Welcome back to money talks where snapchat snapchat reported they were going to miss their q2 guidance and the stock snapped back so far back to 2017 levels. It felt like i was in college taking freshman science, i'm your unofficial host of mid always trying to be legit here with justin, oh and tom nash, and we aren't in dc. But today we're going to discuss how snap stock left in a flash today we're going to be going over one. Some hot takes number two: the snap, the snapchat crash and ultimately, what went wrong with their q2 guidance.

Three jeremy grantham saying that this bubble is the worst one of them all, including the dot-com crash, and finally, a new bill attempting to break up google's 50 billion per year at business. Is google just too big? Don't go anywhere, we'll be right back! Welcome back everybody to another edition of money talks on this beautiful tuesday morning it is may 24th, so i had to uh pop out the kobe jersey, the late and great kobe bryant owed to him we're going to start off with some hot takes up. Let's start off with tom nash: do you have a hot take for us today, sir? Welcome to the immigrant version of millennial money with the russian indian and the korean? We we are the most we should be in the s p. 500 esg invest in this show because that's investing in esg.

Definitely so i just want to say i'm a huge kobe fan and i totally love the fact you brought out the short for today, 24th he's one of my favorite players of all time. In fact, he's number two behind mj as an all-time great, i believe, he's better than lebron, so my order would be mj kobe lebron. The main issue i have with lebron is even though he's the most gifted human specimen we've ever seen in any sport. I've never seen anybody built like this run like this jump like this he's insanely talented, but he does not have the mental killing that hey kobe had and mj head it just wasn't good, so you would have you would have kobe over lebron on your team.

Oh, a hundred percent, if i had to make it that was a hot take because it's hot and flamingly wrong, but go ahead. I think if i had to assemble my team - and i think mj would be definitely number one at his prime. I don't think we can debate about that, given the failings of lebron in the fourth quarters of finals and series, i think that kobe would be a very solid number too. Of course i mean if you go back way back.

When i mean you cannot build a team without built like wilt as his prime, a giant it would, you know in modern basketball, it's mj, lebron and mj kobe and then lebron see the truth comes first subconsciously. Well, you know you would put lebron on your team before kobe. No, like he's a cancerous team teammate, i mean he's not a leader of men, which kobe definitely wasn't. Mj definitely was not liked.

Nobody liked them both they liked lebron, but they were leaders and they brought the best out of people all right, justin. What's your hot take for today, yeah i mean i'm, i don't know as much about basketball as you guys uh, but i did grow up under the three-peat era in southern california. So i think you can clearly know who i who i vote for. I i really don't know, do you do you feel like lebron is a true laker.

Do you identify with that or no? Well again, it's it's hard, like, i could say no um. I don't think so, but also like. I know i'm pretty biased because i don't live there anymore, but i think the answer is no like he like look at how many franchises kobe played under versus how many he's played under it's like he's kind of a contract for hire right, and i think he's There, because he wants to hang out with his like celebrity friends like that's my perception of him uh in in in uh socal, but uh, yeah and in terms of uh, my hot take today. I just wanted to call out that on um on cnbc this morning.

All three of us watched a clip which i haven't posted yet of alex carp, saying um, some really crazy, wacky things about china and russia calling them. You know he did refer to them, as i have a lot of respect for our adversaries. Um. That's an interesting word adversaries.

We all know how his position's there, um especially being pound, tear being only serving western um, allied governments and then also he uh pulled up here. We'll pull up on the screen. He did an extended tai, chi lesson with andrew ross, sorkin and uh. We also have uh some kind of connections with folks that that uh, that have either worked there and know some somebody who works there and it sounds like tai chi is - is quite a theme over there in tier hq.

So i guess my hot take is uh. I mean it's not that hot honestly i just forgot to have one but yeah he's a crazy man like he. He cannot talk to the media without confusing everybody. I couldn't even follow his interview, yeah and i think that's a little bit of the beauty of alex carp.

It's the eccentricities of him, and hopefully that leads to a higher stock price going into the future. What was also crazy, as we transitioned into our first topic for the day, is snapchat. They dropped 30 percent after hours yesterday when they reported something that was not their q2 earnings or guidance, because we still have a couple months so that, but they basically said they're not going to miss they're, not going to hit their q2 guidance. So, at the time last uh about two months ago, the company said it expected between 20 and 25 year-over-year revenue growth.

