Flagship Pod: Earnings Season Kicks Off

Every single Friday we host a live discussion in our Discord Channel at 12:00pm EST. This gives you the opportunity to ask us questions and hear our thoughts on the things you want answers to!

Here are the 4 key things we went over for this week: 

• How the macro environment is affecting earnings season

• What Liz Truss's resignation will mean for the UK markets

• Which long-term trends we're keeping an eye on through this recession

• Why the market is feeling optimistic about softening Fed policy

If you'd like to listen live and ask us questions throughout the next live session, just join the weekly Friday afternoon session at 12:00pm EST.

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Check out a broader summary & transcript below! 

Peter Starr:
From Moby.co, this is The Flagship Pod, a weekly live podcast about the stock market, the economy, and the various market forces powering the world around you. As always, I'm your host, Peter Starr, bringing you this time a week where earnings season is better than expected, honestly. We're seeing corporate earnings trickle out starting with the banks this week with a lot of positive earnings coming out after last week's big CPI hit. To get through how volatility is on the way down especially in the crypto space, especially in the corporate earning space, as always, to discuss that, I am joined by Justin Kramer, CEO, co-founder, and chief analyst here at Moby.co. Justin, man, what's good? How do we even begin unpacking this? It's once again just a period of interesting positivity as we soldier on through this period of downturn.

Justin Kramer:
Yeah, another week of craziness. Right now, 2022 is seeming to shape up to be very different than the last decade. Today, or this week rather, there's optimism that we can just smell in the market. We'll talk during this episode if we think that will persist or not, but things are hopefully starting to get to a bottom. It's just week in and week out. It's tough seeing this over the first 10 months of the year.

Peter Starr:
Yeah, but if I could pick which '20s I was going to be in, the 1920s versus these 2020s, definitely would go with the 1920s. I feel like this is definitely not the Roaring Twenties part two. I couldn't even begin to describe what's happening in this decade, but a lot is going on here. I guess first and foremost, we'll just keep talking about the things that are defying expectations, and that's the news coming out just now that while volatility is finally starting to go down, at the same time, you think inflation means consumer spending is going to go down, but Bank of America just came out and was like, "I don't know guys. Consumer spending is up 21% year over year." What's going on here, Justin? Is it just one of those things where Americans have given up on the idea of savings and are just going to spend their way through this no matter what because it's the only thing we can do? How is consumer spending still up during a year of unprecedented inflation?
 

Justin Kramer:
Yeah, it's a good question. Right now, there's a lag. Everyone's calling for this recessionary period to start next year, which we're definitely forecasting as a chance that breaks in, but the economy has been fairly resilient even in the face of inflation, even in the face of rising rates. A lot of things that should slow things down. Unemployment has been low and the economy is still seemingly decently strong. GP isn't growing the way it once was, but for what should be a much weaker economy, it's still pretty strong.

When we look at the spending numbers, the saving numbers specifically in the retail banks, it shouldn't come as much of a surprise that they're pretty strong. They ended up being a little bit better than I think most people anticipated and that's why corporate earnings, at least for some of the banks, was pretty positive this week outside of investment banking-related revenue.

But for retail-heavy banks like Bank of America, like Wells Fargo, companies like that, they've seen consumer balances go up.

A lot of people are starting to put more cash into the bank as we potentially enter into a period of pullback. Long story short, it's pretty crazy to see how resilient the US economy is and how it really is the backbone of the world economy. Doesn't mean it's necessarily going to stay that way, but that is what we're seeing so far. So there are a lot of mixed signals right now so I understand how it can be confusing, but overall, the biggest takeaway is that the economy is still pretty strong even in the face of really expensive stuff.

Peter Starr:
It really is wild too, but I guess it's also just going in lots of different directions as well. If you look at consumer spending, it's up in a lot of specific areas across certain core tiles of the actual populace and then you look at corporate earnings this week. Overall, we're up 300 points on the week, but there have been a lot of losers too. So we're just going to pick apart the winners and losers and try to understand.

