The 50% AI Software Crash: Why Wall Street Is Dead Wrong | SIH
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Well, get ready for some extreme volatility in the world. That's what we're going to talk about in part. We're going to talk about many things today, but we're going to talk about passive investing, mega cap gigantic stocks, the potential for the stock market to go to zero. Not kidding. It's a real It's a real paper, an academic paper. We're going to talk about that with our guest Brian Beach. And while I'm thinking about it, there is a great webinar with Jonathan Rose on May the 28th. You can sign up for it at volatilityprofit.com. volatilityprofit.com. If there's one thing you want to know, it's how to handle volatility because as we're going to talk about with Brian Beach today, you're going to see some of it, I believe, in the next few years in the stock market. And it and it could start anytime as far as I'm concerned. I'm not going to pretend to know the schedule. It could start tomorrow, next month, next week, next year, next three or four years, but I think it's coming. So, let's get into that and we'll talk about specific stocks and a lot of other stuff with Brian who's he's my good friend. I've known him for years. So, let's do it. Let's talk with Brian Beach. Let's do it right now. >> Brian, welcome back to the show. Always always a pleasure to talk with you. >> Yeah, Dan. Feels like I was just here, but I guess it's just cuz I I ran into you at a conference last week. I wasn't on your your show, but it was good catching up and uh glad to be here. >> Yes. Yes, we did uh we did attend a little meeting. Um I thought there were a lot of great ideas there. I heard some things that I blew me away and you know some things like everybody wants to talk about AI so that's not unusual. But I I felt like I heard things that just I never expected to hear. I mean I I just it was pretty amazing. Anyway, >> yeah. What what what what grabbed your attention like that? >> Well, it was the thing that Josh Balum was talking about um about augmented humans like the you know the last pure human has been born. >> Yeah. >> And I just thought, wow. And it's one thing to say that, but it's another to have the whole thing spelled out with a timeline. He had he must have had 40 or 50 ticker symbols on that one slide too about you know companies that would that would benefit from it and those that would be just fine you know no matter what happened. >> Yeah. His daughter is the last real human. She was born in 2025 or something. You know that a little bit of a interesting shtick or way to put it but uh yeah that that was a that was a showstopper for sure. >> Yeah. >> Yeah. Especially for guys, you know, like you and me from the value investing background, you know, reading 10Ks and, you know, punching up numbers uh into spreadsheets. Um it's interesting to to hear kind of visionary investor type um how their brain works, you know, watch their um method in and um you know, that's why I love these conferences. You know, you learn from a lot of different kind of people. >> Yep. you get all the just everybody we work with all together and all their ideas. It's just really exciting. >> But um I want to talk about an idea that you um have spoken and written about. I've actually spoken and written about it quite a bit too. Um and I don't want to spend a lot of time because we spent a lot of time last time you were on the show, but it's an interesting topic and it is the topic of passive investing, the relentless passive bid. Right. Um >> I found it interesting. Did you see a paper by Mike Green and Hari Krishnan and a couple one one or two other people that said at some point starting in about four or five years they expect the market could go to zero actually that the volatility could be so great that the S&P 500 would actually go to zero. >> Did you see that? >> I saw the paper and I saw your article on it. Um, you know, I'm not a mathematician. Um, when I when I rolled my sleeves up and and and tried to understand the paper, I just kind of had to um uh you know, trust them, you know. I don't I don't follow the Greek the Greek letters and math, you know. That's that's uh I I might have understood that at one point, but you know, um you know, it is something I've been writing about a lot. I I actually was at a a uh I went to a a presentation that Michael Green gave uh when I last time I was in Baltimore. He was there and um the slide deck I think was was three or four years old. He's clearly done this talk a lot. Um but it was about uh what I've been talking about and I think I you know I got the idea from hearing him on a podcast but um if you're new to the game or or or you didn't tune in last time I was on here I'll just give a quick rehash. The idea is passive investing uh through 401ks um has kind of probably permanently um uh changed the way the market is valued. Um you know people without thinking about it are saving for retirement which is a good thing whether they understand the stock market or not. they're saving for retirement and most of those dollars are going into an S&P 500 index fund, which is a a passive fund in that there aren't decisions made um kind of based on the kind of the things you and I do, rolling up your sleeves and sharpening your pencil and figuring out what's undervalued. You put if you put a hundred bucks in um it's go it's a weighted average and and 35 of those dollars are going to the very biggest stocks in the market. Um and it's causing a real valuation dislocation. Um and when you know um Bogle started doing this started Vanguard that was the first passive investment fund the first S&P 500 index it was a small part of the market. And what's happened now is um guys like uh all of us are are saving for retirement every paycheck or most of us um we're all just throwing money at uh at these passive investing funds and um it's it's really uh causing some changes to how how uh stocks are being valued particularly at the top end of the market. Um and you know I've talked about this as it relates to Apple. Um, you know, there's something like, uh, I think I wrote it down, 90 million investors investing in in 401ks. On average, they're putting probably 10 or 12 per pay period into Apple, just Apple, you know, and and and that that, you know, it used to be Apple has good news, the stock goes up, or you're enthusiastic about about Apple's prospects and the the the stock goes up. If Apple has bad news, the stock goes down. And there's still some of that, but you can see the flood of when they talk about relentless bid, this relentless buying of stocks is really obscuring the valuations at the top end of the market. Um, and uh I I pick on you sometimes and other people who put these these 20-year um uh valuation charts, you know, in there and I'm like, you know, of yeah, the market is a lot more expensive than it was in 1991 or, you know, 1981 or 2001 because it there's some different dynamics in play here. There's a a huge um $600 billion a year of 401k investments passively flowing into the market. Um, what you were talking about is Green Green's presentation did a masterful job just showing this relentless bid in action and showing exactly how it causes these big stocks to be, you say overvalued, but just richly valued, more more valued than they've ever been. >> Mhm. I don't fully understand his point about the Rubicon getting crossed and then the market going to zero from that, right? You know, um I and and and so I I'm sure he's got a point there and that's kind of important part of the story. But um you know, when I talk to people uh I've I've given a presentation on this and you I talked to people dental my dental hygienist didn't realize she was investing in the stock market, right? She's what do you do? We're waiting for the dentist to come back up. She clean my, you know, oh, I write about stocks. I don't I'm not in the stock market. I'm, you know, turns out she was investing in a 401k. And she didn't realize that was the stock market, you know, like she, you know, it's not irrational exuberance. It's irrational indifference. She didn't even know she's buying Apple every single pay period. So, if you don't realize you're buying Apple, I or or the stock market, like I don't fully understand what's going to cause you to just liquidate all of a sudden. So, I micro greens kind of it loses me a little bit. I think it has it we there's just we're creating a volatile bomb, you know, is kind of what the way he put it. And and something's going to happen in four or five years. We're not exactly sure what. the volatility is going to just amplify to the point where >> the dental hygienist doesn't have to pull our money out of the market, right? Like something's going to trip things and there's going to be a huge draw down. So, a long-winded answer, but yeah, I've been following this for for a while >> and and we did talk about it a bit last time I was on here. Fascinating topic. Yeah, my interpretation of that um phenomenon of going to zero is that eventually you know if if um passive becomes this huge part of the market then the part that's not passive it becomes very very small and I thought the point might be that big flows in and out of that could really make things volatile similar to the way that Like I mean it's kind of a stock versus flow issue, but um similar to the way that you know if a billion dollar company only has like a $50 million float or something, >> right? >> Big big money going in and out of that flow. And I know it's stock versus float. Okay, I get it. Um I've read I've read economics books, but just you know, it's analogous is all I'm saying to that. >> Yeah, that's a that's a great point. you know, and I see that down in the micro cap world where I I spend most of my time. Um, you know, if if a if a company has no float and then there's a little bit of good news. I mean, it it might even be just, you know, the CEO bought some shares in the open market. Um, >> uh, a little bit of extra demand sends it up. A little bit of extra selling sends it down on no news. So yeah, if it's kind of if this is just kind of that and a trillion dollar version of that or, you know, multi-trillion dollar version of that, um, uh, it makes sense conceptually. Um, yet I wasn't scared enough to completely reconfigure my own 401k, but maybe maybe that's coming. Got to brush up on the the Greek letter math. But um, yeah, that's a fascinating thing to watch. And it's a fascinating thing to watch at the top end of the market because a lot of the people who write about stocks for a living, maybe not doing exactly kind of newsletter, but like people are writing headlines or the AI bots that are writing headlines and financial, you know, they don't >> seem to get it. Um, and if if uh Apple is up 5% this month, they'll try to find a reason for that, you know, or if Tesla or, you know, one of these other huge companies are up, they'll be like, "Oh, you know, investors are are excited about Apple's product." I'm like, I'm, you know, Apple, the last two years, there haven't been that much good news for Apple. And I just >> That's right. With Apple, are they though? I don't know. >> Yeah. Yeah. I mean, I I don't think that's what's happening. Um, and you know, it used to be, you know, and I talk about Ben Graham and, you know, the uh, uh, Mr. Market, and it's just, >> um, sometimes he's irrationally exuberant, to borrow a phrase that wasn't Ben Grahams, and sometimes he's, um, you know, overly pessimistic. And this is this is just indifference, uh, irrational indifference, you know, in a way that we haven't really really seen for these. and it and it all gets focused on the the seven or eight or 10 biggest biggest companies. Um, so I'm interested in it. Michael Green talks about it more from a macro point of view, but I I think it's it's been interesting to watch it from uh kind of the biggest stocks in the market, which is a little bit ironic because I I'm paid to write about small cap stocks. Um, but it I I do I do think about the valuation at the top end as well. So >> I know. So, and that's funny because the other thing that that I think we should talk about is um you make a really great point about um SAS and AI and there and how investors had expectations of how they would influence the biggest you know companies like Microsoft and other large >> uh companies which are the all those big you know mag seven companies they're they're at some point from some perspective they're all pretty much like software companies right so >> everybody has AI is going