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#FinanceDaily: $HD Earnings Miss, $TSLA Shareholder Mtg, Debt Ceiling
Recorded: May 16, 2023 Duration: 1:36:21Space Recording
Short Summary
The discussion highlights strategic partnerships, including Twitter's acquisition of a recruiting startup to bolster its HR capabilities and Tesla's efforts to enter the Indian market through localization talks. These moves reflect ongoing strategic expansions in the tech and automotive sectors.
Full Transcription
Morning everybody. They're just trying to get Dr. Danish on stage.
So probably get started when he's up here.
Okay, this is super weird. Can you guys hear me now?
All good.
Any echo? Go ahead. Say something, guys.
Yeah, there we go. Cross talk. Go ahead and interrupt me a lot and just keep talking. We'll see. I think it's fine, though.
Yeah. Yeah, we're good.
Justin, I really enjoy interrupting you so it all works out.
Hey, Brian.
Yeah.
Hey, man, Brian, I don't know.
I should do spaces every day.
Like, it's, I've been doing it, and it's absolutely awful.
This is just my daily reminder that, man, the Spaces team needs to get their shit together.
This is like...
Yeah, yeah.
It's been bad.
Like, it's glitching.
Like, yesterday had a lot of issues, especially yesterday.
Yeah, loving the new spaces, by the way, Brian.
For anybody that's not subscribed to Brian, I'd really recommend it.
Very good.
Awesome.
Awesome.
By the way, how do they determine who gets the subscribers?
I mean, do you have to have, like, a shit-ten-out followers?
I mean, I feel like you can apply for it.
So, like, anybody can apply for it.
And, like, I think they just...
I think they accepted me quickly.
That's why I have it.
But I think that they are going to start accepting a lot of, a lot more people.
I just think they are kind of, I think too many people applied and they didn't have enough time.
They don't have enough employees to go through them all quite yet.
So it's like the blue check, but like real.
Well, yeah.
Yeah, I guess you could say that, right?
Yeah.
It's like the new blue check.
That's so funny.
Yeah.
Oh, my God.
How has it been for you?
Good.
Like, I find that it's, like, for me, it's more about, like, the personal interactions than, like, the money.
It allows me to, like, have, like, subscriber-only spaces where I can, like, get all my subscribers together.
I have, like, 150 subscribers or so.
So it's not a ton.
And it's just more interactive, you know?
So, like, all of my subscribers can speak in a private space, right?
whenever they want if I launch it rather than having to compete with 700,000 followers to get in.
So I like doing subscriber-only spaces.
I also just put out some videos and stuff, some extra longer form posts and stuff like that.
Yeah, it's funny.
I've been thinking about it since Mario and his team have been talking about this, you know, different strategies.
With video streaming coming, I'm actually kind of convinced that the approach to video streaming is going to be through subscribers.
You know, that would be a really cool idea of doing sort of video streaming only for subscribers.
And then taking snippets of it, like sort of the more viral snippets of it and then putting it out to the general public.
But if you want to watch the whole video, you've got to be a subscriber.
I find that to be a really cool approach.
Kind of changes...
the whole algorithm on its head where people start saying like look i i love
caleb's analysis uh Caleb gives that shit out for free right uh you can get his sub
stack but you can also become a subscriber and he'll actually break it down for you um uh you know
because when he's up on these spaces he's got to go through it pretty quickly we try to keep it
pretty snappy but the opportunity to actually sit down and understand the thought process
behind the charts
or, you know, it would be kind of interesting.
And so I do think that there's something about video streaming and this omni-channel approach of like, hey, you can get long, everything being more long-form for subscribers would be kind of an interesting approach.
I'm just very confused about where this goes.
And this is not about the business of Twitter, but I find this fascinating because if...
If that turns out to be true, the blue check allows for verification, but it also allows for finance, right?
It allows for you to be able to make financial decisions on Twitter.
You made a financial decision to pay for the blue check.
So we have access to the credit card, right?
Once that is done, then the next step is...
okay what other financial things can you do well you can subscribe to people why would you
subscribe somebody i have to say that has always been a big question for me so there's like special
content but what the fuck is special content yeah this is this is the challenge right now is like
there's a lot of people that just put the subscribe thing up but the value is not very clear like
even Elon it's just like i guess maybe i'll do some stuff so um but he's Elon so of course
i'm sure a lot of people signed up for that but that's that's what i think most people are struggling
with is like
artificial, I would call them artificial paywalls.
Like they're just putting a paywall up and saying you're going to get some exclusive stuff,
but the value is not really there.
So I think some people will tinker around with it now, but creators are going to have to get serious.
on what actually constitutes more value.
Yeah, I think that if you start getting a ton of subscribers, like say I had 2,000 subscribers, I mean, I got to start making it an like almost a full-time gig trying to provide content to my subscribers, I think.
Because I think once people start getting access to being able to open up subscribers, you're going to have so much competition and that competition is just going to drive people to have to come up with better things to offer others. Right now, there's only a few people that have subscriptions open. So the.
the content that they're providing doesn't really have to be great, but that's definitely going to change.
Brian, have you considered putting together a team around this or you're just trying to see if this will actually last?
I mean, like, that's actually a question for me, which is everything on Twitter is sort of like a fleeting thought until it's real.
And so, like, would you put resources behind this if you knew that this was going to be the future?
Well, yeah, I think that if I noticed a lot of subscriber growth and I could see it as like a full-time gig, then yeah, I consider maybe hiring a team.
Right now, like Ed helps me and I help Ed, and I think that's enough.
I think that if it definitely got a lot bigger, which I do think it will, I think like you said, I think video is going to play into the subscriptions quite a bit.
I think if they add like a periscope type functionality where you could ask questions live in a video, you could make that maybe subscribers can ask questions and everybody else can view or something like that.
There's going to be a lot of cool functionality, I think.
Yeah, anybody up here just before we move on, anybody else up here had the opportunity to have subscribers at all yet?
No, yeah. We're all peasants. It's okay. It's okay. Brian, back to elitism, Brian.
I wouldn't do it right now if I did because I don't know what I have. It's worth a, like my, the only way I make money is by client work. So it's not like I'm going to put client work behind a subscription model, although that would be really hilarious.
That would be interesting. Caleb, you were about to say anything?
Yeah, I think that, you know, I'm kind of stuck in like a limbo process.
I can't even remember when I applied.
to have subscriptions enabled, but I think it was actually sometime last year or even before then.
And so now that like this whole new kind of aspect of Twitter has been rolled out just over the,
what's been like four weeks or six weeks or something, like not even, right?
My like quote unquote application is like still pending.
And, you know, I have no, I can't withdraw the application.
I can't resubmit a new one.
So I'm just kind of like in this absolute limbo here.
I think just to kind of echo what Justin had mentioned,
I don't even know necessarily what I would be posting on there.
It's something I've been trying to think about,
but it's kind of like I'm not really going to spend much time thinking about it
if it's going to take another six months to get approved, right?
All right.
Well, people that are listening, if you would like Caleb, myself,
or anybody else on this stage to have a subscription service,
go to the bottom right, hit comment,
tag Twitter, tag Elon Musk and say, hey, approve their subscription applications.
Everybody here, if we all do it, then you can get special content.
Caleb is going to give you real-time access to information.
I'm just kidding.
I don't know.
I don't know.
I know, but, but, you know, Dr. Danish is going to drop his only things.
That's right.
Move to Twitter.
Never.
That is my most profitable business.
It is the oldest business in civil society.
So I was going to say that, you know, but in reality, I do wonder if people are interested in this topic, happy to kind of do one of the spaces about this, which is around.
hey, what is going on with subscriptions?
Is this really part of what Linda was brought in on?
And is that really the future of Twitter?
Because I thought she was an advertising guru.
So does her getting her to join as CEO mean that they're actually not going to focus on subscriptions?
Or...
You know, it's actually kind of confusing if you think about it.
If subscriptions was the answer, you'd think that they'd bring somebody from Amazon Prime or somebody, you know what I mean?
Somebody that comes from a subscription background, but she actually comes from sort of a subscription background, but NBC and she comes from advertising.
So it's very interesting that, you know, maybe they're showing their hands.
And like Caleb said, he's not going to spend a shit ton of time trying to build something.
Yeah.
that may or may not even come through.
Brian, I'm kind of hearing the same thing from you,
which is like you're not going to put a shit on our resources
if it's not going to exist in a few months or years.
And so it is.
So I is actually in this space like two days ago,
and a Twitter engineer came in.
She wasn't that high up,
but they asked her about like spaces
and why spaces are glitching.
And she said it's because,
we are all focused on subscriptions.
So I think that kind of goes against that narrative.
I think that Twitter definitely is trying to boost subscriptions as much as possible,
and that's why they have all the engineers away from fixing other issues.
