Red Flags at OpenAI — How One Company Could Burst the AI Bubble

Transcript

Speaker 1 Adobe Acrobat Studio, so brand new.

Speaker 2 Show me all the things PDFs can do.

Speaker 3 Do your work with ease and speed.

Speaker 4 PDF spaces is all you need.

Speaker 1 Do hours of research in an instant.

Speaker 6 With key insights from an AI assistant.

Speaker 7 Pick a template with a click.

Speaker 8 Now your prezzo looks super slick.

Speaker 9 Close that deal, yeah, you won.

Speaker 10 Do that, doing that, did that, done.

Speaker 11 Now you can do that, do that, with Acrobat. Now you can do that, do that.

Speaker 12 With the all-new Acrobat. It's time to do your best work with the all-new Adobe Acrobat Studio.
Studio.

Speaker 13 As marketing channels have multiplied, the demand for content has skyrocketed. But everyone can make content that's on brand and stands out with Adobe Express.

Speaker 13 You don't have to be a designer to generate images, rewrite text, and create effects. That's the beauty of generative AI that's commercially safe.

Speaker 13 Teams all across your business will be psyched to collaborate and create amazing presentations, videos, social posts, flyers, and more.

Speaker 13 Meet Adobe Express, the quick and easy app to create on-brand content. Learn more at adobe.com slash express slash business.

Speaker 14 What do walking 10,000 steps every day, eating five servings of fruits and veggies, and getting eight hours of sleep have in common? They're all healthy choices.

Speaker 14 But do all healthier choices really pay off? With prescription plans from CVS CareMark, they do.

Speaker 14 Their plan designs give your members more choice, which gives your members more ways to get on, stay on, and manage their meds.

Speaker 14 And that helps your business control your costs because healthier members are better for business. Go to cmk.co slash access to learn more about helping your members stay adherent.

Speaker 14 That's cmk.co slash ACCESS.

Speaker 15 Today's number 63. That's how many hours Americans spend in traffic each year.
Ed True Store, I was driving down in Florida with my 13-year-old son, and of all things, a dildo hit the windshield.

Speaker 15 And trying to protect his innocence, I said, Oh my God, did you see that bug? And he said, Yeah, I can't believe bugs have dicks that big.

Speaker 15 What'd you do last night, Ed? What'd you do?

Speaker 16 I went to your book launch, Scott.

Speaker 15 Say it more. You're not getting up that easy.

Speaker 16 I had an incredible time.

Speaker 16 I met many of your friends who are wonderful people. You had your 92nd Street Y

Speaker 16 performance with Ben Stiller. I don't know what you'd call it, but I do know that it was the fastest sellout in the history of the 92nd Street Y.

Speaker 15 I don't like these commercial metrics, Ed. That was so nice, wasn't it? I was really happy with that.

Speaker 16 I had a great time. It was great to see you.

Speaker 15 You forgot that I was on the daily show right before that. I forgot.

Speaker 16 Yes, that's a very good point. You were on the daily show.
show.

Speaker 15 Second time I started crying this week, Jordan Clepper actually had to reach across and grab my hand.

Speaker 15 That's a good look.

Speaker 16 I'm a little annoyed that they're not putting you on with Jon Stewart, though. They're giving you sort of like the Jon Stewart's Ed Elson's to interview you.

Speaker 15 What's going on with that? Jon Stewart intimidates me. I think I'd be too nervous.
But yeah, I love, I love Jordan.

Speaker 15 He just, his type of humor really, and I get the sense, I kind of relate to him that maybe he was tall and didn't have a lot of social capital in high school.

Speaker 15 So I sort of relate to him, like a little too tall.

Speaker 15 And he's got a five-year-old kid. Yeah, God, I'd love.
I think they've done such an amazing job with their backup cast. God, how do I find better people? Memo to self, how do I get better people?

Speaker 15 Yeah. I'm about to.

Speaker 15 I'm about to head on the pivot live tour, seven cities in seven days. When is the markets live tour happening? We'll do one next year.

Speaker 15 I think we'll do one in Q1 of next year. So

Speaker 15 if you're watching this YouTube, tell us which cities we should go to. I just thought it was so funny.
We're doing Toronto, D.C., New York, Boston,

Speaker 15 Chicago, San Francisco, LA. And I thought the funniest comment was, why do you hate Arizona?

Speaker 15 I thought that was so funny.

Speaker 16 We'll do it. Phoenix, 2026.
Yeah.

Speaker 15 So if for those of you watching this prod, we're going to be doing a Prop Gene Markets live tour. And

Speaker 15 whoever has the most comments from any city, we don't care if it's Madison or, I don't know, whatever, Little Rock will come to that city if we get a lot of comments. Who are going to be the groupies?

Speaker 15 Well, this is the problem. This is what I'm scared of.

Speaker 15 Don't tell her I said this, but whenever we do a live tour, more people come up to see me than Kara. And it really pisses her off.

Speaker 15 It really pisses her off.

Speaker 15 And I have this really awful dread that the same thing is is going to happen to me with you.

Speaker 15 That if a line is at any point longer to get a selfie with you, I'm going to freak the fuck out.

Speaker 16 There was a very interesting moment for me when we had the South by Southwest.

Speaker 16 event where someone had your book and they brought it over and they asked me if I could get they could get my signature and I was like what am I supposed to do with this because it was your algebra of wealth I was like no I can't do this you gotta get you gotta give this to Scott.

Speaker 15 I can just sense it. People are constantly coming out to me and like on the street.
They're like, Prof.

Speaker 16 G, where's Ed?

Speaker 15 Where's Ed?

Speaker 15 And

Speaker 15 all these women and gay men are like, so is that single?

Speaker 15 Is Ed? Is that sequel? Because, you know, I don't, just a crazy idea.

Speaker 15 Do you want to set up a total stranger who just accosts you on the street with your podcast co-host?

Speaker 16 That's a great idea.

Speaker 16 Well, look, I'm very excited for that.

Speaker 16 I think I need a few more years before I'm at that level, Scott.

Speaker 15 I'll be honest with you.

Speaker 16 I don't think I'm anywhere close.

Speaker 15 Brother, I hate to say anything nice about you, but you are literally like Muhammad Ali meets,

Speaker 15 I don't know, LeBron meets Messi at your age compared to where I was. When I was 26,

Speaker 15 I was... Just out of grad school.
I had started a market research firm. I pivoting to a strategy firm.
I was working out of my apartment. I had no idea what I was going to do.

Speaker 15 And I was, my highlight was I used to take my dog for long walks. And my girlfriend at the time was supporting us.

Speaker 15 And she wasn't that happy about that. She was, she was pretty, she was pretty cool about it, but I don't think she was really happy about it.

Speaker 15 You know, when she came home, she wouldn't be like, do me, you.

Speaker 15 indigent loser.

Speaker 15 That wasn't an enormous turn on for her. I'm starting a a market research i mean a strategy i mean an e-commerce company the internet the internet the internet

Speaker 15 i was

Speaker 15 i was i don't want to say i was flailing but i was definitely doing what you're supposed to be doing in your 20s i was workshopping my career trying to figure out what to do so you're i was thinking though 26 is the age that you started

Speaker 16 uh it was profit right profit yeah yeah yeah which turned out to be a massive success i feel like 26 was kind of a big that was a big year for you, no?

Speaker 16 I haven't started a company. I mean, I've sort of semi-started a podcast, but.

Speaker 15 Well, I don't know.

Speaker 15 You kind of own this little business and you're extracting the majority of the margin by telling me you're having coffees with Andrew Ross Sorkin, but don't be threatened.

Speaker 15 As we're going into bonus season, I love how you dropped that little gem. Boom.

Speaker 15 But yeah, 26 was a huge year for me on a lot of levels because

Speaker 15 I moved in with my girlfriend.

