SPEAKER_01 0:02

Hey Delson. Hello, Hamid. Another week.

SPEAKER_02 0:06

Another week.

SPEAKER_01 0:07

Do you ever listen to our episodes, by the way?

SPEAKER_02 0:11

Um, I listen to some clips and then I get free. You know, it's funny, I as you know, and this is maybe too much information for this podcast, but I used to do comedic skits on YouTube. So I am used to listening to my own voice. But I don't know, it still freaks me out a little bit. So I try not to listen too much. I like to listen when you talk.

SPEAKER_01 0:36

Uh oh, yeah, that's that's funny because when when I listen to it, I can't stand the how slow we talk to each other. But then if I listen to it at 1.5 times, it's actually much, much better, which uh is kind of interesting. But um uh yeah, what do we have uh to talk about?

SPEAKER_02 0:52

Is that a production note for me to talk faster?

SPEAKER_01 0:56

Because I think of telling me if we if we talk faster, then when I listen to it at 1.5, it might be a little too fast. I can't I can't stand actually listening to anything now uh at one time speed, even like uh my favorite um uh podcasters like Lex Freed Friedman or uh whatever podcast I listen to now, it's it's usually at 1.5 times. Yeah, and those, I mean Lex Friedman's super long.

SPEAKER_02 1:23

Um okay, so what we're talking about today. Market is green today. We'll talk about that.

SPEAKER_01 1:34

Uh by the way, like your uh sound uh sorry, your audio is slightly low on my side. I don't know if that's um Adrian, do you also hear Dustin slightly lower than normal?

SPEAKER_00 1:48

He sounds good to me.

SPEAKER_01 1:50

It does? Okay, then maybe it's just me. Sorry, go continue. Mark is very green today.

SPEAKER_02 1:57

I'll I'll yeah, I'm gonna yell and I'm gonna talk really fast. So that's how we're gonna solve this. Bring them bring the mic closer. I will bring the mic a little closer. Um Meta announced their newest AI model. Robin Hood was tapped to be the trustee for the Trump accounts. We're gonna talk a little bit more about Rocket Lab and how that compares to SpaceX. And as always, listener questions. So if you have a question for us, feel free to shoot it in the chat. So let's start with the market turning around today. It was uh pretty green. I my portfolio was up like three percent. I think your portfolio was maybe up five percent by the end of the day.

SPEAKER_01 2:43

Yeah, it started out like uh at the beginning of the day, it was up like close to eight percent. But um, but yeah, it's what did it what did it end up at? I haven't seen this much green for a long time, but uh yeah, four and a half, almost four and a half percent. Yeah. Yeah. Um so yeah, you know, what's what's interesting about it is uh obviously the reason today was such a green day in the markets is because of the um two-week ceasefire with uh with Iran uh going right off of you know potentially civilization-ending uh commentary yesterday. So uh this is the stuff that happens at the macro level that's completely out of our control, which is why I sort of like tune it out for the most part, because uh buying great companies at good prices, sort of you wait it out and the macro stuff eventually works itself out. Um and you know, if nuclear war breaks out and it doesn't work itself out, then you know who cares at that point, right? So that's that's another way to look at it. So um, and when these things do work themselves out, uh you you it's kind of like too late to jump in. So if you would have jumped in this morning, for example, after you had learned that uh uh you know the two-week ceasefire uh thing had been announced, um, not only would it have been too late, but by the end of the day, you would have been negative, right? So uh trying to time these things and getting in and out of the market is is just not the way in which I uh I operate. So um it was nice to see the upswing, but I fully expect there to be more downswings and upswings and all of the above uh in the coming weeks and months. Um who knows what happens tomorrow.

SPEAKER_02 4:36

Especially that it's it's just the delay in whatever the next step forward is and not a positive, necessarily uh final decision or direct.

SPEAKER_01 4:47

Right. Yeah, but we had we had almost identical type of um uh issues happening at um last year, roughly about this time, maybe uh yeah, actually right around March, April timeframe, uh February, March, April time frame around tariffs, right? Like and uh there was the uh the tariff day, I forget what what uh um we called it, but that day was sort of like the equivalent of the war starting or the Strait of Hormones closing. Uh the markets crashed quite a bit, and then eventually it's all it got resolved, right? And um none of it was inside of my control, but what was inside of my control is what I was doing, which is I was buying great companies at good prices uh or better prices when when prices had gone down pretty tremendously, and then uh just waiting it out. So um that strategy has worked out historically for me. And uh and I'm not saying by one day that this is gonna work out great for me this time around. At any time, things can go wrong, but the 2008 financial crisis, it worked out for me, right? Like in 2018, there was like crashes that had that happened, it worked out. During the COVID, there was crashes, it worked out. Like, like every single time you can sort of point back to these major events, um, people who waited out, had patience and had cash that they deployed during the sort of downturns, um, ended up doing significantly better than people who panicked and sell, sold, and uh got out of the market. So we talked briefly about this last week, obviously, but um, but it's interesting that just like in the past week, so much has happened, and then all of a sudden, since yesterday to today, we see this huge market rebound.

