Moby Live: Bitcoin All Time High's, Facebook Scandals, Supply Chain Shortages & More

Audio Recorded on October 21, 2021 (Transcript below)

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Peter Starr: Q4 is obviously pretty wild. It is half an hour before the market closes, and this is a Thursday just chock full of solid earnings, which is driving the S and P to new highs.

I mean, what is it? Tesla rose 3% unimproved gross margins. I think they went up 30 and a half percent on its automotive business and somewhere around 25 for other business, which for the last five quarters is another record. Netflix spiked pretty well off with the success with squid game, which is hilarious, watching a very anticapitalist TV show, single handedly prop up our HELOC capitalist market, the chips shortages, and slowing Invidia down for whatever reason.

3% and we work,  , his back from the dead going up 13% after their cute little speck launch. I mean, it's not all rosy though. Apple claimed its first victim today with their new privacy policy. Snap is down 25% for the missed revenue goals. Hard, thanks to apple turning up tracking. So all in all, a really wild day, copping off kind of a really wild week.

I guess, Justin, the main question we have here in the audience is are we going to start seeing the market get even more volatile now that we're starting to exit the more exciting part of earnings season? Or do you think the market can keep this rally going through? It'll be a tough Q4. Like it really feels like all the services we're seeing are making this just completely avoid inflationary pressure right now.

Justin Kramer: I mean, I think you're better suited to answer the question. Super comprehensive,This is  something we've been paying attention to. So when the market hit, you know, two, three weeks ago it was crashing and everyone's worried and we just said, don't worry, it's going to rebound.

And then you have weeks like this, where it's hitting all time highs again, this is just part of like the upward cycle higher. So the valuation ratio ratios, the earnings of the S and P 500, the PE ratio of the S P 500. These are things that, although things are expensive it's because things are growing so quickly.

And we saw such a peel back,  , in a lot of sectors due to COVID that a lot of this is like supercharged demand that is finally coming to pick back up. So a lot of these sectors and companies are a little depressed in their earnings, even though their valuations are high because they're just lagging their potential.

So it may stunt growth here in the. Like overall in the long-term again, until things fundamentally change, inflation's picking back up. People are still willing to pay the prices for now. We're continuing to be long. If inflation spikes another 5%, then, then maybe this conversation changes. But given where we are today and where it looks like things are headed.

We're still going to be long. And then you, you mentioned the Snapchat things, some privacy related concerns kind of put out a slam piece on Facebook about a week or two ago, talks about iOS 14 and a half and how it's going to be potentially the downfall, a lot of their advertising platform. And so when Snapchat comes out today, they report earnings and they're down 25% after hours.

This is not going to be a challenge that is isolated just to them. This is going to be a wide-field issue around Facebook, around other social media giants. Pinterest. We have a piece of later coming out on Pinterest and PayPal and the rumors there. And so this is going to be a problem for a lot of platforms out there, especially on mobile,  as tracking and, and third party cookies comes to an end.

So. Long story short stimulation on the market, a lot of headwinds for data privacy and some advertising platforms, but overall things are trending holistically and in the right direction. 

Peter Starr: Exactly like overall, like outside of the media and advertising industrial complex, you're seeing a lot of positive signs too, as you know, money tends to flow in a lot of different directions.

So I want to add on top of those SNAP conversations. Audience, I want you to put two facts together real fast here. Snapchat went down 25% today and they've basically blamed them missing revenue on Apple's new privacy settings. So also keep in mind that yesterday. Weirdly announces that they want to completely rebrand and then also be entirely a metaverse company.

And you're seeing Facebook try to reshift its entire ecosystem so they can have way more control over their audience and not even need to rely on, you know, a multi-platform approach with the Facebook pixel has. So watch these market pressures play out in real time. It's amazing how much Apple has changed the game in terms of advertising.

Kat and galvanized a lot of really insane growth. Like I'm so excited for the metaverse. I'm so excited for all these developments, but that's mostly me as a creator because I S I succeed if I have new and interesting places to talk. Right. So keep that in mind. Like, we're seeing a lot of energy, like, this is one of those situations,  and not to be all weird or anything, but this is one of those situations where there's kind of like a month-long period where decades happen as opposed to, you know, several months where nothing happens.