They now said we believe it is now likely that we will report revenue and adjusted ebitda below the low end of the guidance range we provided for this quarter, so they're not going to hit guidance, they're, actually gon na get lower than guidance. The market went into a frenzy. Facebook went down, six percent, google went down four percent. Basically all online media advertising stocks took a hit as a result of snapchat's guidance.

So justin, let's start off with you, we don't know the exact reason why they're not going to hit their numbers. But what do you think is the reason for why snapchat fell uh so badly? So an interesting thing is, i called a short on snapchat stock on their ipo. I actually looked pretty extensively at their ipo at 27. It was what mid high 20s per share.

I think about 24 in 2017, 20 yeah 24 in 2017, and that would have been a really good show for a number of years. Um. It was down peak to trough like 80 and it's really gotten a coveted beneficiary, because i think we all craved, especially the younger generation, really craved sending each other messages uh. My big thing with snapchat is i've never touched it with a 10 foot pole.

Nor will i because i don't think it's a platform. I think it is a um. You open it when you receive a message, a dm and it's a dming platform and by nature disappearing messages are basically, you know disappearing by nature. So you don't go to snapchat to go, discover things now.

They've tried to do that in the discovery feed and they have these like pseudo stories that are semi. Media um raise your hand put in the comments, if you even use that, but my generation, meaning uh folks from 25 to 35, do not use snapchat anymore. I think it's somewhat used in the kind of maybe the gen z uh cohort, but even then you don't go to snapchat to go, discover things instagram, you, you kind of go to discover things and even more so uh tick tock is like you go to discover. Even more things, because the discovery's so good here on youtube, discovery's, really good, so the more discovery you have, the more addiction you have to come back and the more of a platform you have, i think, snapchat's on the other end of the spectrum tom.

Why do you think they drop so badly because the crash i mean? What's the what's the problem, the look, i don't think it's a structural issue with the whole industry. I think digital advertising is going to come out strong, regardless of any recessions. Spending on digital advertising is not going to be diminished, no matter what happens with this economy to an extent i mean it's going to come down with the entire economy, but it's not a reopening story. That's now getting close because of of covet going away.

I think the problem is not macro or industry-wide. The problem is snap individually, not all digital advertising. Business models are built the same. Obviously, you can see with google - that's not the case with other providers with facebook.

That's not the case, they're losing a little bit more ground since the reopening, but i mean it's very marginal compared to what snap is going through. The main problem with snap is just the business. Don't make no sense. Justin alluded earlier to the structural issues of the platform: i'm not an expert in social media like that, but i'm i'm a numbers guy and i look at the numbers and i look i it's it's quite scary to me their revenues.

Our quarterly revenues went 20 25 down in q1 versus q4 of last year, so they're losing uh losing momentum quite severely. So it's a 4 billion revenue business not really growing anymore. In fact, decelerating that's trading at 40 billion dollars and they're losing money. I don't understand how a software as this platform business has 60 gross margin.

I mean it should be 80 for a software business and then to your point to your point. They have 310 million daus, which is 100 million more than twitter, and they still can't monetize at a hard level. Well, justin alluded to why they have they have these issues, i'm just talking about i'm completing what justin says from the financial perspective. I'm i'm just seeing.

Uh, the company has never lost and has never made money. Their net income is about one negative billion for uh for 2019 negative billion for 2020 and another negative half a billion this year, so they're losing money. Their margins are strange, 60 gross margins for a software business and and they they're decelerating in the growth they had the minus 25 growth. This quarter, which is quite alarming also, i don't know anybody who uses snapchat for anything.

Besides things, we cannot mention on the show. I do not want to imagine what tom sends out from his snapchat i've. Never i don't have an account. Why would i use snapchat um one thing i'll add about snapchat? Is i think, in a uncertain time, we've? Actually, i think that you see a bifurcation.

