue is the average. Um, so this is and this is back to 1986 by which Sevita is showing us these stocks have never been cheaper. The healthc care stocks relative to the S&P 500. Never been cheaper. I I feel it's a 40-year chart. I feel like we have to pay attention to that, right? Um, so let me quote her. Um, this is important. This is Sevita. Pharma overhangs dissipating still early in the obesity opportunity. Investors boycotted pharma shares for most of the year because of US policy uncertainty with pricing and tariffs. These seem to be one and the same being the key overhangs. The Washington overhang was partially lifted after the Fizer deal. Fiser just got out of tariffs with Trump. I'm not going to spend any time on that today. It's pretty benign overall. In Tim Anderson's view, that's a Meril healthcare analyst. Um, if this is all drug companies have to do, pretend they're going to build factories in the US. Um, then that's much better than the headlines from earlier in the year suggested. For the investor ready to dip their toe in the water, Tim Anderson highlights Eli Lilly and Gilead. Okay. Blah blah blah blah. So, um, there are a lot of viable tickers in that space, and I wanted to make that the mystery chart because part of what we try to do here on the show is turn your attention to things that maybe others aren't uh, focused on that have potential. Um, so if you want to read more, you could track down what Sevita wrote for Bank of America. It's uh, it's a really interesting take. All right, that's it for the show. Once again, want to remind you guys live compound and friends in New York City, Friday evening, October 24th. make a weekend out of it. I have no idea if there are tickets still left. So excited to be hanging with Kramer and Michael on stage. Jim's got a new book out. He may or may not be signing copies that we may or may not have purchased for you. Uh so it's going to be an epic night and uh we'd love to see you guys there. Thanks so much for listening. Shout out to Michael Batnik. We'll see him back next time. And uh like and subscribe. Talk to you soon. Heat. Heat. [Music]
Introducing the Low Altitude Economy | WAYT?
Summary
Transcript
[Music] All right, gangsters. It's 5:00 p. p.m. Eastern time. Uh, tonight is going to be a special edition of What Are Your Thoughts? I'm so glad to see so many of you guys joining me live in the tra chat because I almost said live in the trap cuz I listen to too much hip-hop. Uh because I'm going to need your help. Tonight's edition uh will be the first time ever that I've gone live without uh my co-host Michael Batnik. Michael is in Texas doing actual work on behalf of Rholtz Wealth Management. Um so while he's on assignment, I basically said focus on that. I'll I'll I'll take care of the show. and I knew you guys would be here to back me up. So, we're gonna have a lot of fun. We're going to get to all of the biggest topics and things happening on Wall Street this week. Want to say a couple of quick hellos here. Um, and I'll do more obviously as the show goes on and you guys contribute. Uh, Matt Steic is here, Brian Grill, Chris Hayes, Rachel's back, East Bay Elitus, good to see you. Um, who else? The guys, say hello to Nicole. Nicole's in the chat, the chat, and she's got a link she's about to drop that she's very excited about. Dr. Horton, John Nem, good to see you guys, too. Cliff, what's up? Um, David Shoko is here. He says, "Let's go." I agree. Let's get on with it. Um, first things first, quick item of housekeeping. We are doing our next live from the compound recording before a live audience in New York City. Guys, I believe a graphic for who our special guest is. Oh my god. Can you believe Do I have any sound effects? Can we play? Can we do a horn or a bell? All right. I mean, uh, first time ever, guys. Jim Kramer and The Compound will be live from the Financial District in New York City. It'll be Friday, October 24th at 6 PM. Jim is so pumped to be part of the show. We are too. Um they said they would never see me and Jim on the same stage or in the same uh room. They're wrong. It's going to happen. Uh and uh we we we love each other. So uh it's going to be a really great event. If you guys want your ticket to come see Jim and I, Nicole's going to drop the link. Or maybe she already Oh, there it is. Wow. She dropped it 50 times. I don't know how I missed it. Um unfortunately, there's less than 120 tickets for sale. So, if you want to do this, you got to you got to act. Um, and I hope uh anyone that's going to be in New York that night is is able to join us. And we'll have a ton of fun. I promise. There'll be drinks, there'll be uh podcasting, there'll be food, there'll be Kramer. Would love to see you guys then. Um, it looks like somebody's at the door. I wonder who I wonder who that could be. All right, let's let's uh let's see who do we guys? It's Andre Shepard. Uh Andre is going to lead off tonight's discussion on a topic that I'm super excited about. He is the lead mobility equity research technology analyst at Caner Fitzgerald. Andre, welcome to the show. So happy to see you. >> Great to be here. Yeah, good to see you again. >> All right. It's epic for our audience that you're here because you have been covering the EV tall sector and what I'm calling many people are calling the lowaltitude economy for how long? uh about four years now. >> Okay. Um four years ago, what were we talking about? Blueprints on a drawing board or was was there some was there something here? It >> it was uh a very early uh and rudimentary uh start with basically an idea, a pen and paper to try to make the skies cleaner and more efficient and more accessible to just the everyday passenger. What started off I think as a dream is now coming closer and closer to uh fruition. Can we just say it out loud? It's literally flying cars. It's not helicopters. >> That's right. That's right. So, uh, EV toll, as you mentioned, right, that stands for electric vertical takeoff and landing. And so, these are electrified miniaturaturized aircraft that will take five people, one pilot, and four passengers of distances of up to 100 miles. So, flying cars or flying taxis is one way to describe. >> Okay. I like that description. And I know the early stages of this won't be flying cars. It's more likely that it'll be rescue vehicles um and things of that nature in the government sector. Maybe military, maybe cargo before we're ready to start loading tourists and fanny packs into these things. But that is where this is ultimately headed. You guys seem to have a pretty strong level of conviction that this is going to be an everybody technology at some point. Yeah, that's exactly right. So, if we maybe take a step back and sometimes people don't forget forget this, but Michael uh Leonardo da Vinci is basically the first person credited for designing the idea of a helicopter. We still have the the draws from his diary since then. Well, helicopters today have three fundamental flaws. Number one, they are obnoxiously loud. For anybody who's been inside a helicopter knows that the the noise can sometimes be unbearable. In fact, for just that reason alone, we don't have more helicopters in cities like New York because tenants complain about the noise profile. The second flaw, maybe their biggest flaw is that they are not ultimately that safe. Helicopters on average have two rotors, one at the top to go up and down and one in the back to steer. And if something happens to either one, let's just say it's not a good day for the people on >> No redund no redundancy. >> No redundancy. Single points of failure. Exactly. And then the third issue that they have, I