So,  I'm really excited just to watch all that shake out. But I think. Like looking in the comments, looking in the questions. A lot of us are very concerned about the volatility we see here in the stock market. And so a lot of us are thinking about other places to put our money. And so this gives me a nice little segue, Justin, into some research.

I believe yesterday, it was yesterday's research where you were talking about Apollo and talking about investing in the private market. And I said just when it gets through your thoughts, in terms of what it means to invest like in the primary market, as opposed to the secondary market and what the value there is, like, what are your thoughts in terms of thinking about finding those new avenues to invest?

Like a lot of people are running to fundraise for retail. What's your, what are your, what are your hot, what are your top level takes on Apollo and how to invest in the, in the primary market, as opposed to the secondary?

Justin Kramer: Yeah. So just real quick to kind of piggyback on the challenge of that before,  , about Snapchat and Facebook and the metaverse, you know, Snapchat's down 25% today, and Facebook hasn't even reported down 5% after hours.

So investors are gonna start seeing the trend.  and so to your point, creating like this, this new context or who their company is going to be a year ago, it was, they tried to launch their own crypto. It kind of really went nowhere. Now it's this metaphor. They're seeing kind of the way to the end of the tunnel.

And they realize that social media, especially from Facebook's perspective, is not necessarily going to be their long game. Instagram is still crushing WhatsApp, a lot of the other platforms, but they're, they're definitely looking to pivot in some capacity as they,  , they see a lot of things changing.

So it's a really interesting thing to watch.  and again, that's why we called it out last week, made a video on. You know, something we're watching really closely.  but yeah, outside of that kind of relating more towards your, your later question as it is for Apollo. And this is like something that we've been wanting to write about for a long time.

Um, Especially with the rise of crypto and people investing in other assets. It's like, okay, well our equities, what they used to be, are there better returns elsewhere? Can we invest in crypto? How do I invest in private companies? Can I invest in real estate? Can I invest in all these things that historically I haven't had access to?

And today the answer is largely no. Or the ease of doing it as hard as we know.  but as more and more options kind of opened up. Those in theory should become easier, but there still are ways via the equity market to get access to those types of investments. And there's a company called Apollo that most people, if you've never heard of, they're, they're a large asset manager.

And by. Investing in them, maybe it's not one-to-one exposure, but you're getting access to their entire portfolio. And so that their direct kind of results in terms of like their operating profits and what makes a stock go up and down is strictly incumbent upon the investments they make and all their investments are in real estate.

In startup tech companies and crypto and all these areas. So you're kind of getting a culmination more or less of everything they do wrapped into an ETF or sorry into an equity rather. And you can invest in them, get in, get out super fast. It's a way to get exposure, like broad, broad exposure to all these traditional or less traditional rather asset classes.

You know, 99% of the population doesn't have, you know, most people can't go out there and buy an apartment building and get passive income via the rental. It's just, it's just not feasible. So like, this is a really good way for people,  for I'm sure a lot of people here get exposure, do it cheaply, do it quickly.

And if things don't work out, you can get out fast. Whereas know if you're obviously going to try and sell a billion. It's going to take some time, take some money. It's not so challenging. This is a really good alternative. Something that we've had our eyes on for a while. And they're kind of in the middle of a rapid growth phase right now.

So it's a cool way to get exposure and not have to spend too much time digging into what's the best building. What's the best startup company? What's the best crypto we're calling? It's just, you know, they're doing kind of the hard work for you. And that's a, that's where you're participating with, with their stock.

Peter Starr: Precisely. And that's a lot of the reason why we are always so bullish on ETFs too. Like it's, it's great getting access to all this private stuff, but getting access to something more institutionally managed as well. So that's why I'm bullish on this as on Apollo as well, and just like excited to have that kind of exposure, because right now the name of the game genuinely is diversification because with the amount of energy that we're experiencing in this economy right now, it's really hard to see where things are going to go.