That's the game in earnings season, folks. Most of the trading you do is going to be on corporate earnings because it's going to see the biggest swings and volatility. First and foremost, I guess the biggest news of earnings season so far, Justin, is Netflix coming back a little bit. They absolutely popped off 10% on pretty decent earnings. They managed to add a lot of new users and they managed to set up a lot of good expectations to their ad-supported product. Is Netflix back or is this just like a temporary pop office, people sell high and then they're going to continue their downturn?

Justin Kramer:
Yeah. It's a good question because obviously, Netflix is the talk of the town for the first half of the year, was that they were in not a period to worry about, but just a period of paused growth, which at their scale, it was difficult to grow. They had so many subscribers, such a large user base, and they never historically had supported ads. They only had more or less a single way to monetize and they had done such a good job with such a good product that they normalized spending significantly less on their platform than you would spend on an equivalent platform like cable historically. So yes, it helped them grow, but it pigeon-toed themselves now when they got to 2022 and things started to get more real, if you will. But to your point, the stock has responded well over the last week on news that subscriber growth has grown, that the ad-supported platform is starting to show signs of life and will continue to grow.

That's really exciting because when you look at Hulu, you look at some of these other platforms, ad-supported revenue is a decent contributor to overall top-line growth. So for Netflix to roll this out is big. They've been talking about it, getting a push to gaming. Then the subscriber growth, I think we're going to pause before we really can say one way or another. Their entire subscriber growth at this point is really attributed to shows on the platform. The Dahmer show was very popular, put on a lot of subscribers and was timed very well for when they actually rolled that out relative to earnings. So we will see, but ultimately their scale, similar to Facebook, it's truly hard to continue to grow because you have so much market share already. We see a similar story with Spotify too with how many users they have right now. They have 40% of the US market.
 

Peter Starr:
And that's one thing that's really driving a lot of that bear sentiment for Netflix, thinking that Netflix finally achieved full penetration, full saturation in the US market. They had 2.4 million users in the last quarter and a lot of that came from East and Southeast Asia, so it's awesome seeing... This is not all Squid Game from last year, but it's really awesome seeing that they're able to find these trends and really exploit them across the world. There's a lot more that Netflix can be doing and they're big enough to do it and do it very quickly, so I'm excited to see how they pull things off. I really don't see what they're going to be doing with gaming. I don't know a single human person on earth who has actually utilized the various gaming services that you have within both the Netflix app and whatever Netflix is doing.

I'm still curious about how that's all going to work out. They're talking about starting a full-on gaming studio in Santa Monica, but where would those games live? Are they going to be Google Stadia, i.e., fail completely when they just can't compete with Microsoft and/or Sony? So just really interesting to see how that all plays out, but just really excited to see that they're pulling off the things they can do, which is to grow in other areas because it's something they can keep spending more money on content. I think it's really interesting that they've managed to find a way to cheaply produce content. They've become a very, very strong reality TV rag, buying up old reality TV properties, reinvigorating becoming a reality TV sensation as well and just maintaining subscriber growth that way. So moving in a lot of different directions at once, but excited to see it. I just want bigger diversity from their cash flow because that one product-
 

Justin Kramer:
Yeah, it's super interesting.

Peter Starr:
... is so vulnerable, right?

Justin Kramer:
Yeah. It's interesting. You brought it up. They're this one-trick pony in the sense that this is their content. They're buying up other content. They're going for original content, but now they're making this push into gaming. Google Stadia failed miserably. Amazon had their own gaming product that most people probably didn't even know about, which is just a testament to how bad that did. It's not necessarily due to technology. A lot of it's due to the marketing component which they're claiming they can do significantly better than Google and Amazon, which I wouldn't be surprised from a marketing perspective if they can do better, especially since Google Stadia is one of a thousand products. It's hard for them to truly launch that at scale and get true consumer recognition, especially since Google has historically really been a B2B platform.