SPEAKER_02 6:38

Right. Speaking of your cash or cash position, um are you eyeing particular stocks to utilize the the cash, or are you just thinking of holding it for now and just kind of waiting on the sidelines?

SPEAKER_01 6:55

Well, as you know, my cash position was uh was pretty high uh going into the end of last year. It was as much as 30%. And I deployed a lot of that cash for uh Micron at the end of the year, uh, then deployed some more as Micron sort of uh as I thought that Micron is very undervalued, then Meta started to crash. I deployed some of it for Meta, uh, paid my tax bill. So it caused like my cash to be down to like I think it's around 2% right now. Um and that's like an uncomfortable number for me. So in order for me to deploy the last 2%, we'd probably have to uh go down pretty significantly from here. It has now since rebounded in the past, you know, like I think the low point was maybe a week or uh or two ago. Or the low point has been one of the days in the past 10 days, I would say. Uh, and and during those low points, I was still buying Micron and Meta. So uh I have been deploying, but um now prices I think are starting to come back. And at 2% cash, I'm gonna keep it at 2%. I'm not gonna deploy the last two percent right now.

SPEAKER_02 8:04

The problem is with these green days, that cash position naturally only gets smaller because all of their positions are growing. So there's a world where we see it at uh you know one and a half percent.

SPEAKER_01 8:16

Um I guess what I will likely end up doing is um increasing my cash position as things go uh up. But maybe uh I might trim a little bit sooner or start the trims a little bit sooner than I would have under normal circumstances. But because I deployed so much of my cash and added more than I would have, Micron and Meta in particular, uh I might trim though, I might start trimming those way sooner than where I even think that they will be six months from now or or a year from now, just because I do want to rebuild the cash position at some point, um, back up to above 10%. That that's sort of like the 10% number in my mind is sort of like the minimum bar. So if I'm going below 10%, there's gotta be good reasons for it. And I feel like there was a good reason for it to have done that. Uh, and then my ideal cash position is around 20%.

SPEAKER_02 9:14

Okay, let's talk about Meta. They announced their new AI model uh called Muse Spark. Muse is the family of models, and Spark is uh the the specific model. Um so and this was the avocado model that was rumored a couple weeks ago that we talked about that was delayed. Have you played around with it? Um I know it let the news just broke today.

SPEAKER_01 9:44

What are your yeah, what are your thoughts? I saw the news. I haven't had a chance to play around with it. I did see a chart of like the scorecard, if you will, for okay, um, for for the model. And it seems like it's gotten pretty good scores based on based on what I found relative to uh Claude, relative to Chat GPT and Gemini. So um it it should be a premiere model. They're trying to sort of like position. I saw their press release around it. Um, this is exactly what we were talking about, that the the new team that Meta and Mark Zuckerberg have put together have not yet released anything. This is the first product that they have released in the AI field, essentially, with with the new team sort of starting from scratch and rebuilding their uh their full stack. And um they're pretty excited about it. And basically, Meta's price does not, uh, in my opinion, encapsulate any of their AI potential. So this new product is sort of like, wow, if it's a success, then it's only upside from here. And if it's a failure, well, the market was sort of pricing it in as zero and way too much CapEx spending anyway. So um it's it's all gravy as far as I'm concerned. Uh, did you get a chance to play around with it?

SPEAKER_02 11:01

Yes, I had an exclusive sent-down interview with the AI model. Um meaning I logged into, I think it was like meta.ai. Uh that's the website, not meta.ai.ai.com. Just meta.ai. Anyway, um, I had a little chat with it, got to know it a little bit. Um, I asked it what its differentiators were compared to the other models. Um, the two big highlights was it's supposed to be faster, hence the name Spark, and it's completely free to use, at least for now. There's no like pro plan from interesting at all. Yeah. Um, and I'm sure that's to come down the road. And I will say it was it did feel faster than other models I've used, but that might just be because I was looking for it as opposed to it actually being faster.

SPEAKER_01 11:57

How was the quality did you compare the quality of like asking the same question from both Claude and Minnesota?

SPEAKER_02 12:02

I didn't I didn't compare different queries, but I when I was talking to it, I asked it like, so are you avocado, like the avocado model? And it would not admit that it was the avocado model, even though that's been reported in the news. So, like I think Gemini, for example, would probably have given me the right answer for that, just because it would be looking at the news articles where I'm sure this is also looking at news, but it was probably prioritizing its own knowledge of itself and it doesn't know that it was avocado. So that was the only yeah, fluke that I ran into.

SPEAKER_01 12:44

Yeah, interesting. I mean, Meta at uh but by the way, meta was like hit uh prices in the 500s, which to me it just seems kind of crazy uh with a price earnings ratio in the uh in the teens. Um it it just uh like the the AI stuff has been so discounted for meta that the upside potential here, especially with glasses, uh, which this new model is going to go on their smart glasses as well, um, combine that with the vision that uh the glasses have. And you could have some very interesting things that only Meta can provide, that none of the other models can potentially provide. The problem with the smart glasses before has been that the model was a little too dumb. Like if if you asked it questions, if you know, um it had basic rudimentary information to respond with, but it wasn't nearly as good as like a chat GPT or Claude. So if you could get on par with that, the it just increases the usefulness of the glasses so much more because imagine if you you could have Claude with vision all the time, right? Like at any time you could tell uh Claude could see what you can see, right? And then you could ask the question. So um this uh this might have impact on Meta's uh smart glasses sales as well, which uh which I love. So the upside for Meta as a company, um and at this price point just seems incredibly good to me. Uh, which again is why I've been accumulating meta, and when the prices went down into the 500s, I had to add some more. So yeah.