I looked, I looked this week and I saw the earnings calls coming up and I thought about what various short-term plays I was going to make. And I was like, I literally sold some Chipotle lay stock because I didn't want to have any real huge exposure to what I thought was going to be rising.

Prices. But instead of that, they crushed estimates. Their sales jumped 22% and their stock is now, well, it's flat now, but it went up pretty hard today. So it's really hard to predict precisely where all this energy is going to go. Who's going to win and who's going to lose because of. Heat in this economy.

You think you think the market's going to Zig and it's going to zag. It's just the amount of upturns and downturns you're going to see. I never thought Nvidia would go with, have it, have it, stock price, go up. But it's just, you know, doing so well, despite a ridiculous chip shortage with a lot of, there's a lot of good gaming news coming out and, you know, sales are up.

I mean their earnings aren't till November, but there's still a lot of good sentiment driving their stock price up today. So that's the main thing to keep in mind. This is just so fundamentally hard to predict. And the ups and downs are just going to be a lot sharper during a period like this, which is pretty nutty considering we're here in Q4.

So,  God help you if you're a day trader and also just like good, like if you, you know, make all the right moves, it's a great time to be a day trader, but it's not really a philosophy that we super,  endorse, but that kind of gets me into various other ways. The market is diversifying.

 And last week we talked about the coming rise in crypto and low and behold, not to like pat ourselves on the back or anything, but like almost right on schedule Bitcoin hit new all time highs. Thanks to leveraging Bitcoins now down to about 62. So literally we talked about Bitcoin at 60. Now we're talking about it at 62, as opposed to it at 6 K 

So, what's your view overall of the crypto space right now? I mean, I understand like it's impossible to predict, but looking at this, do you see this, this October is more of a bull trap or the start of a bull run? Like, what is your feeling right now in the crypto space, as Bitcoin goes through this kind of goofy little hiccup?

Justin Kramer: Yeah. I mean, a lot of crypto kind of just in general follows trends. I mean, we're not really ones for our technical analysis, but. If you look at the crypto space. So like there, there's definitely a common theme in terms of you can use kind of past,  kind of pass indicators to, to start predicting forward prices, whereas in the equity markets.

So we'll be more challenging to do. And so if you look back over the last, like five years in even, or even earlier this year, you saw the spike.  , kind of late 2020, it was around 20,000 and it surges up to 60 and four months. It goes back down to the thirties for a while. And then obviously over the last month or two, it's really gone crazy.

And you go back to 2017, it's floating in the, the two to 5,000 range. It spikes up to 20 or close to it. And then it goes back down into, like, again, the mid kind of 5,000 range  , for a few years until it spikes back up again. So, you know, Bitcoin doesn't have a tremendous history. I mean, it's only obviously been around for so long, so it's hard to say, oh, this happened before it'll happen again.

But using the indicators that we use, a lot of the proprietary tools. Yeah, it does look like it's starting to approach a point where there could be some sort of inflection point where either there'll be a crash and it'll likely start like recovering to a certain level, stay there for a while until it makes its move upwards or kind of then spike upwards, and maybe hit 70 to 80 K before making that eventual move downwards.

We're looking at the charts in real time. And we're kind of at an interesting point where it could go either way. I'm not probably the answer everyone wants to hear, but it's kind of the truth right now. So for us, as short-term from a short-term mindset, we weren't allocating too much more. We already have some pretty heavy exposure.

And then over the long-term, as you know, Called out before we're continuing to just dollar cost average in. If we see opportunities to buy in cheap, we'll get in.  This is something we fundamentally believe in over the longterm. Last year, we wrote a piece about how we thought it was going to go to a 100K. I mean, there's a real chance that it will happen this year, if not next.

And so it's really the long-term game here. NFTs are slowly starting to cool off. So you need to pick your opportunities wisely. And again -- it's the responsible yet boring answer. Everyone wants to get rich overnight. We realize it's not, it's not fun waiting, but this is an asset class that is still very, very young and still has a ton of room to run.