Yeah, I feel like that's a good excuse.
But yeah, I agree, though, that subscriptions are.
Like, what are they working on with subscriptions?
Like, what does that even mean?
Like, it's not a technical problem, is it?
What's the technical problem that they're solving?
Well, like there's little things they could do.
Like, like in this space, for example, wouldn't you want to, if you were somebody that had subscriptions open, wouldn't you want to see who subscribes to you so that maybe you could bring them up to speak if you see them in the room?
Like, just little things like that.
And of course.
People can buy their way to happiness.
Yeah, and implementing other, implementing, like, other, like, video and stuff like that can be paywall and paywalling, paywalling post if you want to do it, stuff like that.
Actually, a question for the audience, you know, uh,
and we'll get to like the fun part.
Sorry, everybody.
That would be good, by the way.
Just side note to plug that.
That would be a great idea, I think.
Twitter economics.
I think that would be a cool finance.
It would be a really interesting one.
You know, one thing I was going to say is for the people that are listening,
I guess we already have 2,500 people.
You talk about Twitter and like thousands of people show up immediately.
It's the funniest shit in the world.
But it's as if the algorithm wants us to just talk about it more.
But for people that are listening,
if you can go into the comments on the bottom right and tell us,
what would you actually want from a subscription?
I mean, I'm actually kind of curious for everybody to give us some ideas
because I'm like Brian and Justin,
where I'm very confused about what people actually want.
Do you want to know, like,
who we are outside of what we do.
Do you want to know about information
that other people don't?
Would it be different for Caleb
versus myself versus Brian versus Jeff
versus Justin?
I mean, like, you know,
what are people looking for from subscriptions?
Because is it, or is it access
like Brian was kind of alluding to,
which is, hey, when you're a subscriber,
you get replied more.
When you're a subscriber,
you get brought up on stage more.
You get your voice heard more.
I find that to be a little fucked up.
But, well, so I actually get a poll.
I think it's, I think it's kind of a little mess.
But it's kind of interesting.
Brian's not wrong, though.
Like, real tough.
People pay for access all the time.
I did a poll among my subscribers.
And like I have 150 or so, 152, I think.
And I asked them, like, what is it you're looking for?
And the vast majority of them said that they want me to interact with their post more.
So, like, I think they think that if I interact, then they're going to get more engagement.
So they're seeing it that way.
I think a lot of them, which is odd, right?
I just got it.
I got what you're saying.
Hold on.
Brian just kind of told us this is like Twitter economics.
I love this.
So...
Brian has hundreds of thousands of followers.
All right.
So I'm a peasant.
I have like 11,000 followers.
Uh, so, uh,
When I reply to someone's message, maybe the engagement is decent.
But when Brian replies to their messages, suddenly they get thousands of followers or hundreds of, I don't know if that's true, but hundreds of followers, right?
And so they get more engagement.
They get more followers, which then raises their profile in Twitterverse, which then allows them to be able to.
you know, build their own subscription service and become a creator themselves.
Man, Brian, that is kind of two kinds of fucked up.
That's kind of interesting.
Yeah, right.
Yeah.
That is so interesting.
I do wonder if that's actually how it's going to work out.
That is fascinating.
Yeah.
So people that are listening, is that something that you're interested in?
You can go to the bottom right into comments and engage with us.
And again, the way our shows work is that if you're listening and if you put something, you know, in there,
that we like, we'll bring you up to kind of discuss it.
But wanted to put that in there.
Thanks, thank everybody for kind of jumping in this morning.
I think is Neely up here yet.
She was going to talk about Home Depot.
But we can get started very quickly.
I know that we've been talking about this forever.
But wanted to get started with the big news this morning.
Dow, you know,
Dow Jones is down. Home Depot pulled back about 4.4% after they beat earnings but missed on revenue and guidance. Caleb, I saw a tweet from you about them. You know, you think that once they drop a little, they might be a buying opportunity. But are you not worried about large home improvement projects and their and their guidance for this year? Give us a sense of why the market is reacting the way it has been.
Yeah, I mean, I just saw kind of the headline figures.
I have not gone through the earnings report.
That's not, you know, something that I typically do for companies that I'm not yet currently invested in.
But admittedly, you know, over the past, you know, several months even, you know, Home Depot has kind of been at or near those mid-2020 lows.
And so the stock looks enticing. This has been one of the most, like, you know, largest
compounders over the past 10, 20, 30 years, right? So the stock is an absolute beast.
And one of the things that I was highlighting in the post that I did this morning, I mean,
first of all, they missed very significantly in terms of the revenue side. I think I read
something that it was like their worst revenue miss in like 20 years.
Maybe someone else can provide a little bit more context around that, even though they beat on earnings per share just briefly.
But I think the big reason why the market is responding so significantly is that they lowered guidance, right?
So clearly consumption trends are slowing down.
But I think for those of us who have been kind of listening to overall economic data, this really shouldn't be too much of a surprise.
So I think even when I did the post about them earlier this morning, they were trading around 278.
Yeah.
you know, pre-market.
Currently right now they're trading at 281.
So it's already starting to bid back up a little bit
as the market kind of absorbs the initial...
response to the miss. But I think, look, you know, I think as someone, I can only speak for
myself, right? And I'm 28 years old. I know that I need to be buying assets for the long run
to kind of grow my nest egg, so on and so forth. And so when I see companies like Home Depot
that are already down very significantly from the all-time high, that doesn't mean that they
can't keep going lower. In fact, I expect the shares to go lower.
But they're trading right on the 200-week moving average.
Historically, this has been a great place to be buying strong, fundamental stocks.
But, you know, if we look at the stock during 2002, it fell below that 200-week moving average.
It did the same thing in 2007, 2008, 2009.
So clearly, this stock can fall much, much lower.
And in a lot of ways, I'm actually hoping that it does because I'd really like to be
buying this around 240 to even 220 a share, if we can get back to those pre-COVID highs from, you know, January 2020, February 2020, that was at 247, right? So I think that that would be a great opportunity for someone like myself would be looking to start building a position out.
Yeah, I mean, the big question is, I agree with you. So again, just want to remind everybody that's listening, this is not financial advice. You know, Caleb's kind of giving his thought process, but it's not financial advice. Everybody should do their own diligence. In the nest, I put in the CNBC article that kind of goes through the numbers. I'm going to go through them together as well. And I agree with Caleb that,
Overall, Home Depot is an incredibly successful company.
It represents a large part of the Dow.
There's a reason why.
And, you know, if you think that long-term people are going to be building homes,
which, of course, they are, you know, it's going to be around,
and going to be repairing homes as well.
But what I was going to say is, you know, really quickly running through the data
for people that are not, that don't know,
that Home Depot actually represents a very large portion of the Dow Jones
and actually has a small portion of the SMP 500 as well.
I think they have their value is double what Walmarts is.
Is that correct on Dow Jones?
I was just reviewing this.
And that they beat EPS by two cents as a 3.9% reduction in SG&A costs also helped.
But they, yeah, they miss revenue estimates.
Yeah.
They were 2.7% below Wall Street's expectations at 37.26 billion versus what was expected, which was 38.2 billion.
That's a pretty big miss. It's the largest miss in the last 20 years. That is correct, Caleb.
Jesus Christ, that's pretty big miss.
And so the bigger problem,
the reason why the market's actually reacting so poorly to this news
is was their guidance.
And their guidance was that, hey, look, next year looks tough.
And so the big question now is,
and that's what I kind of want to go to Samantha with.
Samantha, do you think that this is a harbinger for the rest of the retail earnings this week?
Or do you think that this is specific to the fact that home improvements post-pandemic have taken a pretty big hit?
And people are doing less projects and doing more partying?
I love that, more partying. Well, I actually am partial to Home Depot, so for a few reasons.
Yes, it is showing a slowing trend, a slowing demand trend, but I also, in full compliance, as I mentioned yesterday, am a silent owner of a mid-sized construction company in Boston area. So,
So that translates to we're on the pro desk with a few million a year through Home Depot, and no other supplier is as good.
So they might not be the ideal, but they're definitely better than the competition in our professional opinion.
So you got that first anecdotal evidence?
But I think mostly this is a case of lumber deflation hit them hard.
So, you know, we're trying to find the stocks that can benefit from the inflationary impulse.
They obviously have benefited in passing on those prices to consumers.
Their largest, you know, effect was lumber deflation as it relates to the bottom line.
So I think that's kind of interesting.
It's good for the consumer, but not for the stock.
But I still think they're a solid company.
No question.
What about the, so you don't think it's going to have a broader impact on the market?
I mean, it's obviously having an impact on the Dow, but you don't think that this is a harbinger at all.
Are you not worried about retail earnings this week?
I'm worried about retail earnings, especially as it relates to employment.