But with Netflix, they made an interesting hire. To your point, they're opening up a gaming studio in California and their hire was the executive producer on a very popular game called Overwatch, so we'll see how it shakes up. I think ultimately, consumer demand just hasn't been there. Most people have these expensive consoles that they've spent money on. The true gamers and a lot of the casual gamers are probably playing more of these cloud-based services, so it'll be really interesting to see if they can reverse a narrative that ultimately would be a massive, massive opportunity if they could do it. But I think that if they can do it is the biggest question mark right now because there hasn't been any history of success there. They would be ultimately creating a new market per se.

Peter Starr:
It makes a lot of sense too considering there's definitely an opportunity in gaming right now. All of the old-school juggernaut winners of the past, what is it, decade or so have been Microsoft and Sony and both of them are facing crises of profitability on the AAA gaming side. Microsoft has had trouble with Halo Infinite for the past year and a half just trying to make it a live service model game that people actually want to play in the... There's been a lot of backlash from the community over that because of just how difficult it is to adopt a live service model. At the same time, Call of Duty just launched. If I'm watching my memes right, I think it launched this week. Don't call me on that. And again, the live service model for them isn't working out so well, specifically because you need a huge amount of very expensive and hard to find content, but in order to do that profitably, you cannot hire too many developers.

So there's an interesting rock and a hard-place area for the AAA gaming scene that Netflix, if they do open a full-on studio in Santa Monica, could potentially jump on. Somebody's going to spend a lot of money to try to unseat Microsoft and Sony and/or Nintendo. It's going to be very interesting to see if you can muscle into that space. But again, to your point, Justin, Prime Gaming, Amazon's gaming service, all of that stuff they had, they had that and they owned Twitch, the place where gamers go.
 

Justin Kramer:
Yeah, exactly.
 

Peter Starr:
You just can't do it. It's the hardest space to break into. Nobody understands. I don't understand gamers, no offense of course, but I don't know how to market to those people out. Nobody does and it's just one of those things where it just takes an insane amount of effort to get the attention and to actually grow here. So props to Netflix if they pull it off, but I'm not super sure.

The market seems to be buying it though. It's up 20%, what is it, at the end of this week. Speaking of 20% moves, down 30% today is Snap. Justin, the big loser of the back half of earnings season this week. Earnings just aren't there. Snap is down 90% year over year. October 2021, they're at $52 a share. Now they're barely pushing seven and me thinking I'm super smart buying at nine. Already getting flamed at Discord just saying, "No, I know it's going to come back." I'm going to be buying Snap at night and now it's pushing 7.50. What on earth is happening to social media, Justin?

You'd think Snap would be able to take advantage of Facebook's weaker position and do something, but it's just not there. Is it just because advertising's not super huge given where we are in the bull and bear cycle? Or how in the world is social media playing out right now? Because I am clueless at this point. I have no idea what's happening in the social media space.
 

Justin Kramer:
Yeah. Unless you're working at TikTok right now, social media companies are getting slaughtered. If you haven't paid attention, it's hard to miss at this point, but Facebook, it's bad news after bad news there. They rolled out the new Quest. We'll see how adoption is, but it's pretty expensive, so I don't anticipate getting full saturation pretty quickly, but yeah, Facebook is a disaster. Twitter is a disaster and they want to lay off 75% of their employees if Elon comes in, which is a whole conversation in itself that we can talk about in a bit. Then Snapchat, yeah, down 30% today on revenue. It's tough because a lot of people are using Snapchat. They actually have some pretty good technology. They have a really good cohort of users, but they got hit with this double whammy over the last year or so of advertising revenue and just the effectiveness of their ads due to Apple.

Apple came in about two years ago and really changed how people are allowed or companies can advertise on their platform. What they did was basically block the ability to really track a lot of people across the internet, especially on Apple devices and that's just the push of the whole industry. But because you can't track people across their devices on their phone, if you want to advertise on Facebook, on Snapchat, on one of these platforms that are some of the biggest advertising platforms in the world, the ability to do so wasn't what it was. If Nike can't see that someone's searching for shoes on one website, they're looking at shoes on their social media page and historically, they could see that, they could serve you an ad, you buy Nike shoes, it's easy for them.