would say, is that they're very costly both to build, to purchase, and to maintain. And so EV tolls addresses those three flaws. For starters, they're electric. So that reduces the noise profile significantly. Then depending on the company, >> I want to pause there. All of this is all the the way has been paved for this by the start of the EV revolution. This the idea of like working toward eventually solid state batteries and having those have the power and the energy density needed to fit on board one of these things. Like none of that was possible until Elon um proved that you could do it with cars. So that's a really big the power and it being electric the E and the EV tall is a really big component of this conversation >> 100% completely and and and I think it's important to touch on that point and and so similarly when you now look at the technology right helicopters as I was saying they have two rotors these EV tolls depending on the company each company has their own design some of them have up to 12 rotors so there are no single points of failure additional redundancies In fact, these aircraft can both take off and land vertically or conventionally. And so there are these extra layers of safety which I think the consumers and the investors will ultimately appreciate. And then finally, and my last point there, sorry, is they are significantly more affordable to both build and to maintain. And you touched on that a little bit, the fact that they're electric, there's a a lot simpler components u and it just becomes a question of integrating the battery pack into these aircraft. simpler, safer, and quieter. And for us, that ultimately makes them a no-brainer to get adopted and to disrupt the mobility industry as we know it. >> Okay, I have a million questions and I know the live audience does too. And uh I'm monitoring the chat, so if somebody asks something poignant instead of what could possibly go wrong, lol, I'll I'll lob it at you. Um here's qu here's the first question. So this is where these things will differ from an electric vehicle on the road. They require a huge burst of electric power upon the takeoff itself and the landing. Whereas driving an EV, it's a much more steady I don't know if current is the right way to explain it, but it's a it's a much it's a much more steady consistent demand on the battery as you operate the car. This is like a burst and then if they're flying on a fixed wing, the battery power is still running but it's not as intense and then on landing it's another burst. That's an engineering challenge. Do you think that that that challenge has been solved by the companies that are now and we'll get into the companies in a second that are now in the process of completing the FAA certification uh the various stages. >> Yeah, I think that's a great uh question. You touched on a lot of points >> and very bright Let me try to address uh uh everything that you said. So in terms of the technology, you are exactly right. Once these aircraft take off, the amount of energy that they're using, not to mention powering the aircraft, which depending on the company can can weight between 6,000 and 4,000 lbs. It's a massive use of energy that's being used to ultimately elevate that aircraft. Once it transitions into its cruise phase or the fixed wing, then the energy usage is significantly less. But as a result of that takeoff requiring the amount of energy that it does, these vehicles today are being limited to up to 100 miles of range. And that's just the nature of the battery technology that we have available today. But as that continues to develop, so will the range and the payload capabilities uh uh of these companies. And so yes, the technology works. In fact, many of them have conducted several test flights over the last few years, some of them even in New York City with a pilot on board. Um, but so yes, it works. I think that as the batteries get better, we'll see extended battery range similar to what we've seen in the EV industry as well. >> Okay, viewer Theo Williams says, "This is a Joby versus Archer conversation." Look, the way that I think about it, I just go by the market cap of the companies, and that's who I tell you I think is in the lead. I know it's unsophisticated, but it's also helped me in a lot of other technological uh booms. Um, but I want to do some charts. Uh, John, can we roll through a couple of these just so we give people an idea of what we're talking about? All right, Joby, full disclosure, I am long the stock not for a trade, as an investment. I've talked about it here on YouTube as well as on TV for the last couple of months. I've been accumulating. The stock is about 19.5 bucks. looks like it wants to run up against the old high set earlier this summer and who knows what happens if and when it reaches that price. Next chart. This is Archer. Um this is what a lot of people consider to be the the runner up to Joby. I don't know if it's quite that simple. They seem to be not as far along in their commercialization as Joby is. Also, Job's made some bigger deals with companies like Blade. Um, Andre is going to explain that all to us. But as you can see, Archer up 315% over the last year. Full disclosure, I also own this one. And I think we have one more. This is a Andre, I don't know if this is in your coverage universe. This is a uh not quite a a flying car stock as as or EV tall stock. This is the satellites that are providing all the data to enable the low altitude economy, which we'll define in a minute. But Planet Labs is up almost 600% over the last year. It's a $15 stock. They want to be like the data provider, maybe the the alphabet or the I don't know the best way to phrase it, but they have a satellite uh constellation of a hundred, you know, low orbit craft that are monitoring the wind and geology and whatever else. Um very I'm very scientific. Um, so let's start with with We could skip Planet Labs if it's not in your universe. Let's start with Joby versus Archer. >> How do you I mean those are I Let me Let me just ask one final question. I almost view these as they It's an anomaly of history that they're even public companies. They probably wouldn't be if not for the bubble of 2021 in spaxs. >> That's right. They both were able to come public with no revenue pre-revenue because they were merged with spaxs at the height of the postcoid stock market mania. And if that hadn't happened, these might still be privately funded VCbacked companies. So it's almost like a gift. Like from my perspective, I don't know that the stocks will work, but they almost don't belong as public companies or haven't until recently. Would you agree with that premise? >> Definitely. I I think that is a very uh great point to your point even still today both these companies are pre-revenue and on that note they are contingent on receiving FA uh certification if they don't and our expectation is very much that they will and that they will soon and happy to expand on that but hypothetically in a scenario where they don't receive that FA certification these business could be deemed worthless to a degree and that they need that to enter commercialization So certainly you can make the case that it was early for them to enter but as you also said right they're here now and they can work as a >> for investors who are comfortable taking a medium to longer term view and who are comfortable with uh volatility but let's get into maybe some of the similarities and differences uh between Archer and Joby. So um I would agree that both Joby and Archer are today the industry leaders. Um, we like to consider them kind of the Coca-Cola and Pepsi of the