I think ad tech and ad spend will level out through kind of a recession or period of time like this, but the amount of spend that will stay. Strong is conversion advertising, so instagram ads facebook ads uh, search ads things that that, like, oh i'm, a lawyer or you know, i'm selling you a t-shirt or something whatever. I think the ones that are going to take a hit are, you know we talked about this with twitter, are like brand uh impressions impression reputation, ad spend so you're gon na see a pullback, especially like that's all. There is in snapchat it's like coca-cola sponsoring.

Some weird post like nobody's, buying anything from snapchat. That's actually a very good point. In snapchat, i've looked at their uh presentation deck for their last earnings. Their argument is that they know they can't beat facebook or google at conversion ads.

So their narrative is like. We have uh gen z from ages 13 to 35, and that is the most impressionable time for a young person to develop their brand affinities. So if they see coke over pepsi from 13 to 20, they're, probably gon na buy more coke at thanksgiving versus pepsi and that's their argument. The problem is when a recession comes.

Coke doesn't need to spend that money. So that's where it drops immediately yeah and i don't know how effective like seeing coca-cola being drank in between nudes is like well it's how effective that's a that's a valid point, but amit i mean you bring up a very interesting point. I mean your whole. Startup is built on the fact that certain industries lack algorithm yes and suggested based uh consumption.

That's the big problem like tick tock. Has this caters to the same demographic, but their algorithm is brilliant, it's very addictive. Even for me, if you get them, you can spend hours on tick tock. It goes away like the sense of time you can't spend hours on snapchat, there's no algorithm, pushing content your way, and i think that's that's what you were talking about for years with death of non-algorithmic suggested business models.

That's why youtube completely changed for subscription-based feeds to suggested-based feeds? The ai is just too good one thousand percent. I mean the other thing about snapchat, it's a social graph of your friends which you're getting stories from. If you don't have a lot of friends they're not going to show you random content, which means creators aren't going to get discovered, and then you won't spend time because there's nothing interesting. Absolutely all right! Next topic, jeremy grantham says that this bubble that we've had over the past two years, where the fed pumped seven trillion dollars of liquidity to save a storm of pandemic is the worst one of them all.

He says it's worse than 2001. He says nfts crypto. All these speculative assets have led to inflated prices in growth, tech now we're seeing that come down now. Granted, jeremy grantham is a little bit of a perma-bear, so he's been calling a crash for a very long time, but it seems like he might be right about this one after being wrong for the past 10 years.

Justin. Is this really the worst bubble of all time? I disagree with the bubble. Um it's going to be worse than 2000, given uh peak to trough. Let's look at this.

The s p was down 44 45 and it took a long time to get back because all those valuations from that bubble really ran up from 95 to 2000, so five years of over speculation about quite prophetically the biggest thing ever to happen to the human race. Arguably the internet uh, but they were all based on zero revenues and zero profits. Even snapchat, like has ebitda profits, palantir has meaningful profits. A lot of these growth stocks that have come down have meaningful profits.

So i think the valuations are there and they're much more they're much better today, and i i think that eventually valuations act like as a mattress and as a floor, so i think, we'll spring back much quicker. Now, uh, we are less than a halfway there. Well, that's fair. I actually think it's really interesting, because valuations are at basically historical bottoms on price earnings for small to mid caps, but in large caps s p 500 large caps uh.

They still kind of have ha we're only halfway there. So i think if he might be right, that we're halfway to the bottom, but really focusing in on those large cap stocks like like uh, i do see a period of time where um we, you see microsoft and amazon, and all these really great companies going from 21 times ebitda to 11 to 12 and then bottoming around there. That makes sense to me, but that doesn't seem like it would be worse than 2000 because 2000, i think you know it took seven eight years to get back to even and then we had the financial crisis tom. Do you agree with justin, or is this actually going to be worse than 2001.? So look uh a lot of respect for jeremy grantham uh.

He has forgotten things in his 83 years that we haven't learned yet i'm sure of that, and he he he is a little bit of a pessimistic about the situation. I i i here's my two cents about this. Here's why i see this look. We all know that you know there's always a risk of a stock market crash, these crashes, they come in cycles, it happened before it will happen again, and people will forget about it and in 10 to 15 years it will happen again.