So, you know, the TLDR of all this. If you want to get in over the long-term great, you know, it's hard to pick the top. It's hard to pick the bottom.  but if you're, if you're short-term trading it, we would, we'd likely stay away for now. There's a lot of, a lot of downward pressure potentially coming.

Peter Starr: Because what you're watching is that incredible spike from 60 to 67, over a 48 hour period, kind of drove a lot of leveraged interest into the space. And that's where you're going to get a lot of the really heavy volatility people borrowing heavily.  , to get into these leveraged positions that can just completely wipe themselves out.

Bitcoin is not a place where you place your huge, huge bets. You incrementally increase your bet over time, ride this wave as best as you can. I think it's still going to go up from here by in a little bit, with that light light,  , that money you're going to want to light on fire and then get out when you think you're nearing that peak, because that peak always leads to a pretty significant crash.

A lot of people start baling. One thing I saw in 2017 was this absolutely incredible percentage switch where a lot of whales and older Bitcoin investors bought in really early in the rise and a lot of new investors bought and right before the top and kind of got washed until basically recently.

So now's the time to kind of hang out and just wait it out and give yourself time to. Get the capital necessary to win the next bull run. Right? So if you're still new to Bitcoin, if you're still in a really small position, you're just kind of extending your speculative budget rate.

Now, as you watch this go up. So the main thing is short, short Bitcoins really. Medium. Bitcoin's pretty interesting and long, long Bitcoin. I mean, I don't see any reason why I can't hit a hundred K.  but the, the question mark is now is a hundred K this year, or more like Q1 Q2 2022, but that gets us as we think more about the volatility as we think more about just again, all the energy in our economy.

I think there's still a lot of interest, so I guess,  , we have time now to get right into audience questions as we sort of lay, the groundwork here. And I guess Justin, let's go back to snap real fast. You look, you look at snaps products, wheat, you look at the way they're playing this game.

The main thing we have right now is is there any way, like, if you are, if you're Snapchat and you're thinking about like how to monetize.  , social media asset in this new paradigm shift with apple, is this a value play? Like, do you think this is something they figure out eventually? Or do you think this is just a sign of things to come for snap?

Like how do you, when you look at this, this is a hot take. Obviously I know, I can't ask you to give you real analysis on the spot here, but just looking at those facts right there. Is this a value playing by now and just assume it's a dip or do you think this is kind of like a harbinger of snap?

Justin Kramer: Yeah. Again, similar to Facebook, I'm really a bit skeptical,  on kind of their overall business model. We dove into Facebook last week and it's really the same issue for,  , for Snapchat in the sense that, excuse me, sorry.  in the sense that they're dealing with a lot of data privacy.

 You also in Facebook, for example, if anyone here has any advertising experience or spends any time there, Facebook is their bread and butter, is their lookalike audience, their ability to use day-to-day see on their platform to make. To make recommendations, then also use all the attribution that is done by third-party cookies to ultimately model out who the best people are.

And that's why they've been really good at commanding a lot of ad spend because their ad network has been insane. And so with Apple rolling out iOS 14 and a half blocking a lot of the tracking that you can do across the internet.  Facebook has really, I mean, for the, one of the biggest tech companies in the world and.

The one that has the most resources outside of maybe Tesla and one or two others, they are really challenged to find issues. So going over to Snapchat, they should be dealing with this just as hard, if not harder than Facebook is their ability to ultimately drive the same meaningful ad experience.

Keep your customer acquisition costs down while increasing the lifetime value of your customers and finding the right one. They're just going to continue having a harder and harder time if you factor in other social platforms that are becoming bigger. This, you know, inherent metaverse that Facebook and others have alluded to.

And for me, getting behind Snapchat over a multi-year time period is tough for me to say, I, personally wouldn't do it. 

Peter Starr: And to really drive that home too, just to give you some more examples. If you've been in New York, In the past year and a half, like literally anywhere. Like if you're the kind of person who walks across the bridges or you're the kind of person who goes to Coney island, you've seen the, and then create an incredible proliferation of these obnoxious barges that just have visual billboards on them.