Speaker 15 I got a dog, which is the first time anything was dependent upon me for like, like, I remember thinking at one point, you know, my friends were like, I got one out and we got ridiculous fucking drugs.

Speaker 15 We're like, let's go to Vegas. And I'm like, yeah.
And then I'm like, oh, wait, if I do this, my dog will die.

Speaker 15 If I head to Vegas right now for two days, there's a living being at home that is dependent upon me. And also my mom, that was the year my mom got very sick.
That kind of changed my life.

Speaker 15 Yeah, that was a big.

Speaker 15 That was a wow yeah that was a lot of big things yeah it was the early 90s we were coming out of recession get this when i graduated from business school from the house school of business 40

Speaker 15 of uh the graduates had a job on graduation day

Speaker 15 and now when the kids graduate from stern they like it's whether they have three offers or five offers i wonder if that's going to change because all the things we've been talking about in ai yeah exactly i think that's just about just beginning to change now in the last year or so i would say there you go maybe that's a good segue into what why people actually listen to this podcast Should we do that?

Speaker 15 That's a good idea. Yeah.

Speaker 15 Let's talk about what we're supposed to talk about.

Speaker 17 Now is the time to buy.

Speaker 17 I hope you have plenty of the wear with all.

Speaker 16 It was a week of red flags for OpenAI.

Speaker 16 First off, the deposition of OpenAI's co-founder Ilya Sitskeva was released, which shed new light on his time at the company and the drama around Sam Altman's firing.

Speaker 16 In the deposition, Ilya referenced a memo stating that Altman was fired due to a quote loss of confidence and also alleging a quote consistent pattern of lying. So that was not good for OpenAI.

Speaker 16 Meanwhile, Sam Altman appeared on Brad Gerstner's podcast. We've, of course, had Brad on our podcast too.

Speaker 16 And Brad Gerstner pressed him about OpenAI's financial commitments, their spending plans, and he was quite visibly frustrated.

Speaker 15 Let's look at the clip.

Speaker 18 You know, how can a company with 13 billion in revenues make 1.4 trillion of spend commitments? And you've heard the criticism, Sam.

Speaker 14 We're doing well more revenue than that. Second of all, Brad, if you want to sell your shares, I'll find you a buyer.

Speaker 15 I just enough.

Speaker 14 Like, you know, people are, I think there's a lot of people who would love to buy OpenAI shares. I don't, I don't think you would.
Including myself.

Speaker 14 Including myself.

Speaker 14 Who talk with a lot of like breathless concern about our compute stuff or whatever that would be thrilled to buy shares.

Speaker 14 So I think we could sell your shares or anybody else's else's to some of the people who are making the most noise on Twitter, whatever, about this very quickly.

Speaker 16 So, that wasn't great.

Speaker 16 And then, after that, the company's CFO, Sarah Fryer, she went viral after she told the Wall Street Journal that OpenAI is seeking support from the federal government to help finance future data centers.

Speaker 16 She later kind of walked those comments back, but that is what she said in this interview.

Speaker 16 So, Scott, we've discussed OpenAI's precarious financial situation, and we've discussed that at length, the fact that they're generating, as Brad said, around $13 billion in ARR, according to the most recent reports.

Speaker 16 Sam Ottman says it's more than that, but they're also spending more than double of that currently. And the plan is to spend more than a trillion dollars over the next several years.

Speaker 16 So the question we've been asking repeatedly on this podcast, how on earth are they going to pay for all of this? Well, Brad Gerstner asked that question directly to Sam Ottman.

Speaker 16 You would think that he would have at least a canned or rehearsed answer.

Speaker 16 His answer was, I think, horrendous. I mean, I couldn't think of a more defensive, frantic,

Speaker 16 kind of

Speaker 16 sociopathic response is what I would say. If you're trying to shake investors' confidence in open AI, I would say this is how you do it.
Flustered, concerned.

Speaker 15 very triggered, etc.

Speaker 16 First, let's just start with your reactions to those three things, the deposition, what we learned about the firing, the appearance on Brad Gerstner's podcast, and then, of course, the CFO saying that they are going to need a federal backstop.

Speaker 15 All of this is a signal headed towards an IPO.

Speaker 15 The company is definitely going to file, in my opinion, sometime in 26 because the valuation based on the revenue multiple is getting to the point where no institutional investor is probably going to want to buy more.

Speaker 15 So they stop at the last stop of where it could potentially become a meme stock, and that is disconnect from any underlying valuation metrics, and that is the retail market.

Speaker 15 So I do think they're going to go public. When you are on an earnings call and someone asks you a fair question,

Speaker 15 no CEO that I've heard

Speaker 15 who holds on to his job turns around and says, well, if you don't like it, you can sell your shares.

Speaker 15 That could not be, that's a rare misstep for Sam.

Speaker 15 And I think it probably reflects some of the stress he's under right now, probably having to get subpoenas and depositions where his co-founder is saying that he can't be trusted, that he lies, and created a chaotic environment.

Speaker 15 That can't be fun for the guy when he's trying to,

Speaker 15 you know, justify a half a trillion-dollar valuation, getting incoming from the press, is somehow trying to wallpaper over the fact they said they weren't going to do porn, but wait, someone told me I can increase usage by 20% if I offer porn.

Speaker 15 I mean, the guy has got to be under a lot of pressure right now.

Speaker 15 And this was a moment where he lost his shit shit from an investor standpoint. You don't tell investors, we'll sell your shares, because guess what? They will.

Speaker 15 If you can't answer, that is a fair question.

Speaker 15 And it should have been something along the lines of, well, actually, if you look at other companies that have become trillion-dollar companies, we're further ahead in terms of zero to a million users.

Speaker 15 We're faster, zero to 10 billion than any company in history. Our ability to raise capital, he could have come up with a bunch of responses that said, actually,

Speaker 15 we are trading in a multiple of revenues. That is extraordinary.
I want to acknowledge that, but it's not unprecedented. What is unprecedented is some of the metrics we're delivering against.

Speaker 15 He had a chance to respond in a thoughtful, metric-driven way. Even if it was hard to justify the valuation, he could have said,

Speaker 15 No, this is a self-fulfilling prophecy. We're the fastest zero to $10 billion company in history.
This technology is going to make everything else look like small ball.

Speaker 15 And some evidence that we can, in fact, justify this valuation is X, Y, and Z. And

Speaker 15 this has happened before. And even at these valuations, other investors who have invested in this type of valuation at similar companies at similar points in their life cycle have made money.

Speaker 15 He could have and should have had that teed up. This is not, this isn't like an unexpected question that your valuation and multiple on revenues is really rich.

Speaker 16 That question,

Speaker 16 not only is it a fair question, but it is the most important question in the markets right now. Because

Speaker 16 the answer to that question, how are you going to pay for it, is the question that determines the entire stock market right now.

Speaker 16 The fact that the stock market has returned, that AI has been responsible for 80% of the stock market returns since Chat GPT was launched.

Speaker 16 The fact that the valuations of NVIDIA and Oracle and AMD and Microsoft, all of the best performing companies right now, the fact that those valuations are determined by these contracts that have been not signed, but handshake agreed upon with OpenAI, the $300 billion that they say that they're going to pay to Oracle.

Speaker 16 I mean, this question, not only is it like a fair and an obvious question that's going to come up, but you have to have an answer to that question. Sam Altman is the high priest of AI right now.

Speaker 16 And AI is essentially, as we've discussed many times on the podcast, AI is what is holding the stock market together and also holding the economy together.

Speaker 16 And we've discussed the stats about how if you didn't have AI, GDP would be flat this year. He was asked the question.

Speaker 16 He completely fumbled the answer. And you say, well, it's a tell that he's under a lot of stress.
agreed, but also maybe it's a tell that he doesn't have an answer.

Speaker 16 Maybe it's a tell that when he got that question, how are you going to pay for it?

Speaker 16 The answer is he doesn't fucking know how he's going to pay for it, and he doesn't even believe that he's going to be able to pay for it.