So it's kind of like the matrix and rio getting restarted every time, so it's nothing new, but throughout history, if you go back and you study the latest - let's say two crashes: you see this common factor where people claiming well this time it's different right in the Dot com bubble, they said well, this is different because the internet is going to change everything then in 2008 this was different because real estate is so safe. It cannot collapse right and now we're saying well look. The job market is so boiling hot, the economy's. So good, this cannot crash right and, as you know like at least in 2000 2008 things you know were not different, i mean both arguments were wrong and the crashes did happen and they were extremely violent.

Now what we can learn, which is where i think i agree with jeremy here from these previous crashes - is in there's always the same pattern, which is very high retail participation. That's the shoe shine example. You know how your shoeshine boy starts talking to you about his stock portfolio, right so retail participation and a strong belief that things are different this time, combined with the spark, the spark being something happens, that starts this whole show. Now, in this specific crisis, we had three we had the pandemic, we have inflation and qut, and now we have war in ukraine potentially were brewing up with china.

So there's already four factors for potential sparks to this, which can uh really make it one of the worst crashes we've ever seen. Now i don't know if we get a crash or not jeremy grantham doesn't know nobody on this panel knows, but if it happens, it has a potential to be a very violent crash for sure right. I think one of the uh differences between now and then was you got a bunch of bankruptcies because you had a bunch of companies that couldn't raise money anymore and they were based off of zero revenue, zero profits or very, very minimal de minimis uh revenues and Profits, i think it's just a little different. Now uh i mean this time.

It's different this time. It's different. Well, no, i mean well, it is different. Well, it is different.

I think, uh, i'm not saying that well tom. What would be your rebuttal to this argument that profits are there? No, no, i'm actually agreeing with justin here by the way, go ahead tom. What he's saying is that like, if you go back to the dot-com bubble, pets.com, they were not. It was a fake business right, everything was just fake, some of them were real, but for the it's like nfts, when it started off a lot of it was like what the is it's just a greater full theory.

If you look at this stock market pullback, you have a lot of great companies that are performing on the business side, but the stock is in the toilet. I mean the palantir. Can we talk about palantir, killing it in every possible way trading at the insanely low multiples, even though the business is doing better than ever? So? What does that mean? There isn't going to be a crash that bad, because the company this would this would be the counter argument to why a crash this time is not either not going to happen or going to be more mild soft lending. You know like they like to call it.

So this would justin's argument is legitimate, and this is a counter argument to why jeremy grantham might be exaggerating, and also another thing i want to call out is you're actually seeing some of these growth companies. These tech companies, uh uh, authorize shared buybacks so which will provide that's insane. It's just a different. I mean i know like again: i'm i've studied bubbles, i'm generally trained to be pessimistic from wall street uh.

I started out in leverage finance uh but like i think it is a little different, so i'm not saying i still think that mega caps can come down another like we're. We may be only halfway there, so i kind of agree with him in that sense, but i don't, i think, we'll i i'm hopeful that it won't be as long and drawn out and as severe right well if they do come down another 15 percent, it might Be because the market - or it might be because of congress, because congress has introduced the new bill attempting to break up one of the largest tech companies in the world, which is google uh. It is the competition and transparent digital advertising act which which has support on both sides, democrats and republicans, which would prevent companies that process more than 20 billion dollars, an annual digital ad transaction last quarter, google did 54 billion not last year last quarter, 54 billion in Digital ad spend uh look. The question is simple: is congress out of their mind for trying to regulate a company that does such amazing things for the entire advertising market, or does google need some more competition? Justin will start with you.

Well, i think this is a um. Google has a hand in like a lot of steps of the digital ad process and they want to make sure if, if i, if i read this article right that um, they just want it to be like more transparent and ban the companies that process those transactions From uh participating in more than one so, there's like there might be like favoritism going on um, where you know so. I think i think that itself might be fair. It's kind of it reminds me of the amazon thing where they're going after amazon or they're, trying to go after amazon for favoring their amazon basics over other players.

So, like are you a marketplace or are you a seller and i think that's a philosophical thing. I don't really have an answer there uh, but this is exactly the reason why i've been um more hesitant than i otherwise would in jumping on google as the number one position, because it is so much cheaper than than all the other big tech. But i think, what's loomed behind the scenes that people forgot is this anti-trust stuff and i think if you break up google, i actually think the google platform is weaker if you break it up. Like imagine all these other, like we, i've, looked at some other smaller ad tech players.