There just seemed to be more and more and more of them. And for me, that's a real visceral sign of just how,  on how advertising itself. The entire advertising industrial complex is really beginning to lose a lot of age and a lot of efficacy. And so I'm very concerned about advertising in general right now, because so much of the ads industry probably was carried by conversion data. 

Like you were able to really laser in your ad spend based on being able to track somebody from Facebook, all the way to your website, all the way through their entire customer lifetime, really. And that's definitely going away. And without that kind of cost efficiency, there's an inflection point that may have already passed.

However, that doesn't change certain other completely different approaches to advertising, which is what makes tick talks so incredible because tick tock doesn't need to rely on. Conversion metrics. They are an incredible platform for virality, for old-school advertising, which is just exposure campaigns, like really big advertisers, throwing a lot of money to get as many eyeballs on their brand as possible.

That's something that's still effective. It's one of those really wild things where we've completely gone back to like 1995 in terms of our ads paradigm. As these data privacy laws get more and more robust. And companies like Apple just completely piece out like half the. Is off the, the, the tracking cycle now.

So you're losing a lot of efficacy in advertising, but at the same time, certain different approaches to advertising will therefore become more effective. So,  I wish I could invest in TikTok right now, because I feel like it still has a strong position as a virality and exposure engine, as opposed to a conversion tracking.

So I agree with you, Justin. Like it's one of those things where we're really in the woods right now, in terms of, should we be investing in anything that's a part of this industrial ads complex, Facebook and Google are going to be fine. I mean, they own the entire advertising internet, but they have lots of other things that they can fall back on as this becomes very like a very interesting place to be.

I'm really interested about YouTube ads as well. And seeing if that sort of loses its efficacy, as all of this plays out. I'll have to see, we'll have to see, you know, Google learnings too, I guess,  we're, we're really approaching the end here, Justin. We want to make sure we keep this to a tight, tight 30 since we didn't have any technical issues this time.

So that brings me to one quick, I'm going to give you a quick situation. I'm going to give you another quick,  , by the dip scenario brought to us by our audience. And I understand once again, you might've had a chance to do a lot of research. But I want to get your thoughts. People are, people watch the Nvidia news and they're like, okay, some companies just don't care about the chip shortage right now, Intel is down pretty hard.

Um, their shares fell about 6% today on, you know, a weaker than expected sales report.  their EPS was 1.71 versus one point 11 expected, and the revenue was only 18 billion adjusted versus an 18.2, 4 billion expected. So they're. You know, basically off of the, the chip shortage off of like reduced sales.

So if you look at companies like Intel and you watch this microchip shortage,  do you see companies like Intel is a value player by the dip? And like, as the chip shortage wanes that stock prices will go back up or are we entering another paradigm shift as the chip shortage just kind of gets exacerbated and people are talking about it lasting into 2023 again, totally get it.

But what are your high level thoughts re: intel?

Justin Kramer: Yeah, that's a good question.  and this is something we have been looking at.  Just, I mean, chip shortage in general is obviously hurting a lot of companies. The supply chain issue is just it's, it's not going away and it's been a problem for awhile.  So yeah, this is definitely something like we're looking at.

For us, I mean, new Vidia kind of versus Intel,  , to, in our opinion, it's, it's, it's like comparing apples and oranges.  while Intel had,  you know, they had ships in like apple computers when apple started releasing their own processors, like with the M one and M two that. Kind of put a damper on a lot of things like Intel's growth.

Um, if it's a funny sign that, but on Intel's steady, steady, slow growth, where in a video, for example, they're not reliant on one company like that. They're expanding faster than pretty much any other chip manufacturer out there. And so when you see the stock for them being up like 73% today,  , and then even after hours, they're pretty flat relative to Intel to your point of being down 10% after hours.

And they're only up 12% today. Again, it kind of goes back to apples and oranges. So. To answer the kind of audience question here. No, I don't think Intel, this is a good buying opportunity for them. I mean, they're only up 60% in the last five years. Yes. They pay a dividend of two and a half percent, but if you're looking for yield, I think there's better opportunities out there.