But today, when they can't see that information, it's hard to know who to go after and then it's hard to get attribution on those. Users get smarter and so the algorithms, they don't have as much data. They're not as smart as they were because Apple really handicapped their ability to do so, which is really hurting companies like Facebook, like Snapchat. Pair that with now an economic pullback. Companies are being much more protective of capital or trying to be much smarter about where they deploy their advertising dollars because we could be entering the recessionary period and those two factors are just decimating Snapchat. So people, more or less, are just spending less in general and then they're spending less specifically on these platforms because they weren't as good as they once were.

You used to be able to spend 100 bucks and get a few users maybe. Today, you spend 100 bucks, maybe you get one user. So it's not what it was and they haven't been able to really truly have an answer yet to how they get around a lot of Apple's data privacy rules. Ultimately, there's no answer to get around a recession until it's over.

Peter Starr:
And that makes a lot of sense too. It's just one of those things where it's just going to be in a very difficult place until we figure out new technology that makes social media make sense because well, as Apple built its own advertising product and potentially ties it into something on social media, it wasn't them providing good service for the users, it was them kneecapping rivals and making sure that they're not giving away free services to companies who utilize iOS like this gigantic customer base that they built themselves through their awesome brand. Apple's going to be taking that value home pretty soon. So it makes you wonder if Apple's going to maybe make a play into social media or some other ad services model. But it's one of the-
 

Justin Kramer:
Yeah. It's super interesting because it's a really fundamental shift in the way companies are operating. Like Facebook came around and the entire business model for years was: “we're going to give you all these products and services for free and you know that you're going to get served ads, but that's how it's ultimately subsidized.” You get served ads, but you don't have to pay for it. That's how companies have built over the last 10, 20, 30 years. But with Apple coming in, a lot of these data privacy laws are coming in and saying, "Whoa, let's pump the brakes here. This isn't going to be as free rein as it used to. You can't just share data and ultimately allow these companies to monetize their users," it's going to either do one of two things. A, fundamentally change the way companies run that's why you're seeing Twitter, you're seeing other companies try to roll subscription products.

Then if that doesn't work, the other answer is a hard pill for a lot of people to swallow, but that growth is just going to slow down and innovation's going to slow down. Because if you're relying either on lower growth margins or profit margins or revenue growth to ultimately get the users you need, companies are going to have to really scale back how much they spend and then how much they can innovate. The laws are coming from good places and whether or not Apple monetizes themselves is a separate conversation, but ultimately, if companies aren't monetizing their users via their data and their ads, they need to find another way to make money or they're really going to have to change their business model, or as investors, you're going to have to expect slower growth significantly.
 

Peter Starr:
Can you imagine taking a job as a product person or just doing some high-paid stuff at Facebook in 2019 and then just watching over the last three years as you get hit by the astonishing double whammy of being knifed by Tim Cook and finding a social media model that completely takes over the entire internet that you simply cannot copy? Instagram Reels is just not happening. YouTube Shorts isn't happening. TikTok has completely changed the way we consume content and nobody can copy it. Imagine those three years and also, there's a global pandemic in the middle of all that, but whatever.
 

Justin Kramer:
Yeah, it's nuts. TikTok is so unique. It's extremely addictive, but there's no real dividing line between China and TikTok. So if China's really in this for the data game to collect all this data and information, TikTok's profitability doesn't matter as much as Facebook and all these American-based companies where there's clear dividing lines between where the company ends and the government starts. They're just incentivized by two different things. They can play a different game and TikTok is like, "Hey, we're just going to go after what is the most addicting platform in history," and they've done a really good job of doing so so far.

Peter Starr:
Which brings up really just wishing that that sale had gone through in 2020 when the Trump organization tried to basically force Oracle to buy TikTok's American side. They won't be in control of the algorithm, but at least to have some insight into the kind of money that TikTok is actually making because not only are we in a situation where all of our social media companies are just getting crushed under the weight of TikTok, we have no idea what TikTok's actual valuation is in addition to the concerns about the Chinese government, the most addictive platform on earth being "in control" by the Chinese government. So it makes you wonder what they can do with that kind of power, but it's also, what is the value of social media right now? Is social media just all TikTok or are we overplaying the amount that TikTok is winning the attention economy? We've gotten pretty far afield here though, Justin, and I want to make sure we cover some actual news as well.
 