to disrupt them. So >> yeah, um >> I have a I I was talking to um was on another podcast about this and and um again we were talking about Microsoft. So I on on your show I use Apple as my example. On this show I I talk u on on other shows I view Microsoft Microsoft's interesting if you go back software as a service. This is my background right before I was writing about newsletters. I was um controller at a a public software company. um SAS was uh so it was not uh a guaranteed success, right? There was people including the company I worked for that kind of fought the idea. they like the perpetual license model more uh as opposed to selling a a subscription and then folks loading the software through the internet onto their um uh the the alternative to that of course was you you remember when you used to load CDs onto your computer or the the corporate version of that is you bought a server and you loaded the software under the server and that server served all your your computers hardware uh throughout the building or whatever. SAS was not a guaranteed success and there was people who pushed back on that. But once it kind of caught um once it kind of caught fire, the Mr. Market seemed to think that anyone who was in the old business was hosed. Uh you know, including Microsoft and and um uh you know, companies like really um yeah, in it was caught in that. Adobe was was very early on kind of switching to SAS. Um >> but the the market kind of had switched between the stock market decided okay these guys are going to be winners and these incumbents are going to be losers. Um but that didn't what happened at all. Uh companies like Microsoft and then Amazon and even Oracle. Oracle was another one that people kind of assumed um was going to fall away. And I as a controller at a uh you know a big accounting department we used Oracle you know and and um you know it was it was it was not something that was going to go away as far as I was concerned you know we didn't really love it as a sock but it was just so ingrained anyway these companies they then they went out and they built the data centers that facilitated the SAS revolution for other companies right so Amazon um web services that's just a enormous server farm that other software companies are using to host their software. Um, and Microsoft did the same thing, not quite as successfully as Amazon uh, web services, but they had their own version of that. And >> um, not only did SAS not kill Microsoft, and again, we're talking about 15 years ago now. That's the SAS revolution, >> right? Microsoft because they had so much money was able to build some of the data centers that um facilitated SAS for everyone else. So what we're seeing now is the exact same thing with AI >> which is not exactly. So, what's happening? Watch this carefully, Dan. Um, the the AI is supposedly killing Microsoft every, you know, okay, they've got C-pilot. They've got some thing, you know, like, but that's that's got, you know, all of these big software companies have come down and and they do still come down even with the relentless bid to kind of mix topics, you know, but they're still, you know, coming down or riding flat for a couple years. >> Um, uh, it's it's really Oracle's come way down. A lot of these software companies intuitit's come way down. Salesforce.com's come way down. >> Um, and what you're seeing is they're all trying to f follow the kind of the Amazon, you know, playbook, the Microsoft playbook from the SAS revolution. They're building the they're the ones spending tens of billions of dollars, hundreds of billions of dollars building the data centers that's going to facilitate AI. Um, so I don't think there's two reasons I don't think AI is going to kill some of these huge companies. first of all is what I'm talking about. They're they're building out the data centers that are probably going to that they hope to facilitate it for everyone else. That was the SAT. That's what happened 15 years ago with SAS, >> right? >> The other thing is just that it's not like Microsoft and Oracle and and Intuitit coders are not going to be using AI themselves, right? They they they've got they're going to be using AI to code their stuff. They're going to be building AI products themselves. Um, right. Uh, I there's an analogy um I use with uh another podcast um with Matt Wine Shank and I can't remember where I got this idea. I I'm I'm stealing it from somebody, but you know, if there was a a magic pill that made you and me 50% better at basketball, >> right? We would take it and we would be way better at basketball than we used to be. But that pill is also available to, you know, LeBron James and, you know, everyone else in the NBA, right? Like >> Microsoft is LeBron James. >> Yeah. Like it's not like I'm going to, you know, all of a sudden uh become an NBA All-Star. Everyone's got access to that, you know. And so this idea that AI is going to come in and like the people at Oracle or Microsoft or Salesforce.com are going to be just like, "Oh golly, what do we do? We're still coding with black screens with green font on it, you know, like no, I mean, they're they're using it as well." I'm not saying >> I'm not saying that we know who the winners are going to be and who the losers are going to be. Um but I am saying that the incumbents are not hosed um just just you know um uh automatically and I think that there's been for value guys Dan look carefully I mean you know there's been some uh a lot of these pretty good companies are down 30 40% heading into the year um uh you can just pull up I'll just list three Salesforce into it um uh you know I think that uh well there's a lot Oracle Oracle I mean all of them have come into this year and and I think Mr. Market's like I'm not sure who's going to win and who's going to lose but I'm just going to kind of sell everybody and and sort it out as uh earnings come through in in 2026. It's a very interesting fishing uh pond for for value investors. Um >> there's going to be winners and losers. Just grabbing a chart in Bloomberg of >> of Salesforce says the high price was December 4th, 2024, just on a two-year chart. Down 51%, >> right, >> date since then. >> So, let's >> Salesforce down 51% has generally been a pretty good bet. I'm just saying. Right. >> Let's let's talk some more about Salesforce. And I've been running my mouth the whole time. I'm I'm interested to hear your thoughts too cuz we were at a conference like I said last week. >> Somebody made a comment in passing about the AI winners and losers. The idea was that Salesforce um was was going to be a loser. >> The reason was they make too much money and that's where those are the companies that get disrupted the first easiest, right? The companies that make you know historically, right? So >> Sure. And the idea is that people are going to start building um uh the these these customer data sales force um kind of products uh internally with AI and they're going to replace you we won't even need Salesforce anymore. So >> I'll tell you something. >> Yeah. I'm going to use I I I've always wanted to own a Ferrari and uh I'm finally going to be able to use Claude or Chat GPT to build my own is what I'm going to do, >> right? So, yeah, >> I went to listen to this. I went, this is interesting. I didn't know what was going to happen here. I I ran into um the guys who run sales sales organizations for the the biggest publishing companies in the world, including guys we work with. Um, they're all on salesforce.com. So, I just I went to them. I'm like, am I missing? You know, maybe they're right. I don't know. Maybe this guy, you know. Um, so I asked them and I'm going to read you some of these this this feedback. Um, >> okay. >> They are not they would not get rid of Salesforce in a million years. There's two guys on this this thread and that's kind of to summarize it. Um, it's sticky because companies don't just use Salesforce. They build huge parts of their sales and marketing efforts around it over years and years and years. By the time you consider leaving, Salesforce is usually embedded into workflows, reporting, um, salesman compensation, forecasting, customer history, integrations, automations, compliance, making it impossible to live without. Right? And I said, "Would you even like the product?" That was my next question. Right? I mean, is or are you just you just stuck with it? He's like, there are parts I love and parts I wish I were better, but overall, uh, it's the best option out there in my opinion. Um, and this this happened with >> in my old world too with software when when you're embedded with the software and they've got all of your data integrated, it is a multi-year process to to to integrate. And can AI make that more efficient? I'm sure it probably can, but these guys have lived through it. They're like, "We're not we're not going to mess with that." Um, so he just said uh I asked him about that. I'm like, "What's it like to switch?" Um, and he said, "Uh, where where was that part?" Um, yeah. He said, "We just did a a revamping of our Salesforce workflow." So within Salesforce and it took over a year, you know, like it is painful to to to switch some of these things and um and and and he did say there's a Salesforce has this thing around Einstein. That's their AI bot. Um his I've I've read a lot about Einstein from Salesforce's point of view, right? I've heard what management says about it. This is interesting feedback. So far it's been just okay, right? So he doesn't love it, right? they can improve on the implementation of it. It'll make it even more sticky. Um, right now it's been up to the user to train the model. Um, but if they they can do that for us or we can just iterate, more people will adopt. >> So that's always what I like to do too when I hear management talking about how transformative Einstein is, which is the new Salesforce AI bot, and then talk to someone who this guy runs an organization with probably uh couple dozen salespeople. Um, and you know, he's like, "Yeah, it's fine." You know, it's cool. You know, it's a it's a neat trick. Um, but you know, you talk about, >> hey, what would you do if they raised the price 10% next year? They're like, I'm not even going to look at their invoice before I approve it. I'm going to sign that approval, you know, without thinking about it. Um, this is turning into a a huge bullish uh uh Salesforce.com. But this is what I'm talking about. Like AI is great. I'm starting to use it in research. I'm starting to use it to help me word tricky passages. I'm sure you're figuring out ways to use it in your day-to-day. Um, not anti- AI. I just I think that the people that work at these big companies are smart enough to figure out how to use it for their jobs as well. Um, and I when I think about AI winners and losers in software, you've got to think about how integrated they are into the day-to-day lives of of these of their users. >> Yep. And I want my listeners to know Brian just did a great job of describing um with some real on the ground kind of uh scuttlebutt information the competitive advantage of switching costs. >> It just costs too much. It takes too much and costs too much. >> It costs too much dollars and time and corporate resources. And why bother? Because what you have works just great. >> Yeah. Yeah. And you know, again, he doesn't love he he doesn't love sales. He's like, "Yeah, it's fine." And and it it's it nothing we could try is is worth the pain of switching. Let's think about another. Have you come across in your value investing circles? I keep coming across duallingingo as a as as something people are pitching. >> Somebody just me Yeah. Yeah. Somebody did just mention this. So, I I had uh two of my kids are using Dualingo just to, you know, play around and try and learn Spanish. I don't know. Um Right. >> But Duolingo is kind of cool because they do Yeah. While I see you pulling it up, tell me how much they're down. Right. And so, >> yeah. >> Um but their version of stickiness, Dan, is to like send you alerts to try and get you to stay on your streak. you know, they're like, "Hey, you you you've got a streak of 212 days or 100, you know, and and and actually a lot of social media stuff does Snapchat does that. I don't understand it, but it seems to work. You have snapped Dan for 194 straight days. Snap him again." And I won't they don't even send each other messages. They just said, "Hey, you know, so that's that's Duolingo's version of stickiness, right? I don't know if it's working or not. I I don't think my kids speak Spanish at this point, but um if