SPEAKER_02 14:23

Okay, let's uh talk about Robinhood being announced uh as the trustee for these uh Trump accounts. Yeah, so I'm gonna there's a lot to break down here. I'm gonna start with what is the Trump account, and then we'll talk about the Robin Hood piece. Okay. So I think it's important to have that context. So the Trump account is based, it acts like a traditional IRA, but for kids, because the way a trish traditional IRA works is you need to have earned income to put money into it. So most kids do not have earned income. Uh, so this is a different mechanism to have some sort of um slightly tax advantage savings. Okay. Uh the reason why I use the word slightly tax advantage is because with the Trump accounts, there's no deduction for the money you put in. Whereas a traditional IRA, if you put in$5,000, that's a$5,000 write-off on your taxes. Right. Um, with the Trump accounts, you don't get that. Unless if you're a business, weirdly enough, a business can contribute to its employees' kids' Trump accounts, and then the business gets a write-off and then it acts as tax-free income for the employee. So there's that weird purposeful loophole.

SPEAKER_01 15:48

Right. Right. So they're encouraging basically businesses to contribute to their employees' kids. Exactly. Uh Trump accounts. Okay.

SPEAKER_02 15:55

That makes sense. Exactly. Um and there is a tax advantage for the individual, which is you do get tax-free growth in the sense of like if you sell the investment, you're not going to be taxed on the gains. You're only taxed when you take the money out. Now, the it's not that strong of a benefit, though, because you only have access to very specific investments in these accounts. Specifically, it's American-focused index funds. So in a typical IRA, you can invest in whatever you want. So you can be going in and out of stuff all the time. With this, I mean, the only thing I'm really seeing is like if you think the market's going to go down maybe because there's an impending war and you want to take money out, you could do that and then put money in. So it's kind of like a little stop-go, which is, you know, not necessarily the best way to do things.

SPEAKER_01 16:48

For that purpose, it doesn't have a tax disadvantage where like selling it, if you had some gains, you don't have to pay the taxes on it until you pull the money out. Okay, that makes sense. Exactly.

SPEAKER_02 16:57

Um, and then the last piece, uh, which is the biggest benefit in my perspective, is if you have a child that is born between 2025 and 2028, they will receive uh a thousand dollar deposit from the government to start them off. So it's just free money from the government. Very cool. Yeah, that's awesome. Yeah, and and the idea behind it is to get the younger generation uh invested in America, invested in the market. Um, because it's the best way to believe in the American dream and to learn about investing and to be a partial owner.

SPEAKER_01 17:38

Which, if you can't invest in anything, that's kind of annoying because you know there's little reason for you to have to go learn about investing. Um, I do hope that that encourages people to go learn and uh uh investing becomes more taught in schools, for example. Um I mean, like I think it's all around goodness. Is are the account so so Robinhood gets the advantage of being the trustees of these accounts? Is that is that what's happening here? So if you were to set up one of these uh accounts for your uh unborn child here, coming up. Absolutely well. Okay, okay. So um do you do you do you get that account at Robinhood or do you get to choose where you put it, or how does that work?

SPEAKER_02 18:25

Yeah, so the when the this news was announced, Robinhood stock didn't really move at all. And the reason is this isn't it's a positive story for Robinhood, but it's not that positive. So the two potential biggest benefits that Robinhood can get from this deal is either A, this is going to funnel users to use the Robinhood app because this is how they access the Trump accounts. Unfortunately, this is not the case. Robinhood is building a separate app in partnership with the National Design Studio, which is a completely other story, but a very interesting one, uh, to to promote the Trump account. So they're not these users aren't going to be going through Robinhood. So it's there's as far as I'm aware, they're not there's no like marketing play. Okay, that's interesting. The other potential big benefit would be if the money was uh stored in Robinhood, if they were the actual custodian, and that is also not the case. Uh the the government partnered with BMY Mellon to be the custodian. So Robinhood is really just the uh exchange broker tech partner. Um so in the short term, I don't really see much benefit for them. In the long term, they're starting this established relationship with the government that can maybe lead somewhere. The other piece to note is all of this is very temporary. Like BNY Mellon and Robinhood are the initial partners for these accounts, but eventually you'll be able to open a Trump account on any brokerage.

SPEAKER_01 20:07

Um basically called, by the way, a Trump account, or is it really a Trump account? Of course it is.