Justin Kramer:
Yeah, totally, totally.

Peter Starr:
Because you mentioned it too. Elon Musk came out today and basically said, "Hey, when I close this deal," and he is basically just signaling that this deal is on wheels at this point. Twitter, this morning, also basically froze the stock accounts of every employee. You cannot trade Twitter stock if you work at Twitter right now, which is the biggest non-announcement indicator that this deal is basically over. The stock price is hovering at, what is it, $52, now at 54.20. So this market is like, "Hey, man, this is happening. It's definitely going to happen," but rumors are now saying it's going to happen this week, but then Elon's going to go and just nuke 75% of the company. Can you believe this is actually finally over, Justin? What do we even do once Twitter is an Elon Musk property?

Justin Kramer:
Yeah. It'll be interesting. The fact that he's getting rid of so many people and a lot of people on content moderation shows you the type of platform he is trying to make this be. It's really hard to see how customers will react. A lot of people are very upset, especially people who are more liberal about allowing Trump and all these other people back on the platform who are spreading information, whether it's misinformation or whatever it is in a way that they don't see fit. We'll see. Either Twitter's going to lose a lot of users or it's going to gain a lot more loyal or have a more dedicated, loyal cohort of users. There might be a lot of issues that Elon is going to have to start addressing.

It's nice from the outside that he has all these ideals and what he wants to do, but if he's getting rid of 75% of their workforce, there's going to be a lot of product issues that are completely negated. History shows us Elon has a pretty good operating history, but this is a different beast for him, something that he didn't build from the ground up, so very curious to see how this one shakes out. If you're betting on the acquisition to go through, I think there's a really good chance. From that merger investment, not a bad one, but a long term outlook to try to be an investor, we're definitely staying far away right now.

Peter Starr:
And yeah, furthermore, don't bet on it too hard because right now, the stock price is within what, 2% of the actual value.

Justin Kramer:
Yeah, it's a small price.

Peter Starr:
So it's like, wow, you made a big bet there buddy, and you made a whole dollar and a half. Congratulations. It's one of those things where I totally get it feels pretty likely right now, but the time to buy Twitter stock was when this first started shaking it when Twitter was in the-

Justin Kramer:
Totally.

Peter Starr:
... teens briefly. So really interesting thing, but I guess the main question in this, Justin, I think this will be interesting to see how it moves forward for Twitter, but this feels like the only thing it could be is a value destruction event for Tesla, because where else is Elon going to get the 13, 14 extra billion dollars he needs? Is he going to get it all from SBF or is it going to be where he has to sell so much? He has a very limited window where he sells a bunch of Tesla stock, but completely nuking the value of the company, right?

Justin Kramer:
Yeah. It's a good point because not only would he potentially have to just liquidate more Tesla stock, which obviously is just not good for investors, but even if he spends one day a week at Twitter, that's a whole day that he's not now dedicating to Tesla and their roadmap and he has to do SpaceX and he has to do all the other things he's working on. It gets to the point where one man can only do so much. I think for him, it'll be interesting to see who he plays in senior positions. He's shown that he's really good at recruiting and getting the right people in there to help run the company while he tangentially touches the stuff he wants to touch on. But at least in the short term, this is going and has been a distraction for him outside of any stock implications for just his general timeline and agenda for Tesla for these other companies that he's much more heavily invested in.

So yeah, as a Tesla investor, I'm definitely cautious. Do I think it's going to fundamentally alter the trajectory of the company? No, but in the short term, it's definitely going to cause some potential headaches. They might miss revenue expectations, shipping expectations, but if this is just more or less a short term headwind, I don't think it'll affect any of their innovation and trajectory of the company. They're just so far ahead of really anyone else right now. It's mind-blowing.

