Welcome back, everyone. Today on the Joseph Carlson
Show, we have a bunch of news to get into that I think is
important. First of all, we have news that
Microsoft is now talking about doing this $100 billion Stargate
Open AI supercomputer. It would be known as the AI Star
Wars moment according to Fortune.
Now to put this in context, they're they're acting like
they're going to spend $100 billion on this last year.
If we look at Microsoft's financials, their entire spend
on CapEx, if we bring that up right here and focus just on
their capital expenditure, last year it was $28 billion.
So they're talking about spending around 3:00 to four
times as much as they did all of last year on this new Stargate.
So what is Stargate and why is Microsoft talking about spending
$100 billion on it with Open AI? Now we also have news that
Amazon is ditching their Just walkout technology.
This is the tech where you could go in.
You could grab something off the shelf, It would have sensors and
cameras determined what you grabbed and then it would charge
you as you walked out of the store with no checkout process.
And I also want to mention on this subject of Amazon ditching
this technology, popular Fintwit accounts and the way that they
twist the news. We're going to be looking at
three very popular tweets over the past week and now all of
these are incredibly misleading and the way that they
intentionally mislead their followers.
We have the ongoing vote from the Disney shareholders of
whether they should elect Trion and one of their members to the
board. You know that there's an
activist investor, Nelson Peltz has been fighting Disney to get
on the board because he thinks that they're well, their board
has not been accountable. They haven't done a good job.
They haven't done well for the stock over the past decade.
I happen to agree with Treon and I want to highlight some of the
decisions that Bob Iger has made over the past decade to hurt
Disney's stock. And then finally, we have Steve
Iseman, one of my favorite commentators, coming on to CNBC
and saying that he doesn't believe the Fed should lower
interest rates at all this year. We're going to look at his
reasoning for the Fed keeping interest rates where they are.
And then of course, we have My Portfolio, the Story Fund, which
is concentrated into a few companies that I've picked out
that I believe will beat the S&P 500.
We'll be doing a performance update of the Story Fund in this
episode. So we have a lot of exciting
news to get to in today's episode.
Now, one thing I have to mention before I jump in, if you have
not tried out the Patreon on the Joseph Carlson show before,
today's the Day, you can try it out risk free.
You get the rest of the month as a free trial, so you pay nothing
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We've recently surged to almost 6000 active members on the
Patreon. Huge growth over the past couple
of years because people really like it.
You get access to qualtrum.com. This is something that I've
built from the ground up. It's an awesome tool to analyze
stocks. You also get exclusive episodes,
you get access to a huge Discord community.
There's a lot of things included in this membership that I think
a lot of people like. And as a bonus, it makes it so I
don't have to take on any sponsorships, which is another
nice thing. Now let's go ahead and jump in
and I first want to start off before we get to the big news
with Microsoft and their Stargate investment.
I want to take a look at the Story Fund because I share this
portfolio publicly and I give updates on its performance about
once a week. Right now it's surged up to
$57,000 in gains. So we're making some significant
gains here year to date on a money weighted return, it's up
17.5% which is beating out the QQQ and the S&P 500 and that's
been the same for the past year. If you look at the past one
year, the returns on this are astronomical, 65%, 65% returns
without owning NVIDIA. So I'm missing the best
performer in the market, but still widely outperforming the
S&P 500 and the QQQ over the trailing year.
Well, how did that happen? It happened through Amazon and
Netflix. We also have other big winners,
Google, Microsoft and S&P Global.
These have all done really well, really well over the past
trailing year. But Amazon and Netflix have done
particularly well, especially Netflix.
This one has made the biggest comeback.
When I look at the performance overall since I started this
portfolio, I track it against the S&P 500.
We have My Portfolio in blue and we have the S&P 500 in red.
And this is as if I put money into both of these at the same
time. So you see kind of a virtual
reality as if I had put my money in the S&P 500.
As you can see, the majority of the time through 2022 and 2023,
I underperformed the S&P 500. That is because Amazon and
Netflix sold off huge. And those are two of my largest
positions. They are my two largest
positions. So that hurt the performance.