industry. In a lot of ways, they're similar. In some ways, they're different. In some ways, one of them is ahead and the other the other one is ahead. But Joby is partnered with Delta for its operations for with Toyota with its manufacturing and as well with Uber and the military for a few record of programs there which I >> Toyota owns a big chunk of stock too. >> Toyota and so does Uber, right? They're two of the largest investors and they're also working side by side with these companies to integrate their manufacturing efforts into Job's facilities which so Toyota in fact has employees that are based at Job's uh headquarters in California. >> This is significant. This is significant because 10 million automobiles made a year. Toyota makes 1 million of those 10 million. This is arguably the greatest scaled manufacturer of transportation vehicles the world has ever known. Um, so the fact that they're not only partnering with Joby, but they're an equity investor riding along, I think is I think is really critical. I mean, could be really critical. It's it's an incredible resource to have somebody of Toyota's expertise and degrees in manufacturing working side by side with your engineers and and and we're seeing that Joby is also leading the race in the amount of aircraft that they've manufactured today which is close to 10 whereas Archer is maybe still kind of ramping those up. But Archer on the other hand they're partner with United Airlines for their operations. Stalantis for their manufacturing who's also an investor similar to Toyota and then they're also working with the defense and with the military to expand programs there. So they both have I would say very strong partnerships. Um and both of them have the strongest balance sheets in the industry today. Archer's total liquidity is around two billion. Job's total liquidity is around 1 billion. Uh but >> uh have you seen the news? Well, I was just going to say except uh as of this conversation, they've just announced another 500 million equity rate. So, one point >> Joby secondary. Okay. All right. >> Um but still, right, both of them have the strongest balance sheets. Archer maybe has the slight uh um lead there and that they have more liquidity and also a slightly lower cash burn that Joby, but both of them very well capitalized and our view is that they're funded through their commercialization and certification uh efforts. Now, one of the big differences here, and sometimes people don't realize this, is their business model. Archers is very straightforward. They want to be an OEM, and so they want to build the aircraft and sell the aircraft. And so, for them, it's quick revenue recognition at scale over the years. They expect to manufacture each aircraft for around two, two and a half, $3 million. >> This is the Midnight Craft. Is that the Is that the one they're going to sell? >> That's right. Okay. Um Okay. That vehicle is still being tweaked because it's not uh to the FAA degrees of certification just yet, but it's a variant of that Midnight. Exactly. Right. Um and so Archer will sell their aircraft, whereas Joby, they're prioritizing wanting to be an operator. So rather than selling these aircraft, they actually intent on owning the aircraft and conducting the operating business similar to kind of how Blade was, which we can talk about since Joby just acquired uh uh Blade. So I think that's a subtle difference in the business model. Joby today has significantly more test flights under their belt. Archer is ramping up theirs. still have to transition their aircraft from a hover to a cruise which Joby has now been doing for a few months. Um but both of them again strongest liquidity closest path to certification strongest personnel in terms of management teams and partnerships and so we're confident that both of them are going to get to the finish line and commercialize. >> So I bought both for that reason. I don't know which business model is going to be the one that makes the most sense selling these craft to others versus being the taxi service. And then I also know that Archer wants to have a taxi service as well. So it's hard for me to I it's hard for anyone I would say to know two years from now who does what first and and more profitably. It just uh seems really difficult. >> That that's fair. and and a lot of this industry is still being developed. This is uh the first time the FAA has uh defined a new category in over 50 years. So, a lot of this is we're learning as we go. Uh which I think is is fair. >> Sorry, from the chat. Um someone's making the uh Mr. R570 is asking Archer equals Boeing, Joby equals Uber. It seems like an oversimplification. It's pro there's probably more overlap. I I would say >> I Yeah, I think that that's maybe an oversimplification, but I think the the the example applies, right? Because again, Archer wanting to be an OEM like Boeing in the sense hopefully a lot less uh issues and incidents than Boeing over the medium to longer term, but they want to while they are going to have an air taxi service and that they're going to be transporting passengers. Archer intends to basically partner with their airlines or their partnerships and have those companies conduct the operating business while Archer provides the aircraft. Joby wants to do both. Build the aircraft and also operate it. Now, I can't think of any air airline today that is both an OEM and an airline. In fact, Boeing tried it many, many years ago. It didn't work very well. Usually, either you are an OEM or an operator. Well, in Joy's case, they want to do both. We'll see how that uh ultimately shapes out. But you could argue that from an investor's perspective, that raises a lot more questions because now you have to consider things. Well, how many aircrafts, how many passengers, how many flights per day, what are you going to charge those passengers? And so, it's a lot more inputs and ultimately your valuation. Whereas with Archer, you could argue it's a much more straightforward model. They build the aircraft and then they sell the aircraft. So, from an investor's perspective, that one's easier and more straightforward to understand. But again, we'll see which uh business model ultimately ends up being the the more successful one. I think it's important though to realize that this is not going to be a winner take all industry, right? There are going to be >> it's too big. >> It's way too big and there's going to be several players across several uh geographies. Some in Europe, some in the US, some in South America, some in Asia, some in many places and also the business model is different. While some are focusing more on cargo, there's others who are focusing more on the air taxi, the passenger transport. But the reality is that there are several use cases. Military, medical, surveillance, policing, >> Hampton's >> Hamptons, transporting Josh to the Hamptons, you know, all of these things. >> Well, one of them, I think it was Archer, signed a contract to be the official EV tall provider to the Los Angeles Olympic Games, which is 2028. >> That's right. >> Was it Was it Archer or Joby? Which one? >> Archer. Archer won the exclusivity for the LA >> Olympics. What does that mean? >> So that means that in 2028 in LA once the Olympics start, Archer intends to already be transporting passengers. >> So it's nuts. That's nuts. That's like tomorrow. >> Well, a few years from tomorrow. But >> to get to that point, that's the real question is how do we get to that point? And so Archer's expectation is that they will >> hopefully have received their FAA certification by 2027 because by then they'll give them a year to start ramping up. Now