Peter Starr:
With the margins that Tesla has, they don't necessarily need liquidity that comes from a high stock price and frankly, bringing it back down to earth a little bit is super helpful. For me, the main thing I think this could do, the thing that as a degenerate tech investor, the thing I'm most excited for is I do hope this causes a bit of liquidity crisis personally for Elon so it pushes him to do maybe a little sooner than he should make Starlink public. IPO Starlink, that's the only company I want to invest in for the next decade. I just want to put all my money into satellite internet because it's good enough for the entire planet. You're literally watching internet cables in Norway get cut mysteriously. Starlink is a huge part of the future of the infrastructure that makes the internet and thinking that that can be public sooner than later because my man just needs to make money now, I'm really excited for that, frankly. That's going to be pretty gigantic.

Justin Kramer:
Yeah. I know he was talking about cutting service in the Ukraine and start making more pro-China comments, so we'll see if there's underlying reasons he's doing this to get more manufacturing for Tesla in China. There's a lot of things that he does and then you find out months later that there's some sort of internal motivation where he was a few steps ahead of everyone else. I think the Starlink stuff is super interesting. It definitely is a massive, massive opportunity. SpaceX in general is just such a massive opportunity that isn't on most investors' radar since it's a private company, but you better believe that that company is going to absolutely skyrocket once at IPOs. Obviously right now is not the best timing, but as early as at some point in 2023, that could easily happen. The amount of money they've already raised is insane.

Peter Starr:
Yeah. The Ukraine stuff is strange. The Pentagon has been paying for Starlink in the Ukraine for a long time and there's been a lot of really cool crowdfunding efforts to buy more Starlink terminals for the Ukrainian army, I mean for the Russian army too. No one talks about that part, but those terminals are all over eastern Ukraine right now. It's very interesting to see why Elon is also texting about things like, "Oh, let's have peace in the Ukraine, please" and reports that he is talking to Putin all the time and whatever. But we don't need to get into that weird speculative stuff because the main thing is that people are paying for the service and it's one of those things where if it's ubiquitous worldwide, even though the service is a little bit gunky right now and the terminals are a little bit weird, it's still better than what the entire planet has for internet, and that's why it's got such a huge potential as a growth thing. So again, that's why I'm excited to invest in it.

But again, that's the main thing we have to think about right now. We have to think about these long-term plays because we're going to be in this... While volatility decreases are going to be in this bear cycle for a bit, whether or not they declare it to be a full-on recession closer to the beginning of 2023 or whatever remains to be seen, but it's really interesting to watch all these reactions. I love how we talk so much. We don't even cover the major news like the UK PM, Liz Truss, resigning after-

Justin Kramer:
Oh, yeah, .

Peter Starr:
... the whole market's like-

Justin Kramer:
We definitely have to talk about that.

Peter Starr:
Yeah. I wish we had time-

Justin Kramer:
We can talk about that quickly.

Peter Starr:
Yeah. Oh, we could, yeah. Justin, so Reaganomics, we were trying to bring the '80s back fully. Liz Truss did full supply-side economics, killing the pound briefly. We had a brief period in time where the UK was run by two people named Liz, then one, now it's back down to zero. The main question though, Justin, is what does this mean moving forward for the UK? How do you even play in a situation where they have been backed into such a fiscal corner with Brexit, with everything else that zero... They're stuck with a conservative government for at least the next two years, but no conservative policies are being swallowed by the market well. Is the conservative party's going to go full liberalized economic structure or how do we even react to supply-side economics just getting completely booted in the UK?
 

Justin Kramer:
Yeah. The one thing I just want to clear up for some investors or just people in general who are worried, this is not the equivalent of Biden coming in or Trump or anyone coming in in six weeks, were coming in and six weeks later, leaving, same thing with Boris Johnson. The UK operates a little bit differently so while yes, this is a massive deal, it's not what would the extent of the president here resigning, which would cause, from my perspective, just utter chaos. In the UK, a party wins and then that party then elects a leader. So the conservative party, to Peter's point, is still in power. They're going to have to find somebody new, which is a disaster within itself, but there isn't a fundamental shift in more or less who's helping run the country over there. Though Liz Truss stuff, it's like humus. It's so horrific that it's just borderline hilarious because of how much of a disaster it was.