But then I held on and in fact, I doubled down on the stocks at
the low and the recovery has been incredible, making it so
that I went up and match the S&P 500.
And then year to date, I've surged ahead of the S&P 500 up
here right now. As it stands, the S&P 500 is at
31.71% returns since the beginning.
My Portfolio is at 39.88. So we're actually surging
further and further above the S&P 500.
Now the major point I want to mention when looking at these
returns is what earned me these returns.
A lot of people like to pretend that it's the research.
It's looking at these stocks and doing analysis that earns you
the returns. Research is an important
ingredient. I looked at Amazon and I looked
at Netflix and Google and I did research on these companies.
You know, I I had a thesis for them.
But that's not really what earned me the returns.
What earned me the returns was not selling during the most
difficult point in holding these stocks.
When Netflix plummeted, When Amazon plummeted and Google was
selling off because of AI concerns and and Jack Chachi BT
ruining their Moat. When Netflix was losing
subscribers, when Amazon was just a big retail company that
was losing money. All of those stocks going down,
all of the sentiment went incredibly negative.
People got talked out of these stocks, even good ones.
Even good investors like Bill Ackman sold Netflix at the
bottom. Had I done that, had I sold
these companies at the Lowe's during a time where there's a
lot of panic, I would have had terrible returns.
I would have underperformed the S&P 500 dramatically.
I would have lost a lot of money.
That would have been a disastrous outcome.
So it wasn't the research that earned me these returns.
It was the research in combination of hanging on to
these companies during a distressed time.
It's easy to hold them now. The stocks are going up, The
story's good. The coast is clear.
Everybody can hold on to Amazon and Netflix right now.
So long as things are going really well, it's easy to hold
on to these stocks. But the point is, things aren't
always going to be easy. Just like we had a panic in 2022
and 2021, we're likely to have one in the future.
If you're not fully convinced of holding your stocks during the
lows, you're playing a dangerous game because you're going to end
up selling out at the worst time possible.
So when I look at what earned me these returns, it wasn't just
the research. It wasn't just the analysis.
The more important thing was having a strong stomach sticking
with these companies during a difficult time.
That's the portfolio update. For now, let's go ahead and take
a look at the news. The first bit of news is this
talk of Microsoft potentially investing $100 billion with Open
AI into creating Stargate, a supercomputer.
Now to put that in context, we know that Microsoft is a very
big company, but $100 billion is more than the amount of free
cash flow they earn per year. So this is more than an entire
calendar year's worth of profits.
This is also a lot more than they spent on Activision
Blizzard. They spent $70 billion on that.
So this would be a massive, unprecedented investment from
even the likes of Microsoft. Apparently this is rumored by
The Information, but Microsoft have been talking to Open AI
because they want this massive supercomputing cluster to
support their Open AI models. At one point there was another
rumor that Sam Altman was asking for $6 trillion investment to
build something that was like a rival to NVIDIA, a chip making
company for specifically AI chips.
This seems like an extension of it.
It seems like they're going to any company they can and asking
for a fortune for them to spend for Open AI future investments.
They say to put this in context, Microsoft is known to have spent
more than several $100 million to build the cluster used to
train Open AIS, current top of the line model for GPT 4, which
open AICEO Sam Altman also has said cost more than $100 million
to train. It's also known that Open AI is
already training a successor model to GPT 4, likely called
GPT 5, on one of Microsoft's existing data centers.
And we know that Microsoft's last year broke ground on a new
$1 billion data center in Wisconsin the analyst believe is
intended to house the chips for training opening eyes next
generation models. The Information reported that
the supercomputing cluster in Wisconsin may eventually cost as
much as 10 billion once the price of specialized NVIDIA
chips used for AI applications are factored in.
So Stargate is anywhere from 10 to 100 times more expensive than
any of the data centers Microsoft currently has on the
books. Anywhere from a factor of 10 to
a factor of 100 times more expensive than their existing
data centers. That is expensive.
Now they go on giving more context to this, pointing out
that a $100 billion investment is a lot of money even for
Microsoft, which is correct. They mentioned that their total
CapEx last year is less than 1/3 of $100 billion.