they want to stop using it, they can just stop, >> right? Or if they if if AI comes out with a a new product, there's absolutely no pain to try the different product, right? Like you can switch like that, right? And and um Duolingo might be the best thing there is for learning a new language. Um, maybe it is, maybe it isn't, but I know it's not sticky, right? Um, it's users can can try a new version or try a new AI product for a week with with no cost at all. And um, uh, and and you know, they're certainly not using it daytoday for their livelihoods, you know. So, um, >> I think that some of the I think that's a good example. some of the concerns around AI are are valid. I think there's companies that are more um you know, of course, we talk about um you know, moat competitive modes. I mean, there's there's companies that are more entrenched with their customer base than others. Um and and you know, as you're out there, listeners or people who are just reading or thinking about investing, just think about how hard is it for their customer to switch? Such a simple question. Um and and you know what the the guy that that was presenting for us last week um who was telling us that you know Salesforce can just you know be done away with with smart guy right I mean I' I've I read his stuff I know he knows what he's doing right but um you know >> don't make assumptions either right so I I called the guys I knew that that run sales departments and and um uh you know I'm sure you're out there you you've got a golf partner or you know, a a friend of a friend that your brother-in-law that's in sales, you know, some ask them what they think of Salesforce, right? Uh ask your kids what they think of Duolingo or or someone uh you know, in in education, you know. Um it's not it's not hard to get a little bit more uh boots on the ground, the scuttlebot as you call it. Um I think that that's uh that's a key part of investing even if you you're someone who loves spreadsheets uh like I do. Um, and I'm not knocking the guy who who maybe he's gonna end up being right about Salesforce. I don't know. Right. But >> right, we're not knocking anything. It's just um working it out. You got to work it out for yourself. You can't just take somebody else's word. And um and you know, it it doesn't surprise me that this is something that you do because I've generally thought the smaller the company, the more you better get the scuttlebutt. Uh >> right. >> Because you know, right? like you're not are you really gonna find out something from somebody that's going to tank Microsoft? I don't think you are. Um but you know you you could find that out from a company with a hundred million dollar market cap. >> The problem with those guys, Dan, is is um >> if you talk to executives, what I've learned, I mean, you don't get to be CEO of any company without being a good sales guy, right? Like they they they they know what I want to hear, >> you know? They know what um they know. I mean, they're sales guys. Most most people running public companies, you know, um know how to promote themselves, know how to promote their products, know how to promote their company. Um so you you got to go if you can independently a as well. Uh when you do that, sorry I cut you off. You look like you were getting ready to drop an insightful nugget on us. >> I was No, I was just going to tell you that you asked about Duolingo. That one's down 79% since last in over the past year almost exactly to the day. Um, so >> yeah, and you know I maybe that's too much. I don't know. I haven't looked at it. I haven't looked at it at all. I do know that there's some value vultures circling uh Dolingo and um and and you know at a certain point it's cheap enough but I do know this you know Salesforce down 50%. Duolingo is down 79%. I feel like you know Salesforce is is way way stickier. Um and uh um and and they're they're doing some stuff. They're trying to build they're trying to build AI data centers and you know they're trying to do you know they're spending some money that maybe they don't and in in in five years it'll look like maybe they shouldn't have spent. So I Mr. Market's not dumb. You know he's just kind of handicapping the odds and and uh I think 50%'s a too steep of a draw down for a company like uh like Salesforce. 80% for Duolingo that might be just about right or it might be too much. I don't know. I have to look at it. Let us know what you think in the comments. >> You hear that? >> I I'm I'm boosting your YouTube engagement, Dan. So, >> yes, you are. >> You're welcome. >> Well, look, last time when when uh Salesforce was down like 58% in like 2122 that bare market and then you know up to its next peak it was like 180% or so. So, who knows? This Salesforce could be getting to make a killer run here. And >> you know, um >> you look if you look if you look at a stock like, you know, Amazon is like the classic example like multiple multiple multiple huge drawdowns on the way to like you know 2,000 bagger or something crazy. So >> yeah, I always use Microsoft as my I'm sorry. I always use Amazon as my example when one of my micro cap pickics is down, you know, 70% again and I have to try and try and salvage, you know, the egg on my face and and just like nah, this happens. It's just something that happens. Um it does happen. I I don't know that it happens often but uh yeah uh for the first something I've written there's a chart I use a table I use for Amazon all the time you know not all the time but whenever I'm writing about this you know I think every year for the first 15 years of its existence there was a a 50% draw down on average you know every >> every year you know there was always kind of good news and bad news Amazon wasn't really making money took them for a long time to to really make money um and and of course there's been books written about this. We don't need to get into that. But uh uh just a fas that's a a fascinating case study. Salesforce another one it's you know I'm pulling up the chart now myself was 280 um last May 180 uh right now. So you know something to look at if you like if you like picking up scraps uh you know companies that have fallen I I'd take a look at this one. >> All right. Um, is there anything like so this is a mega cap big company. Is there anything in your um, you know, I know you have subscribers to think about, but is there anything in your small cap universe that you feel comfortable sharing uh, you know, a ticker symbol? >> Well, a story. It's um it's May 19th, 2026 right now >> and as >> and um you know I'm I'm watching what's happening in Iran every every day. Um you know the the straighta hermuz and and of course it's it's hard to not get into political stuff when you're talking about what what's going on over there. Um I do think that's a complicated >> issue. I think that our um media outlets don't necessarily uh um get into all the nuance. It's kind of it's one of those things where it's black or white. You're for it or you're against it. But I >> I think there's way more nuance there. But as an investor, I also always think it's go to kind of talk about this, but we have been getting we have been buying and recommending a lot of um North American small cap energy and energy adjacent businesses. Um as the really since 2022, we started calling them energy conflict hedges. uh when when um you know, Russia invaded Ukraine the first time and then amping it up as as the as the conflicts have escalated um in the Middle East. Uh when the world needs energy, um North America is kind of the default safe spot. Um and uh we have been up it from from Canada uh and and not just North America, we we recommended a company and not just energy companies. We recommended a company um that had exposure to uh the UK helicopters that that would ferry people to and from, you know, the the offshore um places in the North Sea. Uh a company called Bristo. We got out of it. I can't remember if I grabbed a quick gainer or something happened with I I recommended that a couple years ago, but um I actually kind of had a I said I make no apologies, but it was kind of one of those I make no apologies apologies cuz my readers have been hearing about the same story every month, you know, and I'm like, listen, this is a big deal what's happening. Um and so we've been recommending um there there's a a lot of small cap opportunities uh in Canada >> um that are focused on energy production uh and down down in uh Texas of course um and then the energy adjacent companies, you know, use the term picks and shovels, but more service companies that are serving these companies and you know, hey, how do you get rid of your wastewater and stuff like that? Um, we we've probably recommended seven over the years, energy conflict hedges. Um, and I'm still in three of them. I if if they shoot up, I I might take some gains and or if they collapse. I mean, look, volatility is a real deal uh in in the micro cap world. Um, it uh I will uh I'll cut I've cut losses on some, I've locked in gains on some, but I like to have three or four of those. And um I'm sure my readers are tired of hearing the story, but um with the straight of Hermoose closed, you know, you can track this even in Bloomberg, the tankers going, they're all coming here now. They're all coming to the west coast of Canada or the the Gulf of Mexico to get their um you know, to get their their oil. So that's been a huge um you know, that's been a really big part of our story. Uh usually uh when you're you have me on here, I'm talking about software just because that's my background. Um but I'm a generalist kind of like you. I'll write about whatever. And I saw you were writing about you know the straight of her music uh the other day. Um you know it it's just it's a it's a hot topic. Um and uh >> can't avoid it. >> You can't avoid it. And you know, if if something happens and the you know, the straight the straight opens and there's peace all over the world and you know, you know, some of these stocks that that I'm I'm recommending uh domest Texas energy stock, you know, they're they're going to go down, right? when when uh Texas oil WTI oil prices go from $100 a barrel to if they went from 100 to 60, you know, >> um my hedge portfolio, it'd be a good thing probably for mankind, right? It'd be a good thing for the rest of my portfolio. So, we've been loading up on on little energy companies uh here and there. Um and uh uh that's been a theme really especially since February, but um really heading into uh last year and and it was a big theme uh in 2022 and 2023 when when the Eastern European war uh conflict started. I don't know. Are you guys are you guys doing anything with with your portfolios specifically about that conflict or you just kind of >> Oh, I sure am. I sure am. Yeah. Um and actually in Extreme Value, we did um recommend um one big important chemical company for the um oil industry. And I'm doing another chemical company in the upcoming issue of um the the May issue that'll be out in a few days of the Ferraris report. And I've recommended I recommended two refining stocks in December. I didn't know there was going to be a war on, but hey. And I recommended um >> you know two independents and I I have had um Exxon Mobile and Chevron in the portfolio for what three or four years here, three and a half years. >> So yeah, but I want to know our listeners to know something. Um Brian mentioned the volatility around small caps and we're talking about the volatility that can occur depending on what they announce about the war and we have a great seminar coming up a a webinar in fact >> um that you can sign up for at volatilityprofit.com with a guy named Jonathan Rose who was on the show recently a very smart trader a pit trader yeah he's great isn't he? >> Yeah. Um, so yeah, volatilityprofit.com. >> What I like when I listen >> I like the theme. Go ahead. >> What I like keep cutting you off. Sorry, Dan. Um, >> that's all right. >> On my last uh actually what's funny is you you you and I come from similar backgrounds, long-term investing, value investing, and then you you see a really smart trader like Jonathan or like Greg Diamond and and and and people seem to think it's either or, right? like you you you and if you're into the kind of things we write about, then you wouldn't be into options trading. And um I think that it doesn't have to be either or, right? Um no. Uh I I learn a lot from reading about about uh what what Greg's been writing. I'm not as familiar with Jonathan. I learn look forward to kind of listening into what he's has to say on his seminar. But