But basically, she proposed a bunch of plans for the economy and the markets went into an absolute shock when she did just several weeks ago. The pound fell to multi-year lows and people started calling for her resignation pretty quick. It's crazy that this plan that she wanted to put into place got such negative feedback to the point where she was literally forced to resign. It's pretty mind-blowing. It's hard to say what's going to happen next, but obviously, the plan she wanted to put into place is not happening even close, which just shows you where the conservative party is at right now in the UK.
 

Peter Starr:
And look, it's not just this historic resignation. We also have to keep in mind that the US dollar's at parody with the pound for the first time in decades. Furthermore, it's in the same year where the men's US national team actually has a fairly solid opportunity to defeat England in the World Cup, which therefore means we're just going to call it soccer from now on. Football's over.
 

Justin Kramer:
Yeah. Basically, the US is stronger both on the front of the currency as well as ultimately the soccer team. I think we have the power to do that now.

Peter Starr:
But to just try to put a bow on this real fast, this is me precluding what we might be talking about next week, Justin, this is a question that keeps coming in from the discord. A lot of the trouble in the UK, of course it's coming from the Russia side of the equation with energy prices skyrocketing out of control, but it's also coming from, like we've been saying, the US dollar getting insanely, insanely strong. So many countries rely on the petrodollar to... You can only pay for certain assets with US dollars and international debt is in US dollars. When the dollar is stronger, like out of control, strong compared to every other currency, again, I'm asking for a bow on this, not a full-on discussion, but a lot of people are becoming concerned. Is there going to be more pressure to find a different reserve currency if the US dollar remains as strong or is this a temporary blip in the macro environment?
 

Justin Kramer:
That's what people have been calling for. Cryptos, since day one, is like this alternative currency, some sort of reserve currency when the world more or less goes to shit. What we've seen is that's definitely not the case. The Bitcoin and the rest of the crypto market has gone up and down and up and down and actually finally got to a point where it's now been less volatile than the market shockingly for the first time since 2020.

But that was the overall premise of crypto, which has just proven to be completely wrong, at least for the time being given it is a very, very young and immature market. But yeah, to your point, not to get too into the weeds, but it'll be interesting to see what happens next because the US has just been this currency where everyone has flocked to safety, but that's not really sustainable over the long run, especially if the US loses its power to other countries as countries often do. We'll see how this one shakes out. It's definitely a little troublesome to see how much it's appreciated in relation to other countries.
 

Peter Starr:
And it's one of those things too where it's interesting to watch as well and see how it plays out, but it's one of those things too where you're watching a lot of different trends diverge too. Finally, crypto is back to being a little bit antithetical to macro trends in the macro stock market. About a billion dollars worth of Bitcoin left exchanges in the past week and now, Bitcoin's volatility is finally way, way separate from the Nasdaq and the Dow, so their price is . Bitcoin is holding steady at 19K, not changing. A lot of people aren't really trading as heavily and with as much liquidity on Bitcoin anymore, so it's going to be interesting to watch to see how well that plays out too. Again, a lot of interesting directions we can go, but of course, the main thing we're going to be watching is next week, which is going to be the big four doing their earnings calls.

We're talking about Apple, Microsoft, Facebook, all of these big tech giants. We had a really interesting earning season this week where the banks lifted the economy back up from the doldrums, but not enough to make us think that we're in the clear here. There's more rumors that the Fed is going to potentially soften their interest rate hikes. That'd be very interesting to see. But again, the main thing we'll be talking about next week is how earnings season went. As always, audience, I really appreciate you being here with us. Justin Kramer, CEO, co-founder and chief analyst here at Moby.co, thanks for just staying way over time on this, dude. Any final thoughts from you before we go ahead and put a bow on this? Again, I really appreciate your perspective today.
 

Justin Kramer:
No, I think this is good. There's obviously a lot more I would love to talk about, but I think next week, the week after when we start getting more into what the Fed will do at their next rate hike, which I guess I'll leave everyone here with this thought, is we'll see if things start slowing down. That's why the market, in large part, has been rallying this week. Obviously, corporate earnings came out. The news have been relatively good for the most part depending on the industry you're looking at, but a lot of people are just calling on the Fed, calling on the Fed to start slowing down things and people are getting hopeful that they're being potentially relatively receptive and that's in large part why we've seen this rally this week. We'll see what happens when they announce their next round of rate hikes, if they're ultimately constructive, listen to people, or if they're going to continue pushing it further.