Speaker 16 And that is the question that we have been proposing on this podcast constantly.

Speaker 16 I mean, we added up all of the investments that they have in the pipeline, the cash that they have on the balance sheet. It's about $150 billion.

Speaker 16 So they're short $1.2 trillion.

Speaker 16 And yes, they're going to go IPO and they're going to raise money in the public markets. You can't raise a trillion dollars in an IPO.
It's not going to happen.

Speaker 16 So what they have to do at this point is they have to go out and they have to find different forms of financing. We had another tell where the CFO says, oh, maybe we'll get a backstop.

Speaker 16 Maybe the government will bail us out. Maybe the taxpayers will be the ones who pay for this gigantic AI build that is holding the entire stock market together.

Speaker 16 Or, and this is my belief, they're going to have to go for some debt and not just some debt, but a fuck ton of debt. And that could be the beginning of the end for the AI bubble.

Speaker 16 That could be how the whole thing unravels. And when we look throughout history, that is generally how it goes.
And we've discussed that as well.

Speaker 16 We talked about it with the railroads and the electric grid and we talked about it with the internet.

Speaker 16 But I think that this was a big big moment in the ai story where he had his chance and maybe he wasn't that well prepared because you know it was just a podcaster with his buddy but he had his chance to assuage investors and be like no no don't worry i know what i'm doing here i know what this looks like i know how everything that you guys are talking about but just just trust me everything's under control he did the total opposite he had a meltdown and what wasn't included in that recording is the fact that a few minutes after that he randomly bailed on the podcast and left the Zoom.

Speaker 15 Poor little Sam.

Speaker 15 Sam's like, I'm out of here. You're not being nice to me.
It's like when Trump

Speaker 15 left poor Leslie Stahl, he couldn't handle the hard-hitting questions from an 83-year-old journalist.

Speaker 15 I mean, a couple of things here. This is super interesting.

Speaker 15 So, Sarah Fryer, the CFO, she had some splaining to do. She's had a bad day because she clearly communicated that OpenAI is seeking federal support to backstop.

Speaker 15 She said that the depreciation rates of AI chips remain uncertain. Raising debt to purchase them is costly.
Government or private sector guarantees can really drop the cost of the financing.

Speaker 15 They might be able to secure government backing. Trump loves this shit.

Speaker 15 He loves thinking he's innovative and using your credit card to sustain or to juice these companies that right now are driving the S ⁇ P. America is a giant bet on these 10 companies.

Speaker 15 So Trump has a vested interest in keeping

Speaker 15 the music spinning. And also, to be fair, if you look at Apple, if you look at Google, if you look at Amazon, they're built on the backs of

Speaker 15 taxpayer subsidies. Apple is built on a technology that costs tens of billions of dollars that taxpayers paid for such that we could deliver an ICBM missile into the Kremlin.

Speaker 15 GPS was initially conceived to give missiles the ability to go like to hit its target within four feet.

Speaker 15 And then they said, oh, wait, maybe we could use this technology to triangulate off of satellites and do things like help cars get where they need to be and help people get cell coverage everywhere in the world.

Speaker 15 Apple's been massively subsidized by public taxpayers.

Speaker 16 Well, I think, I mean, if we're making the comparison, what you're describing there is government money that was used to create technologies, which were then used to build the products that we're describing.

Speaker 15 But

Speaker 16 it wasn't a

Speaker 15 bailout.

Speaker 16 It wasn't just here's hundreds of billions of dollars for you to do the thing that you're going to do.

Speaker 16 It was like, here's technology that we've built as the government and you can now use it in your products, right?

Speaker 15 Ed, I just want you to know it's going to impact your future earnings if you thoughtfully contradict my logic.

Speaker 15 Okay, fair point. Fair point.

Speaker 15 Let me skip to what I'm doing. I'm not giving investment advice what I'm doing.
I have been for a long time thinking about, do you know, I think it's called Direxion.

Speaker 15 They do all these kind of innovative ETFs where they figure out a way to short things or have triple the exposure. And their fees are higher, which I don't like to pay, but they're very innovative.

Speaker 15 So the ETF X Mag by Defiance ETFs is not a short of the Magnificent 7, but a large cap

Speaker 15 X Magnificent 7. So it basically holds large cap stocks, including the 40% of the mega caps, because at some point the S ⁇ P 490 will have their day.

Speaker 15 So the QQQD by Direxion is a bare 1x ETF targeting the inverse. So it's minus 100% of the return of the Magnusin 7 index.
I am trying to figure out a way to go short the Magnivision 10. Why?

Speaker 15 For some of the reasons you're talking about, they've just gotten out way over their skis and these circular deals feel like late stage.

Speaker 15 I don't know if it's 98 or 99, but I feel like if I can hold on to these things, these short short vehicles long enough, I'll be, you know, I want to hedge my exposure right now because if these things come down, there's going to be nowhere to hide.

Speaker 15 Everything is going to come down. When 40% of the S ⁇ P is riding on 10 companies, if they get cut in half, nobody gets out alive.

Speaker 15 The strafe and shrapnel here is going to be extraordinary.

Speaker 15 The moment there's any sort of checkback or slowdown or the consumer-based enterprises who are all signing up for these expensive site licenses from OpenAI or Anthropic, the moment they announce their, the moment PepsiCo CEO says, we made these huge $10, $20, $50, $100 million investments in AI and in the LLM, site licenses, chips, whatever, and we're scaling it back dramatically because it hasn't offered the IRI we expected.

Speaker 15 If a bunch of other companies jump in and say, yeah, actually, it seems true here, these companies, I mean, if the music stops, there's not only not any chairs,

Speaker 15 there's like hot coals they're all going to sit on. It's going to be ugly.

Speaker 16 It is a house of cards, which is built on AI, which is built on open AI, which is built on Sam Altman and his response to that question, which again is why that

Speaker 16 question is so important. And it's just so phenomenal how bad the answer was when it's not just AI resting on this, but America.
It's actually the presidency. I mean, so much is writing on this.

Speaker 16 But just going to like,

Speaker 16 how the bubble would pop. You're just, you're saying that you think the bubble would pop.
And so you're saying, you're thinking about shorting

Speaker 16 some of the big tech stocks. I mean, my view, markets can stay irrational longer than you can stay solvent.
And as we've discussed, I just don't think there's actually that much alpha in going short.

Speaker 16 I just think

Speaker 16 my recommendation is to stay away from that stuff, but

Speaker 16 have at it. And there are people who've made a lot of money.

Speaker 15 I want to be clear, though. I'm not Jim Chanos.
I'm not trying to find alpha here. I'm not that guy, Michael Burrier, the big short guy, who, by the way, just took a huge position shorting Palantir.

Speaker 15 What I would, what I'm considering doing is, quite frankly, just as a hedge, I don't like to short either.

Speaker 15 The natural trajectory of the market over the medium-long term is up, and you constantly have to ask yourself what could go right, as our friend Josh says.

Speaker 15 But I do think I feel like no matter what we do right now, if you're invested in the markets almost anywhere, you're uncomfortably levered to the magnificent 10. That's right.

Speaker 15 And so, I like the idea of putting 1% of my net worth in a short basket. And that way, if shit really gets real and my whole thing goes down 40%, I'll get 10 or 15% of it back.

Speaker 16 I like that. I think that's a good idea.
And you're uncomfortably leveraged to open AI as well. But just going to like how the bubble could pop, how the whole thing could come crashing down.

Speaker 16 I think one thing that is important to recognize is the way that these things happen, it's not like you see a sequence of bad earnings calls and earnings reports and then suddenly everyone realizes oh it wasn't what we thought it was what has to happen and josh brown has talked about this with us before there needs to be some narrative shock to the system you need to have some spectacular story some spectacular event which hits people all at once causes this massive shock to sentiment and then suddenly everyone starts pulling their money out and it starts this chain reaction that's how this always goes down Like just the most recent example would be FTX.