um you know, chart volatility is real, right? It happens and you can and you can make money figuring out what's going to happen. You know, if Ben Graham were alive, he would tell us, you know, oh, it's it's meaningless for long term. And he's right. It is meaningless for long term, but it doesn't mean you can't trade around it and make a little money on it. Um and so >> and you see volatility in options pricing uh you know as well as you like that's a great place for a trader to trade volatility because opt volatility is a huge part of options pricing. So it doesn't surprise me at all like you know a guy like Jonathan um does what he does the way he does it. Yeah. what we're talking about. Um, and this is definitely the case down with micro caps and small caps, but I'm sure you know >> oil trades all around the clock, right? And and so, you know, and so if if the market opens and oil is down went from 103 to 98 overnight, the little companies in my portfolio might be down 10% based on that, right? And and again, that's amplified. I don't think that happens in kind of the big companies with active options but um with with all the uncertainty in the war with all the uncertainty everywhere um volatility short-term volatility is is is something I'm going to be paying more attention to maybe for my personal account. I don't I'm not paid to figure out how to do these trades for my readers, but uh uh I'm encouraging them to kind of, you know, if there's if there's an itch you've got for for learning about how to how to profit off that, um you know, I I I I that's a very real thing. I was talking to a guy the other day kind of thought it was one or the other. Like, no, I'm a long-term guy. I'm like, that's fine, but it's it's it's still it's still possible to make money doing that. Doesn't mean it's all business. >> Yeah. Yeah. My favorite thing to do in the world is a two-eek trade. I might I mean it's like a second job for me to sell put spreads on on a particular large index option ETF. Um and you know we we're we're not you know I don't want to like talk my own book because that's you know we have rules in our company about that. But but my favorite trade is to sell these spreads on a regular basis every you know every other Friday I'm doing this. Um, and it's like a second job that pays thousands and thousands of dollars a month. Um, >> and >> wow, can I write you a check? You you gonna run a fund? Uh, that sounds >> Yeah, I I I feel like I could do that. I could just run that. >> It is a second job, though, right? I mean, you can't It's not a set it and forget it kind of thing. You've got to be paying attention and and um if you if you're not paying attention um you're going to get fleeced and realize that a naked put you sold uh got put to you. Um and >> I mean I spread but you're right. Same thing like when you see the when you see the soul, you know, the short put half of that spread um like you know the market's down whatever 1% and that thing is like whoa it's way down you know it's down 50% just like that. Um, yeah, you got to watch. You got to know when what you're looking for and, you know, when the real signal is to get out and you got to make all those decisions ahead of time. Just like, you know, we keep talking about Jonathan, but or Greg Diamond or any of these guys, they always know when to get out before they get in. >> Yeah. >> And And you got You're right. >> Yeah. >> Got to do that work. Yep. >> Well, I didn't think we'd get on to this topic. >> You see, we we never know where I never know where I'm going with you. which >> value investing software. Uh but yeah, it turns out we're both wannabe uh option traders at heart. So, uh you know, um I I I uh >> I'm not good enough at paying attention um to to to to find those kind of trades myself. You know, to you you you got to watch you got to watch all all day. So, uh not all day, but that's what you know, that's what I've used Greg for in the past, and I'm you know, I'm look forward saw Jonathan on your podcast. I'm looking forward to see what he says. Yeah, volatilityprofit.com. All right. Um, where are we here? We may we may it may be time to ask our final question. I think it is. Um, you've answered it before. I'm If you forgot it, it works better if you didn't remember the question. I think and it's the same same for every guest. No matter what the topic, even if it's a non-financial topic, same final question. If you've already said the answer, feel free to repeat it. So, the question is this. If you could leave our listener today with just one thought, one takeaway for our listener, what would you like it to be? >> Yeah, this month it's definitely um the thing we've just covered. I I mean I'm I'm I'm watching I'm watching the the Middle East very closely. um part partly because of you know um some friends and you know uh serving in the military, some friends with with family trapped in Iran. I mean you know it's it's a um I think that the next couple of months um our grandkids are going to be reading about them uh about it in in history books. Um, and uh, you know, I doubt anyone listening or watching was like, "Oh, I hadn't thought of that," or, "I hadn't thought that to look at what's happening in the war," you know. Um, but I do think that um it's again it seems rude to say it or go, you know, I do think there's money to be made if you're if you're watching the right kinds of of companies uh defense companies uh and uh some of these these North American um energy and energy adjacent businesses. Um but uh uh pay attention to what's happening over there. I I probably overdo it, but it's the first thing I look at. um in the morning is what you know what news is coming out over there. Um and uh uh I I really I'm going to be using that news to shape my portfolio um certainly for the rest of 2026 at at least. Um and um you know again I I doubt that's super insightful. I'm sure everyone listening is already kind of paying attention. Um but it's a it's a big deal for mankind and it's probably a big deal for your portfolio. Well said and I agree with every word of it and I too um in the Ferris report I'm focused on that trade because I I I see 10 or or more different ways >> that this could work out um in 10 or more different industries. I mean everything clothing and >> um you know household appliances and um tires and autos and you know just all kinds of stuff. >> So I agree with you. I think it I think it is something to watch. And every morning I too look at Middle East news, S&P 500 futures, oil prices >> every single morning, you know. >> Yeah. So So that's a great takeaway. I'm glad you said that. At least you're confirming my bias anyway, and I appreciate that. >> Yeah. Well, we think a lot about a lot of thing or we think the same about a lot of things. So I guess that's another one. >> Yeah. >> Yeah. All right, Brian. Listen, it's always a pleasure to talk to you. thanks for making time for us and uh I look forward to talking to you again real soon. >> Hey, thanks for having me back on. I happy to be here. >> It's always good fun to talk with my friend and colleague Brian Beachch. Obviously a very smart guy with a lot of great ideas. What I want to do is tell you that of course you heard me agree with him u in his final message to you about paying attention to what's happening in the war in Iran and the straight of Hormuz and oil and so forth. And I said the first thing I do every day is look at news from the Middle East, the price of oil and what has what are the S&P 500 futures doing? And um I believe in my heart of hearts that this is going to be an enormous trade. I think it's you you've probably seen it described as the biggest oil market disruption in history. I think it's more than just an oil market disruption. I think it's a global manufacturing reset. Right? So, for example, one of the latest things that I've written about, um, it's not quite published as I'm speaking to you, but it will be out by the time you, uh, are hearing these words, is about, um, certain chemicals that are produced in Europe and Asia and on the Gulf Coast of the United States. And uh the inputs for Europe and Asia are getting a lot more expensive because what's happening in the Gulf, but the inputs are cheaper in in the Gulf of Mexico coast of the United States. So what do you think is going to happen? Well, the world is going to buy a lot less of these chemicals from Europe and Asia and it's going to buy a lot more of them from the United States. And there are a few companies that are particularly well positioned to to exploit that. And if you looked at the companies and you looked at their balance sheets and their results of the last few years, you'd go, "Uh, this looks terrible, which is great because the best way to buy any commodity producer is on a contrarian basis." So, I'll just leave it at that and tell you that, you know, that's and this is just one company. And so, this is we are talking to you in May of 2026. So, um, I've got seven more months of 2026. And it wouldn't surprise me at all if I wound up with seven more stock picks, maybe even two a month or something. Um, based entirely upon what is happening in the straight of Hormuz and and in the oil fields in Iraq or sorry, Iran, um, thousands of oil fields have shut down. Millions of barrels a day of production. What people don't realize is the longer they're shut down, the more likelihood that more of them will never be restarted because an oil well is not a kitchen faucet. You don't just turn it on and turn it off. And when you have to turn it off in a big fat emergency because you're getting the daylights bombed out of you by the US and Israel, it's worse. You turn an oil well off fast enough, you get a shock wave at the speed of sound, I guess, or speed of light or just, you know, really fast, straight back down the bore hole, and it can fracture the cement casing and fracture the rock and mess everything up and it costs a lot of money to fix it. And even if you shut them, if you shut them down quickly, but you don't get all that violent, you know, reaction, um, the chemistry keeps going. And over there in the Middle East, they have these sort of layered reservoirs, and they use a lot of water and gas to keep the pressure in the reservoir to keep pumping the oil. And once you turn the thing off, this delicate balance of pressure goes out and the the layers of the reservoirs can migrate to other places and the water can seep in and just kind of ruin the well. So, and there's other things too, like it's like when you stop mixing, you know, salad dressing in a blender, it starts to separate. Same thing with oil down in those wells. Only the stuff that that separates is really waxy paraffin and stuff called asphaltine, which is like a mucky tar substance. And um that kind of gums up the works. And it'll cost you whatever 10 or 20 grand a well. and it could cost you millions of dollars in rig workovers and all kinds of stuff. So, some of the stuff can be turned back on in days and weeks. Okay, let's get that clear. But I think a lot of it um is is going to be lost for good. A chunk of it. Somebody I heard somebody say there's 10,000 oil wells shut in and 3,000 of them aren't coming back. I'll accept that as a general ballpark. Whether it's 8 or 9 or 10 or 12,000 and whether it's, you know, one or two or three or five, you know, whatever it is. Many thousands are shut down, a few thousand maybe aren't coming back is the point. So yeah, and that's going to have longerterm consequences and all those other inputs that come through the straight, the the ammonia and the sulfur and the uh NAFTA refined products, all of it is going to trickle down through the global economy. So, there's a huge trade here in my opinion and it's much longer term than what the market seems to be seems to be discounting. I want you also to remember volatilityprofit.com. Jonathan Rose is going to put on a probably a absolute master class. The guy's a genius trader and you can sign up for it at volatilityprofit.com because let's face it, everybody nowadays needs to learn how to handle volatility because I think we're going to see quite a bit more of it. All right. Well, man, that's another great interview in my opinion. In my humble opinion, we just did another great interview and that's another episode of the Stanberry Investor Hour. Hope you liked it as much as we did. Hit subscribe, hit like, and by all means, please sign up for our free daily email. Opinions expressed on this program are solely those of the contributor and do not necessarily reflect the opinions of Stanbury Research, its parent company or affiliates.