If we look at it, we know that Microsoft spent around $38
billion in CapEx. The total expenses for the
entire company, their research and development, sales and
marketing, general and administrative, and CapEx did
not add up to $100 billion. So this is a massive fortune of
money that Sam Altman is wanting to spend.
It seems a little bit more risky than most of the things that
Microsoft does. In order for Satya Nadella to do
this, he would have to be completely, 100% convinced he's
going to get a great return on this money.
They say that Microsoft has to hope that whatever Stargate is
being used for, it is not, in fact, to train AGI, since
Microsoft's partnership with Open Eye only entitles the tech
giant to commercialize Open AI's technology, that falls short of
AGI. So basically, Microsoft can
commercialize everything up until AGI, but once Sam Altman
says we've accomplished AGI, they keep all the fruits of that
for themselves, apparently. But there's a lot of skeptics,
both saying that we're not going get returns off of this because
this is an outlandish amount of money, way too much to get any
reasonable ROI on it. And then there's other ones
pointing out if they get to AGI, Microsoft can't even monetize
it. So there's no point for
Microsoft either way, they'd be footing a bill for something
that they're not going to get a return on.
Now normally when I look at a company and I consider them
spending a huge amount of money on some type of investment, that
seems like a bit of a long shot. Training an AI model that
hopefully you can monetize down the road, that raises a lot of
red flags. When I look at this story, it
just raises a lot of red flags. There's just alarm bells going
off. Most massive investments are not
good for companies. Most of them are value
destructive. There's very few instances where
you can do huge investments and have it be a creative for the
shareholder. For the company, there's a case
of Amazon doubling their fulfilment network.
That was a massive investment, and investors sold out of the
stock because they were concerned about it.
But it ended up being, I think, a good return.
They're getting good returns on those investments now.
They're satisfying their customer base.
And in the case of Microsoft, I realize that this again raises a
lot of red flags. But there's few CE OS that I
believe I would trust more to only do big investments if he
believes fully, you'll get a high return on those
investments. Satya Nadella is not one to
waste shareholder money. He's not one to spend carelessly
and without any regard to the returns he's going to get, and
he's not one to take astronomical long shots that
don't have predictable returns that doesn't match any of his
history. He's helped build Microsoft into
the powerhouse and profitable company it is, so he's someone
that I trust far more to make the right decision and exercise
the right judgment in this case than most CE OS.
But either way, as a Microsoft shareholder, I'll be following
this, looking at it and seeing the direction they're going.
If they end up going forward with this, it's going to be an
incredible story, an incredible investment for Microsoft.
Now moving on, we have news, it's gone viral for probably the
wrong reasons for Amazon. But Andy Jassy, the CEO of
Amazon, finally decided to pull the plug on their just walkout
technology. Now this is some type of like
futuristic technology where you could walk into an Amazon store,
you could go and take things off the shelf and just walk out, and
then Amazon on your app would charge you for whatever you
picked up without you doing any scanning, without any shopping
carts, without anything, just walking in, grabbing items and
walking out. That's how you paid now.
It seemed really cool and futuristic.
It was driven by AI and a bunch of sensors and cameras and
technology, and they decided that they're going to pivot.
They're going to pivot from the just walkout technology to what
other companies are doing. Where they have the dash cards,
we have a normal shopping cart. And as you put things in the
cart, it scans the item in the cart.
So it's not quite as futuristic, but it's still better than
having a checkout, right? You just put it in your shopping
cart. That's where it scans it.
So that's basically the story. They're doing a major pivot.
They're moving away from the just walk out technology to the
shopping carts. But that's not where the story
went viral. The story went viral for the
wrong reasons for Amazon. Let's go ahead and take a look
at some tweets here. This is from a tweet that got
viewed 300,000 times. Amazon's Just Walkout
technology, which was pitched as a magical AI technology, was
actually 1000 contractors in India working as virtual
cashiers, identifying what people put into their carts and
tracking their purchases. It will likely be replaced with
shopping carts with scanners. Let's go ahead and take a look
at another tweet here. This is Gurgaon on Twitter.
Popular account 4000 likes 593,000 views This is crazy.
A few years ago, Amazon introduced tech that let
shoppers just grab whatever they wanted and just walked out.