Speaker 16 You know, Sam Bagman-Fried, who was the high priest of crypto at the time, he has this big blow up. Everyone says he's fraudulent.
He goes to jail.

Speaker 16 This unbelievable story that captures the imagination of millions. And that's what brings the crypto markets down.

Speaker 16 Another good example would be Evergrand in China, another recent example where they had this massive blow up. They went insolvent.
They had $300 billion in liabilities.

Speaker 16 And then that was sort of the moment where suddenly all the investors in China freak out. And then you see this big, big correction in the Chinese stock market.

Speaker 16 So for the bubble to pop in AI, you're going to need a story. You're going to need something that is spectacular, that captures the imaginations of the investment community.

Speaker 16 If you had to bet on a story happening,

Speaker 16 it is the implosion of open AI.

Speaker 16 I just, there is, there is nothing else.

Speaker 15 Well, NVIDIA, if a chip, if they announce that purchases of chips, if somebody, if again, a Chinese manufacturer or someone else or a Northern European or a U.S.

Speaker 15 manufacturer or even Amazon, which is now producing AI chips, says, we've come up with a comparable chip at 60% of the price, and Jensen for the first time has to announce that sales seem to be slowing.

Speaker 15 There's points. The attack surface here of vulnerability is pretty broad because when the bubble gets this inflated, it doesn't take a lot to pop it, right? Right.

Speaker 15 And what we forget is that that's not to say this isn't an amazing company

Speaker 15 and leaders in a technology that will change the world.

Speaker 15 A standard, unavoidable part of the cycle is the following. A major 12-month destruction in value.

Speaker 15 And that's why it's dangerous to lever up and buy these things on margin because as long as you can wait out these things, and in fact, it's a great company that in the technology that ends up being a simple technology, you can hold on, you know, hold on for dear life, right?

Speaker 15 So for example, Amazon and Cisco from 99 to 2001 lost 90% of their value. Amazon, if you held on to your Amazon shares, you recovered.
And then some. It's up, whatever, 100x since then.

Speaker 15 But let me just go through some. These are one-year declines of these companies.
In 2022, Meta lost two-thirds of its value. That was crazy.
Right. In that one year, real recently.
Why?

Speaker 15 Post-Apple iOS privacy changes that crushed their ad targeting. Remember that? They turned off whatever it was opt-in or opt-off.

Speaker 15 And also the Reality Labs metaverse losses ballooned and investor confidence credit lost two-thirds of their value. By the way, since then, up three or five-fold.
NVIDIA in 2022 lost 58% of its value.

Speaker 15 It was a chip cycle downturn, crypto mining bust, export controls to China. It rebounded massively the following year as the AI boom took off.

Speaker 15 Netflix, just three years ago, just three years ago, Netflix saw a drawdown, a destruction in the value of its shares of 70% in a 12-month period.

Speaker 15 Subscriber loss for the first time in a decade, growth to value rating,

Speaker 15 growth to value re-rating, and rate hikes.

Speaker 15 What is every amazing company in the midst of a technology boom that has done incredibly well, the best performing long-term holds, what do they all have in common?

Speaker 15 In a 12-month period, they were down at some point between 50 and 70%.

Speaker 15 But the problem is, if these guys go down 50 to 70 percent, if they follow the cycle of every other tech company in history that has reached these types of valuations and they come down 50 to 70 percent in a 12 month period,

Speaker 15 hold on tight, says the global economy, because it's no longer a company worth, you know, Netflix at the time was worth probably 100 billion going to, or 150 $150 billion going to $50 billion.

Speaker 15 It's a company worth $5 trillion going to $2 trillion. It's a $3 trillion destruction in value.
They're going to lose the GDP of Germany, one company.

Speaker 15 That will send a chill across another dangerous concentration in our economy, and that is the consumer confidence. of the top 10% who are now responsible for 50% of consumer spending.

Speaker 15 I'm going to go, I don't feel as rich as I used to. I can take my spending down, my discretionary spending down, 50 or 80%.

Speaker 15 You can't, Ed. You're spending the majority of your income on rent and trying to do a little investing and living in the cost of living in Manhattan.
You could take it down 10 or 20 percent.

Speaker 15 You can't take it down 70 or 80. So what do we have? At some point, these companies are going to experience this type of drawdown, except it is now so much more.

Speaker 15 This isn't the ripple effect of a stone. This is the ripple effect of the, you know, the Millennium Falcon or a Starship Cruiser crashing into a lake.

Speaker 15 Starship, that's a, I think that's a Star Wars reference. Are they called Starship Cruisers at? I think that's right.

Speaker 15 My ability or my desire to short some, even if it's a little amount, I just want mental health insurance because what I see here,

Speaker 15 and by the way, these companies could double in the next 12 months. I don't know.

Speaker 15 But if these companies get whacked and go through the same cycle as every other great technology company, the impact it's going to have on everything

Speaker 15 is going to be much more dramatic. There's going to be no, PNG is going to be off 20%.

Speaker 15 I mean, everybody, there's going to be nowhere to hide.

Speaker 16 I would also add, though, that the difference between a company seeing like a 50 to 60% drawdown versus a 99% drawdown and going out of business, the difference between those two companies is always leverage.

Speaker 16 It's which company was financially managed such that they were able to withstand a downturn.

Speaker 16 And this is exactly what Andrew Ross Sorkin talks about when we had him on and he talked about what went wrong in 1929.

Speaker 16 The companies that go bankrupt that just get completely wiped out, it's always leverage. I mean, Evergrand, which I just used as an example.
Great example of that.

Speaker 16 The most indebted company in the world, $300 billion in liabilities, lost 99% of its market value. Lehman Brothers is another good example.

Speaker 16 I mean, some banks made it out alive, but Lehman Brothers was so overly leveraged, 30 to 1 at some points.

Speaker 16 And so when they started to see the defaults on the CDOs and all the mortgage-backed securities, they were insolvent. They couldn't pay back their credits.
And then it started the chain reaction.

Speaker 16 And again, this was too much debt, too much leverage, and long-term financial mismanagement. So I think for sure every company is going to be susceptible to a downturn.

Speaker 16 But I think the question when that happens is which of these companies are being responsible about the amount of debt that they're taking on?

Speaker 16 Which of them are making accurate and responsible projections about how they can cover their losses in the future if there is a downturn, if there is a drop-off in demand?

Speaker 16 I think you look at many of the big tech companies. I think you look at NVIDIA and Meta and Microsoft and Google and Amazon.
These companies are expertly managed from a balance sheet perspective.

Speaker 16 So yes, they might see some drawdowns, but they're not going to get wiped out. I mean, these companies, they have incredible technology teams, but also incredible financial teams.

Speaker 16 Open AI is a fucking train wreck from a financial management perspective.

Speaker 15 Whoa. It is.
Ed's going gangster. Why would you say it's a train wreck?

Speaker 16 Look at the numbers. They want to spend $1.4 trillion.
They've got $13 billion in revenue.

Speaker 15 How much of that, though, do you think is just marketing?

Speaker 16 It probably is, but the market is pricing off of it. The market is pricing in a $300 billion contract to Oracle.
So even if it's just marketing, the market believes it isn't.

Speaker 16 The market believes it's real. And Sam Altman is going around and saying it's real.

Speaker 16 I don't know if you saw the Financial Times report, but the Financial Times learned that they're not even seeking legal counsel on these deals.

Speaker 16 They're having their head of product lead these deals with AMD and NVIDIA.

Speaker 16 They're having Greg Brockman.

Speaker 15 figure out the paperwork.

Speaker 16 They don't have a financial team. And then, of course, they brought in Sarah Fryer, the CFO.
She said, in order for this to work, we're going to need a backstop from the government.