SPEAKER_02 20:16

Yeah. Um, at least for now. That's so funny. Yeah. So uh basically any brokerage that is already authorized to support an IRA can support a Trump account as long as they meet certain like technology and reporting criteria. So it'll it'll eventually be within Robinhood, within uh Vanguard Fidelity Schwab. And you could roll over your initial Trump account through this like BNY Robinhood partnership to whatever brokerage uh you use daily in time. That's not going to happen for a little while. Okay. So and and the the other the last or the final piece of this is a lot of Robin Hood investors on Twitter were was hoping Robinhood would be tapped to be the initial trustee, thinking it was going to be this big deal. And it turned out, in my opinion, to be an absolute nothing burger. Didn't hurt them though. And again, I think it's only positive stuff, but it's just not as positive of a story as we were hoping.

SPEAKER_01 21:21

The the big question is, will these kids be able to buy Trump coins in the in the Trump accounts? Right. Exactly.

SPEAKER_02 21:29

I think it it's American indexes and Trump coins.

SPEAKER_01 21:32

Trump coins, okay. I mean, they need to have some exposure to crypto at some at some point.

SPEAKER_02 21:37

So preaching to the choir. They there there are there are going to be ways to own specific stocks. You don't have control over that. It's going to be like companies can um potentially like donate their shares to Trump accounts. I'm not sure if I don't think there's any official deals on that. But I they they've been talking about that as a as a piece. So if Apple wants it to get one, it's all around goodness.

SPEAKER_01 22:06

Like it's good good for the parents, good because you know they're basically building a savings account that I presume there's some regulations around being able to touch it by the parents. Yes. Um so uh the kids have some kind of savings when they turn 18 that they could use to go to college or you know, if they're going into the workforce or or whatever. Uh it encourages um it encourages savings, first of all, as well as investing, which is which are fantastic things to be encouraging. And then it who knows, it might even encourage having more kids, which I think might be a good thing, especially in highly developed countries where the population numbers are going down. So uh all around, I see it as goodness. I'm actually happy to hear that it doesn't benefit a single company like Robin Hood, despite being a Robin Hood shareholder, because that just seems like a very bad thing to do from a government standpoint. So um I I like the fact that they uh it it it makes it seem more legitimate, honestly, that uh that all of the financial institutions can potentially participate in it if uh uh if that's the case. So that that's that's all around goodness as far as I'm concerned. Good. I mean good summary.

SPEAKER_02 23:21

The the real winner is to be in wine melon as being the initial cons custodian, getting a thousand dollars for every child born. I don't know again if it's gonna go to 2028, but at least for 2025 and 2026. Um that'll that'll but again, but I think I don't think um it's that much of a lead because all these other companies will be able to sign up, participate in it as well.

SPEAKER_01 23:49

Yeah. That that's yeah, very cool. Okay. So that that's my that's my rant. Okay. That wasn't the rants, technically.

SPEAKER_02 23:58

Yeah, it was like educational, actually. That was good. It's uh it's an educational rant, right? Rants don't have to be negative, rants can be positive. All right, all right. No, no, I mean it was it was good.

SPEAKER_01 24:09

It's whenever you're talking and not breathing, because you're just well I I I view rants as more like you're complaining about something, right? Like not you personally, but like when I'm ranting, I'm I'm usually complaining about you know the market not understanding Micron or whatever it is, right? Like Meta's uh you know, Meta's uh AI is being discounted to zero, right? Like that's how I I I view rant is like I'm complaining. There's a complaint in there somewhere where like I'm uh I'm fundamentally complaining that the market does not understand what I understand. That's my preference.

SPEAKER_02 24:45

Okay, so I I'll I'll get I'll give you a rant. I'll give you a rant right now. So let's we are we talked about this last week, comparing Rocket Lab to SpaceX, but you had a great post on X um comparing their their market cap. So why don't you rant about that?

SPEAKER_01 25:04

Uh on about SpaceX and Rocket Lab. First of all, why do I feel like a drug addict where you're like, oh, I'll give you a little rant. Do you want to hit it? I know you're hit for a rant, right? I see you. Um yeah, so I I I posted basically that uh you know, you know, Rocket Lab at$37 billion uh feels like a way better investment than SpaceX at$2,000 billion or$2 trillion uh market cap. And the reason for it is because the law of large numbers, the both companies are being valued extremely high relative to their revenue. Rocket Lab has roughly, you know, 600, uh 650 million revenue run rate. Um and it's getting a$37 billion uh uh market cap, which is a pretty, I think last time we looked at it was around 60 times revenues. Um and uh and um SpaceX is also getting somewhere around 70, 80 times uh revenues. So from that perspective, they're not actually too far apart, where like one is getting 500 times revenues, one is getting five times revenues or whatever. But the law of large numbers is what makes me uh like Rocket Lab significantly more than SpaceX. And the reason for it is because it is much, much more difficult to grow a$2 trillion market cap to be 10 times larger than it is to grow a$37 billion company to be 10 times larger, right? So um the comparison I made is that the entire uh public uh market, meaning every single company that is public in the United States, collectively, uh, that includes Apple, Nvidia, Google, you know, Amazon, plus the other 11,000 companies that are public, collectively they're worth approximately$60 trillion, right? Um, in order for SpaceX as a$2 trillion company to become a$20 trillion company, it'd have to be worth approximately one third of the market at today's size of the market, right? Which is which means that, you know, like obviously no company is worth one third the entire market. So the market itself would have to grow significantly uh in order for that to even be for a 10x opportunity to be even possible for SpaceX. Um so you know, 10x possibility for uh, and that's not unique to SpaceX. That's true for you know Nvidia or uh Apple and Amazon and Google, right? That's part of the reason why I'm not even in uh some of these companies, um, is because their upside potential is relatively capped. Whereas when you look at a company like Rocket Lab uh at 37 billion, uh 10xing means it would only have to become a$370 billion company. Uh and uh and$370 billion company is going to be at less than a quarter the size of SpaceX uh IPO. So the possibility of uh you know Rocket Lab 10Xing over the course of the next 10 years, for example, seems much greater than uh than SpaceX. And that's why uh I had said that I'm much more excited about Rocket Lab uh than SpaceX. And of course, you know, X is full of people with commentary and opinions, and I'm one of them. So I got a lot of heat in both directions, uh, you know, like or support for that idea, but also heat from a lot of SpaceX and Elon fans who are like, you're crazy. Um and and that seems to be sort of like par for the course, but yeah, yeah. What are your thoughts on that?