Next week, we'll get PCE, core PCE coming out and we'll get consumer sentiment. We'll get a bunch of other consumer confidence, new home sales. We'll get a bunch of things next week that'll probably really, really help shape the Fed's decision. So again, as always, do not fight the Fed in 2022. That is the number one thing to be looking at when they decide to start slowing down that interest rate policy increases. We'll keep you posted. We'll be back next week. I'm sure we'll have a lot of updates to chat on then.
 

Peter Starr:
Final huge degenerate question, Justin. If you wanted to and bet on it, do you think there's any chance the Fed goes 50 basis points as opposed to 75 with their next rate hike?

Justin Kramer:
I think by the end of the year. Is there what, there's one or two more potential-

Peter Starr:
Two, I think.

Justin Kramer:
... opportunities.

Peter Starr:
You got the November-

Justin Kramer:
Sure.

Peter Starr:
... and December, yeah.

Justin Kramer:
Yeah. I think depending on how corporate earnings go and ultimately how inflation goes going into the end of the year, I think there's definitely a chance they go 50. I don't think it'll happen this month, but I wouldn't be surprised to see it happen before the end of the year, if not early next year. This 75 basis point raise cycle, I know they want to slow down inflation, but it's just not sustainable. The 30-year mortgage rate right now is around 7%. New home sales are down at 10-year lows.

The economy's been strong, but it's on the edge of a cliff just waiting to fall off. I think what the Fed needs to ultimately balance is, do they want inflation to come back down and for things to get marginally more expensive for people to have jobs or do they want to solve inflation, but everyone, not everyone, but a lot of people lose their jobs, which ultimately probably puts us into more of a hurting period, at least in the short term for the economy? There's no good answer, but a lot of investors are hopeful that they'll do the right things from the market's perspective.

Peter Starr:
Exactly. I think that's really starting to emerge because I think you're also seeing the Fed really start talking about how they recognize that they can raise rates all they want, but they can't change energy prices and that's the main thing that's been driving the bus in regards to inflation too. So it's just like, keep it under control as best you can. Balance it with not completely the economy off a cliff. But again, we're staying-

Justin Kramer:
Yeah, it's really tough.

Peter Starr:
Yeah, it is.

Justin Kramer:
We're sapped because Biden just released more oil from our own reserves in-

Peter Starr:
Let's go.

Justin Kramer:
... order to help add inflation. Ultimately, that's coming up very good timing because midterms are coming up and they obviously want to help out the Democratic cause. But there's only so much they can do with the energy prices, especially with the way OPEC and Russia are behaving. Unless we want to get into a full out war on top of the war that's already going on, it's a tough situation right now.

Peter Starr:
Yeah. One day, we will have the time, patience, and measured ability to talk about what in the hell is going on with the US relationship with Saudi Arabia because that's a whole other can of worms as that, air deteriorates? Really interesting to see as we try to apply pressure to stop OPEC from cutting more supply. But again, we'll find out together. Either way, audience, lot's going on.

Really, really love all of you being here till the end of it. If you any questions, you can always hit us up at [email protected] or join us live on our Discord as we do these conversations. We really appreciate you being here with us though audience, but for now, I'm just going to go ahead and read the credits.

So just so you know, this podcast is produced, hosted, and voiced by me, Peter Starr. All of the intellectual value that comes from this podcast comes from our analyst team, which is headed up by Justin Kramer, our CEO, co-founder and chief analyst. You can also find us over at Instagram, TikTok, or anywhere else. If you want to get inside more detailed versions of our research, find us over at moby.co/go to see if you can get a free trial if you're not already a member of Moby.co. Regardless, audience, we really appreciate you being here. As always, we like to leave you with peace, love, and incremental gains. Everyone, be well. Thank you so much.