I mean, oh my goodness, Walmart in particular has been trying so hard to break out and hire to resume its kind of trend, long,
status. So that's actually been a holding. It has been a very hard hit target because of their
inventory problem a year ago. I'm kind of expecting that they've worked through that now. And then,
of course, Home Depot is very much in regards to the housing market. So I watched that
intensely for all kinds of reasons, not only as a trading vehicle, but also, like I said, as a major
account for a remodeling company. So this is, to me, digestion period. This is
you know, competition, this is e-commerce growth, it's lumber deflation. But did you know, their
most bought item is two by force. So where there was deflation in lumber, that hit them. I mean,
that's really it in a nutshell. So supply chain disruptions, they've kind of worked that out,
but there's still large shipping costs, wage increases, but they're extremely well run. So I'm
less worried about Home Depot than other retailers that don't have a very wide moat.
I definitely am looking to Walmart to see how they are positioned with their guidance because that will impact the retail sector the most.
Yeah, Walmart's one of the largest employers in the country.
So I think they might be the largest, correct, Samantha?
Just want to make sure.
Correct.
Yeah, they're the largest employer in the country.
And so they would be a pretty big harbinger,
especially if they announced any sort of layoffs.
I think that would be a really big harbinger for the market.
And just as, how close is Amazon on closing that gap?
I thought they were pretty close.
Are they not close?
I'm not sure, actually.
I don't know headcount.
I'll research that on my own.
Sounds good.
And just for people that are listening, Target reports tomorrow,
Walmart reports on Thursday, and Lowe's reports next week.
So it'll be very interesting to see how it all pans out.
Nancy, any initial reactions to Home Depot's earnings?
Obviously, the market's reacting to it,
but I wanted to get your thoughts.
Nancy, are you there?
Yeah.
Sorry, I was turning my mic on.
Yeah, no, I'm, I definitely think these were going to have probably in my expectation
negative headlines later today about the debt ceiling.
I feel like they were really building up, working together over the weekend and yesterday.
So I would say maybe I'm being jaded, but I would say prime to disappoint.
I expect we'll see volatility today, negative headlines later this afternoon.
Interesting. What makes you think that?
I, you know, it's always hard to predict things, but I don't think either side of the table really has the incentive to get something done.
I think it's going to be right up to the end.
And I mean, I'm one of the few people that I do actually think we will hit the ditch sailing.
I know a lot of people are not concerned.
I know Dr. Dana shares my view.
Yeah, to clarify, you think we're going to default.
Not the U.S. default.
I think we're going to have to have the Treasury prioritize.
Well,
where they make payments because the politicians have not going to be able to agree before we run out of money.
But I don't think it's going to be a default on all of our debt.
I think it'll be a delay.
Nancy, you're going to give me more indigestion.
This is not good.
I just got a little reflux.
Because to me, that is.
So what's the practical implication of that?
Do they have to approve debt payments by line item?
What does that look like?
Nancy, would you like that way?
Yeah, it's...
Yeah, no, it's hard to say because we haven't, in 2011, we didn't really have the same situation as now.
I think a lot of people are looking at 2011 and what happened the last time.
But interest rates were at a very different place.
Europe was in a really bad political situation.
I feel like either way I could see the yield curve steepening on the back of hitting the debt ceiling,
either from market turbulence in the Fed's,
You know, yesterday, what were they doing yesterday?
They were jawboning like crazy that they were going to hike in June.
I don't think really anybody believed them, but why are they doing that?
They're doing that to build up more of a cushion because they probably know that things are going to get really bad this afternoon.
This whole slew of Fed speakers, everybody's trying to keep June alive and well as a potential hike.
And, you know, maybe it's, maybe they're just living on another planet and academics or maybe they know that, you know, politically it's just going to be really tough.
Yeah, Caleb, those new news, right?
Yeah, we just got the advanced retail sales data for April.
The estimate was for growth of 0.8% month over month, and it came in at 0.4.
And it looks like the March data was revised to negative 0.7%.
I can't remember exactly what it was there in March, but basically softer than expected, but still showing growth.
It's important to remember this is a nominal figure, so it's not adjusted for inflation.
But I think if I remember correct, the April headline CPI, wasn't that 0.4% month over month?
So basically, you know, flat retail sales on a real basis.
Interesting.
I wonder if, again, if all of this is a harbinger for a tough retails week.
I mean, I think the market has been in a malaise.
If Nancy's correct, which I think she is, but again, if people disagree, you got to tell us.
Because Nancy and I can go doom and gloom all we want, but we want to hear other sides.
Well, just.
I mean, the good thing about it, I'm looking here through the report right now, it's saying total sales for February, 2023 through April, 2003, were up 3.1% versus the same period last year.
So, you know, 3.1% year over year is pretty solid over a multi-month period.
So, you know, I think generally this is, I wouldn't say optimistic, but it's definitely not bad news, right?
Yeah.
Well, Caleb, the question is, is that inflation adjusted?
No, it's not.
And so the real question is, if inflation went up a significant amount,
then you would expect it to match that increase at least, right?
And so I think that's, so it's just showing slowing growth, I think, more than anything else.
And I think that with inflation being so rampant, you would think that these, they wouldn't miss on revenue.
So what, to me, what is saying is a couple of things are happening.
The biggest one is consumer spending is going down.
Yeah.
overall that we're expecting it not going down.
It's slowing down.
That's a better way of saying it.
Amidst higher prices, possibly.
Yeah, I would just be clear to say that perhaps real retail sales are contracting, but I haven't done the math on what the CPI has been over the course of February through April on a year-over-year basis.
So I'm not sure if we could even conclude that yet based on the data because as far as I'm concerned, we still have disinflation.
Even though I think the month-over-month figures for headline CPI...
you know, they've all still been positive. But I expect that to change here potentially in the coming months. So I don't know. I mean, I look at this data and, you know, relative to March contracting at a pace of negative 0.7%.
you know, coming in at 0.4% monthly growth isn't, you know, that's a good sign.
We're not contracting on a nominal basis, right?
You know, any level of growth is better than contraction on a nominal basis, right?
Because to your point, if we were contracting on a nominal basis with still strong inflation pressures,
then real consumption trends would be terrible, right?
So the fact that we're still having nominal spending growth, I think, is better than, you know, what it could be, right?
So I think that's important.
By the way, just got someone thing me on the back end.
There's news that Twitter, I guess this must have been a little bit earlier this morning,
but Twitter agreed to acquire Lasky, Chris Bakke's company,
which is a recruiting HR tech startup.
Sorry, very interesting.
Not sure why they acquired an HR company.
But, yeah.
I just wanted to say it out in the finance groups.
If anybody has any comments on that, we can get back to the business of what the hell is going on in this environment.
Maybe if I could just make one final statement, I'm happy to get other people's thoughts because I want to hear other people's opinion on this.
But I'm seeing here that on a year over year basis, retail sales grew 18.4%.
Right. So if we're growing at 18.4% on a nominal basis and headline inflation on a year over year basis is 4.9%.
That's, you know, basically, you know, real growth of, you know, 13, 14% year over year.
So, you know, again, I think the April data was worse than expected, but still good in a vacuum.
Yeah, not bad at all, actually, if you think about it in an overall context.
Jeff?
It's the only thing I think to consider on that data point.
It's good.
It's just adjustment adjusted for supply.
Because we still were backed up, I think, even the early part of Q1 of last year.
But yeah, it's a good data point overall.
Yeah, it's interesting.
I mean, again, for me, the big thing is what are the expectations on retail sales?
I think with the debt ceiling looming, any negative news is going to be taking the super negative news by the market.
Anything that even has like a tinge of negative is going to be exaggerated by this market, I think.
You know, and that's sort of the, why the sentiment really matters.
If we start seeing that the consumer, quote unquote, is getting weaker, that retailers are starting to see weakness.
You know, the market is going to start coming up with the narrative around recession and deeper recession and, uh,
you know, if it actually does go to the brink like Nancy and I are saying, you know,
that could actually be even scarier, I think, for the average market person that right now
is acting like nothing's wrong. It's like literally the world is on fire around them and
they're acting like nothing's wrong. It's actually kind of fascinating that how the market
So I want to ask a...
I want to ask the question about the Home Depot news.
Does their unusually high performance during the pandemic have anything to do with the report now?
Because everyone was stuck in their house and doing updates.
And I think sales at Lowe's in Home Depot during the pandemic were unusually high.
So someone correct me if I'm wrong, if I'm wrong on this.
But does that impact this report?
The analysts were taking all of this into account.
And so, Dakota, did you want to weigh in?
Oh, good morning, everybody.
Thank you for bringing me up.
Yeah, I was going to say, so we're not seeing signs of slowing anywhere.
We're vertically integrated across multiple sectors.
You know, our manufacturing sector, I mean, we're having to deny orders across the board.
on the sales side, I mean, everything's moving.