SPEAKER_02 28:46

No, I I think it's a great point and a very like there's just physical dollar limitations with what these companies can do at a certain point. And I think it's important to recognize that and call that out because I don't I think a lot of people miss that, right? Um like they don't they don't think about the market cap at all, they just look at the stock price, which doesn't really tell you anything.

SPEAKER_01 29:10

Right, right. Yeah, it's it's funny because I kind of want to do a stock explainer video where um you you know you kind of explain that the number of shares of the company is completely in the hands of the company. Uh meaning a company can have a million shares, they can have a billion shares, or anywhere in between, or or even more than a billion in many cases uh now. But um uh but the stock price times the number of shares is what gets you the market cap. And that is far more important thing than just the share price, right? So um what when you I can't tell you how many times somebody will be excited about a$10 stock versus a$100 stock. Uh and my immediate reaction is why? Because just because that something is ten dollars does not even mean that it's valued at a lower valuation than something that's at 100, because it all depends on how many shares they have.

SPEAKER_02 30:04

So uh yeah, it's yeah, that's probably one of the most common misconceptions in investing.

SPEAKER_01 30:13

There's an assumption that things uh priced at around you know, the same stock price probably have similar valuations, uh, which is an easy thing to um just assume if you don't know anything about investing in stocks in general. But yeah. What what were you gonna say?

SPEAKER_02 30:30

We we got a listener question uh asking about Rocket Lab specifically. They're asking, I don't have any position in Rocket Lab. Is now a good time to enter?

SPEAKER_01 30:44

The age old question. The age old question of uh you know, yesterday would have been a better time to enter. I think that's a good joke of me. I wonder, did you come up with that on your own? You you had mentioned that uh prices were lower yesterday, right? So they certainly were. But uh it it's it's hard to determine when is a good time to enter. Um I think that uh the time that I was accumulating Rocket Lab, it wasn't trading at 60 times revenues. And um generally it's hard for me to invest in things that are that high of valuations because so much of the upside is built into the stock price. Um, I still do uh, you know, Rocket Lab still makes up the number one uh position in my portfolio. So I haven't exited the position despite the fact that uh it's 60 times its revenues, because of how excited I am about the future of this company uh and their neutron uh rocket that uh is coming and going to compete with the Falcon 9, uh, and the fact that um space in general is going to grow so rapidly in the coming years. And now, if uh Elon and the proponents of data centers in space are correct, then we're gonna need even more access to space. And there's literally only three companies that uh US-based companies that are doing a great job here. Uh, one is SpaceX, uh, one is Rocket Lab, and uh Blue Origin is the only other one from uh Jeff Bezos. And basically all these rockets are going to be sold out in terms of, you know, this is so similar to this sort of like memory issue, right? Uh access to space is sold out for uh the foreseeable future, just to get all of these things into space, all the satellites that we want to get there uh into orbit. So um they're constantly backlogged and delayed because of the fact that uh there isn't enough rockets to put them up there. Uh so they're in an amazing position to continue to grow for a long time. And uh that's what I love about them. So even if you were to overpay for Rocket Lab today, and again, this is just my opinion, but I suspect that if you just waited it out, meaning that this is a great company that uh the price might be a little high right now, but if you waited it out, the price will fix itself down the road. And um, and because price is unpredictable, the price might never go down from here. Who knows? Like that, like those things are sort of hard to predict uh in the short term. But uh if you were to sort of take the long-term approach five years from now, the price almost certainly would is is gonna be higher than today. That's my perspective perspective on it.

SPEAKER_02 33:23

Yeah, my take if non-investment in bias, if I didn't have a position in Rocket Lab, was interested in investing investing in them, um how would I go about it? I mean, they're down roughly 40% from their all-time highs. Um, the stock price has been fairly flat. I mean, it's definitely fluctuated, but fairly flat since uh February, if you zoom out um on their chart. Like I I think now is a totally fair time to buy, you're not buying at an all-time high, or you're not you're definitely not buying at the best price ever. So I would potentially get in here. Again, not investment advice.