Speaker 16 That is like all of the red flags of a company that is not figuring out how to manage their balance sheet in a responsible

Speaker 16 and reasonable manner. I mean,

Speaker 16 this is the biggest red flag in AI by far. And that says nothing about the technology, says nothing about the product, which is amazing and which I use and everyone uses.

Speaker 16 But the question being, like, who gets wiped out in a downturn is the companies that are over-leveraged. And OpenAI is that company.

Speaker 15 I wonder how much of it, quite frankly, is trying to this fake signal and manifest success that the market will believe that if this guy is willing to sign a contract for 300 billion, I'd love to see the terms and conditions of this contract.

Speaker 16 Please.

Speaker 15 Well, exactly. You got to think, I wouldn't be surprised if Oracle and OpenAI said this is more like Trump's favorite word, a framework.
It's a framework.

Speaker 15 And that if quote unquote, they don't need it, if they have a little bit opt-out, they got to give them notice.

Speaker 15 I think that agreement is basically, they said, I know, let's announce that you're buying $300 billion with an Oracle Compute. It'll send my stock up.
It'll increase my net worth by $93 billion.

Speaker 15 It'll signal to the market that you, as someone who has insight into your revenue growth and the subsequent demand it inspires,

Speaker 15 I don't know. The more I listen to you, Ed, quite frankly, I think you're right.
I think this is the mother of all fucking jazz hands, these agreements.

Speaker 16 And this week was our proof. I mean, he was offered the opportunity to correct that, and he bailed.
He freaked out. He said, sell our stock then.
And then he left the room.

Speaker 15 When Trump comes back from a meeting with Xi and says, okay, they've agreed to continue to ship rare earth materials or delay the suspension of rare earth mineral exports by a year.

Speaker 15 And he comes back, which means it's still, they're still like pointing at us with the gun cocked.

Speaker 15 Basically, he comes back and he says, oh, it's

Speaker 15 him and Besent go on all the shows, an amazing agreement, historic leadership. And the reality is he didn't get dick.
Basically,

Speaker 15 she knows he's, she's like, look, this is bad for us, but what we have that you don't have is I can starve tens of millions of people and I'm still going to be in power.

Speaker 15 If fucking NVIDIA gets cut in half, you're going to have real trouble. You're going to lose Congress, right? And probably your,

Speaker 15 you know,

Speaker 15 Vance or Ruby or whoever you anoint is going to lose. So he, again, his big error was she, I'm getting off script here, was not understanding their willingness to sacrifice.

Speaker 15 But I'm kind of with you as we kind of un

Speaker 15 I don't know, unfold all of this stuff. It does appear like there's a lot,

Speaker 15 a lot of jazz hands going on.

Speaker 16 But what's funny is what happened with Trump is that the markets originally priced everything in, and then

Speaker 16 the talkification came in and then they said, screw it, we're not going to price this anymore because we don't believe it. The question is, when does that happen with AI?

Speaker 16 When does the talkification of AI happen where you start seeing these press releases and these handshake deals? We're going to spend $100 billion on AI.

Speaker 16 At what point does the market just go, you know what, dude? We don't really, we don't really buy it. So far, not happening at all.

Speaker 16 You could announce a multi-billion dollar contract with a hyperscaler tomorrow and the stock will go up invariably at least 5%.

Speaker 15 That's just how it works right now.

Speaker 16 But the question is, when does that run out? What is going to be the moment? And I will tell you my prediction, then let's move on because we've got more to get into.

Speaker 16 But if the bubble pops, my prediction is the reason it will pop is because of an implosion at OpenAI.

Speaker 16 It was because they said they were going to spend one and a half half trillion they made all these commitments they borrowed money they haven't borrowed that much yet but they will and that will be their downfall as it has been for many companies throughout history

Speaker 16 we'll be right back after the break and if you're enjoying the show so far send it to a friend and please give us a follow if you haven't already

Speaker 17 Support for profit markets comes from Found. Does Does it ever feel like keeping up with your business finance is a whole second job? That's where Found can help you out.

Speaker 17 Found is a business-making platform that makes it simple to track expenses and manage invoices. You can even stash money for specific goals and keep spending in check with customizable virtual cards.

Speaker 17 Found doesn't just bring your finances under one roof, it also takes repetitive tasks off your plate. You can even automatically spot tax write-offs.

Speaker 17 And the best part, there are no hidden fees, no maintenance costs, no minimum balance, and signing up is completely free.

Speaker 17 With found, your financial world is streamlined and your time is freed up so you can put your energy into growing your business. Oh, and by the way, other small businesses are loving Found too.

Speaker 17 This Found user said, Found is going to save me so much headache. It makes everything so much easier, expenses, income, profits, taxes, invoices even.

Speaker 17 And Found has 30,000 five-star reviews just like this. You can open a Found account for free at FOUND.com.
Found is a financial technology company, not a bank.

Speaker 17 Banking services are provided by Pyramont Bank, member FDIC. Don't put this one off.
Join thousands of small business owners who have streamlined their finances with Found.

Speaker 17 Support for the show comes from Framer. If you run a business, you need a website.

Speaker 17 And sure, you could pay for one of those cookie-cutter side builders, but you'll end up with a website that looks like everyone else's.

Speaker 17 Or, if you want to go beyond a typical site builder and get into something with a true aesthetic design, you could try Framer.

Speaker 17 Framer already built the fastest way to publish beautiful production-ready websites, and now it's redefining how we design for the web.

Speaker 17 With the recent launch of Design Pages, a free canvas-based design tool, Framer is more than a site builder. It's a true all-in-one design platform.

Speaker 17 From social assets to campaign visuals to vectors and icons, all the way to a live site. Framer is where ideas go live, start to finish.

Speaker 17 Framer even helps you design more than websites, create social assets, campaign visuals, icons, and even site resources all in one place.

Speaker 17 Framer stands above the others because it's not just a site builder. Framer is a true design tool that also publishes professional production-ready sites.

Speaker 17 Ready to design, iterate, and publish all-in-one tool? Start creating for free at framer.com/slash design and use code markets for a free month of framer pro.

Speaker 17 That's framer.com/slash design and use promo code markets. Framer.com/slash design, promo code markets, rules and restrictions may apply.

Speaker 19 Support for the show comes from Quince. Cold mornings, shorter days, holiday plans, this is when I just want my wardrobe to be simple.

Speaker 19 Stuff that looks sharp, feels good, and things I'll actually wear. Luckily, there's Quince and the bonus, pieces from Quince can make great gifts too.

Speaker 19 This season's lineup is simple, but smart and easy with Quince, $50 Mongolian cashmere sweaters that feel like an everyday luxury and wool coats that are equal parts stylish and durable.

Speaker 19 The best part, all Quince items are priced 50 to 80% less than similar brands. By partnering directly with top factories, Quince cuts out the cost of the middleman and passes the savings on to us.

Speaker 19 I've tried Quince for myself. I wear their linen shirts, which I love.
Give and get timeless holiday staples that last this season with Quince.

Speaker 19 Go to quince.com/slash markets for free shipping on your order and 365-day returns. Now available in Canada, too.
That's q-u-in-n-ce-e.com/slash markets, free shipping and 365-day returns.

Speaker 19 Quince.com/slash markets.

Speaker 16 We're back with Profit Markets. The Supreme Court heard arguments in the tariff case last week.

Speaker 16 Multiple justices expressed deep skepticism that a 1970s emergency powers law gives the president sweeping authority to impose tariffs.

Speaker 20 Here's just some of what they said: It's a congressional power, not a presidential power to tax.

Speaker 20 And you want to say tariffs are not taxes, but that's exactly what they are: degenerating money from American citizens' revenue. AIPA is a sanctioned statute.

Speaker 20 It's not a tax statute where Congress gave away the store. Congress knows exactly how to delegate its tariff powers every time for two hundred and thirty-eight years.

Speaker 20 It's done so explicitly, always with real limits. IEPA looks nothing like those laws.