The 50% AI Software Crash: Why Wall Street Is Dead Wrong | SIH
Summary
Sign up for the FREE webinar on volatility happening May 28 here: https://volatilityprofit.com/ Get smarter about markets before …Transcript
Well, get ready for some extreme volatility in the world. That's what we're going to talk about in part. We're going to talk about many things today, but we're going to talk about passive investing, mega cap gigantic stocks, the potential for the stock market to go to zero. Not kidding. It's a real It's a real paper, an academic paper. We're going to talk about that with our guest Brian Beach. And while I'm thinking about it, there is a great webinar with Jonathan Rose on May the 28th. You can sign up for it at volatilityprofit.com. volatilityprofit.com. If there's one thing you want to know, it's how to handle volatility because as we're going to talk about with Brian Beach today, you're going to see some of it, I believe, in the next few years in the stock market. And it and it could start anytime as far as I'm concerned. I'm not going to pretend to know the schedule. It could start tomorrow, next month, next week, next year, next three or four years, but I think it's coming. So, let's get into that and we'll talk about specific stocks and a lot of other stuff with Brian who's he's my good friend. I've known him for years. So, let's do it. Let's talk with Brian Beach. Let's do it right now. >> Brian, welcome back to the show. Always always a pleasure to talk with you. >> Yeah, Dan. Feels like I was just here, but I guess it's just cuz I I ran into you at a conference last week. I wasn't on your your show, but it was good catching up and uh glad to be here. >> Yes. Yes, we did uh we did attend a little meeting. Um I thought there were a lot of great ideas there. I heard some things that I blew me away and you know some things like everybody wants to talk about AI so that's not unusual. But I I felt like I heard things that just I never expected to hear. I mean I I just it was pretty amazing. Anyway, >> yeah. What what what what grabbed your attention like that? >> Well, it was the thing that Josh Balum was talking about um about augmented humans like the you know the last pure human has been born. >> Yeah. >> And I just thought, wow. And it's one thing to say that, but it's another to have the whole thing spelled out with a timeline. He had he must have had 40 or 50 ticker symbols on that one slide too about you know companies that would that would benefit from it and those that would be just fine you know no matter what happened. >> Yeah. His daughter is the last real human. She was born in 2025 or something. You know that a little bit of a interesting shtick or way to put it but uh yeah that that was a that was a showstopper for sure. >> Yeah. >> Yeah. Especially for guys, you know, like you and me from the value investing background, you know, reading 10Ks and, you know, punching up numbers uh into spreadsheets. Um it's interesting to to hear kind of visionary investor type um how their brain works, you know, watch their um method in and um you know, that's why I love these conferences. You know, you learn from a lot of different kind of people. >> Yep. you get all the just everybody we work with all together and all their ideas. It's just really exciting. >> But um I want to talk about an idea that you um have spoken and written about. I've actually spoken and written about it quite a bit too. Um and I don't want to spend a lot of time because we spent a lot of time last time you were on the show, but it's an interesting topic and it is the topic of passive investing, the relentless passive bid. Right. Um >> I found it interesting. Did you see a paper by Mike Green and Hari Krishnan and a couple one one or two other people that said at some point starting in about four or five years they expect the market could go to zero actually that the volatility could be so great that the S&P 500 would actually go to zero. >> Did you see that? >> I saw the paper and I saw your article on it. Um, you know, I'm not a mathematician. Um, when I when I rolled my sleeves up and and and tried to understand the paper, I just kind of had to um uh you know, trust them, you know. I don't I don't follow the Greek the Greek letters and math, you know. That's that's uh I I might have understood that at one point, but you know, um you know, it is something I've been writing about a lot. I I actually was at a a uh I went to a a presentation that Michael Green gave uh when I last time I was in Baltimore. He was there and um the slide deck I think was was three or four years old. He's clearly done this talk a lot. Um but it was about uh what I've been talking about and I think I you know I got the idea from hearing him on a podcast but um if you're new to the game or or or you didn't tune in last time I was on here I'll just give a quick rehash. The idea is passive investing uh through 401ks um has kind of probably permanently um uh changed the way the market is valued. Um you know people without thinking about it are saving for retirement which is a good thing whether they understand the stock market or not. they're saving for retirement and most of those dollars are going into an S&P 500 index fund, which is a a passive fund in that there aren't decisions made um kind of based on the kind of the things you and I do, rolling up your sleeves and sharpening your pencil and figuring out what's undervalued. You put if you put a hundred bucks in um it's go it's a weighted average and and 35 of those dollars are going to the very biggest stocks in the market. Um and it's causing a real valuation dislocation. Um and when you know um Bogle started doing this started Vanguard that was the first passive investment fund the first S&P 500 index it was a small part of the market. And what's happened now is um guys like uh all of us are are saving for retirement every paycheck or most of us um we're all just throwing money at uh at these passive investing funds and um it's it's really uh causing some changes to how how uh stocks are being valued particularly at the top end of the market. Um and you know I've talked about this as it relates to Apple. Um, you know, there's something like, uh, I think I wrote it down, 90 million investors investing in in 401ks. On average, they're putting probably 10 or 12 per pay period into Apple, just Apple, you know, and and and that that, you know, it used to be Apple has good news, the stock goes up, or you're enthusiastic about about Apple's prospects and the the the stock goes up. If Apple has bad news, the stock goes down. And there's still some of that, but you can see the flood of when they talk about relentless bid, this relentless buying of stocks is really obscuring the valuations at the top end of the market. Um, and uh I I pick on you sometimes and other people who put these these 20-year um uh valuation charts, you know, in there and I'm like, you know, of yeah, the market is a lot more expensive than it was in 1991 or, you know, 1981 or 2001 because it there's some different dynamics in play here. There's a a huge um $600 billion a year of 401k investments passively flowing into the market. Um, what you were talking about is Green Green's presentation did a masterful job just showing this relentless bid in action and showing exactly how it causes these big stocks to be, you say overvalued, but just richly valued, more more valued than they've ever been. >> Mhm. I don't fully understand his point about the Rubicon getting crossed and then the market going to zero from that, right? You know, um I and and and so I I'm sure he's got a point there and that's kind of important part of the story. But um you know, when I talk to people uh I've I've given a presentation on this and you I talked to people dental my dental hygienist didn't realize she was investing in the stock market, right? She's what do you do? We're waiting for the dentist to come back up. She clean my, you know, oh, I write about stocks. I don't I'm not in the stock market. I'm, you know, turns out she was investing in a 401k. And she didn't realize that was the stock market, you know, like she, you know, it's not irrational exuberance. It's irrational indifference. She didn't even know she's buying Apple every single pay period. So, if you don't realize you're buying Apple, I or or the stock market, like I don't fully understand what's going to cause you to just liquidate all of a sudden. So, I micro greens kind of it loses me a little bit. I think it has it we there's just we're creating a volatile bomb, you know, is kind of what the way he put it. And and something's going to happen in four or five years. We're not exactly sure what. the volatility is going to just amplify to the point where >> the dental hygienist doesn't have to pull our money out of the market, right? Like something's going to trip things and there's going to be a huge draw down. So, a long-winded answer, but yeah, I've been following this for for a while >> and and we did talk about it a bit last time I was on here. Fascinating topic. Yeah, my interpretation of that um phenomenon of going to zero is that eventually you know if if um passive becomes this huge part of the market then the part that's not passive it becomes very very small and I thought the point might be that big flows in and out of that could really make things volatile similar to the way that Like I mean it's kind of a stock versus flow issue, but um similar to the way that you know if a billion dollar company only has like a $50 million float or something, >> right? >> Big big money going in and out of that flow. And I know it's stock versus float. Okay, I get it. Um I've read I've read economics books, but just you know, it's analogous is all I'm saying to that. >> Yeah, that's a that's a great point. you know, and I see that down in the micro cap world where I I spend most of my time. Um, you know, if if a if a company has no float and then there's a little bit of good news. I mean, it it might even be just, you know, the CEO bought some shares in the open market. Um, >> uh, a little bit of extra demand sends it up. A little bit of extra selling sends it down on no news. So yeah, if it's kind of if this is just kind of that and a trillion dollar version of that or, you know, multi-trillion dollar version of that, um, uh, it makes sense conceptually. Um, yet I wasn't scared enough to completely reconfigure my own 401k, but maybe maybe that's coming. Got to brush up on the the Greek letter math. But um, yeah, that's a fascinating thing to watch. And it's a fascinating thing to watch at the top end of the market because a lot of the people who write about stocks for a living, maybe not doing exactly kind of newsletter, but like people are writing headlines or the AI bots that are writing headlines and financial, you know, they don't >> seem to get it. Um, and if if uh Apple is up 5% this month, they'll try to find a reason for that, you know, or if Tesla or, you know, one of these other huge companies are up, they'll be like, "Oh, you know, investors are are excited about Apple's product." I'm like, I'm, you know, Apple, the last two years, there haven't been that much good news for Apple. And I just >> That's right. With Apple, are they though? I don't know. >> Yeah. Yeah. I mean, I I don't think that's what's happening. Um, and you know, it used to be, you know, and I talk about Ben Graham and, you know, the uh, uh, Mr. Market, and it's just, >> um, sometimes he's irrationally exuberant, to borrow a phrase that wasn't Ben Grahams, and sometimes he's, um, you know, overly pessimistic. And this is this is just indifference, uh, irrational indifference, you know, in a way that we haven't really really seen for these. and it and it all gets focused on the the seven or eight or 10 biggest biggest companies. Um, so I'm interested in it. Michael Green talks about it more from a macro point of view, but I I think it's it's been interesting to watch it from uh kind of the biggest stocks in the market, which is a little bit ironic because I I'm paid to write about small cap stocks. Um, but it I I do I do think about the valuation at the top end as well. So >> I know. So, and that's funny because the other thing that that I think we should talk about is um you make a really great point about um SAS and AI and there and how investors had expectations of how they would influence the biggest you know companies like Microsoft and other large >> uh companies which are the all those big you know mag seven