SPEAKER_01 34:06

Well, some things that could affect it, by the way, is that if the SpaceX IPO uh is a success and goes up even further from$2 trillion, that could pull up Rocket Lab with it as well. Um, and if it's if it's a dud and it ends up uh going down from wherever it IPOs, it could also hurt uh uh Rocket Lab because then all of a sudden a lot of people who are enthusiastic, uh they love space and they want to invest in something space related, might choose to invest in SpaceX as opposed to Rocket Lab. So um right now, you know, my view is that Rocket Lab is the much, much better investment. Um, even if you could invest in SpaceX at, let's say, one and a half to two trillion dollar uh price tag. But uh but that could change, you know, if uh if SpaceX goes public and it becomes a$700 billion company, now you know that the perspective might be a little bit different. Much easier to 10x a$700 billion company, by the way.

unknown 35:08

Yes.

SPEAKER_02 35:09

Uh we're gonna get to more listener questions shortly. So if you have any listener questions, feel free to post it in the chat. Uh I just have one question for you, Hamid, and then we'll get to those. Um so I was curious, what are some red flags that make you walk away from an investment that might have strong fundamentals?

SPEAKER_01 35:37

Yeah, so um the the one investment that I can think of that had strong fundamentals that I walked away from uh more recently was uh was SMCI. And if you remember, I got into SMCI because they're building the infrastructure for uh AI data centers. They they have the uh rack systems, the power systems, the cooling systems, uh, and their revenue growth has been pretty tremendous. Uh I got into them after there there was some like accounting issues, um, but uh there was audits done on that. They it seemed okay. The uh the market had soured on the company, but the potential growth for the company, especially because of AI data centers coming on board, was going to be so uh so extensive over the you know for the foreseeable future that I thought this company was going to do really well. The red flags for me became the CEO. Like just listening to him talk, and then in the earnings calls, listening to his CFO talk, which seemed to say some things, and then he seemed to say some things that may have contradicted, but it was also kind of hard to understand him. Um, I sort of took the route of better safe than sorry. Uh, and uh I decided that they don't seem to be in sync, his CFO and uh uh the the founder CEO. Um so that was a red flag for me. And him not being able to articulate his vision and story and the and the why so there was some discrepancies uh in why they were falling short of expectations, for example, is why I ended up exiting SMCI. And I just you know decided it doesn't matter. I'm just gonna exit 100%. It turns out that the the uh stock price has tanked since then, despite you know having a pretty substantial revenue increase last quarter. So I haven't been keeping track of them either. But so that that was one uh where it was a very specific thing. I just lost uh lost trust in to in the CEO. But other things that can potentially be red flags is if the uh the the product is not getting market acceptance, right? If, for example, here here's an here's an example of a stock I own today, which is Meta, right? If the only reason I was buying Meta was because of AI, uh and uh their AI products were not getting accepted by the marketplace in the type of numbers that they need in order for that uh revenue to actually be meaningful, then I would probably exit my meta investment. But that's not the only reason I own Meta. From my perspective, Meta's uh AI upside is only gravy. The fact that their core business, the the Instagram, Facebook, and WhatsApp business is growing at 20% annually, and it's already a$200 billion business and it's a cash-generating machine. Um and then they, you know, you know, that in itself at a PE of 17 makes it an extremely attractive company. But then the fact that they have the AI investments is it's just uh gravy. But um the the other thing I like about Meta um is that Mark doesn't just give up, right? Like he he's been trying this sort of like series of products, uh, and from a Wall Street's perspective, wasting tens of billions of dollars on ARVR and now potentially wasting tens of billions of dollars on AI. Their profitability is despite all of that, right? Like the the fact that you know they're as profitable as they are, despite wasting tens of billions of dollars from the market's perspective, uh, is pretty incredible. So um, but he's not giving up. He he does things that uh uh again, I like, which are um, you know, so it would be a red flag if I was just looking at product uh success rate. That would be a red flag. They haven't had the kind of success that I'd want them to have in AI or VR. The Quest uh, for example, products have been lackluster in terms of sales performance. I'm a Quest user, so I like the product. The product is great, but the sales are just not there. Yeah, but there's also a lot of things about the product that are not so great. For example, Quest Meta, uh like what was it, Horizons? Um was horrible. The Quest Pro was a horrible product. So their execution on the uh uh video glasses, the way in which they sold them by like forcing you to go through Best Buy demo, and then like there was no ability to even buy them correctly or on the spot. There was a there's been a lot of misses as far as Meta is concerned, but I'm giving them a pass because their core business is so strong, right? But that would be a major red flag for me. Um, but despite all of the misses, he does make pretty substantial uh shifts and changes in personnel, in strategy, that every time it has an opportunity to fix those uh yeah, those issues. So um I like that about Zuckerberg and um still excited about Meta as an investment. But those are the type of red flags I look for. You know, like if uh if there seems to be a disconnect between uh product acceptance and what the expectations were, if I lose trust in the founder or the business acumen of the founder, that that or CEO, uh that's a problem.

SPEAKER_02 41:19

Okay, let's move on to listener questions, Adrian. What do we have? Let's do it.

SPEAKER_00 41:26

Okay, let's can you guys hear me?

SPEAKER_03 41:28

You can. Hi Adrian.