And if you're looking for growth opportunities with not a ton of risk, I also think there's better opportunities out there. So we've kind of been a little bit. Hands-off Intel for a while now. And, and we, we do feel that way with,  , a few of the other tech giants as well. And in terms of like the more legacy brands.

So like,   I know like Oracle, for example, is doing really well,  over the last year, but again, over the last five years, they're only up 150%, even though they're paying a relatively small dividend yet. 

Peter Starr: So I haven't really felt the need to like, get more chip or tech stocks. They're like Nvidia has been like my entire play.  but that, you know, that's bringing us really close to that half hour. I think we've talked a lot about the energy in the economy. Kind of given a good sort of benchmark for where we are in terms of this inflationary cycle.

We're seeing how services can kind of dodge inflationary pressure for a bit and keep driving the economy up. And even places in meatspace are doing pretty successfully as well. As you know, when you think about inflation and inflationary pressure, the only bands that have inflation are too much money chasing too few goods.

And it looks like. Even though we're experiencing a lot of labor shortages. There's a little bit of production in other parts of the economy that are keeping up with those inflationary pressures. So it's kind of working out in a positive direction, as long as we get to a situation where, you know, production can keep up as long as we can get through these supply chain issues.

The main thing, of course, being those supply chain issues have been brewing since about the beginning of 2020. And so if they're only coming to a head. Is it going to be the same amount of time to get out of there? And we're going to have to see that moving forward, but Justin again, thank you so much for your time today, man.

This has been a really awesome conversation. I really love where we went with it, but any final thoughts from you as we begin to think about this really like a high moment and when it's potentially kind of roller coaster.

Justin Kramer: No. I mean, we, we just need to continue watching kind of just overall earnings watching inflation, if that picks up substantial, even though it obviously has over the last 12 months looking at certain assets, if they're becoming overbought to the point where it just doesn't make sense anymore, there could be an interesting inflection point in either direction,  , over the next quarter.

Um, but again, right now, given the information we have, we're, we're continuing to be long. A lot of our positions, we've had a value tilt moose this year, which has done pretty nicely for us. The fact that we've kind of mitigated some of the super growth names.  and again, as a strategy, we're going to continue until, until things change otherwise.

Um, as things potentially inflation picks it more that should, if only continue to kind of push,  , alpha towards the names that we're holding. So long story short. We're continuing to hold along.  Q4 is always an interesting time in the markets. You got a ton of money pouring in, especially in the consumer names, in terms of sales people, trying to hit their targets at the end of the year.

Um, it's, it should always be an interesting time in the market. And again, we're working. 

Peter Starr: Exactly. I'm so glad we chose to stop. Start this podcast in October. It was not an August or anything because Q3 was so boring by comparison. I'm really loving riding the wave here in Q4, but either way, Justin Kramer , co-founder and lead analyst here  at moby.co it's been really awesome having you on this call live.

Thank you so much for all of your awesome questions. Again, if you have anything else, you can always just feel free to hit us up throughout the whole Moby verse here on discord. We love, you know, answering your questions and engaging with you and you know, doing the research you want us to do. This is a two way street, and we want to make sure that we are providing you the intelligence and research.

You need to build a portfolio you want to have, as you become, as you continue to grow your wealth over time, either way, audiences really appreciate your time. I'm going to go ahead and read the credits here. Podcast is produced, produced, hosted, and voiced by me, Peter Starr, Northrop. You can find more about us [email protected].

Feel free to follow us here on discord. Follow us on YouTube as well. We just released an awesome video, kind of going deeper into our position on sofa. After a piece of research we released last week, follow us on Tik TOK, just so I can keep juicing that algorithm. I'm very close to figuring it out and getting people excited about the market.

They're on the, on the clock app, either way, audience. I really appreciate your time. If you have any other questions, you can feel free to DM me directly as well. And for now, all I can say is I like to leave you with. Love and incremental gains. Everyone be well, thank you so much. Have a great day.