I think it's important to be mindful of scale. We shouldn't expect thousands of these in 2008 at the Olympics. We should expect a handful of these, you know, maybe tens of these at most. But the idea is to showcase them uh you know for America and for the world to see that this is ultimately going to be another vertical out there. So Archer won the exclusivity. Archer and Joby were both bidding for it. Ultimately it was awarded to Archer and so they are now kind of ramping up to start having enough aircraft and flight test so that they can perform some sort of flight services during the Olympics. >> Okay, got a few more for you from the chat. A lot of people are asking about the Dubai connection here. So it seems as though Abu Dhabi and Dubai are really excited about being at the lead of this technology worldwide. They seem to be maybe a little bit less risk averse >> than Europe and the United States. A little bit more willing to try new things. And as a result, the center of gravity of this industry, yes, these companies are American companies, but like a lot of firsts are going to take place in the skies over um the the Arabian Peninsula. >> That's exactly right. And in fact, I should congratulate your audience because these questions are really uh uh you know, >> the compounders don't play. >> They don't play. Clearly, it shows and you you've taught him well. Um so that's right. So the UAE by now has almost proven itself to to be the first market to integrate and adopt this technology. Okay. They have developed their own regulatory agency separate from the FAA and from YASA in Europe. And so their goal is to be first. And so to that point, both Archer and Joby for that matter are targeting to first enter into commercialization in this part of the world prior to in the United States. So you nailed it. In fact, Archer is intending to sell uh one or two or a number of aircraft to that region this year and Joby is targeting to enter into service by Q1 of next year. both in the UAE, both in a small capacity, but you nailed it. That will be the first market to adopt this this new technology. >> Okay. I want to get into a name that we haven't brought up yet, but it's in your coverage universe. Um the what the company's called Vertical What's the Yeah. So that's Vertical Airspace. So >> it's called Vertical Aerospace. What's the ticker on that? >> Uh EVTL. Uh Echo Victor Tom Larry. And um and so that is another variant of this EV toll industry. In fact, vertical airspace is the only remaining European OEM that's looking to bring this EV toll to fruition. So they are in the same industry in Archer and Joey. >> Is that trading in the is that trading in the US market? >> Has has an ADR in the US market. This one is significantly smaller. Has a market cap sub one billion. They're a little bit maybe further behind in that process, but they're also building their own variant aircraft and their goal is to prioritize Europe. Europe, we don't need to get too technical, but Europe has a different and a higher degree of safety requirement in their certification process. 10 to the >> as we know. >> Yeah. Uh and so Vertical is pursuing that. And so they their goal is to be kind of the only or one of the only OEMs doing EV tolls. Well, they got to get like Benz or somebody. They got to like Daimler, like they got to get a European manufacturer. >> They used to be partnered with Rolls-Royce, although that partnership um ended up being dissolved. Um and they still need to raise a good amount of capital, whereas again Joby and Archer, you could argue maybe they're funded through commercialization or certification, but they are another player in this industry. The last one to consider is a company called Eve Holding and their symbol is EVX. That's maybe the fourth and last remaining public comp in the space. Now, their knowhow is that they are backed by Embraer. Embra is the largest owner. They own more than 50 60% of the stock. And so, they're leveraging Embraer's experience in certifying and building aircraft to build their own EV toll. But again, oh, sorry. >> Oh, two uh two more for you. Um Daniel McCarthy in the chat is saying, "I played rugby with Andre at Boston University." Do you remember him? >> I do. Yeah. Hi, Dan. >> Okay. All right. Shout out to Daniel. Um I wanted to ask you about people who are saying that China is going to leapfrog ahead of us on this one. The Chinese are hellbent on having EV tall taxis in Chinese cities for consumers and I think there's like a point of pride. They don't they don't want to be deepseek anymore. They don't want to be two years after everything we do. What what do you think of the I mean I know there was the Osaka air show, the Paris air show, the Dubai air shows coming up and at each these stocks because they have no revenue, they seem to be driven by headlines and partnerships coming out of these events. Do you see the Chinese being a a major factor here in the development of the technology? >> 100%. Um but what I will say is is there's a lot of parallels between the EV toll industry US versus China than with the EV industry US versus China. So what do I mean by that? So China is actually today ahead of the US in its EV tolls. They have a company a Chinese company which has an ADR that trades in the US. It's called E-Hang. Symbol is EH. And I'll just preface by saying we don't officially cover it but you know we are aware of them. Sure. >> They are the only company today in this industry who has already received their type certification. So they are certified. Now the big >> certified in China. >> Exactly. They're certified in China and not in the US. And get this though, their aircraft, remember Archers and Jobies are between five and 6,000 pounds. They take five passengers. Uh E-Hang's aircraft is a two-seater autonomous aircraft. So there are no pilots and it's just two people in a glorified drone essentially >> that are being used for sightseeing and tourism. No. So different business. >> I'm out. >> I'm from the old school. I need a pilot. >> Yeah. But but so but China has a huge emphasis on uh this low altitude economy as you alluded and and so in a lot of ways that's the incentive that that's what's incentivizing the US and the FAA to try to move quicker. We don't want the US to lose the race in EV tolls similar to what happened in drones where we maybe were leading it and then China eventually surpassed us. We certainly don't want that to happen, which is why you've seen a lot of momentum from the current administration with two executive orders to accelerate the deployment of EVOs. We don't want to fall behind China. Now, they're not going to enter here and we're not going to enter there, but like with EVs, Europe may be some battleground and so we need to accelerate that FA certification process. >> So, a lot of people are skeptical about this stuff. Um, and you know, of course, I am too. I understand like like just because you in the FAA certification process doesn't mean you get a yes and just because you get certification doesn't mean the economics of the business are great. Like I understand there's a lot of hurdles between now and Jetson's. Um, but when I try to think about like what's the next trillion dollar TAM industry over the next 10 years that people just don't fully believe in yet, like where is the opportunity to have a stock go from being worth 10 billion to a hundred billion or more? It like I keep coming back to this idea, this this um this quantum leap in in mobility. Um the lowaltitude economy. Last one for you. low altitude economy. It's it's anything taking place below 3,300 feet uh in the air. So, it's drones, it's