On the real estate side, I mean, every time we put a unit up for rent,
we have somewhere between 10 and 50 applications in the first hour.
On the building side, you know, labor, we're still seeing strapped.
Everybody's building, everybody's growing.
We're not seeing any signs of slowing.
Well, but, you know, outside of that micro environment, clearly from a macro perspective, Home Depot is seeing slowing.
So the question really is, you know, is that being driven by lumber deflation, like Samantha said, or is that being driven by...
Yeah, I mean, I think, I think...
core pricing across the board for Home Depot has gone down, right?
I mean, a lot of the supplies that we have been buying and building with over the last,
you know, 10 years got really inflated through 2020 and 2021 into 22 for sure.
But I mean, the prices on everything have dropped dramatically.
And that being said, I mean, we are slowing just to see what the market is going to do.
But I mean,
I mean, for the most part, I mean, we're just sitting on our hands because we feel like we have to because of the environment.
Yeah, it's absolutely fascinating.
And again, I'm telling you guys.
It's just basically consolidation.
I mean, the market's in consolidation.
Home Depot is consolidating.
I mean, it had a three-year run of unprecedented growth, right?
So for the sector, let's see, they grew sales by over 47 billion over three years.
She said.
So that's like last year, I'm sorry, into 2021 and then we have the big drop, 2022, and now we're just digesting sideways.
They're doing the same thing, but it's not necessarily a harbinger of doom unless we get recession risk pulled forward.
And then, of course, cost cutting, job cutting.
And then we have a whole new kettle of fish.
But for right now, their quarter sales might have been below expectation.
And again, it's lumber deflation that I could see.
Yeah.
But for the most part, they're solidly run, solid brand.
I mean, like I said, anecdotally, that's where we do a lot of business for the residential real estate market.
So I think there's just calm down.
They had a phenomenal run, and it's just time to die.
Completely agree.
Yeah, I posted a business insider article about their record earned, their record, what is just,
Home Depot added a record breaking 40 billion in sales in two years.
So that was, you know, that was, it's hard to keep that kind of pace up, obviously.
I would dare I say impossible.
I think one thing on this topic too really quick is just some additional commentary I could
perhaps provide is, you know, we've been seeing a lot of weakness in just general home,
you know, consumer discretionary spending, right?
Look at...
restoration hardware has been reporting, you know, very negative outlook in terms of consumer
activity in their earnings for the past year plus, right? And we still haven't really seen
that kind of capitulation from a consumer demand standpoint yet. So, you know, it's always
interesting to get this kind of housing market related consumer discretionary input about the
earning side of things, but at the same time, I don't think it's necessarily representative
of the entire consumer discretionary and retail market.
I'm also going to...
The restoration hardware, that's more like really ultra high-end stuff, right?
Like, that's really expensive stuff.
So I would naturally see, like, not...
I don't know if their poor performance would be alongside, like, Home Depot, right?
I mean, but the fact that both are having poor performance is more indicative.
And I will say that...
one of the one of the things to keep in mind also is that we're seeing a straight up crash in
commercial real estate and so i would not be surprised if that's having not in this but you know
something to keep in mind also moving forward that we are seeing commercial real estate take a
pretty big hit right now especially office and commercial uh the office component of it and so
that's really another thing to think about i know there are people there are you know
you know, blindly bullish, I would call them, about real estate.
But I can tell you right now, there's a lot of early signs that we have talked about here day after day that are giving me a little bit of pause.
And maybe I'll get, you know, I'll get Amy to come up and share as well.
And Neely is on her way up as well.
So, Dakota, I know that you are a blind bull on real estate.
So let's hear the other side of the argument.
Yeah, I don't know that I'm a blind bowl necessarily, but I do think that property type is really important in this matter specifically, right?
Yeah, we're definitely seeing a downturn in the segment of office, but industrial real estate.
you know, working real estate, like there is a huge demand in that sector still.
And that doesn't sit just in our micro environment, you know, throughout the Midwest and
Texas.
You know, we're seeing that coastally too, right?
Like if you're in logistics, if you're in manufacturing, the property that you need or
may need for your business is a certain fit.
And if you need a certain property, you're going to buy that property.
And we're seeing that.
We're not seeing any slowing in the buying on the industrial side, on the large business side.
We are seeing a slowing in the office side.
But, you know, a lot of that is getting repurpose, too.
We're just trying to figure out how to do it.
And you're seeing companies come in.
And, you know, if a property is going under,
these companies will buy up these properties on a cash basis and sit on it,
then occupy it,
and then dish it back out on a cap rate that makes sense to whatever private equity group wants to buy it.
Oh, I agree with that too.
In my anecdotal evidence, right, that I mentioned yesterday, five of the 13 house flips that we're doing in the Boston area, which, you know, are under contract.
And they haven't even been, you know, finished.
And they're between one and two million dollar homes.
there is cash and they just come in with cash and they're they're eager to buy so there
there is not a slowdown in certain sectors right um whether it you know with folks with with
liquidity
So it doesn't mean that they are not much, much more picky and that those with unrealized losses, commercial real estate as a whole.
And then specifically, they're, again, unrealized losses.
The trouble occurs in trying to refinance debt, obviously, at a higher cost.
point with all kinds of just sitting losses. But for the nimble player, there are tons of
opportunities still. So if recession gets pulled forward strongly, all bets are off. And that's why
there is hesitation and there should be hesitation. But for right now, the recession risk
is at bay, the unrealized losses,
as long as they stay that way,
hence what happened with the banking crisis.
That's when it actually hit the fan,
is they needed to be realized in a withdrawal event, right?
So as long as that, that's what they're banking on right now,
is that that continued suppression of volatility,
whether in the market or the economy,
they're still buying.
Well, until they're not, right?
I mean, so the challenge is it's such an unregulated industry that there's a significant challenge that we don't even know what their liquidity looks like right now.
I'm talking about private equity, the shadow banking sector in general.
And that's the challenge is that we have no clue what's going on on the inside.
What we do know is that a significant portion of homes are owned by institutions.
We do know that those institutions also have a lot of commercial, real estate exposure.
And ultimately, we're starting for people that are not paying attention in certain cities already,
we're seeing the fastest, again, just to be clear, when you're at the nadir, when you're at the lowest point,
right, even a smaller increase can be considered a large percentage increase. I want to say that
disclaimer, but in certain markets, we're actually seeing crazy increase in inventory. And it's May.
So it's, you know, Miami being the biggest one, I would say that has been very public. So, you know, I do want to
kind of make sure that people are understanding that if this debt ceiling issue carries forward,
if the recession issues carry forward, if the commercial real estate sector continues to hurt,
it's going to end up hurting the broader economy.
I agree with you all that some of those things are...
concentrated and are staying there, but we have to keep an eye on the bigger ball. VIX is way
too low. I've given all of this uncertainty. We're seeing the uncertainty is not priced in.
And so if something's not priced in so clearly, you've got to have the question around what
the hell are people thinking. Like, how is it possible? There's so many big events going on.
And in my opinion, not many have been priced in.
Samantha, I'll let you respond to that before I go to David and then Neely.
Go ahead, Samantha.
I just want to make sure that I didn't say anything out of hand.
Oh, no, no, just it's short and sweet. So I've had this theme since summer of 2020. I'm a big inflationista.
And one of the reasons why I invested in March of 2020 in a construction company that dealt with flips because the most valuable inflationary asset is real things.
And in my particular opinion at the time, that was property.
That was real estate. So now, is it more challenging? Absolutely. But it's not done. Just like Home Depot has now this kind of range bound after a stunning 43 billion in growth over the past three years, real estate.
is now due to take a pause.
It's totally natural.
But that's it.
Inflationary assets, things over paper, to me, I track much more closely,
and companies with balance sheets that have, well, good balance sheets,
and particularly tied to real assets, commodities and real things and real products.
So this is not...
a bad investment theme, right, to diversify a little bit in property, you know, some cash for that
5% or T-bills, money market funds. Trends are still working in a stock market, but as it relates to
why we aren't crashing, it's because they won't let us. So there is still liquidity. Then until
they pull that liquidity out, then, you know, this is what the business at hand is just at
not to, you can't trade, you can't panic until we have a reason to.
Being complacent, bad idea, especially when it comes to the market.
And I'm one of the biggest bears around big picture as what comes to equities.
But I have to also look for the opportunities because there's a lot of cash for my clients that
they want to go someplace.
They don't want to just sit there.
So long story short, I think inflationary assets still have a bid.
Okay.
I just wanted to jump in with one one stat about kind of maybe thinking about, I don't disagree with you that inflationary assets are important.
But I do want to point out that a lot of people, when they're considering what those inflationary assets are, like real estate, I could say, you know, yeah, it is real.
Yes, it does have, you know, but it's so reliant on interest rates and on leverage.