companies they're they're at some point from some perspective they're all pretty much like software companies right so >> everybody has AI is going to disrupt them. So >> yeah, um >> I have a I I was talking to um was on another podcast about this and and um again we were talking about Microsoft. So I on on your show I use Apple as my example. On this show I I talk u on on other shows I view Microsoft Microsoft's interesting if you go back software as a service. This is my background right before I was writing about newsletters. I was um controller at a a public software company. um SAS was uh so it was not uh a guaranteed success, right? There was people including the company I worked for that kind of fought the idea. they like the perpetual license model more uh as opposed to selling a a subscription and then folks loading the software through the internet onto their um uh the the alternative to that of course was you you remember when you used to load CDs onto your computer or the the corporate version of that is you bought a server and you loaded the software under the server and that server served all your your computers hardware uh throughout the building or whatever. SAS was not a guaranteed success and there was people who pushed back on that. But once it kind of caught um once it kind of caught fire, the Mr. Market seemed to think that anyone who was in the old business was hosed. Uh you know, including Microsoft and and um uh you know, companies like really um yeah, in it was caught in that. Adobe was was very early on kind of switching to SAS. Um >> but the the market kind of had switched between the stock market decided okay these guys are going to be winners and these incumbents are going to be losers. Um but that didn't what happened at all. Uh companies like Microsoft and then Amazon and even Oracle. Oracle was another one that people kind of assumed um was going to fall away. And I as a controller at a uh you know a big accounting department we used Oracle you know and and um you know it was it was it was not something that was going to go away as far as I was concerned you know we didn't really love it as a sock but it was just so ingrained anyway these companies they then they went out and they built the data centers that facilitated the SAS revolution for other companies right so Amazon um web services that's just a enormous server farm that other software companies are using to host their software. Um, and Microsoft did the same thing, not quite as successfully as Amazon uh, web services, but they had their own version of that. And >> um, not only did SAS not kill Microsoft, and again, we're talking about 15 years ago now. That's the SAS revolution, >> right? Microsoft because they had so much money was able to build some of the data centers that um facilitated SAS for everyone else. So what we're seeing now is the exact same thing with AI >> which is not exactly. So, what's happening? Watch this carefully, Dan. Um, the the AI is supposedly killing Microsoft every, you know, okay, they've got C-pilot. They've got some thing, you know, like, but that's that's got, you know, all of these big software companies have come down and and they do still come down even with the relentless bid to kind of mix topics, you know, but they're still, you know, coming down or riding flat for a couple years. >> Um, uh, it's it's really Oracle's come way down. A lot of these software companies intuitit's come way down. Salesforce.com's come way down. >> Um, and what you're seeing is they're all trying to f follow the kind of the Amazon, you know, playbook, the Microsoft playbook from the SAS revolution. They're building the they're the ones spending tens of billions of dollars, hundreds of billions of dollars building the data centers that's going to facilitate AI. Um, so I don't think there's two reasons I don't think AI is going to kill some of these huge companies. first of all is what I'm talking about. They're they're building out the data centers that are probably going to that they hope to facilitate it for everyone else. That was the SAT. That's what happened 15 years ago with SAS, >> right? >> The other thing is just that it's not like Microsoft and Oracle and and Intuitit coders are not going to be using AI themselves, right? They they they've got they're going to be using AI to code their stuff. They're going to be building AI products themselves. Um, right. Uh, I there's an analogy um I use with uh another podcast um with Matt Wine Shank and I can't remember where I got this idea. I I'm I'm stealing it from somebody, but you know, if there was a a magic pill that made you and me 50% better at basketball, >> right? We would take it and we would be way better at basketball than we used to be. But that pill is also available to, you know, LeBron James and, you know, everyone else in the NBA, right? Like >> Microsoft is LeBron James. >> Yeah. Like it's not like I'm going to, you know, all of a sudden uh become an NBA All-Star. Everyone's got access to that, you know. And so this idea that AI is going to come in and like the people at Oracle or Microsoft or Salesforce.com are going to be just like, "Oh golly, what do we do? We're still coding with black screens with green font on it, you know, like no, I mean, they're they're using it as well." I'm not saying >> I'm not saying that we know who the winners are going to be and who the losers are going to be. Um but I am saying that the incumbents are not hosed um just just you know um uh automatically and I think that there's been for value guys Dan look carefully I mean you know there's been some uh a lot of these pretty good companies are down 30 40% heading into the year um uh you can just pull up I'll just list three Salesforce into it um uh you know I think that uh well there's a lot Oracle Oracle I mean all of them have come into this year and and I think Mr. Market's like I'm not sure who's going to win and who's going to lose but I'm just going to kind of sell everybody and and sort it out as uh earnings come through in in 2026. It's a very interesting fishing uh pond for for value investors. Um >> there's going to be winners and losers. Just grabbing a chart in Bloomberg of >> of Salesforce says the high price was December 4th, 2024, just on a two-year chart. Down 51%, >> right, >> date since then. >> So, let's >> Salesforce down 51% has generally been a pretty good bet. I'm just saying. Right. >> Let's let's talk some more about Salesforce. And I've been running my mouth the whole time. I'm I'm interested to hear your thoughts too cuz we were at a conference like I said last week. >> Somebody made a comment in passing about the AI winners and losers. The idea was that Salesforce um was was going to be a loser. >> The reason was they make too much money and that's where those are the companies that get disrupted the first easiest, right? The companies that make you know historically, right? So >> Sure. And the idea is that people are going to start building um uh the these these customer data sales force um kind of products uh internally with AI and they're going to replace you we won't even need Salesforce anymore. So >> I'll tell you something. >> Yeah. I'm going to use I I I've always wanted to own a Ferrari and uh I'm finally going to be able to use Claude or Chat GPT to build my own is what I'm going to do, >> right? So, yeah, >> I went to listen to this. I went, this is interesting. I didn't know what was going to happen here. I I ran into um the guys who run sales sales organizations for the the biggest publishing companies in the world, including guys we work with. Um, they're all on salesforce.com. So, I just I went to them. I'm like, am I missing? You know, maybe they're right. I don't know. Maybe this guy, you know. Um, so I asked them and I'm going to read you some of these this this feedback. Um, >> okay. >> They are not they would not get rid of Salesforce in a million years. There's two guys on this this thread and that's kind of to summarize it. Um, it's sticky because companies don't just use Salesforce. They build huge parts of their sales and marketing efforts around it over years and years and years. By the time you consider leaving, Salesforce is usually embedded into workflows, reporting, um, salesman compensation, forecasting, customer history, integrations, automations, compliance, making it impossible to live without. Right? And I said, "Would you even like the product?" That was my next question. Right? I mean, is or are you just you just stuck with it? He's like, there are parts I love and parts I wish I were better, but overall, uh, it's the best option out there in my opinion. Um, and this this happened with >> in my old world too with software when when you're embedded with the software and they've got all of your data integrated, it is a multi-year process to to to integrate. And can AI make that more efficient? I'm sure it probably can, but these guys have lived through it. They're like, "We're not we're not going to mess with that." Um, so he just said uh I asked him about that. I'm like, "What's it like to switch?" Um, and he said, "Uh, where where was that part?" Um, yeah. He said, "We just did a a revamping of our Salesforce workflow." So within Salesforce and it took over a year, you know, like it is painful to to to switch some of these things and um and and and he did say there's a Salesforce has this thing around Einstein. That's their AI bot. Um his I've I've read a lot about Einstein from Salesforce's point of view, right? I've heard what management says about it. This is interesting feedback. So far it's been just okay, right? So he doesn't love it, right? they can improve on the implementation of it. It'll make it even more sticky. Um, right now it's been up to the user to train the model. Um, but if they they can do that for us or we can just iterate, more people will adopt. >> So that's always what I like to do too when I hear management talking about how transformative Einstein is, which is the new Salesforce AI bot, and then talk to someone who this guy runs an organization with probably uh couple dozen salespeople. Um, and you know, he's like, "Yeah, it's fine." You know, it's cool. You know, it's a it's a neat trick. Um, but you know, you talk about, >> hey, what would you do if they raised the price 10% next year? They're like, I'm not even going to look at their invoice before I approve it. I'm going to sign that approval, you know, without thinking about it. Um, this is turning into a a huge bullish uh uh Salesforce.com. But this is what I'm talking about. Like AI is great. I'm starting to use it in research. I'm starting to use it to help me word tricky passages. I'm sure you're figuring out ways to use it in your day-to-day. Um, not anti- AI. I just I think that the people that work at these big companies are smart enough to figure out how to use it for their jobs as well. Um, and I when I think about AI winners and losers in software, you've got to think about how integrated they are into the day-to-day lives of of these of their users. >> Yep. And I want my listeners to know Brian just did a great job of describing um with some real on the ground kind of uh scuttlebutt information the competitive advantage of switching costs. >> It just costs too much. It takes too much and costs too much. >> It costs too much dollars and time and corporate resources. And why bother? Because what you have works just great. >> Yeah. Yeah. And you know, again, he doesn't love he he doesn't love sales. He's like, "Yeah, it's fine." And and it it's it nothing we could try is is worth the pain of switching. Let's think about another. Have you come across in your value investing circles? I keep coming across duallingingo as a as as something people are pitching. >> Somebody just me Yeah. Yeah. Somebody did just mention this. So, I I had uh two of my kids are using Dualingo just to, you know, play around and try and learn Spanish. I don't know. Um Right. >> But Duolingo is kind of cool because they do Yeah. While I see you pulling it up, tell me how much they're down. Right. And so, >> yeah. >> Um but their version of stickiness, Dan, is to like send you alerts to try and get you to stay on your streak. you know, they're like, "Hey, you you you've got a streak of 212 days or 100, you know, and and and actually a lot of social media stuff does Snapchat does that. I don't understand it, but it seems to work. You have snapped Dan for 194 straight days. Snap him again." And I won't they don't even send each other messages. They just said, "Hey, you know, so that's