drone delivery, it's eventually, we think, EV tall, probably military safety, um law enforcement, and then eventually, you know, full-blown consumer. This is going to be like a I think it's going to be a big area within tech, and people are really going to have to familiarize their name. So, um, you you seem to be as excited as I am about it. Um, and I know you're an analyst. You're not a cheerleader. U, but like is do you think my enthusiasm is misplaced or do you think that like I'm I'm the right amount of excited for for the opportunity? What would you say? >> So, um, you know, I I think the answer to that is is somewhat subjective. You know, I don't know that there's a right answer, but I share your enthusiasm. Okay. And to me, >> that's what I'm looking for. I I I if anything I think your enthusiasm is a little bit more muted than it should be if I want to be even more bullish. We here's the bottom line. >> In our lifetime and possibly before the end of this decade, we are going to have flying cars. The regulatory environment is there. The administration is supportive. These companies are public. They're raised enough capital to go through that process which takes years and they are long underway in that process. And so this is going to happen. then the conversation becomes well when and in what scale and so that's where I would maybe warn investors and say listen let's be very clear this is should be considered a medium to long-term investment these companies are still pre-revenue they have a big risk which is that FAA certification uh which again we think is a matter of when not if but that's certainly a risk which could be delayed and so you should consider that in your investment decisions but if you're looking for potential home run ideas over the medium to longer term. Ideas that could possibly disrupt mobility forever, then I share your enthusiasm here and I think we're looking in the right place. The reality is that the technology for these things is not all that revolutionary. It's the same electric, you know, batteries that you'd see on a on an EV except, you know, different combination of cells and size, but it's the same technology and it's just propellers that tilt. But the ability to take off and land vertically and then transition to a wing makes them significantly safer and better than helicopters. Helicopters are a dinosaur. They were designed by like I said Da Vinci way back then and so there has to be a better alternative and that's what I think EVO will come in. It will take time to achieve scale. We're not going to see the same volumes that we'd see in in the EV industry where Ribian and Lucen are producing, you know, tens of thousands of vehicles in the first few years. This will start in the dozens, in the tens, in the maybe hundreds and kind of ramp up from there. It will take some time, but we are going to have flying cars in our lifetime. They may not look like the Jetsons or Back to the Future at first. They will start out as a piloted aircraft to transport you and I to and from airports or to and from uh city centers or surrounding >> Monttok >> or Mont. Well, just remember the 100 mile limitation. So, Montton is about 100 miles exactly. So, maybe to Southampton and then you can drive the rest or or take a different one there. But, um and so I share your enthusiasm. I think this is going to change the world and and I think it's just a matter of time. Andre, this is so great that you came and did this with us. We really appreciate it. I know you're busy. Uh, thank you so much for your time. Put me on your distribution list and we'll check back in with you as uh as the space uh progresses and uh thank on behalf of all of us at the compound. Thank you for answering our questions. We appreciate it. >> Our pleasure. Great to be here. Quite an honor. Speak to you soon. Thank you. >> All right. Cheers. All right. So that so that is uh topic one tonight and we went long because I think the subject matter um is is deserving of that and if you you listen to what Andre has to say um where we're going we won't need any roads and uh it's a it's a really interest look if we have a recession all these projects will get pushed off so I understand it's a bull market and we're talking about flying cars but um nevertheless these companies have raised real money they're partnering with Sirius um uh ser serious OEMs and uh something's going to happen here. Uh the timetable might be longer than we think, but it's a very exciting time to be an investor. All right, we have a lot more to do tonight. Uh thank you guys for uh for being here. Once again, I want to get into BDC's because I think this is a topic that's going to become more relevant in the fourth quarter. Um I don't know how many of you guys are familiar with BDC's. It's a really or it used to be a really small obscure corner of the stock market, but basically these are like publicly traded lenders and the BDC is a designation that they earn by paying out um almost all their income in the form of a dividend. And the dividends aren't like rock solid. They they rise when these companies have made a lot of good loans that are paying. And unfortunately they have to get cut when either there's a buildup of nonacrruals or borrowers who stop making payments which is really bad or um the rates at which they're able to lend come down because of prevailing rates in the industry. There's a lot of talk in social media uh over the last couple of days about the declines in some of these publicly traded business development corps or BDC's. And look, it's warranted because this is that shadow banking that you keep hearing about. This is that shadow banking that Jaime Diamond sneers at and that people have always said is like a hidden risk to the the economy or the markets that you know we're not correctly pricing in. It's not that these companies are melting down by any means. They were trading at a premium to NAV and historically they have in the past tended to trade at more of a discount. Typically, you'll see these uh stocks sell at a at a about 92% of their net asset value. Um, which is warranted because not every loan they make is a good loan and there should be some some risk priced in. The fact that they had been trading at a premium um is a is a historical artifact of how quickly interest rates went up and how fast the I don't know if earnings is the right way to phrase it, but the profits that these companies were able to go up. The higher interest rates are obviously the higher the revenue if it's a lending business. The problem is that works in reverse and these companies are very leveraged. So, not only um do do you see with rates coming down now do you see lower prevailing rates at which they could make loans at, but because it's leveraged, you see people rapidly start to price in a discount to the prices. So, rather than just blather on, let's do some charts. I want to show you guys what I'm talking about. Okay, so the first one, this is this is just Blue Owl Capital. This is like considered to be the gold standard. um and one of the most experienced companies in the space. They've obviously uh made people a lot of money over the years in these types of vehicles. Um but this is like private credit and uh Blue Owl is considered like a main a mainstay in the space. This is technically speaking a very obvious head and shoulders. You do not want to see that neckline break. Um, I know we're not talking about the fundamentals when we're looking at a chart, but just conceptually, a breaking neckline here would mean that this stock has violated support that's been in place for uh almost two years. And what that tells