It also has kind of other noise besides just being real.
I would say the important thing I would look at is in the 70s and 80s is the reason a lot of people look at real estate or cyclical equities or energy or gold or commodities.
It's because...
It did well in the 70s and 80s.
And the very important thing to always keep in mind with inflation markets is they are really new.
The U.S. Treasury did not even start the Treasury Inflation Protected Securities markets, sometimes called TIPS.
until 1997.
That was the first issuance of tips.
And the interest rate derivative markets, you know,
the VAL markets really only started around the 2000s.
And then even going back to the swap market data,
which is a lot larger than the Treasury market.
So that's the interest rate swap market.
The longest you can get data back to that I see in Bloomberg is the weight 80s,
like around 88.
So I think it's nothing wrong.
I completely agree with being, you know, having inflation in your portfolio.
I just think it's really important to keep in mind that there are other ways to do that besides just real estate and commodities and cyclical equities that are linked to commodities because that whole inflation market is new and not really something people look at because it's not in the back test.
I get tested a lot from colleagues that are historically based, and it's not something that's not my wheelhouse.
But they say, take a look at sugar, take a look at coffee, look at the runs that true inflation proxies have had because they're not embargo trades.
Like everything.
energy, oil in particular, is going to have an intervention caller around it. However, energy as an
investment is great. As Buffett says, I might not get super rich from energy holdings, but I will stay
super rich.
So energy as a commodity play right now, I think, is still a very viable one, although I'm going to trade it, you know, my life trading room, you know, every jig and jag. But I think speaking of Buffett, you know, going to Japan right now, lowest interest rates out there.
sold a huge tranche of bonds in yen over there and invested heavily into five of the largest
gateway keepers of commodities in Japan, the trading houses of Japan.
That is absolutely a play on commodities.
So the problem for retail is we don't have a lot of...
you know, access to retail friendly products.
And real estate, of course, is not going to be, this is, you know, this is a great
inflationary proxy if you've got the money.
But otherwise, this is where the majority of homeowners are sitting on their most valuable asset.
that they've leveraged. And yeah, we even had that little stint with used cars in a driveway
was their most valuable appreciating asset past few years. And we will go through a disinflationary
impulse. There's no question. I absolutely see yields actually falling soon. And that's going to put a hit
even further. But overall, we are now back to inflationary expectations becoming entrenched
and commodities in play, whether on a balance sheet or
you know, you're sitting in it. So that's all. My opinion is that there's tradable markets. Those are
absolutely fun, but for durable wealth, things over paper. And with that, I'm going to hop off and
wish everyone a great day. I've got to go run my live trading room. Thank you so much.
Thanks for joining us, Samantha. You know, I wanted to, Neely, I know you had a, you had a commentary
around the retail sale, so I'll go to you real quick to give us some more deep dive.
Yeah, sure. Just been buried in the numbers a little later than normal because, well, they just revised 10 years of data out of the Census Bureau on the historical data sets.
So for any data geeks soliciting, you're going to want to make sure you're looking at the most relevant data set.
But April retail sales were up only 0.2% on a year-over-year basis, not a month-over-month a year-over-year basis. So nearly flat.
That's a pretty decent deceleration from even where we were in March. March last month,
if you recall, was reported up 3.1%, but they actually revised it even lower today to being up only
2.6% on a year-of-year basis.
But to put this in full context, we started the year up in a high single digit number.
It was up 7.8.
Now we're down to nearly flat in just four months.
So when you see things like Home Depot reporting what they're reporting this morning
and talking about a change in...
Broad-based consumption trends, they've also called out whether we think it's actually pretty broad-based.
It's not just their category.
It's not just that retailer.
You can see that in the overall retail sales number.
In fact, what's fascinating is the building materials, garden equipment, supplies, dealers category,
which is where Home Depot reports their sales held up.
the most on a relative basis, April versus March, all other categories decelerated and pretty
meaningfully. So this is just kicking off the retail earning season. We say earnings are learning
as it relates to what's going ahead. It matters because we are a consumption-led economy
and whatever you think the GDP number is going to be, it's very likely going to get revised lower.
That's our view.
Fascinating. It's so interesting how broadly different people's views are on this, which tells me a little bit about the fact that it's not being reflected in the market. But it might just be our stage. And so for people that are actually, David, I know you had a quick comment before we move on.
Yeah, I was just looking at the technical picture of Home Depot, and I was comparing it to one of the whole proxy for home builders, D.R. Horton, which they typically have been tracking very, very closely together until this year, until really last November, Home Depot started to flatten out and then it's been obviously dropping for most of this year to date.
But obviously, D.R. Horton is actually back up to its pre-correction highs, like the late
2021 highs, very, very big divergence between those two, which again is not very common.
In fact, the correlation right now over the last six months is negative 50%.
Again, it's very rare for it to be negative at all, but it's negative 50% right now.
It's a strong negative correlation between those two stocks.
The last time it was...
that strongly correlated and the only time it was that strongly correlated um since like 2000 when it when they
started to really track together um was 2014 home depot at that time broke out of a year long
sideways range and started an upward trend and then d r horton followed it followed suit and
the housing followed suit in this case right now you have home depot is actually like
Caleb was saying Home Depot was actually sitting on the 200 week moving average,
but now is below it with the intraday, you know, the pre-market moves,
flirting with the year-to-date lows.
And, you know, if it breaks down, then D.R. Horton, which is now,
it's actually still 45% above the 200-week moving average.
If it follows suit, it's got a lot of suit to follow.
Right.
And it will be very hard for the broader market in general to maintain bullish sentiment if housing has got that much, you know, that much to go down.
That's a fascinating point.
So just so I'm going to try to explain that point in a little bit less, you know, for, I'm going to try to explain it back.
Ultimately, Home Depot has led the, when Home Depot drops, other real estate stocks drop.
when and the real estate sector in general drops right now home depot has is dropping and it's
and the general real estate sector has not dropped so and the general real estate sector has a lot
of dropping to do is that a fair point david i just wanted to make it even simpler yeah i mean
again they go up together they go down together and since last november they had widely diverged uh
to the point where, like I said, Home Depot is breaking that four-year,
a 200-week moving average, and D.R. Horton is at all-time highs.
And it's 45% above their 200-week moving.
There's a big divergence.
And like I said, it just rarely happens to that degree.
And the last time it was a bullish breakout.
And this time, obviously, that I wouldn't consider Home Depot making a bullish breakout right now.
All right.
I'm not going to say it to Dakota that I told you so, but Dakota, keep your eyes out.
All right.
Now, we're going to move on on the rest of the programming.
Number one.
Anybody that agrees or, oh, Amy's here.
Oh, my God, we were talking about real estate.
Let's do that first and then I'll do, I'll pay, I'll get us all paid.
Just kidding.
None of us get paid, actually.
But we do have sponsors.
Amy, we were talking about real estate.
Where have you been?
We were talking about the fact that Home Depot missed big.
I think most people would say they miss big.
Caleb actually has a really good tweet up there on a year over year basis for people that are just joining us.
Advanced retail sales grew at a pace of 0.5% with headline CPI, 4.9%.
And then we also saw Home Depot miss big this morning beating on earnings, but bad outlook and missing by a billion on revenue or something crazy.
Amy.
Amy.
What do you think is going on?
I think I know, but, you know, people are still fighting as there are people up on stage like Dakota and others, they're like, there's no problems with liquidity.
There's no problems with real estate.
Everything's fine.
The world's burning.
What do you think?
Okay.
So in terms of Home Depot's earnings, you know, I think there was a rush for people to remodel and renovate during the post-pandemic phase.
And especially within the last year, we've seen...
With interest rates going up so much, people sort of feel trapped in place.
They're like, I don't want to give up my 2.9% interest rate, but I also want a different house.
So what I'm going to do is I'm going to pull a helock and I'm going to renovate my property.
So you've seen, I think there was like a little bit, especially I saw this a lot last summer,
there was a little bit of a frenzy of activity for people that are just like, I'm going to remodel what I've got because I feel kind of stuck where I am.
But I think we're starting to see...
Just the money's running out for people to be able to do that.
I actually was just talking to a guy that works in the insurance industry last week.
And he does insurance adjustments for properties.
And he said that something he's seen that he has not seen since, like before in the 2008 crisis,
was he's starting to see people taking, making insurance claims on properties,
like they got a roof damage from a storm or they got...
something that went badly with the property and they, so they get an insurance claim and they get the insurance payout.
They're not making the repair.
They're taking the insurance money and they're using it to pay the mortgage or to pay down something else.
but they're not actually repairing the property with the money.
And that's a sign, it's sort of like a red flag or a signal that people are starting to run out of money.
And so they're starting to look for any source of money they can get for these properties.