Instead of using AI, Amazon just hired 1000 people in India to
manually track their purchases. Amazon today said it's shutting
down this business. That's the tweet.
Instead of using AI and using the sensors, Amazon just had
1000 people from India watching you shop in these stores and
tracking your purchases manually.
We have Max Byrne. This is another one that got a
lot more views. This one has 8.1 million views,
40,000 likes. Amazon build.
It's just walk out stores as some triumph of AI.
In reality, it was powered by thousands of low paid Indian
workers manually adding up items in your cart as you shopped.
How insanely dystopian. That's the tweet. 8 million
views. The reason I go over these
tweets is to highlight the type of punchy news you get from
different online sources. These type of tweets not only
are completely inaccurate, but in sometimes they're just making
up stuff like out of thin air. They make it up, people look at
it, they they reply based off of the made-up tweet and they
criticize companies based off of things that aren't true.
And this type of thing is commonplace.
They use the most provocative language possible to get the
most engagement, but none of it is actually accurate.
This tweet, for example, says that this whole system, this
walkout tech, was powered by thousands of low paid Indian
workers. Now, just on a side note, he
says low paid, but there's no evidence to suggest that he's
just thrown that in because he must assume if they're Indian
workers, Amazon must be underpaying them.
For all we know, Amazon could be paying them above market value,
so we have no evidence of that. But the other part of this that
I think is more important is the suggestion that this entire
tech, the just walkout tech, is solely powered by these workers
in India, like they were just watching every purchase.
And that's how the system works, that there really was no AI, no
technology. This walkout technology was in
fact powered by artificial intelligence.
That was a system behind it. They hired a firm in India to
review some of the footage and make sure that the AI system was
working appropriately. The same way you could have
manual reviews of Tesla's full self driving data.
You have AI be the primary system powering it, and then you
have humans reviewing and checking and labeling to help
train the AI that is the system they had in place.
Amazon said that this entire characterization that people are
trying to make is inaccurate. They disputed how many of the
purchases even required reviews. Quote The primary role of our
Machine Learning Data Associates is to annotate video images,
which is necessary for continuously improving the
underlying machine learning model powering.
The spokesperson acknowledged that these associates validate
quote a small minority of shopping visits when AI can't
determine a purchase. So basically this whole system
was powered by AI, but when some purchases were a little bit
vague or the system couldn't predict what was going on,
that's when they sent it over for manual review.
But according to social media people, that's not good enough
to reflect reality. They have to say the whole
system was powered by people in India.
That's the tweet because it gets more engagement.
Now we get to the news that I think is important for Disney
shareholders to know what is going on with this company
because I've been following Disney for a long period of time
as an investor in media with Netflix, Disney's considered one
of the primary competitors. And there's a vote going on
right now of whether or not Trayon Partners that has Nelson
Peltz can get seats on the board.
Every company has a board. They're the ones that are
supposed to kind of work for the shareholders, to make sure the
executives and the company are working on behalf of the
shareholders. So the board of a company is
elected in order to keep the CEO in check, in order to represent
the shareholders, to make sure they're not being taken
advantage of and everything's done in their best interest.
Well, Tryon Partners or Treon, however you say it, they're
trying to get board seats because Nelson Peltz has
criticized the way that Disney has run the company in the past.
Disney doesn't like that. Disney doesn't want to change
their board. Disney does not want Nelson
Peltz or anyone else from the outside on their board.
They want to run things exactly like they have.
So Disney's doing everything they can to keep Nelson Peltz
off the board. They don't want this activist
investor that's been critical of them to have any type of
influence over running the company.
So they're fighting this as much as they can.
This rumor was released from insiders at Disney that Disney's
winning the proxy fight against Trion with more than half the
votes. This is another showing of bad
behavior by the executive team at Disney.
They intentionally leaked this information that they're winning
the vote in order to try to influence the remaining voters
saying, look, we're winning, if you don't vote with us, you're
going to maybe face repercussions.
Once this vote goes through and we win, we'll know who voted
against us. So they're trying to unfairly
and legally influence the remaining part of this vote by
leaking this information halfway through before the vote is
complete. This is something that should be
investigated by the SEC to see why this leak happened and how
it influences the remainder of the vote.