Speaker 20 It uses regulate, which Congress has used hundreds of times, never once to include tariffs, and it lacks the limits of every other tariff statute.

Speaker 21 You're admitting that there is some non-delegation principle at play here, and therefore major questions as well. It's still very limited,

Speaker 22 very, very deferential. Limited is what.
And again, the phrase that Justice Jackson uses, it just does not apply.

Speaker 21 I know, but that's where you started off, and now you've retreated from that, as I understand it.

Speaker 22 Well, I think we would, as our frontline position, assert the stronger position, but if the court doesn't accept it, then if there is a highly delegated pressure.

Speaker 21 Can you give me a reason to accept it, though? That's what I'm struggling and waiting for. What's the reason to accept the notion that Congress can hand off the power to declare war to the president?

Speaker 22 Well, we don't contend that. Again, that would be.

Speaker 21 Well, you do. You say it's unreviewable.
There's no manageable standard, nothing to be done. And now you're, I think you,

Speaker 21 tell me if I'm wrong. You backed off that position.

Speaker 22 Maybe that's fair to say.

Speaker 16 So it wasn't a great showing for Trump's legal team. And we know that because by the end of the week, markets were pricing just a 23% chance of the court ruling in his favor.

Speaker 16 Before the hearing, it was closer to 45%. This is per prediction markets.

Speaker 16 So just to kind of like go over the arguments that are being made here, basically, generally it's agreed that you need Congress to approve major policy, economic policy decisions, but the government is saying that doesn't apply to foreign affairs.

Speaker 16 It's a foreign issue. The plaintiffs are saying, no, it is a domestic issue because, as Sotomayor was saying, there, tariffs are a tax on U.S.
citizens.

Speaker 16 There are some other arguments at play here, but

Speaker 16 the summary here, the TLDR, is didn't go great for Trump and for Trump's legal team.

Speaker 16 And then if you just look at the prediction markets on Calci, the chances that SCOTIS will rule in favor of Trump, they have gone from 45% to now 23%.

Speaker 15 In a weird way, we talked about on this pivot, and Kerr's view was this actually would be good for Trump. It would give him an elegant way out of this mess.

Speaker 15 that it would it would basically well the Supreme Court I don't agree with him but basically unwind what is probably the worst economic decision in a long long time

Speaker 15 well let me just say say what I'm doing.

Speaker 16 You're not buying the refund claims, are you?

Speaker 15 I feel shamed.

Speaker 16 No, no, no, because that's an amazing investment trade. I was going to bring that up.
Is that what you're doing?

Speaker 15 That's what I'm trying to do. A market is developing in the private markets to purchase claims.

Speaker 15 So if you're Mercedes of Wisconsin and you're importing or made Mercedes USA, say they do a $2.5 billion business in Mercedes, I don't know what it is in the U.S.

Speaker 15 So they're importing in, and some of them are domestically made, so maybe

Speaker 15 that's not the right analogy, but you get the point.

Speaker 15 If it's 15% and they're bringing in $200 million of Mercedes a month from Germany, they're paying a $30 million tariff.

Speaker 15 If this court case ends up going against Trump, then essentially the Trump administration is going to owe Mercedes of USA $30 million a month or say the tariffs have been...

Speaker 15 When did Liberation Day happen? I forgot.

Speaker 16 April 2nd.

Speaker 15 Okay, so they call it six months of tariffs. Then the government owes Mercedes-USA $120 million.

Speaker 16 Aaron Ross Powell, that's the important thing here. If Trump loses, not only does he have to revoke the tariffs, he actually has to return the tariff revenue that he brought in.

Speaker 16 He's going to have to issue refunds to all the people who paid the tariffs.

Speaker 15 Well, there's some question here, and that is it's not immediately A equals B. Even if they rule against him,

Speaker 15 that there could be nuance where maybe the government doesn't have to pay it back. Maybe the government, and we've seen Trump do this, refuses to pay it back.

Speaker 15 So even if the case is ruled against them, we don't know the nuance of the remedy. It might be you can't continue to do this, right?

Speaker 15 Or they might say, all right, they have a legal claim and then the individual companies have to sue the government, which,

Speaker 15 I mean, I, anyways, it's not immediately a fait accompli, I think, if in fact, I've been thinking a lot about this, trying to game theory it out.

Speaker 15 But there's a private market developing, but unfortunately, you have to, right now, it looks at least the stuff I've seen that I've been shown, you have to invest at least $10 million. So

Speaker 15 you have to put together an SPV if you don't have the $10 million yourself. And these claims are trading in the private market for anywhere from 5% to 30%.

Speaker 15 And I think

Speaker 15 the greater likelihood is somehow these people don't get their money back.

Speaker 15 But I think there's a greater than one in 10 chance they get their money back.

Speaker 15 So if I can pick these things up, these claims against the Trump administration for tariffs that were charged illegally based on the Supreme Court decision, if that, in fact, if they deem them as illegal, that I think there's a greater, at this point, one in 10 chance that

Speaker 15 this claim

Speaker 15 will be refunded. It might take a couple of years.
It might take two or three years in court, but I like the asymmetric upside here.

Speaker 16 And very similar to the FTX claims that you made a killing on back in the day. But just to sort of explain how this is working working here.

Speaker 16 So if you're a company and let's say you owe a dollar in, or you paid a dollar in tariff revenue, now there's a question of do you have a claim now to receive a dollar back?

Speaker 16 And what Scott is going and doing is he's buying that claim from you for five cents, or that's the plan. There is a market right now where people say, I don't think I'm going to get my money back.

Speaker 16 I want a little bit of money right now. So I'll sell you the claim for five cents.
And so I think it's an incredible arbitrage opportunity. But I was going to bring this up to you.

Speaker 16 I was going to say, maybe you should look at this.

Speaker 16 You took the words out of my mouth. You already are looking at it.

Speaker 15 And I like these seals because they're hard. And that is, so it's unlikely would be a claim.
It's unlikely Mercedes USA would sell the claim.

Speaker 15 What's a more likely seller is a chain of 14 hardware stores in the Southeast has been paying, you know, over the last six months, has paid $7 million in tariffs.

Speaker 15 And if you show up and say, I'll give you a million dollars for these claims, they're like, Fuck it. I don't, yeah, fine.
Give me the million bucks. I need to operate my business.

Speaker 15 And I've already paid the money and I've already sort of incorporated it into my costs and my business. This guy's going to give us a million bucks.

Speaker 15 And yeah, good luck to you trying to get that money back.

Speaker 15 So, my guess is, though, since Disco's ruling, and quite frankly, after this podcast, you're going to see, you're going to see this is the kind of thing that a diameter capital or an Apollo come in with a team of 12 analysts and NBA interns, and they just crawl all over the U.S.

Speaker 15 trying to find these claims and make really big bets. So I'm wondering, I'm trying to figure out if I can connect with a fund that's already doing this and call them and say, hey, remember me?

Speaker 15 You know, I advised you on the Yahoo deal.

Speaker 16 I was your keynote speaker in 2014.

Speaker 15 Remember when I was talking about happiness and how relationships are everything back in 2019? Remember me at your

Speaker 15 conference you held in August in Tucson? Wow, that was great.

Speaker 16 No, I think it's an amazing trade. As Scott Goodwin, Diameter Guy said on the podcast, the whole game is finding forced sellers.

Speaker 16 And to your point, there are a lot of small companies, small to medium-sized companies that have been put under so much pressure because of the tariffs.

Speaker 16 I mean, you look at the difference in the way that the small caps are returning right now versus the large and mega caps in the stock market.

Speaker 16 Tariffs have fucked one group in particular, and it's small and medium-sized businesses who are gonna need some liquidity soon.

Speaker 16 So, the idea that they were, I mean, I'm sure there is a market where these smaller companies are down to sell these claims for cents on the dollar. So, I think it's a great trade.

Speaker 16 We'll be right back. And for even more markets content, sign up for our newsletter at profgmarkets.com/slash subscribe.