SPEAKER_00 41:30

Hi. Um so let's go to um I'm trying to think. Here, let's do this one. This is a question for Dustin. Dustin, why won't you walk away from EOS? Despite good revenue, the management has proven not trustworthy. Isn't that a red flag?

SPEAKER_02 41:51

That's a good question. Yeah. Um, yeah, so basically uh what happened was uh EOS completely missed uh their guidance for the last earnings or expectations for the last earnings. Um and the market Was it their own guidance or was it Wall Street's expectations? It was their own. Yeah, it was their own guidance. Yeah. Okay. Um and they reiterated like a month before, two months before that they felt they were still on track. Um basically. So then the market felt like they they were decepting uh or deceptive. Um and there was there was some potential like malpractice uh in regards to investor relations. My take on it being a newer investor in EO, so I I haven't been following them as closely necessarily, but I felt like um they were maybe just over-optimistic. Um and they need to learn to underpromise and over-deliver. And I talked about this on the podcast when it happened uh several weeks ago. The other piece of like, why am I not walking away is the it's a very small position in my portfolio. It's I think under 2%. Uh yeah, it's under one and a half percent of my portfolio. And the price has really uh got uh was really beaten down after earnings, and typically that's just a buying opportunity. I haven't bought too much since the earnings. I'm I'm watching them right now. Um if the price goes down significantly more, I'll buy more. Um, but everything is in from my perspective, isn't it is intact outside of the price. Um, like the revenue was good, it just didn't hit guidance. Uh the product is good. Um, I think they're executing well in regards to the So they're building a new factory. Uh, they're overhauling uh the mechanics of how they build these batteries. So there's a lot of positive momentum outside of them missing the guidance. And the guidance they they set at the annual level. So it's not that they set the guidance the previous quarter and it was a big miss. They set the guidance a year ago and then they kept reiterating that they were on track for it. So with that said, I could change my opinion on management as time moves on, but I am not in the camp that the managed them management isn't trustworthy. It's that they're just overly optimistic. And that's a problem, and they do need to fix that.

SPEAKER_01 44:43

But I have a little bit more grace there. You know, speaking of management having uh or being too optimistic, I'm I'm uh I've been very critical as uh you know about Tesla and Elon, you know, being way too optimistic with his timelines and promises and then underdelivering. And uh, and in my calculation, that pace has only increased, and he's more and more wrong over like you know, 10 years ago he was making promises, or 15 years ago he was making promises and um and delivering late, but uh but they weren't as late and the promises weren't as grand, and then he eventually was delivering and over-delivering uh with you know, like the Tesla model S, for example. You know, he had promised it to be delivered by 2011 or you know, time frame, and then it ended up being almost a year late, 2012. Uh, from when he had promised it in 2008-nine frame nine time frame, he was only off by just a few months, essentially. Um, and then the car itself ended up being way better than what he had promised, and it just kept getting better and better. Uh, Tesla Model uh three was a similar type of story where the uh promise and delivery timelines were roughly on par. He was like maybe six months late to delivering 5,000 vehicles per week. Um that took that ramp up took took longer than he had been promising. But those types of promises were like relatively minor. Uh, whereas in the past few years, he keeps double downing on these sort of like promises that are pretty extravagant, like a million robotaxis by the end of next year, every year for the past five years. And uh that with the launch of robotaxis in 2025 in June, he it said that they're gonna cover like 90% of the US with robotaxis by this time, this year. So um those promises not coming to fruition just seems a little bit um uh red flaggy uh for sure, especially as they just keep increasing. Optimus was supposed to be uh having deliveries more than a year ago, and even that continues to get delayed. Um, so it it's it's it's one of those red flag things for me now. So you know, I no longer can trust what Elon says, you know, just from the standpoint of um promises and deliveries have been too too far apart.

SPEAKER_02 47:17

Right. Yeah. And I think if if EOS has a longer history of promises not being met, I would definitely exit the position there. But right, right. It's it's too early to say management, I need, you know, I'm not gonna trust management completely. Right. Makes sense.

SPEAKER_01 47:36

Yeah, you have to give give them a little bit of leeway, right? Okay, yeah, let's do it, Adrian.

SPEAKER_00 47:42

Okay. We kind of talked about this already, but how do you not get FOMO with maybe other plays doing better, such as photonic substocks or industrials that were going up over the last few months as high beta was getting hit?

SPEAKER_01 47:59

Um yeah, so there's always going to be something that's going to do better than your stocks. Um and uh and that's always obvious when you look at his historical, but it's not obvious which one's gonna do better going forward, your stocks or some some something else. So um oftentimes people jump ship off of their own convictions of something that they own, um, and buy something that has had a history of like going up, but then they're buying it at the highs, and then that ends up going down as their the stock that they exited goes up. So this is sort of like a common um meme that you know, like now that I, you know, like the all the stocks that I uh bought are you know tanking, all the stocks that I sold are you know going up. Uh the reason that meme holds true is because of FOMO, right? Um in in the stock market, I think you just can't I personally don't invest, I shouldn't use words like can't or you shouldn't. I personally do not uh invest via FOMO. Um and I generally don't have FOMO uh when it comes to investing. I I might joke around that I had FOMO about something or or another, but uh but that's just not my investment style. I I have to be convinced that something, a company is a is a great company or at least a good company, and the price has to be good or great if it's only a good company. So uh that that's the perspective I have on it.