But regardless, we have Bob Iger running the show now, the CEO
that's been with this company since 2005, He's morphed the
company into what it is today, and he's trying to protect his
influence at the company and get rid of any type of harsh critic
of his performance over the past 10 years by trying to get Nelson
Peltz out of Disney. Now just to review some of the
things that Bob Iger has done. He's extended his contract
repeatedly. You can see how many times it's
been extended over and over again.
So he's been the CEO from 2005 to 2020 when he stepped down,
that's when Chapeck took over. But Bob Iger was still in a
position of control. He was looking over Chapeck's
shoulder. He was undermining him as he was
the CEO. And then he ended up filling
back in and firing Chapeck after his succession plan didn't go as
well as planned. If we look at Bob Iger's
performance in history, Disney stock today.
Over a 10 year period, full decade from 2014 is up 51%.
Now if we compare that against the S&P 500, let's just take a
look at the market. We can go back 10 years here.
The market's up 180%, Disney's up 50% and the market pays a
bigger dividend than Disney. So Disney has dramatically
underperformed the market. That is the performance of the
current CEO. That was the CEO 10 years ago.
Bob Iger owns this performance. This is his performance and he
can't blame anyone else for it during this time period.
It also wasn't just a mistake that Disney underperformed.
One of the best performing stocks in the market during this
time period was Netflix. Let's go ahead and take a look
at Netflix performance over the past 10 years.
It is 1199%. Netflix has grown from a small
company ADVD rental business back in 2007, switching over to
streaming around 2013. So the beginning of this
timeline, and now it's grown into the biggest media company
in the world. It has a larger market cap than
Disney without having any parks, any cruise lines, any broadways,
all from streaming, all from media alone.
Disney is a smaller company than Netflix, even counting its
parks. What caused this over the past
10 years? Well, what caused this is Bob
Iger. He is the reason that Netflix is
the size it is today. You can thank him for helping
build up Netflix during the early phases of Netflix's
streaming journey. They didn't have any content and
they didn't have the budget to create their own content.
So they decided they would purchase license content from
other companies. One of them, in fact, one of the
biggest ones being Disney. Disney licensed Marvel content.
They licensed Star Wars content. They licensed Disney Animation
content. All of their key content being
put on this small streaming service because Bob Iger thought
the best decision was to make a little bit extra cash, just make
a little bit extra cash, putting your streaming content on this
different platform, some of your key series.
Meanwhile, Netflix at the same time period was gaining millions
and millions of subscribers every single quarter.
You can look at the numbers every quarter they gained
millions and millions of subscribers, of course, growing
their reach and their revenue over time.
Netflix realized far before Disney did that Netflix was
going to grow to a size where the competitors would become
scared, where they would take away their content.
But by that point, it was too late.
By the time Bob has realized his mistake of building Netflix into
this unstoppable juggernaut, it was too late.
Netflix was already in position to create their own content.
They had a bunch of key series like Orange is the New Black,
Stranger Things, House of Cards, all these different shows to
finally replace Disney content. But the thing that built Netflix
into what it is today is a combination of Bob Iger at
Disney licensing Netflix all of the content they needed to build
their service. Now he wasn't the only one to
blame. There is also Comcast with NBC
content like The Office, but Disney played a huge role.
Netflix would not be as powerful and big today without Disney's
help. So just to recap, the reason
that Disney is in the situation it is today as being the second
largest media company behind Netflix, showing that it cannot
compete in streaming with Netflix and having this other
company surpass them dramatically.
And market cap and performance is because of the actions of the
leadership of Disney. Unwittingly building up there
would be biggest competitor. That is the leadership and the
returns that Bob Iger has earned for his company.
And now that there's someone else stepping in, a loud and
critical voice, Nelson Peltz, to point out that this has been a
disaster. Returns have been horrible for
Disney shareholders. The company has been mismanaged
and they're losing to Netflix. Well, Bob Iger doesn't want to
hear it. He wants to remain at his
leadership position in Disney with no critical voices.
Bob Iger wants to assure you that he's got it under control.