Speaker 17 Support for the show comes from Groons. Even when you do your best to eat right, it's tough to get all the nutrition you need from diet alone.
That's why you need to know about Groons.

Speaker 17 Groons isn't a multivitamin, a green scummy, or a prebiotic. It's all of those things and then some at a fraction of the price.
And bonus, it tastes great.

Speaker 17 All Groons daily gummy snack packs are vegan, nut, nut, gluten, dairy-free with no artificial flavors or colors and they're packed with more than 20 vitamins and minerals made with more than 60 nutrient-dense ingredients and whole food.

Speaker 17 Groon's ingredients are backed by over 35,000 research publications and the flavor tastes just like sweet tart green apple candy.

Speaker 17 And for a limited time you can try their Grooney Smith Apple flavor just in time for fall. It's got all the same snackable, packable, full-body benefits you've come to expect.

Speaker 17 But this time, these taste like you're walking through an apple orchard in a cable-knit sweater warm apple cider in hand grab your limited edition grooney smith apple groons available only through october stock up because they will sell out get up to 52 off when you go to gruns.co and use the code markets

Speaker 8 Now your Prezo looks super slick.

Speaker 9 Close that deal, yeah you won.

Speaker 11 Now you can do that, do that with Acrobat.

Speaker 12 Now you can do that, do that with the all-new Acrobat. It's time to do your best work with the all-new Adobe Acrobat Studio.

Speaker 23 These days, every business leader is under pressure to save money, but you can't crush the competition just by cutting costs. To win, you need to spend smarter and move faster.

Speaker 14 You need Brex.

Speaker 23 Brex is the intelligent finance platform that breaks the trade-off between control and speed with smart corporate cards, high-yield banking, and AI-powered expense management.

Speaker 23 Join the 30,000 companies that spend smarter and move faster with Brex.

Speaker 23 Learn more at brex.com slash grow.

Speaker 16 We're back with Profit Markets. Robinhood posted earnings that topped expectations after doubling doubling revenue year over year.
The stock is one of the best performers in the S ⁇ P this year.

Speaker 16 It has soared 450%

Speaker 16 since Trump's election. A key driver of that momentum is prediction markets.

Speaker 16 Events contracts traded on Robinhood more than doubled quarter over quarter to 2.3 billion as election speculation pushed volumes to all-time highs.

Speaker 16 Calci and Polymarket also saw record volumes in the past month, surpassing the presidential election of last year.

Speaker 16 And now Truth Social, trump's social media company is rolling out its own crypto-based predictions platform so scott we've been talking about the gambling economy you talked about it with kyla scandal and all of these uh trading apps uh these platforms which facilitate gambling betting you've got robinhood and yes people are investing properly on robinhood but also there's a ton of options trading a ton of crypto trading as we discussed events contracts trading people betting on prediction markets that stock is up 230% this year.

Speaker 16 Coinbase stock is up 50% in the past six months. Calci's trading volumes are up 150x since last year.
There has been an explosion in what we would call the casino economy over the past few months.

Speaker 16 And much of it is certainly to do with Trump and his sort of pro-casino economy policies. I just want to get your reactions here.
What do you make of the proliferation of this market?

Speaker 16 Crypto plus prediction markets, sports betting, options trading, all of this stuff that is exploding right now.

Speaker 15 I just think it's out of control. And the problem is I don't think you can evantilize a 22-year-old.
I think they get to make decisions, including stupid decisions.

Speaker 15 But I think they need to be educated about the risks they're taking. So

Speaker 15 gambling has the highest suicide rate of all addictions because most people, Ed, if you developed a meth addiction, we'd figure it out and we would try and move in.

Speaker 15 You could get on your phone and get addicted to gambling and lose everything.

Speaker 15 You know, a guy spends his kids' college fund, mortgages his house, no one has any idea, and he decides, okay, I'm in too deep. Highest addiction rate.

Speaker 15 Yet, there's no dedicated federal budget for gambling, addiction, treatment, or research.

Speaker 15 By comparison, the National Institute for Drug Abuse allocated $1.6 billion for drug addiction research, and the CDC allocates about $310 million to tobacco control.

Speaker 15 And because there's so much money in this, it runs unregulated. Personal bankruptcy filings increase by 28% in states where sports betting gets legalized.

Speaker 15 So basically, bankruptcies surge by almost a third the moment you legalize gambling. It also disproportionately affects young men and low-income people.
Approximately 15% of U.S.

Speaker 15 adults age 18 to 34 have problematic gambling behaviors compared to only 2% of people age 55 plus. 20% of male gamblers have a gambling problem compared to just 8% of the female gamblers.

Speaker 15 Again, it's the above. Immature Immature prefrontal cortex.

Speaker 15 Households with lower savings balances spend 32% more on gambling as a share of their income than high-savings households looking for a way out.

Speaker 15 But it's increasingly difficult to regulate this because we no longer call it gambling. It's been rebranded as a prediction market.
And these are casinos. They're more interesting.

Speaker 15 They might feel more substantive to bet on the outcome of the mayoral race, but be clear, folks, this is gambling.

Speaker 15 According to Cal Street, prediction markets are not gambling, but a form of financial market exchange. Yeah, fuck you.
We're not that stupid. This is gambling.

Speaker 15 Whether you're gambling on the Jets or am Donnie, it's gambling. So the most profitable companies in the world all do the same thing.

Speaker 15 They tap into an instinctual flaw and they start monetizing this flaw despite the impact it has on consumers, whether it's tobacco companies, getting people addicted to tobacco and then spending a ton of money.

Speaker 15 to try and argue that nicotine wasn't addictive. And then when our mothers and our sisters continued to die, we finally figured figured this shit out.
The same thing is happening here.

Speaker 15 And the thing that got me initially kind of

Speaker 15 inspired is the wrong word, but very interested in this, is Alex Kearns. And that is this young man, a 19-year-old, I think he was a sophomore at Oklahoma State.

Speaker 15 Nice kid, no history of mental illness, good family. You know, you see this kid and you just see your son.
I don't care who you are.

Speaker 15 You see your kid and you see like, okay, there by the grace of God go my kids.

Speaker 15 Bought options on Robinhood, got messages saying he was down $60,000. He wasn't.
They were errant messages.

Speaker 15 Spent all night sleepless emailing Robinhood to try and get some sort of response from customer service because, you know, they're in the business of hyperscaling and because they didn't place any sort of regulation or any sort of safeguards.

Speaker 15 They didn't get back to the kid. And the kid leaves a note for his parents saying, I don't want to leave this debt for you and throws himself in front of a train.
These are the people we want to trust

Speaker 15 with

Speaker 15 an addiction. These are the people.
So we have Trump,

Speaker 15 the crime family Trump, and we have the mendacious Fox at Robin Hood

Speaker 15 deploying at scale using technology a drug that is highly addictive. So

Speaker 15 I'm horrified by this shit. And

Speaker 15 I think if Congress had any stones or anyone under the age of 90 fucking five years old that actually understood what is going on with young people and especially young men here, they would do their goddamn jobs and prevent a tragedy of the commons and weigh in with legislation or at least age gate the shit.

Speaker 15 So this is,

Speaker 15 I think this is hugely distressing. I think this is the next major opioid scandal.

Speaker 16 I mean,

Speaker 16 gambling is pretty bad for society. I mean, like, it's pretty indisputable.
I mean, it consistently leads to financial ruin, as you've said.

Speaker 16 One of the most common causes of bankruptcy, as you said, in states where sports betting is legalized, bankruptcy filings have risen 28%,

Speaker 16 disproportionately affects poor people, disproportionately affects young men, one of the most predictive causes of domestic violence, also one of the most common causes of suicide.

Speaker 16 But

Speaker 16 we kind of like it. because it's fun.
Now, I think one of the big questions is like, what counts as gambling?