And one of the problems with something like that in the market that we've had,
when people are waiving inspections, is there's been a lot of stuff that slipped under the radar in the last couple of years
where people could have been buying properties that had...
claims like, oh, well, you know, we filed insurance that we were going to fix X, Y, Z thing on this, on this house.
Well, they didn't actually do it.
They didn't fix it.
So somebody just bought an asset at a really high valuation that needs to have a repair made that wasn't made.
And...
Again, this is something that this person said they were seeing in the lead up to the 2008 crisis because people were just sort of frenzied buying homes without paying attention really.
They were waiving inspections.
They were buying sight unseen.
So there was a lot of room in that kind of a market for things to sort of slip through the cracks.
And I think now that the liquidity is tightening so much, we're just seeing people that are sort of running into reality.
Like, yeah.
They don't have the ability to upgrade their property anymore.
They've probably already pulled the HELOC and spent it on whatever they were going to spend, you know, last summer.
And they're not going to Home Depot anymore.
So that's, you know, that's how I would explain Home Depot earnings.
If, you know, if you ask about that, I wasn't here for the earlier part of the conversation.
So I'm not sure what the other side of that argument is, but...
That's my thoughts on the home depot.
Dakota, is that in line what you're seeing?
Not at all. We have investments in a roofing company here locally as well. We're not seeing insurance fraud on the claim side from customers by any means. We are seeing an uptick in utilization of claims and things of that nature, but the jobs are getting done.
Yeah.
homes are being sold every single home that we have built has sold before we've even broke on the land
we're not seeing any issues with the clarity i just i don't see it so and that might is that being
mortgage are those properties that you're selling be mortgaged or bought for cash i would say that
probably somewhere between 30 and 40 percent of them are being outright in cash
Yeah, so, I mean...
So the higher interest rates are not affecting your sales?
Correct.
But how's that possible?
Can I just bring up that, doctor?
I just want to, because remember, we all think that this 6% interest rate is a high interest rate for housing.
Right.
Historically, it's very low as a relationship, I don't know how to say this because I'm not a real estate guy, but the price of the house versus the mortgage, the ratio there is very, very high.
If you go back to when I put a house, which was decades ago, the interest rate was 8 in 3 quarters. The price of the house was very low.
So now you have this spread that's happening.
And I'm sure that affects what people look at what they're doing because 6% is a
race, what they're spending on their mortgage is very low relative to what they're spending
on the house.
Hey, Alan, you're getting a ton of echo, but I think we all heard you, just wanted to give you
that heads up.
I was going to say that, you know, ultimately, if people are buying cash, liquidity is not
the issue.
You know what I mean?
Like, yeah, sure people, some people have cash.
And maybe, you know, we have to be very careful about bringing that to the broader market.
Right now, it's, it's not about actual slowdown.
It's slow in growth.
And even you, Cody, were earlier talking about like, well, you're kind of watching to see
how the market turns, right?
and so as people are watching that means you're not jumping on every little thing i'll even give
you like an anecdotal example uh to kind of what amy was saying uh people wave inspection all
all were waving inspection like crazy last year it was completely within the norm to for people to do
whatever they could to get into the home that is no longer the case obviously transactions have
gone down obviously that's data and then on top of that we're actually seeing commercial real estate
take a hit we're also seeing you know different sectors different uh sorry regions take a hit this week was
was the and again if I'm incorrect please correct me but this week was the largest single week increase in Miami inventory in the last 20 years
no you're actually one of my one of my they call prop tech like real estate technology one of my clients is in prop tech
And she's been saying that it's like this weird.
Now, this was last month she said it.
But she says this weird market where it's almost both a seller's market and a buyer's
market at the same time.
And she was saying that like a year ago, even two years ago, you just stick a four
sales sign in the yard.
The house just goes no matter what.
She's like, now it will sit on the market for months.
If it's not priced right, if it's not staged appropriately.
But if it is priced right and staged appropriately, it'll go immediately.
But if it's not, people will wait it out for months.
So you have millennials now that are getting into the housing market.
And as real estate agents are figuring out, they're pretty damn patient.
Yeah, but a big ship takes the long time to turn.
And clearly the ship is turning.
But Cody, go ahead.
No, that's exactly what I was going to say. We saw a lot of that during the pandemic and maybe 2021 as well running into there. A lot of people were afraid to buy homes because of the waiving of inspections because of home prices rapidly increasing. So they sat and waited. They waited and now it's 2023 and they're going, okay, we have an opportunity to maybe get in. We can offer at a discount.
Maybe that's, you know, a couple thousand below ask instead of 50,000 above ask, or at market value, whatever it's been listed at.
And people are buying.
I mean...
these guys, the millennial generation that was sitting there on their feet waiting for the opportunity is jumping on it now.
Oh, look at that. Look at Cody blaming the millennials. Just kidding. I'm sorry. It's Amy and my biggest pet peeve.
But, but I wanted to move forward a little bit.
I know we have to go through the shareholder meeting,
and we're lucky enough to have Jeff up here to walk through the Tesla shareholder meeting
and his expectations.
And then I did want to touch on the debt ceiling as well.
But before we do, we have to pay the bills.
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But, okay.
So let's keep going.
I know we have to talk to the Tesla shareholder meeting.
Jeff, give us your big points for today.
What are you looking for?
Yeah, today of the meetings at 3 p.m. today, and there'll be some, you know, a number of things to run through in terms of new board members, you know, nominations, you're renominating the chair, Robin Denholm, and Musk are also up for re-election, and then a new election with one of their board members, Herono retiring.
J.B. Straubel has been nominated for the board position.
He was prior CTO of Tesla before he went and started.
Redwood Materials, who does battery recycling, battery materials recycling.
So he's nominated for the board.
So that'd be some of the things they run through today.
They're going to go through kind of accomplishments and then take questions for
the rest of the meeting.
And then after that,
Elon's got a one-on-one
with David Faber from CNBC,
It'll be at 5 p.m. Central right after the shareholder meeting Q&A.
It's highly unusual, isn't it, Jeff?
He doesn't really do meetings on CNBC anymore, does he?
Or like interviews on...
He does.
And he clarified in a tweet last night that, you know, Ari Emanuel, you know, basically said, like,
David Faber is someone you should meet with, whether, you know, David Faber was on some other network or not.
um are we kind of recommended that you know he and elon have an interview together and david's a very
talented you know interviewer so it's for elin he kind of clarified it's not so much about cnbc it's
about kind of having a proper you know financial you know interview with a good interviewer and
and what has been the sentiment at tesla since uh elan has decided to step down from ceo of twitter
You know, it's interesting.
I mean, he's discussed this over, you know, the last couple of years that he would not be CEO forever.
He's put that out there.
in the open. He says he does not, he's been very open that he does not like, you know,
what comes with the day-to-day kind of CEO job and understands there's a certain point in time
in each of his companies where he needs to be CEO. But what he has said, and I think that kind of
the higher order bit in this whole conversation, is with the hiring of Linda Yaccarino,
for X slash Twitter CEO, this is going to free up,
and this is him being quoted on Twitter,
free up more time for him to dedicate to Tesla.
And he believes, you know,
he needs to spend more time there.
I think that's the key takeaway.
It's not less, it's more about where Elon, for him.
It's more about where, you know, what, where he spends his time and less about his specific title.
That's why he, his official title at Tesla is Techno King.
That's hilarious.
But by the way, that's what I'm going to start calling myself a really weird name at Resilient, but I don't know if our investors are going to like it.
Only Elon King in the way with something like that.
It's kind of nuts.
So beyond that, is there anything specific that you're concerned about?
I know you're a Tesla bull, but you're also a realist.
So give us a, give us what would worry you at this point?
Yeah, I mean, the key thing I think everyone's looking out for is, you know, have we seen the bottom in terms of price versus demand?
You know, Tesla's made some very big pricing moves over the last four months.
And the belief is, is, you know, recently there's been two smaller prices.
price increases on the model that runs the highest volume for Tesla, which is the Model Y.
It's about 70% now of what Tesla builds.
So 7 out of every 10 Tesla is built.
The belief right now is Model Y, and they've done two recent price increases just about a couple
weeks apart.
Inventories are, you know, we get relative inventory data outside of Tesla.
Nobody outside of Tesla actually knows that.
their real inventory, but the relative data is very minimal, actually, in the U.S., which isn't a good thing,
which is why they actually have to raise prices.
Otherwise, they're stocked out on available vehicles.
In Europe, it's a different distribution model because you're going to like 20 different countries
in the start of the quarter.
So inventories appear to be running higher there, but sales are also running higher.
Registrations are running higher in the first month of April.
of the quarter that we're seeing. Also, the registrations out of China, the insurance data,
right now this is shaping up to be the best performance through six weeks in the quarter.
So I think you'll hear some noise out there about vehicle inventories,
but from my background in supply chain, you've got to run up your inventories a bit
when you're increasing your sales velocity and
your production velocity.
Remember, they've added two factories, brand new factories.
They've doubled, you know, in terms of number of factories.
But those factories now have basically 10xed their volume for where they were a year ago.
So when you have new production nodes, you have more delivery nodes, you will carry more inventory.
And, you know, the key thing everybody's looking out for now is, you know, did the price reductions equate to volume?
increases in the quarter and are they done is this is Q2 the trough for gross margins how's the
market reacting to the overall narrative that price reductions increase Tesla uh sales which then
ultimately sets them up for higher margin after sales like software and fSD uh you know is that is the
market actually buying it or no
They don't seem to be.
Geez.
And also, like, we kind of thought that, you know, we kind of thought that maybe the share prices would go up when Elon appointed the new CEO of Twitter.
And that's not what happens.
I do not under, I am a Tesla shareholder.
And I have no clue what's happening with that stock at the time.
Yeah, it's going to be in a trading range, I think, until there's any significant news,
or we get, obviously, Q2 production numbers, which will be the first couple days of July,
official production numbers from the company, and then, you know, earnings.
Everybody's going to be looking out for gross margins.
But it's kind of like this, you know, is Tesla like drowning in a puddle?
I mean, their gross margins and their operating margins are still...
quite good. And again, I believe this, you know, this quarter is, is the trough. And, you know,
they're going to have, uh, cogs declines accelerating, you know, as they implement, you know,
their plan on cogs. And as quite frankly, they're running a playbook. They're running a playbook
to keep their factories at greater than 80% utilization during this perceived, you know,
slowdown potentially coming to autos. By the way, Otto Sarr is up.
you know, 10% year and year,
but you can also say that supplies were constrained last year too.
But anyway, if there's a perceived auto slowdown,
what I think Tesla,
the playbook they're running clearly is keep all of your factories
over 80% utilization,
which keeps the cost structure, you know,
going in the right direction,
keep your suppliers utilization over 80%.
And if commodities are going to roll over and slowdown,
then you reap the benefits of, you know,
lower costs of copper, aluminum,
uh so forth so that's the playbook they're running uh and they've got a lot of room uh to run
that playbook given you know where their gross margins are so we'll have to see how it plays out yeah
A couple other quick ones, Doc, is they did apply for expansion.
This is baffling people because, again, they're concerned about what's going on with
auto demand, but they did apply for an expansion.
I put it up in the nest for Shanghai for their power train units so that currently they
can do about 1.25 million power trains out of Shanghai, which is the capacity of Shanghai
today for car output, and they just applied to expand it.
from 1.25 million annualized to 1.75 million.
So that's a big bump up for that facility.
And the other big news is they're meeting with Indian officials later this week
to talk about kind of procurement and localization options for...
India to get Tesla into India faster.
Yeah, of note, just took a quick look at the market.
Thanks, Jeff.
Appreciate the rundown.
And if anybody's interested in Tesla and what's happening with Tesla, Jeff is clearly the person.
follow. I was going to say that overall, looking at the market right now, we're seeing a pretty
big pullback in the Dow that's down 103 points pre-market. S&P is down 1150. So we are seeing the market
react negatively to the Home Depot news. And I am kind of interested to see how the shareholder
meeting goes today. So thank you for that rundown, Jeff. Appreciate you. I was going to say that,
you know, really want to make sure that we run through the debt ceiling before we close.
in the last 10 minutes. So, you know, really how, you know, does anybody want to speak to how the market is reacting to his debt ceiling meeting today?
So, you know, I can kind of, for people that are not aware, and, you know, Joe Biden, the president, will be meeting with House Speaker Kevin McCarthy this afternoon, alongside other congressional leaders.
staff from both sides have actually been working every day
since the leaders first met last week
to try to come to a deal before early June.
By the way, that's when the federal government
runs out of money, supposedly.
And then the leaders...
left their meeting last week without any progress.
Of note, they were supposed to have a meeting late last week, and they moved it.
It was postponed as negotiations were continuing behind the scenes.
Of note, people are also saying that this is a positive development.
I've never heard that talking less was more positive for
negotiations, but it does seem to be reported by NBC that, according to staffers, this is a good thing.
I will say that three weeks ago, Janet Yellen was crying fire, and now it's suddenly feeling very positive, which is also for a person like me, super ominous.
if suddenly they're acting like everything's okay,
it must mean that things are not as okay as people think,
and they're trying to change the sentiment around it.
They probably listen to the Twitter space
and figured they should get their shit together.
That's right. That's right.
It's funny that you say that,
but we were in an FTC report,
which is kind of scary,
which is why this is not financial news
and nobody should listen to us,
unless they want entertainment.
Go ahead, Patrick.
Patrick, you were about to jump in.
Okay.
Yeah, sorry, guys. Well, it's not directly related to the debt ceiling, but it's more related to people just waiting to get some guidance and news from whatever meeting, from important people out there.
But look, I flooded a little bit the Twitter, the Twitter tweet there for this space with a whole bunch of charts.
But there's just one. If you guys want to put your attention to SPX versus the money supply.
you can see that it's the momentum, it's 10-year rate of change.
So SPX is not able to grab its fair share of the money supply,
whether the money supply is expanding or shrinking.
It's losing momentum versus that.
And I think any type of rub pulls are more susceptible
once you're losing momentum, once the capital flows
aren't going to the SPX as much as they were before.
All these types, the news become more bearish news.
Even the bullish news might be neutral, neutralized or even turn bearish because just the capital flows, they're not going in the same space at the same rate as they were before in the SPX.
And this is the inverse also for gold.
Gold is actually the opposite.
Gold is stealing more from the money supply.
It's expanding, its acceleration, its 10-year rate of change.
So if you can't zoom out and look at these charts, even I put the Tesla chart guys.
Until it crosses 200, 206, it's a no man's land.
It's a danger waiting to happen.
It could go sideways.
It could go up.
But right now the probabilities are that rug pulls could happen at any moment.
So I just want people to be aware that the capital flows, those investment funds, those billions and trillions of dollars moving around.
It's not headline news guys that's going to drive that stuff.
It's a more secular business.
battles between inflation and growth.
And right now, it's still looking dire for growth instruments.
Yeah, so just want to clarify a little bit.
So your concern is that the movement is losing momentum,
so therefore it has more to fall.
Any news, it will be seen as bearish as a reason to continue to slow down momentum.
Or I just want to make sure I understand exactly, you know,
I'm not a TA person.
Yeah.
Well, that's pretty much it.
So if you start from the charts, the charts actually being the aggregate of all market participants with all their theories, with all the billions of dollars they're pushing around, the aggregate of all these people, right?
You might be bullish Tesla, but there might be this Arab sheikh who has more money than you.
He's bearish, right?
You don't even know about him.
He's not on Twitter, right?
So it's kind of dangerous for us to live in our echo bubble and get our sentiment from what we think is driving the price, right?
Because we heard an influencer say something about...
an instrument, you know.
So you got to be careful.
There's silent people that are pushing billions of dollars.
You'll only see those movements, their positions.
You'll see it in the charts.
The only place you can see it because they're not telling you,
but eventually they have to buy and sell.
So right now the chart's telling me that the 10-year rate of change for the SPX
is breaking down, has broken down,
and there's more support lines that it's time to break down.
And as long as it's not able to accelerate...
all the headline news will be backfilled to say, oh, well, SPX goes down in spite of good earnings,
in spite of the market shrugs off, Tesla earnings beat.
You know those type of things we're going to start hearing?
We're going to be hearing more and more of those as time moves on.
And perhaps if there is any bearish news, they're going to just blame the bearish news instead of just the market losing momentum.
Well, yeah, nobody's looking at momentum.
Seriously, it's hard to explain that on the headline CNBC.
Nobody's going to say, oh, the 10-year rate of change for SPX has broken down.
Like, if I wouldn't show you these charts, seriously, who's looking at that?
Like, practically nobody, right?
So, but you got to see those big pictures.
It's like...
There's a tidal wave coming in and people are looking at the beach at their feet and they see, oh, it's calm.
But if they would lift the head up, they would see there's a tsunami coming up and they're only going to react once a tsunami is like it's too late to react.
Patrick, is there any way to know what is bringing this?
You said capital inflows, but is it because of the dollar it is, is it associated with?
the debt ceiling concerns because vix is still low it's close to all-time lows uh you know
we're seeing you know uh today volume did pick up for people that are watching uh for the
people that are listening volume did pick up i know yesterday the volume was like super low in the markets
uh like ominously low uh a bunch of different people reached out about that and so you know is what
Is there any way to use the charts to work your way back on what is the cause of this?