SPEAKER_02 49:41

I think the antidote to combat FOMO is two different things. I think it's being grateful and being confident. So being grateful meaning if your portfolio is doing well, even if it's not doing the best or close to the best, you should be grateful for that and grateful that you that you were able to execute that. Um and the other piece of uh being confident is be confident in not only the decisions you're making today, but be confident that there's going to be more opportunities in the future. Like there's thousands of opportunities, right? So you like that this is why I one of the many reasons I feel like I've been talking about this a lot. I don't invest in IPOs. Like it's to me just a complete FOMO trap. I know there's going to be plenty of non-IPO opportunities that that's really that will come across my plate. So I think those are the the two the two pieces that I cling on. And it's not something that necessarily has come naturally to me. Like that that's a muscle I have exercised and learned to grow over time.

SPEAKER_01 50:53

Yeah, absolutely. It doesn't come like actually most of investment, uh investment things don't come naturally, right? It's it's something you have to build over time. Typically, it comes from getting burnt with something, right? Like in the dot-com bust, I learned about valuations matter, right? It doesn't even matter if you just uh you know are investing in great companies, even the great companies' valuations got hammered hard, like Amazon down 95%. That was a great company. Uh its stock price went down 95% and didn't recover for eight years. So uh for people who are overpaying for that stock price, uh once it got hit, it went it got hit hard. So yeah. Adrian, do we have any? Yeah, let's do it.

SPEAKER_00 51:39

Okay. Rivian has been in consolidation mode. When do you think this one breaks out? Question for Hamid.

SPEAKER_01 51:48

I I mean again, like these are things that I don't know timing-wise, I can rarely predict them. Um and this sort of goes back to the sort of FOMO question. I've hold held Rivian for a couple of years um at roughly the same band of price price range, um, sub-20, let's say. Uh and uh and in that couple of years, the story just keeps getting better and better. And I thought the story was great two years ago, right? But now we're on the verge of the R2 coming out. They have way more sales centers, they have way more service centers, they have way more charging network, they their existing vehicles have gotten better. They now have the uh AI chip, then they're now uh building uh and much closer to having self-driving vehicles than they ever have been in the past. So the story has gotten significantly, maybe an order of magnitude better, but the stock price hasn't moved for two years. But, you know, okay. Uh I'm I'm patient, right? Um, and to to the question of like, well, what if you could have been uh investing that money in Robinhood or Rocket Lab instead or whatever, something that has gone up? It's like there was no way for me to have known that those two would have done as well as they did, right? Like so uh switching from, let's say, uh Rivian today to Rocket Lab uh because of its historical performance. Well, now going forward, it might be Rivian's turn that it starts to do well because uh the market starts to recognize its potential. Um and and I use the term uh turn lightly because you know obviously these are not turn-based uh events, but um but but yeah, I I have no idea when Rivian is going to have its day, but I feel like it will eventually, and that's the reason I hold on to it. Uh and accumulate and have accumulated to it uh over the past, let's say six months, because the price has gotten very attractive, and I just wanted to own more of it as the story just keeps getting better. So um hopefully that helps put things in perspective.

SPEAKER_02 53:59

Yeah. No one really knows, obviously, when things will break out or if they'll break out at all. What we've said on or what I've said on the pod in the past is it wouldn't surprise me if the market doesn't recognize the R2 story until either the R2 is in customers' hands or until we start getting sales numbers uh from R2 in uh earnings reports. Um but that doesn't mean the market needs to move when those things happen. It would just, you know, make sense if the market is waiting for further confirmation there. Right, right.

SPEAKER_00 54:36

Okay, I think we're uh we're good on questions today, but I did we did receive uh request, kind of what you guys were talking about earlier, um, to kind of build like an explainer of basic metrics and everything. Um, so we do have requests for that. So we should do it in the near future.

SPEAKER_01 54:57

That okay, that's good to know because I've been it's I've been mulling over in, you know, having some kind of explainer that um uh maybe explainer series where we explain you know, just go from the basics of what stocks are and you know, why they're valued the way they are, what the market cap of a company is uh to price-earnings ratio, what uh the difference between revenues and profits and gross margin and cash flows are, um and how the market often is looking at uh at valuing companies that are growing relatively quickly and why fast growing companies get valued so much higher. Uh right. All of these things are relatively easy to explain. I bet you we could have like a 15-minute explainer video that could explain most of these concepts. Should we do it?

SPEAKER_02 55:50

Might as well. I feel like even if I say no, we're gonna do it anyway. So, yes, we should absolutely do it.

SPEAKER_01 56:00

But this is something you are excitedly saying. Yes, absolutely. I'm very excited to explain the movie works. I am very excited. It may not look like it, but I am jubilious inside. Yes, I am very, very excited. Try to contain yourself, Dustin. Uh all right, everyone. Thank you very much. Yeah. Bye. Bye, bye, Dustin.