that's Duolingo's version of stickiness, right? I don't know if it's working or not. I I don't think my kids speak Spanish at this point, but um if they want to stop using it, they can just stop, >> right? Or if they if if AI comes out with a a new product, there's absolutely no pain to try the different product, right? Like you can switch like that, right? And and um Duolingo might be the best thing there is for learning a new language. Um, maybe it is, maybe it isn't, but I know it's not sticky, right? Um, it's users can can try a new version or try a new AI product for a week with with no cost at all. And um, uh, and and you know, they're certainly not using it daytoday for their livelihoods, you know. So, um, >> I think that some of the I think that's a good example. some of the concerns around AI are are valid. I think there's companies that are more um you know, of course, we talk about um you know, moat competitive modes. I mean, there's there's companies that are more entrenched with their customer base than others. Um and and you know, as you're out there, listeners or people who are just reading or thinking about investing, just think about how hard is it for their customer to switch? Such a simple question. Um and and you know what the the guy that that was presenting for us last week um who was telling us that you know Salesforce can just you know be done away with with smart guy right I mean I' I've I read his stuff I know he knows what he's doing right but um you know >> don't make assumptions either right so I I called the guys I knew that that run sales departments and and um uh you know I'm sure you're out there you you've got a golf partner or you know, a a friend of a friend that your brother-in-law that's in sales, you know, some ask them what they think of Salesforce, right? Uh ask your kids what they think of Duolingo or or someone uh you know, in in education, you know. Um it's not it's not hard to get a little bit more uh boots on the ground, the scuttlebot as you call it. Um I think that that's uh that's a key part of investing even if you you're someone who loves spreadsheets uh like I do. Um, and I'm not knocking the guy who who maybe he's gonna end up being right about Salesforce. I don't know. Right. But >> right, we're not knocking anything. It's just um working it out. You got to work it out for yourself. You can't just take somebody else's word. And um and you know, it it doesn't surprise me that this is something that you do because I've generally thought the smaller the company, the more you better get the scuttlebutt. Uh >> right. >> Because you know, right? like you're not are you really gonna find out something from somebody that's going to tank Microsoft? I don't think you are. Um but you know you you could find that out from a company with a hundred million dollar market cap. >> The problem with those guys, Dan, is is um >> if you talk to executives, what I've learned, I mean, you don't get to be CEO of any company without being a good sales guy, right? Like they they they they know what I want to hear, >> you know? They know what um they know. I mean, they're sales guys. Most most people running public companies, you know, um know how to promote themselves, know how to promote their products, know how to promote their company. Um so you you got to go if you can independently a as well. Uh when you do that, sorry I cut you off. You look like you were getting ready to drop an insightful nugget on us. >> I was No, I was just going to tell you that you asked about Duolingo. That one's down 79% since last in over the past year almost exactly to the day. Um, so >> yeah, and you know I maybe that's too much. I don't know. I haven't looked at it. I haven't looked at it at all. I do know that there's some value vultures circling uh Dolingo and um and and you know at a certain point it's cheap enough but I do know this you know Salesforce down 50%. Duolingo is down 79%. I feel like you know Salesforce is is way way stickier. Um and uh um and and they're they're doing some stuff. They're trying to build they're trying to build AI data centers and you know they're trying to do you know they're spending some money that maybe they don't and in in in five years it'll look like maybe they shouldn't have spent. So I Mr. Market's not dumb. You know he's just kind of handicapping the odds and and uh I think 50%'s a too steep of a draw down for a company like uh like Salesforce. 80% for Duolingo that might be just about right or it might be too much. I don't know. I have to look at it. Let us know what you think in the comments. >> You hear that? >> I I'm I'm boosting your YouTube engagement, Dan. So, >> yes, you are. >> You're welcome. >> Well, look, last time when when uh Salesforce was down like 58% in like 2122 that bare market and then you know up to its next peak it was like 180% or so. So, who knows? This Salesforce could be getting to make a killer run here. And >> you know, um >> you look if you look if you look at a stock like, you know, Amazon is like the classic example like multiple multiple multiple huge drawdowns on the way to like you know 2,000 bagger or something crazy. So >> yeah, I always use Microsoft as my I'm sorry. I always use Amazon as my example when one of my micro cap pickics is down, you know, 70% again and I have to try and try and salvage, you know, the egg on my face and and just like nah, this happens. It's just something that happens. Um it does happen. I I don't know that it happens often but uh yeah uh for the first something I've written there's a chart I use a table I use for Amazon all the time you know not all the time but whenever I'm writing about this you know I think every year for the first 15 years of its existence there was a a 50% draw down on average you know every >> every year you know there was always kind of good news and bad news Amazon wasn't really making money took them for a long time to to really make money um and and of course there's been books written about this. We don't need to get into that. But uh uh just a fas that's a a fascinating case study. Salesforce another one it's you know I'm pulling up the chart now myself was 280 um last May 180 uh right now. So you know something to look at if you like if you like picking up scraps uh you know companies that have fallen I I'd take a look at this one. >> All right. Um, is there anything like so this is a mega cap big company. Is there anything in your um, you know, I know you have subscribers to think about, but is there anything in your small cap universe that you feel comfortable sharing uh, you know, a ticker symbol? >> Well, a story. It's um it's May 19th, 2026 right now >> and as >> and um you know I'm I'm watching what's happening in Iran every every day. Um you know the the straighta hermuz and and of course it's it's hard to not get into political stuff when you're talking about what what's going on over there. Um I do think that's a complicated >> issue. I think that our um media outlets don't necessarily uh um get into all the nuance. It's kind of it's one of those things where it's black or white. You're for it or you're against it. But I >> I think there's way more nuance there. But as an investor, I also always think it's go to kind of talk about this, but we have been getting we have been buying and recommending a lot of um North American small cap energy and energy adjacent businesses. Um as the really since 2022, we started calling them energy conflict hedges. uh when when um you know, Russia invaded Ukraine the first time and then amping it up as as the as the conflicts have escalated um in the Middle East. Uh when the world needs energy, um North America is kind of the default safe spot. Um and uh we have been up it from from Canada uh and and not just North America, we we recommended a company and not just energy companies. We recommended a company um that had exposure to uh the UK helicopters that that would ferry people to and from, you know, the the offshore um places in the North Sea. Uh a company called Bristo. We got out of it. I can't remember if I grabbed a quick gainer or something happened with I I recommended that a couple years ago, but um I actually kind of had a I said I make no apologies, but it was kind of one of those I make no apologies apologies cuz my readers have been hearing about the same story every month, you know, and I'm like, listen, this is a big deal what's happening. Um and so we've been recommending um there there's a a lot of small cap opportunities uh in Canada >> um that are focused on energy production uh and down down in uh Texas of course um and then the energy adjacent companies, you know, use the term picks and shovels, but more service companies that are serving these companies and you know, hey, how do you get rid of your wastewater and stuff like that? Um, we we've probably recommended seven over the years, energy conflict hedges. Um, and I'm still in three of them. I if if they shoot up, I I might take some gains and or if they collapse. I mean, look, volatility is a real deal uh in in the micro cap world. Um, it uh I will uh I'll cut I've cut losses on some, I've locked in gains on some, but I like to have three or four of those. And um I'm sure my readers are tired of hearing the story, but um with the straight of Hermoose closed, you know, you can track this even in Bloomberg, the tankers going, they're all coming here now. They're all coming to the west coast of Canada or the the Gulf of Mexico to get their um you know, to get their their oil. So that's been a huge um you know, that's been a really big part of our story. Uh usually uh when you're you have me on here, I'm talking about software just because that's my background. Um but I'm a generalist kind of like you. I'll write about whatever. And I saw you were writing about you know the straight of her music uh the other day. Um you know it it's just it's a it's a hot topic. Um and uh >> can't avoid it. >> You can't avoid it. And you know, if if something happens and the you know, the straight the straight opens and there's peace all over the world and you know, you know, some of these stocks that that I'm I'm recommending uh domest Texas energy stock, you know, they're they're going to go down, right? when when uh Texas oil WTI oil prices go from $100 a barrel to if they went from 100 to 60, you know, >> um my hedge portfolio, it'd be a good thing probably for mankind, right? It'd be a good thing for the rest of my portfolio. So, we've been loading up on on little energy companies uh here and there. Um and uh uh that's been a theme really especially since February, but um really heading into uh last year and and it was a big theme uh in 2022 and 2023 when when the Eastern European war uh conflict started. I don't know. Are you guys are you guys doing anything with with your portfolios specifically about that conflict or you just kind of >> Oh, I sure am. I sure am. Yeah. Um and actually in Extreme Value, we did um recommend um one big important chemical company for the um oil industry. And I'm doing another chemical company in the upcoming issue of um the the May issue that'll be out in a few days of the Ferraris report. And I've recommended I recommended two refining stocks in December. I didn't know there was going to be a war on, but hey. And I recommended um >> you know two independents and I I have had um Exxon Mobile and Chevron in the portfolio for what three or four years here, three and a half years. >> So yeah, but I want to know our listeners to know something. Um Brian mentioned the volatility around small caps and we're talking about the volatility that can occur depending on what they announce about the war and we have a great seminar coming up a a webinar in fact >> um that you can sign up for at volatilityprofit.com with a guy named Jonathan Rose who was on the show recently a very smart trader a pit trader yeah he's great isn't he? >> Yeah. Um, so yeah, volatilityprofit.com. >> What I like when I listen >> I like the theme. Go ahead. >> What I like keep cutting you off. Sorry, Dan. Um, >> that's all right. >> On my last uh actually what's funny is you you you and I come from similar backgrounds, long-term investing, value investing, and then you you see a really smart trader like Jonathan or like Greg Diamond and and and and people seem to think it's either or, right? like you you you and if you're into the kind of things we write about, then you wouldn't be into options trading. And um I think that it doesn't have to be either or, right? Um no. Uh I I learn a lot from reading about about uh