He knows what's best for the company and its future, and we
don't need that. Nelson Peltz, he doesn't have
any experience in media. What does he have to offer?
That's not the point. The point isn't that Nelson
Peltz is some perfect solution to Disney's problems.
The point is that Nelson Peltz represents accountability.
Accountability to the shareholders.
The point that Bob Iger can't continue to run the company as
Aceo indefinitely without getting returns for the
shareholders. He either needs to get returns,
strong returns for the company or needs to get let go one or
the other. And Nelson Peltz brings that
accountability. So in this proxy fight, I hope
that Treon Partners wins. I hope that Nelson Peltz gets
his board seat because I I think Disney lacks accountability, but
it looks like they may not. So far it looks as though
Disney's going to win, and that's a shame for the Disney
shareholder. Now finally, we have Steve
Eisman, the Big Short Investor, going on to CNBC and making his
case of why he believes the Fed should just keep interest rates
where they are for the rest of the year.
I feel that ever since Greenspan was in charge of the Fed, the
Fed has always been extremely insensitive to its own impact on
markets. And you know, when Powell said
that was it last, I think it was last week.
It feels like an eternity ago that financial conditions are
tight. I was like, what planet do you
want? So I mean, my view is the
economy is fine. There should be.
I personally think there should be no Fed cuts this year.
He doesn't think there should be any Fed cuts this year, and I
must agree with him. the Fed is saying one thing.
They're saying financial conditions are very tight,
right? We have interest rates at 5%.
I guess if you're looking at some parts of the economy with
the housing market that's frozen up, the car market doesn't seem
to be doing too well. Tesla didn't hit their numbers.
E VS are going down. You have like solar companies
that I think are struggling, pool companies selling big
expensive things like that are struggling.
But the financial markets, if you look at the stock market,
it's going up. This year has been a great year.
It's one of the best starts to the year of any year in history.
So I agree with him. When the Fed is saying the
financial markets aren't looking great, what is he talking about?
The financial markets overall are doing really well.
You know, the market will do whatever the market does, but
the economy is fine. Why would you cut?
You know, my my actual fear is that if the Fed were actually to
cut rates, the market goes into so it becomes, I guess
bubblicious and then and then we have a real problem, so.
So Steve Iseman is concerned that if we have interest rate
cuts the end of this year, the stock market will go up ten
2030% and we'll have another bubble territory just like 2021
where stocks are so far above any relevant intrinsic value
that you can't even own stocks without fear of the bubble
collapsing, of everything imploding which will eventually
happen if you're in a bubble. So I agree with them.
I don't think stocks going up is always a good thing.
I like my stocks to go up because their free cash flow
goes up, because their earnings per share goes up, because their
organic revenue grows, because they do buybacks and pay
dividends. I do not like them to go up just
because investors are buying more and more of them in a a
fervourish excitement. So I agree I don't want a
bubble. And if the Fed lowering interest
rates this year causes a bubble, I wouldn't think that's the best
thing to do. But I'm not convinced that
lowering interest rates this year would cause a bubble.
I think that's what's already priced in and I think that's
what's causing stocks to go up already.
In fact, I believe the Fed comes out and says they're not
lowering interest rates this year.
The stock market will go down, So what he's saying will cause a
bubble I think is already priced in.
Investors are expecting interest rates to be lowered.
So why? What?
What's causing the Fed to talk about six rate cuts six months
ago? My personal opinions.
I think Powell is as deep down as just a dove.
Just he's always been a dove. He, you know, raising rates was
out of character for him. He had to do it and he he wants
to cut. Rate.
So he thinks the right thing to do is to keep interest rates
where they're at. But he believes the Fed will
probably lower them just because they're a dove.
And a dove is a way of describing a Fed that likes an
easy monetary environment, low interest rates and lots of
stimulus, the best environment to have business and commerce.
And I agree with him. I think the Fed and the
administration is very dovish. And that's part of the reason I
believe it's so important to own assets right now because if you
have a dovish environment, assets typically go up in value.
So that's going to be it for this episode.
I hope you enjoyed. Again, if you want to check out
the Patreon, today's to do it, you can try it out risk free.
That's all for now. See you in the next one.