you is that the sentiment on companies in the space has very quickly changed. Um, so this is again private credit, but it's a publicly traded company operating there. Now, I'm going to show you some of the BDC's themselves, and we're going to look at one-year price charts, and I'm just trying to give you a sense of the recent um chatter about something going wrong with these companies and people being a little bit concerned. Um, so this one is, and by the way, not all of these are created equal. Some of these are much higher quality lenders who are much more serious about their covenants. So, I don't want to give you the impression that like these are all subprime lenders. That's not what's happening here. Um, all right. But so here's Main Street Capital Corp. So, uh, the stock is in a draw down from its all-time high. It is not catastrophic. Uh, actually had a really good recovery off the April Liberation Day lows. Um, but this is one of the names that people are pointing to because it's very well-known uh, company in the space. Here's Aries. Aries Capital Corp specifically. This is their BDC. 13% draw down below uh the all-time high and now back to those liberation day lows or close to uh this one is also closely followed. Again, Aries is one of the most respected companies in uh private credit and uh you know again draw downs are normal when there's concern about cutting dividend yields which is what what's happening across the space not just at Aries. This is Blue Owl Capital. So, this is Blue Owls BDC. I mean, this looks bad. This is in a 15% draw down from its all-time highs. Um, you can see it's right at the uh the April lows when the market was getting absolutely creamed. And again, this is another one that's trading down as people are concerned about dividend cuts in the future. Um, and part of that is because rates are coming down. And part of that is people are now starting to get concerned about the underlying loans and some of the borrowers. Um, which I think in the case of most of these, we're talking about middle market companies, not mom and pop companies, but just companies that are not quite big enough to tap the traditional Wall Street debt markets. Got another one, Blackstone Lending Fund. I mean, this one looks worse than the others. This is in a 19% draw down below its all-time high. And again, I'm just pointing a price at a chart. I'm not telling you the fundamentals are that much worse than the others. Um, each one of these warrants, if you know, if you're looking at these as potential investment, um, what you're probably seeing is that yields are really high now. That's because the prices have come down, but the dividends haven't yet been cut. So, the risk here is you look at something that's like a 10 or 11% distribution or dividend yield and you're like, why wouldn't I buy this? It's 20% off its high, yielding 11%. It's Blackstone. That looks like a great opportunity. The problem with that is that if rates continue to come down and or the economy gets worse and there are more defaults, naturally there will be more skepticism about these vehicles. Whether or not whether or not these companies as lenders did anything wrong is not the question. It's suspicion in the marketplace and they will go lower. They will trade at deeper discounts to their NAV. It's going to happen if again if um people view these as as uh an avatar of the economy getting worse. So um through no fault of the issuer. There's one uh we have one more. This is KKR. Uh this is their BDC. Okay, this is like this is crashy. No disrespect. This is in a 33% draw down. Now it could be that the ones in the deeper draw downs are the ones that have been more realistic with their shareholders about the need to either mark down the value of some of these loans um or cut their dividend or both. Like that that could very much be the case here. And if that's the case, then the ones that are down more aren't necessarily the worst ones um to be in or to look at as potential buy. So, I want to I want to be open-minded here and not present myself as an expert on all of these companies, but like these are pretty substantial draw downs in an economic expansion. In other words, like that's happening with GDP growth printing between two and 4% each quarter and almost full employment. Not a great sign that these names are in that big of a draw down. Oh, there are the macro bears and as we all know, they very much want these to crack because it will feed their need to present the recession story and uh call them a canary in the coal mine and say it's the next um subprime that those people are out there. They might end up being right. They've said it about a lot of other things before and they weren't right. Maybe this time uh they'll get lucky and the meteor will hit Earth, which is what they've been rooting for for the last 15 years. And that's okay. Or some of these will just cut their dividend yield. Shareholder base will turn over. Nothing really big will rupture and they will prove to have been um buying opportunities. It's I won't be the one that will know. I just wanted to present you guys the story so that you're not freaked out when you hear people talking about things and you haven't looked at them yourself. Um, all right. We're going to put a pin in that, but I think that topic is going to come up later um in Q4 if we get another rate cut because that could be another leg down for for for the space and it would make sense if it is. Um, I just want to I want to play a video from uh I want to play a video from my friend Robert here. >> Well, the ultra >> Oh, sorry guys. I think it really sums up this moment in the stock market/economy story. Um, let's let Robert Frank tell us what's going on. >> Well, the ultra wealthy just got ultra wealthier. I'm CNBC's Robert Frank. The top 10% of Americans added over $5 trillion to their wealth in the second quarter. That was driven mainly by the stock market. All wealth groups saw gains in the quarter with the bottom half of Americans adding about $150 billion to their wealth. But the fastest growth is at the very top, the top.1%. Those are folks worth $46 million or more. They have seen their wealth nearly double since 2020 to over $23 trillion. Stocks were the main reason for all of that growth. The top 1% own half of individually held corporate equities and mutual fund shares. The top 10% own 87% of all the stocks. That's remained fairly consistent over time. But that topheavy wealth creation has led to a topheavy consumer economy. The highest earning 10% of Americans accounted for a record 49% of total consumer spending. That according to Mark Xandandy at Moody's. Now any deep or prolonged decline in the stock market could have a large reverse wealth effect on all those big spenders and pose a threat to the economy. For the full breakdown of the changing wealth population and the winners in the luxury economy, check out the inside wealth newsletter on the link below. All right, Robert's the man. By the way, this is what I want you guys to take away from that. A couple things. The first one, the really big one, you were probably taught in school that the stock market is a function of how the economy is doing. That might used to have been true. Is that good grammar? Maybe that used to be true in the 60s and 70s and 80s. Listen to me now and believe me later. That's backwards. The economy is a function of how the stock market is doing. It wasn't always thus. It is flipped. And this is how it works now. It's the wealth effect on steroids. Basically, we've created a situation where everyone is a forced investor in the market and everyone's mood is affected by