what what Greg's been writing. I'm not as familiar with Jonathan. I learn look forward to kind of listening into what he's has to say on his seminar. But um you know, chart volatility is real, right? It happens and you can and you can make money figuring out what's going to happen. You know, if Ben Graham were alive, he would tell us, you know, oh, it's it's meaningless for long term. And he's right. It is meaningless for long term, but it doesn't mean you can't trade around it and make a little money on it. Um and so >> and you see volatility in options pricing uh you know as well as you like that's a great place for a trader to trade volatility because opt volatility is a huge part of options pricing. So it doesn't surprise me at all like you know a guy like Jonathan um does what he does the way he does it. Yeah. what we're talking about. Um, and this is definitely the case down with micro caps and small caps, but I'm sure you know >> oil trades all around the clock, right? And and so, you know, and so if if the market opens and oil is down went from 103 to 98 overnight, the little companies in my portfolio might be down 10% based on that, right? And and again, that's amplified. I don't think that happens in kind of the big companies with active options but um with with all the uncertainty in the war with all the uncertainty everywhere um volatility short-term volatility is is is something I'm going to be paying more attention to maybe for my personal account. I don't I'm not paid to figure out how to do these trades for my readers, but uh uh I'm encouraging them to kind of, you know, if there's if there's an itch you've got for for learning about how to how to profit off that, um you know, I I I I that's a very real thing. I was talking to a guy the other day kind of thought it was one or the other. Like, no, I'm a long-term guy. I'm like, that's fine, but it's it's it's still it's still possible to make money doing that. Doesn't mean it's all business. >> Yeah. Yeah. My favorite thing to do in the world is a two-eek trade. I might I mean it's like a second job for me to sell put spreads on on a particular large index option ETF. Um and you know we we're we're not you know I don't want to like talk my own book because that's you know we have rules in our company about that. But but my favorite trade is to sell these spreads on a regular basis every you know every other Friday I'm doing this. Um, and it's like a second job that pays thousands and thousands of dollars a month. Um, >> and >> wow, can I write you a check? You you gonna run a fund? Uh, that sounds >> Yeah, I I I feel like I could do that. I could just run that. >> It is a second job, though, right? I mean, you can't It's not a set it and forget it kind of thing. You've got to be paying attention and and um if you if you're not paying attention um you're going to get fleeced and realize that a naked put you sold uh got put to you. Um and >> I mean I spread but you're right. Same thing like when you see the when you see the soul, you know, the short put half of that spread um like you know the market's down whatever 1% and that thing is like whoa it's way down you know it's down 50% just like that. Um, yeah, you got to watch. You got to know when what you're looking for and, you know, when the real signal is to get out and you got to make all those decisions ahead of time. Just like, you know, we keep talking about Jonathan, but or Greg Diamond or any of these guys, they always know when to get out before they get in. >> Yeah. >> And And you got You're right. >> Yeah. >> Got to do that work. Yep. >> Well, I didn't think we'd get on to this topic. >> You see, we we never know where I never know where I'm going with you. which >> value investing software. Uh but yeah, it turns out we're both wannabe uh option traders at heart. So, uh you know, um I I I uh >> I'm not good enough at paying attention um to to to to find those kind of trades myself. You know, to you you you got to watch you got to watch all all day. So, uh not all day, but that's what you know, that's what I've used Greg for in the past, and I'm you know, I'm look forward saw Jonathan on your podcast. I'm looking forward to see what he says. Yeah, volatilityprofit.com. All right. Um, where are we here? We may we may it may be time to ask our final question. I think it is. Um, you've answered it before. I'm If you forgot it, it works better if you didn't remember the question. I think and it's the same same for every guest. No matter what the topic, even if it's a non-financial topic, same final question. If you've already said the answer, feel free to repeat it. So, the question is this. If you could leave our listener today with just one thought, one takeaway for our listener, what would you like it to be? >> Yeah, this month it's definitely um the thing we've just covered. I I mean I'm I'm I'm watching I'm watching the the Middle East very closely. um part partly because of you know um some friends and you know uh serving in the military, some friends with with family trapped in Iran. I mean you know it's it's a um I think that the next couple of months um our grandkids are going to be reading about them uh about it in in history books. Um, and uh, you know, I doubt anyone listening or watching was like, "Oh, I hadn't thought of that," or, "I hadn't thought that to look at what's happening in the war," you know. Um, but I do think that um it's again it seems rude to say it or go, you know, I do think there's money to be made if you're if you're watching the right kinds of of companies uh defense companies uh and uh some of these these North American um energy and energy adjacent businesses. Um but uh uh pay attention to what's happening over there. I I probably overdo it, but it's the first thing I look at. um in the morning is what you know what news is coming out over there. Um and uh uh I I really I'm going to be using that news to shape my portfolio um certainly for the rest of 2026 at at least. Um and um you know again I I doubt that's super insightful. I'm sure everyone listening is already kind of paying attention. Um but it's a it's a big deal for mankind and it's probably a big deal for your portfolio. Well said and I agree with every word of it and I too um in the Ferris report I'm focused on that trade because I I I see 10 or or more different ways >> that this could work out um in 10 or more different industries. I mean everything clothing and >> um you know household appliances and um tires and autos and you know just all kinds of stuff. >> So I agree with you. I think it I think it is something to watch. And every morning I too look at Middle East news, S&P 500 futures, oil prices >> every single morning, you know. >> Yeah. So So that's a great takeaway. I'm glad you said that. At least you're confirming my bias anyway, and I appreciate that. >> Yeah. Well, we think a lot about a lot of thing or we think the same about a lot of things. So I guess that's another one. >> Yeah. >> Yeah. All right, Brian. Listen, it's always a pleasure to talk to you. thanks for making time for us and uh I look forward to talking to you again real soon. >> Hey, thanks for having me back on. I happy to be here. >> It's always good fun to talk with my friend and colleague Brian Beachch. Obviously a very smart guy with a lot of great ideas. What I want to do is tell you that of course you heard me agree with him u in his final message to you about paying attention to what's happening in the war in Iran and the straight of Hormuz and oil and so forth. And I said the first thing I do every day is look at news from the Middle East, the price of oil and what has what are the S&P 500 futures doing? And um I believe in my heart of hearts that this is going to be an enormous trade. I think it's you you've probably seen it described as the biggest oil market disruption in history. I think it's more than just an oil market disruption. I think it's a global manufacturing reset. Right? So, for example, one of the latest things that I've written about, um, it's not quite published as I'm speaking to you, but it will be out by the time you, uh, are hearing these words, is about, um, certain chemicals that are produced in Europe and Asia and on the Gulf Coast of the United States. And uh the inputs for Europe and Asia are getting a lot more expensive because what's happening in the Gulf, but the inputs are cheaper in in the Gulf of Mexico coast of the United States. So what do you think is going to happen? Well, the world is going to buy a lot less of these chemicals from Europe and Asia and it's going to buy a lot more of them from the United States. And there are a few companies that are particularly well positioned to to exploit that. And if you looked at the companies and you looked at their balance sheets and their results of the last few years, you'd go, "Uh, this looks terrible, which is great because the best way to buy any commodity producer is on a contrarian basis." So, I'll just leave it at that and tell you that, you know, that's and this is just one company. And so, this is we are talking to you in May of 2026. So, um, I've got seven more months of 2026. And it wouldn't surprise me at all if I wound up with seven more stock picks, maybe even two a month or something. Um, based entirely upon what is happening in the straight of Hormuz and and in the oil fields in Iraq or sorry, Iran, um, thousands of oil fields have shut down. Millions of barrels a day of production. What people don't realize is the longer they're shut down, the more likelihood that more of them will never be restarted because an oil well is not a kitchen faucet. You don't just turn it on and turn it off. And when you have to turn it off in a big fat emergency because you're getting the daylights bombed out of you by the US and Israel, it's worse. You turn an oil well off fast enough, you get a shock wave at the speed of sound, I guess, or speed of light or just, you know, really fast, straight back down the bore hole, and it can fracture the cement casing and fracture the rock and mess everything up and it costs a lot of money to fix it. And even if you shut them, if you shut them down quickly, but you don't get all that violent, you know, reaction, um, the chemistry keeps going. And over there in the Middle East, they have these sort of layered reservoirs, and they use a lot of water and gas to keep the pressure in the reservoir to keep pumping the oil. And once you turn the thing off, this delicate balance of pressure goes out and the the layers of the reservoirs can migrate to other places and the water can seep in and just kind of ruin the well. So, and there's other things too, like it's like when you stop mixing, you know, salad dressing in a blender, it starts to separate. Same thing with oil down in those wells. Only the stuff that that separates is really waxy paraffin and stuff called asphaltine, which is like a mucky tar substance. And um that kind of gums up the works. And it'll cost you whatever 10 or 20 grand a well. and it could cost you millions of dollars in rig workovers and all kinds of stuff. So, some of the stuff can be turned back on in days and weeks. Okay, let's get that clear. But I think a lot of it um is is going to be lost for good. A chunk of it. Somebody I heard somebody say there's 10,000 oil wells shut in and 3,000 of them aren't coming back. I'll accept that as a general ballpark. Whether it's 8 or 9 or 10 or 12,000 and whether it's, you know, one or two or three or five, you know, whatever it is. Many thousands are shut down, a few thousand maybe aren't coming back is the point. So yeah, and that's going to have longerterm consequences and all those other inputs that come through the straight, the the ammonia and the sulfur and the uh NAFTA refined products, all of it is going to trickle down through the global economy. So, there's a huge trade here in my opinion and it's much longer term than what the market seems to be seems to be discounting. I want you also to remember volatilityprofit.com. Jonathan Rose is going to put on a probably a absolute master class. The guy's a genius trader and you can sign up for it at volatilityprofit.com because let's face it, everybody nowadays needs to learn how to handle volatility because I think we're going to see quite a bit more of it. All right. Well, man, that's another great interview in my opinion. In my humble opinion, we just did another great interview and that's another episode of the Stanberry Investor Hour. Hope you liked it as much as we did. 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