Or is it just people are expecting a rugpole?
it's it's the aggregate of all these shorter term because what you're describing oh the vix is low sure on the daily then it could spike up and then we could have a huge market sell off and then it subdues but when you zoom out on 10 20 30 year charts that vix spike you know it's going to be it's going to be flatline normalized so it's it's the aggregate of all these events put together um
the market's showing us that overall the price of the SPX, even if the SPX could actually, the VIX could stay low, it could nominally stay afloat.
It could even practically maybe do a new marginal, new high.
But overall, when the capital flows are leaving the SPX, there's something else that's going to appreciate faster.
And as an investor, you don't always want to be, I want to be in the spy, I want to be in the QQQQ.
There's other stuff, guys, that people aren't even looking at that are outperforming while the SPX grind sideways and people are playing these bare market rallies and they think it goes up and then they get the rock pool.
While that stuff grind sideways for 10 years like it did from 2011, like it did from 1970 to 1980, when we're in these periods, you have to start looking at investment vehicles which will be outperforming those growth stocks.
And that's what people should be weakening.
Yeah, things like gold and silver, I'm assuming, is what you're referring to.
Gold, silver, oil, copper.
There's a whole bunch of sugar.
Like, nobody's talking about sugar, cocoa, you know, that's stuff that you're putting on your cappuccino.
Patrick, it's a lot more sexy to be Jeff Lutz and be a Tesla expert, right?
Like, who wants to be old and cocoa next?
Yep.
I'll just leave you on this thing because people got to remember because we're talking about Tesla, because we're talking about Bitcoin, because we're talking about this, think about it.
We're only talking about these things because they appreciated it in price in the past.
In the past, they did, it were penny stocks.
They went, they did a hundredfold and people are imagining the lombos.
They're imagining they're the original investor in those things when those things were breaking out.
it's too late. The stuff that's going to have a higher chance of breaking out is the stuff
nobody's talking about. And there's opportunities all over the place. But if we keep trying to
play these things that have been talked to death as a contrarian, it's just like, that should be
big red lights, man. It's almost as bad as your grandmother wanting to invest in Tesla.
You don't want to hear that. I feel like Jeff is getting a lot of heat right now. Jeff,
I'll let you respond to that and then we'll go to Alan.
I know it wasn't attacking Jeff.
I was just kidding.
Oh, I know.
It's totally good.
I love the perspective.
I mean, find another mega cap company with this growth in, you know, in this market cap.
And then, you know, let's talk through that.
That's right.
But, you know, it's interesting that suddenly gold, silver, and commodities traders are telling Bitcoin people to zoom out.
I find that.
freaking hilarious. I love it. Alan, go ahead. We'd love to hear from you as well. I hope I'm
at echoing now. I just a little bit of background. Okay. I can hear you. I'm just trying to
mute my Bloomberg. Okay. The two things. First of all, you've said it many times and people talk
their own book. And I believe that...
Ms. Yellen is talking her own book as she's always done, even when she was in head of the Fed.
I kind of discount what she says, but I hope that there is some kind of either an extension or something like that.
How it's being reflected in the market right now is clearly, you know, I'm,
I appreciate Patrick's use of charts.
Mine are a little bit more simplistic.
I always look at the spread between the U.S. Treasury tenure and the
German 10 years, an indication of what's going to happen and who's winning the interest rate bet.
I had thought that Europe was going to continue to raise interest rates and it looks like they will.
It's leveled off last week.
I think I mentioned that the spread between a 10-year German Bund and a 10-year U.S. Treasury was broke below 100 basis points.
Okay.
And now it's back up to 122.
The average for the last year has been 155.
That to me is an indication that people think that interest rates in our country are going to move up.
One of the things that was mentioned here, which is kind of overlooked,
why do people buy U.S. denominated securities and that's like the quality?
It hasn't been hampered by this debt ceiling thing.
So I'd say that right now, people are believing that there's going to be a settlement,
either that won't cause the fault.
Remember, I brought up, I think, last week that the auctions were going to be a big indicator
of what's going on in European buying in the U.S. Treasury's.
And I believe the low one was...
67% in the 30 year.
There was over a 70% purchase of the 10 year and over close to a 70% purchase of the three year, I believe.
Memory strikes me, right?
So I think that, you know, this market right now in all cases right now, we're drifting up.
Oh, something no one's brought up.
Dr. Evan brought it up.
What's the spread between the two year and the 10 year now?
Oh, it's meaningless now. It's only 49 basis points after being at 107. And in one month, I went from 107 to 39 basis point spread. But more importantly, and what I'm looking at, that's kind of interesting, no one else is bringing up as one of Patrick's charts, which is,
basically not looked at, is the spread between the 10 years and the 30 year is now 15 base,
two year and 30 year is 15 basis points.
So we have a flat yield curve.
If you remember what I said about two or three weeks ago,
that when you have a flat yield curve, one of two things up,
if the rates go up significantly or they go down,
And if we are heading through a recession, as I suggested, there's a possibility if we go into a recession, we will see the tenure next year, but a two and three quarter is 3%.
Right now, I think the equity markets are limping. They have no direction.
They're concerned about more things than we would imagine. That's the only border crisis, an election coming up in less than a year and a half, I guess. Is that what the election is?
So you have a whole bunch of wild cards that people are forgetting about.
But I'll leave you with this one thought.
We are truly in a social media marketplace.
Don't believe the talking heads.
Stick to your knitting.
Do your own research.
And don't listen to anyone else.
Except Alan, because I love how Alan sort of summed everything up.
I appreciate it. Just kidding, Alan.
But, you know, like, I do love how you summed it up.
The market is waiting to see which of these events are going to actually move the market.
But overall, Alan, the real likelihood, if the yield curve is uninverting, what happens 99% of the time that that happens?
You gave us two options, but you're acting like there's a 50-50 shot.
That's actually not the case.
I looked this up after last time we spoke.
What happens most of the time?
Rates move up.
Exactly.
That's what happens.
And so I just want to...
But I don't want to be inflammatory
in a marketplace where people are always inflammatory,
where they always talk their own book.
But Alan, you also have to be accurate.
The way, if you polled our listeners,
most of our listeners would think
that there was a 50-50 shot of rates moving up
versus moving down.
And that is not the actual case, right?
Just want to make sure.
Well, I'll tell you that rates will be higher.
There's another phenomenon that's happening, and no one's looking at.
The more issuance of corporate bonds being high yield and junk bonds, their indexes tend to go down in value because the people who have been parking, I'm talking about the large investors, the high yield managers who weren't able to buy money.
new issues during a period of inflows into their funds were parking money in the high yield
indexes.
So as soon as new issuance comes about, they take their money out of those high yield funds,
which causes those prices to go down, and they use the new issues, which are at higher rates
than what they've been selling.
There's been a lot of selling of triple Cs in here.
And when someone put out a tweet a couple of days ago, I saw it, that the market cap of
of Apple
is more than the Russell
2000. Is that correct?
I mean, I saw that.
The total market cap of the Russell
was less than that of Apple.
And I tweeted that
the market cap
of the high yield index
is less than Apple.
So we have this people running to buy
what they believe is this flashy handbag
or this flashy car and I'll never go down.
That's one thing I've learned over the years
that don't buy everything that you think is flashy.
Sometimes you have to look
beyond what's going on, and don't believe that a two and a half billion dollar company can't become a one billion dollar company.
It's happened time and time again.
Go back to the 70s, the nifty 50.
Look at the number of issues that aren't even in that nifty 50.
You mean, you know, Woolworth, Sears, etc.
companies come and they go.
The one thing that I know that's consistent is that interest rates will be extremely volatile.
You brought up the VIX.
The VIX is now being overshadowed by the one-day VIX, right?
So are you, I'm discounting that VIX index is being a big indicator now.
And just as you should be...
eliminating this two
30s, 210 spread in treasuries
is not being a big indicator anymore.
So you have to be very careful here, guys.
The market is kind of limping along.
And the other thing I looked up
while we were talking,
Home Depot is up from pre-pandemic.
to now 100%.
So this eight-point decline
is very, very meaningless.
It's not taking it through
where it was pre-pandemic,
which is 150.
So on that note,
Alan, thank you so much for helping us close up.
Everybody, thank you so much for joining us.
We'll have a lot more information for you tonight and tomorrow.
I have a feeling that we'll be talking death ceiling tonight, but I'll let Mario and his team figure that out.
It's going to be a little bit.
Yeah, doctor, you got to understand Mario is taking some very challenging spaces over the last couple of days.
At night, he keeps me up.
You know, I just have to be a listener.
I can't talk.
These guys are going on each other.
He's a very bold person.
Bold is definitely a good way to describe Mario.
But, you know, I'm not going to give him too many compliments.
He already has a pretty big head.
So just kidding.
But, all right, love you guys.
We'll see you guys tomorrow.
Everybody, thank you so much for joining us.
And join us at 8 a.m. Eastern every day.
Thanks.