They they don't have the the uh the moat that they have as a collective. That alphabet does so. I would be. This is somewhat worrying.

I guess, on a scale of 1 to 10 of 10, being the like cell now, that'd probably be like a four to give a little bit of context. Before we go to tom, which google is one of your top three positions, i have a blog right now and i recently started monetizing that blog with google ad and google ads and, oh, my goodness, they make it so simple. They give you a little piece of code, you copy and paste in the html of your blog and boom. You have an ad, they take uh 32.

I get 68 of the cost per click or cost per impression, and i can have as many ads as i want and if i drive traffic, if i can get 50 100 000 views per month on my blog, i can make an income and it's all because This one company has the search-based targeting to make sure those ads are relevant because they have to be relevant, or else people aren't going to click on them. So to me you know, google plays a heavy hand, but it helps support independent publishers, kind of like myself, which is why i think this bill wouldn't be the best tom. What are your thoughts on breaking up? Google, i think, you're spot on i mean even the show we're doing right now is on the google platform, google own platform and the reason we're able to do it because it's so good at allowing us to reach exactly the audience we want and monetize it uh. That's how we pay amid the big salary we pay him and we're gon na double it in the next show by the way and uh.

I think that the idea here is, i don't agree with justin about one thing, and one thing only is justin saying: well: the market isn't pricing in. I think the market is definitely pricing in the anti-trust concerns. It's quite evident. If i mean google is a company, that's doing 270 billion dollars of of revenue per year, i mean that's insane uh and they they're trading at the an insanely low valuation of five price to sales.

Yeah uh, i mean that's a one quarter, tentative evaluation, yeah uh, but i mean price to sales price. To sells, the apples to apples like a snowflake is trading at 23 or 22., and i mean they're trading at like one quarter over the valuation of snowflake. Even though i mean google is definitely a better business because everybody knows the hammer is coming for google and that's getting priced in. Unfortunately, i i do want to give a fair disclosure.

Google is one of my biggest positions in my portfolio. It's 10 of my portfolio. Uh, i i still think that, despite the ftc aggressiveness, they will be fine and don't forget. The ftc is at the end of the day, unfortunately as a political entity at this point as much as we don't want to admit it, and if the administration changes independence, this is congress.

This is congress, i know, but depending on what happens in the midterms and the next elections, the whole approach of the ftc might change this current ftc, lina khan, et cetera these guys are very correlated to this administration. So if the administration changes in the next couple years, you might see a little bit of a different narrative and but yes, the risk is different. I mean it's priced in five price: two sales for google, that's insane uh! I think it's a buying opportunity. But again you got ta yeah right, it's ten percent of my portfolio.

Yeah i mean like you saw what happened like. The only thing we can go back on is is microsoft and the and internet explorer, and they ended up being fined and competes with google. What are the competitors? Well yeah, i mean, but yeah do you agree tom that if they broke it up like they had to sell off youtube, they have to sell off like search and whatever and like, and you can't favor youtube videos in the google search. It does get weaker yeah, i don't know if it's a good move macro economically you're going to be taking a shot at one of your main drivers of gdp and independent publishers around the world that use google ads.

You know yeah a lot of freelancers. A lot of independent contractors like we are depending on the platform. I don't know if the people really want ftc to go after google. That would be an interesting question right.

It sounds more like a political agenda than something that's coming down from the people upwards. I've. Never heard anybody say: oh google is a monopoly. Let's go at google right, especially because anyone can get discovered on google, whereas on amazon, if they're selling their own basics over your stuff, then you're like all right, amazon's.

Actually screwing me at this point. So all right not bad. Well, this new bill was a uh. It was attempting to break up google because they were just too big.

Hopefully one day people will attempt to break up the money. Talk show because we just get too big and that'll be uh. A great day when we see the people wanting to break up, thank you guys for joining us today on another edition of money talks and we'll see you tomorrow on tom's channel uh for another episode, we'll see you tomorrow and you can see amit on his snapchat Profile doing things that should not be done i'll, be sending them to you, of course, as always, you.