Speaker 16 Clearly, we agree mostly that there should be some form of regulation, or at the very least, we should like draw some line in the sand as to what is gambling and what isn't.

Speaker 16 I had the founder and CEO of Calci on first-time founders, and we talked about this for a long time. And he has a very interesting perspective.
Of course, he's biased because he runs Calci.

Speaker 16 His view is it's gambling when the house is involved. And Calci isn't really gambling because you're not betting against the house.
You're betting against other people in the system.

Speaker 16 You're matching traders up with other traders, similar to the way the stock market works. But I think my view on gambling is you know it's gambling when you see it.

Speaker 16 I mean, day trading, options trading, especially very short term, like zero day options trading, sports betting, crypto trading, meme stocks, meme coins, prediction markets, all of this stuff is gambling.

Speaker 16 It's gambling in one sense or another. And we could talk about the very specifics of how actually the transaction works.

Speaker 16 But when you're just kind of betting on something happening or something going one way or the other versus investing over the long term, putting your money and letting it sit there and building an asset base, those are just by nature, very, very different things.

Speaker 16 And I think it is clear that... people are interested and very excited by the gambling stuff right now.
Many reasons why that could be.

Speaker 16 I'm sure the fact that young people just don't have the economic prospects that their parents and grandparents did, that certainly plays into it in large part.

Speaker 16 That sort of explains the crypto obsession and the meme stock obsession. But I think the thing that is so interesting and what has changed this year

Speaker 16 is now the government is behind it. There is a very obvious support system for all of these types of gambling platforms and gambling mechanisms.
I mean, Don Jr.

Speaker 16 is an advisor to Kelchie and to Polymarket. Trump Media is launching their own prediction market.
Trump is getting into crypto.

Speaker 16 He's pardoning Chiang Peng Zhao, who pled guilty, or Binance, his company, pled guilty to money laundering. He's pardoning Justin's son.
He's launching his meme coins.

Speaker 16 So the government and the administration is deciding for one reason or another that.

Speaker 16 We like this stuff and we should have more of it. We should deregulate and defund the CFTC.
We should deregulate and defund the SEC. We should invest in prediction markets.

Speaker 16 We should create our own prediction markets. We should have society gamble more.
And I think the big question for us citizens is why do they want that?

Speaker 16 I mean, most Most people are in agreement that this stuff is dangerous. And many Americans say it's flat out a problem.

Speaker 16 Actually, 43% of Americans say that sports betting should not, or they say that the fact that sports betting is legal, they say that it's bad for society.

Speaker 16 And it's gone up and up and up in recent years. So we're all kind of in agreement, like this is at the very least kind of dangerous.
And yet the administration is pushing it.

Speaker 16 I guess my question to you, why do you think that Trump and the administration has decided pro-gambling, pro-casino economy, pro-prediction markets, pro-crypto, pro-meme coins, all of these things that while, yes, they can be kind of fun every now and then, in a lot of of cases, they lead to the financial ruin of thousands, in some cases, millions.

Speaker 15 Well, I'm going to go out on a limb here and say that perhaps his own economic enrichment supersedes his concern for

Speaker 15 the public. I know

Speaker 15 that's a stretch,

Speaker 15 but look, we know why he's doing it. He's doing it, he's doing it for money.
And what I would say to young men is that

Speaker 15 sacrificing and investing is a means of having less anxiety and more relationships in your life, more healthy relationships.

Speaker 15 Gambling is going to reduce your mental well-being. It's going to make you be seen as undependable by friends and potential mates.

Speaker 15 And it's going to result in a level of self-loathing if you're not careful

Speaker 15 that oftentimes leads to extreme depression and even self-harm. In some,

Speaker 15 you know, know, if you're listening to Andrew Huberman and Peter Atya and taking the right supplements of creatine

Speaker 15 and getting the right sleep, it's all for fucking not if you wake up one day and you're broke because of really stupid decisions you made in search of DOPA and have convinced yourself that you're investing, not gambling.

Speaker 15 No,

Speaker 15 you're gambling. And I'm not going to infantilize you.
If you want to gamble, gamble, but call it what it is and assume you're going to lose it all. You want to do these things.

Speaker 15 You need to assume you're going to lose it all. The danger is when you think this is investing and you're going to make money.
You're not. These companies aren't building anything.

Speaker 15 The reason they're worth so much money is that over time, everybody loses.

Speaker 15 Everybody. No one beats this market, these markets over the long term.
Unless you're on the platform. There you go.
Those are the winners. So if you're going to gamble, buy Calci or

Speaker 15 polymarket stock, you could argue that's investing, even.

Speaker 15 But these companies are preying on young people and

Speaker 15 instinct that hasn't caught up to industrial production. So anyways, just be honest with yourself.
Are you gambling or are you investing?

Speaker 16 There's this quote from Alexander Hamilton, 1792, which I love. He said, quote, there should be a line of separation between respectable stockholders and mere unprincipled gamblers.

Speaker 16 I just find it hilarious that this has been around for hundreds of years and we know where Alexander Hamilton stands on it.

Speaker 16 Let's take a look at the week ahead, Scott. We'll see earnings from Rocket Lab, AST Space Mobile.
So these are these space companies that we've discussed in the past. Also, Paramount Skydance

Speaker 16 and Disney. Any predictions?

Speaker 15 Well, I already said it. I think the market for claims against

Speaker 15 tariffs paid is going to become an active investment market. And I think it's going to do well for those.
The price may already, I mean, I get the sense.

Speaker 15 I've been working on this for a few weeks I get the sense my guys are going to call me back and say oh prices have doubled like sellers have caught on to this and I've jacked up their prices but I think this is going to become a really interesting market that we're going to hear about that's going to be actively traded and I actually think that even if before the decision I think there's going to be a lot of people who trade who I think these things are going to go up even before the decision or the collection of revenues.

Speaker 15 I think they're going to start to trade up.

Speaker 15 So I think the best stock right now or the best investment, and granted, most people don't have access to it because there's certain minimums and it takes time.

Speaker 16 10 million minimum. Put me in the SBV.

Speaker 15 Yeah, but this is what will happen. A bunch of people will create SPVs and charge fees and give access to retail investors.

Speaker 15 You're about to see claims against tariffs become an active private asset class.

Speaker 16 This episode was produced by Claire Miller and engineer by Benjamin Spencer. Our associate producer is Alison Weiss.
Mia Silverio is our research leader. Our research associates are Isabella Kinsel.

Speaker 16 Dan Shallon and Kristen O'Donoghue. Drew Drew Burrows is our technical director, and Catherine Dillon is our executive producer.
Thank you for listening to Profit G Markets from Profit G Media.

Speaker 16 Tune in tomorrow for a fresh take on markets.

Speaker 16 as the world turns

Speaker 16 and the love flies

Speaker 16 and love

Speaker 8 Now your preso looks super slick.

Speaker 9 Close that deal, yeah, you won.

Speaker 11 Now you can do that, do that with Acrobat.

Speaker 12 Now you can do that, do that with the all-new Acrobat. It's time to do your best work with the all-new Adobe Acrobat Studio.

Speaker 24 300 sensors. Over a million data points per second.
How does F1 update their fans with every stat in real time? AWS is how.

Speaker 24 From fastest laps to strategy calls, AWS puts fans in the pit.

Speaker 24 It's not just racing, it's data-driven innovation at 200 miles per hour. AWS is how leading businesses power next-level innovation.

Speaker 14 What do walking 10,000 steps every day, eating five servings of fruits and veggies, and getting eight hours of sleep have in common? They're all healthy choices.

Speaker 14 But do all healthier choices really pay off? With prescription plans from CVS CareMark, they do.

Speaker 14 Their plan designs give your members more choice, which gives your members more ways to get on, stay on, and manage their meds.

Speaker 14 And that helps your business control your costs because healthier members are better for business. Go to cmk.co slash access to learn more about helping your members stay adherent.

Speaker 14 That's cmk.co/access.