what their retirement account looks like. And when it looks really great, like it does right now, you get tons of spending. And when it looks less great, you will see spending moderate. In this case, um, as Robert just explained to us, 50% of consumer spending is now coming from the top, I think he said 10% of of, uh, households. Think about how insane that is to have an economy balanced precariously like an upside down pyramid where like, flip the pyramid over, the whole thing is balanced on that top 1%, 10% consumer not dropping the [ __ ] ball here. And the thing that will make them drop the ball is if their stock portfolio uh loses 10 or 15% in a quarter, which could totally happen. That 0.1% uh doubling their wealth in 90 days is obviously [ __ ] sick. I mean, we we wish we wish everyone well. Uh we don't hold it against anyone for making a lot of money, but that's insanity. And all of that is AI. All of it. 100% of it it's AI. It's the biggest 50 stocks, 30 of which are AI companies and 20 of which are big consumers of AI um to run their businesses like Walmart and blah blah blah. So, um this is what's happening right now. It's very K-shaped. All the airlines are going to come Delta reported today every airline is going to come out and tell you no problem selling out the front of the cabin. back of the cabin is so so um you'll hear that reiterated with hotels. You hear that high-end restaurants versus low-end. You'll hear you'll hear it everywhere because that's the reality that we're in right now. And I I just wanted to reinforce um the idea of that with Robert's commentary there because or or Robert's reporting there because it's as clear as day to me. The biggest risk to the stock market is not the economy. the biggest risk to the economy is the stock market. Um or or the NASDAQ will just go up 40% every year from here on out. We have nothing to worry about. So, um I I really want everyone to take away from me that that's how it works now. And look, people would say otherwise, and I'd love to agree with them, but then we'd both be wrong, and nobody wants that. Um so, so so that's that's that. I also want to get into this thing about hiring plans from US employers because it it uh it feeds directly into this idea. Um this is uh this is a news article. Hiring plans among US employers for the year through September were at their lowest since 2009. This is um Challenger Gray and Christmas put this out in a report. And uh the weaker planned headcount was largely fueled by a steep drop in seasonal hiring announcements. Yeah. Okay. I don't think so. I think there's something bigger happening here. And I think while companies are not laying off workers that quickly, they have stopped hiring because they're not sure what the impact of AI will be both on their business and inside of their business. I think there's a lot of hesitancy to just let a lot of people go, but there's also a lot of hesitancy to add headcount as though we're not in the midst of this transformative technology revolution. um that could literally change everything about the way companies run their businesses. I want to share something that happened at the end of September that we didn't talk about here, but I thought you talk about a canary in the coal mine. Accenture, which is this global consulting company that is supposed to be at the forefront of helping other companies implement AI, announced that they laid off 11,000 of their own workers in just the third quarter. So, uh, CEO Julie said, um, as advanced AI becomes quote, a part of everything we do and the global professional services company continues to invest significantly in the area, it expects employees to retrain and retool at scale. Quote, we are investing in upskilling our reinventors, that's what they call their like uh employees, which is our primary strategy. The company is exiting on a compression timeline. People for whom reskilling isn't a viable path. Sweet said Accenture had already reskilled 550,000 workers on the fundamentals of generative AI and outlined a six-month $865 million business optimization program. Listen to these uh euphemisms. uh business optimization program which detailed costs associated with severance and headcount reductions. So firing people and and the $865 million is like here here's money. Um last thing on this quote we expect savings of over a billion dollars from our business optimization program to reinvest in our business and blah blah blah. So, um, so basically the only people they're interested in hiring are AI experts. An AI expert is somebody that woke up an hour earlier than you basically because nobody knows anything yet. Um, but that's like the whole game. And so they looked at all their employees and they were like, "If we can't retrain you for the AI age, we have to let you go." I'm telling you that Accenture will not be alone in doing this. They are the front. They are at the vanguard of a movement that we're going to see repeated in every segment of the economy all over America and probably all over the world. Um, so I do not think that hiring plans being at a multi-year low has anything to do with Christmas uh seasonal hiring. I think it's a much bigger story and anyone that um just wants to whistle past the graveyard is free to do that. We're not going to do that here. We're going to chronicle this stuff for you guys on an ongoing basis. Um, couple things left. Capex questions is probably the big theme of the week. You saw um Oracle just get absolutely picked over on multiple occasions over the last couple of weeks about like, all right, they're doing all these $500 billion deals and announcements with Nvidia and OpenAI, but what does all this [ __ ] really mean? Um the information uh let's put the stock up real quick. This wasn't that bad. Honestly, the stock had a huge spike higher. Um and then it's given back, let's say half of that. Um that spike higher is from an earnings report where they just completely shocked uh the stock market. So, you know, in fairness, fundamentally, companies had a lot of great news. But uh today here, this is uh CNBC quoting the information cuz I don't have a subscription to the information. Um the report raised questions about the company's plan to buy billions of NVIDIA chips to rent as a cloud provider to clients like Open AAI. So OpenAI pays Oracle. Um Oracle makes uh access for OpenAI to all these GPUs that they've bought. That's the That's the business. Um, Oracle had 14% gross margins on $900 million in sales in its Nvidia cloud business in the 3 months ending in August, according to the report, which cited internal documents. Somebody saw something they weren't supposed to see. That's significantly lower than Oracle's overall gross margin of around 70%. Look, I'm I'm not the one to tell you that this is an anomaly or this is like the way it is. Um, more people will look more closely at this sort of thing. If this is a 14% profit margin business, it doesn't look very different than, I don't know, Abbercrombie and Fitch selling sweatpants in the mall, that might change a lot of people's opinions about what multiple they want to pay for the ISPs and the cloud providers and um the hyperscalers and whatever whatever you want to call them. Um, so look, this is not one of those things where I I just want to say, yeah, it's a bubble, throw the whole thing out. But I'm just pointing this out because the volume at which people are now shouting these questions is starting to be heard in the stock market. Stocks are reacting to this stuff rightly or wrongly. Uh but it was not just uh Adam in the chat points out Oracle crashed NASDAQ today. There were a lot of NASDAQ stocks, chip stocks that were down 7, 8, 9, and 10% on on this report. and it is not going to be the last report. One positive thing I'll say on this is thank God somebody is writing and reporting skeptically on all this spending because if not if we're all in a 100% agreement that this is just all rational. It takes the NASDAQ to 30,000. It takes the Dow to 60,000. It's not healthy. You must have skep skep skepticism. you must have uh people on the other side of some of these things so that it doesn't feel like we're just going to bubble up vertically until there's a crash. So, I actually think it's healthy that we're having these debates. And look, um as Jeff Gunlock says, this is the bloodless verdict of the market. Anyone's allowed to have any opinion they want. Price decides, uh you know, what where the market's beliefs are. So, um I don't hate it. I don't think it's negative. Um, all right. We're we're in the home stretch, guys. We we did it. And I want to thank everybody in the chat uh for helping me make this happen. I'm going to do a make the case and then a mystery chart and we'll get out of here. Uh I want to talk about Netflix. Do I don't know. Do we have a chart, guys? Yeah, we have this. This is Netflix performance and it's 200 day moving average. Let's say you knew absolutely nothing about technical analysis, right? Let's just say like you don't believe in it. You sort of can see you sort of can see that the junction we're at now should be support for the stock. You sort like just on a trend basis, if the buyers are going to come in and rescue this from a three-month downtrend, which is what what's been happening, it should be like sort of now or never, right? Um, so technically I like that it's kind of fallen into support and the buyers started to show up today on a red day. Um, the company was defended at Seapport, which is a brokerage firm I I barely know. Um, but I'll read you what uh I'll read you what the analyst thinks. This went from a neutral to a buy. The stock's been controversial this summer. Um, and it's and it's been in a downtrend. Um the research firm S uh Seapport now says the momentum on Netflix shares which has moderated lately lol nice way to put it could be digesting the year-to-ate 30% gains ahead of the advertising infrastructure build related monetization momentum that word salad s uh uh that word salad sentence that I just read here's what that's about increased the ad revenue estimates for Netflix to more closely track TV viewership share. Quote, this is the analyst. We think advertising could double to 3.1 billion this year and could grow at 48% annually through 2030 to reach $16 billion just ad revenue. Channel checks indicate same store ad buying could be tracking better than 16% for the third quarter of 2025. um also noted engagement on Netflix is strong with at least a couple of quote cultural zeitgeist titles driving viewership share. I think that's hunting wives. Uh I think that's the cultural zeitgeist show that's on Netflix right now. Um that's right. Rachel's pointing out K-pop Demon Hunters, which I still don't know what that is, but I know it's a really big deal. Um, so they have those they have those big shows that drive new signups also right now. So, um, Seapport thinks it could be a better than expected quarter. Their target is 1385, which be upside from here of 20%. Um, full disclosure, I am long Netflix. I've been long for a while. Uh, have not sold any during this recent downturn, and I'm hoping the stocks finally found support. Um, all right, we did it, guys. Now you're gonna Now you're going to be play the role of Michael Batnik. I'm going to give you the mystery chart and uh whoever gets it in the chat, Nicole's going to find you and we'll send you a t-shirt or something. Um, this is okay. This is uh a sector versus the S&P 500. I'm not going to tell you which is which. You could probably guess. So, it's you have one out of 11 uh chances. It's a It's an S&P 500 sector ETF. Um, versus the S&P 500. Let me see. I'm going to give you guys like a couple seconds here. All right. I got healthcare, financial, XLE. Somebody guessed, SMH, Energy, Financials, SMH, another healthcare, another energy. Very concentrated to the just a few. Here's a communication services. Somebody's saying utilities. No. Um, utilities look way better. Tech, of course not. All right, let's do the reveal. John, let's show them. [Music] It is healthcare. Uh, I know a couple of people guessed healthcare. We'll hook you. We'll hook you guys up. Nicole will try to get in touch somehow or you can get in touch with us. Um, here's what I want to tell you. Sevita Subermanian, who is one of my favorite people on Wall Street, one of the smartest people on Wall Street, just upgraded the entire healthc care sector. Let's do this XLV, the the regular chart real quick. I want to show you how shitty uh not this the next one. Yeah, I want to show you how shitty this sector has been. This is a three-year look at the XLV. It's in the middle of the range. It's basically gone nowhere while the S&P has obviously launched into space. Um, it's just been really tough sledding. Got some really big market cap companies like UNH that look like [ __ ] and have very company specific problems. But Sevita is pointing out that this is the this is the moment where everything turns around. Um, let's put her chart up. She's showing you valuation support. This is the relative forward PE for healthc care stocks versus the S&P 500 in blue, dark blue. And that line running across in light blue is the average. Um, so this is and this is back to 1986 by which Sevita is showing us these stocks have never been cheaper. The healthc care stocks relative to the S&P 500. Never been cheaper. I I feel it's a 40-year chart. I feel like we have to pay attention to that, right? Um, so let me quote her. Um, this is important. This is Sevita. Pharma overhangs dissipating still early in the obesity opportunity. Investors boycotted pharma shares for most of the year because of US policy uncertainty with pricing and tariffs. These seem to be one and the same being the key overhangs. The Washington overhang was partially lifted after the Fizer deal. Fiser just got out of tariffs with Trump. I'm not going to spend any time on that today. It's pretty benign overall. In Tim Anderson's view, that's a Meril healthcare analyst. Um, if this is all drug companies have to do, pretend they're going to build factories in the US. Um, then that's much better than the headlines from earlier in the year suggested. For the investor ready to dip their toe in the water, Tim Anderson highlights Eli Lilly and Gilead. Okay. Blah blah blah blah. So, um, there are a lot of viable tickers in that space, and I wanted to make that the mystery chart because part of what we try to do here on the show is turn your attention to things that maybe others aren't uh, focused on that have potential. Um, so if you want to read more, you could track down what Sevita wrote for Bank of America. It's uh, it's a really interesting take. All right, that's it for the show. Once again, want to remind you guys live compound and friends in New York City, Friday evening, October 24th. make a weekend out of it. I have no idea if there are tickets still left. So excited to be hanging with Kramer and Michael on stage. Jim's got a new book out. He may or may not be signing copies that we may or may not have purchased for you. Uh so it's going to be an epic night and uh we'd love to see you guys there. Thanks so much for listening. Shout out to Michael Batnik. We'll see him back next time. And uh like and subscribe. Talk to you soon. Heat. Heat. [Music]